an exceptional opportunity to acquiref.tlcollect.com/fr2/615/61763/towers,_manchester...aviva...

An Exceptional Opportunity to Acquire

Manchester’s Premier Suburban Office Destination

A thriving business community with over

2,000 people

A Compelling Opportunity

Towers provides an investor with a unique opportunity to acquire Manchester’s premier suburban office destination. A highly attractive, long-dated income profile is provided by the exceptionally strong tenant line-up.

This tenant line-up includes John Lewis, the UK’s largest department store retailer, and British Airways, part of Europe’s 4th largest airline group – both of whom have committed to the destination within the last 12 months. In addition, the likes of Oracle, Cisco, Syngenta, Regus and SPX are all based at Towers.

The opportunity provides excellent rental growth prospects – Manchester is the UK’s best performing regional office centre.

To view a short film providing greater insight into the investment attributes of Towers, Manchester, please visit www.towers-investment.co.uk

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“ Well positioned to both Manchester

Airport and Manchester City Centre ”

Executive Summary

Manchester - a leading European city exhibiting high levels of growth across all measures.

A rare opportunity to acquire Manchester’s premier suburban office destination.

Situated within Didsbury – a highly affluent South Manchester suburb, with excellent connectivity to the city centre and Manchester Airport by train, tram and bus.

The Park’s composition includes ten buildings which provide 292,317 sq ft (27,157 sq m) of modern, high quality office accommodation benefitting from a car parking ratio of 1:298 sq ft (982 in total).

Multi-let to 21 quality tenants including John Lewis PLC, Cisco, Oracle Corporation, Regus and British Airways PLC.

70% of the income is secured against very low risk or low risk companies.

Towers provides an exceptional working environment underlined by its high occupancy levels.

Situation

Tenant Retention

Manchester

Premier Office Destination

Low Capital Value

Proven Tenant Commitment

AWULT

Price

Special Purpose Vehicle

Accommodation

Tenants

Environment

Low Risk Income

Current Income & ERVTotal income of £5,578,319 per annum equating to a low average rent of £17.50 per sq ft, with car spaces at £500 per space per annum. Total ERV of £6,468,160 per annum equating to £20.45 per sq ft, with car spaces at £500 per space per annum. These assume all rent free periods/stepped rents are “topped up” and include a 2 year rent, rates and service charge guarantee on vacant space.

The quoting price reflects a capital value of £284 per sq ft, assuming car parking at £5,000 per space.

148,500 sq ft of re-gears and lettings have been executed over the course of the last 18 months – over 50% of the destination’s office accommodation.

Average length of occupation across existing tenants is approximately 7 years demonstrating excellent occupier retention and the highly attractive working environment.

The Average Weighted Unexpired Lease Term (AWULT) is 7.12 years to expiry and 5.70 years to earliest termination.

Towers is held freehold.

Offers are sought in excess of £88,000,000 (Eighty Eight Million Pounds) subject to contract and exclusive of VAT.

A purchase at this level would reflect the following yield profile on the assumption of the “top ups” as stated in the tenancy schedule (assuming purchaser costs of 5.80%) • Net initial yield - 6.00% • Equivalent yield - 6.77% • Reversionary yield - 6.93%

The transaction may be structured as a purchase of the SPV. Assuming reduced purchaser costs of 1.80%, the net initial yield on the quoting price would improve to 6.23%

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Investment Rationale

Manchester

• Manchester has firmly established itself as the UK’s 2nd City and is the largest and fastest growing regional capital.

• The city is globally recognised for its commerce, education, culture and its two footballing global superpowers.

• Recognised as the best UK City to live in by The Economist.

• The Manchester region has a track record of attracting major corporate entities as evidenced by the recent BBC and ITV relocations.

• Manchester is the biggest financial and professional services hub outside London, employing 250,000 people and is home to 80 of the FTSE 100.

• Manchester is forecast to outperform international cities such as Tokyo, Berlin and Paris on job creation.

Prosperous Office Market

• Manchester has the best performing UK regional office market with almost 1,000,000 sq ft of lettings across the city centre and South Manchester in H1 2015.

• Prime Manchester office rents currently stand at £32.50 per sq ft, with the strongest regional rental growth forecast over the next 5 years.

• Significant confidence in the occupational market is reflected by speculative development in the city centre but, importantly, no speculative, competing suburban office development.

• Manchester is ranked 46th globally for direct commercial real estate investments since 2008 with over £4.25 billion transacted – a highly liquid market.

• Prime Manchester office yields are currently 4.75%, 50 basis points weaker than previous peaks of 4.25%.

Premier Office Destination

• Towers is undoubtedly Manchester’s premier suburban office destination and is home to thousands of highly qualified employees.

• A vibrant working environment benefitting from modern efficient buildings, a beautiful mature landscaped setting and an impressive array of retail and leisure amenities.

• Outstanding and diversified blue chip tenant base including British Airways, John Lewis and Syngenta, who account for 48% of the total income.

• 70% of the income secured against covenants offering “very low” or “low risk” credit ratings according to Experian.

• Comprehensive £3m+ improvement programme across the scheme including a new piazza, public realm and refurbishments completed within the last 12 months.

• AWULT of 7.12 years to expiries and 5.70 years to earliest termination.

• British Airways’ presence extends to over 15 years and John Lewis to over 5 years.

• Void rate of only 4.3% and low average passing rent of £17.50 per sq ft across office accommodation, providing exceptional opportunity for growth.

Value Enhancement Opportunities

• The continued positioning of Towers as Manchester’s best suburban office destination, taking advantage of the improving occupational market and restricted supply.

• Leveraging existing strong tenant relationships and tenant commitment to action lease renewals, lease extensions and expansions/relocations.

• Re-letting of vacant accommodation to further improve the income profile and establish new rental benchmarks.

• Opportunity provided by the John Lewis and Regus rent reviews, whose current rents are highly reversionary, to immediately enhance the income position.

• Potential for new development to include a new nursery, restaurant/bar and additional car parking.

• Continued management and growth of the integral ‘Lifestyle’ offer available to occupiers.

• Annualised rental growth in Manchester is forecast to be 4% per annum over the next 5 years.

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Let to:

Pioneer House

Let to:

Scotscroft

31,918 sq ft with floorplates of up to 10,928 sq ft

Let to:

Crescent House

Let to:

Adamson House



Let to:Let to:

Ocean HouseSpectrum House

Let to:

Worthington House

Let to:

Kingston House

Let to:

Pavilion

The Lodge



992 sq ft with floorplates of up to 385 sq ft





Energize Recruitment

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Didsbury Metrolink Station

East Didsbury Train Station

Wilmslow Road

A5103 (Princess Parkway)

Manchester Airport - 6 Miles

Manchester City Centre - 6 Miles

A34 Kingsway

A34

Manchester City Centre

East Didsbury Metrolink Station

Didsbury

11 Minute walk

12 Minute walk

8 Minute walk

7 Minute walk

Universities

Connected to the world – 10 minutes from Manchester International Airport

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The original modern city.

The world’s first industrial city and birthplace of the

modern computer.

From an industrial past to an innovative future.

represented in Manchester

Manchester has the highest retention rate of gradu-ates outside of London

tourism economy

employers in the city

airport passengers

A city transformed...

Manchester is the premier regional centre in the UK and the centre of a thriving city region. It is the largest economic area outside London with a gross value added of £51 billion.

The city is home to 80 of the FTSE 100, the UK’s largest University, world class research and Europe’s largest student population.

Manchester’s highly skilled workforce of over 7 million people are within an hour’s commute, making it an ideal business location. Google, HSBC, ITV and BBC are just a few of the big names to call Manchester home.

No other city in Europe has invested as much in its media and digital scene as Manchester, with £3.5 billion spent creating the second largest hub for creative industries on the continent.

Manchester is the only city in the UK to offer next generation fibre broadband, putting it 10 years ahead of other UK cities in terms of access to digital communications.

80 of the FTSE 100

100,000 Students

£6.6 Billion

350,000

22.4 Million

This is Manchester

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CultureA city rich in heritage and named the best UK city to live in by The Economist, Manchester has invested heavily in arts and culture. Home to the Hallé Orchestra and 13 theatres which create the UK’s best theatre repertory scene outside London’s West End. Other attractions include the Manchester Arena, the National Football Museum and the internationally acclaimed Manchester International Festival.

SportIn addition to the rich cultural history, the city also boasts a fantastic sporting heritage and is home to two of the world’s largest football clubs, Manchester United and Manchester City. The city that staged the 2002 Commonwealth Games now plays host to the World Swimming and Cycling Championships and the Aviva Premiership rugby union team, Sale Sharks.

Science & InnovationEurope’s largest clinical and academic campus is based in Manchester, while the ‘Oxford Road corridor’ has made Manchester one of Europe’s super league biotech locations, home to 280 biomedical companies, 24 NHS organisations and leading clinical trials.

Tourism & ConferencesManchester is the third most popular UK city for international visitors. The tourism economy is worth £6.6 billion per annum. Major venues such as The Manchester Arena, The Lowry, The Palace Theatre and The Bridgewater Hall are regularly attracting large audiences and helping to boost occupancy levels – indeed, city centre hotel occupancy levels are currently at a 15 year high.

“Britain’s most vibrant city” Experian

‘’ Manchester has once again been named the best UK city to live in’’ Economist

Manchester Lifestyle

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Manchester’s universities continue to attract the highest calibre researchers and teachers, with the University of Manchester boasting 25 Nobel Prize winners and more Nobel laureates on their staff than any other UK university.

The University of Manchester is one of the most targeted universities in the UK by graduate recruiters and with 400 different degree programmes on offer; it attracts students from more than 180 countries.

94% of University of Manchester graduates go straight into employment or further study and its high-profile alumni include Professor Brian Cox and Lord Norman Foster.

Manchester is the home of Graphene – a revolutionary 2D material – and the £61 million National Graphene Institute was opened in March 2015 by Chancellor George Osborne.

The universities, their campuses and their students provide a key linkage between the city centre and Towers.

UK’s 3rd and 5th largest universities by student numbers

Greater Manchester has the largest student population in Europe

Over 65% of students remain after graduation

Over 25,000 international students

Two Top 5 Universities

Largest in Europe

65% Graduate Retention

25,000

Economy and EducationThe visibility of Manchester to the global investment community has never been as strong as today. The economic resilience of the city has seen development and inward investment continue apace throughout the global economic downturn, with overseas investors and major global companies identifying Manchester as a real source of opportunity.

Manchester’s major wins over the last 10 years in terms of inward occupiers include:

The BBC AegisUK Government John LewisFord Credit Slater and GordonFreshfields SPX Nabarro Bank of New York Mellon

All of these occupiers considered Manchester’s competing cities, both nationally and internationally, and opted for Manchester. In addition to those economic reasons listed above, the City Council’s approach to attracting inward investors is such that the city repeatedly wins in this highly competitive process, as demonstrated by Syngenta’s recent arrival at Towers.

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On Your Doorstep

On-site cycle hub and an array of

cycle routes

6 miles fromManchesterAirport

5 miles from Manchester City

Centre

Unrivalled public transport connectivity via train, tram and bus

Manchester

Paris1hr 30mins8hrs 25mins 3hrs 40mins 13hrs 20mins

Moscow

8hrsNew York

2hrsMunich

7hrs 10minsAbu Dhabi

12hrs 05minsHong Kong

Chicago Singapore

Direct flights to over 200 destinations

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“Didsbury - Best 50 Places to Live in the UK”

Sunday Times

WORK LIVE AND PLAY

Towers is situated in Didsbury - one of Manchester’s most cosmopolitan and vibrant suburbs, providing a fusion of independent and national retail and leisure operators. Towers benefits from an unrivalled level of amenity within a short walking distance.

These amenities include a plethora of bars, restaurants, sports venues and outstanding open green spaces.

Manchester City Centre and Manchester International Airport each lie within only a 5 mile distance, ensuring Towers is highly accessible for staff, clients and visitors.

Didsbury is one of South Manchester’s most desirable residential areas, featuring extensive Victorian and Edwardian housing. It was named in the Sunday Times’ ‘Best 50 Places to Live in the UK’ in March 2015.

7.2 million commuters within a one hour drive

42% of residents classified as professionals (Nomis, 2015)

Median Earnings 18% higher than the North West and 10% higher than the UK

7.2 Million

42%

18% Higher

Situation

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A Destination With Unparalleled Appeal

Towers is undoubtedly Manchester’s premier suburban office destination with striking modern architecture.

Towers is home to thousands of people during a working day, attracted by its beautiful mature landscaped setting, modern, efficient accommodation and rapid transit to the city centre and Manchester International Airport.

World class companies such as British Airways, John Lewis and Oracle have all committed to the location as a result of its strong sense of business community, unrivalled local amenity and excellent staff retention levels.

The destination has benefitted from a comprehensive improvement programme, totalling over £3 million, during the course of the last 12 months, providing a new central piazza, remodelled entrance, improved building linkage and building refurbishments.

DescriptionTowers is set across 15 acres of beautiful mature landscaping and provides almost 290,000 sq ft of high quality accommodation across 10 individually designed buildings.

These buildings provide modern, efficient office space with the flexibility to provide self-contained accommodation of up to 54,000 sq ft, single floor plates of 18,500 sq ft and suites from 1,000 sq ft upwards. An excellent car parking ratio of 1:314 sq ft is provided to occupiers.

The tranquil working environment is aided by the striking new main entrance, new central piazza, open green spaces and on-site amenities including, designated exercise zones, picnic areas, cycle and shower facilities and eatery. Didsbury’s best restaurants, shops and leisure facilities are on the doorstep.

TenureTowers is held with full Freehold ownership.

A copy of the Title Register and Plan is available to view within the marketing dataroom. The site plan below denotes the extent of the ownership for indicative purposes only. Two buildings, Egerton House and The Towers, have been sold by way of seperate long leasehold interests at peppercorn rentals.

Manchester’s Premier Suburban Office Destination

999 year long leasehold

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Floor Sq Ft Sq M Tenant/s

Ground 17,903 1,663 BA

First 18,060 1,678 BA

Second 18,060 1,678 BA

TOTAL NET AREA 54,023 5,019


Ground 19,844 1,843 Oracle and Coffee Hub

First 19,354 1,798 John Lewis

Second 18,992 1,765 John Lewis


• Completed in 1999.

• Pioneer House occupies a prominent position in the south western corner of the estate, with an outstanding view over the landscaped gardens.

• Grade A specification arranged over ground and two upper floors.

• Occupied in its entirety by British Airways as its CityFlyer Head Office, Executive Club Centre of Excellence and its ContactBA Division.

• 201 car spaces offering an excellent ratio of 1:269 sq ft.

• AWULT of 5.37 years to both lease expiry and earliest termination – 0% vacancy.

• Low average office rent of £17.33 per sq ft, assuming car spaces at £500 per space.


Pioneer House

• The most recent and final development at Towers, completed in 2003.

• Scotscroft occupies a key position overlooking the new piazza and is a modern, striking building.


• Currently let to 3 tenants including the globally renowned John Lewis and Oracle.


• AWULT of 8.49 years to lease expiry (7.28 years to earliest termination) – 0% vacancy.

• Low average office rent of £18.50 per sq ft, assuming car spaces at £500 per space, with immediate potential for growth through 2015 rent reviews.


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Ground 12,747 1,184 Regus

First 11,972 1,112 Regus

Second 11,663 1,084 Spirit Medical, Allied International and Broadcom



Ground 10,397 966 Syngenta

First 10,593 984 Syngenta

Second 10,928 1,015 Syngenta



Crescent House

• Completed in 1999 and a comprehensive £2.415 million refurbishment is currently being undertaken to include M&E, reception and common areas.

• Crescent House is a landmark building with its distinctive curved appearance and excellent views over a landscaped central square.


• Syngenta, a global agriculture technology firm, occupies the entirety and chose Towers for its new Global Operations Centre after an extensive assessment of European locations.


• AWULT of 9.92 years to lease expiry (6.92 years to earliest termination) – 0% vacancy.

• Headline rent of £21.50 per sq ft, assuming car parking spaces at £500 per space, setting a new rental tone.

• Completed in 1997 and recently benefitted from a cosmetic upgrade to the reception.

• Adamson House has modern architectural features and benefits from a central situation fronting the new piazza.


• Occupied by a first-class tenant line-up including Regus and Allied International – Regus currently operating at an 85% occupancy level.


• AWULT of 6.14 years to lease expiry (4.62 years to earliest termination) - 0% vacancy.

• Highly reversionary - very low average office rent of £12.14 per sq ft, assuming car parking spaces at £500 per space.


Adamson House

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Ground 7,017 652 Honeywell

First 7,017 652 Honeywell

Second 7,017 652 Vacant



Ground 12,638 1,174 Mason and Vaughan

First 11,983 1,113 SPX

Second 12,786 1,188 SPX



Worthington House

• Completed in 1988 and benefits from a newly installed four-pipe fan coil air conditioning system.

• Worthington House sits prominently adjacent to the recently remodelled main entrance to the scheme.


• Ground and 1st floors currently occupied by Honeywell and the fully refurbished 2nd floor is currently vacant, offering an immediate opportunity to improve the income profile.




• Completed in 1993, with a comprehensive M&E upgrade completed in 2010.

• Ocean House has modern architectural features and benefits from a central situation fronting the new piazza.


• Occupied by a first-class tenant line-up of SPX and Mason and Vaughan.


• AWULT of 6.73 years to both lease expiry and earliest termination - 0% vacancy.



Ocean House

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Ground 7,754 720 Calyx, Energize Recruitment

First 7,641 710 Calyx

Second 7,641 710 Research Triangle Institute



Ground 6,968 647 Finlay James, Part Vacant

First 7,004 651 Lowry Capital, Roper Industries

Second 7,017 652 CGI IT UK Ltd



Pavilion

• Completed in 1990 and has benefitted from a phased refurbishment including new M&E in 2008 and refurbished reception and common areas more recently.

• Pavilion sits along the eastern boundary with excellent views overlooking Didsbury Cricket Club and the landscaped gardens.





• Completed in 1988 with reception and common areas recently upgraded.

• Kingston House sits prominently adjacent to the recently remodelled main entrance to the scheme.






Kingston House

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Ground 4,396 365 Cisco International

First 3,933 408 Cisco International

TOTAL NET AREA 8,329 773


Ground 621 58 Vacant

First 371 35 Vacant

TOTAL NET AREA 992 92

The property extends to 992 sq ft

The Lodge

• The Lodge is a small, self-contained office located adjacent to the scheme’s 2nd entrance and is currently vacant.

• Completed in 1990 with a comprehensive upgrade undertaken in 2015 including a new VRF system.

• Spectrum House sits along the western boundary with excellent views overlooking the landscaped gardens.

• Grade A specification arranged over ground and first floors.

• AWULT of 5 years to lease expiry and earliest termination – single-let to Cisco International.


• Headline rent of £21.50 per sq ft, assuming car parking spaces at £500 per space, setting a new rental tone.

Spectrum House8,329 sq ft with floorplates of up to 3,997 sq ft

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Property Floor TenantFloor Area

(Sq Ft)Car Parking

Spaces Lease Start Lease End Break Option Rent ReviewTotal Rent

(£P.A.)

Rent (Per Sq Ft) *Assuming cars at

£500 per space P.A.

Office ERV (£PSF)

Office ERV (£P.A)

Car Spaces ERV *Assuming cars at

£500 per space P.A.

Total ERV (£P.A)

Comments

Adamson House Ground & 1st Floors Regus (Manchester Didsbury) Ltd 23,734 83 30/06/98 30/09/21 01/01/16 £280,000 £10.06 £17.50 £415,345 £41,500 £456,845

2nd Floor (Suite A) Spirit Medical Communications Ltd 1,830 5 21/06/13 20/06/23 21/06/18 (Tenant) 21/06/18 £37,500 £19.13 £19.50 £35,685 £2,500 £38,185

2nd Floor (Suites B & D) Allied International Credit (UK) Ltd 7,480 24 01/04/09 01/06/22 01/06/17 £135,000 £16.44 £19.50 £145,860 £12,000 £157,860

2nd Floor (Suite C) Broadcom UK Ltd 2,012 6 28/03/13 27/03/18 27/03/16 £36,500 £16.65 £19.50 £39,234 £3,000 £42,234

Crescent House Ground, 1st & 2nd Floors Syngenta Ltd 31,918 131 01/08/15 30/07/25 01/08/22 (Tenant) 01/08/20 £759,755 £21.50 £22.50 £718,155 £65,500 £783,655 Lease awaiting completion. Vendor to top-up rent-free period.

Worthington House Ground & 1st Floors Honeywell Control Systems Ltd 14,034 55 24/03/14 24/03/24 24/03/19 (Tenant) 25/03/19 £270,611 £17.32 £19.50 £273,663 £27,500 £301,163 Service and estate charge cap of £6.92 psf, excluding utilities, rising annually with RPI.

2nd Floor Vendor Guarantee 7,017 £136,832 £19.50 £19.50 £136,832 £136,832 Quoting terms assume 2 year rent, rates and service charge.

Car Park Spaces Honeywell Control Systems Ltd 22 25/03/14 24/03/24 Monthly (Mutual) £9,900 £11,000 £11,000

Kingston House Part Ground Floor Finlay James 3,587 13 05/09/14 04/09/24 05/09/19 (Tenant) 05/09/19 £75,147 £19.14 £19.50 £69,947 £6,500 £76,447 Vendor to top-up rent-free period.

Part Ground Floor Vendor Guarantee 3,361 £65,540 £19.50 £19.50 £65,540 £65,540 Quoting terms assume 2 year rent, rates and service charge.

Car Park Spaces Roper Industries Ltd. 4 15/04/14 14/04/24 15/04/19 (Tenant) £1,600 £2,000 £2,000

Part 1st Floor Lowry Capital Ltd 1,140 6 31/10/14 30/10/19 31/10/17 (Tenant) £24,830 £19.15 £19.50 £22,230 £3,000 £25,230 Vendor to top-up rent-free period.

Part 1st Floor Roper Industries Ltd. 5,855 6 15/04/14 15/04/24 15/04/19 (Tenant) 15/04/19 £120,573 £20.08 £19.50 £114,173 £3,000 £117,173 Service and estate charge cap of £8.55 psf, excluding utilities, rising annually with RPI.

2nd Floor CGI IT UK Ltd 7,300 23 06/12/13 05/12/18 £146,000 £18.42 £19.50 £142,350 £11,500 £153,850

Car Park Spaces Vacant 5 £2,500 £2,500

Ocean House Ground Floor Mason and Vaughan Group Ltd 11,653 47 24/06/15 23/06/25 24/06/20 (Tenant) 24/06/20 £275,400 £21.62 £22.50 £262,193 £23,500 £285,693 Vendor to top-up rent-free period.

1st Floor SPX Shared European Services Ltd 11,983 39 14/06/10 13/06/20 £210,963 £15.98 £22.50 £269,618 £19,500 £289,118

2nd Floor SPX Shared European Services Ltd 12,786 39 14/06/10 13/06/20 £224,228 £16.01 £22.50 £287,685 £19,500 £307,185

Car Park Spaces Calyx Managed Services Ltd 5 07/05/13 01/09/16 £1,980 £2,500 £2,500

Pavilion Ground Floor (Suite A) Vendor Guarantee 1,163 2 £23,679 £19.50 £19.50 £22,679 £1,000 £23,679 Quoting terms assume 2 year rent, rates and service charge.

Ground Floor (Unit 9) Energize Recruitment Solutions Ltd 3,494 15 11/02/13 10/02/18 £65,000 £16.46 £19.50 £68,133 £7,500 £75,633 Service and estate charge cap of £6.75 psf, rising annually with RPI. Land-lord service shortfall for 2015/16 of £6,010 per annum.

Ground Floor (Suite D) Calyx Managed Services Ltd 2,777 11 10/11/10 24/12/20 £48,598 £15.52 £19.50 £54,152 £5,500 £59,652 Service and estate charge cap of £7.30 psf, rising annually with RPI. Land-lord service shortfall for 2015/16 of £3,249 per annum.

1st Floor Calyx Managed Services Ltd 7,641 30 10/11/10 24/12/20 £135,730 £15.80 £19.50 £149,000 £15,000 £164,000 Service and estate charge cap of £7.30 psf, rising annually with RPI. Land-lord service shortfall for 2015/16 of £9,075 per annum.

2nd Floor Research Triangle Institute 7,641 29 28/03/11 27/03/21 28/03/16 £122,368 £14.12 £19.50 £149,000 £14,500 £163,500

Pioneer House Ground, 1st & 2nd Floors British Airways PLC 54,023 180 01/02/00 31/01/21 £1,026,000 £17.33 £19.50 £1,053,449 £90,000 £1,143,449 Vendor to top-up rent-free period.

Car Park Spaces British Airways PLC 6 29/08/13 01/09/16 £3,600 £3,000 £3,000 Tenant licences additional 15 spaces from neighbouring land owner.

Scotscroft Part Basement The Coffee Hub Ltd 172 21/10/09 20/10/19 £1,170 £6.80 £10.00 £1,720 £1,720

Part Basement Management Office 936 £9,360 £10.00 £10.00 £9,360 £9,360 Rent income paid via service charge.

Part Ground Floor The Coffee Hub Ltd 862 1 21/10/09 20/10/21 21/10/15 £14,745 £16.53 £20.00 £17,240 £500 £17,740

Part Ground Floor Oracle Corporation UK Ltd 12,158 41 05/02/13 04/02/23 04/02/18 (Tenant) 05/02/18 £253,400 £19.16 £22.50 £273,555 £20,500 £294,055 Vendor to top-up rent-free period.

1st Floor John Lewis PLC 19,354 56 02/06/10 06/08/24 24/06/15 01/06/19 £358,212 £17.06 £22.50 £435,465 £28,000 £463,465 Vendor to top-up rent-free period.

Part Ground Floor and 2nd Floor John Lewis PLC 23,896 55 07/08/14 06/08/24 01/06/19 £489,868 £19.35 £22.50 £537,660 £27,500 £565,160 Vendor to top-up rent-free period.

Car Park Spaces Oracle Corporation UK Ltd 10 08/10/14 04/02/18 £5,500 £5,000 £5,000

Spectrum Ground & 1st Floors Cisco International Ltd 8,329 30 07/09/15 06/09/20 £188,892 £21,50 £22.50 £187,403 £15,000 £202,403 Vendor to top-up rent-free period.

The Lodge Vendor Guarantee 992 3 £19,840 £20.00 £20.00 £19,840 £1,500 £21,340 Quoting terms assume 2 year rent, rates and service charge.

Total £5,578,319 £5,977,160 £491,000 £6,468,160

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Income Analysis

• Total rental income of £5,576,341 per annum (including rental guarantees and vendor ‘top ups’).

• Total Estimated Rental Value of £6,465,660 per annum.

• Let to 21 tenants.

• Average Weighted Unexpired Lease Term 7.12 years to expiries and 5.70 years to earliest termination.

• Almost 100,000 sq ft of rent reviews within the next 3 years.

Property Tenant Area (Sq Ft)

Rent(P.A)

ERV(P.A)

ScotscroftJohn LewisOracleCoffee Hub

58,190 £1,132,255 £1,356,500

Pioneer British Airways 54,023 £1,029,600 £1,146,449

Crescent Syngenta 31,918 £759,755 £783,655

Adamson

RegusSpirit MedicalAllied InternationalBroadcom

36,382 £489,000 £695,124

Ocean Mason & VaughanSPX 37,407 £712,570 £884,496

Worthing-ton

HoneywellRent Guarantee 21,051 £417,343* £448,995

Kingston

Finlay JamesLowry CapitalRoper IndustriesCGI IT UKRent Guarantee

20,989 £433,690* £442,740

Pavilion

EnergizeCalyxResearch Triangle InstituteRent Guarantee

23,036 £395,375 £486,462

Spectrum Cisco 8,329 £188,892 £202,403

The Lodge Vacant 992 £19,840 £21,340

TOTAL 292,317 £5,578,319 £6,468,160

*Inclusive of 2 year rent guarantee

7.12 Years AWULT to expiry

21No of tenants

48%Income from BA, John Lewis and Syngenta

148,500 sq ftLettings and re-gears in the past 18 months

Income by Sector

Towers is home to a diverse range of successful businesses across several sectors, as outlined below.

Vacant Space by Floor Area (Sq Ft)

Towers is 96% let and benefits from consistently high occupancy levels as occupiers immerse themselves into the Towers Lifestyle.

Income by Tenant

Towers benefits from a first-class international and national tenant line-up which is strong and diverse. All tenants utilise Towers as a key part of their business operations. For example, Syngenta operate their new Global Operations Centre.

Technology

Aerospace

Retail

Manufacturing

Other

Energy

Finance and Professional

British Airways PLC

Syngenta Limited

Honeywell Control Systems

Vendor Guarantee

Calyx Managed Services Ltd

John Lewis PLC

Regus Ltd

Cisco

8 Smallest Tenants

SPX

Oracle Corporation UK Ltd

CGI IT UK Ltd

Mason and Vaughan

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Towers benefits from a strong community with year-round events to facilitate networking and business opportunities between occupiers, creating a vibrant working environment which helps to ensure high staff retention levels. The destination’s lifestyle element has helped lead to over 148,500 sq ft of re-gears and lettings over the course of the last 18 months.

Key aspects of the Towers Lifestyle programme include:

• Towers Bike Scheme

• Towers ‘LifeCard’ valid at over 20 businesses including Zizzi, Virgin Active and The Didsbury

• Charity Event Days

• Exercise Classes

• Meeting and Boardroom Hire Facilities

• Cycle and Shower Facilities

• Open Outdoor Spaces

Towers LifestyleA Strong Community with Regular Events

“We are delighted to be able to base Syngenta’s new Global Operations Centre in Manchester, which was

chosen following an extensive assessment of possible European

locations.”

COLIN HARDY, PROGRAM LEAD – GLOBAL OPERATIONS

CENTRE AT SYNGENTA

“Towers has been a great business home for us since our move from Manchester City Centre in 2000. We look forward to our continued

business growth and success at Towers.”

STEVE BARNES, PROPERTY REAL ESTATE MANAGER

AT BRITISH AIRWAYS

“We have found that the location and having the extensive

array of shops and restaurants on the doorstep has been

popular with our clients and extremely attractive to our staff.”

LINDA ATKINSON, REGIONAL FACILITIES

- BRITISH AIRWAYS

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The current rental income at Towers is derived from 21 tenants. Major corporate/blue chip

companies account for over 90% of the total income, with 57% of the contracted income secured against British Airways, John Lewis,

Syngenta, Honeywell and Oracle.

The remaining 13 tenants include additional successful businesses such as Cisco International, Roper Industries and Finlay James. The breadth of the tenant line-up provides security by way of diversification.

Tenant Contracted income

% of total contracted

incomeExperian rating

British Airways PLC £1,038,600 19.5% 100/100

John Lewis PLC £848,080 15.9% 100/100

Syngenta Limited £759,755 14.2% 100/100

SPX Shared European Services Limited

£435,190 8.2% 9/100

Honeywell Control Systems Limited

£280,511 5.3% 100/100

Regus (Manchester Didsbury) Limited

£280,000 5.3% 15/100

Mason and Vaughan Group Limited

£275,415 5.2% 10/100

Oracle Corporation UK Limited

£253,400 4.7% 69/100

TOTALS £4,170,851 78.3%

Mason and Vaughan Group LimitedMason and Vaughan is part of the Pinnacle Alliance Group – a UK property investment company which works with investors across Hong Kong, China, Singapore and Canada. Pinnacle has sold over 2,000 student bedrooms and 400 residential apartments in the last 3 years alone. Current developments include 20/20 in Leeds, 16 Fleet Street in Liverpool and Angelgate in Manchester.

Honeywell Control Systems Limited Honeywell is a $35 billion Fortune 100, diversified technology and manufacturing leader in aerospace products and services and power generation systems. The group employs over 150,000 employees worldwide, including more than 20,000 engineers and scientists. The group has a significant presence across the Americas, China, EMEA and Asia-Pacific. The UK is one of the largest national markets for Honeywell in Europe. It is one of the UK’s leading suppliers of domestic heating and combustion controls.

For the year ending December 2013, Honeywell Control Systems Limited had a turnover of £358 million, pre-tax profit of £18 million and total assets of £405 million.

Oracle Corporation UK LimitedThe Oracle Corporation is a $38 billion American global computer and technology business, headquartered in California. The group employs over 130,000 employees worldwide. The company primarily specialises in developing and marketing computer hardware systems and enterprise software products.

For the year ending April 2014, Oracle Corporation UK Limited had a turnover of £672 million and total assets of £518 million.

British Airways PLC British Airways is a name which resonates around the globe. BA is the flag carrier airline of the United Kingdom and the country’s largest airline based on fleet size, international flights and international destinations.

BA became part of the International Airlines Group in 2011, merging with Iberia, to form the world’s third largest airline in terms of annual revenue and Europe’s second largest airline group.

For the year ending December 2014, British Airways PLC had a turnover of £11.72 billion, pre-tax profit of £859 million and total assets of £13.43 billion.

John Lewis PLC John Lewis sits within the John Lewis Partnership which is a unique employee- owned company. It consists of 44 John Lewis shops, 338 Waitrose supermarkets and the successful johnlewis.com.

John Lewis is the UK’s largest department store retailer, dating back to 1864, and is committed to growth with 5 new department stores opening in the next 2 years and continued expansion of its multi-channel strategy.

For the year ending January 2015, John Lewis PLC had a turnover of £9.70 billion, pre-tax profit of £349 million and total assets of £5.85 billion.

Syngenta Limited Syngenta is a leading global agriculture company helping to improve global food security. It utilises world-class science, deep understanding of growers’ needs and continuous innovation to feed an ever-growing world population.

Syngenta is based across 90 countries with almost 30,000 employees and group sales of $15.1 billion. The company has invested over $1.25 billion in research and development in each of the last 3 years. For the year ending December 2013, Syngenta Limited had a turnover of £457 million, pre-tax profit of £115 million and total assets of £634 million.

SPX Shared European Services LimitedSPX Corporation is a global, multi-industry manufacturing leader with operations in more than 35 countries and employing over 14,000 employees. The company’s highly-specialised, engineered products and technologies are concentrated in Flow Technology and energy infrastructure.

SPX Flow Technology is part of the wholly-owned subsidiary SPX Corporation and serves the food & beverage, power & energy and industrial markets. SPX FT’s human resource and accounts service centre for its European operations is based at Towers. SPX selected Manchester and Towers as its preferred location after an extensive search with MIDAS – Manchester’s inward investment agency.

SPX Corporation is head-quartered in North Carolina, being listed on the New York Stock Exchange (NYSE) and an annual revenue of approximately $5 billion.

Regus (Manchester Didsbury) LimitedRegus is a multi-national corporation that provides global workspace operating 3,000 business centres in 900 cities and 120 countries. The business was founded in 1989 and was one of the first to identify a need for flexible business centre space. Regus provides serviced offices, virtual offices, meeting rooms and video-conferencing facilities for occupiers of all sizes. Regus clients include the likes of Danone, Dell and Toshiba.

The parent group reported revenues of £1.76 billion in 2014 with over 8,700 employees.

Covenant Analysis - Top 8 Tenants by aIncome

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Destination Tenant Size Headline Rent Status

MediaCityUK Confidential 16,000 sq ft £24.00 per sq ft Under Offer

MediaCityUK Sony 4,000 sq ft £22.50 per sq ft Under Offer

MediaCityUK Confidential 22,000 sq ft Undisclosed Under Offer

First Street Ford Credit 25,000 sq ft £23.50 per sq ft Completed – H1 2015

First Street Ford Credit 12,750 sq ft £23.50 per sq ft Completed – H1 2015

Our opinion is supported by the fact that Towers is 1 of only 3 truly suburban business destinations in Manchester, which comprise a single ownership within an intensively managed estate. It competes with MediaCityUK and First Street, where quoting rents are typically £24 to £25 per sq ft exclusive of car parking. A summary of the key competition is set out below:

Estimated Rental Value & Future Rental GrowthOur opinion of Estimated Rental Value (ERV) is set out as follows:

Key Competition

Recent Letting Comparables

Year Prime Grade A Rent % Growth

2014 £32.00 6.70%

2015 £33.75 5.40%

2016 £35.00 3.70%

2017 £37.00 5.70%

2018 £38.25 3.40%

2019 £39.00 2.00%

Manchester Prime Rental Growth Forecast

Prime Rental ForecastAnnual Average Growth 2015-2019

Aberdeen 1.5%

Edinburgh 2.6%

Glasgow 2.7%

Manchester 4.0%

Liverpool 1.9%

Bristol 2.4%

Birmingham 3.1%

Leeds 3.3%

Source: CBRE

Building/s ERV

Scotscroft, Crescent, Ocean, Spectrum £22.50 per sq ft

Kingston, Pioneer, Pavilion, Worthington £19.50 per sq ft

Adamson £17.50 per sq ft

Car Spaces £500 per space per annum

DestinationTotal Size of Office Scheme Currently

DevelopedCurrent

Availability Quoting Terms

MediaCi-tyUK

800,000 sq ft 12% Offices - £24.00 per sq ftCars - £1,500 per space

First Street 180,000 sq ft Fully-Let Offices - £25.00 per sq ft Cars - £1,750 per space

Airport City Pre-let Only £24.50 per sq ft

Manchester Office Market

Office MarketManchester has cemented its position in recent years as the UK’s leading office destination outside London, with levels of office take-up during the past 5 years consistently exceeding the other “Big 6” regional cities.

Having demonstrated robust and resilient volumes of take-up and demand throughout the economic downturn, indeed setting an all-time city centre record in 2010 with 1.35 million sq ft of take-up, Manchester now looks set for further growth as the wider economic recovery continues.

Strong demand yet again characterised the Manchester office market in H1 2015. A total of over 1.3 million sq ft of take-up was recorded across the city centre, South Manchester and Salford Quays markets.

Whilst occupier activity has in recent years been dominated by requirements of between 2,500 and 10,000 sq ft, there has been a resurgence of large occupiers to the market during the past 18 months with the likes of Barclays (82,000 sq ft), Ford Credit (45,000 sq ft) and Ernst & Young (42,000 sq ft) all committing to space.

Large occupational requirements are set to continue over the next 4 to 5 years with over 1.2 million sq ft of known Grade A lease events above 10,000 sq ft set to occur including the likes of Sainsbury’s, Eversheds and Freshfields.

Office RentsPrime rents in Manchester are currently at £32.50 per sq ft, reflecting substantial growth from the previous peak in 2007 of £28.00 per sq ft, and are expected to grow to £35.00 per sq ft by 2016 and £39.00 per sq ft by 2019. Annualised rental growth in Manchester is 3% per annum since the late 1990s, and Manchester is forecast to demonstrate the strongest rental growth relative to the other UK “Big Regional 6” during the next 5 years, as set out opposite:

160% increase in half yearly take-up across Manchester’s 3 key office markets since H1 2011

1,400,000

1,200,000

1,000,000

800,000

600,000

400,000

200,000

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H12012

H22012

H12013

H22013

H12014

H22014

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Combined City Centre, South Manchester and Salford Quays - Half Year Take-Up

1,600,000

Airport City, Manchester

Media City, Salford Quays

First Street, Manchester

Chancery Place, Manchester

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Only 6 Regional Multi-Let Business Parks over £50m have Traded

in the Last 5 Years

Key Investment TransactionsWe set out below a selection of key CBD and suburban office destination investment transactions:

Regional CBD Comparable Transactions

Date Address Price NIY AWULT (to breaks) Capital Value Per Sq Ft Purchaser

Under Offer Colmore Plaza, Birmingham c.£130m c.4.00% 4.8 years c.£400 Confidential

Under Offer One St Peter’s Square, Manchester c.£175m c.4.85% 10 years Confidential Confidential

Under Offer 66 Queen Square, Bristol c.£33m c.4.90% 15 years c.£535 Confidential

July 2015 1 Colmore Square, Birmingham £87m 4.04% 9.1 years £430 L&G

December 2014 4 Hardman Square, Manchester £31.08m 4.95% 4.75 years £532 Orchard Street

September 2014 Chancery Place, Manchester £57m 5.05% 5.50 years £537 NFU Mutual

UK Suburban Office Destinations

Date Address Price NIY AWULT (to breaks) Capital Value Per Sq Ft Purchaser

June 2015New Square, Bedfont Lakes, Heathrow

£167m 5.45% 5.1 years £444 M&G

May 2015 First Street, Manchester Confidential Confidential Confidential Confidential Patrizia

March 2015 MediaCityUK, Salford Quays c.£250m - 50% stake Confidential Confidential Confidential L&G

October 2014The Causeway Centre and Aviator Park, Staines

£140m 5.53% 5.20 years £320AIMCO,

Stanhope

November 2013 Chiswick Park, Chiswick £778m 6.03% 9.90 years £585 CIC

Manchester and UK Regional Office Investment Market

Manchester is ranked 46th globally for direct commercial real estate investments since 2008 with over £4.25 billion transacted.

It is the only UK city alongside London to feature in the top 50, demonstrating its credentials as a highly liquid market.

Manchester has experienced a significant influx of investors from across the globe, diversifying its investor base from the traditional core group of UK institutions and property companies. Purchasers of Manchester assets in the past 18 months have originated from Asia, the Middle East, the US and Canada, along with established investors from other European nations.

Overseas investors have also identified Manchester as a long term strategic opportunity, evidenced by the significant sums already – and further to be – invested by Chinese investors in Airport City and NOMA; and Abu Dhabi investors in Manchester City Football Club and the Etihad Campus.

Prime yields of 4.75% reflect a 50 basis point discount from the 2007 peak and continue to trend stronger as a result of clear rental growth evidence. Industry forecasts anticipate further yield compression over the next 5 years.

Global capital is targeting regional office investment

Manchester’s economic performance is outstripping that of other UK regional cities

Global Money

Economic Performance

One St. Peter’s Square, Manchester

4 Hardman Square, Spinningfields

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Further Information Service ChargeComprehensive estate and building service charge budgets are detailed in the data room.

VATThe property is elected for VAT. We envisage that the transaction will be treated as a Transfer of a Going Concern (TOGC).

Capital AllowancesSignificant capital allowances are available by way of separate negotiation.

EPCEnergy Performance Certificates are available to view on the marketing dataroom.

Marketing DataroomAdditional information can be found on the marketing dataroom:www.towers-investment.co.uk

Proposal

The transaction may be structured as a purchase of the Jersey Limited SPV. Assuming reduced purchaser costs of 1.8%, the net initial yield on the quoting price would improve to 6.23%.

We are instructed to seek offers in excess of £88,000,000 (Eighty Eight Million Pounds) subject to contract and exclusive of VAT.

A purchase at this level would reflect the following yield profile (assuming purchaser costs of 5.80%)• Net initial yield - 6.00%• Equivalent yield - 6.77%• Reversionary yield - 6.93%

The above yield profile reflects the vendor’s 2 year rent, rates and service charge guarantee on the vacant accommodation and the ‘topping up’ of outstanding rent fees and stepped rents.

The quoting price reflects a capital value of £284 per sq ft, assuming car parking at £5,000 per space.

£88,000,000

Low Capital Value

Special Purpose Vehicle

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Contacts

Colin ThomassonExecutive Director

T: 0161 233 5645M: 07900 134 234E: [email protected]

Will KennonDirector


Luke Wilson

Surveyor


Vincent TaylorExecutive Director

T: 020 7355 3033M: 07767 786 444 E: [email protected]

Stuart AtkinsonExecutive Director


Noel TiffneyDirector


Misrepresentation Act 1967. Unfair Contract Terms Act 1977 The Property Misdescriptions Act 1991. These particulars are issued without any responsibility on the part of the agent and are not to be construed as containing any representation or fact upon which any person is entitled to rely. Neither the agent nor any person in their employ has any authority to make or give any representation or warranty whatsoever in relation to the property. Designed by 90degrees Design and Marketing 0161 833 1890. September 2015.

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an exceptional opportunity to acquiref.tlcollect.com/fr2/615/61763/towers,_manchester...aviva...

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