UK Property Market London & South East

October 2012

Economic Background In our last market update in May 2012, we reported on the loss of market confidence due to the sovereign debt burden imposed on all European economies by the Southern Eurozone countries. Despite the rhetoric of leading European politicians and announcements of support by the ECB, the Euro crisis rumbles on and now Spain is the focus of attention as it struggles with its budget deficit and the weakness of its domestic banks. It is not surprising that other European economies continue to be infected and as a result the prospects of a return to robust growth in Western Europe have diminished. Ernst & Young’s recently published Global Capital Confidence Barometer for the period October 2012 to April 2013 states that leading companies see little immediate prospect of a recovery for the global economy. While the situation has stabilized in some markets, most executives expect this downturn to endure for at least a year, while many economists think it could persist for three years or more. The Eurozone crisis and slowing growth in emerging markets, such as China and India, have dampened global economic confidence and expectations around corporate earnings. UK Economic Statistics Britain's economy was not immune from these global factors with UK GDP having contracted by 0.5% during Q2 2012 but GDP bounced back in Q3 2012 with a positive increase of 1.0% compared with Q2 2012. However, the construction sector still appears to be in recession with output estimated to have decreased by 2.5% per cent in Q3 2012 following a decrease of 3.0% per cent in Q2 2012. These falls were more than offset by output of the production and service industries which were estimated to have increased by 1.1% and 1.3% respectively in Q3 2012. The Confederation of British Industry (CBI) reported in September that UK manufacturers expect modest growth in output in the coming three months, while order books improved compared to the disappointing figures from August. Of the 425 manufacturers responding to the latest monthly Industrial Trends Survey, 28% expect to increase their volume of output over the course of the next three months, while 21% expect it to fall. The resulting balance of +7% is in line with the long-run average (+6%) and follows the expectation last month of a flat period for output (0%).

Despite the positive growth in Q3 analysts still expect UK GDP to be negative or flat for 2012 as a whole. The Ernst & Young Item Club did forecast a return to UK GDP growth in the second half of this year but expect GDP down by 0.2% on the year. Their forecast shows output growing by 1.2% next year and 2.4% in each of 2014 and 2015. The ITEM Club sees these more hopeful consumer trends being reinforced by a recovery in the mortgage and housing markets next spring, although a move back to balanced growth over the medium term hangs critically upon a recovery in world markets. There is better news on the inflation front. The UK Consumer Prices Index (CPI) annual inflation rate was lower at 2.2 per cent in September 2012, down from 2.5 per cent in August and the Retail Prices Index (RPI) annual inflation rate was at 2.6 per cent in September 2012, down from 2.9 per cent in August. However, with rising utility prices already announced by major suppliers, it is doubtful if inflation rates will fall much further in the short term. The Bank of England’s Monetary Policy Committee continues to maintain the historically low Base Rate of 0.5% and held quantitative easing at £375 billion in October following an increase of £50 billion announced in July 2012. The latest set of labour market statistics released by the Office for National Statistics in October show an increase in employment for the period June to August 2012, up 0.5 per cent over the quarter with 212,000 more people in employment and 510,000 more than a year earlier. The unemployment rate was 7.9 per cent of the economically active population, down 0.1 on the quarter. There were 2.53 million unemployed people, down 50,000 on the March to May quarter. The growth rate for total pay was 1.7 per cent in the three months to August 2012, up 0.1 per cent from the three months to July. Despite falling household incomes in real terms, UK retailers enjoyed strong trading conditions in September, with the value of sales increasing 1.1% month on month. Clothing & footwear was the standout performer, though all sub-sectors registered growth for the first time in six months. In year on year terms, sales were 3.2% higher than in September 2011. That shrinks to 2.5% when price increases are stripped out but the bottom line is that demand is holding up relatively well in the retail sector. UK House Prices The August 2012 data from Land Registry's House Price Index shows an annual price increase nationally of 0.7% over the preceding year, which takes the average property value in England and Wales to £163,376. There was however no monthly change from July to August. This flat market saw no change in London house prices for the last month although on annual basis the London region showed the largest uplift of 5.0% in its average property value over the last year. Central London was responsible for most of this increase in overall London house prices with the City of Westminster seeing an annual increase of 18.3%, followed closely by Kensington & Chelsea with 17.9% and Hammersmith & Fulham showing an uplift of 10.8% in the year to August 2012. This Central London trend of large annual increases in residential values has already eased as the March 2012 Budget introduced significantly higher rates of Stamp Duty Land Tax (SDLT) for residential properties sold for prices in excess of £2 million. Knight Frank report that there is emerging evidence that these rises in stamp duty are having an impact on the market. They also say that the on-going consultation on the annual charges and Capital Gains Tax which will be levied on property worth over £2 million held in company structures, due to be introduced in April 2013, is creating uncertainty and causing some would-be buyers and sellers to adopt a ‘wait and see’ attitude. According to Knight Frank total exchanges across the whole prime Central London market between May and July were 11% lower than the same period in 2011. However, while sales of properties worth between £2m and £10m fell by 23%, exchanges of houses worth £10m or more rose by nearly 30%.

Cost of Finance Since June, 3 month LIBOR has eased from 0.67% to 0.5% in early October. With little risk of any imminent rise in Base Rate, SWAP rates are still at historically low levels; with the 3 year SWAP at 0.81% and 5 year SWAP at 1.12%, both almost 40 bps lower than the figures we reported in May. Despite these low rates the levels of new lending on commercial property continue to be restricted and bank margins remain high. For large loans of over £25 million there continues to be competition amongst lenders but even loans secured against long leases to secure covenants will see margins of circa 300 bps while loans for smaller properties and those with more risk attached will see much higher margins. UK Commercial Property Market Trends The September 2012 IPD monthly index for all UK property showed annualized total returns of just 3.5% down from 7.8% for the calendar year 2011. The best performing sector was offices with total annualized returns for the preceding year of 4.9%. The lower overall returns are the result of eleven consecutive months of reducing capital values across the UK as a whole with values at headline level down by a cumulative 3.2% since November 2011. Despite this trend, total returns in the UK have remained positive. The total return for September was 0.2%. Income return remained steady at 0.6% but initial yields crept up overall to 6.4%. Capital values in the City office sector saw an increase of 0.2% in September, following three months of decline to August, buoyed by continuing rental value growth, of 0.1%. The City office market has seen values grow by 1.3% since the beginning of the year, although IPD comment that some feel the City market is keenly priced. The West End has delivered the strongest performance in the Capital in 2012, with office values growing by a 0.3% in September alone, while Central London retail dominated by the West End, recorded 1.0% growth. Outside Central London and the South East values continued to fall with lacklustre occupier with rents falling by up to 0.4% in the worst hit segment, shopping centres outside of the South East. It is interesting to note that 47.3% by value of the overall stock of properties included in the IPD UK monthly index is invested in retail, with 30.3% and 17.2% respectively in offices and industrial, which are currently the stronger performing sectors. Central London Office Market Office take-up in Central London Q3 2012 was 2.22 million sq ft, a fall of 8% on the second quarter but at a similar level to the take up in the first quarter according to CBRE’s latest survey. Activity was particularly slow during August, when both national and international attention was firmly on the Olympic and Paralympic games, the success of which should not be underestimated in reinforcing London’s image as a city that can deliver. The largest volume of leasing deals was in The West End with 843,000 sq ft of leases completed during the quarter, a 31% increase on Q2 2012, but 11% lower than the same period in 2011. Takeup in the City was 758,000 sq ft, its lowest level since Q2 2011. Docklands saw the largest increase of any Central London market with a 134% quarterly increase but this was almost entirely as a result of the largest Central London letting of the quarter with the Financial Ombudsman Service acquiring 165,400 sq ft at Exchange Tower, 1/2 Harbour Exchange Square. CBRE also report that for the sixth consecutive quarter TMT was the most active business group, with 23% of all leasing deals in Q3 coming from firms within the that sector. Space under offer to identified tenants rose for the second quarter in a row to reach 2.55 million sq ft. Of this, 1.26 million sq ft, almost half of the total space under offer in Central London, is located in the City. 885,000 sq ft is under offer in the West End accounting for 35% of the total for Central London.

After four consecutive quarters of increases, availability decreased over the quarter is now at 16.27 million sq ft. This is a drop of 5% in Q3, the largest decrease in availability since Q3 2010. The primary cause of the drop in availability was a large fall in the second-hand space, especially in the West End, where a contributing factor is the growing trend for office space to be taken off the market for conversion to higher value residential use. City of London Total office take up for the City of London for Q3 2012 was only 758,400 sq ft, down about 26% from Q2 2012 when take up reached 1,074,450 sq ft and down 22% on Q3 2011 with take up of 972,300 sq ft. As mentioned above these lower lease completions were probably due to a very low level of activity during August. One of the largest deals of Q3 was the pre-let of 78,226 sq ft to Kiln Group Limited, the international insurance and reinsurance underwriting group, at 20 Fenchurch Street, EC3 under development by Land Securities Group and Canary Wharf Group. As mentioned above, August was a particularly slow month for City leasing deals the largest of which was by Nationwide Building Society which took 47,500 sq ft of space at 1 Threadneedle Street. Elsewhere in the City, Hines leased 25,000 sq ft of office space at its 1 Bartholomew Lane, EC2 development in three separate deals to RK Capital Management (10,500 sq ft), Singer Capital (8,100 sq ft) and Payden & Rygel (7,000 sq ft). At Derwent London’s 157,000 sq ft Johnson Building, Hatton Garden EC1 advertising agency Grey Group leased another 11,000 sq ft of space and now occupies more than 60,000 sq ft at the building where it has been a tenant since 2006. The largest currently available office block in the City is 389,000 sq ft at Cannon Place, EC4 developed by US developer Hines, whose joint venture with Network Rail, owner and operator of Britain's rail infrastructure, includes remodelling the mainline and underground stations at Cannon Street. Prime Core City of London office rents were unchanged at £55.00 per sq ft at the end of Q3 2012. West End West End office supply continues to be constrained with availability at the end of Q3 2012 at 4.78 million sq ft (including projects under construction) representing 6.19% of total stock, according to Strutt & Parker’s latest market report, a reduction of 470,000 sq ft from the previous quarter. Excluding stock which is under construction, the completed supply figure stands at 2.80 million sq ft only 3.62% of total supply. Strutt & Parker’s core West End survey, which only records units of over 3,500 sq ft, reported take up for Q3 of just 463,614 sq ft. This was an improvement on Q2 but is the second quarter in a row that take up has been below the 3 and 5 year quarterly averages and is also below the corresponding quarters in 2011 (530,247 sq ft), 2010 (490,260 sq ft) and 2009 (644,919 sq ft). Soho and Victoria/Knightsbridge, with 125,776 sq ft and 120,936 sq ft sq ft respectively, were the only two areas to achieve over 100,000 sq ft of leasing deals during Q3. The highest headline rent achieved in the West End in Q3 2012 was £105.00 per sq ft per sq ft at 3-5 Burlington Gardens in Mayfair, where Lone Pine Capital leased 3.500 sq ft for a 10 year term with a tenant’s option to break at the 5th year. The incentive package included 16 months’ rent free which tempers the net effective rent. Over £100 per sq ft was also achieved at Hines’ 1 Grafton Street, where Abraaj Capital (UK) Ltd agreed to pay £102.23 per sq ft also for a 10 year term with a tenant’s option to break at the 5th year, but with a more normal 6 months’ rent free period. Other notable deals in Mayfair included Apollo Asset Management taking 6,270 sq ft of space at 25 St George Street on a 10 year term without break at £90.00 with 20 months’ rent free and two smaller leases of 2.500 sq ft suites at 10 Bruton Street at headline rents of £85.00 per sq ft. Strutt & Parker report that the TMT (Telecommunications, Media and Technology) business sector continues to dominate the active identified demand figures, supported strongly by the Banking & Finance and Professional services sectors. The Banking & Finance sector has shown a willingness to pay the highest headlines rents to secure space, particularly in Mayfair, but the TMT sector has

accounted for the largest amount of space during Q3 with 37% of the total take up compared to Banking & Finance’s 17%. In a recently published IPD/H2SO survey of the inner core West End markets of Mayfair, St James’s, Westminster, Victoria, Covent Garden, Marylebone and Fitrovia, future West End supply 1.15 million sq ft of new offices space was estimated to be due for delivery in the second half of 2012. In 2013 1.6 million sq ft is due to be delivered of which 300,000 sq ft is already pre-let. The survey shows a substantial fall in supply expected in 2014 to only 418,000 sq ft of new development, more than half of which is contained in one project, Fitzroy Place, London W1. The pipeline should improve in 2015 and 2016 with approximately 1 million sq ft scheduled for each year and in 2017 and 2018 projects above the new Crossrail underground stations currently under construction will be coming on line.

KENSINGTON £50.00 psf

HAMMERSMITH £37.50 psf

KNIGHTSBRIDGE £75.00 psf

PADDINGTON £55.00 psf

MAYFAIR & ST. JAMES’S

£105.00 psf

EUSTON & MARYLEBONE

£52.50 psf

NORTH OF OXFORD STREET

£85.00 psf

VICTORIA £70.00 psf

KINGS CROSS £47.50 psf

BLOOMSBURY £50.00 psf

MIDTOWN £50.00 psf

SOHO & COVENT GARDEN

£75.00 psf

NORTH FRINGE £45.00 psf

CITY CORE £55.00 psf

SOUTHBANK £45.00 psf

CANARY WHARF £40.00 psf

EAST FRINGE

£42.50 psf

DOCKLANDS £22.50 psf

OUTER CORE £45.00 psf

October 2012

M25 & Thames Valley Office Markets Increased activity in the Thames Valley resulted in improved south-east take up figures according to Knight Frank’s latest M25 market survey. Q3 take-up was only 12% below the ten-year quarterly average with 35 transactions completed following just 20 in Q2. M4 take-up was its highest since Q3 2010 and 58% above average. Supply is continuing to fall, reflecting limited speculative development completions over the last three years. The survey shows that M4 vacancy rate fell sharply in Q3 to 9.6%, its lowest level since Q3 2008, while the M25 vacancy rate fell to 7.9%, its lowest level in two years. The increased leasing activity included Data security group Viasat taking 50,000 sq ft of offices on a 15-year lease at BAM Properties’ 80,000 sq ft Chiswick Green development in Uxbridge at close to the quoting rent of £39.50 per sq ft. IMG Worldwide has reportedly gone under offer to take all of Schroders’ 114,000 sq ft 5 Longwalk at Stockley Park near Heathrow around £26.50 per sq ft on a 15- year lease and Huawei Technologies has agreed a deal to take 139,000 sq ft of offices at 300 South Oak Way, Green Park in Reading at around £23 per sq ft. In addition, Winton Capital is also reported to be taking a pre-let of 60,000 sq ft at Grove House in Hammersmith. If all these lettings complete, Q3 will see a significant turnaround in fortunes for the South East office market. New build construction activity remains unchanged albeit at a three year high of 823,000 sq ft in the M25. Speculative development is forecast to increase further in Q4, with several new projects due to commence in the Thames Valley. Of the 823,000 sq ft under construction in the M25 area at the end of Q3 2012, almost 400,000 sq ft is due to complete before the end of 2012. Refurbishment activity has also increased as landlords have responded to shortages of Grade A space in the strongest locations. At the end of Q2, 316,000 sq ft was under refurbishment in the M4 corridor, up 118% from Q1, including the refurbishment of the 55,735 sq ft Griffin House, Hammersmith and 51,255 sq ft at Phoenix, Reading. Investment Market Activity UK investment activity has been consistent through 2012. According to the Investment Archive compiled by Kaspar Associates, Q3 2012 UK investment transactions totalled £8.51 billion, a small 5% decrease from Q2 2012 of £8.96 billion. Q3 2012 was however an increase of 18.8% from the Q3 2011 volume of £7.16 billion. Overseas investors continue to have the largest share of investment at £4.03 billion (47.4%) of total acquisitions in Q3 2012, a trend which started in Q4 2011. Of the overseas investors, the Far Eastern investors were the most prominent with £1.05 billion of investment, followed by the Scandinavians at £0.93 billion, the later largely consisting of the £762.5 million purchase by Norges Bank IM for Norway’s Sovereign Fund of a 50% interest in Meadowhall Centre, Sheffield from London & Stamford & Abu Dhabi Investment Corp. Offices continued to be the most popular sector at 30.4% (£2.59 billion) in Q3 2012, followed by shopping centres at 17.5% (£1.49 billion). Central London remained the dominant location at 40.8% (£3.47 billion), followed by the rest of UK at 18.1% (£1.54 billion), again, as with the shopping centre sales volume, heavily influenced by the Meadowhall deal. On the buy side, Central London was favoured by the overseas and UK institutions. The overseas investors also preferred the South East and the South East was the second favourite location for UK institutions. Total UK property investment volume for 2012 to end Q3 2012 was £25.34 billion, an increase of 1.2% over the same period in 2011. For the year to end September 2012, the Irish continued to be the main sellers at 35.1% (£2.27 billion), followed by the US at 28.6% (£1.86 billion) and the Germans at 19.7% (£1.28 billion). US investors’ motivation was generally to realise profit whereas the Irish were mainly forced sales due to outstanding lending issues. German sellers were mainly selling to service fund redemptions. The largest sector for sales was offices dominated by Central London. Central London offices remain the favoured investment sector with total investment in these assets in Q3 2012 of £2.84 billion, or 35% of the quarterly total, according to research by Lambert Smith Hampton. Since Q1 2011 25% of all money invested in UK commercial property has been for City, West End and Midtown offices. The driving force behind this has been overseas investors, who are

responsible for 65% of this total, and are net investors to the tune of £4.1 billion. LSH state that the City of London is now majority foreign-owned and they see nothing to suggest a reversal of this trend in the medium or even long term. As evidence they identify another new foreign entrant to the market this quarter, as Lembaga Tabung Haji, the Malaysian haji pilgrims’ fund which purchased SJ Berwin’s 221,198 sq ft offices at 10 Queen Street Place in EC4 for £165 million. Over £5 billion of London property was purchased in Q3 2012, which is the highest figure LSH have seen for a number of years. At £2.51 billion, the 11 largest deals account for over half this figure. With the purchases of Battersea Power Station, Broadgate West and the forward funding of a development at King’s Cross Central accounting for £1 billion alone. As mentioned above, South East regional offices were in favour with both UK and overseas investors with £840 million of investment deals closed in Q3 2012. In the M25 submarket market, Q3 2012 turnover was £340 million, 13% below the level in Q2 but 7% above the five-year quarterly average. Activity for good quality secondary assets also improved in Q3, with reduced vendors’ aspirations now to a level which is proving attractive to buyers. Q4 2012 should confirm this trend with around £1 billion of assets having come to market in the West London office market in the last month, underlining current market confidence about the demand for Chiswick, Hammersmith and Stockley Park offices from occupiers and investors. At a regional level, market activity remains subdued with only prime quality office properties, regional shopping centres and long leased logistics properties attracting institutional and overseas investors. Outlook The UK economy has emerged from the recession which hit the last quarter of 2011 and first two quarters of 2012 but recovery from here be slow due to the continued caution of corporate decision makers holding back investment pending better world economic news. UK Inflation has started to ease and is now close to the 2.0% target rate. Bank of England Base Rate is likely to be held at its current 0.5% level for some time to come and SWAP rates remain at historically low levels. The UK property market continues to attract capital from around the world due to the attractive potential returns, liquidity, transparent market conditions and favourable tax treatment for offshore owners, which more than compensate for the current uncertainty surrounding world economic factors. Rents and yields remain relatively stable, although weaker regionally than in Central London. Investors should not expect a rapid increase in rental levels as the UK economy improves as there is still considerable surplus accommodation in most sectors, which will need to be absorbed before front end incentives reduce and rental growth emerges. West End offices are the exception but even there caution should be adopted as only the newest properties in prime locations will attract the highest headline rents. Capital values across the UK have softened over the last nine months but as the economy picks up we should see a gradual improvement in 2013 as occupiers become more confident. As and when the Eurozone member states reach agreement on how to resolve their national and banking troubles, the UK should be set to provide stronger real estate returns as the economy expands. Selected recent UK investment transactions City of London 10 Gresham Street, EC2

Malaysian pension fund Kumpulan Wang Persaraan (KWAP) purchased this 260,000 sq ft office and retail building for a price of £200 million reflecting a net initial yield of 5.2%. The building, designed by Foster + Partners, was completed in 2003 and is leased mainly to Lloyds TSB Bank and seven other tenants including Milbank Tweed Hadley & McCloy, Jones Lang LaSalle and JC Flowers. Average headline rents are

£44 per sq ft and the average unexpired lease term is around 9 years or 7 years after accounting for tenant break options. The purchase price equates to £769 per sq ft. 20 Finsbury Circus, EC2

The City of London Corporation has completed the sale of an 85,425 sq ft office and retail block to NTT Urban Development, a subsidiary of Japanese telecoms company Nippon Telegraph & Telephone Corporation. The building is leased to DB UK Bank on a lease expiring in June 2015 at a rent of £4 million a year. A new long leasehold interest was granted for a term of 150 years from completion. NTT Urban Development paid £42.9m for the long

leasehold, reflecting a yield of 7.9% and a price of £502 per sq ft for the leasehold interest. Garden House, 11-13 & 19 Throgmorton Avenue & 21 Austin Friars, EC2 Legal & General Investment Management has purchased the long leasehold interest in this 43,382 sq ft office building for £22 million, reflecting a net initial yield of 7.45%. The property is fully leased to Deutsche Bank until March 2018 and produces an annual net income of £1.724 million after head rent of circa £50,600 per annum payable to The Draper’s Company. The purchase equates to a capital value of about £522 per sq ft on a Freehold equivalent basis. Hasilwood House, 60 Bishopsgate, EC2

Scottish Widows Investment Partnership purchased the long leasehold interest in this multi-tenanted 44,426 sq ft Grade II Listed office and retail building; originally constructed in the 1920s, rebuilt behind the retained facade in 1996 and refurbishment in 2007. The property is held from The Leathersellers Company for a further 117 years expiring in September 2119. The purchase price for the leasehold interest was £16 million. The net initial yield of 7.0% reflects the short average unexpired terms of the occupational

leases of 6.48 years or only 3.41 years to tenant break options. The purchase equates to £396 per sq ft on a Freehold equivalent basis. 90 Fenchurch Street, EC3

The former Anglo Irish Bank sold this fully refurbished 83,007 sq ft office building to Hong Kong-based investor, Kingboard Investments for around the asking price of £58 million reflecting a net initial yield of 5.5%. The entire property is leased to Thomas Miller & Co, an international insurance company on a lease which has a further 12.5 years to run, expiring in March 2025. The purchase price equates to £699 per sq ft.

Peterborough Court & Daniel House, 133 Fleet Street, EC4

Almost two years after it went into receivership, the 370,000 sq ft London headquarters of Goldman Sachs sold for £264 million to a Cayman Islands-registered company, Fleet Street Investments II, reported to be controlled by members of the Qatari royal family. The sale was complicated by the fact that Goldman’s occupation is not certain once its lease expires in 2021 as it plans a new London HQ on a 2.5 acre it owns at 40 Shoe Lane, EC4 for which it has recently submitted an outline proposal to the City of London Corporation.

10 Queen Street Place, EC4 Lembaga Tabung Haji, the Malaysian Hajj pilgrims fund board, in partnership with Gatehouse Bank, purchased the long leasehold interest in this 221,198 sq ft office and retail building from Irish investor Jaguar Capital for £165 million to show a net initial yield of 5.02%. The property is held on a 150 years lease from the Corporation of London for a term expiring May 2154, subject to upward only head rent review on 25

December 2015 and 5 yearly thereafter, to 4.99% of the rack rental value of the office accommodation. The purchase equates to a capital value of £784 per sq ft on a Freehold equivalent basis

Vintners Place & Thames House, 68 Upper Thames Street, EC4

Downtown Properties, the US arm of Hong Kong investment manager Gaw Capital Partners, purchased the long leasehold interest in this 277,270 sq ft multi-tenanted office property for around £150 million alongside a group of South Korean investors from US opportunity fund manager Atlas Capital, to show a net initial yield of around 7%. Tenants include Jefferies International, Thomson Reuters and Sumitomo among others. The price equates to a

capital value of £541 per sq ft for the long leasehold interest. St Martins Court, 10 Paternoster Row, EC4

Canadian investment manager Oxford Properties purchased this 100,000 sq ft building, which is next to St Paul’s Cathedral from a fund managed by Legal & General for £115 million representing a net initial yield of 5.5%. The building, constructed in 2001, is leased at a rent of £52 per sq ft. The purchase price equates to £1,150 per sq ft.

68 King William Street, EC4

London & Regional sold this 97,878 sq ft office and retail building to Manafea Holding, a Saudi investor, for around £65 million at a net initial yield of 5.5%. The property is fully let to Regus and House of Fraser under long-term leases, expiring in May 2023 and April 2033, respectively. The price equates to £664 per sq ft.

Procession House, 55 Ludgate Hill, EC4 Greycoat purchased this 95,846 sq ft office and retail building, the former headquarters of Goldman Sachs, for £62 million to show a net initial yield of 6.5%. The office rent is guaranteed by Goldman Sachs for a term expiring in September 2024, subject to a tenant option to break on in September 2019. The retail units are leased to Waterstones Booksellers and Starbucks Coffee until September 2019 and September 2014

respectively. The purchase price equates to £647 per sq ft. 20 Cannon Street, EC4

German fund manager IVG Immobilien AG purchased the newly developed 40,000 sq ft office block for around £30 million, reflecting a net initial yield of 5.23%. The entire building is leased to executive headhunter Odgers Berndtson, which took a pre-let the whole of the office space in the refurbishment scheme. The purchase price equates to £750 per sq ft.

50 Cannon Street, EC4 A Spanish family, thought to be Compostela Beach, paid £16 million for this 26,599 sq ft Freehold office building reflecting a net initial yield of 6.42%. The building was comprehensively refurbished and re-clad in 1996 and is 80% occupied by part of fund management house The Vanguard Group on floor by floor leases with a weighted average unexpired lease term of 5.5 years, or 3.5 years to tenant break options.

The purchase price equates to £602 per sq ft.

Midtown 49-51 Bedford Square, London, WC1

A private charitable body acquired this 23,477 sq ft building for £14.75 million to show a net initial yield of 4.0%. The property is leased to the London School of Hygiene and Tropical Medicine for a further 9 years at a rent equivalent to £26.83 per sq ft. The sale price equates to £628 per sq ft.

7-10 Adam Street, WC2 The Rueben Brothers purchased this terrace of four Georgian buildings, constructed between 1768 and 1774, totaling 17,218 sq ft for £12.5 million reflecting a capital value of £726 per sq ft. The buildings currently house the Adam House serviced offices operation and the Adam Street private members club. The buildings are Grade II* listed and are situated within the Adelphi Conservation Area.

West End The Clarges Estate, 82-84 Piccadilly, W1

British Land purchased this 1 acre site comprising a number of dated office buildings in Mayfair for more than £150 million. The property would provide up to 200,000 sq ft of “super-prime” residential and commercial space when redeveloped. The site already has planning consent for a development including a 100,000 sq ft office block and 24 super-prime flats totalling 70,000 sq ft overlooking Green Park.

30 Old Burlington Street, Mayfair, W1 Native Land, in partnership with Hotel Properties Limited (HPL) and Amcorp, purchased the existing 83,000-sq-ft office and retail building from Standard Life Investments for a figure believed to be in the region of £85 million. The property is fully leased until 2014 giving time for Native Land to work upplans to redevelop the property as a luxury apartment block together with art galleries and restaurant on the ground floor. The target delivery date for the scheme will be 2016. 23 Savile Row, Mayfair, W1

LaSalle Investment Management and Quantum Global Real Estate paid £212 million for this Freehold 103,000 sq ft office building reflecting a net initial yield of 4.30%. The building which was completed in 2008 is multi-tenanted with an average unexpired lease term of 7.5 years and is home to several hedge funds and investment managers, including York Capital and General Atlantic, as well as art gallery Hauser & Wirth. In April 2012 the top floor was leased to a German

hedge fund manager for one of the highest Mayfair rents at £110 per sq ft. The purchase price equates to £2,058 per sq ft 100 Regent Street, W1 The Great Capital Partnership (”GCP”), the 50/50 Joint Venture between Capital & Counties Properties PLC and Great Portland Estates plc sold this multi-tenanted 52,195 sq ft office and retail building to UK fund manager, Hermes Real Estate Investment Management Limited for £64.60 million to show a net initial yield of 3.66%. The property is held on a long lease from The Crown Estate for a term of years expiring in December 2132 and geared to 10% of retail rents received. The property is currently fully let to three tenants on five leases and produces a net income of £2.50 million per annum. The purchase price equates to £1,375 per sq ft on a Freehold equivalent basis.

Regent Arcade House, Regent Street, W1

The Great Capital Partnership (”GCP”) also sold this 64,656 sq ft property to Stenham Property Ltd for £48.00 million reflecting a net initial yield of 5.5%. The property is leased to four office tenants, producing £2.78 million per annum with one vacant floor and a further two floors falling vacant in September 2012 and January 2013 respectively. The property is held on a long lease from The Crown Estate expiring December 2132, at a peppercorn rent. The retail elements of the basement, ground and mezzanine floors are sublet back to The Crown Estate for a term also expiring December 2132, at a peppercorn rent. The sale price

equates to £742 per sq ft for the office space on the upper floors excluding the retail element. 31-36 Foley Street, North of Oxford Street, W1 Dutch property company Wereldhave sold this 34,295 sq ft office building to BA Pension Fund and Duke lease for £22 million reflecting a net initial yield of 4.68% and a capital value of £641 per sq ft. The Foley Street office building was acquired by Wereldhave in 1988 and had been renovated in 1993. 9 Marylebone Lane, Marylebone, W1

Private overseas investors purchased this 25,808 sq ft office building situated north of Oxford Street for £21.5 million to show a net initial yield of 5.18%. The property is leased to commercial estate agents, Colliers International UK plc for a further two years at a rent equivalent to £44.56 per sq ft overall. The purchase price equates to £833 per sq ft.

The Jermyn Street Estate, St James’s, SW1 This portfolio totaling 133,000 sq ft of mixed use office, retail & restaurant buildings in was purchased by Great Portland Estates for £120 million to show a net initial yield of 3.70%. The estate has 62 tenants including Standard Chartered Bank, Wiltons, Starbucks and Kent & Curwen. The purchase price equates to £902 per sq ft. 9 Millbank & Ergon House, Westminster, SW1 Berkley Homes purchased these two buildings overlooking the River Thames for future potential conversion to residential. The buildings total 221,308 sq ft and are occupied by 5 tenants including a UK Government department with approximately 4 years remaining lease terms. The purchase price of £100 million reflects a net initial yield of 7.73% but more importantly a price of only £452 per sq ft. 67 Tufton Street, Westminster, SW1

Legal & General Investment Management acquired this 22,467 sq ft office building for £16.25 million to show a net initial yield of 5.64%. The building is leased to the UK Government for a further 4.25 years at a rent equivalent to £43.82 per sq ft. The purchase price equates to £723 per sq ft.

29 Queen Anne’s Gate, St James’s, SW1 A western European fund purchased this 24,875 sq ft office building for £17.95 million reflecting a net initial yield of 5.68%. The property is multi-tenanted with 7 occupiers on average unexpired term of 7 years at an average rent of £43.36 psf. The purchase price equates to £722 per sq ft. 84 Eccleston Square, Victoria, SW1

A private middle-eastern buyer acquired this 68,648 sq ft office building for £49 million to show a net initial yield of 6.13%. The building is leased to Lafarge Cement UK Ltd & APL Group Ltd paying average rents of £46.32 per sq ft with a weighted average term of less than 2 years remaining on the leases. The purchase price equates to £699 per sq ft.

Outer London Bechtel House, 245 Hammersmith Road, W6

Legal & General Property bought this 164,343 sq ft headquarters office building from CBRE SPUK III for £42.25 million reflecting a net initial yield of 9.8%. The building is currently let in its entirety to Bechtel Limited, the construction engineering company which has occupied the building since it was developed in the early 1980s, on a lease expiring in 2014. Subtenants include Accor UK Business & Leisure Hotels, UK Channel Management and Virgin Media. The price equates to £257 per sq ft.

The BBC Television Centre, Wood Lane, White City, W12

The BBC exchanged contracts in July for the sale of it West London Television Centre to Stanhope, backed by Mitsui Fudosan, who will pay £200 million for the 14-acre site. The site currently has 1.2 million sq ft of offices but has potential for a large-scale residential development and a redeveloped office complex. The sale arises as a result of BBC Television’s relocation to Salford Quays in Manchester, with its first divisions starting broadcasting from there earlier this year.

South-East Regional Sales Adobe HQ, Market Street, Maidenhead, Berkshire Gatehouse bank purchased this 75,390 sq ft office building for £34.25 million to show a net initial yield of 6.24%. 50,000 sq ft is leased to Adobe for a further 10.5 years with the seller providing a 10 years lease guarantee on the remaining 25.390 sq ft at £29.50 per sq ft. The purchase price equates to £454 per sq ft. Logica HQ, 250 Brook Drive, Green Park, Reading, Berkshire

Oxford Properties strengthened its ownership at Reading’s 1.3 million sq ft Green Park with the purchase of the Freehold of Logica’s 65,500 sq ft headquarters building for £19.5million reflecting a net initial yield of 8.75% and a price of £298 per sq ft.

Lucidus, 41-43 Clarendon Road, Watford, Hertfordshire

British Steel Pension Fund purchased this 51,246 sq ft milt-tenanted office building for £14 million to show a net initial yield of 7.5%. The average unexpired lease term was circa 7. years at an average rent of £21.67. The purchase price is equivalent to £273 per sq ft. Costain House, Vanwall Business Park, Maidenhead, Berkshire

Aviva sold this 36,973 sq ft office building to a private investor for £14.7 million reflecting a net initial yield of 7.0%. The building was constructed in 2001 and was leased to Costain Ltd at a rent equating to £29.46 per sq ft for a term expiring in August 2024, providing approximately 12.5 years income. The purchase price is equivalent to £398 per sq ft.

Network House, Norreys Drive, Maidenhead, Berkshire

Volvo’s 22,000 sq ft UK headquarters was sold by Castlemore Securities Pension Scheme, to a private investor for £9 million to reflect a net initial yield of circa 6.4%. The building, constructed in 1996, was leased to Volvo Car UK Limited on a new 15 year lease on full repairing and insuring terms. The purchase price equates to £409 per sq ft.

Terra Firma, Redhill, Surrey A private investor acquired this 46,835 sq ft town centre office building with only 4 years remaining on a lease of the entire office space to construction group, Balfour Beatty for £9 million to show a net initial yield of 10.14%. The purchase price reflects a capital value of £192 per sq ft. Other Regional Sales Skandia House, Portland Terrace, Southampton, Hampshire

Danish investor Danmerc purchased the Freehold of Skandia life insurance company’s 108,957 sq ft headquarters office building for £26.56 million to show a net initial yield of 7.25%. Skandia’s lease runs until 29 September 2032, providing approximately 20 years to expiry and 15 years to the tenant’s break option; an unusually long lease term in today’s market. The purchase price is equivalent to £244 per sq ft.

3000 Parkway Solent Business Park, Whiteley, near Southampton, Hampshire Claymore Group, acting on behalf of a middle-east investor purchased this 53,000 sq ft office investment located on Goodman’s 130 acre Solent Business Park near Southampton from Legal & General in an off-market deal for £13.5 million. The property is occupied by Zurich Insurance on a ten-year lease at an annual rent of £1.03 million. The purchase shows a net initial yield of 7.25% and the purchase price equates to £255 per sq ft. Bridge View and Consort House, Aberdeen

Gatehouse Bank, the London based Shariah compliant investment

bank, acquired this 159,170 sq ft office complex located in central Aberdeen for £59.9 million to reflect a net initial yield of 7.15%. The property is occupied and fully let to oil and gas service provider Petrofac as its North Sea headquarters, and The Scottish Ministers (NHS), with an average weighted unexpired lease term of 14 years. The purchase price equates to £376 per sq ft overall.

Contacts

Peter Dewar peter@coh.eu 020 7399 2734

Rob Cregeen rob@coh.eu

020 7399 2743

Dick Grillo dgrillo@coh.eu 020 7408 1114