Aviation House

125-133 Kingsway London WC2 Landmark Trophy Midtown Freehold

Investment Summary
Location
Occupying a highly prominent position at the junction of Kingsway and High Holborn in the heart of Londons Midtown, an established and sought after office location.

Tenancies
Retail - let to Sainsburys Supermarkets Ltd until 22 October 2035 at a current rent of 683,750 pa (24.95 per sq ft overall) and Boots The Chemists Ltd until 19 December 2025 at a current rent of 250,000 pa (130 Zone A). The Boots unit has a tenants break option effective 20 December 2015. Office - let to The Secretary of State (Food Standards Agency) for a term expiring 24 December 2020 at a current rent of 6,053,259 pa (45.73 per sq ft) rising to 7,364,727 pa (55.64 per sq ft) in December 2015, with a tenants break option effective 20 February 2018. All the leases are on effective full and repairing and insuring terms with the exception of the lease to the Secretary of State which is drawn on internal and repairing terms.

Description
An imposing trophy building redeveloped in 2000 incorporating a 1913 Grade II listed faade of the Holy Trinity Church providing two retail units over ground and lower ground floor levels together with eight floors of high specification offices above and a two storey church hall to the rear.

Accommodation Current Gross Income

Retail Offices Total 32,141 sq ft 132,345 sq ft 164,486 sq ft 2,986 sq m 12,295 sq m 15,281 sq m 6,987,009 pa

In addition 4 car parking spaces are provided at basement level.

Current Net Income

6,749,009 pa after allowing for the annual maintenance contract of 238,000 pa applicable to the Secretary of State internal and repairing lease.

Tenure
Freehold.

Proposal
Offers in excess of 109 million reflecting a net initial yield of 6.10%, rising to 7.25% in December 2015 assuming purchasers costs of 1.75%. This reflects a low capital value of only 663 per sq ft. The property is held in an offshore SPV with any stamp duty saving accruing directly to the purchaser.

Charing Cross

Covent Garden The Strand Covent Garden

Kingsway New Oxford Street

Lincolns Inn Fields

Holborn

High Holborn Southampton Row

Location
Aviation House occupies a highly prominent corner site at the junction of Kingsway and High Holborn in the heart of Midtown and close to the border with Covent Garden. Midtown lies equidistant between the City and the West End at the core of Londons commercial district. With its easy accessibility to public transport infrastructure the area affords occupiers excellent connectivity throughout Central London. This together with its high quality modern office buildings at affordable rents has combined to create a vibrant, popular and first-class London office location.

Aviation House

Not to scale. Indicative only.

Today the area boasts an impressive occupier base popular with UK and international organisations including financial, accounting and professional industries. It is also a popular location for the London School of Economics (LSE) as well as a number of government bodies, regulatory authorities and professional bodies such as the ACCA, the Land Registry and Royal College of Surgeons, and traditionally the legal profession due to its proximity to the Royal Courts of Justice. Major occupiers include Olswang LLP, BBC, Pearson Plc, Deloitte, Coutts Bank, EDF Energy, Lovells, J Sainsbury and the Civil Aviation Authority.

The building is surrounded by some of the finest and varied shopping and restaurant amenities that London has to offer with the world famous shopping destination Oxford Street, featuring retailers such as Selfridges, John Lewis, Marks & Spencer, House of Fraser and Debenhams, being located nearby to the west of the property, whilst the shopping, entertainment and thriving theatre-land area of Covent Garden is located a short walk to the south west. Nearby high-class restaurants include Bank, The Ivy, Rules, St Martins Hotel and The Savoy Grill.

High Holborn is the main east-west thoroughfare connecting the City of London with the West End and along with Kingsway to the south provides the majority of Midtowns shopping amenities where major national retail operators are represented along with numerous restaurants, pubs and wine bars serving the areas large working population. Communications are excellent with Holborn Underground station (Central and Piccadilly lines) located immediately opposite and Tottenham Court Road (Central and Northern lines) also located within a short walking distance. Additionally numerous bus routes operate along Kingsway and High Holborn providing access to the City, West End and beyond.

Description
A striking trophy corner building providing two retail units on ground and lower ground floor levels together with eight floors of high specification offices above totalling approximately 164,486 sq ft (15,281 sq m). Originally constructed in 1956 the building was redeveloped in 2000 by Laing Limited to a scheme by architects Sheppard Robson. Constructed around a steel frame with predominantly glazed frontages Aviation House has a modern look incorporating aluminium framed windows and glass bricks below the perimeter window frontage. The redevelopment incorporated the 1913 Portland stone Grade II faade of the Holy Trinity Church housing a central semicircular projecting portico of Corinthian columns and a shallow lead lined domed roof. The development further encompasses a two storey church hall to the rear of Holy Trinity Church. Retail accommodation comprises two units over ground and lower ground levels which have extensive frontages to both High Holborn and Kingsway and have been fitted out by the existing tenants. The Sainsburys store is accessed from an entrance on the corner of Kingsway and High Holborn and consists of an L-shape sales floor whilst the Boots store is accessed from an entrance on Kingsway and consists of a unit broadly rectangular in shape and benefiting from a high frontage to depth ratio. The offices are accessed through the impressive faade of Holy Trinity Church accessing an impressive double height reception area with marble covered concrete flooring and a glazed roof atrium. The entrance lobby provides an approach to three separate staircases and lift lobby providing four 13 person Otis passenger lifts which serve ground to eighth floors (one lift accesses the lower ground floor).

Specification
Internally the office specification is to a high standard and arranged in a U-shape around a central atrium principally providing open plan accommodation and includes: Four pipe fan coil air conditioning to all office floors. Fully accessed raised floors providing 100mm clear void. Metal tiled suspended ceilings with integral Category II lighting Male and female toilets on all floors. Four 13 person Otis passenger lifts. Full height double glazed aluminium framed windows. Floor loadings of 3 + 1 KN/m2 or 4 + 1KN/m2. Excellent natural light throughout.

Accommodation
Floor 8th Floor 7th Floor 6th Floor 5th Floor 4th Floor 3rd Floor 2nd Floor 1st Floor Ground Ground Basement Basement Ground Basement Ground Basement Total Use Office Office Office Office Office Office Office Office Office Reception/Atrium Office Ancillary/Storage Retail Retail Retail (ITZA) Retail Area sq m 1,011.1 1,007.8 1,172.2 1,172.2 1,511.3 1,626.6 1,723.4 1,736.0 502.6 348.2 199.3 284.4 1,519.0 1,026.9 240.1 (168.4) 200.0 15,281.1 Area sq ft 10,883 10,848 12,617 12,617 16,268 17,509 18,551 18,686 5,410 3,748 2,146 3,062 16,350 11,054 2,584 (1,812) 2,153 164,486

Ground Floor

Sainsburys Central

Boots The Chemists

Office Reception

Not to scale. Indicative only.

Fourth Floor

Seventh Floor

Offices

Offices

Atrium Terrace

Offices

Terrace

Not to scale. Indicative only.

Tenure
Freehold.

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115

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Bank
215 to 2

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Tenancies
Currently let to three tenants at a current gross passing rent of 6,987,009 pa in accordance with the tenancy schedule. The income is split as follows:

3% 10%

87%

Secretary of State (office) - 6,053,259 pa (45.73 per sq ft) Sainsburys (Retail) - 683,750 pa (24.95 per sq ft) Boots (Retail) - 250,000 pa (130 Zone A)

The lease to the Secretary of State is subject to 4% pa compound fixed uplifts receivable every five years. The vendor is topping up the rent to the next fixed uplift effective 25 December 2010. The Church Hall situated to the south western corner of the site is let to the Secretary of State at a peppercorn until December 2020.

Tenancy Schedule
Accommodation Sq m Area Sq ft Tenant Rent pa Rent psf Lease Term Next Rent Review Comments

8th Floor 7th Floor 6th Floor 5th Floor 4th Floor 3rd Floor 2nd Floor 1st Floor Ground Reception/Atrium Basement

1,011.1 1,007.8 1,172.2 1,172.2 1,511.3 1,626.6 1,723.4 1,736.0 502.6 348.2 483.7 12,295.1 1,519.0 1,026.9 2,545.9 240.1 (168.4) 200.0 440.1 15,281.10

10,883 10,848 12,617 12,617 16,268 17,509 18,551 18,686 5,410 3,748 5,208 132,345 16,350 11,054 27,404 2,584 (1,812) 2,153 4,737 164,486

The Secretary of State (Food Standards Agency)

6,053,259 (topped up to Dec 2010)

45.73

25/12/2000 24/12/2020

25/12/2015

5 year compound fixed uplifts at 4% pa Dec 2015 - 7,364,727 pa (55.64 psf) Lease has limited repairing liability. Tenants break 16/02/2018. 6th, 7th & 8th floors sublet to OFSTED.

Ground Basement

Sainsburys Supermarkets Limited

683,750

24.95

23/10/2000 22/10/2035

23/10/2010

FRI lease. Guarantor J Sainsburys plc.

Ground (ITZA) Basement

Boots the Chemists Limited

250,000

130 ZA

20/09/2000 19/12/2025

20/12/2010

FRI lease. Tenants break 20/12/2015.

Total

6,987,009

Annual Service Contract

The lease to The Secretary of State was granted on an internal repairing basis only. The responsibility for maintaining and repairing the structure and fabric of the building and plant is that of the freeholder whilst the tenant is responsible for electricity, water, cleaning and on-site staff/security. There is currently an annually reviewable maintenance contract made between the Freeholder and JCA Maintenance Ltd at 238,000 pa. We have been advised that the liability to the freeholder for the year ending 1 August 2011 was in the order of 310,000. Finally The Secretary of State has a limited reinstatement obligation which requires them to quietly yield up only.

Tenants Financial Information

The Secretary of State for the Environment, Transport and the Regions
Occupied by the Food Standards Agency, the tenant is a government department.

Boots the Chemists Limited

Boots the Chemists Ltd is a member of Alliance Boots Plc and is the UKs number one health and beauty retailer operating a wide range of stores from local community pharmacies to large destination health and beauty stores. In June 2007 Alliance Boots Plc was acquired by private equity firm KKR & Co and Stefano Pessina for an estimated 11 billion and today employs over 110,000 staff in over 3,200 retail stores and 685 opticians. Alliance Boots has reported the following key financial figures:
31 March 2009 Net Sales Pre Tax Profits 31 March 2008

Sainsburys Supermarkets Limited

A wholly owned subsidiary of J Sainsbury plc which is a leading UK food retailer listed on the London Stock Exchange and included on the prestigious FTSE 100 index with a market capitalisation of approximately 6.05 billion. The company employs around 150,000 people from 525 supermarkets, 303 convenience stores and Sainsburys Bank. The lease is guaranteed by J Sainsbury plc and listed below are both companys key financial figures: J Sainsbury plc Guarantor
21 March 2009 Net Sales Pre Tax Profits Net Assets 21 March 2008

17,195,000,000 13,000,000 4,224,000,000

11,865,000,000 (64,000,000) 4,048,000,000

Net Assets

18,911,000,000 466,000,000 4,376,000,000

17,837,000,000 479,000,000 3,826,000,000

Sainsburys Supermarkets Limited Tenant

21 March 2009 Net Sales Pre Tax Profits Net Assets 21 March 2008

18,910,000,000 548,000,000 3,541,000,000

17,619,000,000 332,000,000 4,113,000,000

Market Commentary
Investment Market The central London investment market is currently witnessing strong demand from overseas investors together with the return of UK institutions and funds. Activity is being enhanced by a rising expectation that the Central London occupational markets are now in a recovery phase. Activity in the market is however being restricted by a severe lack of suitable investment opportunities, which has resulted in a hardening of prime yields across all central London sub-markets. The appetite for larger, high profile investment transactions is expected to continue and can be demonstrated by the following transactions:Occupational Market After a prolonged period of falling tenant demand and increasing supply the Central London office market is now widely considered to be in a period of recovery with strong rental growth expected across all sub markets over the coming years. The Mid-Town office market consistently out-performed the City of London in headline terms in the last rental cycle achieving rents in excess of 70.00 per sq ft whilst today prime rents for Grade A space currently stand at approximately 50.00 per sq ft with a very limited future development pipeline. Key transactions include:-

Address

Price (m)

Net Initial Capital Value Yield (%) ( per sq ft)

Size ( per sq ft)

Tenure

Date

Address

Tenant

Rent ( per sq ft)

Date

30 Finsbury Square, EC2 Orion House, Upper St Martins Lane, WC2 111 Strand, WC2 15-17 Long Acre, WC2

102m 74.5m 35m 38m

5.60% 5.25% 5.10% 5.20%

748 847 921 898

136,401 87,937 37,998 42,300

FH Q2, 2010 FH Q2, 2010 LH Q2, 2010 LH Q1, 2010

The Rolls Building, 110 Fetter Lane, EC4 One Southampton Row, WC1 40 Holborn Viaduct, EC1 40 Holborn Viaduct, EC1
* Note: data above derived from third parties

Weil Gotshal & Manges Carpmaels and Ransford GDF Suez Energy UK Ltd Capgemini UK

54.00 (u/o) c.49.50 (u/o) 45.00 45.00

Q2 2010 Q2 2010 Q4 2009 Q4 2009

Retail Market The Central London retail market continues to out-perform the rest of the UK where like-for-like sales grew by 4.4% in March alone. The latest data from the British Retail Consortium/KPMG London Retail Sales Monitor showed retail sales in central London in March 2010 were 9.9% higher on a like-for-like basis than a year ago, when sales had risen 5.2%. Recent letting activity has centred around Englanders newly developed mixed use scheme at 1 Southampton Row, directly opposite Aviation House, where Metrobank have taken 6,975 sq ft at 235 per sq ft Zone A or 82.00 per sq ft overall. In the same development EAT have taken a smaller unit at an overall rent of 56.00 per sq ft. Further afield but also relevant is the rent review in September 2009 to Waitrose at 98 Marylebone High Street which was agreed at 35.75 per sq ft overall. Lastly the rent review to Sainsburys at 145 Tottenham Court Road was agreed at 30.00 per sq ft overall in September 2007.

Planning
Aviation House lies within the London Borough of Camden. The property is not listed.

VAT
The property is elected for VAT.

Capital Allowances
There are no capital allowances available.

Proposal
Offers in excess of 109 million reflecting a net initial yield of 6.10%, rising to 7.25% in December 2015 assuming purchasers costs of 1.75%. This reflects a low capital value of only 663 per sq ft. The property is held in an offshore SPV with any stamp duty saving accruing directly to the purchaser.

Further Information
For further information or to arrange an inspection please contact:

Mark Shipman 020 7529 5708 markshipman@michaelelliott.co.uk

Toby Larman 020 7529 5715 tobylarman@michaelelliott.co.uk

Sean Howes 020 7529 5709 seanhowes@michaelelliott.co.uk

Misrepresentation Act 1967 Conditions under which particulars are issued: Messrs Michael Elliott LLP for themselves and for the vendor of this property, whose agents they are give notice that: 1. These particulars do not constitute, nor constitute any part of, an offer or contract. 2. None of the statements contained in these particulars as to this property is to be relied on as a statement or representation of fact. 3. Any intending purchaser must satisfy himself by inspection or otherwise as to the correctness of each of the statements contained in these particulars. 4. The vendor does not make or give, and Michael Elliott LLP nor any person in their employment has any authority to make or give, any representation or warranty whatever in relation to this property. Property Misdescription Act 1991: These details are believed to be correct at the time of compilation but may be subject to subsequent amendment. www.cube-design.co.uk (Q1520) May 2010