Valuation for Internal Purposes: The residential car parking site at the Tregunter Estate, Finborough Road, SW10 ('the Property')

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1 Drivers Jonas Deloitte 66 Shoe Lane EC4A 3BQ Tel: +44 (0) Fax: +44 (0) The Royal Borough of Kensington and Chelsea 3rd Floor The Town Hall Hornton Street W8 7NX Direct: +44 (0) Direct Fax: +44 (0) For the attention of Danielle Torpey Our Ref: OELS/RB Date: 16 August 2012 Dear Sirs Valuation for Internal Purposes: The residential car parking site at the Tregunter Estate, Finborough Road, SW10 ('the Property') Instructions We refer to our dated 22 May 2012 which sets out the scope of this work in respect of the property. We have agreed to provide: The likely rents achievable from a change of use to a storage site; The income that could be generated from a car park operator; The likely rents from letting the spaces on an individual basis; and The likely costs of putting the car park into operational use. Compliance This advice is outside the requirements of the Red Book as it is not a formal valuation and is given in the context of a potential letting. However, we have adopted the principles of the Red Book. Location The Property is located 1km (0.6 miles) southwest of West Brompton station, which offers overground (Network Rail West Line) and underground (District Line) connections to the heart of and east. The immediate area surrounding the Property is predominantly residential, although Earls Court exhibition centre is only 0.8km (0.5 miles) to the north. The site can be found at the furthermost western point of Tregunter Road. The only way that it can be accessed is at the crossroads of Tregunter Road and Redcliffe Gardens (A3220), which is a one way street heading southbound. The site backs onto and is situated beneath the Walnut Tree House estate.

2 Description The Property is a private underground car park consisting of 97 car parking spaces. There are separate entrance and exit points for the car park, which are guarded by electric roller shutters that require a key fob to open. There are separate points of entry for cars and people, which are adjacent. The car park has a Gross Internal Area (GIA) of 2,378 sq m (25,597 sq ft). Assessment of potential income that can be generated through different uses of the car park The likely rents achievable from a change of use to a storage site There have been lettings of car parks that have been converted for self-storage. These have achieved rents in the region of 2-4 per sq ft, with the higher rents achieved in Central. We have cross checked this by running a profits approach method of valuation to see whether this site would be affordable for a self storage operator. Some explicit assumptions were made in this approach in order to calculate the likely rent, these are as follows: Assumptions Maximum Lettable Area MLA (65% of the GIA) Maximum Occupancy (80% of MLA) Average rent for customers Total Costs of running site (per annum) Fit Out Costs Amortisation Period 1,546 sq m (16,638 sq ft) 1,237 sq m (13,310 sq ft) 377 per sq m ( 35 per sq ft) 260,000 p.a. 215 per sq m ( 20 per sq ft) 10 years The maximum lettable area MLA is the total amount of space that can be used for self storage. It can be defined as the whole building fully fitted out for self storage less circulation space. We have assumed that the maximum occupancy would be 80% of the MLA, which is 1,237 sq m (13,310 sq ft). This is the total area that income could be generated from. We have applied a self storage rent of 35 per sq ft. This rental value is based on the research we have undertaken on self storage operators within the area. The rent assumed is below the competition due to the low visibility of the subject property. We have assumed total costs to be 260,000. These costs include: staff costs ( 50,000), business rates ( 125,000), marketing ( 30,000), HQ costs ( 30,000) and other additional costs ( 25,000). Furthermore, we have assumed that fit out costs would in the order of 20 per sq ft and that these costs would be paid over a period of 10 years. By deducting all these costs, including the fit out costs, from the gross income, it derives a net profit at maturity. 20% has been deducted from the net profit due to the potential lease up risk. A high

3 percentage has been applied due to the location of the site and that it would be an underground storage facility. We believe that an operator could then expect to pay 50% of the remaining amount as rent. The cashflow summary is set out below: Profits Method Summary Gross Income 465,865 Less Total Costs ( 260,000) Less Fit Out Works (per annum) ( 33,000) Net Profit (at maturity) 172,865 Less Lease Up Risk (20% of Net Profit) ( 34,573) Residual Amount c. 140,000 Less 50% Share ( 70,000) Rent per annum 70,000 ( 4.16 per sq ft) The profits method produced a rental income of 70,000 based on a 50% share. However, we feel that a self storage operator would be willing to pay rents in the order of 70,000 to 90,000 per annum Additionally we have done some analysis on the rental value that the subject site could achieve if it was converted to a pure storage site with a single occupier. There is a lack of evidence for pure storage sites of this size. Therefore, we looked at rents achieved for smaller units and discounted accordingly due to the size of the subject property. We feel that the site could generate in the order of per sq m ( 4-5 per sq ft). Therefore, given the GIA less some space for access to the underground site, we believe that the converting the car park to storage space could achieve a rental value in the order of 100,000 per annum. Therefore, both the self storage and pure storage sites would produce a similar level of rental income of 85,000 to 100,000 per annum. The income that could be generated from a car park operator You have instructed us to consider the rental value that could be generated based on a pay and display car park. You have also wanted us to consider a season ticket only car park as there may be an issue with gaining planning permission for a pay and display car park. Pay and Display Car Park If the car park uses a pay and display system, individual spaces can generate up to 5,000 per annum. The total revenue received is likely to be higher in prime locations. Furthermore, we have found that based on comparable evidence an operator is likely to offer a rental value in the region of 750-1,000 per individual car parking space per annum. Therefore, a total rental value of 75,000 to 100,000 per annum would be achievable.

4 Cross Analysis Due to the problem of a non-transparent market, other indicators are used as a cross check. We have set out a graph below showing the relationship between rent and EBITDAR and Net Revenue for a range of rent review and lease renewals. As the graph below shows the majority of evidence ranges between 30% to 60% of Net Revenue and 40% to 85% of EBITDAR. We have run a profits method of valuation over a five year period. We researched local car park operators and analysed the prices that they currently charge customers. Consequently, we believe that a daily rate of 15 would be appropriate based on rates in the local market, which we have adjusted to reflect the car park. The following assumptions have been applied: Assumptions Occupancy Levels 40% in Years 1 & 2, 50% in Year 3 & 4, 60% in Year 5 Number of Spaces 97 Daily Rate 15 Business Rates 60,000 per annum

5 Marketing Wages Management Repair & Maintenance Ticketing 10,000 per annum 35,000 per annum 15% of the total income generated per annum 25,000 per annum in Years 3 & 4, 50,000 in Year 5 7,000 in Year 1, 7,500 per annum in Years 2 & 3, 8,000 per annum in Years 4 & 5 Total income per annum is calculated by multiplying together the occupancy rate, number of spaces, daily rate and the number of days in the year. Costs are deducted from the gross income to derive the net income. Profits Method Summary Total income over five year period 1,274,580 Less Total Costs over five year period ( 854,187) Net income over five year period 420,393 Average net income per annum Average net income per space per annum c. 85,000 c. 865 The average rent per annum over the five year period is 85,000. Given the number of car parking spaces at Tregunter Estate, the rent breaks back to approximately 865 per individual space. Season Ticket Only Car Park We have researched local car park operators and found that their revenue, on a per space basis, varies depending on how the space is operated. If an individual car parking space is let on a season ticket, the total revenue generated is generally in the order of 2,500 per annum. However, this value would have to be adjusted due to the location of the subject Property. We have run a profits method of valuation based on car park season ticket sales over a five year period. We researched local car park operators and analysed the season ticket prices that they currently charge customers. Consequently, we believe that a price of 2,000 per space per annum would be appropriate based on rates in the local market, which we have adjusted to reflect the car park. Due to its distance from offices and other commercial areas, we have assumed that it is unlikely to ever be more than half full unless rates were significantly reduced. The following assumptions have been applied:

6 Assumptions Occupancy Levels 25% in Year 1, 30% in Year 2, 35% in Year 3, 40% in Year 4, 45% in Year 5 Number of Spaces 97 Season ticket price Business Rates Marketing Management Repair & Maintenance 2,000 per annum 15,000 per annum 10,000 per annum 7% of the total income generated per annum 25,000 per annum in Years 3 & 4, 50,000 in Year 5 Total income per annum is calculated by multiplying together the occupancy rate, number of spaces, daily rate and the number of days in the year. Costs are deducted from the gross income to derive the net income. Profits Method Summary Total income over five year period 339,500 Less Total Costs over five year period ( 173,765) Net income over five year period 165,735 Average net income per annum Average net income per space per annum c. 33,000 c. 340 The average rent per annum over the five year period is 33,000. Given the number of car parking spaces at Tregunter Estate, the rent breaks back to approximately 340 per individual space. We have taken a prudent view on occupancy; it could achieve rents of 50,000 if a more optimistic scenario was carried out. Therefore, it would achieve a rental value that is significantly lower than those that could be generated from storage use. However, it is important to note that if it was possible to gain planning permission for a pay and display car park, we believe rental values would be broadly in line with storage rental values. The likely rents from letting the spaces on an individual basis We have researched the prices that people charge potential customers when renting out individual spaces. Our research shows that in this location, a car parking space would cost in the region of 200 per month. Therefore, letting all the spaces on an individual basis could generate approximately a

7 gross income of 230,000 per annum. Currently, only 25% of the parking units are tenanted. Therefore, given the location of the subject property, it could be difficult to let all the spaces. Our comparable schedule is attached as Appendix B. The likely costs of putting the car park into operational use We believe the car park to be in a fair condition. Subsequently, we feel that putting the car park into operational use, assuming it was only ran as a car park with season ticket sales, would only require the installation of ticketing and barrier systems. From the discussion with operators, we believe this is likely to cost in the region of 75,000 to 100,000. Conclusion From our analysis, the highest and best use is for storage (or self storage). However, the car park market is competitive at the moment and there may be some operators who take a very optimistic view of the income potential. If you were considering letting the car park for storage, we would recommend some soft market testing with some of the more aggressive car park operators who are bidding high rents in. Liability to Third Parties This Letter is confidential to the Royal Borough of Kensington and Chelsea ("the Client"), has been prepared in accordance with the terms of your instruction letter of 18 May 2012 and our Terms of Engagement letter dated 22 May 2012 ("the Contract"), and is subject to the restrictions on use specified in the Contract. No party other than the Client is entitled to rely on this Letter for any purpose whatsoever and we accept no responsibility or liability to any party other than the Client in respect of the contents of this Letter. This Letter must not, save as expressly provided for in the Contract, be recited or referred to in any document, or copied or made available (in whole or in part) to any other person without our express prior written consent. Notwithstanding this, should access to this advice be requested by the Royal Bank of Scotland Group, Santander Group, Royal Bank of Canada Group, Morgan Stanley, BNP Paribas (including Fortis) or Canada Life, either as sole lender or as syndicate members, we request that we are informed in order that we can satisfy our own regulatory requirements. Publication of Contents Neither the whole nor any part of this Letter nor any reference thereto may be included in any published document, circular or statement nor published in any way without our written approval as to the form and context in which it may appear. Yours faithfully Ollie Saunders for Deloitte LLP (trading as Drivers Jonas Deloitte)

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9 Appendix A- Terms of Engagement

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15 Appendix B Comparable Schedule

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17 Tregunter - Individual Car Park Lettings Schedule Address Type Daily Rate Monthly Rate Additional Comments Kempsford Gardens, West Brompton Private driveway (building's back yard) Private driveway - 3 spaces. Rent for events, daily, weekly, monthly access; Gated, lighted and CCTV. Rates negotiable of up to 25% depending on length of stay. Lillie Road, West Brompton Private driveway Warwick Road Private driveway Brompton Park Crescent Private driveway Lillie Road, West Brompton Private driveway Templeton Place Private driveway space. Rent for events, daily, weekly, monthly or annually. Minimal rental is one day. 1 space. Rent for events, daily, weekly, monthly or annually. Minimal rental is two days access; Gated, lighted, security patrolled and CCTV. 60/week; 200/month 1 space. Rent for events, daily, weekly or monthly access; Gated, lighted, security patrolled and CCTV. Longer stays negotiable. 1 space. Rent for events, daily, weekly, monthly or annually. Minimal rental is one day. 1 space. Rent for events, daily, weekly, monthly or annually. Minimal rental is two days access; Gated and security key provided. Milliner House Hortensia Road Fulham SW10 0NG Brompton Park Crescent Fulham SW6 1SP 1-20 Princes Gate Kensington SW7 3QL Allocated space Private driveway Allocated space Secure residential underground parking space, available for rental on Hortensia Road, located nearby to Chelsea & Westminster Hospital. The space is accessible from the street and you will be provided with your own Key Fob. 50 deposit. Available from 01/06/2012 Parking space available to rent in a gated development outside the CC zone, close to West Brompton (rail & tube), Fulham Broadway & Earls Court tubes. 24 hour security & CCTV. Available 24/7. 50 deposit. Available from 01/06/2012 Open carport at Princes Gate. Secure and available 24/7. Very sought after, safe location. 50 deposit. Available from 30/06/ Brompton Park Crescent Fulham SW6 1SZ Brompton Park Crescent Fulham SW6 1SZ Allocated space Allocated space Allocated parking space available to rent in private gated development, which has 24 hours security. The space is 5 minutes walk from Earls Court Exhibition Centre and Tube Station, only 5 minute walk from Fulham Broadway and its available on monthly rental with accessibility 7days a week. 50 deposit. Available from 01/06/2012 Parking space available to rent in a gated development, just a few minutes walk to West Brompton (rail and underground), Fulham Broadway, Earls Court, 24 hour security. Available Monday to Friday. 50 deposit. Available from 01/06/ Brompton Park Crescent Fulham SW6 1SZ Allocated space Allocated parking space available to rent within short walking distance of Earls Court and Fulham Broadway. The spaces are in a private, residential car park with gated entrance and a security guard in attendance. Available 7 days a week 24 hours a day. 50 deposit. Available from 01/06/ Brompton Park Crescent Seagrave Road Fulham SW6 1SW Kings Road West Brompton Kensington SW10 0BB 5-15 Brompton Park Crescent Seagrave Road Fulham SW6 1SN Allocated space Allocated space Allocated space Allocated parking space available to rent in private gated development, which has 24 hours security, CCTV on the gate and nightlights. The space is a 5 minute walk from Earls Court, West Brompton and Fulham Broadway Tube Stations and provides easy access to the M4 out of. It is accessible 24 hours a day, 7 days a week. 50 deposit. Available from 01/06/2012 Allocated parking space in a secure underground car park, located in King's Road, off Worlds End Estate. This particular space is available to access 24/7 of which a key card will be provided to gain entry. This car park has CCTV and on site security. 50 deposit. Available from 01/06/2012 The space is in a private and secured residential area. is about 5 minutes walk from West Brompton station or Fulham Broadway station. Monday-Sunday Access. 50 deposit. Available from 01/06/2012