26 40 Kensington High Street

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1 26 40 London W8

2 Contents 04 Investment Highlights 08 Location 12 The Property 14 Accommodation 16 ing 18 Tenure and Tenancies 20 Investment Transactions 21 Development Opportunities 23 Tenant Financial Information 24 Proposal and Contact Details Landmark mixed use building in the heart of Kensington 01

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4 Investment Highlights A rare opportunity to acquire a major freehold site covering 0.6 acres providing a total of 120,211 sq ft. Occupying a highly prominent site, the property is located at the eastern end of, at its junction with Kensington Palace Gardens and Old Court Place. Four superbly configured flagship retail units which total 46,386 sq ft of prime floor space, let to TK Maxx, Diesel, American Apparel and Urban Outfitters. High quality office accommodation arranged over part fourth, fifth and sixth floors, separately accessed from Old Court Place. The second, third and part fourth floors are home to a recently refurbished state-of-the-art Virgin Classic Health Club. Current gross income of 3,003,998, with an average weighted unexpired term of over 8 years assuming no breaks are exercised. 62% of the income is secured against the five key retail and restaurant tenants. Over 19% of the income is secured against Holmes Place Health Clubs with five yearly rent reviews linked to RPI. The property offers development opportunities through the conversion of the upper floors into residential accommodation on lease expiry, subject to planning. 04

5 STREET HIGH KENSINGTON NOTTING HILL KENSINGTON CHURCH STREET KENSINGTON PALACE GARDENS H&M Gap Whole Foods Uniqlo Topshop TK Maxx Royal Garden Hotel Kensington Palace Zara Energie Urban Outfitters

6 Location is one of London s premier retail destinations, situated in the affluent Royal Borough of Kensington & Chelsea. is a key thoroughfare, linking the borough with Central London to the east and Hammersmith and the A4 to the west. Kensington and Chelsea is one of London s wealthiest boroughs and home to some of the most expensive real estate in the world. The borough is also Britain s most densely populated local authority with more than 13,000 people per square kilometer. Situation The building is located at the eastern end of at its junction with Kensington Palace Gardens and Old Court Place. The property is situated opposite Whole Foods Market, one of the key anchors on the street and adjacent to The Royal Garden Hotel. The subject pitch is characterised by mainstream retailers occupying large flagship stores including Urban Outfitters, TK Maxx, Topshop, New Look, Zara, Uniqlo and is arguably one of the strongest tenant line ups on the street. has an excellent transport infrastructure with High Street Kensington Underground Station being served by both the District and Circle Lines. Notting Hill Gate Underground Station is also only a short walk away. Regular bus services provide access to Hammersmith to the west and Knightsbridge and Hyde Park Corner to the east. Location map not to scale

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8 The Property Originally constructed as the depositary for Barker s department store in 1912, the property has been extensively reconfigured and refurbished to provide a total of 120,211 sq ft spread over a mix of uses including retail, restaurant, office, college and a state-of-the-art gymnasium The ground, lower ground and first floors are dedicated to four well configured retail stores and a restaurant which total 51,141 sq ft of prime floorspace. The flagship stores are particularly prominent benefiting from fully glazed double height frontages. The restaurant entrance fronts Kensington High Street leading up to a first floor seating area. All of the retail units are serviced from a shared loading bay at the rear of the property accessed via Old Court Place. 17 Old Court Place 17 Old Court Place currently provides 5,522 sq ft of efficient, well configured college space arranged over mezzanine, first and second floors. The accommodation benefits from a good floor to ceiling height, suspended ceilings, solid floors with perimeter trunking and secondary glazing. 17 Old Court Place The fifth and sixth floors provide high quality office accommodation currently let to Cambridge Place Investment Management LLP. This tenant also occupies part of the fourth floor having taken a sublease from Holmes Place Health Clubs Ltd. The offices benefit from a self-contained entrance from 17 Old Court Place and provide flexible, open plan accommodation with excellent natural light. Two six person passenger lifts serve the fifth and sixth floors. 17a Old Court Place 17a Old Court Place provides a newly refurbished gym arranged over second, third and fourth floors to a total of 36,685 sq ft. Leased to Holmes Place Health Clubs Ltd the gym trades as a state-of-the-art Virgin Active Classic Club offering world class facilities including a 17.5 metre pool. Wagamama TK Maxx Urban Outfitters Diesel American Apparel Royal Garden Hotel Holmes Place Health Clubs Ashbourne Independent School Cambridge Place Common parts Building illustration not to scale. For identification purposes only. 12

9 Accommodation Address Tenant Floor Use Area sq ft Area sq m Lower Ground floor Ground floor 26a Wagamama First Floor First Floor Restaurant Ancillary 4, , Old Court Place Royal Garden Hotel American Apparel Old Court Place 26/34 TJX UK Ground Floor ITZA Lower Ground Floor Lower Ground Floor Storage Storage 7,911 2,607 3,697 3,697 6, , ,073.6 Urban Outfitters Holmes Place Diesel Urban Outfitters 36/38 URBN UK Ground Floor ITZA Lower Ground Floor First Floor 4,127 2,352 6,620 7,269 18, ,673.7 TK Maxx TK Maxx 38a Diesel (London) Ground Floor ITZA 2,038 1, floor First floor 40 American Apparel (Carnaby) Ground Floor ITZA Storage 1, , , Old Court Place American Apparel Ashbourne College Old Court Place Ashbourne College 26/40 Royal Garden Hotel Lower Ground Basement Ancillary Hotel Ancillary Hotel 1,934 15,615 17, , ,630.4 Urban Outfitters Urban Outfitters 17 Old Court Place Ashbourne Independent School College / B1 Storage 2, , Old Court Place Ashbourne Independent School First First College / B1 Storage 1, , TK Maxx Wagamama 17 Old Court Place Ashbourne Independent School Second College / B1 1, Old Court Place Cambridge Place Investment Management LLP Fifth Floor Office 4, Second floor Indicative Fifth and Sixth floors 17 Old Court Place Cambridge Place Investment Management LLP Sixth Floor Office 4, Old Court Place Ashbourne College Old Court Place 17a Old Court Place Holmes Place Health Clubs Second Floor Third Floor Fourth Floor Gym Gym Gym 13,569 12,896 10,220 36,685 1, ,198, , a Old Court Place Holmes Place Health Clubs Basement Storage Holmes Place Cambridge Place 26/40 Vacant Basement Storage TOTAL 120,211 11,168.4 * Holmes Place Health Clubs have sublet part of the fourth floor to Cambridge Place Investment Management LLP. 14 All plans not to scale. For identification purposes only. 15

10 Market Overview ing Kensington is home to a number of key tourist attractions including The Royal Albert Hall and Kensington Palace bringing an international consumer base to. Together with Knightsbridge, the area is considered to be one of the most exclusive and affluent retailing locations in the UK. Anchored by Whole Foods and Marks & Spencer, provides a diverse range of multiple and high street traders creating a vibrant retail fashion destination. Prime rents measured on 30 ft zones peaked at 340 ZA. The tone along the street did soften in anticipation of the opening of Westfield London. However, it s opening has re-instilled confidence in retailers evident by the increased take-up along the street. The subject pitch is characterised by mainstream retailers with larger floorplates and is arguably one of the strongest tenant line ups on the street with retailers including Zara, Uniqlo, Topshop, TK Maxx and Urban Outfitters. Bars and restaurants complement s retail offer with well known restaurants and popular bars including Zaika, Balans, The Papaya Tree and Babylon. 16 Comparable Transactions RPI Growth We set out below a table highlighting a number of comparable transactions, including the rent review of HSBC in February 2010 which was settled at 230 ZA and compares favourably to the current rental tone of the subject property. We anticipate further rental growth going forward. Over 19% of the income is secured against Holmes Place Health Clubs with 5 yearly rent reviews linked to the retail price index. We set out below CB Richard Ellis annular RPI forecasts: Date Address Tenant March February 2010 Transaction Type Rent (ITZA) Ecco Shoes Lease Regear 188 ZA 4.0% -0.5% 4.6% 5.1% 3.5% 3.0% 2.7% 2.5% 3.1% 94 HSBC Rent Review 230 ZA December New Look OML 185 ZA December Metro Bank OML 224 ZA April Barclays Bank 252 ZA OML 17

11 Tenure Freehold. A Deed of Easement from the London Fire and Emergency Planning Authority grants emergency rights of access, rights to light and rights to air over the passageway shaded blue on the OS plan for an annual fee of 3,000 subject to 5 yearly upward only rent reviews linked to RPI. The grantor may determine the deed on 6 months notice in the event that he intends to demolish, reconstruct or undertake substantial works to the passageway or adjacent fire station. The grantee can determine at any time on 6 months notice. There is a separate lease from The Crown Estate at a peppercorn rent for a term of 150 years from 20th February 2008 of the tunnel which links to the Royal Garden Hotel. Royal Garden Hotel has an underlease of the part lower ground and basement but only a right to use the tunnel which links with the main hotel. The Crown Estate have a rolling development break option. Tenancies The property is let on 16 leases to 10 tenants producing a current passing rent of 3,003,998 per annum. 62% of the income is secured against the five key retail and restaurant tenants. Holmes Place Health Clubs, trading as Virgin Active accounts for approximately 19% of the income with the remaining 19% being split between office, college and hotel use. The property has an average weighted unexpired term of 8 years assuming no break options are exercised. 54% of the income is secured for in excess of 10 years and 65% of the income for over 6 years assuming no break options are exercised. Reversionary leases have been granted to Ashbourne Independent School from 24 December 2012 which have been reflected in the tenancy schedule. The reversionary leases simplify the distribution of the lease demises. Currently one lease demise extends over part of the first floor and all of the second floor. From 24th December 2012 the part first will be included within the main first floor reversionary lease. The total rents for all three leases of 172,273 p.a. remains the same. Tenancy Schedule Address Tenant Floor Use Term Lease start 26a Kensington 26/34 Kensington 36/38 Kensington 38a Kensington 40 Kensington Kensington Wagamama TJX UK URBN UK Diesel (London) American Apparel (Carnaby) Royal Garden Hotel 17 Old Court Place Ashbourne ** Independent School Rent review Lease expiry Uxp Term Current Rent First Floor Restaurant 25 years 05/03/ /03/ /03/ ,000 ( psf) Ground, and Lower Ground Floors Ground, First and Lower Ground Floors 15 years 26/03/ /03/ /03/ ,000 * ( 208 ZA) 15 years 22/02/ /02/ ,000 ( 167 ZA) Ground Floor 15 years 04/02/ /02/ ,000 ( 175 ZA) Ground and Floors Part Lower Ground and Basement Floor 10 years 27/04/ /04/ /04/ ,000 ( 219 ZA) Hotel (Ancillary) years 25/12/ /03/ ,225 ( 5.60 psf) College 20 years 25/12/ /12/ /12/ ,067 ( psf) Comments Tenant break option 26th March 2018 on provision of 9 months notice. Current rent passing is 625,000*. Rent deposit of 95,000 + sum equivalent to VAT. Rolling break option. (see Tenure section) Review assumes B1/D1 use. Contracted out of the Landlord and Tenant Act Landlord break options 31/08/2014 and 31/08/2019. Tenant break option 31/08/2019. For identification purposes only 17 Old Court Place Ashbourne ** Independent School 17 Old Court Place Ashbourne ** Independent School 17 Old Court Place Cambridge Place Investment Management LLP First Floor College 15 years 25/12/ /12/ /12/ ,226 ( psf) Second Floor College 20 years 25/12/ /12/ /12/ ,980 ( psf) Ground Floor Reception 9.7 years 15/10/ /06/ ( 1.00) Review assumes B1/D1 use. Contracted out of the Landlord and Tenant Act Landlord break options 31/08/2014 and 31/08/2019. Tenant break option 31/08/2019. Review assumes B1/D1 use. Contracted out of the Landlord and Tenant Act Landlord break options 31/08/2014 and 31/08/2019. Tenant break option 31/08/2019. Contracted out of the Landlord and Tenant Act Old Court Place Cambridge Place Investment Management LLP Fifth Floor Offices 10 years 24/06/ /06/ ,600 ( psf) 17 Old Court Place Cambridge Place Investment Management LLP Sixth Floor Offices 10 years 24/06/ /06/ ,300 ( psf) 17a Old Court Place Holmes Place Health Clubs Second, Third and Fourth Floors 25 years 08/03/ /03/ /03/ , 314 ( psf) Rent review linked to RPI. Guaranteed by Virgin Active Holdings Ltd. Service charge cap of 105, p.a. linked to RPI. The tenant has sublet part of the fourth floor to Cambridge Place Investment Management LLP. 17a Old Court Place Holmes Place Health Clubs Part basement Storeroom years 25/12/ /12/ /03/ ,285 ( 36.40) Rent review linked to RPI. Contracted out of the Landlord and Tenant Act Guaranteed by Virgin Active Holdings Ltd. Service Area 26/40 Kensington Holmes Place Health Clubs Parking Spaces c. 13 years 19/03/ /03/ Lease of easements at nil rent. Determines automatically if main gym lease is determined. 26/40 Kensington 26/40 Kensington Vacant Basement Storage London Electricity plc Basement Transformer room 99 years 01/01/ /12/ Landlord only break for redevelopment on 12 months notice. 3,003,998 * The rent review in March 2013 of 26/34 currently let to TJX UK is subject to a fixed uplift to 725,000 p.a. The vendor proposes to provide a rental top-up until March 2013 from the current rent passing of 625,000 p.a. ** Ashbourne Independant School have provided a rent deposit of 28,500 pa to cover all three leases

12 Investment Transactions Some of the most recent investment transactions along with yields and prices achieved are illustrated below. Date Address Key Tenants Tenure Capital Value Capital Value per sq ft February HSBC F/H 9.8 million 1, % December Kings Road Marks & Spencer F/H 66.5 million 1, % July Game Store and Campbell Harris Tutors F/H 4.45 million 1, % July /141 Kings Road URBN UK Ltd t/a Anthropologie L/H 17.8 million % NIY Planning and Development The property is not listed but lies within the Kensington Palace Conservation Area. Development Opportunities The property offers excellent development opportunities through converting the upper floors into residential accommodation on expiry of the leases to Cambridge Place Investment Management in June 2014 and Holmes Place in March 2023, subject to vacant possession and the necessary planning consents. Kensington Palace Gardens, located immediately to the east of the property, is arguably the most desirable residential street in London and boasts some of the most valuable homes in the world. Lancer Group s development opposite Kensington Palace will include super prime residential which we expect to be priced in the region of 3,000 per sq ft overall. Other significant new build developments in the vicinity include Northacre s development on Vicarage Gate, consisting of 12 large lateral apartments, the Kensington Odeon Site totalling 32 units and the Holland Park School Site with planning for circa 150 units. May Clarks F/H million % February Kings Road Monsoon, Accessorize Ltd, Twinmar Ltd, Hawes and Curtis and Ernest Jones January Kings Road Radley Ltd, Tabio Europe Ltd and Warehouse Ltd F/H 30 million 2, % F/H million 1, %

13 Tenant Financial Information TJX UK 24.1% of income TJX UK, trading as TK Maxx, operates off-price retail stores in the United Kingdom, the Republic of Ireland, and Germany. TK Maxx is known for its fashion but also sells accessories, luggage, toys and homeware. There are over 240 TK Maxx stores in the UK and Ireland and an additional 24 HomeSense stores in the UK. TK Maxx is the only major off-price fashion retailer in Europe and is the 7th largest fashion retailer in the UK. TK Maxx is the UK s fourth favourite retailer, the third favourite clothing retailer and the UK s favourite shoe retailer for (source: Verdict Group) In the year to January 2010 TJX UK reported an impressive total turnover of 1.19 billion with pre-tax profits of 78 million. The company is considered by Experian as very low risk and has been awarded an excellent Delphi score of 100 out of 100. For more information please visit Holmes Place Health Clubs 19.4% of income Holmes Place Health Clubs, trading as Virgin Active, is a leading global international health club operator with 194 clubs and more than 975,000 members worldwide. It is the UK s second biggest gym operator with a 71 strong portfolio. Virgin Active have recently agreed to acquire Esporta s UK business of 55 health clubs and 159,000 members The lease is guaranteed by Virgin Active Holdings who, in the year to 31st December 2009, reported pre-tax profits of 1.4 million and total assets of 621 million. The company has been awarded the highest possible Delphi score of 100 out of 100 and is considered by Experian to be very low risk. For more information please visit URBN UK 18.5% of income Founded in 1970, the US fashion retailer Urban Outfitters operates more than 135 stores in the United States, Canada and Europe, offering an eclectic mix of merchandise from men s and women s apparel and accessories to items for the home. In the year to 31st January 2010 URBN UK reported a total turnover of 68.9 million an uplift of 21.5% from the previous year. The company is considered by Experian to be low risk and has been awarded a Delphi score of 88 out of 100. For more information please visit Cambridge Place Investment Management LLP 10.1% of income Cambridge Place Investment Management LLP is a specialist global institutional investment manager, with its principal offices in London and Boston. As at 30 June 2010 the company reported gross assets under management of $3.1 billion. The company reported a total turnover of $10.7 million in the year to November 2009 with total assets of $6.26 million. For more information please visit American Apparel (Carnaby) Ltd 7.8% of income Founded in 1997 as a wholesale business producing good quality basic cotton staples like t-shirts and sweaters, American Apparel is now a vertically integrated manufacturer, distributor and retailer, based in Los Angeles. The company s first retail store opened in 2003, and they now have over 285 stores across 20 countries worldwide. There are 15 stores in the UK. Diesel (London) 6.3% of income Founded in 1978, the company now has around 2,200 employees in 18 subsidiaries across Europe, Asia and the Americas. Its products are available in 5000 retail outlets, of which 300 are Diesel-branded stores. For the year to December 2009 Diesel (London) reported a total turnover of over 75 million with pre-tax profits in excess of 2 million. Revenue is largely derived from denim sales, but also extremely successful and influential ranges of accessories and children s wear. The company are considered by Experian to be low risk and have been awarded an excellent Delphi score of 88 out of 100. For more information please visit Ashbourne Independent School 5.7% of income Founded in 1981, Ashbourne College is an independent sixth form college specialising in pre-university education at GCSE and A Level. The college also runs its own medical school programme and is equally strong in both arts and sciences. Ashbourne Independent School reported a total turnover of 3.09 million in the year to June 2010 and is considered by Experian as a below average risk company having been awarded a good Delphi score of 77 out of 100. For more information please visit Wagamama 4.8% of income Established in April 1992, Wagamama is a chain of award-winning pan-asian inspired noodle restaurants. The company was voted most popular London restaurant in 2006, 2007, 2008, 2009 and 2010 by Zagat readers. In August 2010, the chain, reported strong annual results with underlying earnings up 22% to 20.9 million in the 12 months to April and sales up 8.6% to million. Like-for-like sales during the year rose by 2.4 per cent. The company reduced its debt by 20 million to 80 million in the 18 months to August Wagamama is considered by Experian to be very low risk have been awarded a very good Delphi score of 92 out of 100. For more information please visit The Royal Garden Hotel 3.3% of income The Royal Garden Hotel is a five star luxury hotel which opened in It was an official hotel for the FIFA World Cup the following year and has now established itself as the international sports person s London hotel of choice. The Hotel is in its final stage of a 45 million refurbishment set to complete in May of this year. Today, the hotel remains privately owned, with two sister properties in Singapore The Godwood Park Hotel and York Hotel. In the year to 30th November 2009 The Royal Garden Hotel reported a total turnover of 22.2 million and total assets of million. The company is considered by Experian as very low risk and has been awarded an excellent Delphi score of 98 out of 100. For more information please visit American Apparel (Carnaby) reported total turnover in the year to December 2008 of 18.2 million and total assets of 10.5 million. For more information please visit

14 On instructions from the Great Capital Partnership, a joint venture between Capital & Counties Properties PLC and Great Portland Estates plc. VAT Status The property has been elected for VAT. Proposal Offers are invited for the freehold interest. Contact For further information please contact: Rob Tudor direct line [email protected] Ben Goodberry direct line [email protected] David Green direct line [email protected] John Starkie direct line [email protected] Liz Parsons direct line [email protected] DISCLAIMER: CB Richard Ellis nor Tudor Toone Investment and Development on their behalf and for the Vendors or Lessors of this property whose Agents they are, give notice that: 1. These particulars are set out as a general outline only for guidance to intending Purchasers or Lessees, and do not constitute any part of an offer or contract. 2. Details are given without any responsibility and any intending Purchasers, Lessees or Third Parties should not rely on them as statements or representations of fact, but must satisfy themselves by inspection or otherwise as to the correctness of each of them. 3. No person in the employment of CB Richard Ellis nor Tudor Toone Investment and Development has any authority to make any representation or warranty whatsoever in relation to this property. 4. Unless otherwise stated, all priced and rents are quoted exclusive of VAT. May

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