20pp 104257 B&Q Bury Visual 03

B&Q Warehouse and Burger King | BuryW E L L S E C U R E D R E T A I L W A R E H O U S E I N V E S T M E N T

W I T H A N N U A L R P I I N C R E A S E S

contents 2 Investment Summary

4 Location

6 Situation

7 Other Retail Warehousing in Bury

8 Description

9 Accommodation

10 Planning

11 Tenure

12 Tenancies

13 Covenant Information

14 Rental Value

15 Retail Price Index

16 Proposal

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The property comprises a modern B&Q Warehouse extending to 97,364sqft and a Burger King restaurant of 2,750sqft on a site of 11.9 acres.

Investment summary

Prime B&Q Warehouse situated immediately adjacent to Junction 2 of the M66, 7 miles north of central Manchester

The location benefits from excellent communications, and therefore an extensive and large catchment population extending beyond the town of Bury itself, estimated to be over 2.68 million within 12 miles of the town centre

The property comprises a modern B&Q Warehouse extending to 97,364 sq ft and a Burger King restaurant of 2,750 sq ft on a site of 11.9 acres

The property is let to B&Q plc on a 20 year lease from 18 April 2006 (with a tenant’s option to determine on 01/05/2020) and Burger King Ltd on a lease for 25 years from August 1997

The B&Q benefits from a non food retail consent, which can be used for the sale of any bulky goods, save for clothing and shoes? The restaurant has an A3 use

The site is held freehold

96.6% of the income is secured against B&Q plc on a lease which provides for annual RPI increases to May 2020, these being capped at 4% per annum to May 2010 and 5% to May 2020

Our clients are seeking offers in excess of £30.72million, subject to contract and exclusive of VAT. Assuming purchaser’s costs of 5.7625%, this reflects a net initial yield of 5.00%. With the benefit of annual increases to 2020, assuming RPI increases during this period at 3.50%, this would reflect a nominal equivalent yield of 6.94% and a true equivalent yield of 7.20%

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M66Junction 2

LocatIonB u r y

Buryisamajorcommercialcentresituatedtothe

northoftheconurbationofGreaterManchester,

approximately9milesnorthwestofManchester

citycentreand7mileseastofBolton.

The town benefits from excellent road communications, being

situated immediately to the north of the A58, which provides

direct access to Junction 2 of the M66 motorway, situated

approximately 1.5 miles to the east of the town centre.

From here, there is direct access to the M60 which then leads

to the M62 and M61. Bury is also situated on the A56, which

provides a main carriageway link to Manchester city centre.

As at 2001, Bury had an urban area district population of 180,608.

This increasing to an estimated 627,000 and 2,680,435

within 6 miles and 12 miles of the town centre respectively

(1994 estimate). As such, Bury benefits from a substantial

retail catchment population.

Various statistics suggest a reasonably prosperous and

economically active population, generally in line with national

statistics. This is illustrated by the classification of the

population within various class groupings suggested by Focus:

As at 2001, the district population has an average number

of cars per household of 1.1, being exactly the same as for

Great Britain as a whole. As would be expected, household

tenure is dominated by owner occupation standing at 75.5%

within the district population, as opposed to a national average

of 68.3% (2001).

Within the “travel to work” area, the claimant count unemployment

rate in January 2007 stood at 2.67% as compared to a national

of 2.50%. Manufacturing industries are well represented and

account for 16.3% of employment within the district area, as

opposed to a national average of 14.8%. However, the services

industry is also well represented with “banking, finance, business

services and other services” standing at 41.0%

of the district area, as compared to a national average 41.40%.

Major employers in the town include Tetrosyl, PC World Business,

Genesis Communications and John David Group.

ClassGrouping2001 DistrictPopulation NationalAverage

AB – high and intermediate managerial/administrative/professional 22.0 21.7

C1 – supervisory, clerical junior/administrative/professional 30.7 29.4

C2 – skilled manual workers 14.7 15.1

D – semi skilled and unskilled manual workers 18.1 17.2

E – on state benefits, unemployed lowest grade workers 14.5 16.6

1.0

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sItuatIon

The subject development is situated in a highly accessible

position, immediately to the north west of Junction 2 of the

M66 motorway at its intersection with the A58. As such, the

subject property is highly accessible to customers travelling in

all directions. This means the location serves the catchment

populations of Bury itself to the west, Rochdale to the east

and the collection of towns situated to the north including

Ramsbottom, Rottenstall, Haslingdon and Accrington.

The subject property is accessed immediately from Bridge

Hall Lane, via the slip road leading directly off the southerly

carriageway of the M66 and the roundabout forming the

intersection with the M58.

2.0

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otHer retaIL WareHousInG In Bury3.0WoodfieldRetailPark

This is the prime scheme in the town, comprising a Tesco

foodstore and a further 50,000 sq ft of open consented retailing

occupied by Boots, Sports World, Currys and JD Sports.

The scheme, which is owned in a joint venture between British Land

and Tesco, is currently let off a highest rent of £27.50 per sq ft.

MoorgateRetailPark

To the east of the town centre is the Moorgate Retail Park, which

is owned by Cordea Savills and extends to circa 52,000 sq ft and

is let to Comet, Carpetright, MFI and Halfords. The last letting

here was to Halfords in 2006 at a rent of £17.50 per sq ft.

CrostonsRetailPark

Approximately a mile to the west of the town centre is the

Crostons Retail Park, this being a more secondary development

occupied by Motorworld, Netto and B&Q. Rents here are historic

with outstanding rent reviews due in June 2007.

AngoulemeWay

To the south of the town centre, fronting Angouleme Way

(southern ring road), there is a collection of secondary retail

warehousing adjacent to an Asda foodstore currently occupied

by Argos, TK Maxx, Au Naturale and InStore. Again, rents here

are historic with the last letting being to PC World in 2003 at

£15.00 per sq ft.

OtherRetailWarehousing

There are various other standalone units elsewhere in the town

including a Wickes alongside Peel Way, and a Matalan unit on

George Street.

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WoodfieldRetailPark

MoorgateRetailPark

AngoulemeRetailParkSUBJECTSITE

CrostonsRetailPark

DescrIptIon

Thesubjectpropertycomprisesamodernpurposebuilt

retailwarehouseoccupiedbyB&Q,togetherwithan

adjacentdrivethrurestaurantoccupiedbyBurgerKing.

The B&Q Warehouse is constructed in accordance with the

tenant’s standard specification and comprises a store with a

gross internal area of approximately 97,364 sq ft, being of steel

portal frame construction with elevations generally being clad with

steel cladding above masonry. The front elevation includes an

enclosed full height entrance lobby, together with a covered trade

entrance. We are advised that the main building has a clear eaves

height to the underside of the haunch of approximately 6 metres.

To the rear of the store is a first floor amenity block.

To one side of the unit is an enclosed garden centre within which

the tenant has erected two canopied areas, whilst on the other

side is an enclosed builders’ compound/loading area, part of

which is covered.

At the front of the building is a tarmacademed customer car park

providing approximately 500 spaces equating to a ratio of one per

195 sq ft (1 per 18.12 sq m). Customers access the car park from

Bridge Hall Lane, from where there is also a direct access leading

to the rear of the store to the enclosed service yard within which is

also situated a sprinkler tank.

4.0Adjacent to the entrance of the B&Q car park is a standalone

drive thru restaurant occupied by Burger King providing a gross

internal ground floor area of 2,750 sq ft, together with 30 dedicated

car parking spaces.

We have estimated that the entire site extends to approximately

11.9 acres.

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accommoDatIon5.0The property provides the following gross internal floor area:

Unit Areasqft Areasqm

B&Q 97,364 9,045

Burger King 2,750 255

Total 100,144 9,300

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pLannInG

The planning consent for the B&Q is for a non food retail unit.

Whilst there are no restrictions on the range of goods which

can be sold, there is a Section 106 Agreement stating that the

property shall not be used for other items than the sale of bulky

goods and goods and services for the construction, repair and

maintenance of the home and garden and shall not be used for

the sale of food (other than confectionery), clothing and shoes

(other than sold ancillary to the principal use) or for fashion

accessories. It also includes a clause which states that no

individual unit shall be constructed or created which shall

have an area of less than 10,000 sq ft (GIA).

6.0

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Therefore, the development benefits from a flexible restricted

planning consent to allow the sale of normal bulky goods and the

unit can be subdivided.

Subsequent planning consent was obtained for the Burger King

unit for use as a fast food restaurant (Class A3).

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tenure7.0The site, as outlined in red, is held freehold.

M66Junction 2

River Roch

tenancIes

In summary, the property is let in accordance with the following terms:

8.0

1 The tenant can determine the lease either on 1st May 2021, or following determination of the rent review due on this date, subject to giving no less than 6 months

and not more than 12 months’ written notice, expiring on 1st May 2021 or not more than 12 months and no less than 3 months following the determination of the rent review.

Tenant FloorArea Rent Rent Term Rent Tenant’s GIA p.a. p.s.f. Reviews BreakOption

B&Q plc 97,364 £1,569,505 £16.11 20 years Annual increases from 01/05/07 to 01/05/2021 from 18/04/2006 01/05/2020 to RPI and with 6–12 months’ notice1 OMV on 01/05/2021

Burger King Ltd 2,750 £55,000 £20.00 25 years 26/08/07 and 6 months’ notice if B&Q becomes from 06/08/97 5 yearly thereafter vacant/ not trading for 6 months

Total 100,144 £1,624,505

B&QRentReviews

The period from 1st May 2007 to 1st May 2020, the rent will

be increased annually on an upwards only basis to reflect the

increase in the Retail Price (RPI) for the 12 month period ending

in March in the year in which the relevant review date falls.

During the period to 1st May 2010, this annual increase will be

at 4% per annum, and between 1st May 2010 and 1st May 2020,

the cap will be 5% per annum. On 1st May 2021, this rent will

be increased to the higher of the rent previously payable or the

open market rent to be ascertained in the normal manner with the

provision for any dispute to be referred to a third party acting as

an arbitrator.

BurgerKingRentReview

The lease provides for 5 yearly upward only rent reviews with the

next rent review being due on 6 August 2007. These reviews are

to be to the higher of the previous rent or open market value and

includes provision for the matter to be referred to a third party to

act as an Expert.

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covenant InFormatIon9.0B&Qplc

B&Q plc is the main trading company for B&Q, the UK’s largest

DIY retailer. In addition, B&Q are continuing to develop into a

powerful international brand, with significant expansion in the Far

East and are the number one DIY retailer in Europe and the third

largest in the world.

B&Q plc are classified by Dun & Bradstreet as 5A1, which

represents a “minimum risk of business failure” and the most

recent accounts are summarised opposite:

BurgerKingLtd

Burger King is one of the UK’s leading fast food operators,

classified as N3.

Their most recent accounts are summarised opposite:

B&Qplc Yearto Yearto Yearto 28/01/2006 29/01/2005 31/01/2004 £000’s £000’s £000’s

Turnover 753,000 3,895,500 3,895,100

Pre-tax Profits (44,500) 349,900 330,500

Net Worth 1,343,200 1,481,300 1,830,700

BurgerKingLtd Yearto Yearto Yearto 28/01/2006 29/01/2005 31/01/2004 £000’s £000’s £000’s

Turnover 61,608 66,376 67,321

Pre-tax Profits (18,211) (7,544) (20,205)

Net Worth 1,302 17,034 23,416

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rentaL vaLues

B&Q

When considering the rental value of the subject property, we believe one must take into account its strategic location adjacent to the M66

and therefore its extensive catchment. We set out below some evidence of lettings and rent reviews which provide an indication of the true

worth of this unit.

10.0

Location GIA Rent Transaction Approx sqft p.s.f Date

Maskew Avenue, Peterborough 104,000 £16.00 Letting 03/05

London Road, Stevenage 133,000 £16.25 Letting 03/05

Glencoe Road, Yeading 97,259 £21.25 Rent Review 12/04

Mucklow Hill, Halesowen 92,400 £16.88 Rent Review 06/04

Snipe Retail Park, Ashton-under-Lyme 88,316 £16.00 Rent Review 03/04

Trafford Park, Manchester 130,000 £15.50 Letting 03/04

Whilst undoubtedly there have been recent transactions at rents

lower than this, in general we believe this reflects the inferior

nature of the properties in question.

In addition, evidence suggests that the main DIY operators,

including B&Q, have recently been benefiting from substantial

improvements in trading levels and we would expect this to feed

into their store acquisition activity and lead to an improvement in

rental values.

We therefore believe the B&Q is rack rented at its current

provable level.

BurgerKing

The McDonald’s (2,552 sq ft) on the Woodfields Retail Park, Bury is

currently subject to a rent review from March 2007. The passing rent

equates to £27.50 per sq ft and the landlord is anticipating a settlement

in excess of £30.00 per sq ft.

Of particular relevance will be the settlement of the KFC (1,643 sq ft) unit

at Moorgate Retail Park, Bury, which is outstanding from September 2006.

This unit is subject to a current rent of £23.50 per sq ft and the landlord is

anticipating a settlement in excess of £26.50 per sq ft. We are advised the

tenant submitted a Calderbank at a level of £25.25 per sq ft.

In light of this evidence, it is our opinion that the Burger King unit has a

current rental value of £68,750 per annum, equating to £25.00 per sq ft.

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retaIL prIce InDex (rpI )11.0General

The Retail Price Index (RPI) is the most familiar general purpose

measure of inflation in the United Kingdom. It measures the

average change from month to month of prices of goods and

services purchased by most households in the UK and includes

housing costs. The government uses it for up-rating pensions,

benefits and gilts etc.

The Consumer Price Index (CPI) was designed as a macro

economic measure of consumer price inflation and forms the

basis of the governments inflation targets, which the Bank of

England are required to follow. The CPI is essentially based on

similar information to RPI save that in common with the European

Homogenised Index of Consumer Prices (HICP), it excludes

housing costs.

The Office for National Statistics produces the RPI on a monthly

basis and for the 12 month period to March for the last previous 5

years, it was as follows:

The RPI rose 4.8% in the proceeding 12 months to March 2007

compared to 4.6% in February. This rise was a result of a substantial

increase in the price of goods, including furniture, household equipment

and transport costs, together with housing costs.

RPIForecast

Year Index% Increase%

March 2002 174.5 –

March 2003 179.9 3.09

March 2004 184.6 2.61

March 2005 190.5 3.12

March 2006 195.0 2.36

March 2007 204.4 4.82

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Over the last 10 years annual RPI increase has averaged ??% and as

indicated above, stood at 4.8% in March 2007. Recent mortgage interest

payments and housing depreciation costs (which increase with house

price inflation) have all been steadily increasing, which has had an impact

on RPI. The forecast for the coming medium term expects significant

increases in mortgage payments through rises in interest rates, together

with a continued albeit increasing amount of house price inflation.

The government has set a target level of CPI increases at 2.00% and

the Bank of England is responsible for implementing monetary policy to

meet this target. Currently the CPI has increased by 3.1%. It is therefore

reasonable to assume that on average the RPI will increase at a similar

level with an adjustment to reflect inflation in housing costs.

RPIForecastCHARTHERE

AWAITINGDATA

proposaL

Our clients are seeking offers in excess of £30,720,000, subject

to contract and exclusive of VAT.

Assuming purchaser’s costs of 5.7625%, this reflects a net initial

yield of 5.00% and the following yield profile throughout the term

of the tenancies on the assumption of an average increase of

RPI of 3.50%:

12.0

InternalRateofReturn

We have undertaken an internal rate of return calculation from

May 2007 to expiry of the lease in 2026. On the basis of the

income stream summarised opposite and assuming that rental

growth keeps in line with the assumed level of Retail Price Index

increase (3.50%), and the lease is renewed by B&Q at expiry at

the then current ERV, at which time the property is sold/valued on

the basis of a net initial yield of 5.25%, then we calculate that over

this hold period the property produces an ungeared internal rate

of return of 7.87%

1 Assumes average rental growth of 3.50% pa from passing rent.

On the assumptions as set out above, the initial reversion of the

Burger King and the annual uplifts on the B&Q, this price reflects

a nominal equivalent yield of 6.94% and a true equivalent yield of

7.20%.

Date NetInitial Comment Yeild

Purchase May 2007 5.00% B&Q annual uplift

August 2007 5.04% Burger King rent review

May 2008 5.21% B&Q annual uplift













May 2021 8.26% OMV RR1

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MISREPRESENTATIONNOTICE

WilkinsonWilliamsLLP give notice to anyone who may read these particulars as follows:

1. These particulars are prepared for the guidance only of prospective purchasers. They are intended to give a fair overall description of the property but are not intended to constitute part of an offer or contract.

2. Any information contained herein (whether in the text, plans or photographs) is given in good faith but should not be relied upon as being a statement of representation or fact.

3. Nothing in these particulars shall be deemed to be a statement that the property is in good condition or otherwise nor that any services or facilities are in good working order.

4. The photographs appearing in this brochure show only certain parts of the property at the time when the photographs were taken. Certain aspects may have changed since the photographs were taken and it should not be assumed that the property remains precisely as displayed in the photographs. Furthermore, no assumptions should be made in respect of parts of the property which are not shown in the photographs.

5. Any areas, measurements or distances referred to herein are approximate only.

6. Where there is reference in the particulars to the fact that alterations have been carried out or that a particular use is made of any part of the property this is not intended to be a statement that any necessary planning, building regulations or other consents have been obtained and these matters must be verified by an intending purchaser.

7. Descriptions of the property are inevitably subjective and the descriptions contained herein are given in good faith as an opinion and not by way of statement of fact.

Plans are published for convenience of identification only and although believed to be correct, their accuracy is not guaranteed and they do not form part of any contract.

www.wilkinsonwilliams.co.ukWilkinson Williams Mellier House26a Albemarle StreetLondon W1S 4HY

MilesMarten Tel: 020 7317 3777 Fax: 020 7495 5432m.marten@wilkinsonwilliams co.uk

DrewMoore Tel: 020 7317 3789 Fax: 020 7495 5432d.moore@wilkinsonwilliams co.uk

Bury | May 07 | Ref: 104257

Documents

20pp 104257 B&Q Bury Visual 03