Newbondedwhiskywarehouseinvestment - Rougemont Limited · 2020. 2. 29. · M8 M8 M8 M9 A899 A89 A899 A779 A705 A705 A71 A8 A71 B7015 B7030 B7015 B8046 B8046 Livingston Lizzie Bryce

Syndicated CommercialProperty Investment.

August 2013Rougemont Limited is authorised and regulated by the Financial Conduct Authority. Ref No. 516918

New bonded whisky warehouse investment• Annual Return 8.75% p.a, distributed quarterly in advance.• Blue Chip tenant - North British Distillery Company Limited (D&B 5A1).• A new 15 year lease, with no break options, incorporating fixed rental increases.• Strategically located on the Houston Industrial Estate, junction 3 of the M8motorway, west of Edinburgh.

• Target Annual Return following proposed disposal after 5 years c.10.00% p.a.

All syndicated commercial property investment opportunities promoted by Rougemont constitute an Unregulated Collective Investment Scheme(“UCIS”) as defined in the Financial Services and Markets Act 2000 (“FSMA”). Rougemont is authorised by the UK Financial Conduct Authority (“FCA”)to establish, operate and wind up UCIS (Reg. No. 516918). In receiving this document you acknowledge and accept the following disclaimer:

This document contains important information. It is being sent to you as a category of person falling within The Financial Services and Markets Act 2000(Promotion of Collective Investment Schemes) (Exemptions) Order 2001 (“the Order”). The sole purpose of this document is to assist the recipient indeciding whether they wish to proceed with further investigation. Recipients should review this document having first considered the Key Points (page 3) ofthe arrangements and the Important Legal Notice (page 16). The description of the arrangements contained within this document constitutes a summaryof the arrangements. A detailed description of the syndicated structure is provided to potential Syndicate members with the legal purchasers pack whichwill be provided should a potential Syndicate member wish to proceed.

‘Exempt Persons’ falling within the Order include:

• ‘Investment Professionals’, who are Authorised FCA Persons and who are defined, according to the Financial Services and Markets Act 2000, ashaving professional experience of participating in a UCIS for the purpose of their business.

• ‘Certified Sophisticated Investors’ who are defined as investors who are self-certified, or who have been certified by an FCA Authorised Person asbeing sufficiently knowledgeable to understand the risks associated with participating in a UCIS and who have signed a requisite CertifiedSophisticated Investor Declaration in accordance with Article 23 of the Order.

• ‘Certified High Net Worth Individuals’, who are defined as investors who have self-certified or who have been certified by an FCA Authorised Personconfirming that during the financial year immediately preceding the date on which the certificate was signed, held an annual income of not less than£100,000, or net assets of not less than £250,000, excluding their primary residence and benefits from life policies.

• A ‘High Net Worth Company’, which is defined as a corporate entity with called-up share capital or net assets of either (a) in the case of a companywith more than 20 members, or which is a subsidiary of a company with more than 20 members, not less than £500,000 or, (b) in the case of anyother body corporate, not less than £5 million.

• Existing Investors in similar Unregulated Collective Investment Schemes as detailed in COB 4.12 of the FCA Handbook.

Confirmation of prospective clients’ investor status must be received by Rougemont in advance of any information or promotional material in respect ofan investment opportunity being provided.

Investor Eligibility

A syndicated commercial property investment is one where a number of private individuals, corporate entities, or pension funds collectively pool theircapital to acquire a specific tenanted commercial property. Syndicate members own a percentage of the legal beneficial interest in the property pro-ratato the amount of their investment. In return members receive their share of the rental income and future capital growth.Rougemont’s operating structure has received approval from a number of major SIPP and SSAS Pension Trustee/Administrators; however, investorsshould contact their own pension fund advisors to ascertain whether such an investment is permissible within the rules of their own pension fund.FCA authorised Independent Financial Advisors should be aware that Rougemont is an Exempt CAD firm to which MIFID applies, except that it canreceive and transmit orders in relation to one or more financial instruments, or in relation to investment advice. Accordingly, Rougemont is permitted totransmit orders with Non-MIFID Independent Financial Advisors and Professional bodies.As with any investment, syndicated property of this type carries the risk that the investment may fail to increase in value or may depreciate. Rentalreturns may not materialise. Your attention is drawn to the Important Legal Notice in this document and the need to take independent legal andinvestment advice.In summary the arrangements are as follows:

1. Properties are normally office, retail or factory premises let to a tenant with a good covenant strength on a long term lease.

2. An Independent Professional Custodian Trustee will hold the legal freehold/leasehold title to the property as Custodian Trustee. Syndicate membersbecome beneficial owners of the property, as tenants in common, in direct proportion to their investment.

3. Syndicate members are entitled to receive their pro-rata rental income from the property together with their share of the capital receipt upon a saleof the Property.

4. A full legal pack containing a detailed Structure Note, a Syndicate Contract, Trust Deed and a Property Administration Agreement will be providedonce a potential Syndicate member has made a formal reservation by completing the form at the back of this document. Any other relevant materialwill be available upon request. Potential Syndicate members must then arrange to receive advice from other independent advisors as necessary.

5. Acquisition of the property will take place only when sufficient Syndicate members have provided monies to fund the acquisition. Should insufficientfunds be received the acquisition will not progress and any funds received will be returned immediately to Syndicate members.

6. An ‘Initial Period’ is set by Rougemont at the outset and in this instance the Initial Period will run from the Completion Date until its fifth anniversary(See No. 8).

7. Rougemont is the appointed Managing Trustee and will co-ordinate the purchase and handle routine decisions in relation to the property. TheSyndicate members will retain control of major decisions such as, providing consent to assign leases or deciding to carry out structural alterationsto the property. These decisions will be taken by a majority representing 75% (by value) of the Syndicate Price. Syndicate members will also employa management company, Harlow Property Management Limited, to carry out services such as collection and distribution of rent and the provisionof caretaking duties. However, if the Syndicate members collectively decide to instruct Harlow Property Management Limited to provide any non-coreservices then additional remuneration will be payable in respect of such services. Prior to the expiry of the Initial Period Harlow PropertyManagement Limited will provide a quote for a continuation of its services.

8. An individual Syndicate member may sell their stake at any time. The Syndicate members may decide by a majority to sell the property at any time.However, an individual Syndicate member cannot force a sale of the whole of the property until the expiry of the Initial Period and must haveattempted to sell their individual stake before making such a request. However, if a Syndicate member, being a pension fund, has beneficiaries who dieduring the Initial Period forcing the pension fund to be liquidated then the trustees of the pension fund have the right to force a sale of the propertywithin 24 months of the death of the member in the event that the member’s interest in the property remained unsold.

How Syndicated PropertyWorks

Important Legal NoticeThis document describes an investment in a syndicated commercial property that is partially funded with bank finance.An investment of this nature involves risk; it is illiquid in nature and may not be suitable for many investors. Investorsmust be prepared to bear the risk of any investment in the property, for an indefinite period, and be able to withstand theloss of all or part of their investment. All reasonable care has been taken to ensure the information and illustrationscontained within this document are true and accurate, but they should not be construed as advice on which relianceshould be placed. Please refer to the Risk Factors and assumptions upon which the Target Annual Returns in this documenthave been based.

2 The NBD Scotland Syndicate

The NBD Scotland Syndicate - Key PointsThe Property A newly constructed stand-alone 107,650 sq. ft. bonded warehouse facility, located on one of Scotland’s most

central distribution hubs to the west of Edinburgh and with immediate access to Junction 3 of the M8.

The property has been divided into ten self-contained units for use as a bonded whisky maturation facility and hasinherent alternative use prospects, particularly within the commercial storage market.

Completion of the property took place in August 2013.

Tenancy The freehold (referred to as “heritable interest” in Scotland) of the property is being acquired with the benefit of anew 15 year lease to North British Distillery Company Limited (the ‘Tenant’), which commenced on completion ofthe property. The lease has been established on full repairing and insuring terms, with no tenant break optionsand incorporates pre-agreed, upwards only fixed rent increases throughout the term.

Tenant The North British Distillery Company Limited (www.northbritish.co.uk) was established in 1885 and is one ofScotland’s largest grain whisky producers. The company is a joint venture between two of the world’s largest andbest known whisky producers, Diageo plc (www.diageo.com) and The Edrington Group (www.edringtongroup.com).

The Tenant has the highest Dun and Bradstreet credit rating of 5A1.

Syndicate Return 8.75% p.a. distributed quarterly in advance. Please see Syndicate Return on Page 11.

Syndicate Price £6,320,000 (Six million three hundred and twenty thousand pounds)

Minimum Investment £25,000 (Twenty five thousand pounds)

Structure The freehold legal title to the property will be held by SG Hambros Trust Company Ltd as Professional IndependentCustodian Trustee. Syndicate members will purchase a percentage holding within the Trust and will become aregistered legal beneficial owner of the title. All decisions will be taken by a majority representing 75% by value of theSyndicated Price. Syndicate members may sell their holding at any point (see page 14 ‘Individual Liquidity’). Thestructure is suitable for appropriately qualified private investors, corporate entities and SIPP and SSAS Pension Funds.

Capital Allowances An initial ‘desk top’ survey has been undertaken, which indicates that, subject to further detailed analysis, theavailable capital allowances may represent up to an additional 0.50% p.a. return to Syndicate members who arehigher rate tax payers.

Proposed Exit Strategy The lease incorporates five fixed rental increases and it is proposed that the Syndicate considers selling theproperty shortly before the fifth anniversary of the lease term, having benefitted from two of the fixed rentalincreases. The assumptions that give rise to a potential total target Annual Return of c. 10.00% p.a. following asale at this time are illustrated later in this document (See Potential Exit Strategy on page 11).

Funding The property will be purchased with a combination of Syndicate funds and suitably hedged bank finance. Theintroduction of a modest element of bank finance enables the return to be greatly enhanced. In arriving at thereturn described in this document the terms of to the bank finance (“the Facility”) that have been used are thosewhich have been agreed, in principle, with a major bank (subject to formal credit approval). Should those termsmaterially change then the yield detailed in this document will also change and investors will be advisedaccordingly.


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Livingston

Lizzie BryceRoundabout

Dechmont

Uphall

Broxburn

East Calder

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LocationThe Houston Industrial Estate is located north of Livingston town centre, 10 miles west of Edinburgh City Centre and adjacent to Junction 3of the M8 motorway. The M8 is one of the busiest motorways in the UK and connects Edinburgh with Glasgow. Edinburgh airport is 5 mileseast of the property.

Other occupiers on the Estate include; Iceland Frozen Foods, Booker Cash and Carry, Iron Mountain (commercial document storage),Alliance Healthcare, Mitsubishi, Nisa and a new retail trade park, incorporating Kwik fit, Screw Fix, Speedy Hire and Hertz.

The Tenant’s headquarters and main distillery is located on Wheatfield Road, Edinburgh, next to the Murrayfield Rugby Stadium andapproximately 1 mile from Junction 1 of the M8.

Both Glenmorangie, Diageo plc and Glen Turner have main production and bottling facilities within 2.5 miles of the property.

JUNCTION 3

M8

GLENMORANGIEFACILITY

DIAGEO PLCFACILITY

GLASGOW

EDINBURGH

GLEN TURNERFACILITY

The PropertyThe property is a twin bay steel portal frame warehouse extending to 107,640 sq. ft. and divided into ten independently accessed units,each being serviced via roller shutter doors. All internal dividing walls have been built to a high fire retardant specification in order to complywith the necessary health and safety legislation associated with the storage of alcohol. The bays to the property have an eaves height of 10metres (32 feet), which provides extensive storage capacity.

The Tenant will use the property for the storage and maturation of whisky. The whisky will be stored in timber barrels, which will themselvesbe stored on a palletised racking system within each unit. The division of the warehouse into separate units allows for accessing pallets,without disrupting the maturation process within any of the other units.

The site extends to approximately 5 acres and the property is stepped to allow for a slight change in levels. The site is accessed fromNettlehill Road, which leads to a one way service road surrounding the building. At the front of the site is a small office which will be usedfor security and administrative purposes. The entire site is protected by palisade fencing.

TenancyThe freehold to the property is being purchased with the benefit of a full repairing and insuring lease, fromAugust 2013 to North British Distillery Ltd for a term of 15 years, with no break option. The rent is reviewedupwards only and incorporates pre-agreed, fixed rent increases throughout the term.

RentInitially £450,000 per annum, reflecting an overall rate per square foot of £4.20.

The pre-agreed upwards only fixed rent increases are illustrated below.


Year 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027

Gross Rental £450,000 £450,000 £450,000 £450,000 £450,000 £472,500 £472,500 £496,125 £496,125 £520,931 £520,931 £546,977 £546,977 £546,977 £574,326Income

Rent per sq ft £4.20 £4.20 £4.20 £4.20 £4.20 £4.40 £4.40 £4.40 £4.60 £4.60 £4.85 £4.85 £5.10 £5.10 £5.30


CovenantTenantNorth British Distillery Limited is one of the largest Scotch grain whisky producers in Scotland. The Company is a joint venture between twoof the world’s largest and best known whisky producers, Diageo plc (www.diageo.com) and The Edrington Group (www.edringtongroup.com).Almost the entire production of North British Distillery is sold to Diageo and The Edrington Group.Diageo and The Edrington Group are, collectively, responsible for more than 35% of Scotland’s total whisky distribution capacity and morethan 64% of the grain whisky distribution capacity.

The Tenant has the highest Dun and Bradstreet credit rating of 5A1.North British Distillery Statutory accounts for the period ending 31st December

Parent CompaniesDiageo plc

Headquartered in London, Diageo is the world’s leading premium drinkscompany and is the largest single producer of Scotch Whisky. Whisky brandsin Diageo’s portfolio include Johnnie Walker (No. 1 whisky in the world),Bells (No. 1 Scotch Whisky in the UK) and J&B (No. 1 Scotch Whisky inEurope). They also boast an array of what they term ‘Classic malts’, ‘Distillerymalts’ and Hidden malts’ which include brands such as Lagavulin and Talisker.

Its operations in Scotland extend to four maltings, 28 malt distilleries, two grain distilleries and eightmajor warehousing and blending sites. In addition, currently Diageo undertakes 95% of its ScotchWhisky bottling in Scotland and produces Smirnoff Red, Tanquery Sterling, Captain Morgan, ArchersAqua, Smirnoff Ice, Gilby’s Gin, Gordon’s Gin and Tanquery Gin in Scotland.

Diageo plc Statutory Accounts for the period ending 30th June

The Edrington GroupThe Edrington Group is headquartered in Glasgow. Unusually for the drinksindustry, it is owned by a charitable family trust – the Robertson Trust. The Trustwas established to ensure that the family businesses remained active andindependent, and that it continued and extended the past support they hadgiven to charities.

In 1999 Edrington acquired Highland Distillers with William Grant & Sons to become a brand-led drinkscompany like Diageo, Pernod Ricard and William Grant & Sons. Edrington now produces over 60different whisky products, including key brands such as The Famous Grouse, Cutty Sark, The Macallanand Highland Park, which are blended on the same site as their bottling operation in Glasgow. In 2008Edrington also acquired a majority stake in Brugal Company in the Dominican Republic, marking itsentry into the market for rum.The Robertson Trust commits significant charitable donations to almost 500 charities.

Edrington Distillers Ltd Statutory Accounts for the period ending 31st March

Diageo plc 2012 2011Year to 30th June £m £mTurnover 15,487 14,594Profit Before Tax 3,123 3,121Net Assets 8,107 6,811

Edrington Distillers Ltd 2013 2012Year to 31st March £m £mTurnover 698 687Profit Before Tax 191 165Net Assets 771 999

North British Distillery Limited 2011 2010Year to 31st December £m £mTurnover 72 55Profit Before Tax 9 7Net Assets 42 44

Planning ObligationsPlanning permission for the property’s current use as a Class 6 maturation warehouse was granted on 21 April 2011.

A condition of the planning permission is that an obligation exists on the landlord (the Syndicate after completion) in relation to anagreement (‘s75 agreement’) that requires the landlord to meet the cost (to a maximum of £50,000 in any 24 month period) of removingany discolouration to any of the neighbouring buildings (within a defined area), which is shown to result from the maturation process carriedout at the property.

It has been claimed that properties neighbouring bonded maturation warehouses may become affected by what is known in the industry as“Whisky Black”, which is a potential discolouration of surfaces as a consequence of black growth/ deposits resulting from the evaporation ofalcohol during the maturation process.

The s75 agreement applies to the property for as long as it is used as a maturation facility. To mitigate against this obligation the vendorhas agreed to place in escrow the sum of £375,000 (equating to the maximum liability of the Syndicate at the commencement of thelease i.e. 15 years @ £25,000 per year), to be held to the benefit of the Syndicate, to meet such liability should it be incurred (the ‘s75Deposit Funds’).

This obligation can only be triggered by the local authority if they conclude, acting reasonably, that any discolouration to properties in thevicinity, is beyond that which would reasonably be expected as a result of fair wear and tear and ageing of the property.

Furthermore, the obligation only extends to external cosmetic cleaning operations, not to any repairs, improvement or painting. Liability forthis obligation was not included by the vendor in the Tenant’s leasehold commitments; however, the appropriate legal protection andmanagement structure to mitigate against this issue has been established for the duration of the lease.

Market AnalysisScotland has recently enjoyed the best lettings take-up figures for 18 months, totalling 770,000 sq ft. The majority of these lettings werecontract led short term expansions, or cost conscious occupiers from south of the border, looking for good logistical regional locations,available at cost effective rents.

There are signs that rents are beginning to move upwards due to the lack of good quality stock. This is likely to continue into the nearfuture, as nothing significant is being reported with regards to future availability and while there continues to be a lack of speculativedevelopment.

The prime locations for industrial and warehouse development are to the west of Edinburgh, along the central belt, where large distributorscan benefit from more available space and better motorway access. The key areas consist of large industrial parks along the M8 fromNewbridge to Bathgate, which are well-located to service both Edinburgh and Glasgow, and have access to Stirling via the M9. Livingston,in particular, has generally seen a much higher level of development than Edinburgh over the last decade. Livingston is home to a numberof large industrial parks interspersed with smaller office developments. Whilst development has been relatively subdued, compared to themarket history, Livingston has seen its fair share of what development there has been. Perhaps the most notable being Tesco’s one millionsq. ft. distribution and recycling plant at the former NEC semiconductor site, situated just off the M8 between Livingston and Bathgate.

Livingston is also home to Glenmorangie’s 250,000 sq. ft. bottling plant on Alba Campus, which completed in 2010 and in 2010, at StarlawPark Livingston, Glen Turner Distillery developed over 200,000 sq. ft. of maturation warehousing and distillery space.

The warehouse and industrial market in Livingston should be viewed in the context of Livingston and Edinburgh together, forming theprincipal area for warehouse and industrial locations in central Scotland, also catering for eastern and northern Scotland.

In terms of the industrial letting market within Livingston, there is currently a good supply of secondary and tertiary type accommodation.Available capacity is most apparent on the market's older, secondary quality estates, whilst the more modern industrial and distributionparks remain relatively well let.

The bonded warehouse market has traditionally been owner occupier driven with distillers developing and owning their own facilitiesin response to increased demand. However, the on-going expansion of the whisky industry has left the market with a shortage ofaccommodation. In addition, the increasing difficulties that the industry is facing with regard to stricter planning regulations relating tothe storage of alcohol, combined with the increasing constraints of their existing sites, is forcing distillers into having to consider leasingaccommodation on long leases to accommodate the ever growing demand.



Rental AnalysisAlthough the industrial occupier market has been subdued and the bonded warehouse market typically owner occupier lead, the belowtables illustrates a number of comparative industrial and bonded warehouse evidence in the area.

Industrial Evidence

Location Tenant Area Lease Nature of Rent Comments(sq ft) Length/ Evidence (per sq ft)

(Break Option) (Date)Unit 2 & 4, Schuh 33,042 & 5 yr & 1 yr OM letting £3.75 Early 1990’s building.Kingsthorne Park,Livingston 27,364 rolling licence (June/Oct 2012)

5 Nettlehill Road, Livingston Booker 334,871 Expiry 2021 Rent Review £5.28 Rent Review assumed a(May 2011) letting of a 50,000 sq ft

unit on Houston Ind.Estate.

Todd Square, Livingston SDS 42,964 10 yr OM letting £4.00 1993 building.(2017) (Nov 2012)

Bonded Warehouse Evidence

Location Tenant Area Lease Nature of Rent Comments(sq ft) Length/ Evidence (per sq ft)

(Break Option) (Date)Unit 1, Westerton Road, McDonald & 79,021 10 yr OM letting £5.80 Located on aBroxburn Muir (April 2006) Diageo plc facility.

(Glenmorangie)

Unit 2 Westerton Road, McDonald & 54,000 10 yr Rent Review £5.00 Located on aBroxburn Muir (June 2010) Diageo plc facility.

(Glenmorangie)

Westerton Road, Broxburn North British 30,300 10 yr OM letting £5.12 Located next to theDistillery (2015) (Aug 2010) Diageo plc facility.

DTZ Edinburgh consider that in view of the current market conditions and the continued expansion of the whisky industry, thecurrent market rent is £485,000 p.a. (£4.50 per sq ft) compared with passing rent of £450,000 p.a. (£4.20 per sq ft).Source: DTZ Edinburgh Valuation - August 2013


Investment AnalysisNationally, prime yields improved in the second quarter of 2013, at an average of 5.77% across all commercial property asset classes,reflecting the continued competition for prime assets. The overall future trend is predicted to be stable, with signs of downward pressure onyields resulting in capital growth.

This pressure on prime yields is not just relevant to London, but is also being felt in the regions as overseas buyers, who have dominatedthe investment market over the last 12 months, search for opportunities outside of the capital. The shortage of secure long leasedinvestment properties is a common trend across all sectors throughout the country. Consequently, the pent up demand for primeopportunities is now having a positive impact on yields as competition increases. The large yield spread in comparison to other assetclasses is making property more attractive and, in addition to strong income returns, high yields are providing better capital value growthprospects. This is leading to a number of industrial forecasters predicting yields in the regions to fall back towards their historical averagesover the medium term, which will boost capital values.

Conversely, the secondary property market remains weak with both rental and capital values continuing to disappoint.

With occupier demand and investment activity for single let industrial investments being scarce, most activity has centred around multi-letindustrial estates, which present asset management opportunities for the more aggressive investor. The table below illustrates a number ofsingle long let investment transactions which have taken place within recent years.

Location Tenant Area Lease Fixed Net Initial(sq ft) Length/ Rental Sale Yield

(Break Option) Growth (Date)Moss Road, Aberdeen Hydrasun Facility 110,600 20 yr Yes 7.22%

(Dec 2010)

Kirkton Drive, Aberdeen Siemens plc 37,466 13 yr No 6.95%(Feb 2012)

Eurocentral, Motherwell Lightbody of Hamilton 71,700 15 No 7.75%(Aug 2012)

Condor Glen, Motherwell TDG 363,000 15 No 7%(April 2012)

Trident Park, Normanton Kongsberg Automotive 60,000 25 yr (15 yr) Yes 7.5%(July 2013)

Markham Vale, South Yorkshire Andrew Page 100,000 15 yr No 7.25%(June 2013)

The above transactions compare favourably with the proposed Syndicate purchase which reflects a net initial yield of 7.5%.

Source: DTZ, CBRE, Scottish Property Quarterly Investment Property Forum & Cushman & Wakefield Investment Yield Update 2013.

Syndicate StructureAn independent custodian trustee (SG Harlow Trust Company Limited) will hold the legal title to the property. Syndicate members willbecome beneficial owners of the property, as tenants in common, in direct proportion to their investment. Rougemont Estates will act aManaging Trustee and the regulated syndicate operator. Harlow Property Management will act as the day to day property manager.

The Professional TeamManaging Trustee & Syndicate Operator - Rougemont Estates (‘Rougemont’)

Rougemont Estates is a niche property investment company which is authorised and regulated by the FinancialConduct Authority to promote and operate Unregulated Collective Investments Schemes, including syndicatedcommercial property investments. Rougemont is an Exempt CAD firm and has the permitted exception to transmitorders with Non-MIFID Independent Financial Advisors.

Rougemont provides investors with the opportunity of purchasing a direct interest in a wide range of commercialproperty investments. In the case of this purchase Rougemont will act as the regulated operator and managingtrustee.

Further information on Rougemont Estates can be found at www.rougemontestates.co.uk.

Custodian Trustee - SG Hambros Trust Company Limited

SG Hambros Trust Company Limited is a subsidiary of SG Hambros Private Banking and an independent fiduciaryand custodian company. The company is specifically regulated to hold in trust the assets of its private clients. In thecase of this purchase SG Hambros Trust Company Limited will independently hold the legal title to the property intrust for the benefit of the Syndicate members.

Syndicate Solicitor - Turcan Connell

Turcan Connell was founded in 1997, has 20 partners and a staff of around 300. They offer a combination of skillsand expertise covering tax, estate and succession planning, employment, dispute resolution, family and privatebusinesses, divorce and family, land and property and charity law as well as wealth and investment management.

Turcan Connell has offices in Edinburgh, Glasgow, London and Guernsey. In the case of this purchase they will acton behalf of the Syndicate in undertaking the commercial conveyance of this purchase.

Property Management - Harlow Property Management (‘HPM’)

HPM is a company under common ownership with Rougemont and is regulated by the Royal Institute of CharteredSurveyors. HPM will undertake the day to day property management and administration for the Syndicate includingcollection of rent, insurance rent, VAT reporting and will distribute and account to the Syndicate members.



Syndicate ReturnThe Annual Return over the first five years of the lease to Syndicate members, following completion of the Syndicates purchase isillustrated below.

Rental Distribution and TaxationRental income will be distributed quarterly in advance. Syndicate members are responsible for their own tax arrangements and a quarterlyrental remittance statement will be provided to each Syndicate member enabling them to account for the rental income received.

Potential Exit StrategyIt is proposed that the Syndicate will sell the property shortly before the fifth anniversary of the lease term (prior to August 2018), subject tomarket conditions prevailing at the time.

A sale of the property at the fifth anniversary would mean that a prospective purchaser would still have the benefit of an unexpired leaseterm of 10 years with three further remaining fixed rental increases until expiry of the lease. This exit strategy assumes the rent at the fifthanniversary is ‘topped up’ to equate to the rent at the eighth anniversary, in order to accelerate the benefit of the rental increases andthereby maximise the Syndicate’s capital growth prospects (i.e. (£496,125 - £472,500) *2 year=£47,250 to top up)..

With continued competition from institutional funds and property companies, prime assets of this type are likely to appeal to the widerproperty investment market. Over the next five years it is unlikely that developers will consider building speculatively, or there is a suddenincrease in the level of occupiers searching for new build accommodation. It is assumed the continual shortage of prime investmentproperty is therefore likely to remain, putting continued downward pressure on yields and producing opportunities for capital growth.Furthermore, this situation could be compounded as liquidity in the financial markets improve and funding becomes more freely available,creating greater competition.

Assuming a slightly improved commercial market by 2017/18 and no material diminution in the Tenant’s strength of covenant, the followingillustrates a range of Annual Total Returns to Syndicate members compared to a range of target exit yields.

Exit Yield at 5th Anniversary 6.70% 6.85% 7.00% 7.15% 7.30%

Sale Price £7m £6.85m £6.7m £6.55m £6.425m

Annual Total Return over 5 Yrs 11.50% 10.65% 9.80% 9% 8.25%

(Note: Annual Total Return = Gross income received, plus capital growth, over the period of the investment divided by the initial investment)

In calculating the Annual Total Return, following the proposed sale of the property at the fifth anniversary of the lease term, the followingcosts and fees have been assumed:• Rental ‘Top up’ to the eighth year rent, being £47,250• Legal fees of 0.75% of the sale price.• Rougemont and selling agents fees of 1.50% of the sale price.Prior to agreeing a sale of the property Rougemont will provide a fee proposal for Syndicate members to approve.

Year 2013/14 2014/15 2015/16 2016/17 2017/18

Gross Rental Income £450,000 £450,000 £450,000 £450,000 £450,000

Facility Interest £132,293 £132,293 £132,293 £132,293 £132,293

Custodian Charges £0 £0 £0 £0 £0

Management Charges £13,500 £13,500 £13,500 £13,500 £13,500

Net Rental Income £304,208 £304,208 £304,208 £304,208 £304,208

Syndicate Annual Return 8.75% 8.75% 8.75% 8.75% 8.75%

Syndicate Price£6,320,000 (Six million three hundred and twenty thousand pounds)

FundingThe acquisition will be funded by Syndicate member’s funds and 5 year fixed term hedged bank funding.

In calculating the Syndicate Return of 8.75%, the cost of the Facility has been based on indicative terms already proposed by a major bank(subject to formal credit approval). The terms represent a total annual funding cost of 4.65% per annum (incorporating the interest ratehedge facility).

Further discussions are continuing with a number of actively interested funders and it is hoped that these indicative terms will be improvedupon; however, swap rates may continue to harden and in the event that there is a material adverse change in the overall cost of moneythen the return will proportionately alter. In such circumstances Syndicate members will be informed accordingly.

The Syndicate will pay the vendor a fixed, net purchase price on completion (the ‘Net Purchase Price’) of £5,650,000

Syndicate Funding (including all fees, costs) will be £3,475,000

Bank funding will be £2,845,000

Summary of Indicative bank finance terms

Borrower: The NBD Scotland Syndicate

Loan Term: 5 years

Margin: 2.75% over LIBOR

Interest Hedge: 1.85%

Arrangement Fee: 1% of Loan amount

Repayments: Quarterly, interest only

Security: First and only charge on the property, debenture (including fixed and floating charge),rents mandated to lender’s bank. The Facility will be non-recourse and will be limited tothe assets of the Syndicate only and not to the personal assets of any Syndicate member

Covenants: Maximum loan to value and Minimum Interest Cover to be agreed

The facility will also be subject to the borrower’s compliance with a range of agreed conditions precedent, which will include; appropriatedue diligence, a minimum passing rent equivalent to the commencing rent, satisfactory bank valuation and such other documentation asthe bank may reasonably require.

Once negotiations with all interested funders have been concluded, full details of the finance terms agreed will be issued to investors withinthe purchase pack.

Bank ValuationThe Property was independently valued, for bank finance purposes, by DTZ (Edinburgh office) on 21st August 2013 at £5,670,000,representing a current loan to value of 50%.

Funding Risks and Terms and ConditionsBank funding does involve risk. Typically, the Bank will be entitled to require the Facility to be repaid in certain circumstances that aredefined as an event of default.

In the event of a default, the Bank will be entitled to enforce its security, which may include a sale of the Property. In the event of suchenforcement, the Syndicate would only have the right to any residual proceeds after the Facility had been repaid and all other amountspayable under the Facility agreements, and any associated agreements, had been discharged, and all other creditors had been met. In thisevent there is a risk that Syndicate members would not recover all of their investment in the Syndicate.

In the event that the Syndicate still owns the Property following the expiry of the term of the Facility, then the Syndicate will need torefinance its debt. Where such a refinance was not possible, or was only possible on less attractive terms than the previous Facility, thismay result in the return being lower than anticipated, or may result in a loss to Syndicate members.



Syndicate Costs and FeesThe following costs and fees have been used in calculating the annual Syndicate Return.

Property Transactional Fees:

Property transaction costs associated with the acquisition of the Property including, but not limited to, legal & professional fees, StampDuty, acquiring agent’s fees, bank legal fees, VAT registration fees, bank legal fees and valuation / survey fees.

Bank Facility Fees:

An arrangement fee of 1.00% of the facility, payable on completion.

Managing Trustee & Operator Fee:

Rougemont’s fee, based on 4% of the Syndicate Price, payable on completion. No further Managing Trustee & Operator fees will be duepayable during the life of the Syndicate, other than those agreed in advance with the Syndicate.

Custodian Trustee Fee:

Custodian Trustee fees of £10,000, equating to £2,000 per annum for the first five years of the Syndicates’ ownership (“the Initial Period”),payable on completion. .

Property Management Fee:

Harlow Property Management’s fees representing 3% of the annual rent for the Initial Period.

Annual ValuationIt is the intention to have the property independently valued (annually) by a firm of independent Chartered Surveyors. The cost of thevaluation will be deducted pro-rata from the annual rent.

Property ManagementHarlow Property Management Limited (“HPM”) will act on behalf of the Syndicate as the Property manager and will be responsible for;rental collection and distribution, co-ordinating the Syndicate’s VAT returns and for ensuring that the Tenant acts in accordance with theterms and conditions of the occupational lease. HPM is regulated by the Royal Institute of Chartered Surveyors and is a commercialproperty management company in common ownership with Rougemont. Property management fees will be deducted quarterly from theSyndicate’s rent. Management fees will be charged at the rate of 3.00% p.a. of the annual rent as illustrated in the ‘Syndicate Return’page 11.

Capital AllowancesFollowing an initial desktop survey, it has been identified that Capital Allowances of c. £500,000 may be available. It is intended that the taxtransparent syndicate structure will allow members to claim their proportionate share of the available capital allowances to offset againstany income tax. The benefit of these allowances could represent as much as an additional 0.50% p.a return to Syndicate members whoare higher rate tax payers.

It is intended that the cost of undertaking a full capital allowances survey, following completion of the purchase, will be split between thebeneficiaries of the survey.

VATThe property purchase will be undertaken by way of a transfer of a going concern (‘TOGC’) and therefore the Syndicate will become VATRegistered. HPM will be responsible for the registration of the Syndicate with HMR&C. It will also be responsible for administering theSyndicate’s on going VAT returns. Rental payments will therefore be distributed exclusive of VAT.


Individual LiquidityA Syndicate member can sell, or transfer, their holding to whomsoever they wish, as long as the acquiring party qualifies as being asuitable ‘Exempt Person’. A sale, or transfer, of a holding can occur at any point during a Syndicate member’s ownership and does notrequire the sale of the whole property at that time.

As Managing Trustee, Rougemont is authorised to co-ordinate and assist in the sale of a Syndicate holding by promoting it to its approvedclient base. An administration fee of £550 plus VAT (including all legal documentation) is payable for this service.

Other than between other Syndicate members and Rougemont’s client base, there is no established secondary market for the sale of aholding in a property purchased under these arrangements and there can be no guarantee that a holding will sell. As with any property,values can vary at any given time and will depend on factors such as; economic conditions, tenant covenant and length of lease remaining.For further information regarding the above please see ‘Investor Eligibility’ and ‘How Syndicated Property Works’ on page 2.

Rationale for the PurchaseThis is a rare opportunity to acquire a newly constructed building that is subject to a fifteen year lease, without a tenant’s break option andincorporating pre-agreed upwards only rental increases, to a tenant who has the highest Dun and Bradstreet credit rating of 5A1 andis operating in a mature, growing and highly profitable sector.

With interest rates being forecast to remain at their current low levels for the next three years, this opportunity provides an attractive annualincome of 8.75% per annum, distributed quarterly in advance, with the potential for future capital growth as competition for quality propertyinvestments increases. Furthermore, as liquidity in the financial markets improves and funding becomes more freely available, interest ininvestments of this nature have traditionally driven higher capital values.

Typically, syndicated property promotions by Rougemont have not involved bank finance. However, in view of the quality of the Tenant,the length of lease, the fixed rental growth and the attractive bank finance terms available, we believe that this is an appropriate investmentto benefit from the enhanced return that an acquisition with an element of funding can deliver. In particularly, where there is a proposed exitstrategy in place.

The Syndicate structure is ideal for SIPP and SSAS pension fund investors. Non pension fund high rate tax payers will be able to takeadvantage of any available capital allowances, which will enhance their annual return.

The strength of the Tenant and the industry in which they operate is attractive. Scottish whisky exports hit a record £4.3 billion, in 2012,representing an increase of 87% in the last 10 years. Rising demand for whisky from both mature and emerging global markets saw thevalue of exports grow for the eighth consecutive year. Scottish whisky currently represents 80% of Scottish food and drinks exports and25% of UK food and drink exports.

With the continued expansion of the whisky industry, distillers are actively expanding their maturation storage requirements and areseeking accommodation across Scotland. The ability to obtain planning permission for a maturation facility is becoming increasingly moredifficult to obtain due to the local authorises concerns over the environmental implications of storing alcohol. It is therefore possible tosee bonded warehouse rental values adjust to a premium above traditional industrial rents.

The Property is a new warehouse facility, adjacent to Scotland’s busiest motorway corridor, strategically located for the Tenant. It is alsolikely to appeal to other surrounding distilleries. The property also has inherent alternative use prospects, particularly within the commercialstorage market.

Due to the nature of the Tenant’s operations, particularly in relation to the period of time required for whisky to mature, which is typicallythree to six years dependant on the blend, it is unlikely that there will be a time when all of the individual units within the facility will becomeempty at the time the lease expires; consequently, there is the potential to engage with the tenant at an early stage, to discuss extendingthe lease term.


Risk FactorsThe table below sets out potential risks and risk mitigation measures.

Risk Risk Mitigation

Market Value As with any investment class there is a risk that the values may decline or the target exit pricemay not be achieved. This may result in a reduced Annual Return when the property is soldand the bank facility repaid.

The property being acquired represents an attractive, secure income that is rare in today’sproperty investment market. The addition of fixed rental increases provides certainty of rentalgrowth and potential capital growth in the medium term.

Bank Funding The nature of bank funding adds an element of additional risk to any purchase; however, theSyndicate is employing the following strategy to mitigate that risk. Firstly, the Facility will benon-recourse and in the event that the bank needs to enforce its security it will be limited to theassets of the Syndicate and the Bank will not have recourse to any other personal assets ofSyndicate members. Secondly, the element of funding will be limited to a modest c. 50% loanto value. Thirdly, the Syndicate will fix the cost of the Facility for the life of its 5 year term via asuitable hedging instrument, thereby ensuring certainty of the funding cost. Fourthly, should thesyndicate chose not to seek a sale of the property in 2018, or should a sale not be attained,then the length of the lease and strength of the Tenant’s covenant will assist in being able toeither refinance or amortise down the Facility from rental income.

S75 Agreement The necessary financial and management structure has been implemented to ensure that nofinancial liability is incurred by the Syndicate during the term of the lease.

Alternative use Whilst the property has been specifically designed as a maturation facility and is therefore likelyto appeal to other local distilleries, the property does have potential alternative use prospects.The most likely use being within the commercial storage market which would allow the units tobe let to a single occupier, or as individual units to smaller occupiers.

Scottish Independence Whilst it is widely predicted that Scotland will continue to remain part of the United Kingdomafter 2014, there remains potential uncertainty surrounding the possible impact of ScottishIndependence on the Scottish property market. The subject property, however, is occupied bya tenant producing a Scottish whisky for an international market place. By definition, it cannotproduce this product outside Scotland and the demand for Scottish whisky is predicted to growas international demand continues to increase. The requirement for Scottish based maturationfacilities is therefore likely to increase and become more sought after.

Important Legal Notice1. Syndicated investment opportunities that are promoted by Rougemont qualify as Unregulated Collective Investment Schemes and may only be

promoted to; Investment Professionals, Certified High Net Worth Individuals/Companies, Certified Sophisticated Investors and Existing Investors inUnregulated Collective Investment Schemes as detailed in COB 4.12 of the FCA Handbook (“Exempt Persons”). The protections normally affordedby the FSMA and compensation entitlements under the UK Financial Services Compensation Scheme may not apply.

2. No contract is formed by the provision of this material or any subsequent oral or written communication between Rougemont and an ‘ExemptPerson’. A contract is only formed on the completion of a valid Syndicate Contract in a form approved by Rougemont and executed by both parties.The Syndicate Contract forms the entire Agreement between the parties unless the Syndicate Contract is expressly varied by the parties.

3. Commentary and other materials provided to you in any manner are not intended to amount to advice on which reliance should be placed. Rougemonttherefore disclaims all liability and responsibility arising from any reliance placed on such materials or by anyone who may be informed of any of itscontents. Rougemont does not provide or hold itself out as permitted to provide specific investment advice. Potential syndicate members shouldconsult with an FCA regulated Independent Financial Advisor (authorised to provide such advice under the FSMA) as to the suitability of anyinvestment opportunity promoted by Rougemont and the risks associated with it. You are also advised to take independent legal advice.

4. Rougemont has taken all reasonable care to ensure that the information provided in any material supplied to you, or in any written or oralcommunication with you, is true and accurate. However, all information is capable of independent verification and we advise you to seek suchverification. Copies of any documents referred to or source material are available for inspection at Rougemont’s Offices. While all reasonable carehas been taken no liability or responsibility is accepted for any errors and omissions within this prospectus.

5. To maximise returns, Syndicate members may need to hold their investments on a long-term basis. As a consequence the arrangement is notsuitable for short-term investment.

6. Other than between other Syndicate members and Rougemont’s approved client base there is no established secondary market for the sale of aholding in any properties purchased under the arrangements and therefore there can be no guarantee that you will be able to readily dispose of yourholding, or sell it at a particular price.

7. Property values may fall as well as rise and purchasers should be aware that property values are a matter of valuer’s opinion, are subject to marketforces. There can be no guarantee as to future performance. Tenants may default, thus leaving a void in rental income, rates and service chargepayments that may need to be covered by Syndicate members until such default is remedied or the property is sold/re-let. There may also be costsincurred in dealing with any default, re-letting, improvement or repair works or irrecoverable costs relating to the damage or destruction of the propertywhich the Syndicate members will be responsible for.

8. Syndicate members should appreciate that the value of property is dependent upon a range of factors many of which are outside the control ofSyndicate members; these include but are not limited to, fluctuations in land prices, construction costs, interest rates, changes in taxation, changesin supply and demand, and environmental factors. The financial strength and standing of a tenant can change at any time.

9. You are only entitled to use any promotional materials provided by Rougemont for your own use. Such materials are expressly not intended fordistribution to any other party. Reproduction of the whole or any part of any materials provided is strictly prohibited.

Complaints

1. Should you wish to make a formal complaint concerning the services provided by Rougemont then please contact, in the first instance, RougemontLimited at; Montpellier House, 4 Cold Bath Road, Harrogate, HG2 0NQ tel. 01423 877 910 and a copy of the company’s Complaints HandlingProcedure will be issued to you immediately.

2. Once a complaint has been made to us we will acknowledge receipt within 14 days and seek to resolve the issue. Rougemont Limited is regulatedby the FCA and in certain circumstances you may be eligible to refer complaints to the Financial Ombudsman Service.

AvailabilityThe property is available for syndication with a minimum investment of £25,000. Interested parties are therefore invited to review the aboveImportant Legal Notice and make a formal reservation by completing the Reservation Form on page 17/18. On receipt of a ReservationForm Rougemont will issue a purchase pack for completion.


Montpellier House 4 Cold Bath Road, Harrogate, HG2 0NQT: +44 (0)1423 877 910 | F: +44 (0)1423 877 901

www.rougemontestates.co.uk

NBD Scotland Syndicate Reservation FormI confirm I have read and understand the Important Legal Notice on page 16. I would like to acquire a syndicate holding within theNBD Scotland Syndicate and would like to be issued with the purchase pack.

Please reserve a holding in the above syndicate for:(NB. Minimum holding £25,000)

Investor Details:I confirm I wish to make this purchase in the name of:

(Full Name in Block Capitals (pension funds should list all Trustees/signatories names and addresses in full))

Following the completion of the syndicate I wish all future correspondence and rental remittances to be sentfor the attention of:

At the following address:

Financial Advisers Details:Please provide details of your financial adviser (the ‘adviser’) where applicable. If this is not applicable please tick this box andthen proceed to signing the Declaration.

Name of Adviser Contact:

Name of Adviser Firm:

Adviser Firms FCS reference number:

Address of Adviser Firm

Email of Adviser Telephone


£

Postcode:

Postcode:


NBD Scotland Syndicate Reservation Form

Financial Advisers Details continued:By signing this Reservation Form, I instruct you to pay the adviser, who’s details have been provided, the fees (if any)indicated below.

Single Advice fee (including any VAT chargeable by the adviser) payable following completion of thepurchase, for advice related to this investment.

Annual Advice fee (including any VAT chargeable by the adviser) payable quarterly in arrears followingcompletion. The Annual Advice fee is to be deducted from my/our rental payments and paid to the adviser forundertaking annual reviews of my/our investment in the Syndicate.

I hereby instruct Rougemont to deduct the Single Advice Fee and/or the Annual Advice Fee from my/our rentalpayments and to remit the sums to my/our adviser.

I confirm that I have read and understand the terms and conditions attached to this promotion. I haveconsidered the risk involved in proceeding with this purchase and have sought all the recommended advicerequired. I confirm that I qualify as Exempt Persons (as defined within ‘Investor Eligibility’ on page 2). I wouldlike to be issued with the purchase pack.

Signature Date

Name (BLOCK CAPITALS)

Please return this form to:

Rougemont Limited, Montpellier House, 4 Cold Bath Road, Harrogate, HG2 0NQ.Tel: 01423 877910, Fax: 01423 877901Email: [email protected] or [email protected]

(Amount £ or “nil”)

(Amount £ or “nil”)

/ /

Documents

Newbondedwhiskywarehouseinvestment - Rougemont Limited · 2020. 2. 29. · M8 M8 M8 M9 A899 A89 A899 A779 A705 A705 A71 A8 A71 B7015 B7030 B7015 B8046 B8046 Livingston Lizzie Bryce