UNIQUE INVESTMENT AND DEVELOPMENT OPPORTUNITY

SALTMEADOWS INDUSTRIAL ESTATE, BALTIC BUSINESS CENTRE & SALTMEADOWS TRADE PARK

• 25.3 acre site in a strategic location comprising mainly industrial uses with excellent development / asset management potential

• Immediately adjacent to the A184 with easy access to the national road network

• Within easy walking distance of Tyne and Wear Metro line and local amenities

• The estate provides a total of 420,136 sq ft of commercial floorspace with a low site coverage ratio of 33.8%

• Strong tenant profile including Doosan Babcock Ltd, Langley Holdings PLC and Carillion PLC

• Total annual income is £752,860 per annum across all parts of the site

• Offers sought at £7,000,000, equating to an initial yield of 10.16% (6.39% after deduction of non-recoverable void costs). Purchaser’s costs allowed for at 5.8%

EXECUTIVE SUMMARY

LOCATIONGateshead together with Newcastle Upon Tyne form the urban core of the Tyneside conurbation and the financial and cultural focal point of the north east. The town lies 98 miles north of Leeds, 104 miles south of Edinburgh and 277 miles north of London. Gateshead has a resident population of around 78,403 people with 1.4M people within 12 miles of the town centre.

By road, Gateshead has direct access via the A1 south to Leeds and north to Edinburgh and Newcastle train station has a fastest journey time to London Kings Cross of 2 hours and 50 minutes and 1 hour 20 minutes to Edinburgh.

The Tyne and Wear Metro light railway provides 40 million public journeys per year on a network of 46 miles, linking Gateshead to Newcastle Upon Tyne, coastal towns including South Shields and Whitley Bay and Sunderland. Combined with regular bus services throughout the town, Gateshead is host to an excellent public transport network.

Newcastle International Airport, approximately 9 miles to the north west of the subject property, has daily flights to Stansted, Heathrow and Gatwick with journey times of less than 1 hour. Other domestic destinations include Belfast, Bristol, Exeter, Jersey and Southampton. In 2000 the airport completed a £27M redevelopment of Terminal 1 increasing capacity to 4.8M passengers per year.

Manors

GATESHEAD

NewcastleCentralMetro

Park Lane A184A184A184

A167 High St

A1058

A186 Walker Road

Gre

en L

n

Ha

wks Rd

Q

uarryfield Rd

New Bridge Street A193

Saltmeadows Rd Tyne Main Rd

A167(M)

River Tyne

Road

Neils

on

43

42

41

40

39

38

36

37

A194(M)

M6

M6

A1(M)

49

56

57

58

59

61

62

64

63

A1(M)

Penrith

Kendal

Middlesbrough

Darlington

Durham

Newcastle Upon Tyne

Sunderland

NewcastleAirport

A1

A1

A696

A697 A1068

A69A69A69

A68

A68

A68

A68

A68

A19

A688

A688

A66

A685

A65

A66

A6

A66

A19

A692

A69A69

Belfast

Dublin

Glasgow Edinburgh

Bristol

Liverpool

Cardiff

SCOTLAND

IRELAND

NORTHERNIRELAND

WALES

Birmingham

Newcastle

SITUATIONThe subject property is situated on the eastern fringe of Gateshead town centre, to the immediate north of the A184 and adjacent to Gateshead International Stadium. The surrounding area comprises mainly commercial uses including industrial and offices, with a newly-developed residential scheme on the opposing side of the A184.

Transport links are excellent with the A184, the primary trunk route through Gateshead, feeding directly onto the A19 to the east and the A1 to the west. The nearest Tyne and Wear Metro station is Gateshead Stadium, located within half a mile of the site to the south and linking the property to the wider Tyneside and Sunderland conurbations.

To the west of the site is the ribbon of new development along the Gateshead quayside off Saltmeadows Road, including the Baltic Centre for Contemporary Art, the Sage international concert venue, a new Jury’s Inn hotel funded by Aviva and completed in 2013 and Baltic Place, a 130,000 sq ft grade A office development facing the River Tyne. In addition, to the south of the riverfront development is the Gateshead College site, a new Ramada Encore hotel and office buildings constructed in 2008 by Terrace Hill, occupied by the Open University and Gateshead Design Centre.

Other nearby occupiers include Network Q, Fleet Factors, AMK Automotive Components, Parmley Graham, Sunderland College, ArmourPost, McDonalds and Gateshead International Stadium.

Gateshead and the wider Tyneside conurbation have experienced a significant increase in investment over recent years. Projects include the Quayside Regeneration, the new Baltic Centre for Contemporary Art, the Angel of the North, the Newcastle Grainger Town Project and the Millennium Bridge. Gateshead town centre has recently undergone a £150M redevelopment project, providing a new retail and leisure core with occupiers including VUE, Nando’s, Tesco Extra, Sports Direct, Frankie & Benny’s and Costa. The scheme, developed by Spenhill, the development arm of Tesco, also features a new student accommodation scheme catering for over 1,000 students of Northumbria University. The subject site is located within 0.5 miles of this exciting development.

The Metro Centre, located to the west of the town, is the largest shopping centre in the European Union, with representation from key international and multiple retailers, while Team Valley to the south is the north east’s premier commercial estate, with a focus on industrial use.

The commercial focus for the wider Tyneside conurbation has shifted towards the service sector with companies such as BA, Procter & Gamble, EE, Tesco Bank and others setting up significant call centre operations. The region has continued to experience a high level of overseas investment in manufacturing, recently demonstrated by Nissan completing a 420,000 sq ft extension of their plant at Washington and Hitachi starting work on a large facility for construction of rail carriages in County Durham.

Major companies that have significant presence in the region include Sitel, Santander, PriceWaterhouseCoopers, Deloitte, Sage Group, Virgin Money, Barclays and Lloyds Banking Group.

LOCAL ECONOMY OVERVIEW

SITE PLAN

DESCRIPTIONThe property comprises a number of different elements spread over a site of 25.3 acres, described below:

SALTMEADOWS INDUSTRIAL ESTATE

This element of the property comprises 2 terraces of high-eaves steel portal frame industrial units, divided into 9 bays. The external envelope of each terrace is of profiled cladding construction with cavity brick lower walls. Eaves height is up to 20m, which is extremely rare in this location.

Internally the buildings provide large open floorplates suitable for manufacturing purposes with cranage and hoist apparatus. A concrete service yard is located to the north west of the site.

SALTMEADOWS TRADE PARK

A newly-constructed estate, constructed in 2008, of 11 industrial / trade counter units split over two terraces, varying in size between1,729 – 4,931 sq ft. A number of the units feature internal offices. The units are of steel frame construction and benefit from modern specification and ample parking provision.

BALTIC BUSINESS CENTRE

The Baltic Business Centre is a 2-3 storey office building formerly occupied by Rolls Royce, alongside their occupancy of a number of high bay units on the site. The property is of concrete frame construction, built circa 1970 and benefits from prominent frontage onto Saltmeadows Road to the north of the site. The building was most recently let as a serviced office centre but is now vacant. Recent ideas are for demolition in conjunction with redevelopment of other parts of the site.

HALLAM BUILDING

A two storey office building of steel frame construction with composite clad elevation, surmounted by a flat roof. The internal accommodation is divided into four suites, each with associated parking.

STADIUM BUILDING

The Stadium Building comprises a two storey office / workshop building of steel frame construction with cavity brick elevations. This element of the property requires some improvement works to maximise return or could be demolished in conjunction with a wider asset management programme across the site.

In addition to the above, the site features a dedicated security cabin housing CCTV and barrier control equipment. Extensive car parking is provided to the south of the Baltic Business Centre and would provide an excellent construction platform if a re-orientation and redevelopment of the site was contemplated in the future.

Newcastle City Centre

The Sage

Gateshead College

Baltic Place

The Baltic Centre for Contemporary Art

Big Gateshead residential scheme

Felling Industrial Estate

Gateshead Town Centre

A184

A184

Gateshead Arena

Saltmeadows Industrial Estate

Baltic Business Centre

Saltmeadows Trading ParkStadium Building

Hallam Building

ACCOMMODATION

IndustrialPart Unit Area GIA (sq ft)

Saltmeadows Industrial Estate

Bay 1 71,672

Bays 2, 4 & 5 159,631

Bay 3 - 01 13,941

Bay 3 – 02 14,497

Bays 6 & 7 42,282

Bay 8 5,473

Bay 9 3,465

Sub Total 310,961

Saltmeadows Trade Park

1 3,558

2 3,565

3 & 4 7,998

5 4,046

6 4,931

7 4,214

8 2,291

9 2,135

10 1,973

11 1,729

Sub Total 36,440

Totals 347,401

OfficesPart Unit Area GIA (sq ft)

Baltic Business Centre - 56,310

Hallam Building 1 – 4 5,271

Stadium Building - 11,154

Totals 72,735

TENUREThe property is held freehold.

TENANCIESPart Accommodation Floor Area

NIA/GIA (sq ft)Tenant Lease Start Lease Expiry Break Option Passing

Rent paComments

INDUSTRIAL

Saltmeadows Industrial Estate

Bay 1 71,672 Doosan Babcock Ltd 28/04/2014 27/04/2028 28/04/2019 (Tenant only 6 mths notice)

£147,375 Rent offered at sale incorporates landlord’s top up. Open market upwards-only reviews 5 yearly from 28/04/2019

Bays 2, 4 & 5 159,631 Langley Holdings PLC 09/01/2013 08/01/2018 09/01/2016 (Tenant only 6 mths notice)

£354,000 No reviews

Bay 3 28,438 Doosan Babcock Ltd 28/04/2014 27/04/2028 28/04/2019 (Tenant only 6 mths notice)

£58,475 Rent offered at sale incorporates landlord’s top up. Open market upwards-only reviews 5 yearly from 28/04/2019

Bay 6 21,141 Acrol Modular Buildings Ltd

31/05/2013 31/10/2013 Any time (Landlord only)

£36,000 Tenant is holding over on a license and formal lease documentation is with solicitors for completion. Rent is inclusive of service charge

Bay 7 21,141 Vacant - - - -

Bay 8 5,473 Vacant - - - -

Bay 9 3,465 Vacant - - - -

Sub Total £595,850

Saltmeadows Trade Park

Unit 1 3,558 Alimento Int Ltd 22/11/2013 21/11/2018 22/11/2016 (Tenant only 6 mths notice)

£16,900 Rent offered at sale incorporates landlord’s top up

Unit 2 3,565 The Saville Group Ltd 25/09/2012 24/09/2015 - £15,500

Units 3 & 4 7,998 Alimento Meat Products Ltd

22/11/2013 21/11/2018 22/11/2016 (Tenant only 6 mths notice)

£29,750 Rent offered at sale incorporates landlord’s top up

Units 5, 6 & 7 13,191 Carillion Construction Ltd

15/10/2014* 14/10/2019* 15/10/2017* £56,062 *Terms agreed with Carillion Construction Ltd and with solicitors for completion. Rent review to market rent on third anniversary capped at 3% pa increase

Unit 8 2,291 TPC Beauty Ltd 06/01/2014 05/01/2019 05/01/2016 (Tenant only 6 mths notice)

£5,728

Unit 9 2,135 Interlink (NE) Ltd 31/10/2014 30/10/2017 31/10/2016 (Tenant only 3 mths notice)

£10,675 Rental deposit paid equivalent to 3 months’ full rent

Unit 10 1,973 Vacant - - - - Interlink (NE) Ltd in discussions to take a lease concurrent with occupation of Unit 9

Unit 11 1,729 Independent Air Treatment Technology Ltd

08/03/2010 07/03/2015 - £10,500 Terms for surrender and re-letting for additional 3 year term agreed and with solicitors for completion

Sub Total £143,260

TENANCIESPart Accommodation Floor Area

NIA/GIA (sq ft)Tenant Lease Start Lease Expiry Break Option Passing

Rent paComments

OFFICES

Baltic Business Centre

Suites 1 – 29 and Conference

Rooms

56,310 Vacant - - - -

Hallam Building

Units 1, 3 & 4 3,668 Rathbone Training 07/06/2012 06/06/2017 Rolling tenant only break with 3 mths notice

£13,750 Discussions taking place regarding Rathbone Training taking a lease of the whole property.

Unit 2 1,605 Vacant - - - -

Stadium Building

Bay 6 & 7 11,154 Vacant - - - -

Sub Total £13,750

Total £752,860

The vacant areas on site incur holding costs including empty rates charges, service charge and insurance shortfall of circa £279,000 per annum. Of this figure, £162,330 per annum is attributable to the Baltic Business Centre for empty rates charges (£133,382 per annum), service charge shortfall (£26,888 per annum) and insurances (£2,061 per annum). If the Business Centre was demolished or otherwise removed from the rating list and service charge reapportioned, alongside the letting of unit 10 Saltmeadows Trade Park being agreed with Interlink (NE) Ltd, the overall shortfall reduces to £121,100 per annum – a fall of 59%.

COVENANT INFORMATIONTenant Year End Turnover Pre-Tax Profits Shareholder’s Funds Credit Safe Score

Acrol Modular Buildings Ltd 31/03/2013 - - -£50,447 21 – High Risk

Alimento Int. Ltd 30/09/2013 - - £34,310 41 – Moderate Risk

Alimento Meat Products Ltd 31/08/2013 - - £10 95 – Very Low Risk

Carillion Construction Limited 31/12/2013 £1.19Bn £75.65M £207.29M 77 – Very Low Risk

Doosan Babcock Ltd 31/12/2013 £421.15M £126.15M £474.85M 83 – Very Low Risk

Independent Air Treatment Technology Ltd 31/12/2013 - - £78,652 56 – Low Risk

Interlink (NE) Ltd 30/11/2013 - - £3,146 62 – Low Risk

Langley Holdings PLC 31/12/2013 £684.69M £75.06M £407.69M 93 – Very Low Risk

Rathbone Training 31/07/2013 £34.95M £1.85M £1.63M 87 – Very Low Risk

The Saville Group Ltd 31/12/2013 £30.49M £18,930 £2.1M 49 – Moderate Risk

TPC Beauty Ltd 30/04/2013 - - £8,915 90 – Very Low Risk

OCCUPATIONAL MARKET / SUPPLYDemand for industrial and trade counter stock across the north east has seen a dramatic increase over recent months as business confidence returns. This improving occupier market comes against a backdrop of diminishing supply, particularly for larger units, due to the lack of speculative development during the recession. Well-located, modern sites with good transport connectivity and generous service yards are outperforming other property sectors.

On the subject estate, Interlink have recently taken a 3 year lease with a break at year 2 within unit 9 Saltmeadows Trade Park, at a rent reflecting £5.00 per sq ft. An incentive of 3 months’ half rent was granted with a 3 month rent deposit agreed. The same tenant has made enquiries to take a 3 year lease of unit 10 without break at the same level of rent. Once these lettings are complete Saltmeadows Trade Park will be fully let.

Doosan Babcock Ltd and Langley Holdings PLC have both restructured and extended their leases very recently. The supply of similar high bay units with cranage and yard space is extremely restricted.

Neighbouring estates include Green Lane and Felling Industrial Estates as well as other trade park units along Saltmeadows Road, all of which benefit from high levels of occupation.

Elsewhere in the Tyne and Wear region industrial demand is outstripping supply. Follingsby Park Gateshead, which extends to over 865,000 sq ft of industrial space, has reduced vacancy rates from 25% to 5% between October 2012 and October 2014, with rents rising from £4.00/£4.25 to typically £4.50/£5.00 per sq ft depending on unit type and quantum. Similar take up has taken place at Team Valley, Gateshead, Washington and Newburn Industrial Estate in Newcastle Upon Tyne.

INVESTMENT MARKET

INDUSTRIAL

OFFICE

Recent sales evidence is summarised in the table below:

Property Description Lease Term Price / Date Yield

City & Northern Portfolio7no. modern, mid-2000 build units over 3 estates in Blyth, South Shields and Gateshead, with a total GIA of 99,722 sq ft

WAULT of 5.5 years across the portfolio £5.43MJuly 2014

8.00%

Units 1 & 2 Monkton Business Park, Hebburn2no. 2001 build units totalling 55,590 sq ft in a less prominent pitch

Let to Variable Messaging Signs and Ford Components Ltd with WAULT of 9.5 years. Total rent roll £204,800.

£2.35MJuly 2014

8.24%

Units A & B, Hadrian Industrial Park, New York, North Shields

2 industrial units constructed in late 1990s extending to 161,249 sq ft on a site of 9.17 acres.

Unit A let to Freudenberg Technical Products until Dec 2024 at a rent passing of £232,000 per annum. Unit B let to Elanders Graphics Ltd until October 2022 at a rent passing of £370,000 per annum.

£6.9MMar 2014

8.25% rising to min 8.68% in Dec 2017

Booker Cash & Carry Warehouse, First Avenue, Team Valley, Gateshead

77,810 sq ft warehouse operated as a cash and carry unit, located on premier industrial estate in the north east.

Let to Booker Ltd for 25 years from Feb 1995 at rent passing of £279,000 per annum, equating to £3.59 per sq ft.

£3.30mMarch 2014

8.00%

Property Description Lease Term Price / Date Yield

Tyneside House, Newcastle Business Park, Newcastle

37,587 sq ft modern office building in edge of city centre location

Let to the Environment Agency at a total rent of £350,000 per annum until June 2020. Office rent equates to £11.95 per sq ft.

£4.15MJune 2014

8.%

Metropolitan House,Newcastle

Secondary city centre office building over five storeys, extending to 12,071 sq ft

Let to Nigel Frank International on floor by floor leases at a total rent of £110,620 per annum. Rent equates to £9.16 per sq ft average with an AWULT of 3.4 years.

£1.3mJune 2014

8.04%

2 Koppers Way, Monkton Business Park, Hebburn

32,742 sq ft three storey office building, constructed 2005

Let to Seimens PLC expiring December 2020 at a rent of £388,500 per annum

£3.4M April 2013

10.8%

PLANNING The subject site is allocated as a primary employment area under the Gateshead Council Unitary Development Plan, which supports B1, B2 and B8 uses alongside hotels, car showrooms and complimentary retail uses. The Local Authority’s policies are designed to ensure the area retains its vitality and function.

VATThe property has been elected for VAT and it is envisaged that the transaction will be treated as a ToGC.

EPCSEPCs are available on request.

SERVICE CHARGEService charge amounts are not onerous and range from £0.35 per sq ft for trade park units to a maximum of £3.24 per sq ft for bays within the industrial estate.

The charge includes 24 hour security at the request of Doosan Babcock and Longley Holdings, which is the biggest service charge cost. If these tenants were to manage their own security expenditure could be reduced across the estate.

We can provide a full schedule of service charges for the last period on request.

ASSET MANAGEMENT / STRATEGYThe flexibility of the site offers excellent opportunities for redevelopment or refurbishment to maximise return. In particular, the Baltic Building, which is currently entirely vacant and incurring holding costs, may benefit from a full programme of refurbishment or demolition and subsequent re-allocation to other commercial uses. Moving the car parking area to the south which is currently under-utilised would create a large development platform with frontage onto Saltmeadows Road and Stadium Road. Additionally, the estate is nearby an existing residential conurbation and elements of the property may be a candidate for residential use in the future.

A number of the existing leases are drawn on low base rents with forthcoming break options, presenting opportunities for rental growth or lease extension.

The empty rates charges across the estate total circa £160,000 per annum. Rates mitigation measures can be employed to substantially reduce these costs, particularly if a programme of redevelopment / refurbishment is to be employed and elements of the site can be quickly made incapable of beneficial occupation. Several other effective tools to mitigate rates liability are available and reducing rates charges will significantly improve the cashflow position of the estate as a whole.

PROPOSALOur client is seeking offers of £7,000,000 (Seven Million pounds) subject to contract and exclusive of VAT for the freehold interest. A purchase at this price will equate to a net initial yield of 10.16%, or 6.39% after deduction of non-recoverable void costs, allowing for purchaser’s costs at 5.8%.

By way of example, if Baltic Business Centre is removed from the rating list then the yield after deductions would increase to 8.59%.

ENQUIRIESIf you require any further information or would like to arrange an inspection please contact one of the following:-

Simon BeanlandDirect Line: 0191 269 0512simon.beanland@gva.co.uk

Luke SymondsDirect Line: 0191 269 0095luke.symonds@gva.co.uk

GVA, Central SquareForth StreetNewcastle upon TyneNE1 3PJ

For any other investmentsales please visit:gva.co.uk/investment

Subject to contract. Oct 2014

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GVA is the trading name of GVA Grimley limited, conditions under which particulars are issued by GVA Grimley Limited for themselves, for any joint agents and for the vendors or lessors of this property whose agents they are, give notice that: (i) the particulars are set out as a general outline only for the guidance of intending purchases or lessors and do not constitute, nor constitute part of, an offer or contract. (ii) all descriptions, dimensions, references to condition and necessary permission for use and occupation, and other details, are given in good faith and are believed to be correct but any intending purchasers or tenants should not rely on them as statements or representations of fact but satisfy themselves by inspection or otherwise as to the correctness of each of them. (iii) no person in the employment of GVA Grimley Limited or any joint agents has any authority to make or give any representation or warranty whatever in relation to this property. (iv) all rentals and prices are quoted exclusive of VAT Reproduced by courtesy of the Controller of HMSO Crown Copyright reserved. Licence No 774359. If applicable, with consent of Chas E Goad, Cartographers, Old Hatfield, Geographers A-Z Map Co Ltd and/or The Automobile Association. For identification purposes only.

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