Parkway Shopping Centre

DOMINANT COMMUNITY SHOPPING CENTREINVESTMENT OPPORTUNITY COULBY NEWHAM, MIDDLESBROUGH

Parkway Shopping Centre is a vibrant community shopping centre which dominates its immediate local catchment02

Investment Summary u 23.9% of the 2015 election ward’s households owned outright. Compares with 13.3% for Middlesbrough as a whole, 10.6% for theu Parkway Shopping Centre is a vibrant community shopping centre North East Region and 5.7% for the whole of England. totalling 19,392 sq m (208,729 sq ft) which dominates its immediate local catchment. u Taylor Wimpey consent to build a total of 1,230 new homes as part of a £150 million development. A scheme that will add significantly to theu Significant asset management opportunities to enhance value local population and catchment for the Parkway. including consented development for the erection of 5 additional A1 units totalling (44,123 sq ft / 4,127 sqm) as well as proposals for the u Strong income profile with 77% of gross income secured to national construction of a new 5,500 sq ft unit adjacent to Tesco. multiple retailers.u Majority Freehold with car parking and supermarket held Long u Current gross income of £1,418,802 per annum with current passing Leasehold at Peppercorn. net income of £1,375,542 per annum after deduction of landlord shortfalls of £42,260.u Anchored by 117,000 sq ft Tesco Extra with shared access directly into Parkway mall with 30 retail units including national retailers Iceland, u Favourable estimated rental values (ERVs) range approximately Peacocks, Poundland, Boyes, Boots, Specsavers, Pep&Co, Home between £40 and £50 per sq ft Zone A with a total ERV estimated at Bargains and Subway. £1,466,273 per annum after accounting for estimated head rent.u Substantial surface car parking offer of 934 free customer spaces. u Attractive WAULT of 6.96 years to expiry / 4.37 years to tenant break.u Offering a central focal point for Coulby Newham’s loyal local Proposal catchment, Parkway also provides numerous additional local community facilities including the Rainbow Leisure Centre, Library / Offers in excess of £15,140,000 are invited for the freehold and business centre, medical centre, dental surgery, veterinary surgery, leasehold interest. An attractive net initial yield of 8.5% a reversionary social club, undertakers, fast food takeaways and taxi hire. yield of 8.91% an equivalent yield of 8.93% and a true equivalent yieldu Footfall of over 4.4 m pa (87,000 pw), growing at c.4% per annum v of 9.45% assuming purchaser’s costs of 6.8%. national average of [-2.8%]. A local & loyal customer base with 78% of shoppers visiting once a week. A local and loyal customer baseu Strong retailer demand evidenced by recent lettings. High level of with 78% of shoppers visiting occupancy with tenants reporting positive trading, off sustainable and once a week rebased rents and low total occupancy costs (£3.54 sq ft).u Significant leasing momentum offers potential to grow rents whilst remaining affordable for retailersu Fully funded PPM, including recently completed roof and glazing repairs.u 42.3% of the resident population working in either: higher and lower managerial, administrative and professional or intermediate occupations. 03

Thewles Redcar Kirkleatham A1(M) Great Stainton New Marske Carlton A19 Saltburn-by-the-Sea Redmarshall Boosbeck Little Stainton Stockton-on-Tees Middlesbrough South Bank Commondale Barmpton CastletonCoulby Newham A167 Eston DunsdaleLocated in the north east of England and lyinGgrewat iBtuhrdinonStahdeberge A66 Thornaby A174Borough of Middlesbrough, Coulby Newham is one of the Long Newton Marton-in-Cleveland Guisboroughlargest of the 20 boroughs of MiddleDsabrroliungghtoannd liAe6s6 3 miles Nunthropefrom the town centre. The town has a resident populationof 8,967, representing 6.48% of the total MiddlesbroughMStidGdeloertgoen DURHAM Stainton Coulby A172 Newton under TEES VALLEY Newham Roseberrypopulation of 138,412 (ONS) and covers an area of AIRPORT Yarm High Leven Newbyapproximately 411 hectares (1,015 acres). Great Ayton Little Ayton Morpeth Neasham A19 Seamer Croft-on-Tees Low Worsall Blyth Kildare Dalton-on-Tees Stokesley Ponteland NEWCASTLE Whitley Bay North Cowton Crathorne Battersby East Cowton Hutton Rudby Tynemouth Sockburn South Shields Great NEWCASTLE UPON TYNE A172 Broughton Ingleby Baysdale Gateshead Greenhow Great Busby Stanley SUNDERLAND Appleton A19 Consett Wiske Washington West Rounton Marton-in-Cleveland Houghton le Spring Durham Peterlee Pepper Arden Birkby Welbury Brandon Swainby Spennymoor A1(M) Hartlepool Bishop Auckland A19 MIDDLReEdcSarBROUGH Streetlam East Harlsey Chop Gate Darlington Guisborough Whitby Osmotherly Stokesley TEESSIDE Communications Scotch Corner A19 Coulby Newham benefits from excellent communications; by road and rail both inward to the centre of Middlesbrough Richmond and outward to much of North Yorkshire, as well as extensive nationalBridlington links. Coulby Newham is reached via the A174, Northallerton Thornaby-on-Tees to Whitby dual carriageway heading south via the B1365. Leyburn Scarborough Locally, Arriva North East and Stagecoach provide the majority of bus services, Coulby Newham is well served by Thirsk Pickering bus with 12 bus stops in the immediate area of the Parkway. A168 Ripon In 2015, the Tees Valley Council signed the Tees Valley A1(M) Devolution Deal, earmarked by the government as a Easingwold ‘significant development’, and which has facilitated the implementation of key strategic transport schemes such Knaresborough as: a new A19 Tees Crossing and associated enhancements to the strategic A19 corridor and a ‘major upgrade’ of Harrogate the Northallerton to Middlesbrough rail line to ‘improve connectivity for businesses and passengers’. Through these Ilkley Wetherby YORK infrastructure improvements, in total, the Tees Valley Council aim to deliver ‘£1 billion in economic benefit across the North’. Otley Tadcaster Bingley LEEDS & Beverley Shipley BRADFORD HULLBRADFORD LEEDSHalifax Castleford M62 Goole Brighouse Batley04

Demographics and Local EconomyThe population of Middlesbrough at 138,412 and is projected to increase by around400 each year, reaching 146,600 by 2032 (ONS 2015). Coulby Newham with apopulation of just over 9,000 has shown itself to be one of the most affluent areaswithin Middlesbrough with 42.3% of the resident population working in either: higherand lower managerial, administrative and professional or intermediate occupations.Additionally, Coulby Newham also boasts an eminent percentage of households livingin the ‘Percentage of all households – Owned outright’ with 23.9% of the 2015 electionward’s households – this compares with 13.3% for Middlesbrough as a whole, 10.6% forthe North East Region and 5.7% for the whole of England.Middlesbrough & Coulby Newham EconomyBusiness is Middlesbrough continues to be dominated by the chemical industry. Afterthe fragmentation ICI in 1995, Middlesbrough is now home to many smaller scalemanufacturing businesses owned and operated by multinational organisations; allof which are current members of the Northeast of England Process Industry Cluster(NEPIC). The town also remains a stronghold for engineering based manufacturingand engineering contract service businesses; furthermore, it has a growing reputationfor the development of digital animation businesses, which has been linked to theMiddlesbrough based Teesside University. In March 2017, Middlesbrough Councillaunched the Middlesbrough economic strategy, which aims to transform the townthrough investments totalling almost £700 million and ‘attract cutting edge enterprise,accelerate forward-thinking regeneration and deliver services a modern city demands’(Middlesbrough Mayor).In a scheme that will add significantly to the local population and catchment for theParkway, Taylor Wimpey have been granted consent to build a total of 1,230 new homesas part of a £150 million development on the Hemlington Grange site, situated a mile tothe South West of Parkway. The first phase which is now under construction, will deliver124 terraced, semi-detached and detached properties with the entire developmentspread over a 10 to 15 year development period. 05

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Situation The centre also includes an office building known as Dalby House. The building is currentlyParkway Shopping Centre is a community unoccupied and subject to proposals to demolishshopping centre at the heart of Coulby Newham and redevelop the site for additional retailand forms the principal retail, commercial and accommodation.community destination for the town and thesurrounding area. The Parkway is bordered by the Anchored by 117,000 sq ftB1365 to the west, Stainton Way to the south Tesco Extra with sharedand Newham Way wraps round the scheme access directly into Parkwayto the North and East all giving access to the mall with 30 retail unitscentres three substantial surface car parks. In addition to the retail offer at the centre,Description Parkway also offers a variety of community facilities (outside of the centre ownership) whichParkway Shopping Centre is a vibrant high brings a vibrancy to the centre. These include thequality ‘edge of town’, supermarket anchored, Rainbow Leisure Centre (comprising of a six courtcommunity shopping centre at the heart of multi-purpose sports hall, gym, swimming pools,Coulby Newham. Constructed in 1985 the squash court, bespoke dance studio as well asscheme provides total accommodation of 19,392 the Rainbow Library facility and business centre),sq m (208,729 sq ft). Anchored by a Tesco Extra medical centre, dental surgery, veterinary surgery,supermarket of 10,919 sq m (117,527 sq ft), social club, undertakers, fast food takeaways andthe centres offers an additional 30 shop units taxi hire providing a central focal point for Coulbytotalling 8,464 sq m (91,102 sq ft), 6 of which are Newham’s loyal local catchment.MSU’s including Iceland, Peacocks, Poundland, Additional local facilities include a fire stationBoyes, Pep&Co and Home Bargains. and a police station which lie to the north of theThere are three separate car parks adjacent Centre. A cathedral and a nursing home lie to theto and serving the centre providing a total of east with the local secondary school, The King’s934 free customer car parking spaces: one to Academy situated to the west.the north, one to the south-east and one tothe south-west. The retail accommodation isall at ground floor level arranged in a ‘T’ shapedenclosed shopping environment with 4 entrancesproviding access into the scheme from theprincipal car parks surrounding the property. 07

Intercept Survey How Often Shoppers Visit TenureAsset Manager Ellandi recently conducted an intercept 50% Several Weekly Weekly Monthly Every 3 months Every 6 months < once a year The centre is held under 3 separate titles with thesurvey at Coulby Newham which demonstrates the 40% Parkway majority of the centre held freehold with two separatefrequency, loyalty and accessibility of the shoppers who 30% long leasehold titles.use Parkway. 20% Freehold (title number CE89343) 10% Includes the main shopping centre (outlined green onSummary the plan). 0% Leasehold 1, (title number CE175756)• Footfall for the shopping centre is 4.4 million Daily Comprises the supermarket (Tesco) and the main car• Parkway Shopping Centre is the dominant shopping park adjacent to Tesco (outlined orange on the plan), Regional Centre Online which is held on a long lease for a term of 125 years channel commencing 1st December 2003 (111 years unexpired) - 78% of customers visit at least once a week Average Average Average at peppercorn from Middlesbrough Council. - compared with 18% who shop online weekly Retail Spend Grocery Spend Total Spend Leasehold 2, (title number CE138711) - and only 8% who visit larger regional centres each Comprises the Dalby House site (outlined purple on the £22.55 £22.38 £30.31 plan), which is held on a long lease for a term of 125 week years commencing, 4 July 1996 (104 years unexpired) atParkway is highly accessible to customers. 94% of peppercorn from Middlesbrough Council. Leasehold 2 iscustomers spend under 20 minutes travelled whilst 61% not part of the centre for service charge purposes.took less than 10 minutes.Dwell times are long. The average visit length is 63 95% 65% Shopper Habitsminutes. 55% of customers spend between 1 and 2 hoursper visit. purchase rate shop online once 94% travel less than 20 minsBasket spend is robust. The average overall spend is every 3 months 61% travel less than 10 mins£30.31 per customer. The average retail spend is £22.55 78% visit at least once a weekwhilst the average grocery spend is £22.38. or less Average dwell time 63 minutesPurchase activity and satisfaction levels are high. 95% 55% spend 1-2 hours in centreof customers make a purchase, 95% of customers stated 4.4m 70% 56% 63% buy food and drinkthey found everything they wanted and 83% rated their footfallexperience 8-10. travel by car shop more than once a week08

(210) (ESTIMATED) (514) (ESTIMATED) GREEN CAR PARK RED CAR PARKDALBYHOUSE (210) (ESTIMATED) BLUE CAR PARK Freehold Leasehold 1 Leasehold 2 09

Car Park Tenure Strong income profile withand Operation 77% of gross income secured toThere are three separate car parks adjacent to national multiple retailersand serving the centre providing a total of 934free customer car parking spaces. These are laidout as followsThe ‘Red’, Tesco, Car Park to the north, 514 spaces,(within Leasehold 1).The ‘Green’ Rainbow, Car Park to the south-west,219 spaces, (Middlesbrough Council).The ‘Blue’ Car Park to the south-east, 210 spaces,(Middlesbrough Council).The Red car park is currently operated by thevendor via on site security and the managementteam at Knight Frank. The Green and Blue carparks are the responsibility of the Council who inturn submit annual invoices to the vendor for anymaintenance works. The costs invoiced by theCouncil are recovered through the service chargeby the vendor.The car parking arrangements are primarilygoverned by a 1984 Planning Agreement,supplemented by the Leasehold 2 Headleaseand a 2003 Car Parking Deed. These documentsset out the minimum number of spaces requiredto be provided in each of the car parks and thebasis of the re-charging by the Council of therates, insurance and maintenance costs of the carparks. The Council must provide the spaces for aminimum of 999 years.10

Tenancies and IncomeThe centre is let in accordance with the Tenancies and Accommodation schedule attached. The leases are drawn on effectively fullrepairing and insuring terms by means of a comprehensive service charge.The scheme is anchored by Tesco on a lease expiring 27th November 2128 (111 yrs) at a peppercorn rent.The (centre) has a current gross income of £1,418,802 per annum. After deduction of occupational shortfalls and landlordscontribution to marketing, the centre produces a net operating income of £1,375,542 per annum and a weighted average unexpiredlease term (WAULT) of 4.37 years to earliest expiry.In our opinion the centre has an estimated rental value of £1,466,273 per annum based upon a maximum Zone A rate of £50 psf.Income Analysis Income by CovenantMajor Tenants by Gross RentPoundland Home Bargains Iceland Local £140,000 £80,850 £80,000 £287,759 10% 6% 6% Specsavers 20% Other 4% £60,000 £45,800 Pep & Co 3% £60,000 4% Peacocks 4% £60,000 4% Franks Flooring 77% National £55,000 £1,085,243 4% Boyes 3% £55,000 3% Teesside Hospice Charity Shop 3% £50,000 Superdrug 49% £45,000Remainder Mall Income £688,952 £44,000 11

Commercialisation Management and Service Marketing Budget ChargeCommercialisation is an important contributor at the Marketing activities are undertaken by centre managementcentre and provides a popular offer. In addition to the more The management of The Parkway Shopping Centre is currently and involve various promotions throughout the year coincidingpermanent lettings of the kiosks the centre generates and undertaken by managing agents Knight Frank from their with Christmas, Easter, Mothers’ Day and summer holidaysadditional c£55,000 of commercialisation income, of which Newcastle office with Asset Management undertaken by along with various events. The budget is currently £50,0005% is paid into the service charge as a landlord contribution. Ellandi. per annum of which the current owners contribute 50%. The Centre Manager is the only onsite staff member employed The Parkway has an by the managing agents. Other on site staff are outsourced Footfall annual footfall in excess of and appointed to undertake security and cleaning services at 4.4 million shoppers the centre and are paid for by the service charge. The Parkway has an annual footfall in excess of 4.4 million The building’s measured floor area in respect of lettable space shoppers. Bucking the national trend and endorsing the recent is 208,729 sq ft (19,382.11 sq m). The apportionment for each successes at the centre, footfall has been rising up around demise is calculated by reference to the proportion that the c.4% from the previous year. lettable area of each premises bears to the total aggregate lettable area of the Centre. The service charge period runs annually and the budget for the year ended 24th March 2018 amounts to £739,025 (net of VAT) (equating to £3.54 per sq ft, £38.11 per sq m). The centre also has a fully costed PPM budget costed for the next 7 years which is comfortably funded by the current low service charge budget.12

Asset Management &Development OpportunitiesDemonstrating the strong fundamentals of the centre,significant leasing momentum has been achieved with anumber of recent new lettings. These include:u Pep & Co, Boyes Department Store, WH Smith / Post Office, Subway, Bon Marche and Frank’s Flooring.u In addition re-gears/renewals have been agreed with the following tenants: Specsavers, Regis, Card Factory, Greggs, Superdrug, Peacocks and Age UK.The Parkway also offers an investor:u The opportunity to build on the recent activity and momentum to attract new retailers and grow rental levels off a low base.u Potential to explore the possibility of taking ownership and management responsibility on a long leasehold basis of the South West (Green) and south west (Blue) car parks. This would enable an owner to ‘de-clutter’ and re-line this area of the parking. Longer term it would free up the possibility of creating a drive-thru fast food area or similar.u De-clutter entrances particularly around the two entrances by the Rainbow Leisure Centre and MSU1 to improve access and sight lines to the centre.u Improve signage to Parkway from surrounding access roads to ensure passing vehicles are aware of the ‘shopping’ on offer and better engage with the local community in order to increase footfall. 13

Consented ‘Big Box’ Development RainbowUNIT F Leisure CentrePlanning consent was granted in October 2016 for the erection of 5 additional unitstotalling (44,123 sq ft / 4,127 sq m) for use as either retail (A1, A2, A3, A4, A5) including the UNIT Dreconfiguration of the car park and demolition of Dalby House. The permission benefits from an UNIT Cextended implementation period of 5 years. UNIT BMiddlesbrough Council, the freeholder of the majority site have been consulted throughout UNIT Kthe planning process and are supportive of development, however a commercial agreement forarrangements to develop the site are yet to be agreed.As part of the consent MSU1, totalling 8,414 sq ft of existing space, was to be extended by2,360 sq ft. This has been let to Frank’s Flooring in its current configuration, thus leaving, 41,763sq ft of additional consented space for the extension. Rents in the range of £13-15 psf withleases of 10-15 years are envisaged. A list of potential tenant targets is available on request.Unit Space ERV (psf) ERV (pa)K 18,488 sq ft £13.00 psf £240,344External Yard 7,781 sq ft £1.00 psfB 5,160 sq ft £15.00 psf £7,781C 5,160 sq ft £15.00 psf £77,400D 5,174 sq ft £15.00 psf £77,400 £77,610Further Development Option:New Space Next to Tesco Entrance / Unit 10Potential also exists for the construction of up to two new retail units (totalling up toc. 5,370 sq ft) on the centres part freehold and part leasehold land facing the surface car parkadjacent to the Tesco entrance.These proposals do not currently have planning consent, however this is the busiest part ofthe scheme, and a new unit would attract interest from F&B operators such as Wetherspoons,given its high footfall and access to surface car parking.14

Surveys Proposal WebsiteEPCs – A full set of EPC surveys are available in the online Offers in excess of £15,140,000 are invited for the All supplementary ‘back up’ information is availablemarketing web site. freehold and long leasehold interest of The Parkway on the password protected, marketing website. Centre. A purchase price at this level would produce www.coulbynewham-invest.comVAT an attractive net initial yield of 8.5% a reversionary yield of 8.91% an equivalent yield of 8.93% and a true Further InformationThe asset has been elected for VAT and VAT will therefore equivalent yield of 9.45% assuming purchaser’s costsbe chargeable on the purchase price if it is not possible to of 6.8% Parkway Shopping Centrearrange for this transaction to be treated as a Transfer of a Coulby NewhamGoing Concern (TOGC) Middlesbrough TS8 OTJ Coady Supple 12 St George Street London, W1S 2FB +44 (0) 207 629 5251 www.coadysupple.com Robin Coady +44 (0) 20 7629 5272 [email protected] Dermot Supple +44 (0) 20 7629 5276 [email protected] David Sadler +44 (0) 20 7629 5259 [email protected] ACTMessrs Coady Supple, for themselves and the vendors of this property whose agents they are give notice that: The particulars are set out as general outline only for the guidance of intending purchasers, and do not constitute, nor constitute part of an offer orcontract: All description dimensions, references, 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 intending purchasers should not rely on them as statements ofrepresentations of fact and must satisfy themselves by inspection or otherwise as to the correctness of each of them: No person in the employment of Coady Supple has any authority to make or give any representation of warranty in relation to this property. Allnegotiations are subject to contract. September 2017. Designed and produced by Creativeworld Tel:01282 858200 15