JOHNSTREET,WARRINGTON

AnalysisoftheDevelopmentOpportunityForHighStreetGroup

Gavin Fraser – Enesis Ltd 10th October 2016

OverviewTheschemeTheschemeisalargeresidentialschemeinthetowncentreofWarrington.Theschemeisverywelllocatedinterms of its relationship to the Golden Square Intu Shopping centre and the Central Railway station. It iswrappedintheregenerationoftheTownCentre,whichisnowunderconstruction.

Thesummaryofassetisasfollows:

Thesitehasfullplanningconsentthatwas implementedbytheconstructionofphase1,knownasCheshireLines,andbythecompletionremediationandpilingworks.Thereareefficiencyworksthatimprovethevalueofthedesignsignificantly,asbothaPRSandBuytoLetexitstrategy.

The land acquisitionwill be fundedby the ‘front---funding’ of the freehold reversion for the consented scheme.Valued on a 28YP and £350 per annum ground rent the reversion would have a value of circa £2.9m. ThepreconditionsthatexistfromE&JCapitaltofront---fundthefreeholdreversionare:

• That theground rent ispaidduring theconstructionperioduntil it is transferred into the individualapartments

• There is a completion bond put in place, using standard ABI performance bond terms. This can beplacedagainstHSG/ theSPCor thebuilder.The localbuilding thathasbeenengaging in thepricingprocesswithusisHarbourconstruction.WewilldiscusstherebondingcapabilitythiscomingFriday.

Theschemecanbedeliveredinthreephasesandthereisthepotentialforthefollowing3exits:

• InstitutionalPRS(PRS).ThiswouldbetheGraingerMksolution.• Buy to Let Investors (BTL). Most schemes that are too small or badly located will exit to buy---to---let

investors.TheexitwouldbeorganisedthroughinvestmentclubssuchasKnightknoxorConnells.Wecanaccessbothorganisationsassoonasweareready.

• Privatesales.Theflatscouldbesoldinatraditionalmanner.ThiscouldbedoneatthesametimeastheBTLInvestorsaboveanditcouldalsobesupportedbyrollinganyunsoldunitsintoprivaterental,supportedbyaBTLmortgage.

AssumingthattheBuytoLetexitisthemostcommonthentheschemehasprofitabilitytothetuneof£5.8m,overtheperhapsa4---5yeardeliveryplan.Thebuildwouldrequireanaveragedrawncapital(abovethefreeholdreversion)of£7.9m,whichwillbemadeupof£5.9mdebt(at65%ofLTC)and£2.0mequityinvestment.

ThePartiesThe site is owned by a local developer / asset---holder, Bob McLaughlin. The sale price is £3.1m, with £600kdeferred fro12months.Thedeferredpaymentwouldsitasseniorchargeover theassetuntildevelopmentfinance is deployed. At that time the chargewould be demoted to second charge (or some other form ofsecurity–tbc).

TheRegenerationofWarringtonWarrington isaUnitaryAuthority, formed in1998,withapopulationofcirca200,000people.Warrington iscurrentlyexperiencingthethirdlargestgrowthintheUk,behindLondonandAberdeen,andhasamongstthehighestemploymentratesat80%ofitspopulation.ItisasimilarfirstgenerationnewtowntoMiltonKeynes.

OverviewofRegenerationSincegaining its independenceas aUnitaryAuthority therehasbeenamasterplan to regenerate the towncentre.Sincethefinancialcrisisofthelate2000’stheregenerationhasregainedmomentumandsince2013WarringtonCouncilhaveannounced£800mofregeneration,ofwhich£450miseitherbuiltorunderway.

Thetowncentreregenerationiswrappedaroundthepedestrianzoneandthecentralstation,andisfocusedonthreeactivezonesinthefollowingchronologicalorder:

• Greenarea.ThiscomprisedtherefurbishmentandextensionoftheexistingGoldenSquareShoppingCentre,ownedbyIntu.

• YellowArea.TheisthedemolitionandnewbuildofalargeportionoftheoldtowncentreknownasTimeSquareorBridgeStreetarea.Thisisfullycontractedandthephasedbuildingworkisunderway.

• Blue Area. This is regarded as the Stadium Quarter and comprises the central station, the rugbystadium and the proposed residential, secondary education and commercial developments. Thisregenerationhasbegunoverthelast2years.Oursiteisshowninred.

IntuShoppingCentreExtension,GoldenSquare

This£65mextensiontotheGoldenSquareShoppingCentreinWarringtonhasbeencompletedasamajorregenerationofWarringtontowncentreinbothretailandleisureuses.The300,000ft2extensionoffersunitssuitablysizedformodernretailersaswellasintroducinga100,000ft2departmentstoreintothetown.Aswellasthemajorretailelementtheschemeprovidestwonewpublicsquaressurroundedwithleisureusesandlinkinginwiththetowncentrepedestrianisationscheme.

Carparkingaboveandbelowthenewextensionandanewstateofthearttransportinterchange,adjacenttothecentralrailwaystation,hasalsoimprovedaccessibilitytothemanynewattractionsthatareavailable.

ThebusstationanditsentrancetotheIntuCentreisadjacenttothestationandlessthana2minutewalkfromthestationfrontageofoursite.

TimesSquare/BridgeStreetRegenerationThe regeneration of the Bridge Street area is beingrenamedasTimeSquare.Theconstructionofthe£107mredevelopmenthasbegunandisexpectedtobecompletedwith2018.Itcomprises42,000sqftofretail,92,000 sqft of leisure, 42,000 sqft newmarket hall, amulti---storey car parkwith 1,200 spaces, 100,000 sqft ofcouncilofficesandanewpublicsquare.

StadiumQuarterRegenerationTheStadiumQuarterregenerationhasmultipleaspectstoit.Theseparateaspectsareasfollows:

• Green Area – comprises the Rugby stadium and thecompleted regeneration, including outlet stores and carshowrooms. The regeneration was completed some timeagoandhasnowspreadsomelengthuptheA49tocreateahuge retail corridor extending out from the StadiumQuarter

• Blue Area – comprises the residential blocks known as

Cheshire Lines. This is a mixed PRS and homeownershipcommunity. Likeour site, it is accessed fromCentralWay,whichisthestationapproachroad.Itisfullyoccupiedeventhoughtheregenerationhasyettowraparoundit.

• Yellow Area – comprises the central station, which has

directtrainstobothManchesterandLiverpool,in15---20mins.The station has undergone a recent refurbishment,refocusingthestationanditsaccessontoCentralWay.Asaconsequencethestationisnowamodernstationthatfacesthefoyerofourdevelopment.

• PinkArea– ispart---developed.Thepart totheNorthhas been transformed into a nuclear and energycentre of excellence and separately a UTC facility inconjunction with Manchester MetropolitanUniversity.

The area to the South West is currently beingtransformed into a paved plaza that links throughtheunderpasstoGoldenSquareShoppingCentre.

The area to the South East is an existing car parkthat is leasedout toacarparkprovider,untilnextmonth.

• RedArea is yet to be developed. The Council have a

JV with Iliad, but progress has yet to be made. Thearea is currently used as a temporary car---park, buthasconsentforOfficesanda Hotel.

• Red&WhiteHatch–isoursiteandwillwraptheregenerationaroundthestationproperly,with284

residentialunitsbuiltoverthreephasesfrom2017to2020.

TheAppraisalsForthepurposeofanalysiswehavefocussedtheappraisalonaBTLexit.Itshowsaprofitof£2.17mthatwouldneetobesharedwithGMP.Weshouldsharethiswiththembywayofillustration.

Phase1