Prestigious Long Income Office Investment Opportunity

Transcription

1 Prestigious Long Income Office Investment Opportunity PRIME FOUR Aberdeen s first and only world class business park STATOIL an Investment Grade Norwegian oil company, 67% state owned

2 Reversion at 21 October 2030 of 9.05%. Executive Summary Background to Statoil at Prime Four Prime, long income investment opportunity; Located at Prime Four, an unrivalled strategic location in Aberdeen; 45,797 sq ft Grade A office property; Let to Statoil Production (UK) Limited until 31st March 2032 at 1,225, per annum Exec Summary - Guaranteed rental growth with fixed rental uplifts of 2.5% per annum compounded in October 2020, October 2025 and October 2030; The lease is guaranteed by Statoil UK Ltd and Statoil ASA which is 67% owned by the Norwegian State and enjoys a Moody s rating of Aa3 and a Standard & Poor s rating of A+ (Investment Grade); The Norwegian State s exceptional management of their oil and gas assets has resulted in their Government Pension Fund Global exceeding assets of $1 Trillion for the first time ever in September This fund was set up to invest the surplus wealth produced by their oil and gas revenue. Statoil is a major international energy company which is developing the Mariner Project in the North Sea which is estimated to be operational for 30 ; Offers are sought in excess of 18,450,000, subject to contract and exclusive of VAT, for our client s heritable interest in the property. A purchase at this level reflects the following yield profile: Having taken the decision to invest in the substantial Mariner oilfield east of Shetland, Statoil had a requirement to identify premises for a UK HQ in Aberdeen which could accommodate the company over the estimated 30 year lifespan of the project. The company was attracted to the high quality working environment offered by Prime Four and a distinctive Grade A office building was developed by Drum Property Group and completed in October The Mariner field is a flagship development for the company which will create up to 1,500 North Sea jobs offshore and onshore at their Prime Four HQ. Heavy lift operations commenced in July 2017 and the field is expected to yield 55,000 barrels a day when oil comes on stream in the second half of At a recent Energy Voice interview Hedda Felin, Managing Director, Statoil Production UK Ltd renewed the company s commitment to the North Sea for the next 30. She said We believe in the North Sea and are looking forward to bringing Mariner on stream in 2018, with the on-going ripple effects a development like this creates and continuing to explore for new opportunities. We also look forward to seeing the progress of our Hywind development, the world s first floating wind park offshore from Peterhead. It s an exciting time for Statoil in the UK. We are privileged to able to grow and contribute towards the longevity of the UKCS. This demonstrates the significant potential for Statoil to remain at Prime Four well beyond the initial 15 year term of their lease. Mariner A installation completed August 2017 Photograph : Statoil Net initial yield % Reversion at 21 October % Reversion at 21 October % Reversion at 21 October % 1 2

3 Aberdeen: Global Business Centre Aberdeen is one of the most prosperous business focused cities in the UK. Its status as a global centre of excellence in the energy industry has been established for over 40 with other industries giving diversity to the local economy. Some facts and figures about the city are highlighted below: The population is approximately 225,000 making it the third largest city in Scotland. The regional catchment population is 500,000 and is forecast to grow in the next 20. It is the administrative centre for the North East of Scotland and home to the HQs of Aberdeen and Aberdeenshire Councils. The city has two highly regarded universities the University of Aberdeen and Robert Gordon s University. Average weekly earnings in the city in 2016 were 13% higher than the Scottish average Aberdeen city and Shire has a combined GDP of billion. The city is home to a quarter of Scotland s top 100 companies. The city is a cornerstone of the UK and Scottish economies and for it s size consistently punches above its weight. The oil and gas industry is the major contributor to the local economy with many global companies resident in the city including BP, Shell, Total, Chevron, Halliburton, Wood Group PSN, Repsol Sinopec and Nexen. Other industries are also represented in the city including multi nationals like First Group (Transport) and Standard Life Aberdeen, RBS, Barclays and Simmons International (Financial). It is estimated that 50% of the oil and gas activity in Aberdeen is focused on the UK Continental Shelf while 50% is exported globally highlighting the city s importance in the global energy arena. Despite lower oil prices, companies are still committing to long-term leases, underlining the city s excellent business longevity prospects. 4 3

4 Connectivity Aberdeen has excellent communication links with the rest of Scotland,the UK and Europe AIR ROAD RAIL SEA 20 million is currently being invested to expand and modernise Aberdeen International Airport by airlines fly approximately 3 million passengers per year to more than 40 national and international destinations. The heliport is one of the busiest in the world transferring oil workers to the offshore platforms. The A90 trunk road links Aberdeen to the national motorway network, making Edinburgh and Glasgow accessible in just over 2 hours. The 745 million Aberdeen Western Peripheral Route (AWPR) is under construction, with completion scheduled for Q The city is connected to major towns and cities throughout the UK with regular trains to Edinburgh and Glasgow linking in to the national rail network. Aberdeen has one of the busiest commercial ports in the UK and is a vital resource for the North Sea Oil and Gas industry. 4.2 million tonnes of cargo are handled to and from nearly 40 destinations and Northlink operate passenger and car ferries to Orkney & Shetland. There are over 14,800 vessel movements, 100,000 crew and 155,000 passengers every year. The 330 million expansion of the harbour has commenced and will be complete in ABERDEEN TO KEY FLIGHT DESTINATIONS FROM ABERDEEN Belfast Aberdeen Inverness Glasgow EDINBURGH Edinburgh: 2 hours 30 mins train Glasgow: 2 hours 45 mins train Belfast: 1 hour flight Dublin: 1 hour flight Manchester: 1 hour flight London: 1 hour 15 mins flight Alicante Amsterdam Baku Belfast Bergen Birmingham Bristol Cardiff Copenhagen Dalaman Dublin East Midlands Esbjerg Exeter Faro Faroe Islands Frankfurt Geneva Gdansk Humberside Kirkwall Jersey Leeds London Malaga Manchester Naples Newcastle Norwich Oslo Paris Rekjavik Riga Rues Southampton Stavanger Stornoway Sumburgh Tenerife Warsaw Wick DUBLIN Manchester LONDON 5 6

5 Dyce Aker BP Baker Hughes Expro Halliburton Schlumberger Wood Group PSN Aberdeen Airport Bridge of Don GE Oil and Gas Intertek Bucksburn 330 Million new Aberdeen Exhibition and Conference Centre under construction Location of Major Office Occupiers Western Peripheral Route Western Office Corridor West End EY HSBC KPMG Lloyds Banking Group RBS Simmons & Company City Centre Westhill Amec Foster Wheeler Fairfield Forum Kongsberg Schlumberger Scottish Water Seabrokers Subsea 7 TAQA Technip Total AAB Apache Lloyd s Register Maersk Nexen OneSubsea Premier Oil Statoil Transocean Hill of Rubislaw Chevron ConocoPhillips Marathon CNR Centrica Dana Petroluem Deloitte ExxonMobil ENGIE Petrofac Standard Life Aberdeen Wood Group PSN Altens/Tullos Amec Foster Wheeler Maersk Shell Weatherford Wood Group PSN

6 Prime Four Business Park Prime Four is a unique development in Aberdeen, providing the city s first and only International class business park, endorsed by the global companies who have relocated to Prime Four. The strategic context is unrivalled, providing the best location in the Aberdeen office market, surrounded by affluent village suburbs and many of the city s prime residential areas. The AWPR will have a major junction immediately to the west of Prime Four, which will allow superb access and increase the profile further. Prime Four s location is a natural evolution of the western office corridor which starts in the city centre, and links the West End office area, The Hill of Rubislaw office complex, Prime Four and Westhill. The integrated and sustainable transport options are enhanced by the existing Park and Ride facility, which is linked to Prime Four and offers regular bus services to and from Aberdeen, together with a link to the dedicated cycle path between Aberdeen City Centre and Westhill. Park management also operates a car sharing scheme via a dedicated Liftshare portal. The amenities at Prime Four revolve around the Fourcourt, the park s social hub, comprising a 148 bed Village Urban Resort hotel and health club with Starbucks and Urban Bar and Grill, the Fresh Cafe, multi-use sports and event court and Kingswellies Nursery. Marks & Spencer, Tesco and Costco all have stores in nearby Westhill. 9 10

7 History of Prime Four Rental Performance of Prime Four 2010 Site acquired by Drum Property Group ,000 sq ft of pre-lets secured to Apache, Nexen and Transocean on Phase Phase 1 investment forward sold to F&C Commercial Property Trust for 94.0 million ,000 sq ft pre-let to Premier Oil bed hotel deal with Village Urban Resorts 2013 Premier Oil investment forward sold to Royal London Asset Management for 27.4 million ,000 sq ft pre-let to One Subsea 2014 One Subsea investment forward sold to Aberdeen Asset Management for million ,797 sq ft pre-let to Statoil ,000 sq ft pre-let to AAB ,000 sq ft pre-let to Lloyd s Register 2016 AAB investment sold to overseas client of Citi Private Bank for million 2016 Public consultation on Phases 4 and Lloyds Register investment sold for million to LCN Capital Partners. The rental performance of Prime Four has reflected its status as Aberdeen s most successful office development and only International class Business Park. Prime Four has enjoyed strong rental growth since its inception in Phase 1 achieved sq ft for Transocean, sq ft for Apache and for Nexen; with rents for Phase 2 peaking at sq ft for Premier Oil and One Subsea and Phase 3 achieved sq ft for AAB and Lloyd s Register. Of particular note is the fact that incentives have been minimal over this period

8 Accommodation & Specification The building provides a world-class HQ office with an approximate net internal area of 45,797 sq ft. Plowman Craven have measured the building in accordance with the RICS Code of Measuring Practice (6th Edition). The breakdown of the Net Internal Area (NIA) is estimated to be as follows: Description Area (sq ft) Area (sq m) Reception 2, Atrium Base 1, Ground 11,917 1,107.1 First 15,403 1,431.0 Second 14,679 1,363.7 Total 45,797 4,254.7 Practical completion of the building was achieved as at 14th October designated car spaces are provided within the shared car park giving an excellent ratio of 1 space per 274 sq ft. 7 disabled spaces are provided, together with 16 cycle spaces and 7 motorcycle spaces. The property benefits from a Very Good BREEAM rating and the following specification: Floor to ceiling height of 2.70 m VRF heating and cooling system Raised access floors (115 mm clear void) LG7 compliant lighting One 13 person DDA compliant passenger lift and one goods lift Double height modern reception Male, female and disabled toilet facilities on all floors Shower facilities at ground level 13 14

9 Site layout Bright Pink: The Premises Tenure The Heritable interest (Scottish equivalent of English freehold) is for sale. Dark Grey: Retained by vendor Red Outline: The purchaser will hold a 75% pro indiviso share and the vendor will hold a 25% pro indiviso share in the site common parts. The purchaser has the right to use 167 designated car spaces, 7 disabled spaces, 16 cycle spaces and 7 motor cycle spaces. The vendor has retained the right to use 45 designated car spaces, 3 disabled spaces, 5 cycle spaces and 3 motorcycle spaces. Tenancy The property is let to Statoil Production (UK) Ltd with a joint and several guarantee from Statoil ASA and Statoil (UK) Limited until 31st March The current rent is 1,225, per annum, which reflects a rate of per sq m ( per sq ft). There are 5 yearly fixed rent reviews, due at 21 October 2020, 2025 and 2030, where the rent will be increased by 2.5% per annum compounded. We therefore calculate the rent will increase to 1,386, in October 2020 ; 1,568, in October 2025 and 1,774, in October The tenant has the option to extend the lease by 5 from lease expiry and a further 5 from expiry of the first extension. site layout for illustrative purposes only _ 15

10 Financials & Credit Ratings Tenant Statoil Production (UK) Ltd Dun and Bradstreet Rating 2A2 Immediate Subsidiary from Statoil (UK) Ltd Key Financials Fiscal Fiscal Fiscal Non consolidated Non consolidated Non consolidated GBP (000 s) GBP (000 s) GBP 31 Dec Dec Dec 2013 Sales Turnover 26,529 12,622 - Profit / (Loss) Before Taxes (1,711) (1,443) - Tangible Net Worth 1,886 3, Net Current Assets (Liabilities) (1,459) 3, Guarantors Statoil (UK) Ltd Dun and Bradstreet Rating 5A1 Immediate subsidiary from Statoil ASA Key Financials Fiscal Fiscal Fiscal Non consolidated Non consolidated Non consolidated GBP (000 s) GBP (000 s) GBP (000 s) 31 Dec Dec Dec 2013 Sales Turnover 509, , ,214 Profit / (Loss) Before Taxes (88,868) (160,176) 298,745 Tangible Net Worth 1,032, , ,198 Net Current Assets (Liabilities) (120,116) (508,105) 101,308 Statoil ASA Dun and Bradstreet Rating A76 Ultimate Parent Company Key Financials Fiscal Fiscal Fiscal Non consolidated Non consolidated Non consolidated tnok tnok tnok Dec 2016 Dec 2015 Dec 2014 Turnover 242,413, ,279, ,671,000 Result Before Tax -18,499,827-53,586,000-2,493,000 Net Worth 286,142, ,670, ,167,000 Assets 761,273, ,574, ,433,000 Statoil ASA have a Moody s rating of Aa3 which is defined as Obligations rated Aa are judged to be of high quality and are subject to very low credit risk. The company s Standard & Poor s rating is A+ and is thus classified as Investment Grade. _

11 Statoil Mariner Project Originally established in 1972 as the Norwegian State Oil Company, Statoil has become an international energy company present in more than 30 countries around the world, including several of the world s most important oil and gas provinces. Their headquarters are based in Stavanger, Norway and they currently have approximately 20,500 employees worldwide. Mariner A Photography: Jamie Baikie / Statoil Statoil operate in Europe, North and South America, Africa, Asia and Oceania. Its international oil and gas production has increased sevenfold since the year 2000, with a strong portfolio of assets outside Norway. Statoil delivers oil, gas and wind power and are a leading explorer for new oil and gas fields. They operate around the world on a large portfolio of fields and platforms as well as undertaking decommissioning work and pursuing new, renewable energy solutions. Find out more at Norwegian State Ownership 67% Norwegian State Norwegian private owners UK Rest of Europe USA Rest of world Statoil s Mariner Project, initially discovered in 1981, is the development of the Mariner and Mariner East ultra-heavy oil fields located in the northern North Sea, with an estimated $7bn investment. Statoil estimates that up to 1,500 jobs will be created by this major North Sea oil field development. The Mariner field is located in Block 9/11A, while the Mariner East is located in Block 9/11B on the UK Continental Shelf (UKCS). It is located approximately 130km off the nearest British coast, and 40km north-west from the UK / Norway international boundary. Mariner, which lies about 93 miles (150km) east of Shetland, is one of the largest projects currently under development in the UKCS. Statoil will operate the Mariner Area Development with working interests of 65.11% in Block 9/11A and 92% in Block 9/11B. Offshore installation of the platform jacket was carried out in 2015 and the topside installation in Up to 800 people will carry out hook-up and commissioning work before the Mariner field comes on stream in the second half of Mariner East will come on-stream two later in 2020 and once in production, the field will support 700 permanent jobs. After a partial privatisation in 2001, Statoil was listed on the New York and Oslo Stock Exchanges. In accordance with the Storting s decision of 2001 concerning a minimum state shareholding of two-thirds in Statoil, the Government expressed its intention to increase the state s shareholding in Statoil over time to 67%. They have reached this level and current distribution of shareholders shows a majority share or 67% to the Norwegian State, who s ownership interest is managed by the Ministry of Petroleum and Energy. The oil and gas industry plays a vital role in the Norwegian economy and the financing of the Norwegian welfare state. The sector is Norway s largest measured in terms of value added, government revenues, investments and export value. Long-term perspective in the management of the government s petroleum revenues ensures that they benefit Norwegian society as a whole, and that future generations will benefit from Norway s petroleum wealth. One of the overall principles of Norway s management of its petroleum resources is that exploration, development and production must result in maximum value creation for society, and that revenues must accrue to the Norwegian state and thus benefit society as a whole. The main reason for this is the extraordinary returns that can be obtained by producing petroleum resources. Since these resources belong to society as a whole, the Norwegian state secures a large share of the value creation through taxation and the system known as the State s Direct Financial Interest (SDFI) in the petroleum industry. Net cash flow from SDFI in 2016 is estimated to be NOK 68 billion. The government s total net cash flow in 2016, including the dividend from Statoil and various fees, was NOK 127,9 billion, or about 13 % of total government revenues in the National Budget. The net government cash flow is expected to be around NOK 179 billion in The Mariner Area offshore project is expected to remain operational for 30 and the reserves are estimated at more than 250 million barrels of oil, with an average plateau production of 55,000 barrels per day. Furthermore, Statoil has started a three-well exploration drilling campaign on the UKCS and have stated that one of the wells, Mariner Segment 9, could provide additional resources and increase the extent of the Mariner Field. EPC The property has an EPC rating of B. Capital Allowances The purchaser will receive the benefit of all outstanding capital allowances. Further information is available upon request. Construction Warranties A full suite of construction warranties are capable of assignment to the purchaser. 19 _ 20

12 Investment Property Market Prime commercial investment product within the UK has global appeal. Investors remain attracted to assets offering strong property fundamentals together with long, secure income streams, ideally with index linked or fixed growth profiles. The scarcity of such assets continues to pressurise yields. A selection of recent transactions within the UK is provided within the table below. Address City Date Price NIY WAULT Tenants Comments Quartermile 2 Edinburgh July ,500, % 7.2 Exchange Place Edinburgh Jan ,000, % and 3 Exchange Place 1 Edinburgh Jan ,000, % 7.37 Q Park, Glasgow May ,400, % Jamaica Street Lloyds Register, Aberdeen Jan-17 41,500, % 15.5 Prime Four SQA, 24 Wester Edinburgh Nov ,200, % 20 Shawfair Dundas House, Edinburgh Oct ,000, % Brandon Street Skyways/ Speke Aug-16 32,000, % 19.5 Skyways 2 1 St Peter's Square Manchester Aug ,000, % 15 City South Aberdeen May-16 23,500, % 20 Business Park Atria One Edinburgh Apr ,250, % 14 & Two Sonova House Warrington Apr-16 8,725, % 13 Gyle Square, South Gyle Broadway Edinburgh Feb-16 48,300, % 13.5 Riverside East Sheffield Dec-15 23,360, % 12 Standard Life Edinburgh Dec-15 93,750, % 16 House, 30 Lothian Road Citymark Edinburgh Dec-15 43,650, % 10 Sainsbury's Bank, Edinburgh Dec-15 19,000, % 8 Edinburgh Park Admiral, Cardiff Oct-15 69,410, % 25 David Street Equinox Glasgow Oct-15 33,400, % 15.5 Multi-let Multi-let Multi-let Q Park Lloyds Register EMEA SQA (Scottish Ministers) Standard Life Employee Services Ltd Shop Direct Multi-let including DLA Addleshaws and KPMG KCA Deutag Alliance Trust, Brewin Dolphin and PwC Phonak Group Ltd Scottish Ministers Irwin Mitchell LLP Standard Life Employee Services Ltd Bank of Scotland plc, occupied by Lloyds Banking Group Sainsbury's Bank Admiral Esure Top up on the vacant unit. Multi let to tenants including Morton Fraser and Scotch Whisky Association. Multi let to tenants including Wood Mackenzie and Scott Moncrieff. Multi let to tenants including Blackrock and Hymans Robertson. 578 space car park within Glasgow city centre. Current rent subject to annual uplifts linked to RPI (2%&4% collar and cap). Rent reviews to the higher of 3% per annum compound or open market rent. SPV acquisition. 5 yearly reviews to MRV. Off market transaction. Rent review to a percentage of the market rent. 5 yearly fixed uplifts to 2.5%. Two modern office properties within a campus setting, 6 miles south of Liverpool city centre. Long leasehold. Guarantee for 4 on 100,000 sq.ft (37% of building). Grade A new build in prime central location. 5 yearly fixed uplifts to 2.5%. Business park location situated at the southern entrance to Aberdeen. WAULT 16 (14 to breaks). Prime, Grade A office located in the Exchange District. 5 yearly RPI linked reviews (collar and cap at 2%- 5% ). Modern office building located in Warrington, west of Manchester. 5 yearly upward only rent reviews. Single let office located in west Edinburgh. Off market deal. 5 yearly upward only open market rent reviews. Grade A office located to the north of the traditional office core. 5 yearly upward only rent reviews to the greater of rent passing and 70% of MRV. Prime Grade A office located in Edinburgh city centre, on the edge of the Exchange District. 5 yearly upward only rent reviews. Modern, single let office located in the Fountainbridge area of Edinburgh, on the edge of the Exchange district. WAULT 13 (8 to break option). 5 yearly upward only rent reviews. Grade A office located in west Edinburgh. 5 yearly RPI Linked reviews (collar and cap at 1.5% 3%). Grade A office located in Cardiff city centre. Sold as part of a portfolio. 5 yearly, upward only open market rent reviews. Grade A office located in the city centre of Glasgow. Sold as part of a portfolio. 21

13 Proposal Further Information Offers are sought in excess of 18,450,000, subject to contract and exclusive of VAT, for our client s heritable interest in the property. A purchase at this level reflects the following yield profile following the deduction of purchaser s costs and LBTT at a rate of 6.25%: For further information please contact the joint selling agents: Net initial yield % Reversion at 21 October % Reversion at 21 October % Simon Cusiter Ken Shaw Dave MacLeod Reversion at 21 October % JLL Ryden FG Burnett Debt Availability and Analysis The table below illustrates potential cash on cash returns in excess of 9.50% pa subject to purchaser loan requirements. 7 Exchange Crescent, Conference Square Edinburgh EH3 8LL 25 Albyn Place Aberdeen AB10 1YL 33 Albyn Place Aberdeen AB10 1YL Gross cash-on-cash returns Purchase Price: 18,450,000 LTV 50% 55% 55% 60% Interest Only Interest Only 1% amort p.a. 1% amort p.a. T: M: E: Simon.Cusiter@eu.jll.com T: M: E: ken.shaw@ryden.co.uk T: M: E: david.macleod@fgburnett.co.uk ALL IN INTEREST COSTS (assuming margin over 5 year swap rate) 3.05% 9.09% 9.68% 7.73% 8.24% 3.30% 8.87% 9.42% 7.46% 7.91% 3.55% 8.65% 9.15% 7.20% 7.59% 23 24

14 AWPR FUTURE PLOTS PRIME FOUR RETAIL PARK PARK-AND-RIDE Our new office at Prime Four Business Park provides an attractive work-place for Statoil s staff and is an ideal location for our UK offshore headquarters. Hedda Felin Managing Director, Statoil Production UK Ltd 21

15 A development by Drum Property Group Ltd 12 Rubislaw Terrace Lane Aberdeen AB10 1XF Tel: George Street Edinburgh EH2 4JN Tel: Exchange Place Glasgow G1 3AN Tel: Messrs Ryden, FG Burnett and JLL for themselves and for 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 intended purchasers or lessees, and do not constitute, nor constitute part of, an offer or contract; (ii) all descriptions, dimensions, reference to condition and necessary permissions for use and occupation, and other details are given without responsibility and any intending purchasers or tenants should not rely on them as statements or representations of fact but must satisfy themselves by inspection or otherwise as to the correctness of each of them; (iii) no person in the employment of Messrs Ryden, FG Burnett and JLL has any authority to make or give any representation or warranty whatever in relation to this property.