DUNLOP AIRCRAFT TYRES

DUNLOP AIRCRAFT TYRES FORT PARKWAY, BIRMINGHAM SALE & LEASEBACK 25 YEARS WITH RPI UPLIFTS

Investment Summary Substantial industrial complex located in the prime industrial area known as Fort Dunlop, extending to 293,303 sq ft (27,248.9 Sq M) Located in Erdington, Birmingham, being close to Junction 5 of the Motorway Extensive site of approximately 10.75 acres Upon completion of the sale, DUNLOP AIRCRAFT TYRES LIMITED will enter in to a new 25 year lease without break The passing rent will be 879,909 per annum (equating to 3.00 per sq ft) which will be reviewed on a 5-yearly basis in-line with RPI, subject to a collar and cap of 2.00% - 4.00% per annum compounded The tenant has been in occupation of the site for approximately 100 years and is one of only 4 businesses worldwide who are authorised to manufacture aircraft tyres by the CAA and equivalent global bodies Freehold Proposal Offers are invited in excess of 15,275,000 which reflects an attractive NIY of 5.35%, assuming purchaser s costs of 7.73%. This reflects a price of 52 per sq ft. A purchase at this level will reflect a minimum yield of 5.90% in 2023 given the RPI collar provided (i.e. 2.00%), or a yield of 7.01% in 2023 given the RPI cap (i.e. 4.00% pa). 2

1 2 3 JLR Castle Bromwich site Trinity Mirror Spitfire Park 4 5 6 UK Mail DHL/JLR Kuehne + Nagel 7 8 9 Amazon Iron Mountain Hermes 10 11 12 Fort Shopping Park Toyota Lexus 13 14 15 Lamborghini & Bentley JLR Paroh 16 17 18 Roman Originals Stadco Meggit 19 Fort Dunlop 20 JLR Rail Head 21 Fort Industrial Park A38 A38 4 3 1 6 8 2 9 7 5 A47 21 18 16 17 15 19 11 12 14 DUNLOP AIRCAFT TYRES 20 JUNCTION 5 > 10 13 A47 < JUNCTION 6 3

LIVERPOOL MANCHESTER SHEFFIELD Tamworth A41 Birmingham Snow Hill A456 WOLVERHAMPTON BRISTOL Selly Oak A441 BIRMINGHAM M5 CHELTENHAM A34 M4 A38(M) BIRMINGHAM Birmingham New Street M40 M1 OXFORD A435 King s Heath NOTTINGHAM READING M1 Perry Common PETERBOROUGH NORTHAMPTON A1(M) LONDON Birmingham Moor Street A452 Erdington Sparkhill CAMBRIDGE A40 A34 M11 M25 Sutton Coldfield A47 A41 A45 A38 DUNLOP AIRCRAFT TYRES Stechford Shirley Toll Solihull M42 Birmingham M42 2 M42 Coleshill Location Located in the centre of the United Kingdom with the largest regional population outside London, Birmingham is regarded as Britain s second city. With an economy of 24.8 billion, it forms a substantial part of the broader West Midlands economy which generated a Gross Added Value (GVA) of 127 billion in 2016, larger than 11 of the 28 EU nations, sitting between Hungary and Greece. Birmingham is in the heart of a world class multi-modal transport infrastructure, providing access to 90% of Britain s economy which can be reached within a travel time of four hours. The subject property is located within 5 miles of 11 separate motorway junctions. Transport Links Road Birmingham City centre Coventry Northampton Manchester Liverpool London 5 miles 19 miles 50 miles 89 miles 100 miles 115 miles 10 min 24 min 48 min 1hr 26 min 1hr 33 min 1hr 48 min Passenger Rail Birmingham New Street 5 miles 9 miles 10 min 20 min Birmingham International Freight Rail Hams Hall DIRFT 5 miles 35 miles 12 min 33 min Air Birmingham Airport* Coventry East Midlands 9 miles 23 miles 31 miles 20 min 28 min 30 min * (13 million passengers in 2017) 4

Tyburn Situation Stockland Green Erdington A452 Castle Vale The property is prominently situated on, and accessed directly from, Fort Parkway in the most popular industrial zone within Birmingham, both in terms of employment and offering an established business network, with a superb pool of customers and suppliers. Fort Parkway forms part of the A47 Heartlands Spine Road dual carriageway which is one of the main road arteries, linking through A38(M) 6 SLADE ROAD Gravelly Hill A5127 TYBURN ROAD A4080 Bromford TYBURN ROAD THE FORT SHOPPING PARK DUNLOP AIRCRAFT TYRES KINGSBURY ROAD FORT DUNLOP A47 JAGUAR LAND ROVER A452 5 A45 to Junction 5 and Junction 6 of the motorway (Spaghetti Junction), the hub of the national motorway network. Birmingham City centre is STAR CITY readily accessed via the A38(M) approximately 5 miles distant. To the west of the subject property is The Fort Shopping Park providing in excess of 300,000 sq ft of retail accommodation with occupiers including Boots, Next, Debenhams, H&M and Primark, Nechells Birmingham City Centre A47 Washwood Heath A4080 Hodgehill Castle Bromwich amongst other household names. To the east is the Jaguar Land Rover Castle Bromwich car assembly BJ plant for all Jaguar saloon and sports cars. Over 3,000 workers currently work at the site which also benefits from a rail distribution hub. Adjacent to Dunlop Aircraft Tyres is the award winning Urban Splash regeneration of Fort Dunlop. Providing 360,000 sq ft within a vertical office park scheme, it includes a Travelodge hotel and amenities. Prologis have developed approximately 700,000 sq ft of prime manufacturing and logistics accommodation in close proximity to the subject property. Further, there are a number of car dealerships nearby, including the Lamborghini, Toyota and Bentley garages which are directly to west of the subject property. The property s prominence and extensive road frontage are also major attractions of the site. 5

Description The property comprises a substantial industrial site which provides a warehouse and manufacturing unit together with a selfcontained office building. The original building was constructed during the 1910s and has been extended over time. The two-storey office block was constructed during the 1930s and this was extended in the 1950s with an additional interconnecting three-storey block. The building is and has only ever been used for the production of aircraft tyres by the same occupier, Dunlop Aircraft Tyres. Over the years the occupier has added small extensions and made alterations as necessary to suit the business need. The occupier has a large amount of on-site machinery which is used for production, retreading and testing of aircraft tryes with a proportion of this having been in-situ for over 80 years. The accommodation offered by the buildings is functional for the occupiers needs. Loading doors are provided around the site which comprise a mixture of level access and dock level loading doors. There are a number of tunnels located beneath the building which are no longer used and and originally provided access to neighbouring buildings on the previous larger site. A further pump house serving the building is located off-site but nearby, which is included within the sale and leaseback. Access to the site is from the A47 Fort Parkway from which there is a gated entrance and associated gate house. The majority of the car parking provision is provided on the west of the site as well as further spaces situated around the site perimeter. 6

8 Unit 2 Tank Paroh 84.4m SL Chy P 84.3m 84.6m El Sub Sta 84.3m 84.6m 84.5m 84.4m CR < N Unit 1 Site Area The site extends to approximately 4.35 ha (10.75 acres). Site coverage is approximately 57%. Accommodation The property has been measured by Plowman Craven in accordance with the RICS Property Measurement (2nd Edition, 2018), which incorporates the RICS Code of Measuring Practice (6th Edition) and the new International Property Measurement Standards (IPMS) and provides the following accommodation on a Gross Internal Area basis: 50m 100m 150m SL MP 37.75 FORT PARKWAY BROMFORD Boro Const & Ward Bdy For Indicative Purposes Only DESCRIPTION GIA (SQ FT) GIA (SQ M) Warehouse 244,916 22,753.5 Offices 48,387 4,495.4 TOTAL 293,303 27,248.9 The measured survey can be provided upon request and reliance on this can be extended to the purchaser. 7

Leaseback Covenant Information Upon completion of the sale, the property will be let to Dunlop Aircraft Tyres Limited for a term of 25 years without break. The passing rent will be 879,909 per annum, equating to 3.00 per sq ft overall. The rent will be reviewed in-line with the Retail Price Index (RPI), subject to a collar of 2.00% and a cap of 4.00%, compounded annually and effective five yearly. The tenant will have the automatic right to extend their lease for a term of 5 years for a maximum of two occasions. Tenure The property is held freehold. A small parcel of land to the west has been carved out and sold historically. This has been excluded within the site plan shown. Dunlop Aircraft Tyres Limited is the world s only dedicated specialist manufacturer and retreader of aircraft tyres, having been in operation for more than 100 years. The subject property forms the Global headquarters for the business, with other sites located in the USA and China. The business supplies in excess of 150 different aircraft types with over 300 individual customers globally, and holds over 500 approvals from either the Civil Aviation Authority, or other such global equivalents. The business has both aircraft manufacturers and operators among its customer base. It supplies tyres directly to manufacturers such as Airbus, Boeing, Bombardier and Embraer, as well as providing tyres to operators such as Jet2, Flybe, Lufthansa, the US Airforce and China Express. Sales turnover has increased year on year over the previous 5 years, with headline figures from the most recent accounts being: 31 DEC 2017 31 DEC 2016 31 DEC 2015 Sales Turnover 53,340,000 52,260,000 47,298,000 Profit/ (Loss) Before Taxes 22,142,000 3,555,000 7,329,000 Total Net Worth 39,505,000 43,037,000 41,972,000 The latest accounts show an inflated pre-tax profit which is due to exceptional administrative circumstances relating to an inter-company disposal. The business has a Dun & Bradstreet rating of 5A1, representing a minimum risk of business failure. 8

Site Operation Aircraft tyres have been produced on-site for approximately 100 years, with Dunlop Aircraft Tyres being one of only 4 producers worldwide who are authorised to manufacture both new and retreaded tyres for both the civilian and military aviation markets. Approximately 450 people are employed on-site with the business operating continuous working shift patterns, allowing the site to operate 24 hours a day 7 days a week. The business also operates from two further facilities worldwide, one of which is in the United States and the other being located in China. Those facilities carry out a retreading function only, rather than the production of new tyres, with that part of the business conducted solely from the subject property. Tyres are produced for a variety of civil aircrafts, with the business having predominantly targeted, and had great success in, the regional aircraft market. Approximately 30% of the customer base is supplying military aircraft with various contracts in place including being the sole supplier to the Boeing C-17 Globemaster military aeroplane. Approximately 90% of the tyres either produced or retreaded on-site are exported to carriers and manufacturers around the world. The business has historically invested heavily in the site and its relevant operations and it continues to do so. A new tyre building machine, which will allow the production of radial tyres, has recently been installed at a cost in the region of 3m, and this will support an expected increase of market share in radial tyres going forward. The site is also the home to the HQ functions which includes all of the design, engineering and materials development. Since the group s strategy for growth involves expanding its product range, it is currently investing heavily in expanding and upgrading its tyre testing facility involving a multi-million pound investment in a dedicated dynamic tyre testing rig and the associated upgrades to the site power supply. The subject facility houses a multitude of highlyspecialised tyre testing, building and retreading equipment all of which would be very expensive to relocate. Importantly, relocation would also trigger a re-authorisation by the Civil Aviation Authority (CAA) and other relevant authorities causing long machine downtime and creating further costs. The CAA regulations require each individual process to be approved, making it very difficult for new entrants to come into the market. 9

Birmingham Industrial Market Occupational demand for manufacturing and logistics space across the UK is continuing to be robust, due to the structural changes in the market that are being experienced by businesses across the sectors. Birmingham has been synonymous with the manufacturing sector over the last century, and recently demand in the sector has been driven by the automotive industry, in particular following the rapid expansion of Jaguar Land Rover and continued growth of Aston Martin and LEVC in Coventry. This has had a downstream effect on both Tier 1 and Tier 2 suppliers to the automotive industry, where demand from such occupiers remains strong. Owing to its central location, Birmingham is an established logistics location, with strong demand having been witnessed in particular from the rapid growth of e-commerce. Whilst much of the logistics demand is for large scale distribution centres in strategic locations around the country, there is a growing demand from customers for next day, or indeed same day deliveries which is accelerating the take-up of smaller scale urban logistics centres, capable of servicing the population quickly and effectively. The increase in the use of electric vehicles for local deliveries is also helping to fuel demand due to the current limited range of vehicles. Birmingham Investment Market Underpinned by the regional connectivity, as well as being a key regional sub-market, Birmingham and the wider region remains a prime target for a sustained weight of investor demand and capital, in particular for assets benefiting from strong income, property and location fundamentals. The acute imbalance of undersupply against robust occupational demand is driving positive rental growth throughout the manufacturing and logistics sectors, which has seen yields harden over time. Rents in this sector are continuing to rise, with a forecast of 2.5% per annum in the period 2018-2022, particularly attractive when compared with the all property rent growth index of 1%. This limited supply, selective development and increasing rents have further favoured investors and reinforced their positive approach to the sector and its association with defensive income streams, a slow rate of obsolescence and attractive income returns. 10

EPC The property has two separate EPC ratings, as follows: Industrial E-102 Offices E-116 VAT The property is elected for VAT and therefore VAT will be payable on the purchase price and SDLT on the gross purchase price. Legal Costs Each party is to bear their own costs. Capital Allowances There are no transferable allowances. Proposal Offers are invited in excess of 15,275,000 which reflects an attractive NIY of 5.35%, assuming purchaser s costs of 7.73%. This reflects a price of 52 per sq ft. A purchase at this level will reflect a minimum yield of 5.90% in 2023 given the RPI collar provided (i.e. 2.00%), or a yield of 7.01% in 2023 given the RPI cap (i.e. 4.00% pa). 11

12 DUNLOP AIRCRAFT TYRES 40 FORT PARKWAY, ERDINGTON, BIRMINGHAM B24 9HL FURTHER INFORMATION DAVID HAYNES ANDY DICKENS DAVID SMEETON JUSTIN QUIBELL david.haynes@cushwake.com andy.dickens@cushwake.com david.smeeton@cushwake.com justin.quibell@cushwake.com 020 7152 5373 020 7152 5030 0121 710 4657 0121 697 7213 07733 123 318 07793 808 030 07785 253 059 07764 413 752 43-45 Portman Square London W1H 6LY MISREPRESENTATION CLAUSE Cushman & Wakefield gives notice to anyone who may read these particulars as follows: 1. These particulars are prepared for the guidance only of prospective purchasers. They are intended to give a fair overall description of the property but are not intended to constitute part of an offer or contract. 2. Any information contained herein (whether in the text, plans or photographs) is given in good faith but should not be relied upon as being a statement or representation of fact. 3. Nothing in these particulars shall be deemed to be a statement that the property is in good condition or otherwise nor that any services or facilities are in good working order. 4. The photographs appearing in this brochure show only certain parts and aspects of the property at the time when the photographs were taken. Certain aspects may have changed since the photographs were taken and it should not be assumed that the property remains precisely as displayed in the photographs. Furthermore no assumptions should be made in respect of parts of the property which are not shown in the photographs. 5. Any areas, measurements or distances referred to herein are approximate only. 6. Where there is reference in these particulars to the fact that alterations have been carried out or that a particular use is made of any part of the property this is not intended to be a statement that any necessary planning, building regulations or other consents have been obtained and these matters must be verified by any intending purchaser. 7. Descriptions of a property are inevitably subjective and the descriptions contained herein are used in good faith as an opinion and not by way of statement of fact. The particulars were prepared in October 2018. Brochure by Mango 020 7060 4142