CSL House, Pitronnerie Road, St Peter Port, Guernsey - Propex

CSL House, Pitronnerie Road, St Peter Port, GuernseyPrime Freehold Investment Opportunity

Investment Summary• Prime freehold building in St Peter Port, Guernsey• The property provides a total Net Internal Area of 14,175 sq ft (1,317 sq m)• 29 car parking spaces providing a ratio of 1:489 sq ft• Let on a full repairing and insuring lease to 2e2 Offshore Limited for a termexpiring on 31 March 2026• The unexpired term is therefore approximately 14.4 years• Passing rent of £229,000 per annum with minimum uplift provisions ateach review• The tenant has invested a substantial amount on creating this unique, hi techdata centre and disaster recovery facility• The property is currently held in a Special Purchase Vehicle (SPV)Investment ProposalOffers are invited in excess of £3,650,000 (Three Million Six Hundred and FiftyThousand Pounds) reflecting a net initial yield of 6.25% assuming purchaserscosts of 0.5%.CSL HouseThe Pitronnerie RoadSt Peter PortGuernsey01

About GuernseyGuernsey is strategically positioned in the English Channel 75 miles (121km) south of Weymouth, England and only 30 miles (48km) west of France’s NormandyCoast. The island has a land area of approximately 24 square miles and is divided into ten parishes. The main parish is St Peter Port.Although Guernsey is a Crown dependency, it is not part of the UK and has it’s own parliament. As a major financial centre for institutions and trusts, it is a stable andwell secured jurisdiction with all the necessary financial infrastructure and expertise. The taxation advantages include: the absence of death duty, no VAT, InheritanceTax, Capital Gains Tax or Corporation Tax and a flat rate of 20% Income Tax. With a technical infrastructure and fiscal and regulatory framework which is unrivalledalmost anywhere else in the offshore world, the Bailiwick of Guernsey has quickly developed an international reputation as a first class global operational centre.Attracting major operators such as HMV, Virgin Games, Sporting Bet and other significant eGambling and Gaming companies, it offers a robust infrastructure andconnectivity to ensure bandwidth is never an issue.LocationCSL House occupies a prominent position alongPitronnerie Road on the outskirts of the island’smain capital of St Peter Port and the financial andretail centre known as Admiral Park. It is thereforewithin a Key Industrial Area in close proximity to thePorts and a major mixed use prime business andretail park. It therefore enjoys benefits from goodtransportation networks with excellent access.CSL HouseAdmiral ParkOther occupiers in the vicinity include the likes ofWaitrose, B&Q, Guernsey Post, Healthspan, SevenDay Shop, White & Co, WH Smith, ABN Amro,Kleinwort Benson, Close Bank and Northern Trust.St Peter PortCSL HouseThe Pitronnerie RoadSt Peter PortGuernsey02

DescriptionThe Property is a high grade mixed use building withaccommodation arranged over three floors (basement, groundand first). Externally it has blockwork infill with a mix of featuregranite, render and brickwork cladding. It also has UPVCwindows, guttering and fascias. The property is served by onemain pedestrian entrance and a double loading door on theeastern part of the front elevation and has three staircores.It provides a gross internal area of approximately 16,200 sq ftwith the lease provisions allowing for the use of a tarmacadumforecourt with car parking for 29 motor vehicles. This equatesto a net internal area of 14,200 sq ft and a parking ratio of1:489 sq ft.Internally, the ground and first floors are largely fitted toan office specification, with carpet tiled flooring, perimetertrunking, suspended ceilings, recessed fluorescent lightingand a number of stud partitioned cellular offices. There is afully operational data centre at ground floor level and disasterrecovery, office and conferencing facilities at first floor level.The basement is served by an electronically operated loadingdoor and is utilised for storage and additional parking.A centralised air conditioning and fire alarm system serves theopen plan office areas of each floor with additional wall mountedunits serving the majority of the cellular offices. The Propertyalso benefits from extensive tenant investment including fibreoptic telecommunications, 400amp 3-phase electricity supply,and a state of the art generator serves the entire building.CSL HouseThe Pitronnerie RoadSt Peter PortGuernsey03

AccommodationThe Lease details a total Net Internal Area of 14,175 sq ft(1,317 sq m), which is broken down as follows:-Accommodation Sq ft Sq mBasement 4,885 sq ft 454 sq mGround Floor 4,640 sq ft 431 sq m1 st Floor 4,650 sq ft 433 sq mTotal 14,175 sq ft 1,317 sq mThe approximate Gross Internal Area is as follows:-Accommodation Sq ft Sq mBasement 5,638 sq ft 524 sq mGround Floor 5,323 sq ft 495 sq m1 st Floor 5,245 sq ft 487 sq mTotal 16,206 sq ft 1,506 sq mGround FloorThere is parking for 29 vehicles providing a ratio of1:489 sq ft.First FloorCSL HouseThe Pitronnerie RoadSt Peter PortGuernsey04

TenureThe freehold of the property is held in a clean single asset Guernsey special purchase vehicle (SPV). The investment can be acquired by way of a share transfer,thereby saving on document duty.It is also worth noting that Guernsey has no local equivalent to the Landlord & Tenant Act 1954. Business tenancies therefore have no security of tenure and noautomatic rights for renewal on lease expiry. Additionally, due to privity of contract, there is no automatic release for tenants on assignment, thereby ensuring theyremain liable for the entire term unless contracted otherwise.Tax on Real PropertyGuernsey’s equivalent to the UK’s Non-Domestic Rates (Business Rates) is Tax on Real Property (TRP). In 2011 the TRP for CSL House was £11,725.92 (75%less than the cost of Business Rates, if it were to be applied in Guernsey*). This is derived as follows:-Description Category Category ValueLand L1.11Office and ancillary accommodation(non regulated finance industries – land)£5.98Lower Ground Floor B4.5Warehousing, storage facilities andhangars£1,775.48Lower Ground Floor – stairs etc B6.2Office and ancillary accommodation(non regulated finance industries)£163.62Ground FloorOffice and ancillary accommodation(non regulated finance industries)4,890.42First Floor B6.2Office and ancillary accommodation(non regulated finance industries)4,890.42Total TRP value £11,725.92*UK ComparatorAssuming Business Rates are applicable to Guernsey, CSL House would provide an approximate Business Rates bill of £71,000. This compares to Guernsey’s TRP of £11,726 therebymaking Guernsey’s occupational costs significantly lower.CSL HouseThe Pitronnerie RoadSt Peter PortGuernsey05

Lease SummaryThe property is let in its entirety to 2e2 Offshore Ltd by way of a lease dated 14 May 1992, subsequently amended by two Instruments of Variations dated 2 March2010 and 29 July 2011 and a Letter dated 18 May 2010. The lease term is 36 years from 1 April 1990 (expiring 31 March 2026), based on Full Repairing andInsuring terms, subject to 3 yearly upward only rent reviews to market rent (the next being 1st April 2014). The current rent is £229,000 per annum as detailed below.Rent ReviewFor the purposes of rent review, the accommodation on the ground and first floors is assumed to be fully fitted subject to a discount of 5% on account of the tenant’salterations. There is also the opportunity to secure a minimum uplift of 5% on each 3 yearly review. This guarantees an uplift in the rent to £240,450 per annum atthe next rent review due 2014.RentThe last review dated 1 April 2011 has been concluded at £229,000 per annum. This equates to the following:-Accommodation sq ft / spaces rate totalBasement 4,885 £ 10.00 £ 48,850.00Ground Floor 4,640 £ 17.50 £ 81,200.00First Floor 4,650 £ 17.50 £ 81,375.00Parking 29 £ 900.00 £ 26,100.00Total: £ 237,525.00Less discount to account for fitout - £ 8,361.00£ 229,164.00Rounded £ 229,000.00CSL HouseThe Pitronnerie RoadSt Peter PortGuernsey06

UserThe authorised use under the Lease is “disaster recovery, business continuity, data storage, and distribution together with ancillary offices training andconferencing uses”.Covenant Information2e2 Offshore Ltd is the largest IT service company in the Channel Islands and is the parent company of 2e2 Guernsey Ltd, 2e2 Jersey Ltd and 2e2 (IoM) Ltd.Being a fully owned subsidiary of 2e2 Group Limited (which in turn is owned by Duke Street Private Equity (49%) and Hutton Collins (24%)), the Group is one of thefastest growing IT service providers in Europe offering consultancy, implementation and day-to-day management services across a broad range of IT services.With key industry partners including Cisco, Microsoft, HP and Oracle, the Group now holds leading positions in high-growth sectors and is seeing some of itsprincipal markets growing at double digit rates.Now employing over 2,500 staff, operating across the UK, Ireland, Spain, Benelux, USA, Channel Islands and the Isle of Man, 2e2 Group Limited reportedrevenues of £327m (2009:£200m) and EBITDA of £37.9m (2009:£30m) for the year ended 31 December 2010. This included a 33% increase in operationalprofits following the acquisition of Morse. This acquisition increased turnover to £430m and further complements the Group’s high proportion of stable,contracted income. The Morse acquisition has also had the advantage of providing 2e2 with additional scale, greater market visibility and a wider range ofskills and capabilities to offer its customers.In terms of the offshore division, 2e2 Offshore has operated in the Channel Islands for over 35 years. To demonstrate their ongoing commitment to the islands,they have recently invested heavily in all their sites to create high spec data centres and hosting suite facilities. This has allowed them to further enhance theirservices and now makes CSL House a central hub for the Channel Island’s business. As such, CSL House is used for a multitude of services including, datahosting, disaster recovery, IT technical support and storage.Going forward, the huge growth in the IT sector and developments in eGaming and data centre requirements means 2e2 is well placed to take advantage oftheir strong local position. This is further enhanced by the regulatory requirements now placed on the finance industry to provide sufficient space for businesscontinuity.CSL HouseThe Pitronnerie RoadSt Peter PortGuernsey07

ProposalWe are instructed to seek offers in excess of £3,650,000 (Three Million Six Hundred Fifty Thousand Pounds). A purchase at this level reflects a net initialyield of 6.25% assuming purchasers costs of 0.5%.Please note: Value Added Tax is not levied in Guernsey.Further Information & ViewingFor further information, please contact Sole Agents:-Joanna Watts, MA Cantab MRICST: 01481 740071E: jo.watts@joneswatts.comWing Lai, MSc MRICST: 01481 740071E: wing.lai@joneswatts.comRegulated by RICSViewing Strictly by appointment with the Vendor’s Sole AgentsJones Watts Ltd, 41 Commercial Arcade, St Peter Port, Guernseywww.joneswatts.comDisclaimerWhilst every care is taken in the preparation of these details, Jones Watts Ltd for themselves, any joint agents and the vendor take no responsibility for any error, misstatement or omission in these particulars. Measurements are approximate and for guidance purposes only.These particulars do not constitute an offer or contract and no person in the employment of Jones Watts Ltd has any authority to make or give any representations or warranty whatsoever in relation to this property. Prospective purchasers and tenants should make their owninvestigations prior to finalising any agreement to purchase or lease. All terms are subject to contract. Each party is to bear their own legal costs.CSL HouseThe Pitronnerie RoadSt Peter PortGuernsey08

Artistic Impression of CSL House upon full redecoration