Assetz Fund Management Commercial Property No 1 LP

1. Assetz Fund ManagementCommercial Property No 1 LP

2. UK Commercial Property Fund

3. Other Markets *249% growth since 1989

4. Why Commercial Property Source: IPD Index. Growth 240% and assumes UNGEARED investment

5. Why Commercial Property Source: IPD Index. Growth 4949% and assumes UNGEARED investment

6. UK Commercial Fund • FRI (Full Repairing Insuring) leases • Less volatile and more predictable due to long leases • Buy Offices and Industrial off plan + tactical opportunities • 9%+ prospective yield • Once tenanted the building can be worth 25% more • Hold for 5 years and then renew/ replace lease and sell • Repayment mortgage of 70% will be just 40% after 5 years – rent increases returns • Finally if there are commercial property rises then even better – we expect 5-7% pa for the next 5 years on these type of properties

7. UK Commercial Fund • High quality locations • Airports • Major cities • Near other large business parks • Arterial roads • Small developments (8-12 units) • Small units – 2500-8000 sq ft • SME’s are 98%+ of the market • Prices 20% discounted with a 9.5% prospective yield • Fast selling units to Owner Occupiers • Limited sales to investors

8. UK Commercial Fund • 20% discount to market value when tenanted • How is this ‘lease premium’ calculated ? • 9.5% prospective yield • Say building is £100,000 – rent would be £9,500 • Rent is the driver • Once tenanted the building can be sold on a 7.5% yield • £9,500 / .075 = £126,666 a gain of £26,666 • If you 50% gear that is a 53% gain • If you 75% gear that is a 107% gain • Less purchase and sales costs

10. UK Commercial Fund • 9.5% yield is £9,500 rent per £100,000 of property • 9.5% is set by the developer as a reasonable prospective yield on a property price that still makes them money whilst leaving around 2% in it for the investor • The 7.5% yield is ‘set’ by the investor market, what they are willing to receive as a yield on a tenanted property. • As the rent is constant, £9,500 per annum the property is worth £100,000 at 9.5% prospective yield when sold by the developer and worth £126,666 to the investor buying it with a tenant at 7.5% yield

11. UK Commercial Fund • £9,500 / 9.5% = £100,000 • Yield is only prospective – no actual tenant • £9,500 / 7.5% = £126,000 • Yield is real – signed up tenant • Premium is the value of the lease • The better the tenant the lower the tenanted yield

12. Property Price PlusRental Profit in 5-7 Years Price Increases Rental Income/ Profit Lease Premium Property Price Property Price UK Commercial Fund

13. UK Commercial Fund • Risks : • Prices do not rise • Fund already bought at discount and the lease premium plus the rental profit will still give gains. • Prices fall • Fund bought at discount and with the lease premium once tenanted should have around 20% protection built into purchase prices. • Tenants not found quickly • Small units do find tenants quickly but significant voids would be in some units would be countered by others having very profitable rental income. Can always sell to recover costs at least to the owner occupier market. • Interest rate rises • Fund will use interest rate hedging / fixed rates if thought necessary.

14. UK Commercial Fund • Fund can gain in four ways : • Buying at a discount pre-completion – helps developers funding • Tenanting the new building brings c 25% uplift in value according to tenant quality, rental level and lease duration • Rental yield is high – 8%-9.5% - pays down mortgage increasing equity • General price growth • Note price growth is the last of the profit levers • Objective of 20%+ growth per annum if assumptions met

15. Thank You • Stuart Law • Assetz Fund Management Ltd