Business Premises Renovation Allowance (BPRA) & Glasgow easyHotel

1. Business Premises Renovation Allowance (BPRA) & Glasgow easyHotel Presentation for Abercrombie Gemmell by Ramsay Duff

2. Contents • HM Corporate Solutions • Introduction • Business Premises Renovation Allowance • How BPRA can be used • Glasgow easyHotel • Management • Financial Summary • Investment

3. HM Corporate Solutions • Corporate Finance “arm” of commercial lawyers Harper Macleod • Established 6 years ago by HM Ramsay Duff • Active in traditional CF with specialisation in structuring and raising investment vehicles/funds • Work in structured property development projects particularly hotels and tax-based structures led to interest in BPRA

4. Introduction • BPRA Introduced in 2007 Budget to stimulate redevelopment of empty commercial buildings • No sooner introduced than credit crunch started, so limited take-up • Relatively little-used due to perceived complexities • Provides significant and flexible tax-planning opportunity combined with “bricks and mortar” investment • Scheduled to end in April 2012 so limited window of opportunity

5. Introduction (Cont) • Opportunity currently available to invest in Glasgow easyHotel (GeH) BPRA scheme • GeH will see an empty 4-storey office building in central Glasgow redeveloped into a 126-bedroom easyHotel branded “super budget” hotel • Higher rate tax paying investors can recover c.64% of their investment against their income tax liability • Total costs are approximately £6 million, and bank debt facility of £3.6m (60% LTV) is available and equity of £2.4 million is therefore sought of which it is anticipated c.64% will be recoverable through tax reclaim • Investment available in units of £50,000 of (gross) equity

6. Business Premises Renovation Allowance • BPRA provides 100% initial capital allowances on costs incurred on or in connection with renovating: (1) empty buildings (2) in qualifying areas (3) that have been in commercial use • Purchase cost of building not allowable, nor cost of any extension or on any area occupied within 12 months • Property has to be held for 7 years • Tax efficiency depends on e.g. level of debt, purchase price of property, level of eligible expenditure • Statutory Allowance so unaggressive from HMRC standpoint – not disclosable anti-avoidance scheme

7. How BPRA can be used • Claiming BPRAs creates loss available to set-off against income • Can be set-off against all income (earned and unearned) • Can be utilised in tax year of expenditure and following year – can elect which year takes precedence • Reduces/eliminates higher rate taxable income first

8. Glasgow easyHotel • The refurbishment property is a 4-storey empty office block on Cambridge St, a recognised hotel area and close to Sauchiehall St, one of Glasgow’s principal thoroughfares • It will be redeveloped into a 126 bedroom, all en-suite, easyHotel utilising easyHotels own “pod” style bedroom with en-suite shower room • The first easyHotel opened in 2005 and there are now 13 easyHotels in operation including 5 in central London and one recently opened in Edinburgh • Awarded Best Budget Brand 2009 by Trip Advisor

9. Glasgow easyHotel (Cont) • Principal brand features include: • the earlier you book the less you pay • bookings can only be made via the easyHotel website • small rooms • Basic room charge with up-grades at cost • The Glasgow hotel market has held up better in the recession than most other areas of the UK (excl London and Edinburgh) • Expected that the easyHotel format will lend itself well to the market

10. Management • easyHotels are simple to operate, offering a limited provision of services requiring low staff numbers and consequently having low operating costs and risks • easyHotel Ltd will offer wide visibility through easyGroup brands, will provide all brand marketing, internet reservation system etc • Glasgow easyHotel will be managed by Chardon Management, a leading UK specialist hotel management co. operating 30 hotels across the UK • LP will be under overall supervision of HDF General Partner Ltd, experienced hotel GP

11. Financial Summary All figures below are per £50,000 equity “unit” • Est’d Tax recoverable c.64% ie £32,000 => net equity £18,000 • Projected share of e.g. Yr 3 cash surplus = £5k (31% on net equity of £18k) • Projected proceeds on disposal (net of residual borrowings) £104,000 • Tax recovery + share of net proceeds = £136,000 • 2.72x gross equity, 5.82 x net equity • Overall IRR assuming full surplus distributed = 33.8%

12. Investment • Investment available in units of £50,000 • Investment open to suitably qualified investors: • Sophisticated investors • Investment professionals • High Net Worth Companies • Certificate counter-signed by suitably qualified person required • Normal Anti-Money Laundering info required