Capital Markets Day 5 November 2019 Accelerating Growth in our Core Markets Creating the Future of Living
Capital Markets Day 5 November 2019 Accelerating Growth in our - - PowerPoint PPT Presentation
Capital Markets Day 5 November 2019 Accelerating Growth in our - - PowerPoint PPT Presentation
Capital Markets Day 5 November 2019 Accelerating Growth in our Core Markets Creating the Future of Living Welcome Duncan House Health & Safety Fire Exits two to the front of the building on the left and right as you leave this
- Fire Exits – two to the front of the building on the left and right as you leave
this room. Exits are clearly marked.
- In the event of an emergency please leave the building via these exits, turn
left out of the building and congregate in the seating area outside Eleanor Rosa House
- Safety around the building – please watch for trip hazards as you move
around the building
Welcome
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Duncan House – Health & Safety
12:30 Welcome Investment case Investor perspective: Student Roost Growth analysis: Residential for rent sector overview Business unit deep dives Growth strategy financials Summary Q & A 14:15 Tour of building – in groups 15:00 Finish
Agenda
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Duncan House, Stratford
Investment Case
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Investment Case – Summary
WJ is the UK’s leading developer and manager of residential for rent
Opportunity to increase annual volumes of deliveries across UK residential for rent (‘living sector’) in our two core markets from FY 23/24
3500
PBSA beds
1000
BtR units
driven by following current themes:
Long term growing demand from tenants and in turn institutional investors High barriers to entry create attractive competitive environment WJ expertise – track record, sector specialism, customer insight & product development, delivery assurance
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2723 beds delivered in 2019 0 units delivered in 2019
utilising the established capital light, forward sale model
Market leading track record throughout the UK 17,721 Total Units Under Management 50,179 Total Units Developed and In Build 357
Staff
512
BtR Units
17,209
PBSA Beds
2,500
Homes for Sale
1,518
BtR Units
46,161
PBSA Beds
60
PBSA Schemes
4
BtR Schemes
- c. £1.7bn
Assets under Management
90
Developments for Sale
7
BtR Schemes
135
PBSA Schemes
Locations where WJ(1) and Fresh(2) have been active
Investment Case – Established Track Record
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(1) since 1999 to date (2) since 2010 to date
Investment Case – Strong Performance
(1) 2019 figures refer to broker consensus estimates. (2) As at 1/11/2019 close (3) Group’s IPO was in March 2016 (4) Pre-exceptionals
Financial Performance Operational Delivery
Student Beds Completion Fresh Beds Under Management Revenue EBITDA(4)
Leading to 137% share price return(2) while returning £56m in dividends since IPO(3)
28.0k 38.0k
2015 2019
8.3k 17.7k
2015 2019
£244.2m £363.1m £387.7m
2015A 2018A 2019E
£34.1m £52.0m £52.9m
2015A 2018A 2019E
(1) (1)7
WJ structure built around four core business areas, employing c. 700 people
Residential for Rent – PBSA, BtR Resi for Sale
18 people Value creation: land buying, secures planning & forward sells to investors 292 people Value protection: Provides assurance in project delivery 357 people Consumer experience: Tenant & asset owner 36 people Self contained house building business
Delivery Fresh Homes Investment
Working Together
- Leverage experience across the business especially customer insight from Fresh
- All business areas collaborate in devising the proposition & product for PBSA, BtR & Homes
Investment Case – Resourced for Success
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- Progress with the secured pipeline already moving towards these increased levels of deliveries
- 3-4 year rolling visibility of pipeline
- WJ resourced & structured for this level of growth across the development lifecycle
- Sufficient headroom to grow with supply chain, trade packages and subcontractors
- Use of framework contractors to derisk growth – focus on core value add of upfront development expertise
- Strong investor demand for product in the open market means BtR Fund is not essential
‘Creating the future of living’
2609 1928 448 462 1032 415 1610 500 1000 1500 2000 2500 3000 3500 FY20 FY21 FY22
Forward sold In legals to sell fwd fund Secured with planning Secured subject to planning Unsecured in legals
2609 3253 2642
*
**
WJ PBSA Pipeline Delivery
159 782 71 184 213 336 350 800 200 400 600 800 1000 1200 FY20 FY21 FY22 FY23
# units
159 782 818 1136
* Assets owned by WJ and under offer to sell ** WJ in legals to acquire the site
WJ BtR Pipeline Delivery
# beds
Investment Case – Ready for Growth ‘
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Economic downturn Rent controls & tenant protections – Govt initiatives to drive up standards BtR/PBSA part of solution to PRS/housing crisis Land availability, planning consent, build assurance Core expertise, track record, reputation, long term partners Forward sale liquidity Resi for rent structural growth & diversification strongly positioned for investor demand Managing additional work Resourced for growth with detailed plans in place Business model minimises exposure
Risk Mitigation
Investment Case – Risks to Growth
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PBSA & BtR (residential for rent) have long term structural growth characteristics Growing consumer & in turn institutional investor demand WJ specialist in residential for rent – our consumer insight & delivery assurance Institutional investor demand for our product and services High barriers to entry for non sector specialists – attractive competitive environment
Investment Case – Well positioned for Growth
Strong investor demand for new, high-quality product drives demand for forward fund transactions De-risk development activity, capital light, visibility of longer-term earnings & quickly cash generative Balance sheet strength, resilience & agility
Growth sectors, Growing investor demand, Market leading position WJ well placed to grow
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Hollis Croft, Sheffield
Investor Perspective – Brookfield’s Student Accommodation
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Nathan Goddard Chief Executive Officer Student Roost
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Student Roost Portfolio Overview
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Nottingham 1 / 22 Sheffield 3 Snowdon Hall Trinity Square
Oct-13 2,495
Nottingham 32 The Summit Queens Court Regents Court Sheffield 2 Brookland Road Newarke Street Upperton Road Eastern Boulevard Newcastle 1
Total beds operational, managed and under development
Dec-13 2,944 Apr-14 3,638 Sep-14 4,158 Dec-14 4,697 Feb-15 5,313 Oct-15 5,684 Apr-16 5,684
Brookfield completes acquisition of Student Roost and the Portfolio
Sep-16 6,837
Collegelands St James’ House St James’ Point
Oct-16 8,949
St Mungo Avenue Swanson House Great Patrick Street Hollis Croft
Mar-17 13,121
Buchanan View Gibson Street Apollo Court Capital Gate Myrtle Court The Railyard Lady Nicholson Court Panmure Court Portsburgh Court Mealmarket Exchange The Heights Corfe House The Boulevard
Feb-18 20,759
The Depot John Bell House The Old Fire Station Home Park Tramways Towpath Chapel Heights Dobbie’s Point Merchant Studios Byrom Point Mannequin House Hydrogen Cornerhouse Laycock Studios Vincent Place St Davids I & II St Davids III (land)
Jul-17 14,943
Little Patrick Street Pittodrie Street Nelson Street
(1) Nottingham 1, 2 and 3 refer to one asset; now named Nottingham 2Operating assets Development assets
Nov-17
Student Roost Brand and website launch
May-18
Operations internalisation completed
Oct-18
Back Office internalisation completed
Jan-19 20,846
Calton Road
Student Roost Brief History Company history and evolution
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Aberdeen Edinburgh Newcastle Durham York Nottingham Birmingham Southampton Bournemouth Poole Bath Swansea Belfast Glasgow Liverpool Chester Wrexham Leicester Sheffield London
Portfolio Breakdown by Region*
*by bed numbers and includes developments
Portfolio Summary Operational Assets Secured Development Pipeline
Sheffield 14% Glasgow 12% Belfast 11% Nottingham 9% Leicester 9% Liverpool 8% Birmingham 7% Other 31%
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PROPERTIES
20 1,500
CITIES BEDS IN DEVELOPMENT PIPELINE
19,000
OPERATING BEDS
Location Sites Beds Location Sites Beds Sheffield 5 2,869 Swansea 1 722 Glasgow 6 2,390 London 1 527 Belfast 3 1,204 Bournemouth 1 454 Nottingham 3 1,960 York 1 356 Leicester 7 1,849 Edinburgh 3 331 Liverpool 5 1,557 Poole 1 308 Birmingham 2 1,392 Southampton 1 283 Aberdeen 2 896 Durham 1 200 Newcastle 3 936 Wrexham 1 156 Chester 2 736 Bath 1 104 Location Sites Beds Delivery Date Belfast 2 1,204 AY20/21 & AY22/23 Swansea 1 245 AY 20/21 Edinburgh 1 87 AY 20/21
Student Roost at a glance Fourth largest privately-owned providers of student accommodation in the UK
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3 Year Relationship 3,000 Beds delivered across 5 cities – Glasgow, Belfast, Aberdeen, Sheffield and Swansea Forward Funding and Development Partner structures Development partner for our flagship scheme Hollis Croft – delivered on time and on budget in September 2019 Current development partner in Swansea and forward funding Little Patrick Street in Belfast Additional 4,500 beds across our acquired portfolio are WJ built 100 % occupied on full tenure for 19/20 on all WJ schemes
Student Roost and Watkin Jones
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Deliver on-time and on-budget every time – Trust. Wealth of experience – design and deliver fantastic desirable homes which support our customer satisfaction Fantastic working relationship and culture of
- partnership. Can-do attitude.
Aligned strategies – supports our growth agenda in key regional markets . Flexible deal mindset.
Why Watkin Jones?
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Granary Studios, Chester
Residential for Rent - Sector Overview
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- UK Residential for Rent (‘living’)
- Long term structural trends driving
institutional demand
- Real estate moving away from
physical buildings to provision of consumer experience
- Population growth & urbanisation
- Societal change in view of asset
- wnership
- Tenant demand has low correlation to
the cycle
- Investors increasing weighting to this
‘living’ sector
Residential for Rent - Growth Sector
55,000 60,000 65,000 70,000 75,000 1990 1995 2000 2005 2010 2015 2020 2025 2030 2035 To-date Projection UK Population (‘000s) Student Accommodation PRS
2015 £31bn 2019 £51bn Forecast 2025 £65bn 2015 £15bn 2019 £35bn Forecast 2025 £75bn
Source: Knight Frank Residential Investment Survey 2019, ONS
Intend to reduce holdings No Change Intend to increase holdings
8%
25% 67%
UK population is forecast to grow by 7.3 million by 2035 Residential investment intentions in the next five years Total residential investment
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Source: ONS
BtR growth PBSA obsolescence of existing stock
140k → 1.7m units c.£35bn → c.£544bn
Current Market Size At maturity
PBSA growth
620k → 910k beds c.£51bn → c.£75bn c.75k beds to redevelop, 24% of PBSA built pre-1999 (51% pre-2009)*
- Our growth is driven from both
providing for demand and replacing inadequate, older stock
- Institutional capital ‘force for good’
- Improving standards in PRS
- Helping to fix the housing crisis
- Urban regeneration
*Excludes London. It also excludes Oxbridge collegiate beds Source: Savills
Residential for Rent – Quantifying Growth
Source: WJ Management data Source: Cushman & Wakefield
By 2071(1) By 2030(2)
(1) Based on current run rate of net 30,000 units per annum (2) Based on current run rate of net 25,000 beds per annum
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PBSA Sector - Strong Student Demand Trends
- Long-term growth in demand; favourable underlying UK student demographics &
- verseas demand accelerating (EU and non-EU)
- Student expectations over quality of housing changing
- The UK is the world’s second ‘most in demand student market’ – good place to study &
live
- 33 of UK universities in top 250 global ranking
Projection of full-time UK undergraduates Number of top ranked universities by country
Source: Knight Frank Residential Investment Survey 2019, ONS, UCAS, HESA
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PBSA Sector - Demand Exceeds Supply
- Applications continue to significantly
exceed university places available
- Flight to Quality – winners & losers
- Existing PBSA supply unable to meet
‘Accommodation Promise’
- PBSA net supply of c. 25,000 new beds
per annum
- Private HMO sector under pressure
- Potential for increased PBSA demand
from 2nd, 3rd & postgraduate year students
654 677 700 718 718 700 696 465 496 512 532 535 534 533 1710 1728 1730 1771 1827 1875 1878 500 1000 1500 2000 Applicants Acceptances Full time students
Applications vs Acceptances
Students 000s)
Students and supply
1728 1730 1771 1827 1875 1878 682 699 713 727 731 739 487 503 527 553 580 603 500 1000 1500 2000 2013/14 2014/15 2015/16 2016/17 2017/18 2018/19 Students (000s) Total students 1st years (UG) + International (UG + PG) PBSA Beds
Source: UCAS, HESA
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Fiscal headwinds to Buy to Let Growth in consumerism Push Factor Pull Factor ‘UK housing crisis’ Lifestyle flexibility Population growth Demand for premium locations Declining household size Labour mobility Affordability of house purchases Focus on total accommodation experience (amenities and service)
2x
Number of residents renting in England in last 10 years(1)
20% → 25%
( By 2021) Private renters as % of all households(2)
37%
Renters by choice(3)
BtR – Growing Consumer Demand
(1) English Housing Survey (2) Knight Frank, EHS, DCLG (3) CBRE
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PBSA & BtR – Investor Demand
Valuation Yields
- NIYs for PBSA/BtR have been stable/trending positive over the period
- Investor appetite has remained robust
- Driven by sector performance, future outlook & spread to 10yr Swap
Source: IPD, CBRE
8% 7% 6% 5% 4% 3% 2% 1% 0%
2006 2008 2010 2012 2014 2016 2018 10 yr swap rate PBSA Av. UK NIY BtR Av. UK NIY
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- FY2019 forecast investment volumes are above the 5-year average
- Structural demand, defensive characteristics and growth prospects drive investment
- Significant competition for newly built & forward funded assets
1.0 2.7 2.0 1.7 5.7 3.2 4.1 3.2 0.96 2.9 £0 £1 £2 £3 £4 £5 £6 2011 2012 2013 2014 2015 2016 2017 2018 2019 Completed Under offer
5 year average = £3.57bn (£bn)
Source: CBRE
100 200 300 400 500 600 700 800 900 1000 1100 Q1 2015 Q2 2015 Q3 2015 Q4 2015 Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018 Q1 2019 Q2 2019 Q3 2019
Investment (£m)
Average 1/4ly investment volume
2019 PBSA investment volumes YTD Institutional investment volume into the PRS
3.86
PBSA & BtR – Investor Demand
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Competitive Landscape
- New supply response is not keeping pace with both underlying consumer and institutional
investor demand
- PBSA annual supply stable over last five years at c.5% of total PBSA market
- BtR building momentum from a low base
- Competitive landscape – few experienced developers with national presence
- Barriers to Entry are high – specialist sector, track record, navigating planning consents, build
assurance, property management
500 1000 1500 2000 2500 3000 # units
BtR Developer Ranking in 2019 (by BtR units in build) PBSA Developer Ranking (by beds delivered in 2019)
500 1000 1500 2000 2500 3000
Source: CBRE, JLL, Knight Frank, Savills, C&W
# beds
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Kyle Street, Glasgow
Delivering Growth - Business units deep dives
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Alex Pease Group Investment Director
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Watkin Jones Proposition
UK-Wide Opportunity Sourcing & Land Procurement Product and Design Planning Investors / Forward Funding Delivery / Construction Operations / Building Communities
- Synergies across PBSA & BtR
- WJ ‘One stop shop’
- Levering vertically
integrated model
- Target growth in PBSA
- De-risk expansion in to BtR
PBSA & BtR Synergies
BtR PBSA
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Core Proposition – PBSA & BtR
78% of PBSA < 10 mins to University 75% of BTR < 10 mins to transport node 76% of PBSA in Top 50 University town
- Av. 100k Professional Workers in BtR
catchment
- Av. PBSA Amenity = 0.8sqm per unit
- Av. BtR Amenity = 1.6sqm per unit
- Av. PBSA Scheme = 350 units
- Av. BtR Scheme = 257 units
- Aligned investor analysis/trends
- Customer focus driving asset returns
- Reversionary value / alternate use
- Defensive market positioning
- NOI growth
Massing, design & lifecycle efficiencies = building & operational performance
- Re-bookers & increased tenancies
- Future proofing assets
- Catering to requirements
PBSA – Av. 79% Cluster beds BtR – Av. 44% 1-beds / 32% 2-beds
Proposition WJ - Delivering Investor Focus
- Widest customer market
- Granular sustainable income
- Maximise NOI not GOI
Customer & Investor Focused
- Macro to micro analysis
- Quantitative and
qualitative Geography / Micro Location
- Brownfield & urban centres
- Transport, amenities, employment
& universities Design
- High quality & designed for rent
- Maximise density & efficiency
- Lifecycle & environmental focus
Product
- Amenity & technology led
- Building communities
Target Market
- Mid market target rental
- < 35% of household income
- Variable price points
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Growth
- Market supply
continues to be cyclical
- Av. of 4,000 units
fallen out of the supply chain in last five years**
- Obsolescence
will grow with 24% built pre-1999 51% pre-2009
- Strong historic
and future growth in UK student macro dynamics
- Supply consistent
but has not accelerated to meet growth
Obsolescence Universities Headroom Analysis
- Estimated 2020
the 1st year Private sector supply will exceed University stock*
- Increased
proportion of ageing stock with 50% built pre- 1999 and 74% pre-2009
- University
partnership
- pportunities for
WJ to target Current point in time
- 180,000 bed
head room – across Tier 1-3 target cities
- 18 cities with in
excess of 3,000 unit headroom Factoring in Growth and Obsolescence
- 247k bed head
room – across Tier 1-3 target cities
- 20 cities with in
excess of 3,000 unit headroom***
Headroom for Growth - PBSA
* Source: StuRents
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**C&W *** WJ Management
WJ Target Location Graduate Retention Rent Affordability Metrics Size of Professional Workforce Economic Power of Area (GDP / GVA) House Price Affordability Population Demographic Population Growth & Forecasts Transport & Connectivity Current & Pipeline Supply
BtR Supply
- Structural UK housing shortage
- Historic BtR planning and financial
constraints
- Fledgling BtR Supply – 35,000 built /
113,000 pipeline * BtR Demand
- Population and urban expansion
- Prolific growth in rental
- ‘Rental Revolution’
Existing Quality
- PRS – a fragmented & inconsistent sector
- Unregulated
- 27%** of PRS fail to meet Decent Homes
Standards Target Profile
- CACI / alternate data
- Pinpoint core demand hotspots
Headroom for Growth - BtR
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* Source: CBRE, BPF ** Source: Ministry of Housing’s 2016-17 English Housing Survey
Recognising key value chain
Investment and land procurement Technical / design development Planning
Structured for Growth
Hubs are the engine room of growth
Strategic Planning Transaction Lead Transaction Analyst Technical Lead Technical Manager
HUB
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Core strength in land procurement Strong networks across the UK 80% of these developments sourced Off-Market 76% procured with planning or subject to planning Deliverability & reputation breed further success Sites assessed across PBSA / BtR & mixed use bases
- Av. development cycle
34 months acquisition - delivery Past five years WJ has acquired 51 developments
16% 22% 8% 27% 14% 6% 8%
London North Midlands South Scotland Wales Northern Ireland
A genuine cross UK coverage:
‘Watkin Jones have the only genuine integrated platform that allows the successful delivery of PBSA and BtR. Their success relies on an active land buying team that are expert in identifying institutionally acceptable sites and then transacting at speed. This capability is complemented by high quality planning, construction and management to ensure successful exits.’ James Hanmer Director - Savills
Land Procurement
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CBRE June 2019: “In recent months there have been a number of land deals, raising the question as to whether land prices have now reached a level where Build to Rent opportunities are now more viable. L&G recently exchanged contracts on its largest investment into the sector to date; two adjacent sites in Wandsworth, South London extending to six acres and which will deliver 1,000 rental homes.”
Resilient Sectors
- Procure land across the spectrum of
economic cycles Barriers to Entry - Remain high
- Planning, procurement &
development expertise required to unlock many markets Economic Uncertainty – Potential Opportunities
- Brownfield land a key barometer
- Potential ripple effect out from
Central London Capital Light – Forward Fund Model
- A point in time… an unusually
attractive land opportunity
15 12 9 6 3
- 3
- 6
- 9
- 12
2015 2016 2017 2018 2019
Annual change in average land values (%) Residential development land prices
Land Availability
Source: Knight Frank Source: Knight Frank
36
50 PBSA consents 25,000 beds 8 BtR consents 1,066 units
- Planning in UK remains a key barrier to entry for both
PBSA and BtR
- Planning recognised as a key contributor in the value
chain
- Core internal skill sets & collaboration with market
leading & key local consultants
- Combined investment, design and planning expertise to
maximise consents
- Exceptional planning record over the last 10 years….
3001 5389 3850 4903 5531 2255 1089
London North Midlands South Scotland Wales Northern Ireland
- True national coverage and success across the UK
- Worked successfully in 33 different local authorities
Planning consents by region
Planning
Planning consents by year (2009-2019)
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Institutions & Investors
24 clients 14 repeat clients 63 repeat deals 73 assets sold £2bn revenue
- Avg. c £300m pa
Since 2012…..
- Key USP is WJ’s ability to partner and sell to leading institutions
- Built on trust, track record and delivery
- Fantastic rate of repeat clients and deals
- Striving to be the ‘Partner of Choice’ across PBSA and BtR
AIG have funded 5 WJ projects – 1,885 PBSA and 395 BtR units. All projects, including the tallest tower in Cardiff, have been delivered on time and budget. Watkin Jones stand out for their professionalism, & understanding of the investor perspective. When issues emerge, they mobilise additional resources to ensure all problems are
- addressed. We hope to work further with Watkin Jones in
the future. - Naveen Patha, Managing Director, AIG Investments
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PBSA Case Study – Kelaty House, London
The Scheme
- 599 PBSA beds, 300 BtR units / Practical Completion Q3 2021
Acquisition
- Off market acquisition – agent & vendor confidence WJ would
deliver Structuring – transactional & technical
- Development expertise unlocked complex mixed-use scheme
- Comprehensive structural & title redesign
Planning
- In-house planning unlocks +100 beds
Insight
- Wembley regeneration area
- Transport links & amenities
Institutional Grade
- Forward fund to DWS
- New entrant to UK PBSA
Capital Light Structure
- DWS capital forward fund land & PBSA
- Lum Chang forward fund BtR development
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BtR Case Study – Sutton Court Rd, Sutton
The Scheme
- 166 BtR units
- Practical Completion Q2 2021
Acquisition
- Off-market
- Investor introduction
Planning
- Challenging BtR consent
- Negotiated with key stakeholders GLA & Sutton
Development Expertise
- Reworked existing unviable consent
- 25% increase in density & amenity provision
Insight
- Undervalued area
- Commuter belt location (25 minutes to Central London)
- Proximity to station & high street amenities
Institutional Grade
- Competitive market bidding
- Forward fund to M&G Real Estate
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The Scheme
- 159 BtR units and 37,000 sqft commercial
- Practical Completion Q1 2020
Acquisition
- Off-market
- Mixed use multi-phased development
Planning
- Change of use
- Office to BtR led scheme
Development Expertise – Master Planning
- 940 PBSA / 129 Hotel / 159 BtR / 125,000 sqft commercial
Insight
- Strong demographic and economic analysis
- Micro location
- Identify new BtR market
Institutional Grade
- Competitive market bidding
- Forward fund to M&G Real Estate
BtR Case Study – Holdenhurst Rd, Bournemouth
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Jim Davies Director Watkin Jones Group
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17% 12% 30% 41% 100% Scotland & NI North England Midlands South 10% 35% 24% 31% 9% 16% 75% Scotland & NI North England Midlands South
Inner ring = PBSA Outer ring = BtR FY2020 Delivery FY2021 Delivery
2019 Deliveries
- All 2019 schemes delivered on time & well ahead of
student occupation 2020 - 2021 Deliveries
- 11 PBSA & 4 BtR live schemes due for delivery in 2020 & 2021
- All currently on track
Resourced for Growth
- Capacity, expertise & supply chain relationships in place
Brexit/Economic Uncertainty
- Long established relationships with key subcontractors &
suppliers
- Good payment track record & strong aged debt position
- Active involvement & engagement as we navigate
through Brexit and potential Government change
- Detailed risk analysis of direct & indirect supply
- Dedicated procurement teams provide constant
monitoring of critical item stock levels to assure unbroken delivery
Construction
43
Rebecca Hopewell Chief Executive Officer Fresh Property Group
Connecting WJ with the Customer
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Delivering Growth
- 2
4 6 8 10 12 14 16 18 20
Units (000s)
Units Cumulative Ave. (Units)
Continuous Sustainable YoY growth
8 x growth in Units over 10 years
- 23% CAGR
- Largest 3rd party student operator*
- c. £1.7bn AuM
- 44% non WJ built units managed
National Infrastructure
- 17,721 units
- 64 schemes
- 30 cities
- 357 staff
Well positioned for BtR growth
- Core infrastructure
- Business readiness
- Institutional client confidence
- End to end solution for Group
Growth in non WJ built units 100% 2010/11 2019/20 Areas of operation Growth in units under management 56% 44%
WJ built 3rd party built
* CBRE Operator League Table
2,265 units 17,721 units
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Delivering exceptional customer experience
‘Experts in creating and managing vibrant communities which people really want to come home to’
OVERALL MANAGEMENT KNOWLEDGE FRIENDLINESS
91% 94% 93%
What our customers say...
25%
‘The location is second-to-none, the staff are lovely and the building is beautiful inside and out. I wish I could live here forever.’ 'Perfect place for student accommodation. Lovely people and staff and every facility available.' ‘The accommodation is in perfect condition and run by a fantastic manager who really looks after us brilliantly!’ ‘Love the cosy study room and social space, all ready to book for next year.’
Source: NSHS
46
31 clients 7 take overs 2018/19
- Av. 7.4
schemes per top 5 Clients
Client confidence…
- Commercial alignment
- Design input
- Financial visibility
- Driving NOI
- Customer feedback loop
“We were impressed with the enthusiasm, interest and local market knowledge shown by FPG when we were selecting
- ur operating partner. They have been thoroughly
professional in their approach supporting the initial development with an array of specialist personnel. The on-site team have been fantastic and their performance speaks for its self - Mill House was 100% let for 2018/19 and was full for 2018/19 since Q1 2018.“Maven Capital Partners LLP Student Trust
Institutional Grade Client Services
42% of schemes across 5 cities Student Operator of the year 2018*
* Source: Property Week
Delivering value…
"The scale & quality of Fresh's infrastructure ensures consistently high levels of service delivery to students & therefore a high level of satisfaction & better returns from our assets." Curlew Student Trust
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Base Case
- Early mover site in a Regeneration Area
- Under provision of student facilities
- Not an established student area
Fresh PG input
- Off Site marketing suite
- Redesigned amenity spaces
- Initial pricing strategy
Results
- 100% occupancy each year
- Above RPI increases each year (4.8% average)
- Partial nominations agreement
Value Add to PLC
- Stabilised asset has proven location and values
- Positive impact on adjacent WJ site value
- FPG retained as manager on asset sale
Case Study – Merlin Heights, Leicester
48
Phil Byrom
49
Homes – Residential Expertise
North West UK is a strong performing region in the UK. This is the core area for WJ Homes Maintain current delivery rates of c.150 homes per annum WJ Homes have built in the North West region for
- ver 20 years
BtS and single family part of the ‘Living’ expertise of WJ Target sites between 50 to 100 homes, avoiding the larger developers Delivery of residential units under a mixed- use scheme across UK Maintain a small landbank (c. 450 units) with new sites progressed quickly into development Core product will be mid- market units BtR opportunities eg Trafford Street, Chester
50
Financials
Albion Way, London
51
£0 £100 £200 £300 £400 FY16 FY17 FY18 PBSA, £312.7m (86%) BtR, £3.8m (1%) Residential, £30.0m (8%) Accommodation mgmt, £7.3m (2%) Other, £9.3m (3%) £0 £20 £40 £60 £80 FY16 FY17 FY18 PBSA, £60.7m (84%) BtR, £1.0m (1%) Residential, £4.4m (6%) Accommodation mgmt, £4.5m (6%) Other, £1.8m (3%)
Group Revenues Group Gross Profit FY18 Revenues FY18 Gross Profit £267.0m +9.3% £301.9m +13.1% £363.1m +20.3%
£m £m
£53.8m +22.2% GM 20.1% £63.5m +18.0% GM 21.0% £72.4m +14.0% GM 20.0%
Financials - KPIs
52
Group Adjusted PBT Group Net Cash Earnings per share (adjusted) Dividend per share ROCE excluding net cash
2 4 6 8 10 12 14 16 18 FY16 FY17 FY18
6.0p 12.4p +19.2% 14.0p +12.9% 16.0p +14.3% 6.6p 7.6p
£0 £10 £20 £30 £40 £50 £60 FY16 FY17 FY18 £0 £20 £40 £60 £80 £100 FY16 FY17 FY18 pence £m £m
£32.2m
- 17.6%
£41.0m +27.3% £80.2m +95.5% £39.8m +22.7% £43.3m +8.8% £50.1m +15.7% EPS DPS
Financials - KPIs
57.90% 51.8% 69.7%
0.0% 10.0% 20.0% 30.0% 40.0% 50.0% 60.0% 70.0% 80.0% FY16 FY17 FY18
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Earnings Model – PBSA & BtR
PBSA and BtR – Forward Sales Model
- Revenue and profit recognition
- Typical deal structure
- Land sale
- Development works
- Final payment
- IFRS 15 ‘Revenue from Contracts with Customers’
- Applicable to WJ for FY19
- No major impact on WJ’s results
- Formal separation of land sale and development agreement
- Current average gross margins
- PBSA – 20%
- BtR – 15%+
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Worked Example - PBSA
Model PBSA Scheme – 500 beds
- Total capital value - £50.0 million
- Land value - £12.5 million
- Build value - £34.0 million
- Final payment - £3.5 million
- Current gross margin 20% - £10.0 million
- Build period – 24 months
WJ – example PBSA scheme financial profile
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Worked Example - BtR
Model BtR Scheme – 250 units
- Total capital value - £70.0 million
- Land value - £15.0 million
- Build value - £50.0 million
- Final payment - £5.0 million
- Current gross margin 15% - £10.5 million
- Build period – 30 months
WJ – example BtR scheme financial profile
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Illustrative Cost Value Margin for Developments
SOUTH EAST Rent: £175/wk Net income: £5,600 pa NIY: 5.5% Capital value: £105k Land: £25k Build costs: £60k Target margin: 22-24% LONDON Rent: £230/wk Net income: £9,070 pa NIY: 4.75% Capital value: £184k Land: £60k Build costs: £85k Target margin: 26-28% OTHER UK REGIONS Rent: £140-165/wk Net income: £4,500-5,600 pa NIY: 5.5-6.0% Capital value: £60-90k Land: £10-15k Build costs: £55-60k Target margin: 18-22%
All figures are illustrative and relate to an approximate per bed basis Rent = gross per week / Net Income = net annualised Net initial yield (NIY) = forward fund yield / Capital Value = net per bed Land = per bed with planning / Build costs = all other costs per bed
PBSA
SOUTH EAST Rent: £1.3k/mth Net Income: £11.5k pa NIY: 4.0% Capital value: £280k Land: £65k Build costs: £170k Target margin: 15%+ LONDON Rent: £1.4k/mth Net Income: £12.5k pa NIY: 3.75% Capital value: £325k Land: £95k Build costs: £188k Target margin: 15%+ OTHER UK REGIONS Rent: £1.1k/mth Net Income: £10k pa NIY: 4.5% Capital value: £210k Land: £23k Build costs: £155k Target margin: 15%+
BtR
All figures are illustrative and relate to an approximate per BtR unit basis Rent = gross per month / Net Income = net annualised Net initial yield (NIY) = forward fund yield / Capital Value = net sale value per unit Land = per unit with planning / Build costs = all other costs per unit 57
Growth Profiling
Identify site Negotiation
- f site
purchase Obtain planning consent Marketing of
- pportunity
Negotiation of land sale & development agreement Completion of land purchase & sale Construction
- f asset
Practical completion
24 months 6 months 24 months 24 months 6 months 30 months
PBSA timeline to 3,500 beds per annum delivery BtR timeline to 1,000 units per annum delivery Revenue Recognition
Land sale Development
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Cash Profile
- Typical “hockey stick” cash profile
- Land acquisition and planning
costs, overheads, tax and dividend payments utilise cash during the year
- Final payments received on
completion of developments and sales transactions re-build cash at the year end
- BtR should help smooth the cash
profile Cash Requirement
- Current year end cash required is c.
£100m
- Growth strategy is likely to increase
this requirement to c. £150m
Cash Requirement
- 20
40 60 80 100 120 1 2 3 4 5 6 7 8 9 10 11 12
Monthly Cash Balance
Dividend
- Progressive dividend in line with
earnings growth (2 x cover)
- Achieving the growth strategy may
lead to free cash and enable a further review of the dividend policy
Typical cash profile
(£m) month
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The Future of Living – In Summary
Kelaty House, London
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Creating the Future of Living – In Summary
Business is fundamentally scalable and set for growth Resilient, Flexible & Cash Generative
UK market leader in developing & managing residential for rent (PBSA and BtR) Strong underlying market fundamentals driving growth Growing institutional demand for new projects, both from UK and overseas investors Scalable business platform with full end-to-end offering A strong track record of ‘on time and on cost’ project delivery High earnings visibility with new build pipeline stretching 3-4 years out Robust capital structure, working capital light model and low gearing
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Q&A
62
Tour Duncan House
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Duncan House
Entered contract (off market) Topping out Ceremony Construction commenced Planning submission Discussions commenced with University
- f London
Practical Completion Forward fund to UPP / University
- f London
Planning granted Jan 2015 Jun 2015 Nov 2015 Aug 2016 Dec 2016 Nov 2016 Sept 2018 Aug 2019
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Student Accommodation 32 storey tower and 4 storey low rise Student Accommodation providing 511 beds, 420 student cluster bedrooms & 91 studios. 7 student communal areas offering various study, recreation and relaxation
- pportunities.
Academic 2,786 sqm, 4 storey academic block designed to accommodate teaching spaces, lecture theatres and fully service dining facilities. External landscaped courtyard and furnished for social gatherings. Residential 8 storey residential includes 23 private residential apartments and 22 affordable/shared ownership housing partnerships. Communal family play space sheltered within an enclosed roof garden. Commercial Ground floor corner plot 62 sqm off Jupp/Ward Road Development Value
- 1. Student accommodation &
affordable workspace = £78,480,795
- 2. Academic = £10,252,022
- 3. Residential = £13,866,084
Total Development Value = £102,598,901
Duncan House - Highlights
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- Glossary of terms
- Presentation team – biographies
- Projects – list and scheduled completion dates
- Financial track record of Group
Appendices
66
Glossary of Terms
BtR Build to rent CAGR Compound annual growth rate EBITDA Earnings before interest, taxes, depreciation and amortisation GOI Gross operating income HMO House in multiple occupation NOI Net operating income PBSA Purpose built student accommodation PG Post graduate PRS Private rented sector UG Under graduate
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Alex Pease - Group Investment Director
- Joined WJ in 2010 & promoted to the role of Group Investment Director in 2013
- Alex is a chartered surveyor (MRICS)
- Previously Alex spent 6 years in the Savills Residential Investment team specialising in brokerage, consultancy and valuation across all residential asset classes
Richard Simpson - Chief Executive Officer
- Joined WJ in January 2019 as CEO
- Richard has 17 years’ experience working in the property development and student accommodation sector, most recently as Group Property Director at Unite
Group plc (“Unite”)
- Richard’s board level roles include seven years serving on the Plc Board of Unite as well as two years in a Non-Executive capacity with CityWest Homes
Phil Byrom - Chief Financial Officer
- CFO of WJ since joining the business in 2002
- Phil qualified as a chartered accountant with PwC in 1990, with whom he progressed rapidly to senior manager and had responsibility for several public company
clients
- Prior to joining WJ Phil spent 7 years in industry where he held several posts as group financial controller and finance director, including divisional finance director
at BWI plc
Rebecca Hopewell - Chief Executive Officer Fresh Property Group
- Joined Fresh Property Group in 2010 to create a specialist 3rd party management company (wholly owned by WJ)
- Has over 15 years of experience in student accommodation industry
- Prior to specialising in student accommodation, Rebecca spent 17 years as a Senior Director for Sanctuary Housing Association
Jim Davies – Managing Director, Newmark
- Joined the business in 1999, and is currently Managing Director of Newmark Developments (wholly owned by WJ)
- Jim is tasked with focusing on bringing the sites in the land bank forward, ensuring they are ready for the student construction teams to commence work
immediately.
- Prior to joining WJ Jim worked with Mowlem, Norwest Holst and Allenbuild
Presentation Team
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Projects List & Completion Dates
PBSA Beds Completion Planning Status Little Patrick Street, Belfast 430 2020 Granted Forest Road, London 353 2020 Granted Albion Way, London 283 2020 Granted Whitefriars, Coventry 778 2020 Granted Swansea 245 2020 Granted Military Road, Canterbury 197 2020 Granted Liverpool Road, Chester 323 2020 Granted Kelaty, Wembley, London 599 2021 Granted Cathedral Street, Glasgow 422 2021 Granted Rockingham Street, Sheffield 691 2021 Granted Dundee Street, Edinburgh 216 2021 Granted Wilder Street, Bristol 348 2021 Granted Bath Lane, Leicester 462 2021 Granted Birmingham 608 2022 Pending Exeter 154 2022 Pending Edinburgh 270 2022 Pending Bath 191 2022 Pending BTR Bournemouth 159 2020 Granted Reading 315 2021 Granted Wembley 301 2021 Granted Sutton 166 2021 Granted Leicester 184 2021 Granted Sheffield 71 2022 Granted Hove 213 2022 Pending Woking 336 2023 Pending
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2024
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Unless expressly stated otherwise, no statement in this presentation is intended as a profit forecast or estimate for any period and no statement in this presentation should be interpreted to mean that cash flow from operations, free cash flow, earnings or earnings per share for Watkin Jones for the current or future financial years would necessarily match or exceed the historical published cash flow from operations, free cash flow, earnings or earnings per share of Watkin Jones. Statements of estimated cost savings relate to future actions and circumstances which, by their nature, involve risks, uncertainties and contingencies. As a result, any cost savings referred to may not be achieved, may be achieved later or sooner than estimated, or those achieved could be materially different from those estimated. By attending the presentation to which this document relates and/or by accepting this document you will be taken to have represented, warranted and undertaken that you have read and agree to comply with the contents of this notice. This presentation contains forward-looking statements concerning the financial condition, results of operations and businesses of Watkin Jones. All statements other than statements of historical fact are, or may be deemed to be, forward-looking statements. Forward-looking statements are statements of future expectations that are based on management’s current expectations and assumptions and involve known and unknown risks and uncertainties that could cause actual results, performance or events to differ materially from those expressed or implied in these statements. 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Watkin Jones does not undertake any obligation to publicly update or revise any forward-looking statement as a result of new information, future events or other information. In light of these risks, results could differ materially from those stated, implied or inferred from the forward-looking statements contained in this presentation. Certain financial data has been rounded. As a result of this rounding, the totals of data presented in this presentation may vary slightly from the actual arithmetic totals of such data.
Disclaimer
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