FEBRUARY 2015 2 2015 PRELIMINARY RESULTS OVERVIEW AND HIGHLIGHTS - - PowerPoint PPT Presentation
Development Securities PLC PRELIMINARY RESULTS FOR YEAR ENDED 28 FEBRUARY 2015 2 2015 PRELIMINARY RESULTS OVERVIEW AND HIGHLIGHTS / FINANCIAL RESULTS / OPERATING REVIEW / SUMMARY / APPENDICES CONTENTS Overview and highlights Slide
Development Securities PLC
PRELIMINARY RESULTS FOR YEAR ENDED 28 FEBRUARY 2015
2015 PRELIMINARY RESULTS 2
CONTENTS
Overview and highlights Slide 3-5 Financial results Slides 6-11 Operating review Slides 12-27 – Overview – Investment portfolio – Development and trading portfolio Case studies Slides 28 - 38 Outlook Slides 39-40 Appendices Slides 41-63
OVERVIEW AND HIGHLIGHTS / FINANCIAL RESULTS / OPERATING REVIEW / SUMMARY / APPENDICES
2015 PRELIMINARY RESULTS 3
OVERV VERVIEW EW AN AND D HIGHLIGHTS TS / FINANCIAL RESULTS / OPERATING REVIEW / SUMMARY / APPENDICES
2015 PRELIMINARY RESULTS 4
A STEP CHANGE IN PERFORMANCE
– Record-level headline profit before tax - £45.4m* (2014: £19.5m) – Record level development and trading gains – 69% increase to £45.7m (2014: £27.0m) – Good visibility on future gains – Continued NAV growth - 8.4% increase** in adjusted EPRA NAV per share ‒ £10.0m special dividend – paid out of strong cash flows – Cathedral acquisition already adding value – Management succession and shareholder alignment – strong leadership for the future
*Before exceptional items of £10.6m including termination costs of cross currency swap (£7.9m) and acquisition costs of Cathedral Group (£2.7m) **7.7% growth before payment of special dividend and after restructure of Euro loan notes, cancelling previous mark to market swap deficit
OVERV VERVIEW EW AN AND D HIGHLIGHTS TS / FINANCIAL RESULTS / OPERATING REVIEW / SUMMARY / APPENDICES
2015 PRELIMINARY RESULTS 5
A STEP CHANGE IN PROFITABILITY
Exp Expectations ions of gains ins to be reali lised sed across ss current portfoli lio
OVERV VERVIEW EW AN AND D HIGHLIGHTS TS / FINANCIAL RESULTS / OPERATING REVIEW / SUMMARY / APPENDICES
*Existing projects only 28.1 27.0 45.7 54.2 53.4 61.1 5.9 6.8 17.4 0.0 10.0 20.0 30.0 40.0 50.0 60.0 70.0 FY 2013 FY 2014 FY 2015 FY 2016 FY 2017 FY 2018 £’m Realised gains Expected gains* Dividend
£26.3m £50.4m £53.0m
Previous guidance
£42.8m
10.0 7.4 Special dividend
2015 PRELIMINARY RESULTS 6
OVERVIEW AND HIGHLIGHTS / FINAN ANCI CIAL AL RESU RESULTS TS / OPERATING REVIEW / SUMMARY / APPENDICES
2015 PRELIMINARY RESULTS 7
STRONG PERFORMANCE
28th Feb 2015 28th Feb 2014 Change in year
Headline profit before tax £45.4m* £19.5m 133% EPRA Net Asset Value (NAV) pre- special dividend £355.6m £320.7m** 10.9% EPRA NAV per share pre-special dividend 284p 262p** 8.4% EPRA Earnings per share 23.9p 7.8p 206.4% Development and trading profits £45.7m £27.0m 69.3% Final dividend 3.5p 3.2p 9.4% Special dividend 8.0p
36.3% 48.0%
*Before exceptional items of £10.6m including termination costs of cross currency swap (£7.9m) and acquisition costs of Cathedral Group (£2.7m) **Restated after restructure of Euro loan notes, cancelling previous mark to market swap deficit
OVERVIEW AND HIGHLIGHTS / FINAN ANCI CIAL AL RESU RESULTS TS / OPERATING REVIEW / SUMMARY / APPENDICES
2015 PRELIMINARY RESULTS 8
MOVEMENT IN EPRA NAV PER SHARE THROUGH THE PERIOD
OVERVIEW AND HIGHLIGHTS / FINAN ANCI CIAL AL RESU RESULTS TS / OPERATING REVIEW / SUMMARY / APPENDICES
276 14 9 3 6 8 2 1 11 9 37 262 220 230 240 250 260 270 280 290 300 310 320 pence
2015 PRELIMINARY RESULTS 9
DEBT FINANCING
28 Feb 2015 £’m 28 Feb 2014 £’m
Gross debt 205.0 221.1 Cash (79.3) (67.3) Net debt 125.7 153.8 Gearing 36.3% 48.0% Share of net debt in joint ventures 46.8 28.1 Net debt including joint ventures 172.5 181.9 Gearing including joint ventures 49.8% 56.8% Analysis of gross debt (excluding JVs) Fixed rate 44.6% 43.5% Capped / SWAP 31.0% 42.2% Floating rate 24.4% 14.3% Weighted average interest rate 5.4% 5.8% Weighted average maturity 5.4 years 6.8 years
OVERVIEW AND HIGHLIGHTS / FINAN ANCI CIAL AL RESU RESULTS TS / OPERATING REVIEW / SUMMARY / APPENDICES
2015 PRELIMINARY RESULTS 10
ORDINARY DIVIDENDS
DEVELOPMENT AND TRADING GAINS NET FREE CASH FLOW CASH PROFIT
NET FINANCE COST OVERHEAD SHORTFALL CORPORATION TAX
REINVESTMENT IN PROJECTS CAPITAL RETURN
HOW OUR CASH FLOW WORKS
OVERVIEW AND HIGHLIGHTS / FINAN ANCI CIAL AL RESU RESULTS TS / OPERATING REVIEW / SUMMARY / APPENDICES
2015 PRELIMINARY RESULTS 11
FINANCIAL HIGHLIGHTS
‒ Step change in level of performance
‒ Significant increase in dividends from strong cash flow
‒ Strong financial position: ‒ Efficiency of balance sheet improved ‒ £0.8m p.a. of finance cost savings from restructure of Euro loan notes ‒ Focus on capital discipline ‒ Capacity for recurring capital distributions from strong cash flow ‒ £185.4m of new debt facilities secured in the year - Strong capital partner relationships ‒ Balance Sheet gearing modest at 36.3% (excluding JVs)
OVERVIEW AND HIGHLIGHTS / FINAN ANCI CIAL AL RESU RESULTS TS / OPERATING REVIEW / SUMMARY / APPENDICES
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OVERVIEW AND HIGHLIGHTS / FINANCIAL RESULTS / OPE PERA RATI TING REVI REVIEW EW / SUMMARY / APPENDICES
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A BALANCED APPROACH
IN INVES VESTMENT PO PORTFOLIO TFOLIO DEVE DEVELOPMENT AN AND D TRAD TRADING ING PO PORTFOLIO TFOLIO
FY’15 KPIs* – £45.7m of realised gains – 8 projects on site – 6 new projects acquired FY’15 KPIs* – £13.8m rental income – 12.2% valuation gain (inc JVs) – £60.8m of disposals – £65.7m of acquisitions
Objectives – Recurring income stream – Contributes to NAV growth Key value drivers – Lease re-structures – Improve tenant mix and rental tone – Asset management including development Objective – Generate short to medium- term profit realisation Key value drivers – Land improvement profit – Development profit – Arbitrage/mispricing INVESTMENT PORTFOLIO 42% of Book Value £211m capital value DEVELOPMENT AND TRADING PORTFOLIO 58% of Book Value £291m capital value
*All since 1st March 2014 to date
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2015 PRELIMINARY RESULTS 14
Featured property: Chippenham Shopping Centre Acquired in September 2014 as part of ongoing capital recycling within portfolio
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INVESTMENT PORTFOLIO AT A GLANCE
NUMBER OF ASSETS
21
Feb 2014: 24
SIZE OF PORTFOLIO
£203.3m
Feb 2014: £202.1m
INITIAL YIELD
6.87%
Feb 2014: 7.21%
VALUATION INCREASE (inc JVs)
Feb 2014: £4.8m
CONTRACTED RENTAL INCOME
£13.77m
Feb 2014: £14.1m
ESTIMATED RENTAL VALUE
£15.0m
Feb 2014: £14.9m
VOID RATE
4.97%
Feb 2014: 6.27%
OVERVIEW AND HIGHLIGHTS / FINANCIAL RESULTS / OPERATING REVIEW / SUMMARY / APPE APPENDI DICES CES
EQUIVALENT YIELD
7.42%
Feb 2014: 7.48%
NUMBER OF ASSETS
21
Feb 2014: 24
2015 PRELIMINARY RESULTS 16
INVESTMENT PORTFOLIO STRATEGY
‒ Focus on assets with: ‒ Core defensive income ‒ High yields ‒ Value enhancement potential ‒ Majority of assets are convenience retail destinations (73%) with a food store anchor to drive footfall
‒ Size of portfolio is appropriate to contribute to wider returns target for the company and support business overheads ‒ 3-5 year business plan for each asset maintains investment discipline and allows capital recycling
Top 5 occupiers as at 28th Feb 2015 Annual rent £m % of contracted rent 1 Waitrose 1.5 11.1% 2 Matalan 0.7 5.2% 3 J Sainsbury 0.5 3.6% 4 Sports Direct 0.3 2.5% 5 Wilkinson 0.3 2.1%
OVERVIEW AND HIGHLIGHTS / FINANCIAL RESULTS / OPE PERA RATI TING REVI REVIEW EW / SUMMARY / APPENDICES
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DISPOSAL
COLSTON TOWER ‒ Iconic office tower in central Bristol ‒ Held for 3.5 years ‒ 54,900 sq. ft. of lettings completed in period ‒ Rental tone increased from £9psf to £14psf ‒ 34% valuation growth during ownership (net of capex) ‒ 18.5% IRR Key stats
Purchase price £7.6m Date acquired 2011 Purchase yield 10.08% Sale price £11.3m Exit yield 8.25%
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ACQUISITION
KILLINGWORTH SHOPPING CENTRE ‒ Principal retail provision in Killingworth, a commuter suburb of Newcastle ‒ Morrisons anchor foodstore (outside of ownership) ‒ Key tenants: Matalan, Wilkinson, Poundworld ‒ Asset management plans underway to drive value:
‒ Lease re-structures ‒ Deliver additional retail space to broaden offer ‒ Increase dwell time
Key stats
Purchase price
£19.2m
Dev Secs’ share
100%
NIY
8.27%
Occupancy rate
100%
WAULT (to tenant break)
5.1 years
Projected 1 yr cash
9.43%
OVERVIEW AND HIGHLIGHTS / FINANCIAL RESULTS / OPE PERA RATI TING REVI REVIEW EW / SUMMARY / APPENDICES
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Featured property: Telegraph Works, Greenwich £10.2m of profit realised during the year
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DEVELOPMENT AND TRADING
HOW WE CREATE VALUE
OVERVIEW AND HIGHLIGHTS / FINANCIAL RESULTS / OPE PERA RATI TING REVI REVIEW EW / SUMMARY / APPENDICES
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DEVELOPMENT AND TRADING PORTFOLIO OVERVIEW
Development and Trading Portfolio Mixed-use Regeneration Projects Trading Assets ‒ Clear areas of focus:
‒ Sector ‒ Geography
‒ Planning gain is key value driver ‒ Equity light model with high upside potential ‒ Projects de-risked via phased delivery + forward funding/pre-sales/pre-lets ‒ Target 2.0x – 5.0x equity multiple ‒ Good buying opportunities available + terms of trade in our favour ‒ Short-term project delivery + profit flow ‒ Planning gain often key ‒ Target IRR of 30% and 1.5x equity multiple and above
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CLEAR GEOGRAPHIC FOCUS
LONDON CITY REGION London City Region
‒ Greater/suburban London focus (outside of Underground Zone 1) ‒ 90km radius of London – current population of 20 million ‒ Locations served by and directly accessible to the capital in 1 hour by public transport ‒ Deep labour pools and strength of demand are key
OVERVIEW AND HIGHLIGHTS / FINANCIAL RESULTS / OPE PERA RATI TING REVI REVIEW EW / SUMMARY / APPENDICES
Development and trading portfolio by WIP
Greater London (44.2%) South East (16.4%) Republic of Ireland (15.2%) North West (6.2%) Other (18.0%)
2015 PRELIMINARY RESULTS 23
CLEAR GEOGRAPHIC FOCUS
LONDON CITY REGION
OVERVIEW AND HIGHLIGHTS / FINANCIAL RESULTS / OPE PERA RATI TING REVI REVIEW EW / SUMMARY / APPENDICES
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CLEAR GEOGRAPHIC FOCUS
MANCHESTER/DUBLIN Manchester City Region ‒ UK’s ‘second’ city ‒ Strong leadership and devolved powers ‒ Dev Secs has track record and strong local relationships ‒ 4 live projects Dublin City Region
‒ Competitive advantage: ‒ Lack of ‘legacy’ debt issues ‒ Early mover advantage ‒ Market returning to growth and liquidity ‒ Positive business environment and growing investor and occupier demand ‒ Natural balance sheet hedge with Euro loan notes ‒ 7 real estate opportunities secured to date
OVERVIEW AND HIGHLIGHTS / FINANCIAL RESULTS / OPE PERA RATI TING REVI REVIEW EW / SUMMARY / APPENDICES
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MIXED-USE REGENERATION STRATEGY
Regeneration p ion projects: jects: ‒ Continued opportunity + competitive advantage ‒ Planning gain is key PP PPP P projects: jects: ‒ Partnerships with local authorities and public bodies ‒ 40% of land in UK owned by councils ‒ Placemaking is key ‒ Current project pipeline totals £1.6bn GDV Office fice-led d led developm lopment: ‒ Equity light ‒ Focus: transport-connected locations outside of Central London ‘core’ ‒ Long-track record & deep expertise FY’15 KPIs*
‒ 10 planning consents secured ‒ 7 planning applications submitted ‒ £246m of funding secured to enable project delivery ‒ 8 projects under construction
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*All since 1st March 2014 to date
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RECORD LEVEL DEVELOPMENT AND TRADING PROFITS
28th Feb 2015
Realised profits (£’m)
Telegraph Works, Greenwich 10.2 10 Hammersmith Grove 6.7 North London office portfolio 6.3 399 Edgware Road 4.4 Romford 3.8 Sevenoaks 3.1 12 Hammersmith Grove 2.7 The Old Vinyl Factory 1.5 Other (NB: includes PM fees, Deeley Freed partnership and rental income) 7.0 Gross profit £45.7 m
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OUTLOOK FOR FY16 – MAIN CONTRIBUTORS TO DEVELOPMENT AND TRADING GAINS
Project Dev Secs’ share Dev Secs’ equity exposure (as at 28th Feb 2015) Status Anticipated profit Profit trigger 399 Edgware Road 100% £5.5m Under construction £8m Development profit upon practical completion of food store and retail elements Dublin 1) Percy Place 2) Charlemont Clinic 3) Robswall, Malahide 100% £13.0m 1) Under construction 2) In planning 3) Marketing for private sale
£8m 1) Profit from private sale of apartments and sale of retail/office space to fund 2) Land improvement profit from sale of consented site 3) Profit from sale of all residential units Wind farms 100% £3.5m In planning £4m Land improvement profit from sale of consented sites Wick Lane Wharf 35% £0m Marketing for private sale of residential units £4m Profit from sale of all residential units and promoted interest The Deptford Project 100% £6.2m Under construction £3m Completion of pre-sold development Brentwood 100% £3.7m Planning secured £3m Land improvement profit from sale of site Cross Quarter, Abbey Wood 100% £2.4m Under construction £3m Development profit upon practical completion of foodstore + land improvement profit from sale of remaining land Hale Barns 100% £3.8m Under construction £2m Development profit upon practical completion of retail element and sale of residential units Norwich 100% £4.1m £2m Land improvement profit from sale of land Other £17m Total £54m
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OVERVIEW AND HIGHLIGHTS / FINANCIAL RESULTS / OPE PERA RATI TING REVI REVIEW EW / SUMMARY / APPENDICES
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DEVELOPMENT AND TRADING – HOW WE CREATE VALUE
OVERVIEW AND HIGHLIGHTS / FINANCIAL RESULTS / OPE PERA RATI TING REVI REVIEW EW / SUMMARY / APPENDICES
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TRADING PORTFOLIO
NORTH LONDON OFFICE PORTFOLIO
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PUBLIC PRIVATE PARTNERSHIP MODEL
OVERVIEW AND HIGHLIGHTS / FINANCIAL RESULTS / OPE PERA RATI TING REVI REVIEW EW / SUMMARY / APPENDICES
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DEVELOPMENT AND TRADING – HOW WE CREATE VALUE
OVERVIEW AND HIGHLIGHTS / FINANCIAL RESULTS / OPE PERA RATI TING REVI REVIEW EW / SUMMARY / APPENDICES
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PUBLIC PRIVATE PARTNERSHIP
THE DEPTFORD PROJECT
2015 PRELIMINARY RESULTS 34
PUBLIC PRIVATE PARTNERSHIP
THE DEPTFORD PROJECT
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DEVELOPMENT AND TRADING – HOW WE CREATE VALUE
OVERVIEW AND HIGHLIGHTS / FINANCIAL RESULTS / OPE PERA RATI TING REVI REVIEW EW / SUMMARY / APPENDICES
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MIXED-USE REGENERATION
399 EDGWARE ROAD
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MIXED-USE REGENERATION
399 EDGWARE ROAD
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OFFICE-LED DEVELOPMENT
10/12 HAMMERSMITH GROVE
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OVERVIEW AND HIGHLIGHTS / FINANCIAL RESULTS / OPERATING REVIEW / SU SUMMAR ARY / APPENDICES
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A STEP CHANGE FOR DEVELOPMENT SECURITIES
‒ Record level results and a step change in performance ‒ Business positioned for growth and a sustained, high level of returns ‒ A clear strategic focus for the business ‒ Balance sheet efficiency improved with focus on a disciplined capital structure ‒ Commitment to recurring capital distributions from strong cash flow ‒ Senior management deepened, aligned with shareholder interests and incentivised to maximise total returns
OVERVIEW AND HIGHLIGHTS / FINANCIAL RESULTS / OPERATING REVIEW / SU SUMMAR ARY / APPENDICES
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OVERVIEW AND HIGHLIGHTS / FINANCIAL RESULTS / OPERATING REVIEW / SUMMARY / APPE APPENDI DICES CES
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OVERVIEW AND HIGHLIGHTS / FINANCIAL RESULTS / OPERATING REVIEW / SUMMARY / APPE APPENDI DICES CES
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MANAGEMENT TEAM
Michael Marx Chief Executive
(Standing down at 14th July 2015 AGM)
Richard Upton Executive Director
(To be appointed Deputy CEO at 14th July AGM)
Marcus Shepherd Finance Director Matthew Weiner Executive Director
(To be appointed CEO at 14th July 2015 AGM)
OVERVIEW AND HIGHLIGHTS / FINANCIAL RESULTS / OPERATING REVIEW / SUMMARY / APPE APPENDI DICES CES
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OVERVIEW AND HIGHLIGHTS / FINANCIAL RESULTS / OPERATING REVIEW / SUMMARY / APPE APPENDI DICES CES
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NET DEBT, NET ASSETS AND GEARING
OVERVIEW AND HIGHLIGHTS / FINANCIAL RESULTS / OPERATING REVIEW / SUMMARY / APPE APPENDI DICES CES
304.5 306.7 312.6 320.3 335.5 346.4 147.1 146.8 143.0 153.8 150.7 125.7 10 20 30 40 50 60 70 80 90 100 50 100 150 200 250 300 350 Aug 12 Feb 13 Aug 13 Feb 14 Aug 14 Feb-15 % £’m Net assets (LHS) Net debt (LHS) Gearing excl JVs (RHS)
2015 PRELIMINARY RESULTS 46
DEBT MATURITY PROFILE
OVERVIEW AND HIGHLIGHTS / FINANCIAL RESULTS / OPERATING REVIEW / SUMMARY / APPE APPENDI DICES CES
20 29 72.7 14.1 5.3 32.9 34.1 10 20 30 40 50 60 70
£’m
Drawn (Investment) Drawn (Development) Other
2015 PRELIMINARY RESULTS 47
CONTRIBUTION TO NAV GROWTH
£’m Cash-related in the year £’m Non cash-related in the year £’m Net assets attributable to shareholders at 28 Feb 2014 320.2 Contribution from investment property 13.9 13.9 Property revaluations 11.2 11.2 Contribution from development and trading portfolio 45.7 45.7 Operating costs (17.9) (17.9) Cathedral acquisition costs (2.7) (2.7) Net interest costs (11.8) (11.8) Share issue 6.2 6.2 Swap revaluations 0.1 0.1 Foreign currency movements 2.3 2.3 Other (0.6) (0.6) Taxation (3.2) (3.2) Dividends (17.0) (17.0) Non controlling interest (0.7) (0.7) Sub-total 25.5 8 17.5 Net assets attributable to shareholders at 28 Feb 2015 345.7
OVERVIEW AND HIGHLIGHTS / FINANCIAL RESULTS / OPERATING REVIEW / SUMMARY / APPE APPENDI DICES CES
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OVERVIEW AND HIGHLIGHTS / FINANCIAL RESULTS / OPERATING REVIEW / SUMMARY / APPE APPENDI DICES CES
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INVESTMENT PROPERTY PORTFOLIO CONTRIBUTION (INCLUDES SHARE OF JVS)
28th Feb 2015 £m 28th Feb 2014 £m Revenue 12.9 15.1 Direct costs (2.7) (2.7) 10.2 12.4 Gains on disposals 3.8 0.5 Asset management fees and joint venture net income (0.1) 1.0 Contribution prior to revaluation 13.9 13.9 Revaluation gain/(loss)
7.6 3.4 3.1 1.7 Contribution 24.9 18.7
OVERVIEW AND HIGHLIGHTS / FINANCIAL RESULTS / OPERATING REVIEW / SUMMARY / APPE APPENDI DICES CES
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INVESTMENT PORTFOLIO ANALYSIS
Sector Capital value (£m) % of portfolio by capital value Void rates (%) Net initial yield (%) Weighted average lease length (years) London/SE weighting (%) Valuation movement** (%) Foodstore anchored (Waitrose and Sainsbury’s)
73.6 39.2 0.95 6.3 12.1 26.4 2.1
Foodstore anchored (outside DS
63.3 33.8 9.02 7.4 5.5 7.2 4.7
Other Retail
20.4 10.9 0.43 8.8 6.0 0.0 (2.2)
Commercial
0.7 0.4 0.00 13.0 2.3 0.0 0.0
Mixed-use
8.6 4.6 3.23 8.4 4.2 0.0 5.2
Leisure
21.0 11.2 12.05 5.4 25.8 7.4 8.4 Total 187.6 100.0 4.97 6.9 10.4 40.9 3.3
*Analysis covers core investment assets – direct investment portfolio excluding developable land and site assembly **On a like for like basis
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CAPITAL RECYCLING - DISPOSALS
Colston Tower Portfolio of investment assets Winchester shopping centre Eltham
Purchase price £7.6m n/a £18.2m £4.7m Date acquired 2011 Various 2006 2009 Purchase yield 10.08% n/a 8.11% 8.75% Sale price £11.3m £20.9m £22.9m £5.7m Exit yield 8.25% 7.49% 4.86% 6.99%
OVERVIEW AND HIGHLIGHTS / FINANCIAL RESULTS / OPERATING REVIEW / SUMMARY / APPE APPENDI DICES CES
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CAPITAL RECYCLING: ACQUISITIONS
World of Golf, Sidcup Chill Factore, Trafford Killingworth Shopping Centre, Newcastle Borough Parade, Chippenham
Price
£2.3m £15.5m £19.2m £16.3m
Dev Secs share
100% 80% 100% 100%
NIY
7.25% 9.9% 8.27% 7.02%
Occupancy rate
100% 94% 100% 98.8%
Top tenants
Ashtour (sub-let to American Golf) Snow & Rock, Evans Cycles, JD Wetherspoon, Nando’s Matalan, Wilkinson, Poundworld, Card Factory Waitrose, New Look, Argos, JD Wetherspoon
WAULT (to tenant break)
19.5 years 5.2 years 5.1 years 6.0 years
Projected 1 yr cash
7.6% 18.0% 9.4% 8.5%
Acquisition rationale
stream
potential
for town
and occupier base
principal retail destination for town
OVERVIEW AND HIGHLIGHTS / FINANCIAL RESULTS / OPERATING REVIEW / SUMMARY / APPE APPENDI DICES CES
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INVESTMENT PORTFOLIO ANALYSIS*
57.2% 21.8% 15.5% 3.9% 1.6%
Gross rental income - tenant profile
PLC/nationals Local traders Regional multiples FTSE 100 Government 30.8% 41.5% 10.5% 3.2% 14.0%
Gross rental income - lease term profile
0 - <5 years 5 - <10 years 10 - <15 years 15 - <20 years 20 years + 81.90% 9.10% 4.70% 3.80% 0.5%
Capital value - sector analysis
Retail Mixed Office Residential Industrial
*covers core direct investment portfolio
36.2 21.5 12.1 9.6 5.9 4.8 4.4 3.6 1.9
Location of assets by capital value (%)
South East South West North West North East Wales London Midlands Northern Ireland Scotland
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TRADING CASE STUDY
North London office portfolio Acquisition ‒ Portfolio of five office buildings acquired for £17.5m Finance ‒ Three year debt facility secured against acquisition and planning costs Planning ‒ Permitted development rights secured for residential conversion of three properties Disposal ‒ Properties sold individually to various private investors Outcomes ‒ Total project profit of £6.3m ‒ IRR of over 200% and 1.9x equity multiple
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PUBLIC PRIVATE PARTNERSHIP CASE STUDY
Deptford Project Land ‒ 2-acre site adjacent to Deptford railway station ‒ Partnership with freeholder, Lewisham Council Planning – Planning consent secured for: ‒ 132 residential units ‒ 11,000 sq. ft. of commercial and retail space ‒ New public realm Funding ‒ £25.1m bank facility secured to finance construction costs ‒ 121 residential units pre-sold to IPG, de-risking the project ‒ Agreement for lease exchanged with Peabody to manage 8 affordable units Delivery – Cathedral manages construction and delivery of residential units Outcomes – Profit share with Lewisham council upon practical completion – target profit
– Commercial and retail space to be retained as investment
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MIXED-USE REGENERATION CASE STUDY
399 Edgware road Planning – Planning consent secured for: – 81,000 sq. ft. food store – 183 residential units – 50,000 sq. ft. restaurant and retail space Funding – Foodstore pre-let to Morrisons and forward funded by clients of Aberdeen Asset Management – Residential quarter funded by L&Q Delivery – Development Securities manages construction of development and residential sales process – Fixed price contracts for build out of residential and foodstore elements Outcomes – Land improvement profit + profit share upon completion
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OFFICE DEVELOPMENT CASE STUDY
10 Hammersmith Grove Land ‒ Land deal with freeholder TfL – deferred payment in exchange for profit share upon delivery of project ‒ Element of fixed land price just £11 psf vs £820 psf capital value ‒ Minimal equity requirement – c.£5m Planning ‒ Planning consent secured for two-phase office development of 280,000
‒ 10 Hammersmith Grove = 110,000 sq. ft. grade A office building Funding ‒ £50m forward funding secured from Aberdeen Asset Management for construction of building Delivery ‒ Development Securities manages construction and letting of the building Outcomes ‒ Total development profit of £6.7m ‒ Capital values 39% ahead of pro-forma ‒ Average rental values 25% ahead of previous Hammersmith benchmark
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SECONDARY TRADES TO CONTINUE
Vendor Closed sales (€m) 1 IBRC 18,704 2 NAMA 10,101 3 Royal Bank of Scotland 9,612 4 Catalunya Banc 6400 5 Lloyds Banking Group 5,842 6 Hypothekenbank Frankfurt 4,400 7 National Australia Bank 2,391 8 Nationwide 2,152 9 UKAR 2,000 10 Bankia 1,660
Top 10 vendors 2014
Source: Cushman and Wakefield Corporate Finance
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GREAT WALL OF MONEY
145 47 45 29 24 20 40 60 80 100 120 140 160 United States United Kingdom China Japan Germany $’bn
Source: DTZ
OVERVIEW AND HIGHLIGHTS / FINANCIAL RESULTS / OPERATING REVIEW / SUMMARY / APPE APPENDI DICES CES
Estimated capital targeting commercial real estate in top five markets
2015 PRELIMINARY RESULTS 62
LENDING TO COMMERCIAL PROPERTY
Source: Capital Economics
OVERVIEW AND HIGHLIGHTS / FINANCIAL RESULTS / OPERATING REVIEW / SUMMARY / APPE APPENDI DICES CES
2 4 6 8 10 12 14 4 5 6 7 8 9 10 11 12 13 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 Lending to property as a % of total loan book (LHS) Net lending to property, £bn per quarter (RHS)
2015 PRELIMINARY RESULTS 63
YIELD SPREAD STILL WIDE
20 40 60 80 100 120 140 160 20 40 60 80 100 120 140 160 2007 2008 2009 2010 2011 2012 2013 2014 Prime - secondary yield spread (Bps)
Source: Capital Economics
OVERVIEW AND HIGHLIGHTS / FINANCIAL RESULTS / OPERATING REVIEW / SUMMARY / APPE APPENDI DICES CES
2015 PRELIMINARY RESULTS 64
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