PRELIMINARY RESULTS FOR THE YEAR ENDED 28 FEBRUARY 2017 1 AGENDA - - PowerPoint PPT Presentation
PRELIMINARY RESULTS FOR THE YEAR ENDED 28 FEBRUARY 2017 1 AGENDA OVERVIEW AND HIGHLIGHTS FINANCIAL RESULTS STRATEGIC UPDATE + DEVELOPMENT AND TRADING PORTFOLIO + INVESTMENT PORTFOLIO + SPECIALIST PLATFORMS SUMMARY APPENDICES +
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OVERVIEW AND HIGHLIGHTS FINANCIAL RESULTS STRATEGIC UPDATE + DEVELOPMENT AND TRADING PORTFOLIO + INVESTMENT PORTFOLIO + SPECIALIST PLATFORMS SUMMARY APPENDICES + APPENDIX 1: OVERVIEW + APPENDIX 2: FINANCIALS + APPENDIX 3: PORTFOLIO STATS + APPENDIX 4: ECONOMIC CHARTS
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FY2017 HIGHLIGHTS
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STRONG PERFO RFORM RMAN ANCE CE IN H2 + £35m of development and trading gains (in line with guidance) with £23.5m secured in H2 + Basic NAV of 278p per share – after payment of FY2016 dividend + Total dividends of 8.7p per share including a declared supplemental dividend
+ Investment portfolio valuation decline of £6.8m – stable in H2 PORTFOLIO STRENGTHENED TO DRIVE FUTURE GROWTH + Four major PPP projects won with a GDV of over £1.5bn – potential to realise profits in excess of £90m from FY2020 + Investment portfolio transition underway – £18m of non-core assets sold in FY2017 + Two specialist platforms created: JVs with Proprium Capital Partners and Colony NorthStar + Good visibility on restated £65-70m development & trading gains in FY2018 Targeting a post-tax return of 12% and a minimum of £150m of development and trading gains over 3 years
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05/14 – FINANCIAL RESULTS 15/31 – STRATEGIC UPDATE 32/33 – SUMMARY 34/61 – APPENDICES 03/04 – OVERVIEW AND HIGHLIGHTS
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FY2017 PERFORMANCE FY2017 FY2017 FY2016 Development and trading gains £35.0m £51.1m Basic NAV £347.6m(1) £363.3m Basic NAV per share 278p(1) 291p Profit before tax £0.4m(2) £25.8m Dividend per share (in respect of period reported) 5.9p 5.9p Supplemental dividend per share declared(1) 2.8p 2.8p 8.0p Net debt £120.9m £161.4m Gearing 34.8% 44.4%
(1) After payment of supplemental dividend (£10.0 million/8p per share) – declared for FY2016 and paid in June 2016 (2) Before exceptional item relating to serviced office business (£2.1m)
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FY2017: DEVELOPMENT AND TRADING GAINS
Projec roject t name me
Fore recast st(1
(1) )
FY17 gains Realise sed FY17 gains Value tr trigger
Dublin: The Vertium Building £4-5m £4m
Trading: entire building let triggering a profit payment entitlement
Other £8m £5m
Trading: sale of Percy Place and further commercial and residential units across two projects
Birmingham International Park (UK) £8m £8m
Trading: planning secured and site disposal completed
Elizabeth House (LCR*) £2-6m £5m
Trading: disposal of site completed pre planning
Powergen site, Ashford (LCR*) £4m £4m
Trading: disposal of site completed post planning
Springfield Park, Maidstone (LCR*) £2-4m £2m
Trading: disposal of Phase 1 of site completed post planning
Other (8 projects) £8m £7m
Trading: smaller projects (profit below £2m)
Guidance £35-40m £35m
* London City Region: an area within a one hour’s commute of Central London (1) Per guidance (October 2016)
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46 51 35
10 20 30 40 50 60 70 80 FY 2015 FY 2016 FY 2017 FY 2018 FY 2019 FY 2020 Realised gains
Revised guidance (April 2017)
65-70
ANTICIPATED GAINS TO FY2020
£155 - £180m (from existing projects)
3 - 5 year target
*Total returns: the growth in our basic net asset value including dividends
£m
40-50 50-60
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OUTLOOK FOR FY2018: DEVELOPMENT AND TRADING GAINS
Projec roject t name me
Forec recast(1) FY18 gains H1 H1/1 /18 H2 H2/1 /18 Value tr trigger
12 Hammersmith Grove (LCR*) £9-11m – £9-11m
Trading: let 90% of office space; 43% let or under offer; negotiations on further 31%
Scheme A, Brighton (LCR*) £8-10m – £8-10m
PPP: completion of funding strategy
Residential Scheme A (LCR*) £7-10m – £7-10m
PPP: surplus arising from either disposal of the site (post planning) or from development
Residential Scheme B (LCR*) £6-10m – £6-10m
Trading: surplus arising from either disposal of the site (post planning) or from development
Wind Farm Portfolio (UK) £6-8m £3-4m £3-4m
Trading: surplus arising from disposal of 2-3 sites (planning secured on one project)
Mill Green, Cannock (UK) £5-6m – £5-6m
PPP: entering into a funding agreement to develop the scheme (planning consent secured)
Ashford (LCR*) £3-4m £1-2m £2m
Trading: surplus arising from either disposal of the site
The Old Vinyl Factory, Hayes (LCR*) £2-3m – £2-3m
Trading: surplus arising from disposal of the next residential phase (post planning); BTR potential
Telegraph Way, Greenwich (LCR*) £2-4m – £2-4m
Trading: disposal of 16 town houses that were to be constructed for U+I as part of the original land transaction
Other (12 projects) £15m £6m £9m
Trading: smaller projects with profit below £2m per project
Guidance range £65-70m £10-12m £55-58m
* London City Region: an area within one hour’s commute of Central London (1) Per guidance (October 2016)
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FY2020
Value tr trigger
Morden Wharf, Greenwich (LCR*)
PPP: realisation of first phase of site (post planning) from within JV
Scheme B, Brighton (LCR*)
PPP: practical completion of pre-funded mixed-use development
Pincent’s Hill, Reading (LCR*)
Trading: surplus arising from either disposal of the site (post planning) or from development Guidance: major projects contribute c45% of forecast development & trading gains of £50-60m(1) (from existing projects)
FY2019 & FY2020: MAJOR DEVELOPMENT AND TRADING PROJECTS
FY2019
Value tr trigger
Charlton Riverside, Greenwich (LCR*)
Investment asset: realisation of first phase of site
Harwell, Oxfordshire (LCR*)
PPP: refinancing to release value from early phases of commercial development
Valentine House, Ilford (LCR*)
Trading: practical completion of pre-sold residential units currently under construction Guidance: major projects contribute c40% of forecast development & trading gains of £40-50m(1) (from existing projects) * London City Region (1) Per guidance (April 2017)
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EPRA NAV VALUATION
Prop roport rtion
f ass ssets ts va valued Change in Valuati tion Directly owned portfolio 43% £15.5m Assets held in JVs 20% (£2.4m) Total 30% £13.1m
+ EPRA valuation exercise for development and trading assets undertaken + U+I’s business model frequently involves either not owning land (e.g. PPP schemes)
+ Only 30% of assets qualify to be valued with an uplift of £13.1 million and an EPRA NAV of 288p per share + 80% of development and trading guidance (FY2018-2020) result from assets which are not valued + Development and trading guidance most reliable measure of value within portfolio
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DEBT FINANCE FY2017 £m FY2016 £m Gross debt 172.1 213.3 Cash (51.3) (51.8) Net debt 120.8 161.5 Gearing 34.8% 44.4% Share of net debt in joint ventures 44.0 43.6 Net debt including joint ventures 164.8 205.1 Gearing including joint ventures 47.4% 56.4% Analysis of gross debt (excluding JVs) Fixed rate 41.6% 35.1% Capped / SWAP 29.8% 30.1% Floating rate 28.6% 34.8% Weighted average interest rate 4.6% 4.9% Weighted average maturity 4.8 years 4.5 years
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DEBT MATURITY PROFILE
40.1 39.8 68.4 20.9
10 20 30 40 50 60 70 80 10 20 30 40 50 60 70 Feb-18 Feb-19 Feb-20 Feb-21 Feb-22 Feb-23 Feb-24 Feb-25 Feb-26 Corporate Drawn - Investment Drawn - Development
2.3 2.6 60.7
*Terms of refinance agreed
£m
** On Balance Sheet
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TARGETING BUSINESS EFFICIENCIES IN FY2018
Efficiency Gains FY2018 £m Reduction in recurring overhead(1) Platform management fees Offsetting costs Additional revenue(2) 1.0 1.9 (0.9) 1.0 2.0
(1) Targeting a 5% reduction in FY2018 (2) Across specialist platforms
+ Reduction in recurring overhead (from FY2018) + Additional revenue – net management fees from specialist platforms and major schemes
Additional revenue (secured) FY2018 £m Office repositioning platform Income producing platform Mayfield (Manchester) 0.6 0.2 0.2 Net management fees(2) 1.0
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U+I: AN INTEGRATED PORTFOLIO DEVELOPMENT AND TRADING PORTFOLIO
PPP
22%
Of gross assets*
£116m**
Capital Value*** Trading
39%
Of gross assets*
£206m**
Capital Value***
39%
Of gross assets*
£211m
Capital Value***
INVESTMENT PORTFOLIO CREATING PLACES
Delivers
– Longer-term development profit – Shorter-term trading profit – Some elements of completed developments retained within investment portfolio
Key value drivers – Planning gain – Arbitrage/mispricing – Development margin FY2017 KPIs
£35m profit £1.5bn GDV added to pipeline
Delivers
– Income return – Capital growth – Future development
(warehouse)
Key value drivers – Asset management – Planning gain FY2017 KPIs
£179.2m portfolio 6.6% initial yield
*Group share where appropriate **Assets held at cost, not revalued ***Capital value includes all property interests held both directly and indirectly
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MARKET OVERVIEW
EX EXTER TERNAL L RISK ISK
Change Change in in FY2017 FY2017
MARKET RISK SCARCITY OF VIABLE INVESTMENT AND DEVELOPMENT OPPORTUNITIES COUNTERPARTY RISK BANK FUNDING RISK CONSTRUCTION RISK PLANNING RISK
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A YEAR OF ACHIEVEMENT – FOUR MAJOR PPP WINS
COCKPIT YARD, HOLBORN 8 ALBERT EMBANKMENT , LONDON MAYFIELD, MANCHESTER
WESTMINSTER INDUSTRIAL ESTATE, CHARLTON
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A BALANCED APPROACH TO DEVELOPMENT AND TRADING
– SHORT-TERM PROFIT FLOWS (1-3 YEARS) – PLANNING GAIN IS USUALLY KEY – ARBITRAGE/MISPRICING OPPORTUNITIES – IRR OF >30% – EQUITY MULTIPLE 1.5X TRADING – LARGE SCALE MIXED-USE REGENERATION PROJECTS DELIVERED IN PARTNERSHIP (2-5 YEARS) – MAX £20M EQUITY IN ANY ONE PROJECT BUT HIGH UPSIDE POTENTIAL IN ALL – PLANNING GAIN IS KEY VALUE DRIVER – DEVELOPMENT IS KEY PROFIT DRIVER – PROJECTS DE-RISKED VIA FORWARD FUNDING OR PRE-SALES – EQUITY MULTIPLE 2.0X – 5.0X PPP Gains Project delivery time
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2015 2016 2017 2018 2019 2020 2021 2022
BID1 PLANNING2 VIABILITY3 DERISKING DEVELOPMENT PRACTICAL COMPLETION TRIGGER: 15% MARGIN (GDV) SALES + PROFIT REALISATION CASE STUDY: 8 ALBERT EMBANKMENT – INDICATIVE COSTS: 1. Bid cost: £200 - £300k 2. U+I equity investment of £4.7m (planning phase) 3. U+I equity investment of £5m (viability phase)
PHASING OF PUBLIC PRIVATE PARTNERSHIP PROJECTS
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PUBLIC PRIVATE PARTNERSHIP PROJECTS Case Study: Preston Barracks, Brighton
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PUBLIC PRIVATE PARTNERSHIP PROJECTS Case Study: Preston Barracks, Brighton
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PUBLIC PRIVATE PARTNERSHIP PROJECTS Case Study: Preston Barracks, Brighton
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CREATING VALUE THROUGH TRADING ASSETS
ACQUISITION PLANNIMG CONSENT SELL/DEVELOP
DISCOVERING VALUE ADDING VALUE REALISING VALUE
Identify macro planning policy shift Target relevant areas Off-market transactions Enhance planning mix and density through planning process
Value add Time
ASSET MANAGE INCOME LAND IMPROVEMENT PROFIT 05/14 – FINANCIAL RESULTS 15/31 – STRATEGIC UPDATE 32/33 – SUMMARY 34/61 – APPENDICES 03/04 – OVERVIEW AND HIGHLIGHTS
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TRADING PORTFOLIO Case Study: Birmingham International Park
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18 ASSETS £179.2m*
ASSETS: SWANLEY & KILLINGWORTH Targeting £5m of added value
£50m non-core asset disposals targeted
FUTURE PORTFOLIO Regeneration
WAREHOUSE & RETAINED ASSETS £50m new acquisitions
INVESTMENT PORTFOLIO: TRANSITION IN FY2018
2-4 years to transition (target 10% return)
*Valuation as at 28 February 2017
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SPECIALIST PLATFORMS + Opportunity to grow U+I’s pipeline of projects + Two specialist platforms completed:
producing assets in the London City Region with potential for long-term development
+ Built to Rent: progressing discussions
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ROBUST PERFO RFORM RMAN ANCE CE + Solid performance in FY2017 with a record level of development and trading gains forecast for FY2018 PORTFOLIO STRENGTHENED TO DRIVE STRATEGIC GROWTH + Focus on fewer, larger mixed-use regeneration projects + Repositioning investment portfolio to align to Group’s focus on regeneration + Growing specialist platforms DELIVER SUSTAINABLE SHAREHOLDER RETURNS + On target to deliver post-tax return of 12% over 3 years through:
SUMMARY U+I POSITIONED AS THE LEADING REGENERATION DEVELOPER AND INVESTOR
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OPERATING IN LONG-TERM GROWTH MARKET CLEAR COMPETITIVE ADVANTAGE POSITIONED FOR GROWTH OPTIMAL CAPITAL ALLOCATION
UK regeneration market is evolving: (40%) of developable land owned by local authorities – Number of Public Private Partnerships
– Pressure on local authorities to deliver with shrinking resources – Consumer demand for mid-market homes is growing and housing delivery a government priority Focussed on 3 strong growth regions: London City Region*, Manchester, Dublin 25-year track record, experts in planning and leading PPP player Mix of PPP, trading and investment activity gives several routes to value creation PPP market has high barriers to entry - trust, reputation and quality (rather than just price) are key Competitive strength within 3 core regions – London City Region: focussed
locations where demand is growing and price point is appealing to consumers – Manchester: development partner to Manchester City Council on £850m regeneration project – Dublin: investing since 2014 giving early mover advantage in a market with reduced developer capacity Visibility on £50m+ development and trading gains per annum to FY2021 - driven by large scale PPP projects balanced with shorter-term trading activity Guidance of over £150m of gains over the next 3 years NAV driven by cash returns from management driven development, trading and investment activity, not accounting revaluations £6bn development portfolio Development assets held at cost – latent uplift potential from improved planning not reflected in NAV until projects are crystallised Operational leverage: – PPP model and joint ventures with major capital partners (specialist platforms) enable us to grow pipeline and deliver returns with limited equity investment in any one project – Limits specific project risk and keeps balance sheet debt at appropriate levels Committed to redistributing surplus capital to shareholders Balance sheet managed to minimise risks and maximise returns
INVESTMENT CASE
DEVELOPMENT AND TRADING GAINS
per annum and £150 minimum in the next 3 years
INVESTMENT PORTFOLIO TOTAL RETURN
return per annum in the next 2-4 years
TOTAL RETURNS**
post tax total return per annum in the next 3 years
GEARING
OUR KPIs
* A catchment area including satellite towns and locations within an hour’s commute of Central London ** Total return comprises NAV growth including dividends
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OUR INTEGRATED BUSINESS
PIPELINE PRACTICAL COMPLETION FUNDING PLANNING
Main Value Driver
PROJECT DELIVERY
PPP WAREHOUSE (INVESTMENT) TRADING DEVELOPMENT LAND DISPOSAL RETAINED ASSETS (INVESTMENT) DISPOSED ASSETS CAPITAL GROWTH AND INCOME + (POTENTIAL FUTURE DEVELOPMENT PIPELINE) TRADING GAINS DEVELOPMENT GAINS INCOME AND CAPITAL GROWTH OFF BALANCE SHEET (INC SPECIALIST PLATFORMS) ON BALANCE SHEET 05/14 – FINANCIAL RESULTS 15/31 – STRATEGIC UPDATE 32/33 – SUMMARY 34/61 – APPENDICES 03/04 – OVERVIEW AND HIGHLIGHTS
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THE PUBLIC PRIVATE PARTNERSHIP MODEL
PLANNING CONSENT
PUBLIC BODY
PROJECT DELIVERY GREAT PLACES
DEVELOPER/JV
COMMUNITY IMPROVEMENTS – Inspiring public amenity – New public buildings – Jobs – Profit share – Retention of freehold – Long-term asset improvement – Risk-mitigated delivery RISK-MANAGED DEVELOPMENT – Equity light, risk managed approach – Unique route to high quality sites – Hard to deliver – key distinction – Development profit LAND PLANNING EXPERTISE RISK CAPITAL PROJECT EQUITY 05/14 – FINANCIAL RESULTS 15/31 – STRATEGIC UPDATE 32/33 – SUMMARY 34/61 – APPENDICES 03/04 – OVERVIEW AND HIGHLIGHTS
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SPECIALIST PLATFORMS MODEL
U+I FUNDING PARTNER
PROFIT VIA PROMOTE STRUCTURE DEVELOPMENT MANAGEMENT FEE PROFIT PROMOTE ASSETS ACQUIRED VALUE ADDED THROUGH PLANNING/DEVELOPMENT ASSET MANAGEMENT SPECIALIST PLATFORM ASSETS DISPOSED OR DEVELOPED CAPITAL (LAND/ASSETS) + MINORITY EQUITY INVESTMENT + PLANNING AND DEVELOPMENT EXPERTISE 05/14 – FINANCIAL RESULTS 15/31 – STRATEGIC UPDATE 32/33 – SUMMARY 34/61 – APPENDICES 03/04 – OVERVIEW AND HIGHLIGHTS
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DIVIDEND POLICY: GREATER VISIBILITY ON SHAREHOLDER RETURNS
Supplemental dividend Paid from net free cash flow FY2017: 2.8p (45%) FY2016: 8.0p (46%) FY2015: 13.9p (48%)
DEVELOPMENT + TRADING GAINS CASH PROFIT NET FREE CASH FLOW REINVEST REDUCE DEBT RETURN CAPITAL
Ordinary dividend Fixed + recurring
CORPORATION TAX OVERHEAD SHORTFALL NET FINANCE COST ORDINARY DIVIDENDS
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KPIs
DEVELOPMENT AND TRADING GAINS Gains realised in 2017
£35m
Target
£50 million minimum per annum and a minimum of £150m in the next 3 years
TOTAL RETURNS Total return in 2017
0.2%
Target
12% per annum in the next 3 years
INVESTMENT PORTFOLIO TOTAL RETURN Investment portfolio return in 2017
1.7%
Target
10% total return in the next 2-4 years.
GEARING 2017 Gearing (excluding JVs)
34.8%
Target
40-50% on balance sheet and 50-60% including our share of joint venture debt
28.1 27 45.7 51.1 35 10 20 30 40 50 60 2013 2014 2015 2016 2017 1 6 10 7 0.2 2 4 6 8 10 12 2013 2014 2015 2016 2017 47.9 48 36.3 44.4 34.8 10 20 30 40 50 60 2013 2014 2015 2016 2017 £’m % %
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MOVEMENT IN NAV THROUGH THE PERIOD
Pence per share
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NET DEBT , NET ASSETS AND GEARING
£m
*On Balance Sheet 304.5 306.7 312.6 320.3 335.5 346.4 342.9 363.3 340.5 347.6 147.1 146.8 143.0 153.8 150.7 125.7 203.3 161.4 128.0 120.9
0% 10% 20% 30% 40% 50% 60% 70% 50 100 150 200 250 300 350 400 Aug-12 Feb-13 Aug-13 Feb-14 Aug-14 Feb-15 Aug-15 Feb-16 Aug-16 Feb-17 Net assets (LHS) Net debt (LHS) Gearing excl JVs (RHS)
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Scheme Scheme
Reg Region, Acq Acqn Dat Date GDV GDV Profi fit Ran Range, U+I U+I Equity Time mefra frame me Planning Status Rat Rates s (p (per sq sqft) ft) Scheme me details
Mayfield Quarter
Manchester, Sept 2016 £850m £40-60m, £20m (max) FY2020-2024 Pre-planning Apply: 2017 Resi: £450 Office: £28 Retail: N/A 24 acres; 1,300 residential units; 800k sqft offices; hotel & retail; JV with public sector partners
Morden Wharf, Greenwich
London City Region, March 2012 £605m £15-20m, £13m (max) FY2020-2022 Pre-planning Apply: 2018 Resi: £600-800 Office: £30 Retail: £20 19 acres; 1,000 residential units plus c300k sqft other uses; U+I has a Leasehold interest; Development Agreement with the Freeholder
8 Albert Embankment, Lambeth
London City Region, August 2016 £400m £25-35m, £10m (max) FY2021-2022 Pre-planning Apply: 2017 Resi: £1,550 Office: £52 Retail: £30 2.5 acres; 332 residential units, hotel, 70k sqft
with ultimate long-term funding partner
Harwell, Oxfordshire (Phase 1&2)
London City Region, December 2013 £400m £6-7m £10m (max) FY2019-2022 Pre-planning 789,000 sqft; 350 residential units; 362,000 sqft
with Public Sector partner
Westminster Industrial Estate, Charlton
London City Region, October 2016 £175m £10-13m, £8m (max) FY2021 Pre-planning Apply: 2017 Resi: £650 Office: £15 Retail: N/A 5.4 acre; Private Private Partnership with Royal London, JV with Galliard Homes; 400 residential apartments and associated creative use floor space
Preston Barracks, Brighton
London City Region, July 2014 £150m £10-12m, £8m (max) FY2018-2021 Planning submitted February 2017 Resi: £475 Office: £20 Retail: £20 5 acres; JV with University of Brighton; 314 residential units, 50k sqft offices, 534 student beds and ancillary retail
Circus Street, Brighton
London City Region, April 2008 £120m £8-10m, £10m (max) FY2018-2020 Secured Resi: £550 Office: £30 Retail: £30 2.2 acres; 142 residential units, 30,000 sqft of Office space, 450 student bed accommodation, 10,000sqft
Mill Green, Cannock
UK November 2013 £115m £5-6m, £4m (max) FY2018-2020 Secured Resi: N/A Office: N/A Retail: £35 Design outlet village: 130 units (285,000 sqft)
Cockpit Yard, Holborn
London City Region, October 2016 £105m £8-10m, £4m (max) FY2022 Pre-planning Apply: 2018 Resi: £1,500 Office: N/A Retail: £50 110 residential apartments; new library and arts facility
Friarsgate, Lichfield
UK, July 2011 £80m £4-5m, £7m (max) FY2020 Secured Resi: £300 Office: N/A Retail: £30 2.8 acres; PPP to provide a new mixed-use centre comprising retail, leisure and residential uses £3bn £128-178m, £94m (max)
DEVELOPMENT PIPELINE: MAJOR PPP PROJECTS
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DEVELOPMENT PIPELINE: PRINCIPAL TRADING SCHEMES
Scheme Scheme
Reg Region, Acq Acqn Dat Date GDV GDV Profi fit Ran Range, U+I U+I Equity Time mefra frame me Planning Status Rat Rates s (p (per sq sqft) ft) Scheme me details
Charlton Riverside, Greenwich
London City Region, 2015/2016 £500m £8-11m, £7m (max) FY2019 Pre-planning 10 acres (4 sites): 1,000 residential units & associated uses (700,000 sqft)
Kensington Church Street
London City Region, March 2011 £300m £6-10m, £8m (max) FY2018-2020 On appeal Awaiting determination of planning appeal; 46 resi units, 40k sqft offices, 30k sqft retail
The Old Vinyl Factory, Hayes
London City Region, April 2011 £250m £2-3m, £10m (max) FY2018 Planning Secured Resi: £600 Office: £35 Retail: £15 17 acres: 280 residential units; retail (20,000 sqft); office (600,000 sqft); leisure (20,000 sqft)
12 Hammersmith Grove
London City Region, Nov 2010 £140m £9-11m, N/A FY2018 Secured Resi: N/A Office: £52.50 Retail: £30 170k sqft NIA offices with ancillary restaurant; forward funded with Aberdeen; profit share based on waterfall calculation with rent and yield variable; balancing payment trigger is PC+2yrs or 90% let on
Blackhorse Road
London City Region, Aug 2016 £135m £7-10m, £10m (max) FY2018-2021 Planning submitted March 2017 Resi: £630 Office: N/A Retail: £20 3 acres: 337 homes and 18,500 sqft commercial space; U+I act as DM; fixed land price post planning with surplus shared 50/50
Valentines House, Ilford
London City Region, July 2011 £50m £3-4m, £8m FY2019 Secured Resi: £442 Office: N/A Retail: £20 122 pre-sold residential units; 16,350 sqft retail space
Pincent’s Hill, Reading
London City Region, April 2008 £15m £5-10m, £5m FY2020 Pre-planning Apply: 2017 Resi: £315 Office: N/A Retail: N/A 250 residential units
Victoria Way, Ashford
London City Region, Nov 2015 £12m £3-4m, £1m (max) FY2018 Secured Resi: £300 Office: N/A Retail: N/A Proposed development will consist of an 18,000 sqft Aldi, Curious Brew Brewery, 120 bed hotel, 216 apartments and ancillary retail/workshop uses
Springfield Park, Maidstone
London City Region, Dec 2015 £12m £3-4m, £7m (max) FY2018 Secured Resi: £350 Office: N/A Retail: N/A 4.9 acres; Phase 1 - 192 residential units; Phase 2 – residential 310 units £1,4bn £38-56m, £56m (max)
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INVESTMENT PORTFOLIO: OVERVIEW
NUMBER OF ASSETS VALUATION CHANGE (inc. JVs) SIZE OF PORTFOLIO
Feb 2016: 20
Feb 2016: £1.7m
Feb 2016: £203.3m INITIAL YIELD* CONTRACTED RENTAL INCOME
Feb 2016: 6.8%
Feb 2016: £13.6m ESTIMATED RENTAL VALUE* VOID RATE EQUIVALENT YIELD*
Feb 2016: £13.5m
Feb 2016: 4.5%
Feb 2016: 7.1% *On a like-for like basis and core portfolio only
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INVESTMENT PORTFOLIO: ANALYSIS
Type % of Portfolio (by value) Contracted Rent % of Portfolio Let ERV Vacant ERV WAULT Future Portfolio 12.9% £1.77m 12.4% £1.76m £0.21m 4.72 Optimise 21.1% £2.89m 20.1% £2.84m £0.34m 5.06 Disposal 66.0% £9.03m 67.5% £9.56m £0.55m 5.77 100% £13.69m 100% £14.16m £1.10m 5.40
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INVESTMENT PORTFOLIO: TOP FIVE ASSETS
Projec Project name me* Overvi Overview Ke Key stati tatisti tics* The Furlong Shopping Centre, Ringwood
85,000 sqft retail centre anchored by Waitrose Key tenants: AGA; Café Nero; Crew Clothing; Fat Face; Gerry Weber; Holland & Barrett; Joules; Hobbs; Phase Eight; Paperchase; Waterstones; Valuation: £25m - £35m Valuation change: ↔ Running yield: 6.0% WAULT: 5.3 years ERV growth: (1.4%) Top Zone A rent: £75
The Killingworth Centre, Newcastle
Retail centre anchored by Morrisons (not owned) Key tenants: Matalan; 28 further retail units (including Wilkinsons, Poundworld, Card Factory, McDonalds, Specsavers, Betfred) Valuation: £15m - £25m Valuation change: ↔ Running yield: 7.6% WAULT: 3.2 years ERV growth: 9.6% Top Zone A rent: £35
Borough Parade, Chippenham
Retail centre anchored by Waitrose Key tenants: Argos; Café Nero; EWM, New Look; Pandora; Patisserie Valerie; Waterstones Valuation: £15m - £25m Valuation change: ↔ Running yield: 7.1% WAULT: 4.1 years ERV growth: 2.4% Top Zone A rent: £53
Kingsland Shopping Centre, Thatcham
Retail centre anchored by Waitrose Key tenants: Costa Coffee; Lloyds Pharmacy Valuation: £15m - £25m Valuation change: ↔ Running yield: 5.8% WAULT: 12.1 years ERV growth: 0% Top Zone A rent: £40
Crown Glass Shopping Centre, Nailsea
Retail centre anchored by Waitrose (not owned) Key tenants: Boots; Costa Coffee; HSBC; JD Wetherspoon; Poundland; WHSmith Valuation: £5m - £15m Valuation change: ↓ Running yield: 8.0% WAULT: 5.3 years ERV growth: 0% Top Zone A rent: £42 *Valuation change – movement from end August 2016 to end February 2017 (includes capital expenditure): ↑↓(over 2% increase/decrease) ↔ (under 2% increase/decrease); ERV growth (August 2016/February 2017)
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MARKET OVERVIEW
EX EXTER TERNA NAL RISK SK Risk Ex Exposure re Market risk
The UK economy remains supportive – overshadowed by instability in commodity and equity markets and continuing political uncertainty following the result of the EU Referendum and triggering of Article 50
Scarcity of viable investment and development opportunities
Opportunities continue to be sourced for both development and investment which satisfy Group underwriting criteria
Counterparty risk
Group has higher exposure to the private residential market (on and off balance sheet) – increased risk of purchasers failing to complete, not material in FY2017
Bank funding risk
– New entrants in the lending market – reduction in margins, increase in maturities available – Gradual reduction in lender’s appetite for development risk (post EU Referendum)
Construction risk
– Post EU Referendum: Increased material costs on weakness of GBP to Euro; uncertainty over possible workforce shortages and increased labour costs; difficulty in placing contracts in an uncertain market – New tenders: increased prices to build in contingencies for losses; extended tender periods
Planning risk
– Planning process potentially compromised ahead of key political events – Financial strain on Local Authorities – under resourcing of planning departments against an increased complexity in projects and planning regulations impacting larger mixed-use schemes – Urgent need to professionalise planning departments – overlooked in recent White Paper
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BUSINESS INVESTMENT
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REAL WAGE GROWTH (%)
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AVERAGE EARNING AND CPI INFLATION
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HOUSING MARKETS: STRUCTURAL DEFICIT AND PROJECTIONS
50 100 150 200 250 300 50 100 150 200 250 300 1992 1995 1998 2001 2004 2007 2010 2013 2016 2019 2022 2025 Household Formation Housing Starts
Forecasts
‘000s ‘000s
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Source: Capital Economics
57
HIGH DEMAND, LOW COMPLETIONS
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CRE EQUITY DEMAND BY SOURCE
£’bn
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DUBLIN: TAKE UP BY BUSINESS SECTOR
Source: CIS Ireland
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BREXIT TENDER PRICE FORECAST – DEVELOPING PICTURE
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INVESTMENT PORTFOLIO: SHOPPING CENTRES
Percentage
Rental Growth Capital Growth Total Return Rental Growth Capital Growth Total Return Rental Growth Capital Growth Total Return Central London shops
0.4 0.5 0.8 0.7 1.1 2.0 5.1 4.6 8.1
Standard shops
0.1 0.2 0.7 0.1 1.1 2.5 1.2 (0.8) 4.6
Retail warehouses
0.0 0.1 0.6 0.2 0.4 2.0 1.0 (5.5) 0.4
Shopping Centres
(0.1) (0.1) 0.5 0.1 (0.3) 1.4 (0.1) (7.6) (1.3)
Retail
0.0 0.1 0.6 0.1 0.5 2.0 0.6 (4.5) 1.4
City Offices
0.1 0.1 0.4 0.6 2.0 2.9 3.6 (2.5) 1.2
West End and Midtown
(0.0) 0.0 0.3 (0.4) 0.5 1.4 0.6 (3.6) (0.3)
Rest of London offices
0.0 0.0 0.4 0.3 1.1 2.3 2.0 (2.4) 2.1
Rest of UK offices
(0.1) 0.1 0.6 0.4 0.8 2.4 1.2 (6.2) (0.1)
Offices
0.0 0.1 0.4 0.2 0.9 2.1 1.6 (4.0) 0.6
London industrial
0.5 0.7 1.1 2.0 3.6 4.9 5.5 5.3 10.4
Distribution warehouses
0.2 0.5 1.0 1.1 2.7 4.2 3.8 0.7 6.8
Industrial
0.3 0.5 1.0 1.2 2.5 4.0 4.0 1.4 7.5
All property
0.1 0.2 0.6 0.4 1.2 2.6 1.7 (2.8) 2.7
MSCI Monthly performance data
Source: MSCI, Lazarus
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DISCLAIMER
This presentation has been prepared by U and I Group PLC (the “Company”). No representation or warranty (express or implied) of any nature is given nor is any responsibility or liability of any kind accepted by the Company or any of its directors, officers, employees, advisers, representatives or other agents, with respect to the truthfulness, completeness or accuracy of any information, projection, representation or warranty (expressed or implied), omissions, errors or misstatements in this presentation, or any other written or oral statement provided. In particular, no responsibility or liability is or will be accepted and no representation or warranty is or is authorised to be given as to the accuracy, reliability or reasonableness of any forward-looking statement, including any future projections, management targets, estimates or assessments of future prospects contained in this presentation, or of any assumption or estimate on the basis of which they have been given (which may be subject to significant business, economic or competitive uncertainties and contingencies beyond the control of the management of the Company). Any such forward-looking statements have not been independently audited, examined or otherwise reviewed or verified. All views expressed in this presentation are based on financial, economic, market and other conditions prevailing as of the date of this
targets, estimates or assessment of future prospects or any other forward-looking statements to reflect events that occur or circumstances that arise after the date of this presentation, or to correct any inaccuracies in this presentation which may become apparent. Past performance is not indicative of future results and forward-looking statements are not guarantees of future performance. This presentation is for information purposes only and does not constitute an offering document or an offer of transferable securities to the public in the UK. This presentation is not intended to provide the basis for any credit or other evaluation of any securities of the Company and should not be considered as a recommendation that any investor should subscribe for, dispose of or purchase any such securities or enter into any other transaction with the Company or any other person. The merits and suitability of any investment action in relation to securities should be considered carefully and involve, among other things, an assessment of the legal, tax, accounting, regulatory, financial, credit and other related aspects of such securities. This presentation is being communicated or distributed within the UK only to persons to whom it may lawfully be communicated, and has not been approved for the purposes of section 21 of the Financial Services and Markets Act 2000. It may not be reproduced (in whole or in part), distributed or transmitted to any other person without the prior written consent of the Company. In particular this presentation is not intended for distribution to, or use by, any person or entity in any jurisdiction or country where such distribution or use would be contrary to local law or
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