Welcome Henry Galbraith, Senior Investor Relations Residential - - PowerPoint PPT Presentation

Welcome

Henry Galbraith, Senior Investor Relations

Residential Property Market Update

Mark Weedon, Head of Research

UK Residential Property – The Headline Rollercoaster

Guardian, 16-04-2018

Financial Times, 07-06-2018

Financial times, 08-05-2018 Financial Times, 14-06-2018

BBC, 12-07-2018 Capital at Risk

UK House Price Growth

Sources: ONS Land Registry HPI 0.2%

• 0.2%

1.6% 0.6% 0.8% 1.3% 0.4%

• 0.3%

0.1%

• 0.3%

0.4%

• 0.4%

0.6%

• 0.7%

1.2% 4.8% 3.7% 4.8% 4.3% 4.1% 4.4% 4.8% 4.6% 5.1% 4.3% 4.5% 4.3% 4.7% 4.2% 3.9%

• 1%

0% 1% 2% 3% 4% 5% 6% Feb- 17 Mar - 17 Apr - 17 May- 17 J un- 17 J ul

• 17

Aug- 17 Sep- 17 O ct - 17 No v- 17 Dec- 17 J an- 18 Feb- 18 Mar - 18 Apr - 18 % change

UK Land Registry House Price Index

Mont hl y change Ann ual change

Capital at Risk

UK House Price Growth by Region

High value London property has experienced pressure on prices, outer London residential remains more resilient The South West is the strongest performing part of the country

Sources: ONS Land Registry HPI, ONS Private Rental Housing Prices Index

5.6%

Capital at Risk

225,998

• 20%
• 10%

0% 10% 20% 30% 40% 50% £100, 000 £50, 000 £0 £50, 000 £100, 000 £150, 000 £200, 000 £250, 000 1952 1957 1962 1967 1972 1977 1982 1987 1992 1997 2002 2007 2012 2017 Annual house price growth Average UK house price UK house prices over time Annual house pr i ce gr ow t h Aver ag e UK ho us e pr i ce

UK House Price Growth 1952 – 2017

Source: ONS Land Registry HPI (1995 – 2017), Nationwide HPI (1952 – 1995) Peak-to-trough % house price fall from Q3 1989 to Q1 1993: -20.2% Peak-to-trough % house price fall from Q3 2007 to Q1 2009: -18.7% 1955 to 1989: no quarter where house prices had fallen over the previous 12 months Average annual house price growth 1952 to 2017: 7.5%

Capital at Risk

UK Residential Rental Value Growth

• Rental growth remains steady in face of economic uncertainty

Sources: ONS Private Rental Housing Price Index, ONS CPI Annual Rate 100 102 104 106 108 110 112 114 J an- 12 May

• 12

Sep- 12 J an- 13 May

• 13

Sep- 13 J an- 14 May

• 14

Sep- 14 J an- 15 May

• 15

Sep- 15 J an- 16 May

• 16

Sep- 16 J an- 17 May

• 17

Sep- 17 J an- 18 May

• 18

Index values (January 2012 = 100) Rental value growth versus inflation to May 2018 Rent al val ue gr ow t h CPI i nf l at i

• n

Capital at Risk

Housing Market Activity – Transaction levels stable

1.2m transactions in the 12 months to May 2018

• 1.5% above previous 12 months
• Second higher 12 month period on

record since financial crisis

Source: HMRC UK Property Transaction Count – May 18, RICS residential sentiment survey 1,405 739 917 871 925 953 1,168 1,189 1,300 1,186 1,204 300 600 900 1, 200 1, 500 M ay- 08 M ay- 09 M ay- 10 M ay- 11 M ay- 12 M ay- 13 M ay- 14 M ay- 15 M ay- 16 M ay- 17 M ay- 18 Annual transactions in 000's UK Residential transactions over 12 months

Capital at Risk

4.4% 2.1% 3.8%

• 3.0%
• 4%
• 3%
• 2%
• 1%

0% 1% 2% 3% 4% 5% 2008 2009 2010 2011 2012 2013 2014 2015 2016

Housing surplus / shortage as % of households post financial crisis

Engl and London

Housing Market Supply and Demand

• Housing construction is increasing but still more than 30,000 units per

year short of 250,000 requirement

• UK 10% below EU average for dwellings per population, 14% below

Germany and 17% below France

• 80% of housing stock held by owner occupiers and social landlords, not

trading as assets, prices are “sticky”

Sources: DCLG number of households and number of dwellings by local authority area, Euromonitor International

Housing surplus / shortage by location

Capital at Risk

12.2% 15.9% 18.1% 20.4% 1. 4% 3% 4% 5% 2-year mortgage rate

Average cost of mortgage debt repayment as % of household income –“stress test”1

Housing Affordability

18% 20% 26% 28% 23% 20% 15% 14% 15% 14% 15% 16% 14% 15% 15% 15% 16% 19% 19% 20% 23% 23% 19% 17% 16% 16% 15% 15% 14% 13% 12% 5.0 4.7 0% 5% 10% 15% 20% 25% 30% 0. 0x 1. 0x 2. 0x 3. 0x 4. 0x 5. 0x 6. 0x 1 9 8 7 1 9 8 8 1 9 8 9 1 9 9 1 9 9 1 1 9 9 2 1 9 9 3 1 9 9 4 1 9 9 5 1 9 9 6 1 9 9 7 1 9 9 8 1 9 9 9 2 2 1 2 2 2 3 2 4 2 5 2 6 2 7 2 8 2 9 2 1 2 1 1 2 1 2 2 1 3 2 1 4 2 1 5 2 1 6 2 1 7 House price to household income ratio

House prices versus income and mortgage affordability

Aver ag e cos t

• f m
• r t

gage debt r epaym ent a s %

• f

hou s ehol d i nc

• m e

House pr i ce t

• househol

d i ncom e r at i

• Sources: ONS and Bank of England

1Based on 2017 house price and income figures

Capital at Risk

UK Economic Outlook – 5 year Growth Forecasts

Source: OBR UK Economic Forecasts 7.0% 10.4% 14.2% 14.0% 12.1% 1.5% 0% 2% 4% 6% 8% 10% 12% 14% 16% GDP CPI i nf l at i

• n

Wage gr

• w

t h House pr i ce gr

• w t

h Rent al val ue gr ow t h Bank

• f

Engl and base r at e Forecast percentage change in economic variables April 2018 to April 2023

Capital at Risk

Property Investment performance by sector

Investment Performance by Property Sector in 2017

6.3% 7.9% 20.0% 9.6% 2.6% 11.3% 0% 5% 10% 15% 20% Ret ai l O f f i ce I nd us t r i al Al l com m er ci al pr oper t y Pr i vat e r ent ed r esi dent i al PBSA Total return by property sector, 12 months to December 2017 Sources: IPD Annual Property Index

Capital at Risk

Investment Performance by Property Sector 1997 to 2017

*PBSA records began in 2011, showing 6 years of data Sources: IPD Annual Property Index, ONS Land Registry HPI & ONS Private Rental Indices, CBRE Student Accommodation Total Return Index 5.6% 6.0% 7.4% 6.0% 4.1% 6.2% 2.0% 2.6% 2.5% 2.4% 5.6% 5.7% 7.8% 8.8% 10.0% 8.5% 10.0% 11.8% 1.7% 2.2% 1.5% 1.8% 2.7% 2.6% 0% 2% 4% 6% 8% 10% 12% Ret ai l O f f i ce I nd us t r i al Al l com m er ci al pr oper t y Resi dent i al PBSA* 20-year annualised performance by property sector I ncom e r et ur n Capi t al gr

• w t

h Tot al r et ur n Rent al val ue gr ow t h

Capital at Risk

Long-term outperformance of other asset classes by UK residential

Sources: FTSE Russell, Bank of England, World Gold Council, ONS Land Registry HPI & ONS Private Rental Indices, IPD Annual Property Index

Average annualised return 20- years to December 2017 London residential property 13.6% Residential property 10.0% Commercial property 8.5% Equities 6.5% Gold price 6.5% Cash savings 3.7% Inflation 1.9%

200 400 600 800 1, 000 1, 200 1, 400 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Index values (January 1997 = 100) 20-year total return index by asset class to 2017 FTSE al - shar e Cash savi ngs CPI i nf l at i

• n

Gol d pr i ce Resi dent i al pr oper t y London r esi dent i al pr oper t y Com m er ci al pr

• per t y

Capital at Risk

UK savings interest rate Retail Office Industrial Residential All commercial property PBSA* FTSE all-share Gold High return, Higher risk High return, Lower risk Low return, Higher risk Low return, Lower risk 2 4 6 8 10 12 2 4 6 8 10 12 14 16 18 20 Annualised total return % Volatility Risk reward by asset class, 20-year annualised total return and volatility to end December 2017

Risk reward by property sector 1997 to 2017

Sources: IPD Annual Property Index, ONS Land Registry HPI & ONS Private Rental Indices, FTSE Russell, World Gold Council, Bank of England average cash deposit rate, CBRE Student Accommodation Total Return Index. *PBSA records began in 2011, showing 6 years of data **The Sharpe ratio shows the performance of an investment over a period of time, over and above the risk-free rate, adjusted for the volatility of its performance. In this case the risk-free rate is the average annual return on cash savings. The ratio shows the level of return generated for the risk taken and is the industry standard measure of comparing the risk / reward characteristics of different asset classes.

Risk adjusted return p.a. (Sharpe ratio)** Residential 0.86 Industrial 0.64 All commercial 0.52 Office 0.49 Retail 0.42 FTSE all-share 0.16 Gold 0.16

Capital at Risk

Investment Strategy

Robert Weaver, Director of Property

Property Partner Portfolio at June 2018

Ø Choose from more than 100 hand picked property investment

• pportunities

Ø Build a diversified portfolio across regions and property types Number of properties Value of properties Average dividend yield at launch 106 £122.7m 4.0%

London 27% South East 16% East Midlands 10% North West 8% Yorkshire & Humber 6% West Midlands 4% South West 3% East of England 3% North East 2% PBSA 20% Commercial 1%

Portfolio Segmentation

Capital at Risk

PBSA Portfolio

Burns Street, Leicester

• Purchase price £4,536,000
• Capital raise £2,473,600
• Dividend yield 6.3%

Verney Street, Exeter

• Purchase price £3,600,000
• Capital raise £1,682,700
• Dividend yield 6.7%

Pitt Street, Newcastle

• Purchase price £5,360,000
• Capital raise £2,992,800
• Dividend yield 6.1%

Ty Glyn, Bangor

• Purchase price £4,510,000
• Capital raise £2,460,300
• Dividend yield 7.5%

Capital at Risk Pierpoint Street, Worcester

• Purchase price £1,235,000
• Capital raise £719,200
• Dividend yield 6.0%

College Mews, Lincoln

• Purchase price £1,030,000
• Capital raise £582,900
• Dividend yield 6.5%

Fairchild House, Southampton

• Purchase price £4,100,000
• Capital raise £2,243,900
• Dividend yield 6.1%

Andromeda House, Southampton

• Purchase Price 3710000
• Capital Raise £2,064,900
• Dividend Yield 5.77%

PBSA Portfolio - Lettings Update

Name Status Address Room type Bed spaces Bookings to date 18/19 Percentage Let TOTALS 482 265 76% Verney Street Comp Exeter Studios 29 20 69% Pitt Street Comp Newcastle Studios 65 64 98% Ty Glyn Comp Bangor Studios 60 29 48% Fairchild House 100% Southampton Studios 45 Burns Street Comp Leicester Studio/Cluster 70 39 56% College Mews Comp Lincoln En-suite 25 25 100% Pierpoint Street Comp Worcester Studio 17 11 65% Andromeda House 100% Southampton Studio 38 Agreed Huddersfield Non ES Cluster 80 77 96% Agreed Newcastle Studio/Cluster 53 Capital at Risk

Ty Glyn, Bangor confirmed lettings progress for next academic year

Capital at Risk October 2018 lettings ahead of previous cycles

TY GLYN Studios Letting progress by academic year

PBSA Investment Pipeline Focus on high ranking universities, coupled with favourable demand/supply dynamics for purpose-built bed spaces Quality of micro-location and specification of the building are key factors

Capital at Risk

Property criteria

• Blocks of studio flats and ensuite cluster flats
• Value range between £1m - £8m
• Complete and operational
• Under 10-years old

Properties that didn’t go through – outbid

Seeley House, Nottingham PBSA

• 70 units
• Property Partner bid: £2.5m
• Outbid: £2.8m

St Michael’s Road, Portsmouth PBSA

• 13 units
• Property Partner bid: £985k - £1m
• Outbid: £1.1m

Capital at Risk

Properties that didn’t go through – outbid

Capital at Risk Asset Class Property Composition Asking Price Outcome PBSA Selley Oak Birmingham 13 studios, 48 clusters £5.6m Offer Rejected at £4.5m PBSA Green Close Lane Loughborough 61 studios £6.4m Withdrawn PBSA The Leat Verney St Exeter 27 studios 29 Studios £4.3m Acquired at £3.6m Rejected as substantially more expensive than Verney Commercial Lloyds Bank Walton on Thames Bank £1.2m Outbid

Properties in the Pipeline

Capital at Risk

PBSA Huddersfield PBSA Newcastle PRS Preston Tesco - Weymouth

Golden Hill Fort, Isle of Wight

Capital at Risk

Golden Hill Fort, Isle of Wight

Capital at Risk

Golden Hill Fort, Isle of Wight

Net Dividend Yield 3.11% Purchase Price £2,680,000 Funding Target £1,654,560 Total Return 51% Discount 20% (Prudent) Key Facts

• Constructed in 1863 as part of the Palmerston defences by the Royal Commission, the

Fort has been recently converted into 18 luxurious and high-spec terraced houses

• Grade I listed
• Located 1.5 miles south of the picturesque town of Yarmouth and under a mile from the

restaurants, pubs and shops of Freshwater village

• Freehold interest of the whole Fort
• Given the nature of this opportunity, there is capacity to enhance returns for investors,

including:

• Scope to increase the number of holiday lets within the development with 1 of the 14

houses currently occupied in this manner

• As this opportunity was secured at a discount to its Vacant Possession (VP) value, there is

potential to realise capital value uplift if the units are sold individually

Capital at Risk

Premium Services

• Designed for clients investing over £25,000.
• Early access to new deals.
• Programmes for bespoke portfolio creation, including discretionary management.
• henry.galbraith@propertypartner.co
• 020 3457 2477