ml slides 22 march 2011 - segro/media/files/s/segro/documents/presentati… · •80% of current...
TRANSCRIPT
Bank of America Merrill Lynch Real Estate Conference 2011
March 2011
1
SEGROEurope’s leading industrial REIT
SEGRO provides a range of flexible business space concentrated in and around major business centres and transportation hubs such as ports, airports and motorway intersections
2
Overview of the Portfolio£5.3bn of total properties
69%
31%
UK Continental Europe
8.3Weighted average lease term to expiry (years)
Key portfolio statistics at 31 December 2010
326
6.0
7.9
12.0
Passing rent (£m)
Net initial yield (%)
True net equivalent yield (%)
Vacancy (%)
17%
66%
17%
Logistics warehousing Other business space Office
3
0
100
200
300
400
500
600
11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35
Ye ar
B onds and Notes B ank D ebt drawn C as h Undrawn fac ilit ies
£m
Strong balance sheetNet borrowings of £2.2bn
� LTV of 46% and adjusted gearing 80%
� Bonds 83% and bank debt 17%
� Weighted average cost of debt 5.1%
� 97% of debt unsecured
� Limited interest rate exposure (81% of net borrowings at fixed rates)
Average weighted maturity = 9.8 years
4
Straightforward business modelBuy Smart, Add Value, Sell Well
BUY SMARTCAREFUL AND
WELL TIMED ASSET
SELECTION
ADD VALUEDEVELOPMENT
AND/OR
ASSET MANAGEMENT
SELL WELLCO-ORDINATE
INDIVIDUAL ASSET
STRATEGIES WITH
MARKET CYCLE
Efficient Financial
Structure
5
Full year results to 31 December 2010Further improvement in occupancy
� Strong operating performance
� Continued delivery against our three priorities to:
- Improve occupancy
• Group vacancy reduced to 12.0% from 14.1% at 31 March
- Profitably grow and improve the portfolio
• Portfolio further enhanced and focused
- Prudently manage our financial position
• Significant extension of maturity profile and gearing reduced
� 2011 will be another challenging year but SEGRO well positioned
6
Key financial highlights
2.114.014.3Total dividend per share (pence)
Change
%
20092010
(12.1)9180Gearing (%)
(9.0)2,420.12,203.2Net debt (£m)
2.5367376EPRA adjusted NAV per share¹ (pence)
2.19.49.6- final dividend per share (pence)
(6.6)18.317.1EPRA EPS (pence)
22.1104.3127.3EPRA PBT (£m)
Change
%
20092010
1. EPRA adjusted NAV per share including fair value of derivatives and trading properties
7
Improve occupancyGroup vacancy rate of 12.0%
5
10
15
20
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
UK vacancy Continental European vacancy
% b
y r
enta
l valu
e
14.8%
13.3%
Return of Verdus Building, Greenford
10.7%
8.9%
Return of Karstadt-Quelle space, Germany
8
Vacancy rate as
at 31 December
2009
Space returned Development
completions
Short term
lettings/vacations
Other (ERV
changes)
Space let Space made
redundant
Disposals Acquisitions Vacancy rate as
at 31 December
2010
Improve occupancyGroup vacancy bridge
13.5%
7.0% 0.2%0.3% 0.1% 7.9%
0.7%0.4% 0.1% 12.0%
9
Improve and grow the portfolioGrowing pre-let pipeline with 12 projects signed
Takko
Hamburg, Germany(20,700 sq m)
Under ConstructionContractedApproved internally
Ragus Sugars
Slough Trading Estate(3,300 sq m)
SeligSlough Trading Estate
(7,000 sq m)
LonzaSlough Trading Estate
(5,500 sq m)
Budget hotelEdmonton, London
(3,800 sq m)
Freight handler
Heathrow, London(9,900 sq m)
Data centre
Slough Trading Estate(5,700 sq m)
Data managerBerlin, Germany
(5,100 sq m)
Power generation Co.Berlin, Germany
(5,100 sq m)
Telecoms Co.
Milan, Italy(11,800 sq m)
Electronics Co.Milan, Italy
(7,000 sq m)
Distribution Co.Southall, London
(3,400 sq m)
SelcoSlough Trading Estate
(3,200 sq m)
Distribution Co.Enfield, London
(3,500 sq m)
HCHHeathrow, London
(5,700 sq m)
CasinoGonesse, Paris(28,000 sq m)
HL DisplayGliwice, Poland
(7,600 sq m)
AdlerOstrava, Czech Republic
(5,100 sq m)
Expected completion
H2 2011 H1 2011
c.£9m rental income and £68m capex
Distribution Co.Silesia, Poland
(6,000 sq m)
10
Outlook2011 will present further challenges
� Enquiry levels strong
� Healthy pipeline of pre-let developments
� Challenges in 2010 likely to continue into 2011
- Managing takebacks remains key focus
� Future potential:
- Reduction of 1% in vacancy = c.£6m additional annualised earnings
- Well located and prudently valued land bank
UK Portfolio
12
UK Portfolio£3.5bn of completed properties
LONDON MARKETSPark Royal
Valuation: £524m (15%)
LONDON MARKETSHeathrow
Valuation: £668m (19%)
LONDON MARKETSRest of London
Valuation: £315m (9%)
THAMES VALLEY
Slough Trading Estate
Valuation: £947m (27%)
THAMES VALLEYRest of Thames ValleyValuation: £366m (11%)
NATIONAL MARKETSRest of UK South
Valuation: £385m (11%)
NATIONAL MARKETS
Midlands and NorthValuation: £274m (8%)
Based on value of completed properties. Joint ventures included at share
13
Improve occupancyUK - Strong lettings performance and rental growth
0
2
4
6
8
10
12
14
H1 2009 H2 2009 H1 2010 H2 2010
Existing properties New developments
£m
an
nu
ali
sed
ren
tal
inco
me
• Lettings completed at headline rental levels 0.7% above December 2009 ERVs
• Rent free incentives stable at 11.2% (2009: 11.3%)
14
Park Royal (London)Lettings momentum in a recovering market
•Largest industrial “estate” in Europe covering 650 hectares
•Strategic location – easy access to central London and national motorway network
•Principal groups of occupiers – food and drink, TV and film, transport and logistics
•Estimated market vacancy – 12 to 13%
Premier Park, Park Royal
2010 performance
•Capital value increase of 7.0%
•Lettings of 60,100 sq m (2009: 3,800 sq m)
•Transactional rents 2.7% above ERVs
•Vacancy rate of 16.2% down from 18.9%
15
Heathrow (London)Market recovering as cargo volumes grow
•Unique market tailored around the airport
•Limited space availability particularly within the airport perimeter and close to the access points
•Principal groups of occupiers – air cargo, air catering/flight services and airport support services
•Estimated market vacancy – c. 15%
Heathrow Cargo volumes (tonnes)
1,200,000
1,250,000
1,300,000
1,350,000
1,400,000
1,450,000
1,500,000
2003 2004 2005 2006 2007 2008 2009 2010
Source: BAA Cargo Statistics
BA World Cargo Centre, Heathrow
16
Heathrow – Map Wholly owned and APP assets
17
Heathrow – 2010 PerformanceEnquiries levels rising
Opportunity assets – wholly owned
•Capital value decrease of 0.2%
•Lettings of 14,100 sq m (2009:16,800 sq m)
•Transactional rents 1.4% below ERVs
•Vacancy rate of 33.8% down from 36.1%
(like for like)
Stabilised assets – APP portfolio
•Capital value increase of 5.2%
•Lettings of 6,500 sq m in six months
•Transactional rents 9.1% above ERVs
•Vacancy rate of 5.7% down from 9.3% at
30 June 2010
•Passing rent increased by 7.2% through
active asset management
Horton Road, Poyle (artist’s impression)
18
Slough Trading Estate Quality and location of asset ensure continued delivery
•Largest privately owned business park in Europe covering 192 hectares
•75% Industrial and Other Business Space, 25% Offices
•Only location in South of England with Simplified Planning Zone status
•Revised 20 year master plan ‘Vision for the Future’
2010 performance
•Capital value increase of 4.4%
•Lettings of 41,300 sq m (2009: 21,100 sq m)
•Transactional rents 2.0% above ERVs
•Vacancy rate of 6.2% down from 7.3%
•Four new pre-let developments signedBuckingham Avenue, STE
19Premier Park, Trafford Park, Manchester
National MarketsProgress in more challenging markets outside South East
•Capital value increase of 4.6%
•Lettings of 122,500 sq m (2009: 75,800 sq m)
•Transactional rents 2.6% below ERVs
•Vacancy rate of 13.7% down from 15.6%
•Good lettings performance at former Brixton estates
•Completed 13 disposals for £55.4 million
Merlin Park, Portsmouth
20
Improve occupancyTakebacks remain high driven by space consolidation
0
2
4
6
8
10
12
H1 2009 H2 2009 H1 2010 H2 2010
UK
£m
an
nu
ali
sed
ren
tal
inco
me
• Retention rates: Group – 63% and UK – 55%
Continental European Portfolio
22
Continental European Portfolio£1.4bn of completed properties
GERMANY
Valuation: £398m (29%)
FRANCEValuation: £376m (27%)
POLAND
Valuation: £205m (15%)
BENELUXValuation: £275m (20%)
OTHERValuation: £131m (9%)
Based on value of completed properties. Joint ventures included at share
23
Improve occupancyContinental Europe lettings
0
2
4
6
8
H1 2009 H2 2009 H1 2010 H2 2010
Existing properties New developments
£m
an
nu
ali
sed
ren
tal
inco
me
• Lettings completed at headline rental levels 2.2% below December 2009 ERVs
• Rent free incentives decreased to 6.8% (2009: 9.0%)
Calculated at average exchange rates
24
GermanyRecovery in H2 as economy benefits from export trade
•Attractive geographic location in central Europe with well developed road and rail networks
•Focus going forwards on key cities of Berlin, Dusseldorf, Frankfurt, Hamburg and Munich
2010 performance
•Capital value decrease of 9.7%•Return of Karstadt-Quelle space•Roof refurbishments in Munich•More cautious valuation of Neckermann site, Frankfurt
•Lettings of 95,600 sq m (2009: 61,400 sq m)
•Transactional rents 8.9% below ERVs
•Vacancy rate of 11.5% down from 15.4% (30.06.10)
•52.0% of Karstadt-Quelle space now re-let or sold
Skyline Business Park, FrankfurtKapellenwarehouse, Dusseldorf
25
FranceRelative strength of Ile de France
•Economy stabilised and growing property market momentum focused on Paris
•80% of current SEGRO portfolio in Ile de France - continued focus going forward on this area
2010 performance
•Capital values flat
•Lettings of 63,200 sq m (2009: 57,600 sq m)
•Transactional rents 5.0% below ERVs
•Vacancy rate of 6.7% down from 13.1%
•28,000 sq m pre-let under construction for Casino at Gonesse, north of Paris
Marly La Ville, Paris
26
PolandQuality of assets generates good lettings performance
•Strategic location on trans-European transport corridors
•Solid economy driven by strong external demand and increasing internal consumption
•Warsaw, Silesia, Poznan and Lodz/Strykow key focus areas in future
2010 performance
•Capital value increase of 6.8%
•Lettings of 59,100 sq m (2009: 104,300 sq m)
•Transactional rents 5.4% below ERVs
•Vacancy rate of 2.6% down from 12.5%
•7,600 pre-let under construction at Gliwice
Tulipan Park, Poznan
27
BeneluxRe-emphasis on logistics gateway to Europe
•Building on our existing logistics assets:
•Netherlands - around Schiphol, Amsterdam and Rotterdam
•Belgium - Golden triangle: Brussels, Antwerp and Ghent
2010 performance
•Capital value decrease of 3.1%
•Lettings of 36,600 sq m (2009: 43,000 sq m)
•Transactional rents 2.5% above ERVs
•Vacancy rate of 17.3% (13.1% at 31.12.09)
•Largest logistics letting in Belgium in 2010 to Cummins at Rumst
De Hoek, Hoofddorp
28
Improve occupancyTakebacks remain high driven by space consolidation
0
2
4
6
8
10
H1 2009 H2 2009 H1 2010 H2 2010
Continental Europe
£m
an
nu
ali
sed
ren
tal
inco
me
• Retention rates: Group – 63% and Continental Europe – 75%
Continental Europe calculated at average exchange rates
Improve occupancy – UK vacancy
30
Improve occupancy80% of current UK vacancy is in London and the South East
Park Royal (London)
Heathrow (London)
Rest of London
Midlands & North
Rest of Thames Valley
Rest of UK South
Slough Trading Estate
UK vacancy as at 31 December 2010 by rental value. Joint ventures included at share
London = 50% of
current UK vacancyThames Valley = 30%
of current UK vacancy
National Markets = 20%
of current UK vacancy
31
Improve occupancyAge of building is not a deterrent to the right customer
0
5
10
15
20
25
30
35
< 10 years 10 - 20 years 20-30 years 30-40 years Over 40 years
UK vacancy and lettings by rental value. Excluding acquired properties where no age data is available. Age of construction or latest major refurbishment
UK vacancy at 31 December 2010 and 2010 UK lettings split by age of building Vacancy – solid bars Lettings – striped bars
%
32
Improve occupancy86% of current UK vacancy has been vacant <24 months
Vacant less than 12 months64%
Vacant 12 – 24 months22%
UK vacancy as at 31 December 2010 by rental value. Excluding acquired properties where no data is available. Joint ventures included at share
Vacant more than 24 months14%
APPENDICES
34
Adjusted profit before taxUp 22.1% versus 2009
2.810.8Share of joint ventures’ EPRA profits1
(59.0)(62.5)Property operating expenses
269.4282.1Net rental income
-1.9Joint venture management fee
(40.3)(39.2)Administration expenses – excluding prior year exceptionals
231.9255.6EPRA operating profit
104.3127.3EPRA profit before tax
(127.6)(128.3)Net finance costs (excluding fair value movements on derivatives)
328.4344.6Gross rental income
2009£m
2010£m
1. Net property rental income less administrative expenses, net interest expenses and taxation.
35
Net rental income
2009
Acquisitions Development
(lettings net of
takebacks)
Lease surrenders
(premium net of
rent lost)
Disposals Like-for-like rent Currency
translation
Net rental income
2010
Net rental income (£m) Up 4.7% versus 2009
269.4
23.9
9.83.7 (12.9)
(7.4)
(4.4)282.1
36
EPRA NAV per share
at 31 Dec 2009
Realised and
unrealised property
gain and EPRA joint
venture adjustments
EPRA PBT Other Dividends (including
dilutive impact of scrip
dividend)
Currency translation EPRA NAV per share
at 31 Dec 2010
EPRA NAV per share (pence)Up 2.5% versus 31 December 2009
367
7
172 (15)
(2)376
37
Cash Flow Summary
6.7(195.4)Investment in joint ventures
54.7-Net cash inflow from Brixton acquisition
421.3397.0Investment property sales (including joint ventures)
741.4-Rights issue/Placing and open offer proceeds
(59.2)(82.8)Dividends paid
(191.2)(63.9)Capital expenditure (excluding trading properties)
(190.7)23.4Derivatives close out
863.1193.7Net funds flow
0.88.8Other items
79.3106.6Free cash flow
(11.0)(6.0)Tax paid
12.98.8Dividends received (net)
(144.7)(141.1)Net finance costs
222.1244.9Cash flow from operations
2009£m
2010£m
38
Profit/(loss) before tax
(54.7)(2.8)Loss on sale of investment properties
(248.1)197.2Profit/(loss) before tax
(352.4)69.9Total adjustments
(17.9)21.5Net fair value gain/(loss) on interest rate swaps and other derivatives
8.6(13.9)(Amounts written off)/gain recognised on acquisitions
(8.0)5.8Other investment income/(loss)
12.9(0.5)Gain/(loss) on sale of investments in JVs
(16.1)(3.6)Increase in provision for impairment of trading properties
0.6(0.1)(Loss)/profit on sale of trading properties
(271.8)32.4Valuation surplus/(deficit) on investment and owner occupied properties
1.831.1Adjustments to share of profit/(loss) from JVs after tax
(7.8)-Exceptional administration expenses
Adjustments:
104.3127.3EPRA profit before tax
2009£m
2010£m
39
Property valuation – UK4.4% increase as yields sharpen
7.8
8.3
7.9
7.6
%
Net true equivalent
yield
3.56.01,31338Thames Valley
100
19
43
% by value
Portfolio
split
%%£m
5.7
6.2
5.2
Net initial
yield
4.43,479Total UK
4.6
5.1
Valuation movement¹
Completed properties
659National Markets
1,507London Markets
Valuation
31 December 2010
• The valuation movement % is based on the difference between the opening and closing valuations, allowing for capital expenditure and disposals.
IPD Quarterly Index Industrial full year capital growth of 3.5%
40
Property valuation – Continental Europe3.9% reduction impacted by specific one off factors
(11.5)7.58.41319Other
(3.1)7.55.827520Benelux
-8.96.437627France
(9.7)7.47.239829Germany
100
15
% by value
Portfolio
Split
(3.9)
6.8
%
Valuation movement¹
Net true equivalent
yield
Net initial yield
Valuation
31 December 2010
%%£m
6.9
8.1
8.01,385Total
8.5205Poland
Completed properties
1. The valuation movement % is based on the difference between the opening and closing valuations, allowing for capital expenditure and disposals.
41
Largest disposals - 2010
15.4DecemberVelilla and Torrejon, Madrid
8.3AprilWoulwe Industry Park, Belgium
8.5JanuaryBerlin Industriestrasse
11.2*DecemberWoodside Industrial Estate (APP asset)
13.6MayThe Hub, Heywood Distribution Park
14.8JuneLand at Farnborough
21.0MayFluor Building (IQ Farnborough)
27.7DecemberTreforest Industrial Estate
79.3DecemberWestcore portfolio, Heathrow
237.1JuneHeathrow assets into APP
Gross proceeds (£m)Month of disposalAsset
* 100% of gross proceeds shown
42
Euro currency exposure and hedging
2,020
517
978
141
Balance sheet as at 31 December 2010
Euro gross assets
Euro debt
Euro currency swaps
Other Euro liabilities
€m
illio
n
•€1.17:£1 as at 31 December 2010
•€ assets 81% hedged by € liabilities
•€385m (£329m) of residual exposure – 12% of Group NAV
•Sensitivity:
•+/- 10% (€1.29/€1.05) = +/- c.£33m (c4.5p per share)
110
59
Income statement twelve months to 31 December 2010
Euro income
Euro costs (incl €39m interest)
€m
illio
n
•Average rate for year €1.17:£1
•€ income 54% hedged by € expenditure (including interest)
•Net € income for the period before tax €51m (£44m) – 35%
of Group
•Sensitivity versus €1.17
•+/- 10% (€1.29/€1.05) = +/- c.£4.4m(c0.6p per share)
1,636
43
Forward-looking statements
This presentation may contain certain forward-looking statements with respect to
SEGRO’s expectations and plans, strategy, management’s objectives, future
performance, costs, revenues and other trend information. These statements and
forecasts involve risk and uncertainty because they relate to events and depend
upon circumstances that may occur in the future. There are a number of factors
which could cause actual results or developments to differ materially from those
expressed or implied by these forward looking statements and forecasts. The
statements have been made with reference to forecast price changes, economic
conditions and the current regulatory environment. Nothing in this presentation
should be construed as a profit forecast. Past share performance cannot be relied on
as a guide to future performance.