threadneedle investment conference threadneedle property …€¦ · 31/12/2011 · source:...
TRANSCRIPT
Don Jordison
Threadneedle Investment ConferenceThreadneedle Property Investments Limited
February 2012
Agenda
01 Property – the asset class
02 Why invest now?
03 Recent Transactions
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Property – the asset class
01
Keeping perspective – property rewards the long-term investor
Source: Datastream as at 30 September 1999 to 31 December 2011. All data is total return and in GBP
UK asset class total returns since 1999
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0
50
100
150
200
250
300
350
400
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Reb
ased
= 1
00
FTSE All Share Total Return FTA British Government Fixed All Stocks Total ReturnUK IPD: Property Total Return Index (time weighted) NADJ FTSE 350 Real Estate
… exploiting property market volatility is extremely difficult
+36.9%
+108.8%+127.6%
+41.6%
Total return correlation analysis
Correlation with All property Property shares FT All Share FT Gilts 5–15 years
All property 0.20 0.11 -0.20
Property shares 0.20 0.68 0.14
FT All Share 0.11 0.68 0.11
FT Gilts 5–15 years -0.20 0.14 0.11
Source: Threadneedle/Thomson Datastream/Factset. All index data from 31 January 1987 to 31 December 2011. All Property = IPD Index, Property Share = FTSE 350 Real Estate
Property stands alone … equities are equities
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UK property investment – key features
� Secured upon real assets
� Secure and diverse rental income stream
� Upwards only rent reviews with an average unexpired lease length of circa 7 years
� Mature market with stable and transparent legal infrastructure
� Diversified international occupier base – highly liquid
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Offers defensive qualities to global investors
Why invest now?
02
The story so far?
Source: IPD Monthly Index as at 30 September 2011
Boom to bust
40
50
60
70
80
90
100
110
1 3 5 7 9 11 13 15 17 19 21 23 25 27 29 31 33 35 37 39 41 43 45 47 49 51
Inde
xed:
Mon
th 0
= 1
00
Number of monthsFrom June 2007
+16%
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OPEN ENDED FUND CRASH QUANTITATIVE EASING BANK REFINANCING
- 44%
IPD Monthly Index – All Property NIY
Source: IPD Monthly Index as at 31 December 2011
IPD initial yield 2002 - 2012
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4.0
4.5
5.0
5.5
6.0
6.5
7.0
7.5
8.0
Jan-02 Jan-03 Jan-04 Jan-05 Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11
Initial yield on UK Commercial property vs long gilts
Source: IPD, Bloomberg, BoE as at 31 December 2011
Is property really cheap?
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Source: IPD, Bloomberg, BoE as at 31 December 2011
We need to use the correct comparison
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Source: IPD, Bloomberg, BoE as at 31 December 2011
Do rents match inflation?
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% of property loans maturing each year
Debt watershed approaches
Source: De Montfort University / DTZ as at 30 December 2010
Bank refinancing creates opportunity
• £157bn of UK property debt due to mature 2010–2013
• £50bn of loans estimated to be in default
• Basel II legislation motivates UK banks to work-out non-performing loans
• Debt available only to high calibre borrowers
• Banks remain risk averse
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Dash for liquidity =property oversold
2015–201911%
After 201918%
2013 – £23.0bn
10%
2012 – £32.4bn
14%
20149%
2010 – £52.6bn
23%
2011 – £34.7bn
15%
UK Property total return forecast 2011–2017
Source: IPD Monthly Index and BGC / Cushman & Wakefield as at 31 December 2011
The future looks less exciting?
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A return to property fundamentals
10.2 24.0 10.7 6.3 6.5 6.6 6.2
6.3
6.2 7.7 8.8 8.58.3 7.7 7.5
7.3 7.5 7.7 7.1
6.6 6.0
4.9 6.1 6.9
-10.0 -27.1
3.92.6-0.4
3.10.8-4.7-11.9
-7.9 -8.34.2
11.6 12.2 12.4
-5.6 1.2
5.9
5.49.5 8.3
8.2
5.2
8.27.1
6.82.92.92.90.5
14.5
2.2
-22.5
-5.5
18.118.818.911.210.4
7.110.5
14.112.215.4
9.43.2
15.316.3
-0.1-0.7-6.4
16.7
31.2
17.0 8.1
-40%
-30%
-20%
-10%
0%
10%
20%
30%
40%
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
Capital appreciation Annual income All Property Future - Mid Price Return Annual total return
Property market pricing metrics
Source: PMA Main Scenario, IPD, Haver, ONS
Property is cheap vs. bonds but expensive vs. equities
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Equivalent yield
Income return
Income return vs. nominal bonds
Yield gap vs. real bonds
Yield ratio vs. real bonds
Yield gap vs. corporate bondsRP vs. bonds
Equivalent yield vs. equities earnings yield
Initial yield – prime debt cost
Debt availability
Capital values vs. trend
199320062010LT average
Cheap
CheapCheap
Cheap
Expensive
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Sector and geographical breakdown
Geographical
Source: Threadneedle as at 31 December 2011
Sector
Source: Threadneedle as at 31 December 2011
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Cash (inc. Debtors/Creditors)
20.6%
Investment input4.6%
Retail Warehouse15.5%
Industrial14.9%
Other 0.5%
Retail26.8%
Offices17.1%
Wales8.9%
North10.0%
Yorks/Humber6.2%
East0.0%
Southern54.3%
Midlands14.1%
Scotland5.6% London
0.9%
• Net Initial Yield: 7.4%*
*As at 31/12/2011PT/12/00927
Recent Transactions
03
600 & 650 Aztec West Business Park, Bristol
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� Price £4,080,000
� 10.5% Net Initial Yield
� Unexpired lease term 4 years
� Low Gross Capital Value of £179 per sq ft.
� let to Wimpey Homes Holdings Ltd andCo-operative Legal Services (D&B 5A1)
� 24,786 sqft of well specified office accommodation.
� Excellent car parking ratio of 1:180 sqft.
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600 Aztec West
650 Aztec West
Units 1-8 Wincheap Trade Park, Canterbury
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� Price £3,750,000
� 9.6% Net Initial Yield
� 9 unit Trade park scheme adjacent to a retail park and a Morrisons supermarket
� Low gross capital value of £57.00psf
� 70% of income secured to highly regarded covenants including Wolseley Centres Ltd, Screwfix Direct Ltd, Dreams Plc and Howden Joinery Properties Ltd
� Lease, 7.3 years.
19
Southampton Road Retail Park, Fareham
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� Price £11,100,000.
� 7.1% Net Initial Yield
� Let to Argos and Dunelm on FRI leases until 2021 and 2026
� Let at £12.50 psf and £11.50psf respectively
� 68,784 sqft of accommodation within OldSouthampton Road Retail Park
� Low site cover of 29%
� Parking Ratio 1:260 sqft
20
The Rock & Hub, Slyfield Industrial Estate, Guildford
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� Price £5,235,000
� 7.3% Net Initial Yield
� New 15 year Lease to Snow and Rock Ltd (D&B 4A1)
� RPI linked rent reviews with cap at 4% and collar at 2%.
� 2 Modern industrial units providing 52,864 sqft of accommodation.
21
B & Q, Mostyn Broadway, Llandudno, Wales LL30 1PJ
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� Price £5,440,000.
� 7.5% Net Initial Yield.
� Let to B&Q Plc (D & B 5A1) until 2020
� Let at £12.50 psf overall.
� Low site cover of 29%
� Prominently located between 2 retails parks
� Parking Ratio 1:220 sqft
22
y
The Pavilion Shopping Centre, Tonbridge
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� Price £9,400,000
� 8.0% Net Initial Yield on expiry of rent free periods.
� 18 unit shopping centre of 50,000 sqft
� Rents between £43.00 and £58.00 psf ITZA
� Tenants include Monsoon, Boots, Specsavers Opticians ltd, Santander, Blockbuster, Shoe Zone
� 12 Lease renewals in 2010/2011
23
Bricket House, 10 Bricket Road St Albans AL1 3JT
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� Price £3,520,000
� 13.6% Net Initial Yield
� Constructed late 1980’s, provides 26,291 sqft of well configured office accommodation
� Low gross capital value of £141psf
� Let to PriceWaterhouseCoopers Services Limited until 23rd June 2013 at £506,300 per annum equating to £19.27 psf
� 24,786 sqft of well specified office accommodation.
� Excellent car parking ratio of 1:286 sqft.
� Lease re-gear or refurbish/re-let opportunity.
CSB House, 28 Clarendon Road, Watford
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� Price £2,400,000
� 21.9% Net Initial Yield
� Constructed 1989, provides 20,000 sqft of well configured office accommodation
� Let to Beverage Services Ltd (Guarantor from Coca Cola Holdings UK Ltd) until 28th September 2014 at £555,000 per annum.
� Low gross capital value of £126 psf
� Refurbish/re-let opportunity.
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Threadneedle Property Investments Ltd
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