preliminary results for the year ended …...1 preliminary results for the year ended 29.02.16 for...
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1
PRELIMINARY RESULTS
FOR THE YEAR ENDED
29.02.16
FOR THE YEAR ENDED
29.02.16FOR THE YEAR ENDED
29.02.16
FOR THE YEAR ENDED
29.02.16
2
OVERVIEW AND HIGHLIGHTS
08/14 – FINANCIAL RESULTS 15/35 – OPERATING REVIEW 36/37 – SUMMARY 38/60 – APPENDICES02/07 – OVERVIEW AND HIGHLIGHTS
3
OUR VISION IS TO CREATE
LONG-LASTING SOCIAL AND
ECONOMIC CHANGE
FOR THE COMMUNITIES IN
WHICH WE BUILD AND
SUSTAINABLE VALUE FOR
OUR SHAREHOLDERS
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4
OUR YEAR HAS DELIVERED A
NEW COMPANY, RECORD
GAINS AND CONTINUED NAV
GROWTH
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5
FY2016 HIGHLIGHTS
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6
RECORD GAINS AND
CONTINUED NAV
GROWTH
£51m of development and trading gains realised – 11.8% increase
+ 5.4% increase in EPRA NAV per share to 291p
SUPPLEMENTAL
DIVIDEND DECLARED
8.0 pence per share to be paid from strong cash flow
+ Interim and final dividend of 5.9 pence per share paid during the year
+ New dividend policy to provide greater visibility on shareholder returns
DELIVERING
STRATEGIC
INITIATIVES
To position business for long-term growth
+ Focus on larger regeneration projects
+ Repositioning investment portfolio to drive better value
+ Building specialist platforms
FY2016 HIGHLIGHTS
08/14 – FINANCIAL RESULTS 15/35 – OPERATING REVIEW 36/37 – SUMMARY 38/60 – APPENDICES02/07 – OVERVIEW AND HIGHLIGHTS
7
27
46
51
42
72
63
0
20
40
60
80
FY 2014 FY 2015 FY 2016 FY 2017 FY 2018 FY 2019
Realised gains (£'m) Expected gains (£'m)
53
61
Previous guidance (£’m)
54
RECORD GAINS AND GOOD VISIBILITY ON FUTURE YEARS
Aggregate expectations for development and trading gains unchanged for next 2 years
£114m
3 - 5 year target
+ £50m plus pa
+ 12% post-tax total return*
*Total returns: the growth in our basic net asset value including dividends.
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8
FINANCIAL RESULTS
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9
FY2016 PERFORMANCE
FY 2016 FY 2015
Development and trading gains £51.1m £45.7m
EPRA Net Asset Value (NAV) £363.5m* £345.6m
EPRA NAV per share 291p* 276p
Total declared dividends per share 13.9p 13.9p
EPRA Earnings per share 17.1p 23.9p
Profit before tax £25.8m £34.8m
Total return 7.2% 10.0%
Balance sheet gearing 44.4% 36.3%
*Before payment of £10.0m (8.0 pence per share) of supplemental dividend – to be paid on 17th June 2016
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MOVEMENT IN EPRA NAV THROUGH THE PERIOD
291
17
12
2
6
10
41
1
276
270
280
290
300
310
320
330
EPRA NAVFeb 2015
Contributionfrom
invesmentproperty
Contributionfrom
developmentand trading
Operatingcosts
Net interestcosts
Taxation Ordinarydividend
Other EPRA NAVFeb 2016
NOTE: Development and trading assets not revalued, held at lower of book cost or net realisable value.
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DEBT FINANCE
FY2016
£’m
FY2015£’m
Gross debt 213.3 205.0
Cash (51.8) (79.3)
Net debt 161.5 125.7
Gearing 44.4% 36.3%
Share of net debt in joint ventures 43.6 46.8
Net debt including joint ventures 205.1 172.5
Gearing including joint ventures 56.4% 49.8%
Analysis of gross debt (excluding JVs)
Fixed rate 35.1% 44.6%
Capped / SWAP 30.1% 31.0%
Floating rate 34.8% 24.4%
Weighted average interest rate 4.9% 5.4%
Weighted average maturity 4.5 years 5.4 years
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DEBT MATURITY PROFILE
36.6
28.3
11.4 2.6
70.6
32.6
33.9
0
10
20
30
40
50
60
70
80
0
10
20
30
40
50
60
70
Feb-17 Feb-18 Feb-19 Feb-20 Feb-21 Feb-22 Feb-23 Feb-24 Feb-25 Feb-26
Corporate (£'m) Drawn - Investment (£'m) Drawn - Development (£'m)
NB: £7.6m of debt has been extended to 04/2017. £27.2m has been repaid following sales at Deptford.
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NEW DIVIDEND POLICY TO CREATE GREATER VISIBILITY ON SHAREHOLDER
RETURNS
DEVELOPMENT +
TRADING GAINS
CASH PROFIT
NET FREE
CASH FLOW
NET
FINANCE
COST
ORDINARY
DIVIDENDS
OVERHEAD
SHORTFALL
CORPORATION
TAX
REINVESTREDUCE
DEBT
RETURN
CAPITAL
Ordinary dividend:
Fixed + recurring Supplemental dividend:
Paid from net free cash flow –
proportion intended to be
broadly similar to the
proportion paid in April 2015
(48%)/June 2016 (46%)
Announced alongside FY
results
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FINANCIAL HIGHLIGHTS
Record gains delivered and clear visibility on 2-year pipeline
Target 12% post-tax return and over £50m of development and trading gains pa within 3 – 5 years
Strong balance sheet and focus on capital efficiency
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OPERATING REVIEW
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MIXED-USE
REGENERATION
Creating places where people can thrive
IN THREE CORE
MARKETS
London City Region, Manchester and Dublin
TO DRIVE
SUSTAINABLE
RETURNS
Our business model is designed to deliver a 12% post-tax total return on a consistent basis
OUR FOCUS
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CREATING
PLACES
U+I: AN INTEGRATED PORTFOLIO
DEVELOPMENT AND
TRADING PORTFOLIO
63%
Of gross assets*
£359m
Capital Value
INVESTMENT
PORTFOLIO
37%
Of gross assets*
£212m
Capital Value
Objectives
Generate profit from
regeneration activities.
Key value drivers
Quality of place
Arbitrage/mispricing
Planning gain
Objectives
Drive recurring income streams.
Add value and contribute to NAV growth.
‘Warehouse’ longer-term development
opportunities.
Capture the value uplift of our completed
regeneration projects (‘Greenhouse’).
Key value drivers
Improve tenant mix and rental tone.
Asset management including development.
*Group share where appropriate
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FEWER, LARGER
PROJECTS
To drive focus and better returns
+ 2 new PPP projects won with a GDV of over £450m
+ £335m of sales during the year – over 20 projects
+ Increasing profit per project over 3 year period
REPOSITIONING
INVESTMENT
PORTFOLIO
To drive better returns
+ £10.7m of assets ‘rationalised’ during the year plus a further c.£70m in the
short to medium-term
+ c.£130m of assets to be optimised
+ Early progress to build Greenhouse and Warehouse portfolios
SPECIALIST
PLATFORMS
To improve returns, efficiency and delivery options for our projects
+ Heads of terms signed with a major UK-based capital partner to create initial
off-balance sheet Build to Rent platform
FY2016 HIGHLIGHTS: ON TRACK WITH STRATEGIC INITIATIVES
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DEVELOPMENT AND TRADING
PORTFOLIO
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A BALANCED APPROACH TO DEVELOPMENT AND TRADING
MIXED-USE REGENERATION
−PPP PROJECTS AND LARGER MIXED-
USE PROJECTS (2-5 YEARS)
−MAX £15m EQUITY IN ANY ONE
PROJECT BUT HIGH UPSIDE
POTENTIAL IN ALL
−PLANNING GAIN IS KEY VALUE
DRIVER
−PROJECTS DE-RISKED VIA FORWARD
FUNDING OR PRE-SALES
−EQUITY MULTIPLE 2.0X – 5.0X
TRADING
−SHORT-TERM PROFIT FLOWS (1-3
YEARS)
−PLANNING GAIN IS OFTEN KEY
−ARBITRAGE/MISPRICING
OPPORTUNITIES
−IRR OF >30%
−EQUITY MULTIPLE 1.5X
PROJECT DELIVERY TIME
GAINS
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FY2016 DEVELOPMENT AND TRADING GAINS
Anticipated FY16
gains
Gains realised in
FY16 Variance
399 Edgware Road £7m £8m
The Old Vinyl Factory £6m £6m
Dublin projects:
Percy Place
Charlemont Clinic
Robswall, Malahide
£10m £5m Profit from Percy Place deferred to
FY17 due to delay to commercial sale
Cross Quarter, Abbey Wood £4m £5m
Wick Lane Wharf £4m £4m
The Deptford Project £4m £4m
Brentwood £4m £4m
Becket House - £3m Disposal accelerated by off-market
approach from Freeholder
Hale Barns £2m £2m
Norwich £2m - Profit realisation deferred to FY17
Other (15 projects) £12m £10m
Total £55m £51m
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OUTLOOK FOR FY17: DEVELOPMENT AND TRADING GAINS
Project name Anticipated
FY17 gains H1 H2 Profit trigger
12 Hammersmith Grove £10m £10m Letting 90% of office space
Dublin:
a) Percy Place
b) Robswall
c) Pembroke Road
£7m £5m £2m a) Sale of residential units and sale of
commercial component
b) Sale of remaining residential units
c) Sale of consented site
Maidstone
£4m £4m Sale of first consented residential phase.
Secure planning and sell second phase
of development (BTR).
Ashford £3m £3m Secure planning and sell consented site
The Old Vinyl Factory£3m £3m Secure planning and sell consented site.
Funding of record store.
Birmingham International Park
£2m £2m Secure planning and sell consented site
Norwich £2m £2m Sale of consented site
Woking£2m £2m Secure planning and sell consented site
(BTR)
Other (8 projects) £9m £3m £6m
Total £42m £8m £34m
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+ 170,000 sq. ft. Grade A office building
+ Forward-funded by Aberdeen Asset Management
+ Lettings campaign underway - 10HG let within 12 months
+ Average Hammersmith rents - £56psf
+ Profit guidance of £10m based on rents of £52.50 and 5.5% yield
12 HAMMERSMITH GROVE
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Maidstone
+ Consented site acquired in December 2015
– 192 residential units + 180,000 sq. ft. of
commercial space
+ Phase 1 – Under offer to sell existing
residential consent on part of the site
+ Phase 2 – Progressing new planning
applications for c. 240 residential units
MAIDSTONE AND ASHFORD
Ashford
+ 9-acre site acquired in October 2015
+ Planning process underway for c.660
homes – committee in Summer 2016
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+ £380m PPP project with London Fire Brigade
+ Competitive bid process
+ £5m initial equity investment plus £5m post planning
+ Plans for major mixed-use regeneration
NEW PROJECT: 8 ALBERT EMBANKMENT
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NEW PROJECT: COCKPIT YARD
+ £100m PPP project with Camden Council
+ Competitive bid process
+ £2m initial equity investment rising to £4m
+ Plans for major mixed-use regeneration –planning submission targeted Q1 2017
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SPECIALIST PLATFORMS: BUILD TO RENT
CAPITAL
BUILD TO RENT
PLATFORM PLANNING DEVELOPMENT
BUILD TO
RENT UNITS
LAND +
MINORITY EQUITY
INVESTMENT +
PLANNING AND
DEVELOPMENT
EXPERTISE
LAND
IMPROVEMENT
PROFIT
DEVELOPMENT
MANAGEMENT FEE
PROMOTE PROFIT AND RUNNING INCOME
TARGET RETURN c.7.5%
PROFIT VIA
PROMOTE
STRUCTURE
(BASED ON OPERATING
PERFORMANCE OVER THE
MEDIUM TERM)
U+I
(LAND, PLANNING
AND DEVELOPMENT
EXPERTISE)
FUNDING
PARTNER
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INVESTMENT PORTFOLIO
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INVESTMENT PORTFOLIO OVERVIEW
NUMBER OF ASSETS VALUATION INCREASE (inc JVs) SIZE OF PORTFOLIO
20
Feb 2015: 21
£1.7m
Feb 2015: £11.2m
£203.3m
Feb 2015: £203.3m
INITIAL YIELD* CONTRACTED RENTAL INCOME
6.8%
Feb 2015: 6.8%
£14.3m
Feb 2015: £13.8m
ESTIMATED RENTAL VALUE* VOID RATE EQUIVALENT YIELD*
£14.4m
Feb 2015: £14.5m
4.5%
Feb 2015: 5.0%
7.20%
Feb 2015: 7.4%
*on a like-for like basis and core portfolio only
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OPTIMISE Driving value through asset enhancement, planning gain or redevelopment
RATIONALISE Disposing of non-core assets where we see no further potential to add value
REINVEST Building a portfolio that better contributes to our overall returns target as a business
INVESTMENT PORTFOLIO: STRATEGY TO DRIVE VALUE
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DYNAMIC
PORTFOLIO
+
HIGHER
RETURNS
TARGET BREAKDOWN OF INVESTMENT PORTFOLIO
GREENHOUSE
c.£35m (17.5%)
Target size
+ Retail, commercial or leisure elements of our completed developments
+ Emerging locations where ‘destination’ factor is key
+ High income and capital growth potential
WAREHOUSE
c.£45m (22.5%)
Target size
+ Income producing, longer-term development opportunities
+ Feeds regeneration pipeline
CORE
c.£120m (60%)
Target size
+ Assets with strong covenants and stable income streams (suited to Aviva debt facility)
+ Income and capital growth potential through asset management and enhancement
*analysis of core portfolio and assets considered within
investment portfolio repositioning process
08/14 – FINANCIAL RESULTS 15/35 – OPERATING REVIEW 36/37 – SUMMARY 38/60 – APPENDICES02/07 – OVERVIEW AND HIGHLIGHTS
Type Value % of portfolio
Greenhouse £3.6m 1.8%
Warehouse £16.9m 8.4%
Other (including core assets)
£181.0m 89.8%
£201.5m 100.0%
Current portfolio breakdown*
32
OPTIMISE: SWANLEY
+ Planning application to be submitted in Q2 2016
+ Surface car park - 343 residential units, retail and restaurant space, new public realm
+ c.£3m value add through planning. Further value if we develop out.
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REINVEST: ‘CORE’ ASSETS
+ c.£120m of portfolio – held within Aviva facility
+ Focus on strong covenants and stable income streams
+ Location, catchment, experience and tenant demand are key
+ e.g. Killingworth (pictured) –dominant retail scheme in affluent town
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REINVEST: WAREHOUSE ASSETS
ACQUISITION
OF ASSETSGROWTH INCOME
DEVELOP
MASTERPLAN
REGENERATION
OF PROPERTY
Target undervalued, income-producing land
or assets with a strategic planning case,
within our three core geographies.
Manage assets to drive short to medium-
term income streams.
Start process of community engagement
early in the process.
Create development proposals for new
mixed-use place and secure planning
consent.
Deliver new place.
EXAMPLE: CHARLTON RIVERSIDE
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REINVEST: GREENHOUSE ASSETS
RETAIN GROW HARVEST
Ground floor retail, leisure or commercial space of
completed mixed-use regeneration project transferred to
investment portfolio.
Use detailed knowledge and experience of the location to
attract the best tenants, to mature the development, drive
footfall and add value.
Mature the investment asset, capturing rental and value uplift
ahead of ultimate sale.
EXAMPLE: THE DEPTFORD PROJECT
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SUMMARY
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U+I POSITIONED
FOR GROWTH
Business ‘getting into its stride’ and integrated into new home
GOOD VISIBILITY
ON GAINS
£50m+ of gains pa within 3-5 years
WELL-POSITIONED
TO DELIVER
SUSTAINABLE
SHAREHOLDER
RETURNS
Target post-tax returns of 12% plus new dividend policy
SUMMARY
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APPENDICES
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APPENDIX 1: BUSINESS MODEL
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ON BALANCE
SHEET
U+I CREATING PLACES
DEVELOPMENT AND TRADING INVESTMENT
MIXED-USE
REGENERATIONTRADING
OFF BALANCE
SHEET
SIGNIFICANT LONGER TERM
PROFIT STREAMS FROM LARGER
REGENERATION PROJECTS
PLANNING
SECURED
DISPOSAL
(TO A FUND OR
SPECIALIST
PLATFORM)
PLANNING
SECURED
DEVELOPMENT
FINANCE SECURED
PROJECT DELIVERY
AND PRE-SALES
PROJECT
DELIVERY
COMPLETED
DEVELOPMENT
COMPLETED
DEVELOPMENT
DEVELOPMENT
PROFIT
DEVELOPMENT
PROFIT
LAND
IMPROVEMENT
PROFIT
DISPOSAL
ASSET MANAGEMENT
OR PLANNING
SHORTER-TERM PROFIT REALISATIONS
TO BALANCE LUMPIER PROFITS FROM
DEVELOPMENT ACTIVITY
TRADING PROFIT
GREENHOUSE WAREHOUSE OTHER
OPTIMISING THE VALUE OF
OUR RETAINED ASSETS
OPTIMISE
CAPITAL GROWTH
AND INCOME
RATIONALISE
RE
IN
VE
ST
EXAMPLE OF ROUTE:
399 EDGWARE ROAD
EXAMPLE OF ROUTE:
DEPTFORD PROJECT
EXAMPLE OF ROUTE: ROBSWALL,
BRENTWOOD
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PRINCIPAL RISKS
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APPENDIX 2: FINANCIALS
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NET DEBT, NET ASSETS AND GEARING
304.5 306.7312.6
320.3
335.5
346.4342.9
363.3
147.1 146.8143.0
153.8 150.7
125.7
203.3
161.4
48.3 47.9
45.7
48
40
36.3
59.2
44.4
0
10
20
30
40
50
60
70
100
150
200
250
300
350
400
Aug 12 Feb 13 Aug 13 Feb 14 Aug 14 Feb-15 Aug-15 Feb-16
Net assets (LHS) Net debt (LHS) Gearing excl JVs (RHS)
£’m%
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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 2015 345.7
Contribution from investment property 12.1 12.1
Property revaluations 0.2 0.2
Contribution from development and trading portfolio 51.1 51.1
Operating costs (21.8) (21.8)
Net interest costs (11.8) (11.8)
Swap revaluations 0.3 0.3
Foreign currency movements (0.7) (0.7)
Other (1.2) (1.2)
Taxation (2.5) (2.5)
Dividends (7.4) (7.4)
Non controlling interest (0.7) (0.7)
Sub-total 17.6 17.1 0.5
Net assets attributable to shareholders at 29 Feb 2016 363.3
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RECONCILIATION OF PROFIT BEFORE TAX
£’m
FY2015 profit before tax 34.7
Increase in development and trading gains 5.4
Increase in net rental income 1.9
Increase in operating costs:
One off - £2.4m
Recurring - £1.4m
(3.8)
Decrease in valuation gain on investment portfolio and investments held in JV (11.1)
Decrease in profit on sale of investment portfolio (4.1)
Change in FX movements in P&L* (7.8)
Exceptional items in 2015
Cathedral acquisition costs
Euro loan note refinance**
(2.7)
(7.9)
FY2016 profit before tax 25.8
*FX gains taken to reserves increased by £4.7 million
**Corresponding deficit of £6.0 million taken to reserve in 2015
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OVERHEADS
FY2016
£m
FY2015
£m
Staff costs
LTIP
12.8
0.7
12.0
(0.1)
13.5 11.9
Establishment and other
Legal and professional
Depreciation
4.8
3.2
0.3
3.2
2.5
0.3
21.8 17.9
Non-recurring costs included above:
Rebrand and launch costs
Integration
Rationalisation of office space
HDD (unwinding of previous joint venture)
Audit fee
0.9
0.6
0.4
0.4
0.1
2.4
NB: Overheads include administration and professional fees relating to corporate structures for investing into
projects in a capital efficient manner totalling £0.4m
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INVESTMENT PROPERTY PORTFOLIO CONTRIBUTION
(INCLUDES SHARE OF JVs)
FY2016
£m
FY2015
£m
Revenue 14.4 12.9
Direct costs (2.4) (2.7)
12.0 10.2
(Loss)/Gains on disposals (0.2) 3.8
Asset management fees and joint venture net income0.3
(0.1)
Contribution prior to revaluation 12.1 13.9
Revaluation gain
- Direct
- Share of JV
0.2
0.1
7.6
3.4
Contribution 12.4 24.9
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48
APPENDIX 3: PORTFOLIO STATS
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49
LEVEL OF PROFITS PER PROJECT
Aggregate expectations for development and trading gains unchanged for next 2 years
9
28 27
46
51
42
72
63
7
24
11
28 27
1821
14
0
1
2
3
4
5
6
7
8
9
0
10
20
30
40
50
60
70
2012 2013 2014 2015 2016 2017 2018 2019 2020 2021
£'m Profit (LHS) Number of projects (LHS) £'m profit per project (RHS)
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67.1
25.2%
6.0% 1.7
Gross rental income - tenant profile
PLC/nationals/FTSE100
Local traders
Regional multiples
Government
INVESTMENT PROPERTY ANALYSIS
44.1%
37.2%
7.9%
10.8%
Gross rental income - lease term profile
0 - <5 years
5 - <10 years
10 - <20 years
20 years +
40.1%
24.5%
26.4%
9.0%
Capital value - location profile
London and SouthEast
South West
North and Midlands
Wales and NorthernIreland
1.8%8.4%
89.8%
Capital value - asset type
Greenhouse
Warehouse
Other
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51
DEVELOPMENT AND TRADING PORTFOLIO: GEOGRAPHIC BREAKDOWN
60.0%22.9%
16.1%
1.0%
London City Region
Rest of UK
Dublin
Manchester
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52
DEVELOPMENT AND TRADING PORTFOLIO: GDV PER SECTOR (% of portfolio)
66.0
18.8
8.3
2.22.0 2.7
GDV by sector
Residential
Office
Retail
Leisure
Student
Science
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53
DEVELOPMENT PROJECTS IN LONDON CITY REGION
Key
Route of Crossrail 1
Route of Crossrail 2
M25
Zone One
(London
Underground)
1 h
ou
r
30
min
sOxford
Cambridge
Brighton
Reading
Ashford
Tunbridge Wells
Maidstone
SittingbourneWoking
Slough
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APPENDIX 3: ECONOMIC CHARTS
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55
-0.6-0.3
0.81
1.51.8
2.3
2.9
3.8 3.9
-2.0
-1.0
0.0
1.0
2.0
3.0
4.0
5.0
Cap
ita
l G
row
th %
CAPITAL GROWTH SEPTEMBER 2015 – MARCH 2016 BY SECTOR
Source: IPD monthly
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56
AFFORDABILITY OF HOUSING IN LONDON
4
5
6
7
8
9
10
11
12
13
14
30
40
50
60
70
80
90
2000 2005 2010 2015
House Price-to-Earnings Ratio and Mortgage Affordability in London
Mortgage Affordability London HPE London(LHS (RHS
)
Source: Capital Economics
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57
-400
-300
-200
-100
0
100
200
300
400
4.0
5.0
6.0
7.0
8.0
9.0
2000 2002 2004 2006 2008 2010 2012 2014 2016
Unemployment Rate (LHS, %) LFS Employment (3m change, 000s)
EMPLOYMENT CHANGE AND UNEMPLOYMENT RATE
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58
0
20
40
60
80
100
120
140
160
180
0
20
40
60
80
100
120
140
160
180
2001 2003 2005 2007 2009 2011 2013 2015
INVESTMENT YIELDS: PRIME TO NON-PRIME SPREAD (bps)
Source: Capital Economics
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59
-40
-30
-20
-10
0
10
20
-40
-30
-20
-10
0
10
20
Labour avail. Labour costs Materialsavail.
Material costs Land avail. Land prices Planningdelays
Dev. Finance
FACTORS THAT ARE MAJOR CONSTRAINTS ON PRODUCTION
(% balance, Difference from average, Q4 2015)
Source: Capital Economics
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60
98
77
42
223 58
0
10
20
30
40
50
60
70
80
90
100
Number of enterprises Number of employees GVA
% o
f Tota
l
Irish Multinational
DUBLIN: BREAKDOWN OF FIRMS IN BUSINESS ECONOMY IN IRELAND
Source: CSO
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DISCLAIMER
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