1 Workspace Group PLC Delivering Value into the Future Strategy Presentation to Equity Research...
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Transcript of 1 Workspace Group PLC Delivering Value into the Future Strategy Presentation to Equity Research...
1
Workspace Group PLC
Delivering Value into the Future
Strategy Presentation to Equity Research Analysts
Friday 2 November 2007
2
Reconfirm our strategy:
• We are a property based business
• Clear identifiable brand
• Servicing a vibrant customer base
• Proven acquisition model
• Capability to realise redevelopment potential
• Deliver superior returns
…..and introduce new members of the team
Aims for the Presentation
3
Aims for the Presentation - Structure
1. Our Market Place Harry Platt
2. Acquisition Activity Patrick Marples
3. Redevelopment Opportunity Angus Boag
4. Financial Performance Graham Clemett
5. Summary Harry Platt
4
“ We provide affordable, flexible space for new and small businesses in London”
• c.4,500 customers over 119 estates; 6.2 million sq .ft
• Over 10,000 enquiries a year; market leading brand in fragmented market
• A simple product offer
• Superior service from in-house management
• Customer focused
The Brand – Hotelier of Space to SMEs
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London is our Market Place
• London is THE Global city
• London drives the UK economy
• Most multicultural – home to more than 300 languages
• 42 immigrant populations of 10,000 or more
• Home to 12.5% of UK population, produces 16.5% of its output
• Highest concentration of fastest-growing, most productive business sectors
London is our Knowledge Base
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Statistics Support London Growth
• Population expected to grow from 7.5 million to 8.8 million in 2029
• Households expected to grow from 3.2 million to 3.6 million by 2021(source: ONS, Population trends 128; Summer 2007)
Source: Domestic & International Net Migration in London, 1981-2005
Source: GLA Working paper 24: An analysis of London’s employment by sector
7
Source: Enterprise Directorate Analytical Unit, Business Starts & Closures: VAT Registrations & De-Registrations in 2005
Business Starts and Closures
1-416%
50 plus1%
No employees76%
10-493%5-9
4%
Source: Enterprise Directorate Analytical Unit, SME Statistics, 2005
Businesses in London by number of employees
London is Key for Business
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Workspace Customer Base
Customer base of more than 4,000 small businesses
18%
6%
1%2%
1%
12%5%
10%
45%
Manufacture
Retail
Construction
Utilities/Infrastructure
Organisations
Design & Creative
Services
Storage & Distribution
Unclassified
Classification based on DTI categories
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Typical Workspace Customer
Entrepreneurs
• Creative industries/professional services (knowledge economy)
• Employs less than 10 people (50% plus employ less than 4)
• Has been in current unit 2-3 years - traded for 5 years plus
• Describe themselves as “going for growth”
• 3 in 10 are serial entrepreneurs - 2 in 10 are portfolio entrepreneurs
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Typical Workspace Customer
• Rent under 5% of turnover
• Average rents at 31 March 2007: £11. 34 per sq. ft
• Average customer occupies 1,100 sq. ft
• Average rent per week about £240
Source: Enterprise & Entrepreneurs: Profiles of the Workspace Customer base, Kingston University, May 2005
Median% of median
turnover
Turnover 250,000 —
Overheads 90,000 36
Profits 40,000 16
Rent 12,000 5
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Workspace Group Portfolio
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Clerkenwell Workshops, EC1
Before
After
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Kennington Park, SW9
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Kennington Park, SW9
Before
After
15
Patrick Marples
Acquisitions
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Acquisitions – The Fundamentals
Stock Selection
• Investment properties with an “angle”
- Undermanaged
- Underlet
- Above average rental growth prospects (areas of change)
- Added value potential (change of use or intensification)
• Vacant or Part let
- Using the BRAND to create value
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Acquisition Activity
Acquisitions
£m
2003 60
2004 60
2005 43
2006 127
2007 70
Total 360 Average 72
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Acquisition Performance
Acquisition Cost £8m £4m
Yield at acquisition 1.9% Nil
Refurbishment cost £5.5m £1.5m
Completed November 2006 June 2007
March 2007
Valuation surplus £3.7m £2m
Occupancy 81% Nil
ERV Yield
- On cost 8.8% 18.3%
- On valuation 6.9% 13.1%
ERV per sq. ft £16 £55
Lightbox (2005)
Chiswick
Greville Street (2006)
EC1
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The Lightbox, Chiswick, W4
Before
After
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Acquisitions Database
Target acquisitions 400 sites
Potentials 600 sites
Adjacent/site assembly 200 sites
Estimated total value £8.5 billion
“Top 20” £600 million
Acquisitions Value No of Deals FromDatabase
Value from Database
2005 £43m 7 1 14%
2006 £127m 12 3 25%
2007 £70m 11 5 45%
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Customer focus
SME’s
Market Share
Churn
Flexibility
Service Sector
Level One:
The Brand
Workspace - Components Of Return
22
Level Two:
Investment Return
Workspace - Components Of Return
Property Skills
Growing Rents
Area of Change
Gearing
Brand
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Level Three:
Land
Potential
Workspace - Components Of Return
Change of Use
Development
Intensification
Acquisitions targeted at all three types of
return
Brand
Investment Return
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Latest Deal - Neil House, E1
Neil House
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Neil House, Whitechapel Road, E1
Purchase Price £10.8 mFloor Area 43,592 sq.ftValue psf £248 per sq.ft
Current Rent £415,260 paEstimated rental value £879,000
Office Repositioning Total Area 23,260 sq.ftVacant 14,632 sq.ft (62%)
Average Passing Rent £13.79 psfERV £26.00 psf
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Angus Boag
Leveraging the Redevelopment Potential
27
Workspace’s Unique Position
• The London Plan
• Employment led regeneration
• Workspace Brand
• Relationships with local authorities
• Ability to own and manage mixed-use schemes
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Redevelopment Potential
• Over 50% portfolio will be subject to
Intensification / Change of Use
over next ten years
• 20% of portfolio on a five year basis
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Progress to Date
Workspace Portfolio
18 sites identified for immediate progress:
• 3 schemes submitted for planning consent
• 4 schemes in negotiation with planners
• 6 schemes being prepared for negotiation
• 5 schemes being worked up for applications in 2009
Joint Ventures
• 1 Scheme granted consent
• 2 Schemes to Committee imminently
• 1 Scheme in planning negotiation – application 2008
‘
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Future Intensification
• 18 sites identified for planning consent, development and sale in next 5 years
• Land value £185m
• Currently providing 660,000 sq.ft. workspace
• Planning consent will provide an estimated: - 950,000 sq. ft commercial space - 900 + apartments (35% affordable) - 110,000 sq. ft other uses
• Commercial space to be retained within REIT - Apartments and
other uses generally sold
31
Aberdeen Works, Islington, N5
Before66,000 sq. ft commercial (Rents £12 - £15 per sq. ft)
After
45 apartments for sale
27 affordable apartments(37%)66,000 sq. ft commercial (rents £25 per sq. ft)
Proposed scheme has 2.0 times more floorspace than the existing scheme
32
Greenheath, Bethnal Green, E2
Before 46,000 sq. ft commercial (rents £8 - £10 per sq. ft)
After74,000 sq. ft commercial (rents £20 per sq.ft)
230 student housing rooms
Proposed scheme has 2.6 times more floorspace than existing
33
Wandsworth, SW18
Before
Existing 86,000 sq. ft workspace (rents £15 per sq. ft)
AfterPlanning consent for:156 apartments for sale53 affordable apartments (25%)86,000 sq. ft new workspace (rents £22 per sq. ft)
Consented scheme has 2.5 times more floorspace than existing schemes
34
The Pipeline
• Hopper – continue to feed the development process with new sites when conditions are correct
• Adding our name and brand to bids for larger strategic schemes (Silvertown Way, Stratford)
• Ability to acquire and manage mixed-use schemes
35
Graham Clemett
Financial Performance
36
Dynamics of Growth – Next 5 Years
CORE BUSINESS Strong Rental Growth
High Occupancy
Proven Track Record
Extensive Database
In-house expertise
USP vs “traditional” developers
ACQUISITIONS
REDEVELOPMENT
+
+
37
Core Business Valuation
Over next2 years
Yields Stable
Yields out 75bps
Yield out 150bps
ERV up 10%
(5% p.a.)
+ £100m - £10m - £100m
ERV up 20%
(10% p.a.)
+ £200m +£70m - £25m
Reversionary Yield 6.5% 7.25% 8.0%
Rent per week
£264
£288
What if…..
38
Funding Options
Core Business
Acquisitions
Regeneration
- Commercial
- Residential
REITJoint
VenturesOther
39
Summary
Workspace = Robust Business
….with massive opportunities
• The Workspace Difference
- Strength of Brand
- At the Heart of London
- Ability to buy well
- Acceleration of redevelopment potential
- Scale of London market
- We can add scale to the business