Development Securities PLC - U and I Group PLC · 29/4/2015 · Analysis of gross debt (excluding...
Transcript of Development Securities PLC - U and I Group PLC · 29/4/2015 · Analysis of gross debt (excluding...
Development Securities PLC
PRELIMINARY
RESULTS FOR
YEAR ENDED 28
FEBRUARY 2015
2015 PRELIMINARY RESULTS 2
CONTENTS
Overview and highlights Slide 3-5
Financial results Slides 6-11
Operating review Slides 12-27
– Overview
– Investment portfolio
– Development and trading portfolio
Case studies Slides 28 - 38
Outlook Slides 39-40
Appendices Slides 41-63
OVERVIEW AND HIGHLIGHTS / FINANCIAL RESULTS / OPERATING REVIEW / SUMMARY / APPENDICES
2015 PRELIMINARY RESULTS 3
OVERVIEW AND
HIGHLIGHTS
• Featured property:
• Property name
• Description
OVERVIEW AND HIGHLIGHTS / FINANCIAL RESULTS / OPERATING REVIEW / SUMMARY / APPENDICES
2015 PRELIMINARY RESULTS 4
A STEP CHANGE IN PERFORMANCE
– Record-level headline profit before tax - £45.4m* (2014: £19.5m)
– Record level development and trading gains – 69% increase to £45.7m (2014: £27.0m)
– Good visibility on future gains
– Continued NAV growth - 8.4% increase** in adjusted EPRA NAV per share
‒ £10.0m special dividend – paid out of strong cash flows
– Cathedral acquisition already adding value
– Management succession and shareholder alignment – strong leadership for the future
*Before exceptional items of £10.6m including termination costs of cross currency swap (£7.9m) and acquisition costs of Cathedral Group (£2.7m)
**7.7% growth before payment of special dividend and after restructure of Euro loan notes, cancelling previous mark to market swap deficit
OVERVIEW AND HIGHLIGHTS / FINANCIAL RESULTS / OPERATING REVIEW / SUMMARY / APPENDICES
2015 PRELIMINARY RESULTS 5
A STEP CHANGE IN PROFITABILITY
Expectations of gains to be realised across current portfolio
OVERVIEW AND HIGHLIGHTS / FINANCIAL RESULTS / OPERATING REVIEW / SUMMARY / APPENDICES
*Existing projects only
28.1 27.0
45.7
54.2 53.4
61.1
5.9 6.8
17.4
0.0
10.0
20.0
30.0
40.0
50.0
60.0
70.0
FY 2013 FY 2014 FY 2015 FY 2016 FY 2017 FY 2018
£’m
Realised gains Expected gains* Dividend
£26.3m
£50.4m £53.0m
Previous guidance
£42.8m
10.0
7.4
Special dividend
2015 PRELIMINARY RESULTS 6
FINANCIAL
RESULTS
• Featured property:
• Property name
• Description
OVERVIEW AND HIGHLIGHTS / FINANCIAL RESULTS / OPERATING REVIEW / SUMMARY / APPENDICES
2015 PRELIMINARY RESULTS 7
STRONG PERFORMANCE
28th Feb 2015 28th Feb 2014 Change in year
Headline profit before tax £45.4m* £19.5m 133%
EPRA Net Asset Value (NAV) pre-
special dividend
£355.6m £320.7m** 10.9%
EPRA NAV per share pre-special
dividend
284p 262p** 8.4%
EPRA Earnings per share 23.9p 7.8p 206.4%
Development and trading profits £45.7m £27.0m 69.3%
Final dividend 3.5p 3.2p 9.4%
Special dividend 8.0p - -
Balance sheet gearing 36.3% 48.0%
*Before exceptional items of £10.6m including termination costs of cross currency swap (£7.9m) and acquisition costs of Cathedral Group (£2.7m)
**Restated after restructure of Euro loan notes, cancelling previous mark to market swap deficit
OVERVIEW AND HIGHLIGHTS / FINANCIAL RESULTS / OPERATING REVIEW / SUMMARY / APPENDICES
2015 PRELIMINARY RESULTS 8
MOVEMENT IN EPRA NAV PER SHARE
THROUGH THE PERIOD
OVERVIEW AND HIGHLIGHTS / FINANCIAL RESULTS / OPERATING REVIEW / SUMMARY / APPENDICES
276
14
9
3
6
8 2 1
11
9
37
262
220
230
240
250
260
270
280
290
300
310
320
pence
2015 PRELIMINARY RESULTS 9
DEBT FINANCING
28 Feb 2015
£’m
28 Feb 2014
£’m
Gross debt 205.0 221.1
Cash (79.3) (67.3)
Net debt 125.7 153.8
Gearing 36.3% 48.0%
Share of net debt in joint ventures 46.8 28.1
Net debt including joint ventures 172.5 181.9
Gearing including joint ventures 49.8% 56.8%
Analysis of gross debt (excluding JVs)
Fixed rate 44.6% 43.5%
Capped / SWAP 31.0% 42.2%
Floating rate 24.4% 14.3%
Weighted average interest rate 5.4% 5.8%
Weighted average maturity 5.4 years 6.8 years
OVERVIEW AND HIGHLIGHTS / FINANCIAL RESULTS / OPERATING REVIEW / SUMMARY / APPENDICES
2015 PRELIMINARY RESULTS 10
ORDINARY
DIVIDENDS
DEVELOPMENT
AND TRADING
GAINS
NET FREE
CASH FLOW
CASH
PROFIT
NET
FINANCE
COST OVERHEAD
SHORTFALL
CORPORATION
TAX
REINVESTMENT
IN PROJECTS
CAPITAL
RETURN
HOW OUR CASH FLOW WORKS
OVERVIEW AND HIGHLIGHTS / FINANCIAL RESULTS / OPERATING REVIEW / SUMMARY / APPENDICES
2015 PRELIMINARY RESULTS 11
FINANCIAL HIGHLIGHTS
‒ Step change in level of performance
‒ Significant increase in dividends from strong cash flow
‒ Strong financial position:
‒ Efficiency of balance sheet improved ‒ £0.8m p.a. of finance cost savings from restructure of Euro loan notes
‒ Focus on capital discipline ‒ Capacity for recurring capital distributions from strong cash flow
‒ £185.4m of new debt facilities secured in the year - Strong capital partner relationships
‒ Balance Sheet gearing modest at 36.3% (excluding JVs)
OVERVIEW AND HIGHLIGHTS / FINANCIAL RESULTS / OPERATING REVIEW / SUMMARY / APPENDICES
2015 PRELIMINARY RESULTS 12
OPERATING REVIEW
• Featured property:
• 399 Edgware Road
• Project forward funded and under construction
OVERVIEW AND HIGHLIGHTS / FINANCIAL RESULTS / OPERATING REVIEW / SUMMARY / APPENDICES
2015 PRELIMINARY RESULTS 13
A BALANCED APPROACH
INVESTMENT
PORTFOLIO
DEVELOPMENT AND
TRADING PORTFOLIO
FY’15 KPIs*
– £45.7m of realised
gains
– 8 projects on site
– 6 new projects acquired
FY’15 KPIs*
– £13.8m rental income
– 12.2% valuation gain (inc JVs)
– £60.8m of disposals
– £65.7m of acquisitions
Objectives
– Recurring income stream
– Contributes to NAV growth
Key value drivers
– Lease re-structures
– Improve tenant mix and
rental tone
– Asset management including
development
Objective
– Generate short to medium-
term profit realisation
Key value drivers
– Land improvement profit
– Development profit
– Arbitrage/mispricing
INVESTMENT
PORTFOLIO
42% of
Book Value
£211m
capital value
DEVELOPMENT
AND TRADING
PORTFOLIO
58% of
Book Value
£291m
capital value
*All since 1st March 2014 to date
OVERVIEW AND HIGHLIGHTS / FINANCIAL RESULTS / OPERATING REVIEW / SUMMARY / APPENDICES
2015 PRELIMINARY RESULTS 14
INVESTMENT
PORTFOLIO
Featured property:
Chippenham Shopping
Centre
Acquired in September
2014 as part of ongoing
capital recycling within
portfolio
OVERVIEW AND HIGHLIGHTS / FINANCIAL RESULTS / OPERATING REVIEW / SUMMARY / APPENDICES
2015 PRELIMINARY RESULTS 15
INVESTMENT PORTFOLIO AT A GLANCE
NUMBER OF ASSETS
21 Feb 2014: 24
SIZE OF PORTFOLIO
£203.3m Feb 2014: £202.1m
INITIAL YIELD
6.87% Feb 2014: 7.21%
VALUATION INCREASE (inc JVs)
£11.2m Feb 2014: £4.8m
CONTRACTED RENTAL INCOME
£13.77m Feb 2014: £14.1m
ESTIMATED RENTAL VALUE
£15.0m Feb 2014: £14.9m
VOID RATE
4.97% Feb 2014: 6.27%
OVERVIEW AND HIGHLIGHTS / FINANCIAL RESULTS / OPERATING REVIEW / SUMMARY / APPENDICES
EQUIVALENT YIELD
7.42% Feb 2014: 7.48%
NUMBER OF ASSETS
21 Feb 2014: 24
2015 PRELIMINARY RESULTS 16
INVESTMENT PORTFOLIO STRATEGY
‒ Focus on assets with:
‒ Core defensive income
‒ High yields
‒ Value enhancement potential
‒ Majority of assets are convenience retail destinations (73%) with a food store anchor to drive footfall or leisure assets (11%)
‒ Size of portfolio is appropriate to contribute to wider returns target for the company and support business overheads
‒ 3-5 year business plan for each asset maintains investment discipline and allows capital recycling
Top 5 occupiers as at 28th Feb 2015
Annual rent
£m
% of
contracted rent
1 Waitrose 1.5 11.1%
2 Matalan 0.7 5.2%
3 J Sainsbury 0.5 3.6%
4 Sports Direct 0.3 2.5%
5 Wilkinson 0.3 2.1%
OVERVIEW AND HIGHLIGHTS / FINANCIAL RESULTS / OPERATING REVIEW / SUMMARY / APPENDICES
2015 PRELIMINARY RESULTS 17
DISPOSAL
COLSTON TOWER
‒ Iconic office tower in central Bristol
‒ Held for 3.5 years
‒ 54,900 sq. ft. of lettings completed in period
‒ Rental tone increased from £9psf to £14psf
‒ 34% valuation growth during ownership (net of capex)
‒ 18.5% IRR
Key stats
Purchase price £7.6m
Date acquired 2011
Purchase yield 10.08%
Sale price £11.3m
Exit yield 8.25%
OVERVIEW AND HIGHLIGHTS / FINANCIAL RESULTS / OPERATING REVIEW / SUMMARY / APPENDICES
2015 PRELIMINARY RESULTS 18
ACQUISITION
KILLINGWORTH SHOPPING CENTRE
‒ Principal retail provision in Killingworth, a commuter suburb of
Newcastle
‒ Morrisons anchor foodstore (outside of ownership)
‒ Key tenants: Matalan, Wilkinson, Poundworld
‒ Asset management plans underway to drive value: ‒ Lease re-structures
‒ Deliver additional retail space to broaden offer
‒ Increase dwell time
Key stats
Purchase price £19.2m
Dev Secs’ share 100%
NIY 8.27%
Occupancy rate 100%
WAULT (to tenant
break) 5.1 years
Projected 1 yr cash
on equity return 9.43%
OVERVIEW AND HIGHLIGHTS / FINANCIAL RESULTS / OPERATING REVIEW / SUMMARY / APPENDICES
2015 PRELIMINARY RESULTS 19
DEVELOPMENT
AND TRADING
PORTFOLIO
Featured property:
Telegraph Works,
Greenwich
£10.2m of profit realised
during the year
OVERVIEW AND HIGHLIGHTS / FINANCIAL RESULTS / OPERATING REVIEW / SUMMARY / APPENDICES
2015 PRELIMINARY RESULTS 20
DEVELOPMENT AND TRADING
HOW WE CREATE VALUE
OVERVIEW AND HIGHLIGHTS / FINANCIAL RESULTS / OPERATING REVIEW / SUMMARY / APPENDICES
2015 PRELIMINARY RESULTS 21
DEVELOPMENT AND TRADING PORTFOLIO
OVERVIEW
Development and
Trading Portfolio
Mixed-use
Regeneration
Projects
Trading Assets
‒ Clear areas of focus: ‒ Sector
‒ Geography
‒ Planning gain is key value driver
‒ Equity light model with high upside
potential
‒ Projects de-risked via phased delivery +
forward funding/pre-sales/pre-lets
‒ Target 2.0x – 5.0x equity multiple
‒ Good buying opportunities available +
terms of trade in our favour
‒ Short-term project delivery + profit flow
‒ Planning gain often key
‒ Target IRR of 30% and 1.5x equity
multiple and above
OVERVIEW AND HIGHLIGHTS / FINANCIAL RESULTS / OPERATING REVIEW / SUMMARY / APPENDICES
2015 PRELIMINARY RESULTS 22
CLEAR GEOGRAPHIC FOCUS
LONDON CITY REGION
London City Region
‒ Greater/suburban London focus (outside of Underground Zone 1)
‒ 90km radius of London – current population of 20 million
‒ Locations served by and directly accessible to the capital in 1 hour by public transport
‒ Deep labour pools and strength of demand are key
OVERVIEW AND HIGHLIGHTS / FINANCIAL RESULTS / OPERATING REVIEW / SUMMARY / APPENDICES
Development and trading portfolio by WIP
Greater London (44.2%)
South East (16.4%)
Republic of Ireland (15.2%)
North West (6.2%)
Other (18.0%)
2015 PRELIMINARY RESULTS 23
CLEAR GEOGRAPHIC FOCUS
LONDON CITY REGION
OVERVIEW AND HIGHLIGHTS / FINANCIAL RESULTS / OPERATING REVIEW / SUMMARY / APPENDICES
2015 PRELIMINARY RESULTS 24
CLEAR GEOGRAPHIC FOCUS
MANCHESTER/DUBLIN
Manchester City Region
‒ UK’s ‘second’ city
‒ Strong leadership and devolved powers
‒ Dev Secs has track record and strong local relationships
‒ 4 live projects
Dublin City Region
‒ Competitive advantage:
‒ Lack of ‘legacy’ debt issues
‒ Early mover advantage
‒ Market returning to growth and liquidity
‒ Positive business environment and growing investor and occupier demand
‒ Natural balance sheet hedge with Euro loan notes
‒ 7 real estate opportunities secured to date
OVERVIEW AND HIGHLIGHTS / FINANCIAL RESULTS / OPERATING REVIEW / SUMMARY / APPENDICES
2015 PRELIMINARY RESULTS 25
MIXED-USE REGENERATION STRATEGY
Regeneration projects:
‒ Continued opportunity + competitive advantage
‒ Planning gain is key
PPP projects:
‒ Partnerships with local authorities and public bodies
‒ 40% of land in UK owned by councils
‒ Placemaking is key
‒ Current project pipeline totals £1.6bn GDV
Office-led development:
‒ Equity light
‒ Focus: transport-connected locations outside of Central London ‘core’
‒ Long-track record & deep expertise
FY’15 KPIs*
‒ 10 planning consents secured ‒ 7 planning applications
submitted ‒ £246m of funding secured to
enable project delivery ‒ 8 projects under construction
OVERVIEW AND HIGHLIGHTS / FINANCIAL RESULTS / OPERATING REVIEW / SUMMARY / APPENDICES
*All since 1st March 2014 to date
2015 PRELIMINARY RESULTS 26
RECORD LEVEL DEVELOPMENT AND TRADING
PROFITS
28th Feb 2015
Realised profits (£’m)
Telegraph Works, Greenwich 10.2
10 Hammersmith Grove 6.7
North London office portfolio 6.3
399 Edgware Road 4.4
Romford 3.8
Sevenoaks 3.1
12 Hammersmith Grove 2.7
The Old Vinyl Factory 1.5
Other (NB: includes PM fees, Deeley Freed
partnership and rental income) 7.0
Gross profit £45.7 m
OVERVIEW AND HIGHLIGHTS / FINANCIAL RESULTS / OPERATING REVIEW / SUMMARY / APPENDICES
2015 PRELIMINARY RESULTS 27
OUTLOOK FOR FY16 – MAIN CONTRIBUTORS
TO DEVELOPMENT AND TRADING GAINS
Project Dev Secs’
share
Dev Secs’ equity
exposure (as at 28th Feb
2015)
Status Anticipated
profit
Profit trigger
399 Edgware Road 100% £5.5m Under construction £8m Development profit upon practical
completion of food store and retail
elements
Dublin
1) Percy Place
2) Charlemont Clinic
3) Robswall, Malahide
100% £13.0m 1) Under construction
2) In planning
3) Marketing for private sale
of residential units
£8m 1) Profit from private sale of apartments
and sale of retail/office space to fund
2) Land improvement profit from sale of
consented site
3) Profit from sale of all residential units
Wind farms 100% £3.5m In planning £4m Land improvement profit from sale of
consented sites
Wick Lane Wharf 35% £0m Marketing for private sale of
residential units
£4m Profit from sale of all residential units and
promoted interest
The Deptford Project
100%
£6.2m Under construction £3m
Completion of pre-sold development
Brentwood 100%
£3.7m Planning secured £3m Land improvement profit from sale of site
Cross Quarter, Abbey
Wood
100%
£2.4m
Under construction £3m
Development profit upon practical
completion of foodstore + land
improvement profit from sale of remaining
land
Hale Barns 100% £3.8m Under construction £2m Development profit upon practical
completion of retail element and sale of
residential units
Norwich 100% £4.1m £2m
Land improvement profit from sale of land
Other £17m
Total £54m
OVERVIEW AND HIGHLIGHTS / FINANCIAL RESULTS / OPERATING REVIEW / SUMMARY / APPENDICES
2015 PRELIMINARY RESULTS 28
CASE STUDIES
• Featured property:
• 399 Edgware Road
• Project forward funded and under construction
OVERVIEW AND HIGHLIGHTS / FINANCIAL RESULTS / OPERATING REVIEW / SUMMARY / APPENDICES
2015 PRELIMINARY RESULTS 29
DEVELOPMENT AND TRADING – HOW WE
CREATE VALUE
OVERVIEW AND HIGHLIGHTS / FINANCIAL RESULTS / OPERATING REVIEW / SUMMARY / APPENDICES
2015 PRELIMINARY RESULTS 30
TRADING PORTFOLIO
NORTH LONDON OFFICE PORTFOLIO
2015 PRELIMINARY RESULTS 31
PUBLIC PRIVATE PARTNERSHIP MODEL
OVERVIEW AND HIGHLIGHTS / FINANCIAL RESULTS / OPERATING REVIEW / SUMMARY / APPENDICES
2015 PRELIMINARY RESULTS 32
DEVELOPMENT AND TRADING – HOW WE
CREATE VALUE
OVERVIEW AND HIGHLIGHTS / FINANCIAL RESULTS / OPERATING REVIEW / SUMMARY / APPENDICES
2015 PRELIMINARY RESULTS 33
PUBLIC PRIVATE PARTNERSHIP
THE DEPTFORD PROJECT
2015 PRELIMINARY RESULTS 34
PUBLIC PRIVATE PARTNERSHIP
THE DEPTFORD PROJECT
2015 PRELIMINARY RESULTS 35
DEVELOPMENT AND TRADING – HOW WE
CREATE VALUE
OVERVIEW AND HIGHLIGHTS / FINANCIAL RESULTS / OPERATING REVIEW / SUMMARY / APPENDICES
2015 PRELIMINARY RESULTS 36
MIXED-USE REGENERATION
399 EDGWARE ROAD
2015 PRELIMINARY RESULTS 37
MIXED-USE REGENERATION
399 EDGWARE ROAD
2015 PRELIMINARY RESULTS 38
OFFICE-LED DEVELOPMENT
10/12 HAMMERSMITH GROVE
2015 PRELIMINARY RESULTS 39
SUMMARY
• Featured property:
• Property name
• Description
OVERVIEW AND HIGHLIGHTS / FINANCIAL RESULTS / OPERATING REVIEW / SUMMARY / APPENDICES
2015 PRELIMINARY RESULTS 40
A STEP CHANGE FOR DEVELOPMENT
SECURITIES
‒ Record level results and a step change in performance
‒ Business positioned for growth and a sustained, high level of returns
‒ A clear strategic focus for the business
‒ Balance sheet efficiency improved with focus on a disciplined capital structure
‒ Commitment to recurring capital distributions from strong cash flow
‒ Senior management deepened, aligned with shareholder interests and incentivised to maximise total returns
OVERVIEW AND HIGHLIGHTS / FINANCIAL RESULTS / OPERATING REVIEW / SUMMARY / APPENDICES
2015 PRELIMINARY RESULTS 41
APPENDICES
• Featured property:
• Property name
• Description
OVERVIEW AND HIGHLIGHTS / FINANCIAL RESULTS / OPERATING REVIEW / SUMMARY / APPENDICES
2015 PRELIMINARY RESULTS 42
APPENDIX 1:
MANAGEMENT
TEAM
OVERVIEW AND HIGHLIGHTS / FINANCIAL RESULTS / OPERATING REVIEW / SUMMARY / APPENDICES
2015 PRELIMINARY RESULTS 43
MANAGEMENT TEAM
Michael Marx
Chief Executive
(Standing down at 14th July 2015 AGM)
Richard Upton
Executive Director
(To be appointed Deputy CEO at 14th July AGM)
Marcus Shepherd
Finance Director
Matthew Weiner
Executive Director
(To be appointed CEO at 14th July 2015 AGM)
OVERVIEW AND HIGHLIGHTS / FINANCIAL RESULTS / OPERATING REVIEW / SUMMARY / APPENDICES
2015 PRELIMINARY RESULTS 44
APPENDIX 2:
FINANCIAL SLIDES
OVERVIEW AND HIGHLIGHTS / FINANCIAL RESULTS / OPERATING REVIEW / SUMMARY / APPENDICES
2015 PRELIMINARY RESULTS 45
NET DEBT, NET ASSETS AND GEARING
OVERVIEW AND HIGHLIGHTS / FINANCIAL RESULTS / OPERATING REVIEW / SUMMARY / APPENDICES
304.5 306.7 312.6
320.3
335.5 346.4
147.1 146.8 143.0 153.8 150.7
125.7
0
10
20
30
40
50
60
70
80
90
100
0
50
100
150
200
250
300
350
Aug 12 Feb 13 Aug 13 Feb 14 Aug 14 Feb-15
% £’m
Net assets (LHS) Net debt (LHS) Gearing excl JVs (RHS)
2015 PRELIMINARY RESULTS 46
DEBT MATURITY PROFILE
OVERVIEW AND HIGHLIGHTS / FINANCIAL RESULTS / OPERATING REVIEW / SUMMARY / APPENDICES
20
29
72.7
14.1
5.3
32.9 34.1
0
10
20
30
40
50
60
70
£’m
Drawn (Investment) Drawn (Development) Other
2015 PRELIMINARY RESULTS 47
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 2014 320.2
Contribution from investment property 13.9 13.9
Property revaluations 11.2 11.2
Contribution from development and trading portfolio 45.7 45.7
Operating costs (17.9) (17.9)
Cathedral acquisition costs (2.7) (2.7)
Net interest costs (11.8) (11.8)
Share issue 6.2 6.2
Swap revaluations 0.1 0.1
Foreign currency movements 2.3 2.3
Other (0.6) (0.6)
Taxation (3.2) (3.2)
Dividends (17.0) (17.0)
Non controlling interest (0.7) (0.7)
Sub-total 25.5 8 17.5
Net assets attributable to shareholders at 28 Feb 2015 345.7
OVERVIEW AND HIGHLIGHTS / FINANCIAL RESULTS / OPERATING REVIEW / SUMMARY / APPENDICES
2015 PRELIMINARY RESULTS 48
APPENDIX 3:
INVESTMENT STATS
OVERVIEW AND HIGHLIGHTS / FINANCIAL RESULTS / OPERATING REVIEW / SUMMARY / APPENDICES
2015 PRELIMINARY RESULTS 49
INVESTMENT PROPERTY PORTFOLIO
CONTRIBUTION (INCLUDES SHARE OF JVS)
28th Feb 2015
£m
28th Feb 2014
£m
Revenue 12.9 15.1
Direct costs (2.7) (2.7)
10.2 12.4
Gains on disposals 3.8 0.5
Asset management fees and joint venture net income
(0.1)
1.0
Contribution prior to revaluation 13.9 13.9
Revaluation gain/(loss)
- Direct
- Share of JV
7.6
3.4
3.1
1.7
Contribution 24.9 18.7
OVERVIEW AND HIGHLIGHTS / FINANCIAL RESULTS / OPERATING REVIEW / SUMMARY / APPENDICES
2015 PRELIMINARY RESULTS 50
INVESTMENT PORTFOLIO ANALYSIS
Sector
Capital value
(£m)
% of portfolio by
capital value
Void rates
(%)
Net initial yield
(%)
Weighted
average lease
length
(years)
London/SE
weighting
(%)
Valuation
movement** (%)
Foodstore anchored
(Waitrose and Sainsbury’s) 73.6 39.2 0.95 6.3 12.1 26.4 2.1
Foodstore anchored (outside DS
ownership) 63.3 33.8 9.02 7.4 5.5 7.2 4.7
Other Retail 20.4 10.9 0.43 8.8 6.0 0.0 (2.2)
Commercial 0.7 0.4 0.00 13.0 2.3 0.0 0.0
Mixed-use 8.6 4.6 3.23 8.4 4.2 0.0 5.2
Leisure 21.0 11.2 12.05 5.4 25.8 7.4 8.4
Total 187.6 100.0 4.97 6.9 10.4 40.9 3.3
*Analysis covers core investment assets – direct investment portfolio excluding developable land and site assembly
**On a like for like basis
OVERVIEW AND HIGHLIGHTS / FINANCIAL RESULTS / OPERATING REVIEW / SUMMARY / APPENDICES
2015 PRELIMINARY RESULTS 51
CAPITAL RECYCLING - DISPOSALS
Colston Tower Portfolio of investment
assets
Winchester
shopping centre
Eltham
Purchase price £7.6m n/a £18.2m £4.7m
Date acquired 2011 Various 2006 2009
Purchase yield 10.08% n/a 8.11% 8.75%
Sale price £11.3m £20.9m £22.9m £5.7m
Exit yield 8.25% 7.49% 4.86% 6.99%
OVERVIEW AND HIGHLIGHTS / FINANCIAL RESULTS / OPERATING REVIEW / SUMMARY / APPENDICES
2015 PRELIMINARY RESULTS 52
CAPITAL RECYCLING: ACQUISITIONS
World of Golf, Sidcup Chill Factore, Trafford Killingworth Shopping
Centre, Newcastle
Borough Parade,
Chippenham
Price £2.3m £15.5m £19.2m £16.3m
Dev Secs share 100% 80% 100% 100%
NIY 7.25% 9.9% 8.27% 7.02%
Occupancy rate 100% 94% 100% 98.8%
Top tenants Ashtour (sub-let to American
Golf)
Snow & Rock, Evans Cycles,
JD Wetherspoon, Nando’s
Matalan, Wilkinson,
Poundworld, Card Factory
Waitrose, New Look, Argos,
JD Wetherspoon
WAULT (to tenant
break) 19.5 years 5.2 years 5.1 years 6.0 years
Projected 1 yr cash
on equity return 7.6% 18.0% 9.4% 8.5%
Acquisition
rationale • Stable, long-term income
stream
• Longer-term development
potential
• Value-add potential from
operating side of business
• Foodstore anchor (outside
of ownership)
• Principal retail destination
for town
• Stable long-term income
and occupier base
• Affluent catchment and
principal retail destination
for town
• Strong foodstore anchor
• Stable income and
occupier base
OVERVIEW AND HIGHLIGHTS / FINANCIAL RESULTS / OPERATING REVIEW / SUMMARY / APPENDICES
2015 PRELIMINARY RESULTS 53
INVESTMENT PORTFOLIO ANALYSIS*
57.2% 21.8%
15.5%
3.9% 1.6%
Gross rental income - tenant profile
PLC/nationals
Local traders
Regional multiples
FTSE 100
Government
30.8%
41.5%
10.5%
3.2% 14.0%
Gross rental income - lease term profile
0 - <5 years
5 - <10 years
10 - <15 years
15 - <20 years
20 years +
81.90%
9.10%
4.70% 3.80% 0.5%
Capital value - sector analysis
Retail
Mixed
Office
Residential
Industrial
*covers core direct investment portfolio
36.2
21.5
12.1
9.6
5.9
4.8
4.4 3.6
1.9
Location of assets by capital value (%)
South East
South West
North West
North East
Wales
London
Midlands
Northern Ireland
Scotland
OVERVIEW AND HIGHLIGHTS / FINANCIAL RESULTS / OPERATING REVIEW / SUMMARY / APPENDICES
2015 PRELIMINARY RESULTS 54
APPENDIX 4:
CASE STUDIES
OVERVIEW AND HIGHLIGHTS / FINANCIAL RESULTS / OPERATING REVIEW / SUMMARY / APPENDICES
2015 PRELIMINARY RESULTS 55
TRADING CASE STUDY
North London office portfolio
Acquisition ‒ Portfolio of five office buildings acquired for £17.5m
Finance
‒ Three year debt facility secured against acquisition and planning costs Planning
‒ Permitted development rights secured for residential conversion of three
properties
Disposal
‒ Properties sold individually to various private investors
Outcomes
‒ Total project profit of £6.3m
‒ IRR of over 200% and 1.9x equity multiple
OVERVIEW AND HIGHLIGHTS / FINANCIAL RESULTS / OPERATING REVIEW / SUMMARY / APPENDICES
2015 PRELIMINARY RESULTS 56
PUBLIC PRIVATE PARTNERSHIP CASE STUDY
Deptford Project
Land ‒ 2-acre site adjacent to Deptford railway station ‒ Partnership with freeholder, Lewisham Council Planning – Planning consent secured for:
‒ 132 residential units
‒ 11,000 sq. ft. of commercial and retail space
‒ New public realm
Funding ‒ £25.1m bank facility secured to finance construction costs
‒ 121 residential units pre-sold to IPG, de-risking the project
‒ Agreement for lease exchanged with Peabody to manage 8 affordable units
Delivery – Cathedral manages construction and delivery of residential units Outcomes – Profit share with Lewisham council upon practical completion – target profit
on cost of in excess of 15%
– Commercial and retail space to be retained as investment
OVERVIEW AND HIGHLIGHTS / FINANCIAL RESULTS / OPERATING REVIEW / SUMMARY / APPENDICES
2015 PRELIMINARY RESULTS 57
MIXED-USE REGENERATION CASE STUDY
399 Edgware road
Planning
– Planning consent secured for:
– 81,000 sq. ft. food store
– 183 residential units
– 50,000 sq. ft. restaurant and retail space
Funding
– Foodstore pre-let to Morrisons and forward funded
by clients of Aberdeen Asset Management
– Residential quarter funded by L&Q
Delivery
– Development Securities manages construction of development and
residential sales process
– Fixed price contracts for build out of residential and foodstore elements
Outcomes
– Land improvement profit + profit share upon completion
of food store and residential units
OVERVIEW AND HIGHLIGHTS / FINANCIAL RESULTS / OPERATING REVIEW / SUMMARY / APPENDICES
2015 PRELIMINARY RESULTS 58
OFFICE DEVELOPMENT CASE STUDY
10 Hammersmith Grove
Land ‒ Land deal with freeholder TfL – deferred payment in exchange for profit
share upon delivery of project ‒ Element of fixed land price just £11 psf vs £820 psf capital value ‒ Minimal equity requirement – c.£5m
Planning
‒ Planning consent secured for two-phase office development of 280,000
sq. ft.
‒ 10 Hammersmith Grove = 110,000 sq. ft. grade A office building
Funding
‒ £50m forward funding secured from Aberdeen Asset Management for
construction of building
Delivery
‒ Development Securities manages construction and letting of the building
Outcomes
‒ Total development profit of £6.7m
‒ Capital values 39% ahead of pro-forma
‒ Average rental values 25% ahead of previous Hammersmith benchmark
OVERVIEW AND HIGHLIGHTS / FINANCIAL RESULTS / OPERATING REVIEW / SUMMARY / APPENDICES
2015 PRELIMINARY RESULTS 59
APPENDIX 5:
OUR MARKET
OVERVIEW AND HIGHLIGHTS / FINANCIAL RESULTS / OPERATING REVIEW / SUMMARY / APPENDICES
2015 PRELIMINARY RESULTS 60
SECONDARY TRADES TO CONTINUE
Vendor Closed sales (€m)
1 IBRC 18,704
2 NAMA 10,101
3 Royal Bank of Scotland 9,612
4 Catalunya Banc 6400
5 Lloyds Banking Group 5,842
6 Hypothekenbank Frankfurt 4,400
7 National Australia Bank 2,391
8 Nationwide 2,152
9 UKAR 2,000
10 Bankia 1,660
Top 10 vendors 2014
Source: Cushman and Wakefield Corporate Finance
OVERVIEW AND HIGHLIGHTS / FINANCIAL RESULTS / OPERATING REVIEW / SUMMARY / APPENDICES
2015 PRELIMINARY RESULTS 61
GREAT WALL OF MONEY
145
47 45
29
24
0
20
40
60
80
100
120
140
160
United States United Kingdom China Japan Germany
$’bn
Source: DTZ
OVERVIEW AND HIGHLIGHTS / FINANCIAL RESULTS / OPERATING REVIEW / SUMMARY / APPENDICES
Estimated capital targeting commercial real estate in top five markets
2015 PRELIMINARY RESULTS 62
LENDING TO COMMERCIAL PROPERTY
Source: Capital Economics
OVERVIEW AND HIGHLIGHTS / FINANCIAL RESULTS / OPERATING REVIEW / SUMMARY / APPENDICES
-8
-6
-4
-2
0
2
4
6
8
10
12
14
4
5
6
7
8
9
10
11
12
13
1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015
Lending to property as a % of total loan book (LHS)
Net lending to property, £bn per quarter (RHS)
2015 PRELIMINARY RESULTS 63
YIELD SPREAD STILL WIDE
0
20
40
60
80
100
120
140
160
0
20
40
60
80
100
120
140
160
2007 2008 2009 2010 2011 2012 2013 2014
Prime - secondary yield spread (Bps)
Source: Capital Economics
OVERVIEW AND HIGHLIGHTS / FINANCIAL RESULTS / OPERATING REVIEW / SUMMARY / APPENDICES
2015 PRELIMINARY RESULTS 64
DISCLAIMER
This presentation has been prepared by Development Securities PLC (the “Company”). No representation or warranty (express or implied) of any
nature is given nor is any responsibility or liability of any kind accepted by the Company or any of its directors, officers, employees, advisers,
representatives or other agents, with respect to the truthfulness, completeness or accuracy of any information, projection, representation or warranty
(expressed or implied), omissions, errors or misstatements in this presentation, or any other written or oral statement provided.
In particular, no responsibility or liability is or will be accepted and no representation or warranty is or is authorised to be given as to the accuracy,
reliability or reasonableness of any forward-looking statement, including any future projections, management targets, estimates or assessments of
future prospects contained in this presentation, or of any assumption or estimate on the basis of which they have been given (which may be subject
to significant business, economic or competitive uncertainties and contingencies beyond the control of the management of the Company). Any such
forward-looking statements have not been independently audited, examined or otherwise reviewed or verified.
All views expressed in this presentation are based on financial, economic, market and other conditions prevailing as of the date of this presentation.
The Company does not undertake to provide access to any additional information or to update any future projections, management targets,
estimates or assessment of future prospects or any other forward-looking statements to reflect events that occur or circumstances that arise after
the date of this presentation, or to correct any inaccuracies in this presentation which may become apparent. Past performance is not indicative of
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