Notting Hill Housing Trust Investor Presentation
Kate Davies Chief Executive Paul Phillips Finance Director Andrew Sugden Assistant Finance Director
February 2014 www.nottinghillhousing.org.uk Disclaimer
For the purposes of the following disclaimer, references to this presentation shall mean these presentation slides and shall be deemed to include references to any related speeches made by or to be made by the management of Notting Hill Housing Trust (NHHT), any questions and answers in relation thereto and any other related verbal or written communications. This presentation may only be communicated or caused to be communicated in the United Kingdom to persons who have professional experience in matters relating to investments falling within Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (the “Order”) or high net worth entities who fall within Article 49(2)(a) to (d) of the Order (all such persons being referred to as “relevant persons”). Any investment or investment activity to which this presentation relates is available only to relevant persons and will be engaged only with relevant persons. This presentation is being directed at you solely in your capacity as a relevant person (as defined above) for your information and may not be reproduced, redistributed or passed on to any other person or published, in whole or in part, for any purpose, without the prior written consent of NHHT. The information in this presentation is confidential and subject to change without notice, its accuracy is not guaranteed, and it may be incomplete and is condensed. This presentation will be superseded by the final version of the prospectus or offering document relating to the proposed transaction and where there is a discrepancy between the information in this presentation and in the final offering circular, that contained in the final offering circular takes precedence. These presentation slides may contain certain statements, statistics and projections that are or may be forward-looking. The accuracy and completeness of all such statements, is not warranted or guaranteed. By their nature, forward-looking statements involve risk and uncertainty because they relate to events and depend on circumstances that may occur in the future. Although NHHT believes that the expectations reflected in such statements are reasonable, no assurance, representation or warranty can be given that such expectations will prove to be correct. There are a number of factors which could cause actual results and developments to differ materially from those expressed or implied by such forward-looking statements. This presentation does not constitute an offer to sell or the solicitation of an offer to buy any securities of the Issuer. It is an advertisement and does not comprise a prospectus for the purposes of EU Directive 2003/71/EC and/or Part VI of the Financial Services and Markets Act 2000 of the United Kingdom or otherwise. The definitive terms of the securities described herein will be described in the final version of the offering circular. Investors should not subscribe for any securities referred to herein except on the basis of information contained in the final form of the offering circular. When available, the final offering circular will be made available to the public in accordance with EU Directive 2003/71/EC and/or Part VI of the Financial Services and Markets Act 2000.
Page 2 Table of Contents
1. Introduction
2. Overview of Notting Hill Housing Group
3. Development Programme
4. Operational Review
5. Financial Review
6. Treasury Policies
7. Expected Issue and Security Summary
Page 3 Introduction
Page 4 Key Messages
• Notting Hill Housing Group (“NHHG”) operates predominantly in London, with its roots in the Royal Borough of Kensington & Chelsea and the London Borough of Hammersmith & Fulham, celebrating its 50th anniversary • A member of G15 group of London’s largest housing associations • As of 31st March, 2013 – 27,170 units under management with a vacant possession value of £6.8 billion • Strong and long-standing management team • Largest HCA grant and development programme in London, supported by sound financials and a measured approach to balance sheet management • Successful development track record • Strong credit rating of A2 by Moody’s • Maintained excellent regulator ratings for governance, management and financial strength
Page 5 Overview of Notting Hill Housing Group
Folio, Islington, N1 Boatyard, Ealing, UB2 Exchange, Bermondsey SE16 Overview and Recent Developments
Overview Events: Recent Developments • Leading London Housing Association, • Selected by LB Southwark for the formed in 1963 regeneration of the Aylesbury Estate • Core business remains unchanged • Celebrated our 50th anniversary with primary focus on general needs housing in London • Largest ever sales programme • Strong governance with a skilled and achieved in 2013 – beating targets by experienced board more than 10% • • Operates within a highly regulated Funding in place for all committed sector developments • • Flexibility to respond to political Will deliver HCA programme in full change and Welfare Reform
High quality assets in high demand areas
Page 7 NHHG Group Structure
Registered with the HCA with Charitable Rules
Notting Hill Housing Trust (“NHHT”)
The Issuer and major asset owner
Notting Hill Notting Hill Notting Hill Presentation Touareg Trust Home Ownership Commercial Properties Market Rent Market Rent Student Shared accommodation ownership Investment vehicle Market rent Market rent (for build for sale operation)
Page 8 Governance Structure
Board Members Executive Management Team
Paul Hodgkinson (Chairman) Kate Davies (Chief Executive)
Alex Phillips Paul Phillips (Finance)
Sophie Warner John Hughes (Development) Debra Yudolph Andy Belton (Commercial Operations) Mohan Yogendran Andrew Muir (Corporate Services) Sue Hunt
Kath King (Asset Management) Linde Carr
Bukky Bird Mark Vaughan (NHHT)
Alastair Moss
A broad range of commercial and operational skills
Page 9 NHHG Housing Stock by Location
Group Stock Map 27,170 properties under management
Page 10 Core Asset Base
Top five locations of NHHG assets (61% of all stock)
Borough Units Share of Total Hammersmith & Fulham 4,684 17% Kensington & Chelsea 4,287 16% Hounslow 2,685 10% Lambeth 2,640 10% Ealing 2,267 8% Average gross cost per social rented unit - £97,000
Isokon, Hampstead, RG5 Fabrik, Brixton, SE5 As at 31 March 2013
Page 11 NHHG Housing Stock by Type
30,000 Social Rented
25,000 Shared Ownership
Temporary Housing 20,000 Leased Housing
15,000 Market Rent
Intermediate Rent 10,000 Student Accommodation
5,000 Supported Housing
Leashold Management 0 2008/9 2009/10 2010/11 2011/12 2012/13
Annual Accounts 2012-2013
Page 12 Development Programme
Grange Walk, Bermondsey, SE1 Other Recent Successes
• Selected by the London Borough of Southwark to lead on the redevelopment of the Aylesbury Estate – a project involving expenditure of over £800m over a 20 year period • Selected by the HCA for a £45m investment in 141 market rent homes to be purchased from the Berkeley Group • Allocated funds for 1,356 homes under the Mayor’s “building the pipeline” programme
Page 14 Development Pipeline through to 2020
• Over 8,000 homes in identified programme • Grant allocations for 4,000 homes, to be delivered by 2017 • Secured 60% of sites for new programmes through to 2018 • Overall target for development is 1,400 homes p.a.
Page 15 Map of NHHG Development Programme
• HCA grant will support development at these sites
Page 16 Recent Typical NHHG Development
• The Meadows, Mitcham • Grant: £22m • Completion: April 2013 • Sales values: £150,000 to £240,000 • Mix: • First tranche sales achieved 41% • 110 Social Rent • Average sale price • 52 Shared Ownership • Shared ownership £73,000 • 50 Private Sale • Private sale £200,000 • Capital investment: £42m • Surplus £5.1m • Sales margin 36%
Page 17 Operational Review
Orbis Wharf, Battersea, SW11 Key Performance Indicators
2013/2014 2013/2014 Measure 2011 2012 2013 Q3 Target Homes 895 1,580 536 198 1,332 completed Sales time to completion 7.8 14 10 14 12 (weeks) Rent collection 98.9% 100% 99% 100% 100.5% rate Rent losses 1.98% 1.60% 1.60% 1.60% 1.20% due to voids Customer 67% 74% 75% 72% 78% satisfaction
Page 19 Effects of Welfare Reform on Core Social Rent Business
Issue NHHT Impact Under • We estimate that about £1.2m of income (1.2%) is at risk in this year. occupation • 949 tenants are affected • Increase in arrears of those affected from 8.2% to 10% but total arrears have fallen to 7.6% • 57% of tenants affected seeing an increase in arrears • £100,000 has been offset by discretionary housing benefit • 83% of those affected have paid some or all of the increase • We now expect to recover most of the £1.2m with about £0.4m lost Benefits cap • We estimate that amount at risk is about £0.6m in the current year. • 114 tenants affected but we expect to collect about £0.5m. Universal • Additional training to housing officers and improving systems. credit Working with London Credit Union and The Money Advisory Service • Can comfortably withstand a doubling of arrears • Welfare benefit advisor app with tenants Affordable • Capped rents at £246pw rent
Page 20 Welfare Reform – Key Statistics
Only 24% of turnover impacted by Universal Credit
Social housing rent via Housing Benefit from 24% tenants of working age Social housing rent via Housing Benefit from tenants not of working age 49% 4% Social housing rent not from Housing Benefit
Other turnover 23%
• Of those tenants that pay rent directly already, 54% pay by direct debit/standing order and 26% by swipe cards • This provides a useful benchmark for our tenants’ behaviours and we hope to replicate this upon implementation of Universal Credit
Page 21 Financial Review
Bloemfontein Road (The Bloom), White City Financial Highlights
Year Ending 31 March 2013 Historical 5-Year Performance
• Operating surplus of £87.6m • Income from Lettings up 30% • Group surplus of £55.5m • Reserves up from £188m to £342m • Gearing (Loans/Housing at cost) • Homes under management up 42% remains low at 42% versus G15 • Housing assets valued at cost up average of 45% 88% • Successful sales programme
• Committed, undrawn funding lines available of £461.3m (at 31 March 2013)
Page 23 Treasury Policies
Great Eastern Quays, E6 Summary of Debt and Liquidity Position
NHHG Debt Position Facilities (£m) Drawn (£m) Undrawn (£m) Group 1,436 1,134 302 NHHT Only 1,081 815 266
Summary of NHHG Debt Position at 31 December 2013 NHHG Debt Maturity Profile • Average life of drawn debt: 21 years • Average cost of drawn debt: 3.97% • Average drawn bank debt margin: 0.38% • Total Borrowings: £1,134m • Undrawn facilities: £302m • Cash Balance: £10m • No cross default between NHHT and other Group comcompaniespanies
Page 25 Summary of Treasury Position as at 31 December 2013 Loan Covenants • NHHT Interest Cover Covenant of 110% (actual was 338% at 31 March 2013) • NHHT Gearing Covenant of 75% (actual was 42% at 31 March 2013)
Interest Rate Management
• Optimised with the use of derivatives, but only to hedge existing exposures
• A prudent level of variable rate debt is maintained (providing greater flexibility for sales receipts)
• Circa 8,000 unencumbered properties remain in NHHG after bond issue
NHHT Debt Mix Position • Fixed 74% • Floating 20% • Inflation linked 6%
Page 26 Expected Issue and Security Summary
Nevern Square, Earl’s Court, London Summary of Bond Security
Secured • 2,326 properties with Number of Value Amount value as security for Units (£m) (£m) bondholders EUV–SH 475 39.1 37.2 • All secured properties MV–T 1,469 270.8 235.4 within London Nil value 382 nil nil • Social rent, market rent Total 2,326 309.9 272.6 and supported housing units Number of Units • Security over £310m of assets which provides Social Rented 1,759 over £20m of headroom Supported Housing 111 Market Rented 74 Nil value 382 Total 2,326
Page 28 Potential Transaction
• Issuer : Notting Hill Housing Trust • Deal size: £250 million • Maturity: Long dated • Moody’s Rating: A2 (stable) • Security: Secured on 2,326 properties Secured investors rank senior to Social Housing Grant • Asset Cover: 105% EUV-SH, 115% MV-ST • Information Covenants: Compliance certificates, accounts, meetings on request • Use of Proceeds: General Corporate purposes • Bookrunners: Barclays, Lloyds Bank and Santander GBM • Security and Bond Trustees: Prudential Trustee Company Limited • Expected timing of issue: Following completion of the roadshow (subject to market conditions)
Page 29 Conclusion
• A diverse prime property portfolio operating within London – 61% of properties in 5 core London locations • Operates within a highly regulated sector • Strong financial business with borrowing capacity to invest in future high value housing development • Conservative and well managed operation underlined by a strong credit rating from Moody’s at A2 • Portfolio value of £6.8bn on a vacant possession basis • Well equipped to respond
Paragon, Brentford, TW8 to political changes
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