GCP Student Living
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GCP Student Living plc Annual report and consolidated financial statements for the year ended 30 June 2016 for the statements financial and consolidated Annual report GCP Student Living plc Annual report and consolidated financial statements for the year ended 30 June 2016 Contents About us Introduction 01 At a glance GCP Student Living plc was the first Highlights for the year real estate investment trust in the UK 02 Investment objectives 03 Portfolio at a glance focused on student residential assets. 04 Chairman’s statement The Company invests in modern, private Strategic report student residential accommodation and 10 Strategic overview 12 UK student accommodation market teaching facilities located primarily in 16 Review of the financial year and around London. 19 Company performance 20 Property portfolio 30 Corporate, social and Our primary objective is to provide environmental responsibility 32 Risk management shareholders with attractive total returns Governance in the longer term through the potential 38 Board of Directors for modest capital appreciation and 39 The Investment Manager 40 Corporate governance statement regular, sustainable, long‑term dividends 45 Audit committee report with RPI inflation‑linked income 48 Remuneration report 52 Directors’ report characteristics. Financial statements 57 Statement of Directors’ responsibilities The Company invests in properties located primarily 58 Independent Auditor’s report in and around London where the Investment Manager 64 Consolidated statement of total believes the Company is likely to benefit from supply comprehensive income 65 Consolidated statement of and demand imbalances and a growing number of financial position international students. 66 Consolidated statement of changes in equity 67 Consolidated statement of cash flows The Company is a closed‑ended investment company 68 Notes to the consolidated incorporated in England and Wales, and its shares financial statements trade on the SFS of the Main Market of the London 92 Company statement of financial position Stock Exchange. 93 Company statement of changes in equity 94 Company statement of cash flows 95 Notes to the Company financial statements Shareholder information 99 Shareholder information 100 Glossary of key terms ibc Corporate information Visit us online www.gcpuk.com Introduction At a glance Revenue for the year Net operating margin Rental growth 2016 £22.5m 2016 79% 2016 4.5% 2015 £11.5m 2015 78% 2015 3.6% 2014 £9.1m 2014 82% 2014 3.3% Annualised shareholder return Dividends per ordinary share report Strategic EPRA NAV per ordinary share since IPO for the year 2016 13.9% 2016 5.66p 2016 136.93p 2015 18.1% 2015 5.60p 2015 125.51p 2014 11.5% 2014 5.47p 2014 102.64p Share price per ordinary share Value of property portfolio Loan‑to‑value 2016 130.75p 2016 £424.8m 2016 26.6% 2015 129.25p 2015 £177.2m 2015 22.5% Governance 2014 107.75p 2014 £151.6m 2014 26.2% Highlights for the year • The Company delivered a strong • The Company’s properties • Broad student mix with students set of results generating total continue to benefit from the from 106 countries studying at Financial statements revenue for the year of supply/demand imbalance for 72 HEIs. £22.5 million. high‑quality, modern student • High‑quality portfolio of facilities in London, with all • The Company successfully six modern high‑specification properties fully occupied and raised £79 million through properties with c.2,000 beds rental growth of 4.5% for the two oversubscribed placings located primarily in and around 2015/16 academic year. of ordinary shares. London with a valuation • Dividends of 5.66 pence per of £424.8 million at the year end. • Annualised shareholder returns ordinary share paid/declared in since IPO of 13.9%, in excess of • Loan‑to‑value at 30 June 2016 the period in line with target. the Company’s target return of of 26.6%. 8‑10%. • EPRA NAV (cum income) per • During the year, the Company ordinary share of 136.93 pence information Shareholder acquired four properties and and EPRA NAV (ex‑income) per entered into a forward purchase ordinary share of 135.50 pence agreement and a forward funding at 30 June 2016. agreement, in respect of two further properties. GCP Student Living plc Annual report and consolidated financial statements for the year ended 30 June 2016 01 Introduction Investment objectives The Company invests in UK student accommodation to meet the following key objectives: Dividend Capital Portfolio income appreciation quality To provide shareholders with To provide modest capital Focus on high‑quality, modern, regular, sustainable, long‑term appreciation over the long term. private student residential dividends, with RPI inflation‑linked accommodation and teaching characteristics. facilities for students studying at leading academic institutions primarily in and around London. The Company has paid/declared a The valuation of the Company’s At 30 June 2016, the Company’s total of 5.66 pence per ordinary property portfolio has increased by property portfolio comprised share as dividends in the year, 7.1% over the year driven by a six modern, high‑specification increasing the Company’s dividend combination of uplifts in valuation student residential accommodation on an annualised basis. on acquisition, increasing rental buildings, of which 96% of the value rates and yield compression. is located in and around London. Key performance highlights 5.66p 7.1% 100% Dividends paid/declared in the year Capital appreciation Occupancy for 2015/16 academic year 1.1% £424.8m 4.5% Annualised dividend growth Value of property portfolio Rental growth 02 GCP Student Living plc Annual report and consolidated financial statements for the year ended 30 June 2016 Introduction Portfolio at a glance The Company’s portfolio comprises high‑quality, modern student accommodation buildings, of which 96% of the value is located in and around London. Scape East Read more, page 22 Strategic report Strategic Scape Shoreditch Read more, page 23 588 The Pad1 Read more, page 26 541 Water Lane 220 Governance Apartments Read more, page 27 London 153 Bristol Financial statements 141 280 Scape Surrey Read more, page 25 Scape Greenwich Read more, page 24 Future acquisitions information Shareholder Podium, Apex House, Royal Holloway Wembley £424.8m Forward purchase agreement Forward funding agreement Value of property portfolio Read more, page 28 Read more, page 29 2015 – £177.2m 170 580 1. The Pad 1 and The Pad 2 GCP Student Living plc Annual report and consolidated financial statements for the year ended 30 June 2016 03 Introduction Chairman’s statement Robert Peto Chairman Introduction The Company’s core focus on student On behalf of the Board, I am pleased residential accommodation assets to report a year of continued growth, located in and around London, where with the acquisition of four further 96% of the value of the property The Company has paid high‑quality properties in addition portfolio is located, coupled with to entering into a forward purchase conservative levels of borrowings, dividends of 5.66 pence agreement and a forward funding provides shareholders with a property per ordinary share in agreement in respect of two further portfolio with defensive income properties. characteristics which should offer respect of the year and greater resilience to the market The Company has paid dividends of volatility following the ‘Brexit’ vote, in total has delivered 5.66 pence per ordinary share in particularly relative to wider UK respect of the year and in total has an annualised commercial property. delivered an annualised shareholder shareholder return return since IPO of 13.9%, in excess The external market valuation of the since IPO of 13.9%, of its annualised target of 8‑10%. Company’s property portfolio was £424.8 million at 30 June 2016. Portfolio in excess of its This represents a valuation uplift of The Company has successfully grown £58.9 million or 16.1% over the annualised target its property portfolio to c.2,000 studios aggregate acquisition price and beds through the addition of of 8‑10%. (excluding acquisition costs). The c.1,000 studios and beds over the year. valuation increase has been driven by Through positioning the portfolio in a combination of uplift in valuation at those areas which the Investment acquisition, rising rental rates and the Manager believes are well positioned high levels of investment demand for to benefit from significant demand/ student accommodation driving supply imbalances, it is pleasing to upward pressure on asset prices note strong year‑on‑year rental impacting yields across the sector. growth from the portfolio of 4.5%. 04 GCP Student Living plc Annual report and consolidated financial statements for the year ended 30 June 2016 Introduction Full occupancy, strong rental growth and valuation uplifts have all contributed to a strong set of results for the year. The Company’s property portfolio generated £22.5 million of rental income over the year. Strategic report Strategic Acquisitions to acquiring existing operating assets. Financial results During the year, the Company acquired Once complete, it is expected that Full occupancy, strong rental growth four high‑specification, student Apex House will add a further c.580 and valuation uplifts have all accommodation assets – Scape modern studios and beds to the contributed to a strong set of results Shoreditch, Scape Surrey, The Pad 2 Company’s portfolio. Finally, the for the year. The Company’s property Governance development at RHUL and Water Lane Company also entered into a portfolio generated £22.5 million of Apartments in Bristol. In addition, the conditional forward purchase rental income over the year. The EPRA Board was pleased to have secured a agreement which will allow it to NAV per ordinary share increased by rare opportunity to acquire a large acquire Podium, which is in the same 9%, from 125.51 pence to 136.93 pence scale, forward‑funded development at locality as The Pad at RHUL and which as at 30 June 2016.