WE See Property from All Angles

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WE See Property from All Angles www.savillsim.com ECONOMIC OVERVIEW 2 ECONOMIC GROWTH AND PROPERTY RETURNS GDP GROWTH RATE (%) IPD UK ALL PROPERTY INDEX TOTAL RETURN (%) 2.0 10.0 January 20172018 January 20172018 1.8 9.0 1.6 8.0 1.4 7.0 1.2 6.0 1.0 5.0 0.8 4.0 0.6 3.0 0.4 2.0 0.2 1.0 0.0 0.0 2017 2017 2018 2018 2017 2017 2018 2018 forecast first estimate forecast forecast forecast provisional forecast provisional Sources: ONS, MSCI, Consensus Economics 3 GLOBAL RANKINGS Sources: Internet searches, Savills Investment Management 4 UK PROPERTY YIELD SPREAD YIELD PROPERTY UK 11 12 10 - - - 0 1 2 3 4 5 6 7 8 9 3 2 1 Source: Bloomberg, MSCI (formerly, IPD) (formerly, MSCI Bloomberg, Source: 1987 1988 1989 30 year average = 2.3%= average year 30 1990 Spread 1991 1992 1993 1994 1995 All Property yield equivalent Property All 1996 1997 1998 1999 2000 2001 2002 2003 2004 December 2017: 4.8% spread 4.8% 2017: December 2005 2006 Gilt yield Gilt 2007 2008 2009 2010 2011 Average 2012 2013 2014 2015 2016 2017 5 £ billions LOAN PROPERTY COMMERCIAL UK 100 200 300 400 500 600 0 Source: De Montfort University, MSCI (formerly, IPD) (formerly, MSCI Montfort De University, Source: 2000 2001 2002 2003 2004 Debt secured by property commercialby secured Debt 2005 2006 2007 80% LTV 80% 2008 - TO 2009 - VALUE RATIO VALUE 2010 Equity 2011 2012 2013 2014 2015 33% LTV 33% 2016 6 UK PROPERTY CYCLES 100 100 IPD UK All Property Capital Growth Index (1987 to 2000) 95 90 90 80 85 70 80 IPD UK All Property Capital Growth Index (2007 to 2017) 60 75 70 50 1 13 25 37 49 61 73 85 97 109 121 133 145 No. of months late '80s/early '90s (LHS) '07-17 (RHS) Source: MSCI 7 HAVE I GOT NEWS FOR YOU… HEADLINES Smartphone users worldwide Councils’ estates Amazon.com, Inc America First followed by China 1400 1300 1200 1100 1000 900 800 Amazon.com, Inc. Source: Bloomberg 9 ODD ONE OUT ROUND Salvator Mundi Walkie Talkie The Peak, Hong Kong Pink Star 10 SELLING THE FAMILY…CHINA Key overseas investments 2017 Battersea powering ahead Price Street Yield Purchaser Vendor (millions) £1.6bn LKK Health Products 20 Fenchurch Street £1,282.5 3.40% Landsec Plc Group 122 Leadenhall Street £1,150 3.50% C C Land British Land Plc 78 Cannon Street £485 4.40% DEKA Immobilien Hines UK 35-50 Rathbone Place £435 4.25% WestInvest Great Portland Estates 20 Canada Square £410 5.20% CheungKei Group Brookfield Kingboard 15 CanadaSquare £400 - KPMG Investments 2 & 3 Bankside £310 4.94% Deutsche AM M&G Real Estate ‘Walkie Talkie’ and ‘Cheesegrater’ 20 Gresham Street £300 4.00% China Resources Land AXA REIM One Kingdom Street £292 4.86% C C Land Cityhold Property AB Lacon, Theobalds Road £285 4.48% Al Ain Properties Blackstone £1.15bn Tenacity Group Hong Legal & General 70 Gracechurch Street £271 4.40% Kong Property £1.3bn 5 Churchill Place £270 5.20% Cheung Kei Group Said Holdings Ropemaker 240 Blackfriars Road £266 3.94% Al Gurg Partnership Ampersand, 180 £260 2.93% Emperor International Peterson Group Wardour St. 33 Old Broad Street £258 3.80% SEA Holdings Ltd Evans Randall 160 Aldersgate Street £220 4.50% Union Investment RE Castleforge Partners 11 STRATEGY OUR PHILOSOPHY 5 1 4 2 3 8 KEEP CALM AND 7 STAY UNDER THE RADAR 6 9 13 Source: Savills Investment Management (December 2017) OUR PHILOSOPHY 1. Target supply-constrained towns with tight planning regimes 2. Target up-and-coming growth locations 3. Buying under the institutional radar 4. Be counter-cyclical 5. Target less fashionable lot sizes 6. Building critical mass through multiple small acquisitions 7. Fund developments, but only to access the quality and benefit from a discount 8. Keep voids to a minimum 9. Maintain a tail of smaller assets for liquidity 14 LOOK TO THE EAST 15 BUILDING CRITICAL MASS… 16 Leeds (Normanton) DIVERSIFICATION & LIQUIDITY & DIVERSIFICATION % size of each asset 0.0% 1.0% 2.0% 3.0% 4.0% 5.0% Greenwich portfolio of 30% assets: 10 Largest Mansfield Barnet London EC1 Brighton Gateshead London WC2 Cambridge London E1 London EC2 portfolio of 50% assets: of 20% Largest London London N1 Bath London NW5 London Brighton London Harrogate London A ‘long tail’ provides liquidity tail’ ‘long A Brighton Harrogate Harrogate Oxford Bath London EC2 London Smallest 30% of assets: 10% of portfolio of 10% assets: of 30% Smallest London SE15 Harrogate London London N1 London NW9 Bath Bath Bath London London 17 SUSTAINABLE STRATEGY AND TECHNOLOGICAL ADAPTABILITY 18 SUSTAINABLE STRATEGY AND TECHNOLOGICAL ADAPTABILITY 6 8 2 5 4 3 1 7 19 Source: Savills Investment Management (December 2017) SUSTAINABLE STRATEGY & TECHNOLOGICAL ADAPTABILITY 1. Focus on sectors with limited physical obsolescence 2. Limit physical obsolescence in the office sector 3. 60% of the portfolio has obvious alternative uses 4. We like assets where tenants invest for you 5. Our industrial units are generally small average size – wider tenant pool 6. Transport and infrastructure improvements 7. Winning towns and cities – capitalise on excellent local knowledge 8. Placemaking 20 PLACEMAKING 21 Bath UK POPULATION DISTRIBUTION Source: Marc Khachfe WEIGHTED UK POPULATION DISTRIBUTION Source: SASI / PA A HIGHLY RESILIENT QUALITY PORTFOLIO 1,980 89% negligible or 43% investors low risk in Bath, tenants Brighton, Oxford, Cambridge, Harrogate and 41% London fixed or RPI linked income 33% of properties sub £5 million 5.5% 13 vacancy years average rate 50% unexpired distribution & lease term alternatives Source: Savills Investment Management (December 2017) THE SECTORS 25 OFFICES CENTRAL LONDON Global yields Core City Pipeline Source: JLL Source: Colliers City take up and vacancy West End take up and vacancy 9.0 18% 6.0 9% 8.0 16% 8% 5.0 7.0 14% 7% 6.0 12% 4.0 6% 5.0 10% 5% 3.0 4.0 8% 4% 2.0 3% Rate Vacancy Sq ft (million) ft Sq 3.0 6% Rate Vacancy Sq ft (millions) ft Sq 2.0 4% 2% 1.0 1.0 2% 1% 0.0 0% 0.0 0% 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Take-up Take-up (LT Avg) Q4 Vacancy Rate Take-up Take-up (LT Avg) Q4 Vacancy Rate Source: Savills Source: Savills 27 CENTRAL LONDON 28 THE SMITHSON 29 IMPROVING QUALITY & REDUCING RISK ACQUIRED Wolverhampton Brighton . Acquired for £1.0 million in December 2009 . Adjacent to Brighton railway station . Large surrender premium from previous tenant . Low rents of £17 psf . Sold for £1.375 million . Residential values double that of offices . IRR of 18.3% per annum since purchase . £11.2 million, 6.5% Low rents, strong location and underpinned by alternative uses 30 Source: Savills Investment Management (December 2017) INDUSTRIAL & DISTRIBUTION ROBUST DEMAND DRIVERS Ecommerce fuelling need for depots A tale of two property companies 600 450 550 400 500 450 350 400 300 350 300 250 250 200 200 150 150 SEGRO Share Price (LH axis) INTU Share Price (RH axis) Source: Bloomberg Amazon leaves rivals behind in warehouse ONS manufacturing index at highest level since expansion 2008 108 106 104 102 100 98 96 94 Manufacturing Index Manufacturing 92 90 17 - 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Nov Source: ONS 32 CONTINUED LOW SUPPLY . 3.2m sq ft 100 25% . Units of 10,000 -160,000 sq ft 90 . Average 87,000 sq ft . Average rent of £4.72 psf 80 20% . Average capital value £80 psf 70 60 15% 50 Sq ftSq (million) 40 10% Vacancy Rate 30 20 5% 10 - 0% 2009 2010 2011 2012 2013 2014 2015 2016 2017 Supply Vacancy rate Source: Savills 33 TRADING PLACES ACQUIRED iForce, Redditch Wednesbury, Birmingham . Lease extended in 2017 for a further 10 years . Excellent location close to J9 of the M6 . Sold to a UK institution for £25.15 million, 5.35%, . Let for a further 7.25 years to AF Blakemore reflecting £100 psf . Low rent of £4.80 psf . Capital growth of 65% and an IRR since purchase of . Acquired for £4.0 million, 7.45%, reflecting £60 psf 17.3% per annum 34 Source: Savills Investment Management (December 2017) RETAIL WINNERS & LOSERS Supermarket Share – 12 weeks to December 2017 ASOS v M&S 650 8,000 600 550 6,000 500 4,000 450 400 2,000 350 300 0 250 200 -2,000 2011 2012 2013 2014 2015 2016 2017 2018 M&S Share Price (LHS) ASOS Share Price (RHS) Source: Kantar Source: Bloomberg Online retailers fuelling retailing warehouse Winners & Losers of 2017 alternative use 36 RETAIL WAREHOUSING – THE PORTFOLIO Top 10 tenants by income . 21.4% of the Fund . 961,000 sq ft . 72 acres . Average rent UK: £12.95 psf . Average rent in London & SE: £20 psf . Average lease length:13 years 0% vacancy versus 5.3% nationally! 37 DISCOUNT RETAIL – SHOPPING FOR VALUE ACQUIRED ACQUIRED Gateshead, Metrocentre Bury St Edmunds . Adjacent to Metrocentre and Ikea . Strong performer in excellent South East location . Let to Tesco, sublet to The Range and Sports Direct . 12.5 years unexpired . 31.5 years unexpired with 16.5 years to break . Underpinned by numerous alternative uses . £33.7 million, 5.85%, rising to 6.6% in August 2018 . £4.3 million, 6.9% Long leases, low rents and quality locations 38 ALTERNATIVES LONG, SECURE & INDEX LINKED Size of Market Diversified income streams £16 32% £14 28% £12 24% £10 20% £8 16% £6 12% Market Share Market Investment Investment (Billions) £4 8% £2 4% £0 0% 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Alternative Investment Volumes (LHS) % of total UK Investment Volumes (RHS) Source: JLL 40 AUTOMOTIVE Chigwell Solihull Harrogate Harrogate ACQUIRED 41 ACCOMMODATION Cambridge Brighton Poole Oxford ACQUIRED 42 ASSET MANAGEMENT FUNDING & DEVELOPMENTS Office - The Smithson Industrial – Bury St Edmunds Retail - Greenwich Alternatives - Bath 44 ESG 60 Efficiency upgrades 50 50 .
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