GCP STUDENT LIVING PLC GCP STUDENT LIVING PLC Annual report and consolidated financial statements for the year ended 30 June 2019 Annual reportyear ended 30 June 2019 and consolidated financial statements for the CONTENTS ABOUT THE COMPANY Introduction 1 At a glance GCP Student Living plc was the Highlights first real estate investment trust 2 Investment objectives and KPIs 3 Portfolio overview in the UK to focus on student 4 Chairman’s statement residential assets. Strategic report 8 Strategic overview The Company seeks to provide shareholders with 10 Business model attractive total returns in the longer term through 12 Investment Manager’s report the potential for modest capital appreciation and 18 Review of the financial year regular, sustainable, long‑term dividends with 22 Property portfolio inflation‑linked income characteristics. 32 Environmental, social, governance 38 Risk management It invests in properties located primarily in and Governance around London where the Investment Manager 46 Board of Directors believes the Company is likely to benefit from supply 48 The Investment Manager and demand imbalances for student residential 50 Board leadership and purpose accommodation and a growing number of 53 Stakeholder model 56 Division of responsibilities international students. 58 Composition, succession and evaluation 60 Audit, risk and internal control The Company has a premium listing on the 63 Remuneration Official List of the FCA and trades on the 67 Directors’ report Premium Segment of the Main Market of the London Stock Exchange. The Company had a market Financial statements 72 Statement of Directors’ responsibilities capitalisation of £670.9 million at 30 June 2019. 73 Independent Auditor’s report 78 Consolidated statement of comprehensive income 79 Consolidated statement of financial position 80 Consolidated statement of changes in equity 81 Consolidated statement of cash flows 82 Notes to the consolidated financial statements 105 Company statement of financial position 106 Company statement of changes in equity Print/Annual Report Best Report and 107 Company statement of cash flows Gold Winner Accounts (Specialist) 108 Notes to the Company financial statements Additional information 111 Shareholder information 112 Glossary IBC Corporate information www.gcpstudent.com Introduction GCP STUDENT LIVING PLC Annual report and consolidated financial statements for the year ended 30 June 2019 AT A GLANCE VALUE OF PROPERTY PORTFOLIO £m EPRA NAV2,4 PER ORDINARY SHARE p DIVIDENDS PER ORDINARY SHARE p 921.65 165.52 6.15 5.75 5.95 784.4 149.12 634.6 139.08 2017 2018 2019 2017 2018 2019 2017 2018 2019 NET OPERATING MARGIN4 % SHARE PRICE PER ORDINARY SHARE p STUDENT RENTAL GROWTH4 % 1 78 78 79 162.20 3.9 4.1 3.5 145.00 147.00 2017 2018 2019 2017 2018 2019 2017 2018 2019 HIGHLIGHTS3 ― Annualised total shareholder return since ― Completion of the refurbishment of ― EPRA NAV2, 4 (cum-income) per share IPO4 of 12.9%, compared to the Company’s Scape Bloomsbury ahead of schedule of 165.52 pence and EPRA NAV target return of 8-10%. for the 2018/19 academic year, providing (ex-income) per share of 163.96 pence 432 beds in London WC1. at 30 June 2019. ― Dividends of 6.15 pence per share in respect of the year. ― Second forward-funded development ― High-quality portfolio of eleven assets with asset, Circus Street, Brighton, will be 4,116 beds located primarily in and around ― Total rental income for the year of completed for the 2019/20 academic London, with a valuation of £921.6 million5 £44.4 million. year, providing a further 450 beds. at 30 June 2019. ― Equity raised of £43.1 million through ― Commenced construction of Scape ― The Company’s properties continue the placing of ordinary shares. Brighton, which is expected to provide to benefit from the supply/demand ― New debt facilities for an aggregate 555 beds for the 2020/21 academic year. imbalances for high-quality, modern amount of up to £100 million with student facilities, with the portfolio fully ― The Company benefits from a future Wells Fargo. occupied and student rental growth4 of contractual arrangement to acquire 3.5% for the 2018/19 academic year. Scape Canalside, a new-build asset located adjacent to QMUL, which the ― Post year end the Company’s operational Company expects to acquire before portfolio achieved full occupancy with the end of 2019. respect to the 2019/20 academic year, with student rental growth of 4.4%4 1. Share price at 28 June 2019. year-on-year. 2. EPRA NAV is equivalent to the NAV calculated under IFRS for the year. 3. The Company’s financial statements are prepared in accordance with IFRS. The financial highlights above include performance measures based on EPRA best practice recommendations which are designed to enhance transparency and comparability across the European real estate sector. See glossary for definitions. 4. APM – see glossary for definitions and calculation methodology. 5. Includes lease incentives held as receivables. 1 GCP STUDENT LIVING PLC Annual report and consolidated financial statements for the year ended 30 June 2019 INVESTMENT OBJECTIVES AND KPIs The Company invests in UK student accommodation to meet the following key objectives: TOTAL RETURN PORTFOLIO QUALITY DIVERSIFICATION To provide shareholders with To focus on high-quality, modern, To invest and manage assets with attractive total returns in the private student residential the objective of spreading risk. longer term. accommodation and teaching facilities primarily in and around London. KEY PERFORMANCE INDICATORS The Company has generated an The Company’s investment portfolio The Company’s property portfolio annualised total shareholder return has been fully occupied since IPO, comprises nine modern standing since IPO1 of 12.9%. with average annualised rental student accommodation buildings growth1 of 3.8%. and two development assets. 6.15 p FULL 4,116 Dividends in respect Occupancy1 for Number of beds of the year 2018/19 academic year at 30 June 2019 14.8% 3.5% 11 Total shareholder return1 Student rental growth1 Number of assets for the year for the year at 30 June 2019 Further information on Company performance can be found on pages 18 to 21. 1. APM – see glossary for definitions and calculation methodology. 2 Introduction GCP STUDENT LIVING PLC Annual report and consolidated financial statements for the year ended 30 June 2019 PORTFOLIO OVERVIEW At 30 June 2019, the Company’s portfolio comprised eleven assets with c.4,100 beds, providing high-quality modern student accommodation. IN AND AROUND LONDON LONDON Scape Wembley 87% 2 Scape Shoreditch Scape Mile End1 Scape Bloomsbury 6 4 1 Location of assets by Podium 9 8 The Pad Scape Greenwich total capital value 7 11 Scape Guildford2 REST OF THE UK Water Lane Apartments 10 BLENDED NET 3 3 Scape Brighton INITIAL YIELD OCCUPANCY 5 KEY OPERATIONAL ASSETS Circus Street 4.54% FULL UNDER CONSTRUCTION For detailed portfolio information 1. Formerly Scape East. refer to page 23. 2. Formerly Scape Surrey. 3. APM – see glossary for definitions and calculation methodology. 3 GCP STUDENT LIVING PLC Annual report and consolidated financial statements for the year ended 30 June 2019 CHAIRMAN’S STATEMENT The Company has generated a strong set of results in both absolute and relative terms. Introduction Investment activity On behalf of the Board, I am pleased to report In May 2019, the Company acquired Scape on a sixth consecutive year of robust results for Brighton, its second asset in Brighton. The property the Company. The focus on assets in locations is a forward-funded development which, once which benefit from supply and demand imbalances construction is complete, will provide 555 beds for student accommodation, including the and extensive communal areas for students with Company’s core London market, has delivered expected delivery for the 2020/21 academic year. a total shareholder return1 of 14.8% for the The Company benefits from licensing fees which year. On a relative basis, the Company has will provide a 5.5% coupon per annum throughout substantially outperformed the FTSE EPRA NAREIT the construction phase. Scape Brighton will add to index of UK REITs, which declined by 6.0% over the Company’s presence in the Brighton market, the same period. The Company’s annualised total with the construction of Circus Street, Brighton shareholder return since IPO1 is 12.9%, exceeding expected to be completed ahead of the 2019/20 the 8-10% target set at launch and more than academic year. double the return of the FTSE All-Share index The Company also benefits from a future over that period. contractual arrangement to acquire The Company’s performance has been Scape Canalside, a new-build 412 bed asset underpinned by strong operational drivers located adjacent to QMUL, and in the same including full occupancy across the portfolio locality as the Company’s Scape Mile End2 asset. and year-on-year rental growth in excess of both The property is expected to complete before the inflation and the national average for student end of 2019. Robert Peto accommodation. This has enabled the Company Chairman Financial results to increase its annual dividend to 6.15 pence The Company has generated a strong set of per share from 5.95 pence per share in the prior results in both absolute and relative terms. year. In addition, the Company’s investments The Company’s investment portfolio delivered continue to benefit from yield compression arising rental income of £44.4 million over the period, from competitive market demand for student generating profit (including valuation gains) of accommodation assets. This has been reflected £92.8 million (£18.9 million excluding valuation in the upward valuation of the Company’s portfolio gains). Its EPRA NAV (cum-income) per share and a concomitant rise in its NAV during the year.