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Transforming Regenerating Revitalising
ACQUISITIONS
CAPITAL MARKETS MORNING – 25 JANUARY 2017
Transforming Regenerating Revitalising
ACQUISITIONS: A TIMELINE
2015 2016
Refilling the hopper gathers
momentum
Strengthened team and
continued deal flow
• Acquisitions Team successfully invests
£22.74m in new acquisitions.
• A good balance between development
land and income producing assets
secured.
• Assets acquired include Sinfin Business
Park for £6.95m and Wheatley Hall Road
for £8.5m, both acquired out of
Receivership within 8 weeks.
• Appointment of Andy Roberts as
Acquisitions Manager Midlands and Iain
Griffin, Acquisitions Manager North
• Investment in acquisitions totalled
£29.95m for the year, bringing overall total
to £55m.
• Notable acquisitions include 50% of Aire
Valley Land LLP for £8.5m and Four Oaks
Business park for £13.425m.
September – December 2014
Acquisitions Team established
• Gary Owens tasked with leading on new
acquisitions having gained company-wide
experience in various roles
• Harworth’s Board approved the business’s
first Acquisitions Strategy in September
2014
• Harworth completes its first land
acquisition, the Former Skelton Grange
Power Station from RWE Generation for
£2.75m.
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Transforming Regenerating Revitalising
ACQUISITIONS IN CONTEXT OF STRATEGY
An important part of our strategy is to replenish our land and property portfolio in
order to assure the sustainable growth of the business.
• Whilst we own a total of over 22,000 acres, not all of this has development potential or
is in readily deliverable plots.
• To sustain the future of the business, we need to grow and expand our strategic
land portfolio, whilst also securing new recurring income streams to improve the
resilience of our income base.
• Significant brownfield development sites without planning or multi-let business parks
with asset management opportunities will form the backbone of our acquisitions
strategy. However, edge of settlement and assembling new communities like Waverley
will also be pursued.
• We have a dedicated Acquisitions Team in place to source and secure new acquisitions
in line with the expectations of the market, levering the company’s strong track record
for delivery and its management of key stakeholders to set ourselves apart from our
competitors.
Advantage House, Rotherham – February 2016
Gateway45, Leeds – March 2016
Four Oaks, Lancashire – December 2016
- 3 -
Transforming Regenerating Revitalising
HOW WE CREATE AND ADD VALUE
Competitive advantage comes from our ability to add value through management actions rather than reliance on market movements
Acquisition &
Land Assembly
Masterplanning
Planning Approval
Value Engineering &
Land Remediation
Infrastructure Development
Plot Sale / Build Out
Ind
ica
tive
Va
lue
Ad
d
Asset Management
Acquisitions Strategic Land Major Projects Income
Time
- 4 -
Transforming Regenerating Revitalising
KEY ACQUISITION OBJECTIVES
Our aim is to deliver new acquisitions every year for both land
and income generating assets, replenishing plots sold and
growing the overall portfolio.
• We have an annual target of acquiring land with the ability to
deliver over 1,000 residential units and over 1m sq. ft of
employment land, translating to around 200+ acres of net
developable land.
• Land opportunities for residential, commercial or mixed-use will
all be targeted, whether a greenfield ‘edge of settlement’ site or
traditional brownfield land. A variety of deal structures will be
used to allow deal flexibility and to optimize equity investment.
• We are also committed to acquiring income generating assets,
which offer attractive yields and value growth opportunities, to
grow the company’s recurring income base. This will help secure
income resilience and will provide opportunities to churn income
assets. Sinfin Commercial Park, Derby – August 2015
- 5 -
Transforming Regenerating Revitalising
KEY PERFORMANCE METRICS TO DATE
2.7
22.7
29.9
0
10
20
30
40
2014 2015 2016
Acquisition Investment*
0
£540,000
£2,000,000
0
500,000
1,000,000
1,500,000
2,000,000
2,500,000
2014 2015 2016
Income Secured
162
656
244
0
200
400
600
800
2014 2015 2016
Freehold Acres Acquired
1. £55m Invested in Freehold Acquisitions targeting double digit returns
2. 1,062 Acres Acquired
3. £2.5m Recurring Income Secured
4. 1,250 freehold Housing Plots Secured & 5+m sq. ft of Commercial Land
5. 6 Planning Promotion Agreements potentially delivering 1,394 housing
plots
*’Acquisition Investment’ figures are the aggregate of purchase prices paid within the year only
- 6 -
Transforming Regenerating Revitalising
OUR REPUTATION IS A STRONG ONE
• Our reputation for acquisitions is built on efficient, no-nonsense delivery.
• We have a proven track record for acting swiftly, transacting often within
8 weeks.
• We have the ability to create & deliver an appropriate early masterplan
vision for the sites we buy.
• Our team has both a depth and breadth of knowledge that allows due
diligence to be completed thoroughly and efficiently.
• Through our work promoting sites in coal field communities, consultation
is a key part to our planning strategy.
• Our track record in delivering planning consents has been key in securing
Planning Promotion Agreements (PPAs) and assessing opportunities.
• Our environmental and safety management experience has given
corporates the comfort to make a responsible exit from a site.
Reputation
Experienced Team &
Professional Approach
Deal Flexibility
Delivering Projects
Financial Position
Planning Track Record
Consultation & Client Care
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Transforming Regenerating Revitalising
THE GEOGRAPHICAL REGIONS WE ARE TARGETING
Target Region Rationale:
1. Synergy with existing portfolio
2. Sufficient size to generate new opportunities
3. Existing network of industry and Governmental contacts
4. Planning policy opportunities
5. Established markets and economic growth areas
6. Transport infrastructure
7. Proximity to areas of commerce
8. Housing demand for good value family homes
9. Access to a skilled workforce
10. Access to amenities & leisure spaces
- 8 -
Transforming Regenerating Revitalising
SOURCING AND SELECTING NEW OPPORTUNITIES
Sourcing Methods: Variety of methods, leveraging existing contact base and portfolio.
• Off-Market direct approaches to landowners through existing network of consultants, agents and public
partners: 48% of total spend to date (£26.8m)
• Soft-Market approaches by agents: 43% of total spend to date (£23.9m)
• Open Market Advertising: 8% of total spend to date (£4.7m)
Selection Criteria: Emphasis is on flexibility within certain key parameters:
• Fits with approved strategy for the business and doesn’t conflict with existing Harworth sites
• Sites above 10 acres are considered across all sectors, with no upper size limit
• Four key regions: East Midlands, West Midlands, Yorkshire and the North West
• Brownfield or edge of settlement greenfield sites considered, preferably without planning permission
• Flexible in deal structuring, with freehold purchases, PPAs, option agreements and portfolio
opportunities all considered
• Building on our strong stakeholder base, we are also considering opportunities to partner the public
sector in redeveloping surplus land assets
- 9 -
Transforming Regenerating Revitalising
DEAL STRUCTURES
In line with our flexible approach, we pursue four separate deal types, including freehold conditional and unconditional purchase, option
agreements, planning promotion agreements and corporate acquisitions.
PPA
DevelopmentAgreements &
Options
Conditional or Unconditional Freehold Acquisitions
Corporate Acquisitions
Low equity investment, strong IRR but low financial quantum. Factor in
abortive spend.
Provides deal visibility and optimises equity investment, providing
cash flow flexibility.
Most utilised deal structure to date, providing greater
certainty to the landowner.
Transacting quickly with commitment, improves success
rate and financial returns.
Deal structure utilised by Harworth to provide clean
exit for vendors.
- 10 -
Transforming Regenerating Revitalising
EFFECTIVE CONVERSION OF OPPORTUNITIES TO DEALS – 2015 / 2016
Rationalised Opportunities
c.200 Opportunities
Land / Income / PPA
Existing Contacts
Adjacent Land
Yorkshire Centric
Priorities Opportunities
c.100 Opportunities
Site Profile
Returns Hurdle
Cash Flow
Deal Structure
Sale Method
Vendor Profile
Timing
Submit Offer
c.40 Opportunities
Unconditional & PPAs
Upfront DD
Tight Timescales
Clear Approvals
Track Record
Expertise
Deliverability
Bid Successful & Deal Closed
21 Opportunities
Four Oaks / Moorland
Wheatley Hall Road
Sinfin Business Park
POW Parkside Hotel
Temple Green
Wingates
6 PPAsB
id U
nsu
ccessful
Ab
orted
Op
po
rtun
ities
Ab
orted
Op
po
rtun
ities
Application of pricing discipline
- 11 -
Transforming Regenerating Revitalising
STRONG PROGRESS MADE IN 2016
6 NEW ACQUISITIONS of £29.6m, covering
• 244 acres
• *3.54m Commercial sq.ft
• £2m of new income secured
5 NEW PPAs signed
• 59 acres
• 994 potential residential plots
• Brings total plots under PPAs to 1,394
MARCH JUNE DECEMBER
Purchase of 50% of Gateway 45, Leeds
for £8.5m
Planning application submitted for Market
Warsop, Mansfield – our first PPA
Purchase of two multi-let Business Parks
in Lancashire for £17.9m
*freehold commercial sq ft purchased in 2016 includes 50% of Gateway 45’s 2.644m sq ft scheme, due to 50% ownership
- 12 -
Transforming Regenerating Revitalising
CASE STUDY 1: PURCHASE OF WHEATLEY HALL ROAD FOR £8.5M
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Transforming Regenerating Revitalising
CASE STUDY 2: PURCHASE OF 50% OF AIRE VALLEY LAND LLP, LEEDS FOR £8.5M
- 14 -
Transforming Regenerating Revitalising
CASE STUDY 3: PURCHASE OF TWO LANCASHIRE BUSINESS PARKS FOR £17.9M
Moorland Gate Business Park Four Oaks Business Park
- 15 -
Transforming Regenerating Revitalising
FUTURE OPPORTUNITIES
Our strengthened Acquisitions Team has increased the number of potential opportunities open to the company.
Of particular relevance:
• The team is targeting a blend of short, medium and long term opportunities, including tracking a number of major brownfield site
disposals with latent planning and engineering value.
• New PPAs are gathering momentum, with the signing of land for another 250 plots in December 2016.
• Current opportunities balance well with the existing portfolio, utilising existing network of contacts and expertise within the wider team.
• An abundance of exciting land opportunities are available, especially brownfield land disposals across the Midlands and North.
• Further progress is expected in early 2017 with the potential signing of three option agreements, which are in legals, including part of a
future garden village in Derbyshire.
• The team are also exploring joint venture opportunities with corporate landowners, in addition to taking forward discussions regarding
planned government land / portfolio disposals.
- 16 -
Transforming Regenerating Revitalising
STRATEGIC INITIATIVES IN DETAIL
Former Power Station Sites
• Clear Government commitment to reduce
reliance on coal fired power stations
• Currently in discussions with three power
station operators regarding four sites
• Single ownership brownfield sites, with
similarities to colliery sites
• Harworth in a strong position given track record,
expertise and ability to offer a clean exit.
Corporate Joint Ventures
• Opportunities with corporate landowners to
promote and develop their landholdings
• Provide planning and engineering expertise
and funding
• Currently in discussions with a utility company
regarding its surplus estate.
Government Estate Disposals
• Commitment from Government to rationalise
property estate
• Opportunities anticipated from Ministry of
Defence, Ministry of Justice and Network Rail
• Currently in discussions regarding a portfolio of
sites to be sold in Summer 2017.
Landed Estates
• Typically asset rich and cash poor, often with
strategic land opportunities
• Green Belt roll back required to help deliver 5
year housing land supply in some areas
• Currently in discussions with several estates
about promoting and developing their
landholdings.
- 17 -
Transforming Regenerating Revitalising
SUMMARY
• We have made good progress in the past two years in securing new sites to
refill our strategic landbank and in improving the quality of our income base.
• We also have a clear rationale in place for the purchase of future sites in line with
market expectations, backed by the strong fundamentals of the housing and
commercial property markets we operate in.
• Securing planning promotion agreements with other landowners is a growing
workstream as both a source of strategic land and to provide further income to the
business.
• We have a good reputation for being ‘straightforward to deal with’ in negotiating and
completing transactions; when considered alongside our strong reputation with
stakeholders, we are confident this will provide further land and property opportunities
to sustain our growth.
- 18 -
Transforming Regenerating Revitalising
DISCLAIMER
• For the purpose of the following disclaimer, reference to this ‘presentation’ shall be deemed to
include reference to the presentation slides, the presenters’ speeches, the question and
answer session and any other related verbal or written communication.
• References in these slides to financial information for the full financial year ending 31
December 2016 are to an average of forecasts from Canaccord Genuity Limited (11/01/2017)
and Investec Bank plc (11/01/2017), following the Company’s trading update on 10/01/2017.
• This presentation, which has been issued by Harworth Group plc (‘Harworth’), comprises
slides for a presentation for a Capital Markets Morning hosted on 25 January 2017 and is
solely for use at such presentation. This presentation is confidential and may not be
reproduced, redistributed or passed directly or indirectly to any person or published in whole
or in part for any purpose.
• This presentation includes forward-looking statements with respect to the business,
performance and financial condition of Harworth. By their nature, these statements may
involve uncertainty given future events and circumstances can cause results and
developments to differ materially from those anticipated. Any forward-looking statements
reflect knowledge and information available at the date of preparation of these slides. Nothing
in this presentation should be construed as a profit forecast. Harworth gives no undertaking
to update these forward-looking statements.
• Actual results may differ materially from those expressed in forward-looking statements. As
such, you are cautioned not to put undue reliance on any forward-looking statements. No
investment advice is being given in this presentation. No representation, warranty or
undertaking is given by, or on behalf of, Harworth or any of its directors, officers, employees
and advisers that Harworth will achieve any results set out in such statement or as to the
accuracy, completeness or reasonableness of any projections, targets, estimates, forecast
statements, beliefs, opinions or information contained in or given during this presentation and
no liability is accepted or incurred by any of them for or in respect of the same, provided that
nothing in this paragraph shall exclude liability for any representations or warranty made
fraudulently.
• In making this presentation available, Harworth makes no recommendation to buy, sell or
otherwise deal in shares in Harworth or in any other securities or investments whatsoever,
and you should neither rely nor act upon, directly or indirectly, any of the information
contained in this presentation in respect of any such investment activity. Past performance is
no guide to future performance. If you are considering engaging in investment activity, you
should seek appropriate independent financial advice and make your own assessment.
• By accepting these presentation slides, you agree to be bound by the above conditions and
limitations.
• This presentation does not constitute or form part of any offer or invitation to sell, or any
solicitation of any offer to purchase, any shares in Harworth or any other securities, nor shall it
or any part of it, nor the fact of its distribution form the basis of, or be relied upon in connection
with, any contract or investment decision related thereof.
- 19 -