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January 2016
The outlook for London direct property and associated shares January 2016
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The central London office market in 2016 and beyond Dull but still desirable?
Last year’s forecasts
Jan 2015 forecast Actual
West End top rent & avg prime £150 / £110 £150/£107
West End Take-up 4m sq ft 4.3m sq ft
West End vacancy rate 2.9% 2.9%
City top rent & avg prime £90 / £71.75 £90 / £70
City take-up 7m sq ft 7.4m sq ft
City vacancy rate 5.1% 4.4%
Investment volume £19bn £18.8bn
City & West End prime yield 3.0% / 4.0% 3.0% / 4.0%
3
The economic growth story for London remains persuasive
Source: Oxford Economics
0
500
1,000
1,500
2,000
2,500
3,000
1980
1984
1988
1992
1996
2000
2004
2008
2012
2016
2020
2024
Off
ice
-ba
se
d e
mp
loym
en
t ‘0
00
Public administrationand defence
Administrative andsupport
Professional,scientific and tech
Real estate activities
Financial andinsurance
Information andcommunication
4
0.0% 10.0% 20.0% 30.0% 40.0% 50.0%
Turin
Lisbon
Frankfurt
Munich
Hamburg
Paris
Brussels
Vienna
Berlin
Geneva
Zurich
Barcelona
Budapest
Madrid
Amsterdam
Luxembourg
Stockholm
Oslo
Prague
Central London
Warsaw
Dublin
Change in GDP 2015-2024
But the cost of having someone sat in central London is becoming an increasingly common topic of discussion
5
Source: ONS, Savills
0 10,000 20,000 30,000 40,000 50,000 60,000
Northern Ireland
North East
Wales
Yorkshire and The Humber
East Midlands
North West
South West
West Midlands
East
Scotland
South East
London outer
London central
Median gross annual earnings by + property costs per workstation £
Wage Office property cost per desk
2015 was another good year for leasing activity
Source: Savills
6
0
1,000,000
2,000,000
3,000,000
4,000,000
5,000,000
6,000,000
2000
2002
2004
20
06
2008
2010
2012
2014
sq
ft
Q1 Q2 Q3 Q4
West End
0
1,000,000
2,000,000
3,000,000
4,000,000
5,000,000
6,000,000
7,000,000
8,000,000
9,000,0002000
2002
2004
2006
2008
2010
20
12
2014
sq
ft
Q1 Q2 Q3 Q4
City
With Banking and Financial Services accounting for 24% of the space leased (and TMT 23%)
Source: Savills
7
Banking 8%
Business & Cons Svcs
19%
Charities & Assn 4%
Creative 5% Distribution
1%
Extraction & Utils 1%
Insurance & Fin Svcs
17%
Manufacturing 0%
Professional 22%
Property 2%
Public 4%
Retail & Leisure
6%
Technology 11%
City 2015
Banking 7%
Business & Cons Svs
13% Charitie
s & Assn 5%
Creative 10%
Distribution 0%
Insurance & Fin Svcs
13%
Manufacturing 2%
Manufacturing 5%
Professional 5%
Property 6%
Public 3%
Retail & Leisure
6%
Technology 24%
West End 2015
• Less West to East drift in 2015, but watch out for Canary Wharf
• Shortages of supply leading to more pre-lets and longer lead times
• TMT boom over? But companies in this sector now prepared to pay high rents
• Will serviced offices and co-working operators be next?
8
Other demand trends
Source: Savills
0
100,000
200,000
300,000
400,000
500,000
600,000
700,000
800,000
900,000
2014 2015
Sq
ft
Tenant drift from the West End
To Midtown
To Southbank
To City Fringe
To City Core
• Less West to East drift in 2015, but watch out for Canary Wharf
• Shortages of supply leading to more pre-lets and longer lead times:
• TMT boom over? But companies in this sector now prepared to pay high rents
• Is the boom in serviced offices and co-working space sustainable?
9
Other demand trends
Source: Savills
-
200,000
400,000
600,000
800,000
1,000,000
1,200,000
Sq
Ft
Serviced office operator take-up
City West End
Availability continues to fall
Source: Savills
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
7.0%
8.0%
9.0%
0
2
4
6
8
10
12
00
/1
01
/2
02
/3
03
/4
05
/1
06
/2
07
/3
08
/4
10
/1
11
/2
12
/3
13
/4
15
/1
%
M s
q f
t
Grade A Grade B Vacancy Rate
0%
2%
4%
6%
8%
10%
12%
14%
16%
18%
20%
0
2
4
6
8
10
12
14
16
00
/1
01
/2
02
/3
03/4
05
/1
06
/2
07
/3
08
/4
10
/1
11
/2
12
/3
13
/4
15
/1
M s
q f
t
Grade A Grade B V Rate
%
West End 2.9% City 4.4%
10
Low vacancies continue to be the main driver of high rents (not necessarily strong demand)
11
Source: Savills
30405060708090
100110120130140150160
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
£ p
er
sq
ft
City Top City Avg Prime WE Top WE Avg Prime
Looking just at average prime rents achieved, there appears to have been a slight cooling over the last quarter
40
50
60
70
80
90
100
110
120
130
£/s
q f
t
West End
City
12
• The gap between City core and City fringe has almost disappeared
• Rents on new non-tower space are similar in the West End and City – perhaps why the W/E drift has slowed?
• 20% of the lettings in Mayfair and St James’s last year were at over £100/sq ft, though the average size of letting at this price point has fallen to only 6,000 sq ft
13
Random observations on rents
Source: Savills
£20.00
£25.00
£30.00
£35.00
£40.00
£45.00
£50.00
£55.00
£60.00
£ p
er
sq
ft
City Core Average Grade A
City Fringes Average Grade A
The City is about to see four consecutive years of above average levels of completions (though 21% is pre-let)
Source: Savills
14
0
1
2
3
4
5
6
7
8
9
198
5
198
7
198
9
199
1
199
3
199
5
199
7
199
9
200
1
200
3
200
5
200
7
200
9
201
1
201
3
20
15
201
7
201
9
m s
q f
t
Complete Pre-Let Speculative Average completions
As is the West End, where 15% is pre-let
Source: Savills
15
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
198
5
198
7
198
9
199
1
199
3
199
5
199
7
199
9
200
1
200
3
200
5
200
7
200
9
201
1
201
3
201
5
201
7
201
9
m s
q f
t
Complete Pre-Let Speculative Average completions
A simple metric: Development completions divided by take-up
0%
20%
40%
60%
80%
100%
120%
140%
160%
180%
200%
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
20
03
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
20
18
2019
City Dev/TU WE Dev/TU
16
Source: Savills, shaded area indicates a period when the WE vacancy rate was 6% or above or City was 8% or above
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Demand-side Supply-side
17
What would shock the leasing market into a downturn
• Looser lending policies
• More speculative development
• A rise in tenant returns due to sectoral shock
• Sector shock – Tech or Serviced offices
• Eurozone recession or China hard landing
• EU referendum & US election
• Central London office total return in 2015: 20%
• Central London office total return in 2016: 10%
• Non-domestic investor demand to remain strong due to comparative returns, risk aversion
• Very strong middle eastern private demand
• China and Taiwan demand to continue to rise
• Increasing competition for secure income
• Tough environment for developers to acquire sites
• But less upward pressure on site values from residential conversion hopes
But
• Brexit?
• US election?
• Interest rates?
18 We expect investor demand to remain strong but not record-breaking
Source: Savills
0%
10%
20%
30%
40%
50%
60%
70%
80%
0
5,000
10,000
15,000
20,000
25,000
199
5
199
7
199
9
200
1
20
03
200
5
200
7
200
9
201
1
201
3
201
5
% n
on
-do
me
sti
c
C
ity &
We
st
En
d in
ve
stm
en
t tu
rno
ve
r £
m
UK Euro US ME
Asia Other Non dom %
Will interest rate rises impact central London office yields?
19
Source: IPD, Thomson Reuters, Savills
0.00
2.00
4.00
6.00
8.00
10.00
12.00
14.00
16.00
-40
-30
-20
-10
0
10
20
30
40
50
Jan-8
8
Jan-8
9
Jan-9
0
Jan-9
1
Jan-9
2
Jan-9
3
Jan-9
4
Jan-9
5
Jan
-96
Jan-9
7
Jan-9
8
Jan-9
9
Jan-0
0
Jan-0
1
Jan-0
2
Jan-0
3
Jan-0
4
Jan-0
5
Jan-0
6
Jan-0
7
Jan-0
8
Jan-0
9
Jan-1
0
Jan-1
1
Jan
-12
Jan-1
3
Jan-1
4
Jan-1
5
Base r
ate
an
d p
rop
ert
y y
ield
Ren
tal
gro
wth
%p
a
Rental value growth Initial Yield % Base rate
• 2016 will be a fairly boring year with above average take-up, rental growth and investment volumes (but not as strong as in recent years)
• Prime yields to remain stable
• Few buildings capable of setting a new top rent
• Investor interest in secure income and refurbishment to rise
• Limited risk to the market from interest rates
• Demand/supply relatively finely balanced
• Biggest risks to this balance are on the demand-side
20
Conclusions
Source: Savills
0
20
40
60
80
100
120
140
160
180
2000
20
02
2004
2006
2008
2010
2012
2014
2016
2018
2020
£/s
q f
t
City top City avg prime
West End top West end average prime
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Lucian Cook
Prime London Residential Markets
-2%
0%
2%
4%
6%
8%
10%
12%
14%
16%
-20%
0%
20%
40%
60%
80%
100%
120%
140%
160%
An
nu
al
pri
ce g
row
th
Ten
year
pri
ce g
row
th
Since June 2005 Annual
Is it working?
London price growth
Source: Land Registry
Prime London price movements
-9.0%
-6.0%
-3.0%
0.0%
3.0%
6.0%
9.0%
12.0%
Qu
art
erl
y p
ric
e g
row
th
All Prime London Prime Central London
Source: Savills Research
Strong growth
pre downturn
Significant price fall
post Lehmans
Market
bottoms out in
March 2009
Strong recovery through
2009 to early 2010
Growth slows in response to SDLT
increases, ATED & mansion tax risk
Stamp duty
reform
introduced
Weak post
election
performance
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Since 2014 peak
-6.0% Quarterly Price Movement
Q4 2015
-1.5%
Prime Central London
Source: Savills Research
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Dec-15
£4.00m
9.8%
£393,750
Value
SDLT Rate
SDLT £
Dec-07
£3.02m
4.0%
£120,666
Dec-11
£3.64m
5.0%
£181,744
Dec-12
£3.84m
7.0%
£268,407
Dec-14
£4.14m
9.9%
£410,271
The SDLT Burden
A Second Home in Prime Central London
Current Value £4.0m
Apr-16
£4.00m ?
12.8%
£513,750
Price movement by price band
3.0%
0.1%
-2.5%
-3.6%
-5.4%
-6.5%
0.2%
-1.3% -1.2%
-2.4%
-3.2% -3.6%
-3.1%
-3.0% -2.9%
-2.9%
-2.8% -2.8%
-8.0%
-6.0%
-4.0%
-2.0%
0.0%
2.0%
4.0%
£500k - £1m £1m - £2m £2m - £3m £3m - £5m £5m - £10m £10m+
Additional stamp duty on additional properties
Stamp duty saving or additional cost as a % of value in Sept 14
Price Movement Since Sept 2014
Source: Savills Research
Beyond Central London
Looked at someone trading up in
SW London
from a property with a value of
£1.875m in June 2015
to a property with a value of
£2.5m in June 2015
Compared the stamp duty on
acquisition of the home they are
buying
To the house price growth they have
seen in the past 10 years on the house
they are selling
Stamp duty v accumulated equity
0%
5%
10%
15%
20%
25%
-
50,000
100,000
150,000
200,000
250,000
Ju
n-0
5
Sep
-05
De
c-0
5
Ma
r-06
Ju
n-0
6
Sep
-06
De
c-0
6
Ma
r-07
Ju
n-0
7
Sep
-07
De
c-0
7
Ma
r-08
Ju
n-0
8
Sep
-08
De
c-0
8
Ma
r-09
Ju
n-0
9
Sep
-09
De
c-0
9
Ma
r-10
Ju
n-1
0
Sep
-10
De
c-1
0
Ma
r-11
Ju
n-1
1
Sep
-11
De
c-1
1
Ma
r-12
Ju
n-1
2
Sep
-12
De
c-1
2
Ma
r-13
Ju
n-1
3
Sep
-13
De
c-1
3
Ma
r-14
Ju
n-1
4
Sep
-14
De
c-1
4
Ma
r-15
Ju
n-1
5
Sep
-15
De
c-1
5
SDLT As a % of 10 year growth of existing home
Sept 07
£72,523
8%
June 11
£96,227
15%
Mar 12
£142,082
20% Dec 13
£167,412
17%
Jun 15
£213,750
22%
Source: Savills Research
Prime new build supply pipeline (practical completion)
0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
8,000
9,000
2008/09 2009/10 2010/11 2011/12 2012/13 2013/14 2015 2016 2017 2018 2019
AMR (year to march) Savills Est. Savills Forecast
Ne
t p
riva
te c
om
ple
tio
ns
Lower Prime (£1,000psf-£1,500psf) Upper Prime (£1,500psf-£2,000psf) Super Prime (£2,000psf+)
29
Source: Savills Research (assumes 24 month build period), GLA
New delivery
Wapping in 1980s
Canary Wharf in 1990s
South Bank in 2000s
Source: Savills Research
International demand
GDP Constant Prices US$ 2010-2015 2015-2020
European Union -4% 24%
Major advanced economies (G7) 4% 23%
Other advanced economies 11% 25%
Commonwealth of Independent
States -11% 45%
Emerging and developing Europe -1% 31%
Middle East and North Africa 10% 41%
Emerging and developing Asia 66% 51%
IMF World Economic Outlook Database October 2015
50%
17%
12%
8%
8% 4%
Central London 2nd Hand Buyer Profile
UK
West Europe
Eastern Europe
North America &Latin America
Asia
North Africa and theMiddle East
Africa
Domestic Wealth Generation (London)
Financial and
insurance
Prof, Scientific
and tech
Info and
Communication
Real Estate
activities
£10 £ 20 £ 30 £ 50 £ 60 £ 70 £ 80 £ 40
2014 2024 GVA (£bn)
Source: Oxford Economics
Wholesale and
retail
+27%
+64%
+59%
+46%
+40%
Looking at the long run
-8.0%
-6.0%
-4.0%
-2.0%
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
Ma
r-93
Sep
-93
Ma
r-94
Sep
-94
Ma
r-95
Sep
-95
Ma
r-96
Sep
-96
Ma
r-97
Sep
-97
Ma
r-98
Sep
-98
Ma
r-99
Sep
-99
Ma
r-00
Sep
-00
Ma
r-01
Sep
-01
Ma
r-02
Sep
-02
Ma
r-03
Sep
-03
Ma
r-04
Sep
-04
Ma
r-05
Sep
-05
Ma
r-06
Sep
-06
Ma
r-07
Sep
-07
Ma
r-08
Sep
-08
Ma
r-09
Sep
-09
Ma
r-10
Sep
-10
Ma
r-11
Sep
-11
Ma
r-12
Sep
-12
Ma
r-13
Sep
-13
Ma
r-14
Sep
-14
Ma
r-15
Sep
-15
Qu
arl
erl
y P
ric
e G
row
th
Source: Savills Research
5.00 yrs
+94%
1.25 yrs
+3%
3.25 yrs
+65%
3.50 yrs
+5%
1.75 yrs
+48%
1.50 yrs
-20%
3.75 years
+35%
1.75 years
0.5%
1.25 yrs
+27%
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2015 2016 2017
Prime
Central
London -3.4% 0.0% +2.0%
Other Prime
London
+2.3% +2.0% +2.0%
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2015 2016 2017 2018 2019 2020 5 years to
2020
Prime
Central
London -3.4% 0.0% +2.0% +5.0% +6.5% +6.5%
+21.5%
Other Prime
London
+2.3% +2.0% +2.0% +4.0% +4.0% +5.0%
+18.2%
Becoming cautious
Miranda Cockburn
+44 (0) 20 7710 7492
Prices as of 11 January 2016 close unless otherwise indicated
13 January 2016
Stifel does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that the firm may have a
conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their
investment decision. All relevant disclosures and certifications appear on pages 17-19 of this report.
2015 – Share price total return performance in line with expectations
Source: Datastream
37
2015 – NAV growth mitigated by move to a discount
Source: Datastream, Stifel estimates
38
Composition of share price total return vs premium/(discount) to NAV (%)
2015 – Moving to a discount rating but NAVs still growing
Source: Datastream
39
Source: Datastream, Company data, Stifel estimates
Breakdown of premium/(discount) to NAV (%) Breakdown of 2015 NAV growth (%)
2015 – Self-storage the winning sector
Source: Datastream
Investors like the earnings growth
profile
No relationship with valuation
yields
Attractive market dynamics
40
2015 share price total return by sector (%)
2015 – Share price total return – four years of outperformance in a row
Source: Datastream
41
Source: Stifel Research
Becoming more cautious over the
year
Increasing number of Hold
recommendations
But only two 2015 negative share
price total return performances
(Intu -1.3% and Conygar -7.7% vs
FTSE Real Estate +12%)
2015 – Recommendations becoming more cautious
42
2016 – There is plenty to worry about…
Source: Datastream, IMF, EU Law Analysis, Engineering & Technology Magazine, Microsoft Office
When will the UK follow the US? Downgraded and slowing output growth
Brexit impact/sentiment Mayoral election Turbulence in the Middle East
43
2016 – There is plenty to worry about…
Source: IPD, Savills
Yield impact slowing rapidly Valuation yields at all time lows (in some sectors)
44
2016 – There is plenty to worry about…
Source: IPD
Although rental growth picking up… …only for offices and industrial, retail still struggling
45
2016 – But quoted real estate shares not expensive…
Source: Datastream, Stifel estimates
Sector trading on an 8%
discount to current NAV, 15%
discount to NAV a year out
This looks fair/good value given
our 2016 NAV growth forecast
of c.8%
In particular majors trading at
on average 19% discount at
present
Historic average NAV growth 12 month hence depending on share price rating (10 years)
46
2016 – …especially given NAVs still forecast to grow…
Source: Stifel estimates
NAV growth slowing but still strongly
positive (LT average 9%)
• 20% at December 2014
• 15% at December 2015
• Stifel forecast 8% in 2016
• Potential for downgrades
Next 12-month NAV growth forecast (%)
47
2016 – …and income remains attractive
Source: Stifel estimates
Market likes assets with secure
and growing income streams
If capital growth slowing,
investors will look for earnings
and dividend growth
Two ways of playing income –
high current dividend yield or
earnings growth
Dividend yield 3 yr DPS CAGR
Look for a high current dividend yield
Target 5.7% 2%
Cap Reg 4.9% 7%
PHP 4.8% 3%
Tritax 4.7% 3%
Picton 4.7% 4%
Or a high dividend growth rate
Workspace 1.7% 18%
Safestore 2.7% 15%
Big Yellow 3.2% 13%
Assura 3.7% 11%
Derwent London 1.3% 9%
Seeking income in the quoted real estate sector
48
2016 – Share price total return expectation
Source: Stifel estimates
Expect discount to widen as we
move through the cycle but not
dramatically
NAV growth forecast of 8%
gives a 12 month share price
total return expectation of 6-9%
Discount to NAV (%)
0.0% -2.5% -5.0% -7.5% -10.0%
12.0% 18% 15% 12% 10% 7%
NAV 10.0% 16% 13% 11% 8% 5%
Growth 8.0% 14% 11% 9% 6% 3%
6.0% 12% 9% 7% 4% 1%
4.0% 10% 7% 5% 2% -1%
2016 share price total return expectation (%)
49
2016 – Our top picks
Source: Stifel Research
50
INCOME
Picton
Cap Reg
SEGRO
RESI LAND
Urban&Civic
Inland Homes
St Modwen
LONDON/SE
Helical Bar
McKay
RERATING
Grainger
LXB
Summary
• There are worries in the market (Brexit, interest rates, slowing growth etc) and the
sector can be driven by sentiment
• But shares are rationally priced in our view and companies are conservative
• Yield compression is largely over but occupational market dynamics attractive
• Although NAV growth is slowing, we still forecast it to be positive which, together
with income certainty, means the sector remains attractive for many
• Total return expectation of 6-9% with dividend a key component
51
Equity Capital Markets Update
52
Total equity issuance across the UK stockmarket – all sectors
0
200
400
600
800
1000
1200
1400
0
10,000
20,000
30,000
40,000
50,000
60,000
70,000
80,000
90,000
2009 2010 2011 2012 2013 2014 2015
Num
be
r o
f tr
an
sa
ctio
ns
To
tal ra
ise
d (
£m
)
Source: LSE
53
0
10,000
20,000
30,000
40,000
50,000
60,000
70,000
80,000
90,000
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
To
tal ra
ise
d (
£m
) Still below 10 year average but highest since recap. era
10 year average
Source: LSE
54
IPOs across the UK stockmarket – all sectors
Source: LSE, ECM Insight
55
0
20
40
60
80
100
120
140
160
0
2,000
4,000
6,000
8,000
10,000
12,000
14,000
16,000
18,000
2009 2010 2011 2012 2013 2014 2015
Num
be
r o
f tr
an
sa
ctio
ns
To
tal ra
ise
d (
£m
)
IPOs across the UK stockmarket – all sectors
• 93 IPOs during 2015
• Only 19 raises greater than £200 million
Patient Capital
• Largest raise of £2.5 billion by
• Other high profile raises included:
56
-5
0
5
10
15
20
25
30
35
40
Note: share price movements calculated to close of business on 11/01/2016; Weighted average share price movement, weighted by day 1 post issuance market capitalisation
36.7%
-2.5%
10.7%
Ave
rag
e S
ha
re P
rice
Gain
/ (
Lo
ss)
(%)
Main Market IPOs
FTSE All Share
AIM IPOs
FTSE AIM
All Share
5.2%
How did these IPOs perform?
57
Source: LSE, Bloomberg
-20
-15
-10
-5
0
5
10
Note: share price movements calculated to close of business on 07/01/2015; Weighted average share price movement, weighted by day 1 post issuance market capitalisation
8.5%
-4.1%
-18.6%
2.8%
Source: LSE, Bloomberg
Ave
rag
e S
ha
re P
rice
Gain
/ (
Lo
ss)
(%)
Main Market IPOs
FTSE All Share
AIM IPOs
FTSE AIM All Share
Looking back at 2014’s IPOs
58
All these failed
European Solar Fund Ltd
59
All these failed during 2014
Now away Now away
Sold
60
UK real estate sector annual equity issuance
0
5
10
15
20
25
30
35
40
45
50
0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
2009 2010 2011 2012 2013 2014 2015
Num
be
r o
f tr
an
sa
ctio
ns
To
tal ra
ise
d (
£m
)
61
Source: LSE
0
100
200
300
400
500
600
700
To
tal ra
ise
d (
£m
) 2015 UK real estate sector secondary equity issuance
62
Source: LSE
2015 UK real estate sector secondary equity issuance
0
50
100
150
200
250
300
350
NE
WR
IVE
R R
ET
AIL
ST
AN
DA
RD
LIF
E I
NV
ES
TM
EN
T P
RO
PO
RT
Y
RE
DE
FIN
E IN
TE
RN
AT
ION
AL
SC
HR
OD
ER
RE
AL E
ST
AT
E
EM
PIR
IC S
TU
DE
NT
PR
OP
ER
TY
TR
ITA
X B
IG B
OX
RE
IT
PIC
TO
N P
RO
PE
RT
Y IN
CO
ME
RE
AL E
ST
AT
E IN
VE
ST
OR
S
UN
ITE
GR
OU
P
SIR
IUS
RE
AL E
ST
AT
E
PA
LA
CE
CA
PIT
AL
TR
ITA
X B
IG B
OX
RE
IT
NE
WR
IVE
R R
ET
AIL
EM
PIR
IC S
TU
DE
NT
PR
OP
ER
TY
MA
RK
ET
TE
CH
HA
NS
TE
EN
AS
SU
RA
EM
PIR
IC S
TU
DE
NT
PR
OP
ER
TY
AE
W U
K R
EIT
ST
AN
DA
RD
LIF
E I
NV
ES
TM
EN
T P
RO
PO
RT
Y
To
tal ra
ise
d (
£m
)
63
Source: LSE
Total annual value of IPOs in the real estate sector
0
100
200
300
400
500
600
700
2009 2010 2011 2012 2013 2014 2015
To
tal ra
ise
d (
£m
)
64
Source: LSE
2015 UK real estate sector IPOs
0
20
40
60
80
100
120
140
160
To
tal ra
ise
d (
£m
)
Source: LSE
65
Largest fundraises of the year
IPO
Market cap:
Target yield:
Target WAULT:
2015 Performance:
£101 million
£101 million
8 - 9%
4 – 6 years
+4.0%
Secondary
Market cap:
Prospective yield:
WAULT1:
2015 Performance:
£309 million
£902 million
4.4%
14.1 years
+12.7%
(1) As at 31 September 2015
66
2015
67
Pre
miu
m / (
Dis
co
un
t)
Discount / premia to NAV
-60%
-50%
-40%
-30%
-20%
-10%
0%
10%
20%
30%
Mar-80 Mar-85 Mar-90 Mar-95 Mar-00 Mar-05 Mar-10 Mar-15
68
Source: Stifel Research
2015
69
Target Bidder Offer value
(£m)
Date
announced Recommended
Share price
premium NAV1
(£m)
Net
Debt
(£m)
EV
(£m)
Prem/(Disc)
on NAV 1 day 30 day
2014
54 16 June 2014 Yes 7.7% 6.6% 73 71 144 (10.6)%
414 22 July 2014 Yes 21.1% 14.9% 359 129 488 22.0%
2,591 4 Dec 2014 No 4.9% 30.1% 2,661 2,981 5,572 (2.6)%
2015
815 6 March 2015 Yes n/a n/a 815 300 1,115 0%
745 29 July 2015 Yes 31.8% 33.3% 639 201 840 16.5%
M&A activity in the sector
70
• Outlook
o Lower for longer ( )
o Huge breadth and depth of investing equity ( ? )
o Rental growth ( )
• On-going premia to NAV ( )
Rising Capital Values ( ?? )
• (Less) propitious background for equity raising
• Further M&A?
Looking forward to 2016
71
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