First World Hybrid Real Estate plc

Transcription

1 June 2017

2 Fund overview Steady expansion Key portfolio features Acquisition filter process Portfolio overview Performance & volatility Is UK property expensive or cheap? Against UK parameters Relative to SA property Potential concerns & actions Redemptions and liquidity Debt funding risks Concentration risks & diversification Brexit

3 Steady expansion Dec 2014 Dec 2015 Dec 2016 June 2017 No. of properties Gross asset value Net asset value No. of investors m 37m 75m 96m 10m 21m 44m 58m

4 Robust income from the property portfolio Portfolio analysis: property sector type by value LT Target: 75% warehousing 25% regional offices Portfolio analysis: lease expiry profile by value WAULT target >10 yrs, Actual >13 yrs 24% 20% 21% distribution warehousing >5 years and <10 years 22% 54% retail warehousing regional offices 59% >10 years and <15 years >15 years All leases FRI - > income certainty All tenants D&B 5A1 top business rating

5 Key features Regulated Fund, listed on The International Stock Exchange (TISE) Hybrid structure - invested in UK commercial real estate, global REITs and cash Cash Listed REITS Liquid Liquid Priced on stock market Diversified Direct Property UK real estate property portfolio, yielding approx 6% Each property independently valued at least annually

6 The Property Acquisition Filter Process Type of property Geographic location Ticket size - 3 to 15m Unexpired lease term Lease type FRI, 5 yearly reviews Lease covenant Rentals at market? Yield 6

7 Portfolio Geographic Locations 7

8 B&M Retail Leek, Staffordshire Single storey, modern stand alone retail warehouse, totalling square foot and a square foot garden centre Acquired in June 2017 at initial yield of 6.25% Lease expiry 24 th March 2028

9 BDW Trading Ltd Gateshead, Newcastle Office building ( sqft) Acquired in June 2017 (initial yield of 6.7%) FRI lease (expires 1 July 2027, no tenant break)

10 Performance Total Return as at 30 June 2017 Total Return 1 year 2 years* 3 years* FWHRE 8.1% 8.4% 10.2% NAREIT UK REITs (TRGBP) 9.8% -0.6% 9.3% *annualised Source: Bloomberg

11 First World Hybrid Real Estate plc Performance compared to UK Listed REITS as at 30 June 2017 First World Hybrid Real Estate(FWHRE) vs. Listed UK Property 9% higher TR, low volatility Volatility UK Bond Yields up EU vote Jan 14 Mar 14 May 14 Jul 14 Sep 14 Nov 14 Jan 15 Mar 15 May 15 Jul 15 Sep 15 Nov 15 Jan 16 Mar 16 May 16 Jul 16 Sep 16 Nov 16 Jan 17 Mar 17 May 17 First World Hybrid Real Estate NAREIT UK REITs TRGBP Source: Bloomberg and Marriott

12 Performance Risk Statistics as at 30 June 2017 Risk Stats (3 year annualised) Standard Deviation Downside Risk Sharpe Ratio FWHRE 7.7% 2.8% 1.3% NAREIT UK REITs (TRGBP) 19.4% 14.7% 0.4% Source: Bloomberg

13 UK property vs govt bonds vs corporate bonds A compelling investment case double return from corporate bond? Red graph income return from SIG property (FTSE 250 co) Green line the income derived from 10 year bond flat lining Blue line, FTSE 250 corporate bond Using SIG Sheffield property metrics 25 year FRI lease, 6% initial yield, RPI linked 5 yearly reviews (1-3% pa), assumed 2% K k k 11k UK Government Bond (10yr) - Income UK Corporate Bond (10yr) - Income UK Property - Income UK Government Bond (10yr)- Capital UK Corporate Bond (10yr) - Capital UK Property - Capital Source: Bloomberg & Marriott, Note: Monthly returns as at month end K K -

14 UK property vs govt bonds vs corporate bonds A compelling investment case? What the capital investment would look like with income reinvested over the period Million Million 109K Million k K k 11k UK Government Bond (10yr) - Income UK Corporate Bond (10yr) - Income UK Property - Income UK Government Bond (10yr)- Capital UK Corporate Bond (10yr) - Capital UK Property - Capital Source: Bloomberg & Marriott, Note: Monthly returns as at month end K -

15 UK property vs SA property Trends and risks? Lease structures UK Income certainty Long leases, upwards only reviews SA Less predictable Shorter lease duration, reviews to market Occupational mkt (rental growth) Investment mkt (yields) Despite Brexit, firm Good demand, low vacancies, rental growth Firm Diverse investor demand Deal and Valuation evidence Worrying signs Weak economic growth Negative reversions Worrying SA REITs weaker Red flags

16 SA Prime Office yields vs LT Trends vs govt bond yields (source MSCI / IPD) Red flags?

17 Redemptions and liquidity Years ytd Fund net asset value (end of period) 44m 58m Average monthly liquidity 8m 15m Redemptions (period) 1.8m 3.6m Average of monthly redemptions / monthly liquidity 2% 3% Liquidity = Cash and REITs, benchmarked on equity excl Marriott funds: target of 25% (minimum of 15%) 5 REITs identified for investment - BritLand, Hammerson, Segro, LM, TriBox Large, diversified, readily tradeable and liquid - Yield 4% plus

18 Prudent debt funding well justified 100% variable, at 2.5% debt funding cost, 3 year term LTV restricted to 50% on direct properties Low effective 45% overall Fund LTV (based on target weightings) Debt covenants well within agreement levels Approx. 20% property devaluation headroom to 60% LTV covenant Interest charge covered > 5 times (the ultimate test)

19 Concentration risk & currency Property portfolio increasingly diversified 15 properties Spread between distribution & retail warehousing and regional offices (Long term targets: 50/25/25 respectively) Lease expiries (with strong WAULT) Tenants (companies and industries) - all 5A1 This is a UK Sterling denominated investment (multi currency risk avoided)

20 Brexit risk Uncertainty remains but UK economy has performed far better than many have speculated The UK is and surely will remain an important 1 st world economy and one which will be a desirable destination for investment and wealth FWHRE targeted investments (long lease warehousing & regional offices) No evidence of softer yields when buying (actually firmer!) Independent valuations of FWHRE properties best evidence 9 valuations post Brexit 4 confirmed at same levels and 5 at lower yields (higher prices) Recent trend - 4 of the 5 this calendar year at lower yields

21 Summary Robust attractive dividend yield Capital growth in line with rental growth Better liquidity and pricing certainty than typical direct property investments but less volatility than publicly quoted and traded property With the benefit of a Regulated investment