AVIVA INVESTORS REAL ESTATE

Transcription

1 AVIVA INVESTORS REAL ESTATE August 2017 This document is for Professional Clients, institutional/qualified investors and Advisers only. It is not to be distributed to or relied on by retail clients.

2 UK COMMERCIAL REAL ESTATE MARKET

3 %p.a. The outlook for UK real estate All Property rental growth slowing 5 IPD all property 12M rental value growth AIPL Property Fund 0-1 Source: MSCI/IPD Monthly Index June

4 UK PROPERTY FUND

5 Aviva Investors Property Trust Fund overview 31 July 2017 UK Property Fund Fund Manager Andrew Hook Launch date 2 September 1991 Fund size 1,087.00m Number of direct properties 32 Direct property net initial yield 3.82% AIPL Property Fund Average lot size Weighted average unexpired lease term* 29.49m 9.1 years Void / Development void 8.55% / 9.25% Source: Aviva Investors 31 August * Source: IPD IRIS 30 June 2017 Global liquidity 5

6 Aviva Investors Property Trust Asset and sector composition Asset composition 12.96% 1.28% Direct property sector composition 3.7% 1.8% 40.2% 40.0% 85.76% 14.1% All retails 40.2% (39.2%) All industrials 14.1% (19.9%) Direct Property Cash Other Assets All offices 40.0% (32%) Other commercial* 3.7% (8.9%) Non - commercial* 2.0% (n/a) Source: Aviva Investors 31 August *The fund s other commercial assets consists of leisure and the non-commercial assets consists of student accommodation and residential. Please note that the benchmark does not report non-commercial as a separate sector. The benchmark shown in brackets refers to the IPD Authorised Property Unit Trust benchmark as at 30 June 2017, the latest data available. Development cash includes cash committed to developments and refurbishments. Global liquidity 6

7 Recent transactions Sales Property Burlington Road Retail Park Sector Retail Warehouse Sale Price c. 28.3m Burlington Road is a retail warehouse in New Malden comprising a 51,000sp ft unit split into two. The sale provided the fund with additional liquidity Strong institutional demand delivered premium pricing Source Aviva Investors 31 August

8 Aviva Ireland UK Property Fund Fund performance months % YTD % 1 year % 3 years % p.a. 5 years % p.a. Source: Lipper for Investment Management 31 August 2017 pension share class (A), bid to bid, income reinvested. Performance is net of fees and charges. Past performance is not a guide to future returns. *The fund changed its pricing basis to minimum bid/cancellation with effect from 14th December 2015 which has a performance impact of around -5% over certain time periods Global liquidity 8

9 IRISH REAL ESTATE MARKET

10 Irish commercial real estate A volatile investment picture million 2500 Ireland All property Investment Volumes All Property Investment Volumes 4Q rolling average Source: Aviva Investors/CBRE, April 2017 Global liquidity 10

11 IRISH PROPERTY FUND

12 Irish Property Fund Fund structure Fund NAV: 322.2m Number of properties: 25 Property level net initial yield: 4.30%, (4.96% excluding rent free periods) Average lease length: 8.52 years Vacancy rate: 1.40% Average lot size: 9.69m 0.07% 9.80% 12.35% Asset Allocation 2.57% Sector split 7.1% 42.6% 50.4% 75.21% Property Listed securities Restricted cash Unrestricted cash Other Retail Offices Industrial Source: Aviva Investors 31 August 2017 Global liquidity 12

13 Irish Property Fund Fund overview The fund holds 25 properties Diversification across sectors 42.6% in offices, 50.4% in retail, 7.1% in industrial Portfolio focused on major centres 96.53% located in Dublin Retail properties include some key locations e.g. Grafton Street and Henry Street in Dublin, and Patrick Street in Cork Riverside 1, IFSC 7 Grand Canal, Dublin 2 Source: Aviva Investors 31 August Global liquidity 13

14 Positioning for the market cycle Strategic purchases, sales, consolidating holdings and upgrading existing assets We expect the next phase of performance to be driven by the occupational market and rental growth. We are positioning the portfolio for this stage in the market cycle through: Purchases Short leases in core locations with value add potential Grants Row, Dublin c. 8.4m Suffolk St, Dublin c. 4.25m Dawson St, Dublin c. 2.6m Sales Secondary assets South Mall, Cork c. 4.0m Consolidating holdings Reducing the number of shared ownerships 4/5 Grafton St, Dublin c. 2.9m Ossory House, Dublin c. 6.2m Upgrading existing assets Repositioning and refurbishing 7 Grand Canal, Dublin /27 Grafton St, Dublin Source Aviva Investors 31 August

15 Positioning for the Market Upgrading existing assets Property: 7 Grand Canal, Dublin 2 Initiative: Refurbishment The property was formerly occupied by the ESB for 35 years, and following their decision to vacate, an asset management strategy was developed to investigate the Fund s options to maximise value and returns. In order to take advantage of the lack of Grade A office stock in Dublin a wholescale refurbishment plan was developed to deliver what occupiers wanted within a timescale that would be ahead of the developers delivering new build schemes. The property reached Practical Completion on time and under Budget in August The asset was underwritten at an ERV of psf. The building is now 100% let to Brite Bill Ltd, Milliman, Cairn Homes Plc and Kaspersky. The rents achieved range from 45psf to 47.50psf. Source: Aviva Investors 31 August

16 Positioning for the Market Upgrading existing assets Property: Grafton St, Dublin 2 Initiative: Refurbishment The property is located on a prime pitch of Grafton St but required refurbishment in order to secure high quality tenants and headline rents. HMV were secured on a licence agreement to provide income to the Fund during the design, development and planning phase of the refurbishment project. Planning permission was granted in August 2015 and Practical Completion was achieved in October 2016, although the retail portion of the scheme was handed over earlier to the tenant for their fit-out. The three retail floors are leased for 15 years with a break at year 10 to & Other Stories, a H&M brand, with a guarantee provided by the Swedish parent company. The top three floors are Grade A office space leased to international recruitment company Hays Recruitment for 15 years with break at year 10 and with the benefit of a Parent Guarantee from the UK entity. The rent achieved set a new rental tone for Grade A office space on Grafton Street. Artists impression for illustration only Source: Aviva Investors 31 August

17 Positioning for the Market Lettings and Regears 1 Grants Row, Dublin 2 Initiative: Acquisition and Asset Management A four storey, multi-let, good quality office building in central Dublin. The purchase completed in September 2015 at a value of c. 8.4m, reflecting a net initial yield of %. The Dublin office market has seen a lack of modern office supply and with improved levels of demand we are positive of there being good rental growth prospects going forward. The property was acquired fully let, but with a short unexpired term of 1.1 years, this provides the opportunity to benefit from buoyant market conditions. The Ground Floor office space that was vacant at acquisition has been leased to Charles Rivers at 32 psf, ahead of the acquisition underwriting. Negotiations are close to concluding on a new 10 year lease with a break at year 7 with Flynn O Driscoll Business Lawyers, who will expand into the topfloor space being vacated by Structured Finance Mgt (Ire) Ltd at a rental level ahead of ERV. On completion of this lease the building s WALT will be over 5 years, a material improvement from the acquisition level. Pobal, a not-for-profit company that manages programmes on behalf of the Irish Government occupy 35% of the building and has a lease expiry in Negotiations are underway to agree a surrender premium from the tenant and then re-let the floor while market conditions remain strong to further improve the asset WALT. Source: Aviva Investors 31 August

18 Positioning for the Market Sales South Mall Cork Initiative: Disposal This five storey office block was first constructed in the 1970 s and refurbished in the 1990 s. The property extends to 34,165sq ft and has 28 car parking spaces. The property is predominantly let to KPMG and currently has a 28% vacancy rate. The average unexpired lease term of the property is 5.06 years. The property s specification is no longer suitable for the current occupier market and the asset requires significant capital expenditure to be brought up to date. Feasibility analysis was undertaken to establish whether a refurbishment or a sale provided a better risk adjusted return for the fund, and a sale was identified as the best strategy for the asset. The property was sold in early May 2016 at c. 4m a net initial yield of 6% %. Source: Aviva Investors 31 August

19 Irish Property Fund Property portfolio Property address Sector Tenant Riverside 1, Grand Canal Quay, Dublin 2 Office McCann Fitzgerald Creation House, Grafton St, Dublin 2 Retail H & M, & other stories, Hays Recruitment 7 Grand Canal St,. Dublin 2 Office Multi - Let Liffey Valley Retail Park Retail B&Q pt. 4/5, Grafton Street, Dublin 2 Retail Burger King/Swarovski 5, Henry Street, Dublin 1 Retail Fabric World 65-66, Grafton Street, Dublin 2 Retail Massimo Dutti Ormonde House, Earlsfort Centre, Dublin 2 Office DTZ Sherry Fitzgerald 1 Grants Row, Dublin Office Pobal, Flynn O Driscoll Business Lawyers, Structured Finance (Ire) Ltd Plantation House, Herbert Street, Dublin 2 Office Windmill Lane Ltd 44, Henry Street, Dublin 1 Retail Carroll s Gifts pt Ossory House, Earlsfort Cr., Lower Leeson Street, Dublin 2 Office Office of Public Works Longphort House, Earlsfort Centre, Dublin 2 Office Allergan Pharmaceuticals, Dept for Public Works 45/47, Nassau St., Dublin 2 Retail Noyfield T/A Porterhouse Unit 17, Fonthill Business Park, Dublin Industrial Amari Ireland Limited Kilcarberry Dist park, Nangor Road, Co. Dublin Industrial BWG Foods Patrick Street, Cork Retail Holland & Barrett 25 Suffolk Street, Dublin 2 Retail Failte Ireland, Malvern House, Bodywise Clinic and FFA Accountants 30-31, Lr. O'Connell St., Dublin 1 Retail Ann Summers Bray Business Park, Co. Wicklow Industrial Stago 54 Dawson Street Retail and Office Starbucks, Dublin Solicitors Bar Association Unit 4, 60, Heather Road, Sandyford Industrial Est., Dublin 18 Industrial Payzone Ireland Ltd Unit 6, 60, Heather Road, Sandyford Industrial Est., Dublin 20 Industrial General Motors Ireland Ltd Unit 5, 60, Heather Road, Sandyford Industrial Est., Dublin 19 Industrial Rollsford Ltd t/a MC Sports 44, Nassau Street, Dublin Retail Noyfield T/A Porterhouse Source: Aviva Investors as at 31 August Global liquidity 19

20 Aviva Ireland Irish Property Fund Fund performance months % YTD % 1 year % 3 years % p.a. 5 years % p.a. Source: Lipper for Investment Management 31 August 2017 pension share class (A), bid to bid, income reinvested. Performance is net of fees and charges. Past performance is not a guide to future returns. 20

21 Important Information The content of this document has been produced by Aviva Investors Global Services Limited, the investment manager appointed by Aviva Life & Pensions Ireland Limited to manage these funds. Unless otherwise stated all information is Aviva Investors Global Services Limited as at 31 August Please note that the Aviva Ireland UK Property Fund invests into the Aviva Investors Property Trust (AIPT). The Aviva Investors Property Trust is an open ended Non-UCITS Retail Schemes. The Aviva Ireland European Property Fund invests into the Aviva Investors European Property Fund which is a sub-fund in the Aviva Investors Property Funds ICVC. As for the Aviva Investors funds, Aviva Investors Global Services Limited is the Investment manager and Aviva Investors UK Funds Services Limited is the Authorised Fund Manager to the funds. The Aviva Ireland funds are products of The Aviva Life & Pensions UK Limited, trading as Aviva Life & Pensions Ireland, which is authorised by the Prudential Regulation Authority in the UK and is regulated by the Central Bank of Ireland for conduct of business rules. Aviva Life & Pensions UK Limited, trading as Aviva Life & Pensions Ireland, is also regulated in the UK: by the Prudential Regulation Authority for prudential rules and, to a limited extent, by the Financial Conduct Authority for applicable UK conduct rules. Registered Branch Office in Ireland (No ) at One Park Place, Hatch Street, Dublin 2. Tel (01) Web Registered in England ( ) at 2 Rougier Street, York, YO90 1UU. For further information please read the latest Key Investor Information Document and Supplementary Information Document. The Prospectus and the annual and interim reports are also available on request. Copies can be obtained from Aviva Investors UK Fund Services Limited, St Helens, 1 Undershaft, London, EC3P 3DQor by contacting our Relationship Management Team on * or them on fundandsalessupport@avivainvestors.com. *Telephone calls may be recorded for training and monitoring purposes. Calls are free from a BT landline. Call charges may vary from mobiles and other networks. Aviva Investors UK Fund Services Limited. Registered in England No Authorised and regulated by the Financial Conduct Authority. Firm Reference No Registered address: St Helens, 1 Undershaft, London, EC3P 3DQ. An Aviva company. Unless stated otherwise any opinions expressed are those of Aviva Investors Global Services Limited. They should not be viewed as indicating any guarantee of return from an investment managed by Aviva Investors nor as advice of any nature. Past performance is not a guide to future returns Where funds are invested in property, investors may not be able to switch or cash in their investment when they want because property in the fund may not always be readily saleable. If this is the case we may defer their request to switch or cash in their units. The value of property is a matter of a valuer s opinion rather than fact. The content of this document does not purport to be representational or provide warranties above and beyond those contained in the legal documentation and subscription documentation of the Funds. The legal documentation and the subscription document contain the full terms, conditions, representations and warranties in respect of the Fund. Nothing in this document shall be construed as forming any part of those terms, conditions, representations or warranties. Full written terms and conditions are available on request. Issued by Aviva Investors Global Services Limited, the Investment Manager to the Fund registered in England No Registered Office: St Helens, 1 Undershaft, London, EC3P 3DQ. Authorised and regulated by the Financial Conduct Authority (Firm Reference No ). Contact us at Aviva Investors Global Services Limited, St Helens, 1 Undershaft, London, EC3P 3DQ. 21