Being a Disruptor is a Privilege and a Responsibility Being an infrastructure disruptor is a privilege and a responsibility FT TCS Infrastructure Summit, Europe Conference 2015 Dr Nigel Wilson Dr Chief Nigel Executive Wilson Officer November October 2015 Legal & General Group Chief Executive Officer Legal & General Group
After 30 years of failure, now is the time to deliver 2 Vital for growth in Output, Productivity and Real Wages. Devolution has raised political ambition: our towns and cities are not overbuilt but under-demolished: this is generationally unfair. Shifting Public Attitudes: from NIMBY to PIMBY the UK is a great place to invest. Abundant long-term institutional money, new assets needed, traded asset prices high post-qe. Technology enables efficient low-cost infrastructure in housing, transport, energy, healthcare. Historically we have outsourced infrastructure investment to Asia and technology investment to the US: time to reverse the trend
Agent Principal Combination Opens Doors 3 Partners have comfort through shared economic exposure
4 Legal & General as a Direct Investor 15bn We continue to drive riskadjusted returns upwards through direct investments in long dated real assets where the banks have left behind white space. Investment in housing and regeneration are economically useful for us, for the broader economy and socially useful too. Transport and Logistics: 320m, maturities to 30 years Aberdeen international business park: 127m investment, 335,000sq ft office space Places for people: 252m, acquiring 4,000 homes, building 7,000 houses, 50 year lease Media City, Salford Quays: 503m investment. 50% ownership PRS Investment 100s of new homes Royal Liverpool University Hospital: 429m rebuild English Cities Fund schemes in Liverpool, Plymouth, Canning Town, Salford and Wakefield: over 5.4m sq ft of mixeduse space, brownfield land 400m Cardiff city centre redevelopment joint venture Methodist Care Homes: 70m investment, 30 year lease CALA Homes: 210m investment (47% stake), further 200m for Banner Homes 162m Leeds regeneration project: 200 acre mixed use site with potential for 7,000 homes 200m Bracknell regeneration partnership with Schroders Hyde Housing Group: 102m investment 15 year facility Sentinel Housing: private placement (registered social housing provider in Hampshire) Thames Valley Housing: 40m, 25 year facility enabling 500 affordable homes University of Southampton: 93m, 1,104 beds, 40 years income
Investment is required to deliver growth 5 (1) (2) (3) DM economies have over-consumed and under-invested EM economies have under-consumed and over-invested The tsunami of digital money is moving around the world s asset markets, bidding up the price of existing assets, then rapidly exiting, causing volatility to increase and returns to fall Public and private investment is too low we need a change in policy and approach (4) Fed Watching by the market is being replaced by Market Watching by the Fed (5) Moore s Law is relentless
6 We Support the Commission s Approach to Financial Services and the EU Growth Agenda Lord Hill s ambitious Agenda Infrastructure (Physical and Digital) is at its heart Long-term investors will be key: 1. Access to Equity eg Prospectus Directive 2. Deepen and improve access to debt capital markets eg securitisation, private Placements 3. Infrastructure Financing eg early changes to S2 Standard Formula 4. Consistency across the EU canon eg ELTIFs, S2, IORPs We want to support institutional investors to invest in long-term projects for instance, insurance companies were given a number of incentives to invest for the long term in the detailed rules introduced for Solvency II last October. Lord Hill, April 2015
Devolution raises political ambition to build Digital Cities 7 Our Towns and Cities aren t overbuilt, they re under-demolished 20:1 Digital infrastructure investment multiplier: key to economic growth a collective responsibility Direct Investment programme over five years L&G s Investment in a 400m Development - Cardiff
RIO sets a Precedent for UK Infrastructure Investment 8 Slow Money for Long-term Projects: The EU-wide insurance and pensions industry manages 12 trillion of assets, so a small re-allocation of assets will make a big difference. Legal & General is showing the way: -FUM: LGIM, Savings -L&G Property Manages -Annuity Funds -Direct Investments 6.5bn 850bn 14bn 45bn Institutional money invests long-term: portfolio includes 30, 40,50 year investments Project RIO s Unique Selling Points Economic Alignment (Asset manager and Investor) Local knowledge and independent infra/regeneration experience (eg Salford, English Cities Fund) can be deployed for our 3,200 global pension and SWF clients Approach pioneered with PGGM major Dutch pension fund - 750m Flexibility: bilateral/multilateral syndication allows selectivity Creating an institutional asset class Rio Investments to Date Thorpe Park, Leeds: 162m; 13,000 jobs Cardiff Central: 450m; 10,000 jobs Strong Pipeline: two further transactions in the next six months
Slow Money/RIO 9 Central Square Cardiff Development Value c 450m One of our 6.3bn Direct Investments Preferred site for BBC Wales Local partner: Rightacres Thorpe Park Leeds 162m One of our 6.3bn Direct Investments 60,000Sq Ft Offices and 300 homes in Phase 1 Local Partner: Scarborough Group
Bracknell: Slow Money, from Slow Start to Fast Progress 10 JV with Schroders 200m Regeneration Residential Opportunities: Bracknell and Crowthorne 14 Years to start Now Proceeding at pace Crowthorne residential includes Green Belt
Crossrail 3: Manchester - Leeds and Ordsall Chord-sized investments 11 If you laid the Central line across the Pennines it would actually connect Manchester and Leeds. George Osborne Forecasts show demand for peak time rail services into Manchester growing 37% by 2019. The Ordsall Chord, costing 85m will connect Manchester Piccadilly, Oxford Road and Victoria stations. The benefits: Two new fast trains per hour between Manchester Victoria and Liverpool Six fast trains instead of four an hour between Leeds and Manchester Faster journeys between Manchester, Leeds and Liverpool A new direct service through Manchester city centre to Manchester Airport Faster journey times to Hull, Newcastle and the North East
Energy Opportunities eg Photovoltaic and Wind 12 UK realised power price (real /MWh) Hinkley C Today s Price Hinkley C Indexed to 2030 Solar powered growth could contribute in excess of 9.5 billion in contributions to UK GDP over 2014-2030 according to the Centre for Economics and Business Research (CEBR) as a result of large scale PV capacity investments and electricity generated.
Every Day Matters: our Social Purpose 13 L&G s clear aim is to be economically and socially useful to be a force for good in society and to make every day matter for our customers and colleagues.
Being a Disruptor is a Privilege and a Responsibility Being an Infrastructure Disruptor is a Privilege and a Responsibility FT TCS Infrastructure Summit, Europe Conference 2015 Dr Nigel Wilson Dr Chief Nigel Executive Wilson Officer October 2015 2015 Legal & General Group Chief Executive Officer Legal & General Group THANK YOU.