accelerating growth in our core markets/media/files/w/watkin... · 2019. 11. 5. · capital markets...
TRANSCRIPT
Capital Markets Day
5 November 2019
Accelerating Growth in our
Core Markets
Creating the Future of Living
• Fire Exits – two to the front of the building on the left and right as you leave
this room. Exits are clearly marked.
• In the event of an emergency please leave the building via these exits, turn
left out of the building and congregate in the seating area outside Eleanor
Rosa House
• Safety around the building – please watch for trip hazards as you move
around the building
Welcome
2
Duncan House – Health & Safety
12:30 Welcome
Investment case
Investor perspective: Student Roost
Growth analysis:
Residential for rent sector overview
Business unit deep dives
Growth strategy financials
Summary
Q & A
14:15 Tour of building – in groups
15:00 Finish
Agenda
3
Duncan House, Stratford
Investment Case
4
Investment Case – Summary
WJ is the UK’s leading developer and manager of residential for rent
Opportunity to increase annual
volumes of deliveries across UK
residential for rent (‘living sector’) in our two core markets from
FY 23/24
3500PBSA
beds
1000BtR
units
driven by following current themes:
Long term growing demand from tenants and in turn institutional
investors
High barriers to entry create attractive
competitive environment
WJ expertise – track record, sector
specialism, customer insight & product
development, delivery assurance
5
2723 beds delivered
in 2019
0 units delivered
in 2019
utilising the established capital light,
forward sale model
Market leading track record throughout the UK
17,721 Total Units Under Management
50,179 Total Units Developed and In Build
357 Staff
512BtR Units
17,209PBSA Beds
2,500 Homes for
Sale
1,518BtR Units
46,161 PBSA Beds
60PBSA
Schemes
4BtR Schemes
c. £1.7bnAssets under
Management
90Developments
for Sale
7BtR Schemes
135 PBSA
Schemes
Locations where WJ(1) and Fresh(2) have been active
Investment Case – Established Track Record
6
(1) since 1999 to date
(2) since 2010 to date
Investment Case – Strong Performance
(1) 2019 figures refer to broker consensus estimates.
(2) As at 1/11/2019 close
(3) Group’s IPO was in March 2016
(4) Pre-exceptionals
Fin
an
cia
l Pe
rfo
rma
nc
eO
pe
ratio
na
l De
live
ry
Student Beds Completion Fresh Beds Under Management
Revenue EBITDA(4)
Leading to
137% share
price
return(2)
while
returning
£56m in dividends
since IPO(3)
28.0k
38.0k
2015 2019
8.3k
17.7k
2015 2019
£244.2m
£363.1m£387.7m
2015A 2018A 2019E
£34.1m
£52.0m£52.9m
2015A 2018A 2019E(1) (1)
7
WJ structure built around four core business areas, employing c. 700 people
Residential for Rent – PBSA, BtR Resi for Sale
18 people
Value creation:
land buying,
secures planning &
forward sells to
investors
292 people
Value protection:
Provides assurance
in project delivery
357 people
Consumer
experience: Tenant
& asset owner
36 people
Self contained
house building
business
Delivery Fresh HomesInvestment
Working Together
• Leverage experience across the business especially customer insight from Fresh
• All business areas collaborate in devising the proposition & product for PBSA, BtR & Homes
Investment Case – Resourced for Success
8
• Progress with the secured pipeline already moving towards these increased levels of deliveries
• 3-4 year rolling visibility of pipeline
• WJ resourced & structured for this level of growth across the development lifecycle
• Sufficient headroom to grow with supply chain, trade packages and subcontractors
• Use of framework contractors to derisk growth – focus on core value add of upfront development expertise
• Strong investor demand for product in the open market means BtR Fund is not essential
‘Creating the future of living’
2609
1928
448
462
1032
415
1610
0
500
1000
1500
2000
2500
3000
3500
FY20 FY21 FY22
Forward sold In legals to sell fwd fund Secured with planning
Secured subject to planning Unsecured in legals
2609
3253
2642
***
WJ PBSA Pipeline Delivery
159
782
71
184
213
336
350
800
0
200
400
600
800
1000
1200
FY20 FY21 FY22 FY23
# u
nit
s
159
782818
1136
* Assets owned by WJ and under offer to sell
** WJ in legals to acquire the site
WJ BtR Pipeline Delivery
# b
ed
s
Investment Case – Ready for Growth
‘
9
Economic downturn
Rent controls & tenant protections – Govt initiatives to drive up standards BtR/PBSA part of solution to
PRS/housing crisis
Land availability, planning consent,
build assurance Core expertise, track record, reputation, long term partners
Forward sale liquidity Resi for rent structural growth & diversification strongly positioned for investor demand
Managing additional workResourced for growth with detailed plans in place
Business model minimises exposure
RiskMitigation
Investment Case – Risks to Growth
10
PBSA & BtR (residential for rent) have long term structural growth characteristics
Growing consumer & in turn institutional investor demand
WJ specialist in residential for rent – our consumer insight & delivery assurance
Institutional investor demand for our product and services
High barriers to entry for non sector specialists – attractive competitive environment
Investment Case – Well positioned for Growth
Strong investor demand for new, high-quality product drives demand for forward fund transactions
De-risk development activity, capital light, visibility of longer-term earnings & quickly cash generative
Balance sheet strength, resilience & agility
Growth sectors, Growing investor demand, Market leading position
WJ well placed to grow 11
Hollis Croft, Sheffield
Investor Perspective –
Brookfield’s Student Accommodation
12
Nathan Goddard
Chief Executive Officer
Student Roost
13
Student RoostPortfolio Overview
14
Nottingham 1 / 22
Sheffield 3
Snowdon Hall
Trinity Square
Oct-132,495
Nottingham 32
The Summit
Queens Court
Regents Court
Sheffield 2Brookland Road
Newarke Street
Upperton Road
Eastern BoulevardNewcastle 1
Total beds operational, managed and under development
Dec-132,944
Apr-143,638
Sep-144,158
Dec-144,697
Feb-155,313
Oct-155,684
Apr-165,684
Brookfield completes
acquisition of Student
Roost and the Portfolio
Sep-166,837
Collegelands
St James’ House
St James’ Point
Oct-168,949
St Mungo Avenue
Swanson House
Great Patrick Street
Hollis Croft
Mar-1713,121
Buchanan View
Gibson Street
Apollo Court
Capital Gate
Myrtle Court
The Railyard
Lady Nicholson Court
Panmure Court
Portsburgh Court
Mealmarket Exchange
The Heights
Corfe House
The Boulevard
Feb-1820,759
The Depot
John Bell House
The Old Fire Station
Home Park
Tramways
Towpath
Chapel Heights
Dobbie’s Point
Merchant Studios
Byrom Point
Mannequin House
Hydrogen
Cornerhouse
Laycock Studios
Vincent Place
St Davids I & II
St Davids III (land)
Jul-1714,943
Little Patrick Street
Pittodrie Street
Nelson Street
(1) Nottingham 1, 2 and 3 refer to one asset; now named Nottingham 2
Operating assets
Development assets
Nov-17
Student Roost Brand and
website launch
May-18
Operations internalisation
completed
Oct-18
Back Office internalisation
completed
Jan-1920,846
Calton Road
Student Roost Brief History
Company history and evolution
15
Aberdeen
Edinburgh
Newcastle
Durham
York
Nottingham
Birmingham
Southampton
Bournemouth
Poole
Bath
Swansea
Belfast
Glasgow
Liverpool
Chester
Wrexham Leicester
Sheffield
London
Portfolio Breakdown by Region*
*by bed numbers and includes developments
Portfolio Summary
Operational Assets Secured Development Pipeline
Sheffield 14%
Glasgow 12%
Belfast 11%
Nottingham 9%
Leicester 9%
Liverpool 8%
Birmingham 7%
Other 31%
54PROPERTIES
20 1,500CITIES BEDS IN DEVELOPMENT PIPELINE
19,000 OPERATING BEDS
Location Sites Beds Location Sites Beds
Sheffield 5 2,869 Swansea 1 722
Glasgow 6 2,390 London 1 527
Belfast 3 1,204 Bournemouth 1 454
Nottingham 3 1,960 York 1 356
Leicester 7 1,849 Edinburgh 3 331
Liverpool 5 1,557 Poole 1 308
Birmingham 2 1,392 Southampton 1 283
Aberdeen 2 896 Durham 1 200
Newcastle 3 936 Wrexham 1 156
Chester 2 736 Bath 1 104
Location Sites Beds Delivery Date
Belfast 2 1,204 AY20/21 & AY22/23
Swansea 1 245 AY 20/21
Edinburgh 1 87 AY 20/21
Student Roost at a glance
Fourth largest privately-owned providers of student accommodation in the UK
16
3 Year Relationship
3,000 Beds delivered across 5 cities – Glasgow, Belfast, Aberdeen, Sheffield and Swansea
Forward Funding and Development Partner structures
Development partner for our flagship scheme Hollis Croft –delivered on time and on budget in September 2019
Current development partner in Swansea and forward funding Little Patrick Street in Belfast
Additional 4,500 beds across our acquired portfolio are WJ built
100 % occupied on full tenure for 19/20 on all WJ schemes
Student Roost and Watkin Jones
17
Deliver on-time and on-budget every time – Trust.
Wealth of experience – design and deliver fantastic desirable homes which support our customer satisfaction
Fantastic working relationship and culture of partnership. Can-do attitude.
Aligned strategies – supports our growth agenda in key regional markets . Flexible deal mindset.
Why Watkin Jones?
18
Granary Studios, Chester
Residential for Rent - Sector Overview
19
• UK Residential for Rent (‘living’)
• Long term structural trends driving
institutional demand
• Real estate moving away from
physical buildings to provision of
consumer experience
• Population growth & urbanisation
• Societal change in view of asset
ownership
• Tenant demand has low correlation to
the cycle
• Investors increasing weighting to this
‘living’ sector
Residential for Rent - Growth Sector
55,000
60,000
65,000
70,000
75,000
1990 1995 2000 2005 2010 2015 2020 2025 2030 2035To-date Projection
UK
Po
pu
latio
n (
‘000
s)
Student Accommodation PRS
2015£31bn
2019£51bn
Forecast 2025
£65bn
2015£15bn
2019£35bn
Forecast 2025 £75bnSource: Knight Frank Residential Investment Survey 2019,
ONS
Intend to reduce
holdings
No Change
Intend to
increase
holdings 8%
25%
67%
UK population is forecast to grow by 7.3 million by 2035
Residential investment intentions in the next five years
Total residential investment
20
Source: ONS
BtR growth
PBSA obsolescence of existing stock
140k → 1.7m unitsc.£35bn → c.£544bn
Current Market Size At maturity
PBSA growth
620k → 910k bedsc.£51bn → c.£75bn
c.75k beds to redevelop, 24% of PBSA built pre-1999 (51% pre-2009)*
• Our growth is driven from both
providing for demand and replacing
inadequate, older stock
• Institutional capital ‘force for good’
• Improving standards in PRS
• Helping to fix the housing crisis
• Urban regeneration
*Excludes London. It also excludes Oxbridge collegiate beds
Source: Savills
Residential for Rent – Quantifying Growth
Source: WJ Management data
Source: Cushman & Wakefield
By 2071(1)
By 2030(2)
(1) Based on current run rate of net 30,000 units per annum
(2) Based on current run rate of net 25,000 beds per annum
21
PBSA Sector - Strong Student Demand Trends
• Long-term growth in demand; favourable underlying UK student demographics &
overseas demand accelerating (EU and non-EU)
• Student expectations over quality of housing changing
• The UK is the world’s second ‘most in demand student market’ – good place to study &
live
• 33 of UK universities in top 250 global ranking
Projection of full-time UK undergraduates Number of top ranked universities by country
Source: Knight Frank Residential Investment Survey 2019, ONS, UCAS, HESA22
PBSA Sector - Demand Exceeds Supply
• Applications continue to significantly
exceed university places available
• Flight to Quality – winners & losers
• Existing PBSA supply unable to meet
‘Accommodation Promise’
• PBSA net supply of c. 25,000 new beds
per annum
• Private HMO sector under pressure
• Potential for increased PBSA demand
from 2nd, 3rd & postgraduate year
students
654 677 700 718 718 700 696
465 496 512 532 535 534 533
1710 1728 1730 1771 1827 1875 1878
0
500
1000
1500
2000
Applicants Acceptances Full time students
Applications vs Acceptances
Stu
de
nts
00
0s)
Students and supply
1728 1730 1771 1827 1875 1878
682 699 713 727 731 739
487 503 527 553 580 603
0
500
1000
1500
2000
2013/14 2014/15 2015/16 2016/17 2017/18 2018/19
Stu
de
nts
(0
00
s)
Total students 1st years (UG) + International (UG + PG) PBSA BedsSource: UCAS, HESA
23
Fiscal headwinds to Buy to Let Growth in consumerism
Push Factor Pull Factor
‘UK housing crisis’ Lifestyle flexibility
Population growth Demand for premium
locations
Declining household size Labour mobility
Affordability of house purchases Focus on total accommodation
experience (amenities and service)
2xNumber of residents renting in
England in last 10 years(1)
20% → 25% ( By 2021)
Private renters as % of all
households(2)
37%Renters by choice(3)
BtR – Growing Consumer Demand
(1) English Housing Survey
(2) Knight Frank, EHS, DCLG
(3) CBRE
24
PBSA & BtR – Investor Demand
Valuation Yields
• NIYs for PBSA/BtR have been stable/trending positive over the period
• Investor appetite has remained robust
• Driven by sector performance, future outlook & spread to 10yr Swap
Source: IPD, CBRE
8%
7%
6%
5%
4%
3%
2%
1%
0%2006 2008 2010 2012 2014 2016 2018
10 yr swap ratePBSA Av. UK NIY BtR Av. UK NIY
25
• FY2019 forecast investment volumes are above the 5-year average
• Structural demand, defensive characteristics and growth prospects drive investment
• Significant competition for newly built & forward funded assets
1.0
2.7
2.0
1.7
5.7
3.2
4.1
3.2
0.96
2.9
£0
£1
£2
£3
£4
£5
£6
2011 2012 2013 2014 2015 2016 2017 2018 2019
Completed Under offer
5 year average = £3.57bn
(£b
n)
Source: CBRE
0
100
200
300
400
500
600
700
800
900
1000
1100
Q1
20
15
Q2
20
15
Q3
20
15
Q4
20
15
Q1
20
16
Q2
20
16
Q3
20
16
Q4
20
16
Q1
20
17
Q2
20
17
Q3
20
17
Q4
20
17
Q1
20
18
Q2
20
18
Q3
20
18
Q4
20
18
Q1
20
19
Q2
20
19
Q3
20
19
Inve
stm
en
t (£
m)
Average 1/4ly investment volume
2019 PBSA investment volumes YTD Institutional investment volume into the PRS
3.86
PBSA & BtR – Investor Demand
26
Competitive Landscape
• New supply response is not keeping pace with both underlying consumer and institutional
investor demand
• PBSA annual supply stable over last five years at c.5% of total PBSA market
• BtR building momentum from a low base
• Competitive landscape – few experienced developers with national presence
• Barriers to Entry are high – specialist sector, track record, navigating planning consents, build
assurance, property management
0
500
1000
1500
2000
2500
3000
# u
nits
BtR Developer Ranking in 2019 (by BtR units in build)PBSA Developer Ranking (by beds delivered in 2019)
0
500
1000
1500
2000
2500
3000
Source: CBRE, JLL, Knight Frank, Savills, C&W
# b
ed
s
27
Kyle Street, Glasgow
Delivering Growth - Business units deep dives
28
Alex Pease
Group Investment Director
29
Watkin Jones
Proposition
UK-Wide Opportunity
Sourcing & Land
Procurement
Product and Design
Planning
Investors / Forward Funding
Delivery / Construction
Operations / Building
Communities
• Synergies across PBSA & BtR
• WJ ‘One stop shop’
• Levering vertically
integrated model
• Target growth in PBSA
• De-risk expansion in to BtR
PBSA & BtR Synergies
BtR
PBSA
30
Core Proposition – PBSA & BtR
78% of PBSA < 10 mins to University
75% of BTR < 10 mins to transport node
76% of PBSA in Top 50 University town
Av. 100k Professional Workers in BtR
catchment
Av. PBSA Amenity = 0.8sqm per unit
Av. BtR Amenity = 1.6sqm per unit
Av. PBSA Scheme = 350 units
Av. BtR Scheme = 257 units
• Aligned investor analysis/trends
• Customer focus driving asset returns
• Reversionary value / alternate use
• Defensive market positioning
• NOI growth
Massing, design & lifecycle efficiencies
=
building & operational performance
• Re-bookers & increased tenancies
• Future proofing assets
• Catering to requirements
PBSA – Av. 79% Cluster beds
BtR – Av. 44% 1-beds / 32% 2-beds
Proposition WJ - Delivering Investor Focus
• Widest customer market
• Granular sustainable income
• Maximise NOI not GOI
Customer & Investor Focused
• Macro to micro analysis
• Quantitative and
qualitative
Geography / Micro Location
• Brownfield & urban centres
• Transport, amenities, employment
& universities
Design
• High quality & designed for rent
• Maximise density & efficiency
• Lifecycle & environmental focus
Product
• Amenity & technology led
• Building communities
Target Market
• Mid market target rental
• < 35% of household income
• Variable price points
31
Growth
• Market supply
continues to be
cyclical
• Av. of 4,000 units fallen out of the
supply chain in
last five years**
• Obsolescence
will grow with 24%
built pre-1999 51%
pre-2009
• Strong historic
and future
growth in UK
student macro
dynamics
• Supply consistent
but has not
accelerated to
meet growth
Obsolescence Universities Headroom Analysis
• Estimated 2020
the 1st year
Private sector
supply will
exceed University
stock*
• Increased
proportion of
ageing stock
with 50% built pre-
1999 and 74%
pre-2009
• University
partnership
opportunities for
WJ to target
Current point in
time • 180,000 bed
head room –
across Tier 1-3
target cities
• 18 cities with in
excess of 3,000
unit headroom
Factoring in Growth
and Obsolescence• 247k bed head
room – across Tier
1-3 target cities
• 20 cities with in
excess of 3,000
unit headroom***
Headroom for Growth - PBSA
* Source: StuRents
32**C&W *** WJ Management
WJ Target Location
Graduate Retention
Rent Affordability
Metrics
Size of Professional Workforce
Economic Power of Area
(GDP / GVA)
House Price Affordability
Population
Demographic
Population Growth & Forecasts
Transport & Connectivity
Current & Pipeline Supply
BtR Supply
• Structural UK housing shortage• Historic BtR planning and financial
constraints• Fledgling BtR Supply – 35,000 built /
113,000 pipeline *
BtR Demand
• Population and urban expansion• Prolific growth in rental• ‘Rental Revolution’
Existing Quality
• PRS – a fragmented & inconsistent sector• Unregulated• 27%** of PRS fail to meet Decent Homes
Standards
Target Profile
• CACI / alternate data • Pinpoint core demand hotspots
Headroom for Growth - BtR
33 * Source: CBRE, BPF** Source: Ministry of Housing’s 2016-17 English Housing Survey
Recognising key value chain
Investment and land
procurement
Technical / design
developmentPlanning
Structured for Growth
Hubs are the engine room of growth
Strategic Planning
Transaction Lead
Transaction Analyst
Technical Lead
Technical Manager
HUB
34
Core strength in land
procurement
Strong networks across
the UK
80% of these developments sourced
Off-Market
76% procured with
planning or subject to
planning
Deliverability & reputation
breed further success
Sites assessed across PBSA
/ BtR & mixed use bases
Av. development cycle
34 months acquisition -delivery
Past five years WJ has
acquired
51 developments
16%
22%
8%27%
14%
6%8%
London
North
Midlands
South
Scotland
Wales
Northern Ireland
A genuine cross UK coverage:
‘Watkin Jones have the only genuine integrated platform that allows the
successful delivery of PBSA and BtR. Their success relies on an active land buying
team that are expert in identifying institutionally acceptable sites and then
transacting at speed. This capability is complemented by high quality planning,
construction and management to ensure successful exits.’ James Hanmer
Director - Savills
Land Procurement
35
CBRE June 2019: “In recent months there have been a number of land deals, raising the question
as to whether land prices have now reached a level where Build to Rent opportunities are now
more viable. L&G recently exchanged contracts on its largest investment into the sector to date;
two adjacent sites in Wandsworth, South London extending to six acres and which will deliver
1,000 rental homes.”
Resilient Sectors
• Procure land across the spectrum of economic cycles
Barriers to Entry - Remain high
• Planning, procurement & development expertise required to unlock many markets
Economic Uncertainty – Potential Opportunities
• Brownfield land a key barometer
• Potential ripple effect out from Central London
Capital Light – Forward Fund Model
• A point in time… an unusually attractive land opportunity
15
12
9
6
3
-3
-6
-9
-122015 2016 2017 2018 2019
0
Annual change in average land values (%)
Residential development land prices
Land Availability
Source: Knight Frank
Source: Knight Frank
36
50 PBSA consents
25,000 beds
8 BtR consents
1,066 units
• Planning in UK remains a key barrier to entry for both PBSA and BtR
• Planning recognised as a key contributor in the value chain
• Core internal skill sets & collaboration with market leading & key local consultants
• Combined investment, design and planning expertise to maximise consents
• Exceptional planning record over the last 10 years….
3001
5389
38504903
5531
22551089
London
North
Midlands
South
Scotland
Wales
Northern Ireland
• True national coverage and success across the UK
• Worked successfully in 33 different local authorities
Planning consents by region
Planning
Planning consents
by year (2009-2019)
37
Institutions & Investors
24 clients 14 repeat clients 63 repeat deals 73 assets sold £2bn revenue Avg. c £300m pa
Since 2012…..
• Key USP is WJ’s ability to partner and sell to leading institutions
• Built on trust, track record and delivery
• Fantastic rate of repeat clients and deals
• Striving to be the ‘Partner of Choice’ across PBSA and BtR
AIG have funded 5 WJ projects – 1,885 PBSA and 395
BtR units. All projects, including the tallest tower in Cardiff,
have been delivered on time and budget. Watkin Jones
stand out for their professionalism, & understanding of the
investor perspective. When issues emerge, they mobilise
additional resources to ensure all problems are
addressed. We hope to work further with Watkin Jones in
the future. - Naveen Patha, Managing Director, AIG
Investments
38
PBSA Case Study – Kelaty House, London
The Scheme• 599 PBSA beds, 300 BtR units / Practical Completion Q3 2021
Acquisition• Off market acquisition – agent & vendor confidence WJ would
deliver
Structuring – transactional & technical • Development expertise unlocked complex mixed-use scheme • Comprehensive structural & title redesign
Planning• In-house planning unlocks +100 beds
Insight• Wembley regeneration area • Transport links & amenities
Institutional Grade• Forward fund to DWS• New entrant to UK PBSA
Capital Light Structure• DWS capital forward fund land & PBSA• Lum Chang forward fund BtR development
39
BtR Case Study – Sutton Court Rd, Sutton
The Scheme• 166 BtR units• Practical Completion Q2 2021
Acquisition• Off-market • Investor introduction
Planning• Challenging BtR consent• Negotiated with key stakeholders GLA & Sutton
Development Expertise• Reworked existing unviable consent• 25% increase in density & amenity provision
Insight• Undervalued area• Commuter belt location (25 minutes to Central London)• Proximity to station & high street amenities
Institutional Grade• Competitive market bidding• Forward fund to M&G Real Estate
40
The Scheme• 159 BtR units and 37,000 sqft commercial• Practical Completion Q1 2020
Acquisition• Off-market• Mixed use multi-phased development
Planning• Change of use• Office to BtR led scheme
Development Expertise – Master Planning• 940 PBSA / 129 Hotel / 159 BtR / 125,000 sqft commercial
Insight• Strong demographic and economic analysis• Micro location
• Identify new BtR market
Institutional Grade• Competitive market bidding • Forward fund to M&G Real Estate
BtR Case Study – Holdenhurst Rd, Bournemouth
41
Jim Davies
Director
Watkin Jones Group
42
17%
12%
30%
41%
100%
Scotland & NI North England Midlands South
10%
35%
24%
31%
9%
16%
75%
Scotland & NI North England Midlands South
Inner ring = PBSA
Outer ring = BtR
FY2020 Delivery
FY2021 Delivery
2019 Deliveries
• All 2019 schemes delivered on time & well ahead of student occupation
2020 - 2021 Deliveries
• 11 PBSA & 4 BtR live schemes due for delivery in 2020 & 2021• All currently on track
Resourced for Growth
• Capacity, expertise & supply chain relationships in place
Brexit/Economic Uncertainty
• Long established relationships with key subcontractors & suppliers
• Good payment track record & strong aged debt position• Active involvement & engagement as we navigate
through Brexit and potential Government change • Detailed risk analysis of direct & indirect supply • Dedicated procurement teams provide constant
monitoring of critical item stock levels to assure unbroken delivery
Construction
43
Rebecca Hopewell
Chief Executive Officer
Fresh Property Group
Connecting WJ with the Customer
44
Delivering Growth
-
2
4
6
8
10
12
14
16
18
20
Un
its
(00
0s)
Units Cumulative Ave. (Units)
Continuous Sustainable YoY growth
8 x growth in Units over 10 years
• 23% CAGR
• Largest 3rd party student operator*
• c. £1.7bn AuM
• 44% non WJ built units managed
National Infrastructure
• 17,721 units
• 64 schemes
• 30 cities
• 357 staff
Well positioned for BtR growth
• Core infrastructure
• Business readiness
• Institutional client confidence
• End to end solution for Group
Growth in non WJ built units
100%
2010/11
2019/20
Areas of operation
Growth in units under management
56%44%
WJ built
3rd party built
* CBRE Operator League Table
2,265 units
17,721 units45
Delivering exceptional customer experience
‘Experts in creating and managing vibrant communities which people
really want to come home to’
OVERALL MANAGEMENT
KNOWLEDGE FRIENDLINESS
91% 94% 93%
What our customers say...
25%
‘The location is second-to-none,
the staff are lovely and the building is
beautiful inside and out. I wish I could live here
forever.’
'Perfect place for student
accommodation. Lovely people and
staff and every facility available.'
‘The accommodation is
in perfect condition and run
by a fantastic manager who
really looks after us brilliantly!’
‘Love the cosy study room and social space, all
ready to book for next year.’
Source: NSHS
46
31 clients 7 take overs 2018/19
Av. 7.4schemes per top 5 Clients
Client confidence…
• Commercial alignment
• Design input
• Financial visibility
• Driving NOI
• Customer feedback loop
“We were impressed with the enthusiasm, interest and local
market knowledge shown by FPG when we were selecting
our operating partner. They have been thoroughly
professional in their approach supporting the initial
development with an array of specialist personnel. The on-site
team have been fantastic and their performance speaks for
its self - Mill House was 100% let for 2018/19 and was full for
2018/19 since Q1 2018.“Maven Capital Partners LLP Student
Trust
Institutional Grade Client Services
42% of schemes across 5 cities
Student Operator of
the year 2018*
* Source: Property WeekDelivering value…
"The scale & quality of Fresh's infrastructure
ensures consistently high levels of service
delivery to students & therefore a high level of
satisfaction & better returns from our assets."
Curlew Student Trust
47
Base Case• Early mover site in a Regeneration Area• Under provision of student facilities • Not an established student area
Fresh PG input• Off Site marketing suite • Redesigned amenity spaces • Initial pricing strategy
Results• 100% occupancy each year
• Above RPI increases each year (4.8% average)• Partial nominations agreement
Value Add to PLC• Stabilised asset has proven location and values• Positive impact on adjacent WJ site value• FPG retained as manager on asset sale
Case Study – Merlin Heights, Leicester
48
Phil Byrom
49
Homes – Residential Expertise
North West UK is a strong performing
region in the UK. This is the core
area for WJ Homes
Maintain current delivery rates of c.150 homes per
annum
WJ Homes have built in the North West region for over 20 years
BtS and single family part of
the ‘Living’ expertise of WJ
Target sites between 50 to
100 homes, avoiding the
larger developers
Delivery of residential units under a mixed-
use scheme across UK
Maintain a small landbank (c. 450 units) with new sites progressed
quickly into development
Core product will be mid-
market units
BtR opportunities eg Trafford
Street, Chester
50
Financials
Albion Way, London51
£0
£100
£200
£300
£400
FY16 FY17 FY18
PBSA, £312.7m (86%)
BtR, £3.8m (1%)
Residential, £30.0m (8%)Accommodation mgmt, £7.3m (2%)
Other, £9.3m (3%)
£0
£20
£40
£60
£80
FY16 FY17 FY18
PBSA, £60.7m (84%)
BtR, £1.0m (1%)
Residential, £4.4m (6%)
Accommodation mgmt, £4.5m (6%)
Other, £1.8m (3%)
Group Revenues
Group Gross Profit
FY18 Revenues
FY18 Gross Profit
£267.0m
+9.3%
£301.9m
+13.1%
£363.1m
+20.3%£m
£m
£53.8m
+22.2%
GM 20.1%
£63.5m
+18.0%
GM 21.0%
£72.4m
+14.0%
GM 20.0%
Financials - KPIs
52
Group Adjusted PBT
Group Net Cash
Earnings per share (adjusted)
Dividend per share
ROCE excluding net cash
0
2
4
6
8
10
12
14
16
18
FY16 FY17 FY18
6.0p
12.4p
+19.2%
14.0p
+12.9%
16.0p
+14.3%
6.6p7.6p
£0
£10
£20
£30
£40
£50
£60
FY16 FY17 FY18
£0
£20
£40
£60
£80
£100
FY16 FY17 FY18
pe
nc
e
£m
£m
£32.2m
-17.6%
£41.0m
+27.3%
£80.2m
+95.5%
£39.8m
+22.7%
£43.3m
+8.8%
£50.1m
+15.7%
EPS
DPS
Financials - KPIs
57.90%51.8%
69.7%
0.0%
10.0%
20.0%
30.0%
40.0%
50.0%
60.0%
70.0%
80.0%
FY16 FY17 FY1853
Earnings Model – PBSA & BtR
PBSA and BtR – Forward Sales Model
• Revenue and profit recognition
• Typical deal structure
• Land sale
• Development works
• Final payment
• IFRS 15 ‘Revenue from Contracts with Customers’
• Applicable to WJ for FY19
• No major impact on WJ’s results
• Formal separation of land sale and development agreement
• Current average gross margins
• PBSA – 20%
• BtR – 15%+
54
Worked Example - PBSA
Model PBSA Scheme – 500 beds
• Total capital value - £50.0 million
• Land value - £12.5 million• Build value - £34.0 million• Final payment - £3.5 million
• Current gross margin 20% - £10.0 million
• Build period – 24 months
WJ – example PBSA scheme financial profile
55
Worked Example - BtR
Model BtR Scheme – 250 units
• Total capital value - £70.0 million
• Land value - £15.0 million
• Build value - £50.0 million
• Final payment - £5.0 million
• Current gross margin 15% - £10.5 million
• Build period – 30 months
WJ – example BtR scheme financial profile
56
Illustrative Cost Value Margin for Developments
SOUTH EASTRent: £175/wkNet income: £5,600 paNIY: 5.5%Capital value: £105kLand: £25kBuild costs: £60kTarget margin: 22-24%
LONDONRent: £230/wkNet income: £9,070 paNIY: 4.75%Capital value: £184kLand: £60kBuild costs: £85kTarget margin: 26-28%
OTHER UK REGIONSRent: £140-165/wkNet income: £4,500-5,600 paNIY: 5.5-6.0%Capital value: £60-90kLand: £10-15kBuild costs: £55-60kTarget margin: 18-22%
All figures are illustrative and relate to an approximate per bed basisRent = gross per week / Net Income = net annualisedNet initial yield (NIY) = forward fund yield / Capital Value = net per bedLand = per bed with planning / Build costs = all other costs per bed
PBSA
SOUTH EASTRent: £1.3k/mthNet Income: £11.5k paNIY: 4.0%Capital value: £280kLand: £65kBuild costs: £170kTarget margin: 15%+
LONDONRent: £1.4k/mthNet Income: £12.5k paNIY: 3.75%Capital value: £325kLand: £95kBuild costs: £188kTarget margin: 15%+
OTHER UK REGIONSRent: £1.1k/mthNet Income: £10k pa
NIY: 4.5%Capital value: £210kLand: £23kBuild costs: £155kTarget margin: 15%+
BtR
All figures are illustrative and relate to an approximate per BtR unit basisRent = gross per month / Net Income = net annualisedNet initial yield (NIY) = forward fund yield / Capital Value = net sale value per unitLand = per unit with planning / Build costs = all other costs per unit
57
Growth Profiling
Identify siteNegotiation
of site purchase
Obtain planning consent
Marketing of opportunity
Negotiation of land sale &
development agreement
Completion of land
purchase & sale
Constructionof asset
Practical completion
24 months 6 months 24 months
24 months 6 months 30 months
PBSA timeline to 3,500 beds per annum delivery
BtR timeline to 1,000 units per annum delivery
Revenue Recognition
Land sale Development
58
Cash Profile
• Typical “hockey stick” cash profile
• Land acquisition and planning
costs, overheads, tax and dividend
payments utilise cash during the
year
• Final payments received on
completion of developments and
sales transactions re-build cash at
the year end
• BtR should help smooth the cash
profile
Cash Requirement
• Current year end cash required is c.
£100m
• Growth strategy is likely to increase
this requirement to c. £150m
Cash Requirement
-
20
40
60
80
100
120
0 1 2 3 4 5 6 7 8 9 10 11 12
Monthly Cash Balance
Dividend
• Progressive dividend in line with
earnings growth (2 x cover)
• Achieving the growth strategy may
lead to free cash and enable a
further review of the dividend policy
Typical cash profile
(£m
)
month
59
The Future of Living – In Summary
Kelaty House, London60
Creating the Future of Living – In Summary
Business is fundamentally scalable and set for growth
Resilient, Flexible & Cash Generative
UK market leader in developing & managing residential for rent (PBSA and BtR)
Strong underlying market fundamentals driving growth
Growing institutional demand for new projects, both from UK and overseas investors
Scalable business platform with full end-to-end offering
A strong track record of ‘on time and on cost’ project delivery
High earnings visibility with new build pipeline stretching 3-4 years out
Robust capital structure, working capital light model and low gearing61
Q&A
62
Tour Duncan House
63
Duncan House
Entered contract
(off market)
Topping out Ceremony
Construction commenced
Planning submission
Discussions commenced with University
of London
Practical Completion
Forward fund to UPP / University
of London
Planning granted
Jan 2015
Jun 2015
Nov 2015
Aug 2016 Dec 2016
Nov 2016 Sept 2018
Aug 2019
64
Student Accommodation
32 storey tower and 4 storey low rise
Student Accommodation providing
511 beds, 420 student cluster
bedrooms & 91 studios. 7 student
communal areas offering various
study, recreation and relaxation
opportunities.
Academic
2,786 sqm, 4 storey academic block
designed to accommodate teaching
spaces, lecture theatres and fully
service dining facilities. External
landscaped courtyard and furnished
for social gatherings.
Residential
8 storey residential includes 23 private
residential apartments and 22
affordable/shared ownership housing
partnerships.
Communal family play space
sheltered within an enclosed roof
garden.
Commercial
Ground floor corner plot 62
sqm off Jupp/Ward Road
Development Value
1. Student accommodation &
affordable workspace = £78,480,795
2. Academic = £10,252,022
3. Residential = £13,866,084
Total Development Value =
£102,598,901
Duncan House - Highlights
65
• Glossary of terms
• Presentation team – biographies
• Projects – list and scheduled completion dates
• Financial track record of Group
Appendices
66
Glossary of Terms
BtR Build to rent
CAGR Compound annual growth rate
EBITDA Earnings before interest, taxes, depreciation and amortisation
GOI Gross operating income
HMO House in multiple occupation
NOI Net operating income
PBSA Purpose built student accommodation
PG Post graduate
PRS Private rented sector
UG Under graduate
67
Alex Pease - Group Investment Director
• Joined WJ in 2010 & promoted to the role of Group Investment Director in 2013
• Alex is a chartered surveyor (MRICS)
• Previously Alex spent 6 years in the Savills Residential Investment team specialising in brokerage, consultancy and valuation across all residential asset classes
Richard Simpson - Chief Executive Officer
• Joined WJ in January 2019 as CEO
• Richard has 17 years’ experience working in the property development and student accommodation sector, most recently as Group Property Director at Unite
Group plc (“Unite”)
• Richard’s board level roles include seven years serving on the Plc Board of Unite as well as two years in a Non-Executive capacity with CityWest Homes
Phil Byrom - Chief Financial Officer
• CFO of WJ since joining the business in 2002
• Phil qualified as a chartered accountant with PwC in 1990, with whom he progressed rapidly to senior manager and had responsibility for several public company
clients
• Prior to joining WJ Phil spent 7 years in industry where he held several posts as group financial controller and finance director, including divisional finance director
at BWI plc
Rebecca Hopewell - Chief Executive Officer Fresh Property Group
• Joined Fresh Property Group in 2010 to create a specialist 3rd party management company (wholly owned by WJ)
• Has over 15 years of experience in student accommodation industry
• Prior to specialising in student accommodation, Rebecca spent 17 years as a Senior Director for Sanctuary Housing Association
Jim Davies – Managing Director, Newmark
• Joined the business in 1999, and is currently Managing Director of Newmark Developments (wholly owned by WJ)
• Jim is tasked with focusing on bringing the sites in the land bank forward, ensuring they are ready for the student construction teams to commence work
immediately.
• Prior to joining WJ Jim worked with Mowlem, Norwest Holst and Allenbuild
Presentation Team
68
Projects List & Completion Dates
PBSA Beds Completion Planning Status
Little Patrick Street, Belfast 430 2020 Granted
Forest Road, London 353 2020 Granted
Albion Way, London 283 2020 Granted
Whitefriars, Coventry 778 2020 Granted
Swansea 245 2020 Granted
Military Road, Canterbury 197 2020 Granted
Liverpool Road, Chester 323 2020 Granted
Kelaty, Wembley, London 599 2021 Granted
Cathedral Street, Glasgow 422 2021 Granted
Rockingham Street, Sheffield 691 2021 Granted
Dundee Street, Edinburgh 216 2021 Granted
Wilder Street, Bristol 348 2021 Granted
Bath Lane, Leicester 462 2021 Granted
Birmingham 608 2022 Pending
Exeter 154 2022 Pending
Edinburgh 270 2022 Pending
Bath 191 2022 Pending
BTR
Bournemouth 159 2020 Granted
Reading 315 2021 Granted
Wembley 301 2021 Granted
Sutton 166 2021 Granted
Leicester 184 2021 Granted
Sheffield 71 2022 Granted
Hove 213 2022 Pending
Woking 336 2023 Pending69
2024
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