the private rented sector opportunities and challenges kurt mueller, director of corporate affairs...
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The private rented sectorOpportunities and challenges
Kurt Mueller, Director of Corporate Affairs
CIH South East Conference
2013
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Our business
The UK’s largest listed residential property owner and manager
A trader, investor and manager of residential properties
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OPERATIONAL PLATFORM
Investment Asset management
Property Management Development
Snapshot of Grainger
• We directly own c.£2.2bn of residential assets
• We manage on behalf of third parties c.£1bn of residential assets
Owning and managing residential
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• High quality assets
• Gross yield of 6.9%
• Robust income stream
• Low voids
• Strong locations
• +60% of UK portfolio in London and S/E
• 90% of German assets in four strongest regions
Attracting partners and investment
The growth of PRS
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PRS market
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• The number of private rented households has increased from 2.00 million (10%) in 1999 to 3.62 million (17%) in 2010-11.
• Strong future growth prospects for rental sector
• Economic conditions adding to renting demando Constrained mortgageso High deposits
• Growing cultural acceptance of renting
Challenges of PRS investment
• Limited acquisition opportunities, scale is challenging
• High capital values based on vacant possession value mean low yields
• Competition on land with house-building for sale
• What concerns do we have with long term management of PRS?
What are investors looking for?
• Net yields over 5%• Rental growth• Scale• Blocks• High quality• Capital value growth?
So how to make PRS investment work?
• Valuation on investment value• Land value paid for over the long term• Section 106?• Design• Management efficiencies (economies of
scale)
Two examples
• London Road, Barking
• Royal Borough of Kensington & Chelsea
• Project being constructed by Bouygues.
• Barking is located in Zone 4 and is well serviced by public transport.
• Ground floor has been let to ASDA and Grainger have agreed to acquire the residential component.
• No on site affordable housing.
• Start on site December 2012.
• Practical completion in June 2015.
• 20% deposit payable on exchange no further staged payments.
Key Financial Data
• Number Of Units 100
• Estimated Rental Income £1,261m
• Purchase Price £13,700m
• Gross Yield 9.34%
London Road, Barking
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Young Street Hortensia Road
125 year lease on two high profile sites in Royal Borough of
Kensington & Chelsea
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Delivering on the Group’s strategy
SALES
• Sales of high end apartments to repay cost of development, as well as providing development profit and development management fees
RENTS
• Remaining stock rented out at either market or affordable rent levels
• Grainger has 125 year income from share of net rent
FEES
• Grainger will asset and property manage both sites, earning fees on top of the development management fees (under sales)
Thank you
• www.graingerplc.co.uk
• @graingerplc