Helical Plc · LSE:HLCL
Helical — H1 2016 Earnings Presentation
80 slides from Helical's earnings presentation, November 2015
Slide 1: Half Year Results to 30 September 2015
HALF YEAR RESULTS To 30 September 2015
Slide 2: Introduction
INTRODUCTION
Slide 3: Introduction
Introduction • London is delivering strong returns. – We look to increase our concentration in London which continues to show out- performance. • De-risking the developments. – We have de-risked a number of London developments vis the sale One Bartholomew Square offices, forward funding at Creechurc
Slide 4: London
LONDON
Slide 5: The Case for London
The Case for London • London represents 55% of the investment portfolio, post The Bower acquisition. • Strategy to increase London holdings. • Why do we believe in London? Where are we in cycle? • London population growing 100,000 pa over the next 10 years (London Plan). • London fastest growing mat
Slide 6: The Case for London
The Case for London • London is a leading technology centre. Tech sector creating new jobs on a large scale. Jobs in 10 years’ time not yet invented. • Mature cities seeing re-urbanisation after many years of post-war suburbanisation. • A ‘war for talent’ - corporates seek good quality office space
Slide 7: London – Locations
London – Locations Charterhouse Square, EC1 C Space, EC1 Barts Square, EC1 The Bower, EC1 Shepherds Building, 26-35 Drury Lane, WC2 Chart House, N1 W14 The Powerhouse, W4 One King Street, W6 One Creechurch New Loom House, E1 King Street, W6 Place, EC3 7
Slide 8: London – Forward Funding, Purchase and Sales
London – Forward Funding, Purchase and Sales Forward Funding Price Comment One Bartholomew Close £102m Site sale, funding and profit share (JV partner – Baupost) Purchase Price Comment The Warehouse, The Studio & The Tower £248m Purchased from JV partner, at The Bower Crosstree Sales Price Comment C
Slide 9: London Office Development Pipeline
London Office Development Pipeline NIA Sq ft 300,000 2015 2016 2017 2018 2019 ONE CREECHURCH PLACE 250,000 ONE BARTHOLOMEW CLOSE 200,000 THE BOWER: TOWER 150,000 THE BOWER: WAREHOUSE 100,000 23-28 CHARTERHOUSE 50,000 SQUARE 90 HAMMERSMITH BARTHOLOMEW TOWN HALL THE BOWER: CLOSE STUDIO 54-58 BARTS CLO
Slide 10: London Development Scheme Review
London Development Scheme Review Property Partner HB Status Start Area Total Completion Helical Potential Share Sq Ft NIA Cost Profit to Helical Profit 30-09-15 to Come The Studio 18,283 sq ft office 4,033 sq ft retail Phase 1 – Complete £180m Phase 1 – Nov 2015 The Bower, Phase 1 The Warehouse Old
Slide 11: The Bower, Old Street, London EC1
The Bower, Old Street, London EC1 www.theboweroldst.com Helical acquisition: • The Warehouse, The Studio and The Tower for £248m from the joint venture. • Empire House, fully let at £790,000 pa, sold by JV to Standard Life Investments Long Lease Fund for £20.65m (3.8% NIY). • Crosstree acquire the r
Slide 12: The Bower, Old Street, London EC1
The Bower, Old Street, London EC1 Business Case • The Bower acquisition - a ‘step-change’ indicating the strong intent of management to grow the business. • Seeking to increase London exposure. Acquisition adds to the coherence of investment portfolio centred around the Tech Belt (C-Space, New Loom
Slide 13: The Bower, Old Street, London EC1
The Bower, Old Street, London EC1 Empire House • Fully let. • 17,315 sq ft hotel pre-let to Z Hotels at £650,000. • 3,411 sq ft restaurant pre-let to Ceviche at £140,000. • Completed and open March 2015. • Sold to Standard Life for £20.65m on 10th November 2015. 13
Slide 14: The Bower, Old Street, London EC1
The Bower, Old Street, London EC1 The Studio • Fully let. • 18,283 sq ft offices pre-let to John Brown. • 1,184 sq ft A3 pre-let to Honest Burger. • 2,849 sq ft A3 pre-let to Enoteca da Luca. • Total Rent: £977,000. 14
Slide 15: The Bower, Old Street, London EC1
The Bower, Old Street, London EC1 The Warehouse • 122,858 sq ft office:- Floor NIA sq ft Tenant Rent psf Ninth 7,665 CBS Interactive UK Ltd £60.00 Eighth 9,751 CBS Interactive UK Ltd £60.00 Seventh 12,398 Under offer Sixth 12,430 Farfetch £52.50 Fifth 12,396 Farfetch £50.25 Fourth 12,327 Farfetch £5
Slide 16: The Bower, Old Street, London EC1
The Bower, Old Street, London EC1 The Warehouse & Studio • Rental progression: Terms Agreed Floor Rent psf October 2014 The Studio £45.00 November 2014 4&5 £50.25 March 2015 6 £52.50 June 2015 8&9 £60.00 August 2015 3 £55.50 September 2015 1&2 £52.50 & £53.50 November 2015 7 UNDER OFFER • Acquired a
Slide 17: The Bower, Old Street, London EC1
The Bower, Old Street, London EC1 The Tower • Phase 2 – to commence Q4 2015. – completion Q4 2017. • 170,000 sq ft office. • 7,300 sq ft retail/A3. • Acquired at 5% off average rent of £63.50 psf. 17
Slide 18: Barts Square, London EC1
Barts Square, London EC1 www.bartssquare.com 18
Slide 19: Barts Square, London EC1
Barts Square, London EC1 Phase 1 • Construction commenced. • 144 residential units. • 92 residential units launched September 2014 with 52 more units launched June 2015: ‐ Total value £195m. ‐ 93 exchanged, value £125.4m. ‐ Average sales price to date c. £1,579 psf. • Commercial: ‐ 90 Bartholomew Cl
Slide 20: Barts Square, London EC1
Barts Square, London EC1 20
Slide 21: Barts Square, London EC1
Barts Square, London EC1 Phase 2 • One Bartholomew Close - 211,642 sq ft office. • Commence Q4 2015. • Complete Q3 2018. • Site sold to clients of Ashby Capital LLP for £102.4m. • Baupost/Helical to receive profit share based on fixed yield, variable on rent. 21
Slide 22: Barts Square, London EC1
Barts Square, London EC1 Phase 3 Phase 4 • 92 residential units. • 54-58 Bartholomew Close - 10,200 sq ft office refurbishment. • 10,700 sq ft retail. • Commence Q4 2016. • Complete Q1 2019. 22
Slide 23: One Creechurch Place, London EC3
One Creechurch Place, London EC3 www.onecreechurchplace.com • 271,500 sq ft offices. • Construction by Skanska well underway – frame to 5th floor. • Completion due September 2016. • Aldgate public realm improvements. • Limited supply in City in 2016. • Profit share to Helical at different rents. Ass
Slide 24: One Creechurch Place, London EC3
One Creechurch Place, London EC3 24
Slide 25: 23-28 Charterhouse Square, London EC1
23-28 Charterhouse Square, London EC1 • Acquired in December 2014 for £16m. • New 155 year lease from Governors of Sutton’s Hospital in Charterhouse at 8.25% gearing. • Major refurbishment of 37,962 sq ft offices and 5,170 sq ft A3. • Planning consent granted. • Start on site January 2016, completio
Slide 26: 23-28 Charterhouse Square, London EC1
23-28 Charterhouse Square, London EC1 26
Slide 27: The Importance of Space
The Importance of Space 27
Slide 28: Creating Interesting Spaces
Creating Interesting Spaces 28
Slide 29: Flexible 'Activity Based' Working Spaces
Flexible ‘Activity Based’ Working Spaces 29
Slide 30: Value Creation through Public Realm, Gardens and Terraces
Value Creation through Public Realm, Gardens and Terraces 30
Slide 31: Responding to the needs of Gen Y
Responding to the needs of Gen Y 31
Slide 32: C Space, London EC1
C Space, London EC1 After Before 32
Slide 33: C Space, London E1
C Space, London E1 • Contemporary re-invention of a former carpet • 75% pre-let to creative agency factory with 62,000 sq ft of offices. DLKW Lowe at a rent of c.£2.6m p.a. • Additional floor with terraces and new office ‘pavilion’ reception within landscaped • Rents of up to £63.50 psf courtyard. a
Slide 34: Clifton Street, Shoreditch, EC2
Clifton Street, Shoreditch, EC2 • Sale completed Sept 2015. £17.25m profit from £1m equity deployment. 34
Slide 35: King Street, Hammersmith, London W6
King Street, Hammersmith, London W6 35
Slide 36: King Street, Hammersmith, London W6
King Street, Hammersmith, London W6 • Development agreement with Hammersmith & Fulham Borough Council and in a joint venture (50/50) with Grainger plc. • Planning permission received 14 April 2014 for 196 homes, 40,000 sq ft council offices, 3 screen cinema together with retail / residential space.
Slide 37: King Street, Hammersmith, London W6
King Street, Hammersmith, London W6 37
Slide 38: 26-35 Drury Lane & 8-12 Dryden Street, London WC2
26-35 Drury Lane & 8-12 Dryden Street, London WC2 • Exchanged contracts to purchase the existing 65,000 sq ft of office and retail space in July 2015 with completion due on grant of planning. • Planning application submitted in August 2015 for an 80,000 sq ft mixed use scheme comprising 68 residenti
Slide 39: London Income Producing Asset Review – Key Projects
London Income Producing Asset Review – Key Projects Valuation Headline Net Rent Property ERV increase since rents Key Events Sept 2015 March 2015 (psf) Artillery Lane • Refurb complete City • Sold for £15.1m. c. £5m profit • 70% IRR Enterprise House, • Sold for £43m. 4.04% NIY. £10m profit Paddingto
Slide 40: The Regions
THE REGIONS
Slide 41: The Regions: Strategy for Income
The Regions: Strategy for Income • The regions are 45% of our investment portfolio by value, post The Bower acquisition. • Focus on sectors with strong occupational demand with prospects for rental growth and inward yield shift. Logistics and selective office locations. • Acquire institutional quali
Slide 42: The Regions: Purchases and Sales March 2015 – September 2015
The Regions: Purchases and Sales March 2015 – September 2015 Purchases Sales Net Investment Retail £0m £2.6m -£2.6m Logistics £69m £28.5m £40.5m Regional Offices £0m £3.1m -£3.1m TOTAL £69m £34.2m £34.8m • A quieter period of investment transactions reflecting a hotter market where value is harder t
Slide 43: The Regions: Industrial / Logistics
The Regions: Industrial / Logistics • 18.2% of the total portfolio; £194m value. • 1.5% valuation growth. 0.6% ERV growth. • Very strong occupational demand and limited space being built. Beginning to see rental growth e.g. Doncaster, Gloucester. • Finding value in shorter leases providing location
Slide 44: The Regions: Retail
The Regions: Retail • 16.4% of the total portfolio. £102.8m of retail warehousing. £71.6m of in town retail, dominated by Cardiff, The Hayes. • 1.6% valuation growth. • 2.1% ERV growth, dominated by Cardiff, +6.4%. • Numerous rent reviews due in Cardiff this year. ERV £185 ITZA compared to average p
Slide 45: The Regions: Offices
The Regions: Offices • 9.9% of the total portfolio; £105m value. • 55% of value in Manchester; Churchgate House and Dale House. • 23% of value in South East. • 1.9% valuation growth in half year. 2.2% ERV growth. Manchester, Churchgate House • Continued strong performance in Manchester and Bristol.
Slide 46: Asset Management Overview – March 2015 to September 2015
Asset Management Overview – March 2015 to September 2015 Rent % of rent roll Rent lost at break/expiry -£0.7m 1.6% Net rent lost through administration -£0.2m 0.4% New lettings and changes at lease renewal £2.2m 4.9% Rent reviews and RPI uplifts £0.2m 0.4% Net Increase £1.5m 3.3% • Beginning to capt
Slide 47: Retirement Villages
Retirement Villages Asset Class No. No. No. Status Anticipated Units Sold Reserved Completion Liphook 151 150 1 Complete. Planning consent granted for an extra 40 cottages. Start construction Q1 2016. Faygate 173 35 10 Phase 1 & 2 complete 2019. Phase 3 to start once December 2015. Clubhouse further
Slide 48: Portfolio Summary
Portfolio Summary Asset Class Fair Value % of % Overall Income Held for Net Initial Reversionary Strategy Overall Portfolio Producing Development Yield (ex Yield Portfolio Post Profit Development Bower Assets) London £479m 44.9% 52.5% £290.6m £357.3m 2.8% 5.9% Deliver projects to add value for capit
Slide 49: Financial
FINANCIAL
Slide 50: Headline Numbers
Headline Numbers INCOME STATEMENT Sept 2013 Sept 2014 Sept 2015 Net rental income £14.1m £18.8m £20.8m +11% Development profits £63.5m £15.6m £18.7m +20% Gain on sale and revaluation of £10.9m £34.8m £68.1m +96% investment properties IFRS profit before tax £68.9m £42.9m £85.9m +100% EPRA profit befo
Slide 51: Headline Numbers
Headline Numbers BALANCE SHEET Mar 2014 Mar 2015 Sept 2015 Total portfolio at fair value £802m £1,021m £1,066m 436p EPRA net asset value per share 313p 385p Up 13% Net Debt £365m £532m £518m - Secured2 36% 34% 31% Loan to value ratio - Overall 46% 52% 49% Notes: 1 All figures include share of joint
Slide 52: Pro-forma Numbers Post The Bower Acquisition
Pro-forma Numbers Post The Bower Acquisition Sept 2015 Total portfolio at fair value £1,234m Net debt £658m - Secured2 38% Loan to value ratio - Overall 53% Notes: 1 All figures as at 30 September 2015, adjusted for completion of The Bower acquisition. 2 Ratio of secured debt to total property portf
Slide 53: Helical – Rental Income
Helical –Rental Income £m Contracted Current Post Bower Rent ERV ERV £100.0 £90.0 £80.0 £76.5m £70.0 £65.1m £60.0 £50.0 £42.4m £38.6m £40.0 £75.5m £29.8m £30.0 £58.5m £24.5m £22.9m £0.8m £20.0 £17.8m £41.5m £14.9m £34.2m £24.4m £10.0 £17.9m £19.6m £20.0m £14.2m £14.2m £0.0 2010 2011 2012 2013 2014 2
Slide 54: Interest Rate Protection
Interest Rate Protection Fixed rate borrowings £m 1000 900 £837m £827m £800m £794m 800 £672m 700 600 4.1% 4.1% £584m 4.3% 4.1% 500 400 3.4% 300 200 4.3% 100 0 Mar 16 Mar 17 Mar 18 Mar 19 Mar 20 Mar 21 Retail Bond Convertible Bond Other Fixed Rate Borrowings Total Loan 54 Helical Bar plc
Slide 55: Loan to Value
Loan to Value £1,400 90% 80% £1,200 70% £1,000 60% 53% 56% 56% £800 54% 52% 49% 49% 50% 47% 45% 45% 46% 44% £600 41% 42% 41% 40% 36% 34% 37% 38% 37% £400 31% 30% £200 20% £0 10% 2010 2011 2012 2013 2014 2015 1H 2016 2016 2017 2018 2019 2020 2021 Value of Investment portfolio Value of trading and dev
Slide 56: Summary of Financial Position
Summary of Financial Position 30 September Purpose 2015 Unutilised bank facilities £74m To fund capex on development programme and investment acquisitions. Cash £150m Uncharged Properties (at fair value) £50m Average Debt Maturity 4.3 years 31 March 2015 – 4.3 years Weighted Average Interest Rate 3.
Slide 57: Conclusion
CONCLUSION
Slide 58: Conclusion
Conclusion • Step Change – Continue to look for opportunistic joint ventures. – We are also now of a size to build and retain, where appropriate, development stock on our own book. – We have moved this year from 60:40 (regional : London) towards 40:60 (regional : London) with a stronger ‘put’ into L
Slide 59: Notes
Notes ey 59
Slide 60: Appendices
APPENDICES as at 30th September 2015
Slide 61: Income Statement
Income Statement 100 £m 90 £2.9m £85.9m £68.1m 80 70 60 50 £18.6m 40 30 £5.8m £20.8m £7.3m 20 £0.7m £14.9m 10 £12.1m 0 Net rental income Development profits Administration Performance related Net finance costs Other net income EPRA profit before Net gain on sale Other adjustments IFRS profit before
Slide 62: EPRA Net Assets Per Share
EPRA Net Assets Per Share p 600 575 550 525 500 57.0p 475 435.7p 450 9.3p 5.8p 4.3p 425 13.0p 400 385.1p 375 350 325 300 275 250 At 1 April 2015 EPRA EPS Gain on sale and Development surplus Other adjustments Dividends At 30 Sept 2015 revaluation surplus decrease 62
Slide 63: Increasing Rental Surpluses – Investment Portfolio
Increasing Rental Surpluses – Investment Portfolio £m £100.0 £90.0 £80.0 £76.5m £70.0 £65.1m £59.5m £60.0 £50.0 £45.1m £42.4m £40.0 £35.2m £36.4m £36.7m £34.0m £29.4m £28.7m £28.5m £30.0 £23.2m £24.4m £18.2m £20.0 £10.0 £0.0 31 March 2010 31 March 2011 31 March 2012 31 March 2013 31 March 2014 31 Ma
Slide 64: Loan Expiry in Parent and Subsidiaries as at 30 September 2015
Loan Expiry in Parent and Subsidiaries as at 30 September 2015 £m Average maturity 4.4 years £395.6m £400.0 Average cost of debt 3.7 % • £100m RCF extended to April 2020 £350.0 • £99m Investment Facility extended to August 2020 • £68m Retirement Village Facility to August 2020 £300.0 £250.0 £200.0 £
Slide 65: Loan Expiry in Joint Ventures as at 30 September 2015
Loan Expiry in Joint Ventures as at 30 September 2015 £m Average maturity 2.8 years Average cost of debt 5.2% £100.0 £90.0 £80.0 £70.0 £60.0 £50.0 £40.0 £30.0 £27.7m 1 £27.3m 1 £20.0 £10.0 £0.0 < 1 year 1-2 years 2-3 years 3-4 years 4+ years 1 All non-recourse of which £27.3m has interest guarantees
Slide 66: Helical's Portfolio – Changes to Book Value
Helical's Portfolio – Changes to Book Value £1,200,000,000 £1,000,000,000 Convertible Bond Issue £800,000,000 Retail Bond Issue £600,000,000 £400,000,000 £200,000,000 £0 Mar-08 Oct-08 May-09 Dec-09 Jul-10 Feb-11 Sep-11 Apr-12 Nov-12 Jun-13 Jan-14 Aug-14 Mar-15 Poland Retirement Villages Land Regiona
Slide 67: Portfolio Geography by Helical Equity
Portfolio Geography by Helical Equity 1% 5% 12% 9% Scotland Wales 7% 16% South East South West London Midlands North 50% 67
Slide 68: Portfolio Held for Income - Helical's Share
Portfolio Held for income - Helical’s Share Book Value (m) % Value London £288m 37.5% Regional Office £104m 13.5% Industrial / Logistics £194m 25.2% Retail £172m 22.3% Retirement Village £12m 1.5% TOTAL £770m 100% 68
Slide 69: Held for Development Profit – Helical's Share
Held for Development Profit – Helical’s Share Book Value Fair Value Surplus Over % Value (Fair) (m) (m) Book Value (m) London Office £19m £23m £4m 7.8% Development London Office £120m £120m £0m 40.9% Refurbishment London Residential £43m £46m £3m 15.7% Led Development Regional Office £0.8m £1.6m £0.
Slide 70: Income Producing Portfolio Changes
Income Producing Portfolio Changes Investment Change since Mar 12 Mar 13 Mar 14 Mar 15 Sept 15 Portfolio Mar 15 London Offices 30.2% 35.9% 43.2% 46.9% 37.5% -9.4% Retail 61.0% 56.0% 40.8% 20.1% 22.3% 2.2% Industrial / 5.3% 2.9% 2.1% 18.5% 25.2% 6.7% Logistics Regional Offices 2.1% 3.7% 12.7% 13.1% 1
Slide 71: Key Statistics
Key Statistics Valuation increase of 8.8% in 6 months to September, including capex, sales and purchase. (FY 2015 11.7%). % of Investment Valuation Net Initial Reversionary Portfolio Change Yield Yield (HB Share) London 46.9% 18.1% 2.8% 5.9% Retail 18.3% 1.6% 6.1% 6.5% Industrial / Logistics 21.8% 1
Slide 72: Key Statistics
Key Statistics Average Capital Value Vacancy Rate Change to Unexpired Lease psf (floor area) ERV in Year Term (years) London Offices £693 26.2% 7.0 3.2% Retail £193 1.2% 7.4 2.1% Industrial / Logistics £56 0% 4.3 0.6% Regional Office £196 8.7% 5.5 2.2% TOTAL £185 3.9% 7.0 2.2% Note: • London vacancy
Slide 73: Income Portfolio: Lease Expiries
Income Portfolio: Lease Expiries Lease Expiries and Tenant Break Options in: 2016 2017 2018 2019 2020 Percentage of Rent Roll 6.1% 14.3% 10.9% 15.9% 11.3% Number of Leases 72 82 63 41 35 Average Rent per Lease £38,600 £79,200 £78,700 £175,900 £146,900 73
Slide 74: Top Tenants
Top Tenants Rank Tenant Tenant Industry Rent % Rent (Helical) Roll 1 Endemol UK Ltd Media £2.7m 5.8% 2 Network Rail Infrastructure Limited Infrastructure £2.0m 4.4% 3 DSG Retail Limited Retail £1.7m 3.9% 4 Homebase Ltd Retail £1.3m 2.7% 5 Sainsbury's Supermarkets Ltd Retail £1.3m 2.7% 6 Economic Sol
Slide 75: Scottish Power, Glasgow
Scottish Power, Glasgow • 220,000 sq ft net office. • Helical J.V. appointed to deliver Cat A and Cat B fit out. • Total Development fee £7.4m. • Helical share £5.5m. • Completion expected May 2016. • Three surplus sites at Cathcart, Yoker and Falkirk we aim to trade and expect a profit of £500k - £
Slide 76: Helical Retail: Cortonwood and Truro
Helical Retail Cortonwood Truro • Conditional contract subject to 50% pre- • Conditional contract subject to 50% letting pre-letting and relocation of the • Planning permission for 80,000 sq ft Truro football club. Alternative site open A1 use (inc. fashion) under option. • Terms agreed with leading
Slide 77: Case Study
CASE STUDY
Slide 78: One King Street, Hammersmith - Past
One King Street, Hammersmith - Past • Acquired January 2012 from LPA receivers. • Price £14.1m. • 35,000 sq ft. • NOI: £589,500 pa - 3.95% NIY. • Capital value £220 psf on offices assuming 6% on retail. • Six retail units let off an average rent of £117 psf ITZA. • Four upper office floors: • 1st/4t
Slide 79: One King Street, Hammersmith - Present
One King Street, Hammersmith - Present • Lease events completed since acquisition: − Four lease renewals (three retail & one office). − Seven retail rent reviews (highest rent achieved £150 psf ITZA). − Two vacant floors refurbished and let in 2013 off average rent of £33 psf. − New 5th floor constr
Slide 80: Slide 80