Helical Plc · LSE:HLCL
Helical — H1 2015 Earnings Presentation
62 slides from Helical's earnings presentation, Nov 28, 2014
Slide 1: Half Year Results to 30 September 2014
HALF YEAR RESULTS TO 30 SEPTEMBER 2014 FRIDAY 28 NOVEMBER 2014
Slide 2: Introduction
INTRODUCTION
Slide 3: Introduction
Introduction • Helical is in a strong position – developments on site and delivering value, strong valuation gains and growing rental income • The huge investor appetite for real estate is great for our existing portfolio. We are still finding value in certain sectors with nearly £100m of purchases
Slide 4: Financial
FINANCIAL
Slide 5: Headline Numbers
Headline Numbers INCOME STATEMENT Sep 2012 Sep 2013 Sep 2014 Profit before tax £5.2m £68.9m £42.9m Net rental income1 £12.2m £14.1m £18.8m Gain on sale and revaluation of investment properties1 £0.5m £10.9m £34.8m 1.85p 2.00p 2.10p Interim dividend per share Up 5% BALANCE SHEET Mar 2013 Mar 2014 Sep
Slide 6: Income Statement
Income Statement £m 80 Note: All figures include Helical’s share of income and expenses of joint ventures 70 £34.8m £69.2m £5.1m 60 £7.7m 50 £42.9m 40 £12.4m £1.1m £15.6m 30 20 £18.8m 10 0 Net rental income Development and Gain on sale and Total property Administration Performance Net finance costs
Slide 7: EPRA Net Assets
EPRA Net Assets p 400 390 380 370 360 4.5p 0.2p 1.5p 28.7p 4.8p 350 340 330 5.3p 320 310 300 290 280 312.6 345.0p 270 260 250 EPRA NAV at EPRA EPS Gain on sale and Development Other EPRA Derivative financial Dividends EPRA NAV at 31 March 2014 revaluation of surplus increase adjustments instruments
Slide 8: Helical Loan to Value
Helical Loan to Value Value £000’s 1000 900 800 700 600 Low of 28% 53% 500 400 33% 300 200 100 0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 1H Value of property portfolio Secured loan to value Loan to value including unsecured debt 8
Slide 9: Loan Expiry in Parent and Subsidiaries
Loan Expiry in Parent and Subsidiaries £m Loan expiry analysis at 30 September 2014 (excludes JVs) £180.0 £164.9m £160.0 £140.0 £120.0 £100.0 £82.8m £82.2m £79.0m £80.0 £60.0 £51.9m £40.0 £20.0 £9.0m £0.0 < 1 year 1 - 2 years 2 - 3 years 3 - 4 years 4 - 5 years 5-6 years • £100m 4% Convertible Bond
Slide 10: Loan Expiry in Joint Ventures
Loan Expiry in Joint Ventures £m Joint Venture loan expiry analysis at 30 September 2014 £40.0 £35.0 • Terms agreed for a £165m (five) year development facility to build out the £30.1m first phase of Barts Square. Existing £30.0 £27.6m debt repayable March 2015. £25.0 £20.0 £16.1m £15.0 £10.0 £5.0 £
Slide 11: Interest Rate Protection
Interest Rate Protection Interest rate swaps over time £m 600 Current borrowings 500 400 300 200 100 0 Mar 15 Mar 16 Mar 17 Mar 18 Mar 19 Retail Bond Convertible Bond Swap 11 Helical Bar plc
Slide 12: Firepower
Firepower At 30 September 2014 Unutilised bank facilities £137m Cash £61m Uncharged Properties (at fair value) £120m 12 Helical Bar plc
Slide 13: Strategy
Strategy 1. Extend debt maturities • New 10 year fixed rate loan facility • Extend RCFs back to 5 years 2. Maintain high level of hedging • Average £475m of total debt fixed or hedged for average 3 years 3. Retain flexible debt structure: • Secured v Unsecured • RCFs v Term Loans 13
Slide 14: Investment
INVESTMENT
Slide 15: Summary
Summary • Helical’s share of investment portfolio £692m • Investment 78%, Development 22%1 • £53.5m net purchases, an average of one new asset acquired every eight days in the period • Valuation increase of £34.1m, 4.9% net of capex, purchases and sales. 6.5% ignoring purchases and sales. Absorbed c
Slide 16: Purchases and Sales Summary
Purchases and Sales Summary Acquired Sold Industrial Regional Constellation Portfolio £40m Fordham £16m and Office Office Retail Stockport and Harrogate £12m Warehousing Newmarket Retail £18m Industrial Boss Portfolio £30m Others Various £6m Yate Industrial £12m TOTAL £94m TOTAL £40m • £53.5m net in
Slide 17: London
London 1 King Street, Hammersmith • 39.7% of the portfolio (down from 43.2% - Barts transfer) • 9.2% valuation growth. 3.6% ERV growth • Continued strong rental growth and investment demand • Shepherds Building (Hammersmith) refurbishment complete. Achieving rents of £37.50 psf vs average passing of
Slide 18: Clifton Street, Shoreditch
99 Clifton Street, Shoreditch • Signed contract to purchase 45,000 sq ft building in November 2013. Deposit £1m. Agreed purchase price £21m. Anticipated completion summer 2015 • Assigned contract in September 2014. Purchasers will pay £38.25m upon PC of the building • £1m deposit returned • £17.3m p
Slide 19: Regional Offices
Regional Offices Churchgate House, Manchester • 11.2% of the portfolio (down from 12.7%) • 8.8% valuation growth, 0.4% ERV growth • Selective markets very strong: • Churchgate House Manchester acquired for £34m in March • NIY 5.9% • £2m spent – reception and floor refurbishment • 55,000 sq ft let si
Slide 20: Retail
Retail Harrogate • 35.1% of the portfolio (down from 40.8%) • 0.5% valuation growth, 0.7% ERV growth • Occupational market beginning to pick up • Acquiring retail parks; Harrogate, Stockport • Selling shopping centres; Newmarket sold at a 2.5% premium to book value Huddersfield • Strategy: Acquire g
Slide 21: Industrial
Industrial DHL, Leicester • 12.9% of the portfolio (up from 2.1%) • 0.6% valuation growth, 0% ERV growth • Strong occupational market, although no rental growth yet • Acquisitions below replacement cost. Value in smaller lots below institutional radar. Premium for size • Strong cash on cash returns
Slide 22: Portfolio Summary
Portfolio Summary Asset Class Value % Portfolio Yield Strategy Retail £243m 35.1% 7.0% Buy retail parks. Sell smaller shopping centres Industrial £89m 12.9% 7.7% Acquire and build bigger portfolio *London Offices £275m 39.7% 4.1% Acquire if value found. Refurbish and relet to capture rental gains Re
Slide 23: Development
DEVELOPMENT
Slide 24: The Bower, Old Street, London EC1
The Bower, 207 Old Street, London EC1 Studio Ware Tower house 24
Slide 25: The Bower, Old Street, London EC1
The Bower, Old Street, London EC1 • Phase 1 to be completed June 2015 • Public realm / new street • Empire House 20,726 sq ft: • 17,315 sq ft pre let to Z Hotels @ £650,000 pa • 3,411 sq ft pre let to Ceviche @ £140,000 pa • The Studio Building 18,363 sq ft office pre let to John Brown Media @ £45.0
Slide 26: The Bower, Old Street, London EC1
The Bower, Old Street, London EC1 • Commence Phase 2 The Tower 170,000 sq ft office and 7,300 sq ft retail June 2015 • Major refurbishment, completion due December 2016 • Asset management opportunities along retail parade. Possible extension of Post Office unit 26
Slide 27: 1 Creechurch Place, London EC3
1 Creechurch Place, London EC3 • Construction by Skanska well underway • Completion due October 2016 • Aldgate public realm improvements • EC3 market will be short of space 27
Slide 28: Barts Square, London EC1
Barts Square, London EC1 • Phase 1 144 residential units. 88 units launched in September 2014. 45 exchanged, further four reserved. Average price £1,570 psf • Construction of Phase 1 commences January 2015. Carillion appointed as main contractor • Financing terms agreed with HSBC • Office B – 26,000
Slide 29: Barts Square, London EC1
Barts Square, London EC1 The Square: Offices A and B The Askew Building and Abernethy House Dominion House and Vicary House Interior of the Askew Building Penthouse Terrace 29
Slide 30: Barts Square, London EC1
Barts Square, London EC1 • Phase 2 Office A 202,000 sq ft • Commence February 2016 • Phase 3 • Residential 92 apartments • Retail/Restaurant 11,733 sq ft • Commence November 2016 30
Slide 31: C Space, London EC1
C Space, London EC1 31
Slide 32: C Space, London EC1
C Space, London EC1 • Contemporary re-invention of a former carpet factory with 62,000 square feet of workspace • Planning permission granted February 2014 – nine months after purchase • Started on site May 2014. Completion June 2015 • Fixed price construction contract – Willmott Dixon • Work with e
Slide 33: C Space, London EC1
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Slide 34: King Street, Hammersmith, London W6
King Street, Hammersmith, London W6 34
Slide 35: 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 36: King Street, Hammersmith, London W6
King Street, Hammersmith, London W6 36
Slide 37: Scottish Power, Glasgow
Scottish Power, Glasgow New HQ • 220,000 sq ft net office • Helical now appointed to deliver Cat B fit out • Total fee increased to £7.37m • Helical share - £5.53m • Completion December 2015 • Three surplus sites at Cathcart, Yoker and Falkirk we aim to trade and expect a profit of £500k - £1m 37
Slide 38: Milestones
Milestones Property March 2014 March 2015 Comment The Bower, Old Street Under construction Completed Phase 1 Completion delayed until June London EC1 Further lettings Good letting progess C-Space Planning obtained Construction close to completion June 2015 completion - on target City Road, London EC
Slide 39: Development Scheme Review
Development Scheme Review Property Partner HB Status Start Area Total Completion Potential Share Sq Ft NIA Cost Helical Profit to come Empire House 20,726 sq ft hotel/retail The Studio 18,363 sq ft office Phase 1 – Jun Phase 1 Phase 1 – Jan 2014 £180m The Bower, 3,746 sq ft retail 2015 Under Old Str
Slide 40: Development - Conclusion
Development - Conclusion • Heavily geared to ongoing growth of London • Current schemes were acquired before market ‘took off’ • Anticipate steady growth • Threats • Lack of infrastructure • Overheated construction market • Political uncertainty – mansion tax • Opportunities • London remains dominan
Slide 41: Conclusion
CONCLUSION
Slide 42: Conclusion
Conclusion • Helical model is working. We have no need to rely on yield compression nor rental growth in order to outperform • Development portfolio still hugely exciting and looking very profitable • Investment portfolio performing on all fronts • We still see value and believe the market is set fa
Slide 43: Notes
Notes ey 43
Slide 44: Appendices
APPENDICES
Slide 45: Helical – A Long Term Profit Generator
Helical – A Long Term Profit Generator Net Rental Income £m 50 In subsidiaries 45 Passing rent In joint ventures £40.9m 40 35 £36.2m £29.8m 30 25 £24.5m £22.9m £24.4m £23.0m 20 £20.4m £17.9m £17.8m £18.8m £19.6m £16.6m £17.7m £14.9m £17.9m 15 £16.5m £16.4m £16.4m £14.8m £14.2m £14.2m 10 5 0 2004 200
Slide 46: Portfolio Size
Portfolio Size Total Portfolio Value (inc JV Share) £1,400,000,000 £1,200,000,000 £1,000,000,000 £800,000,000 £600,000,000 £400,000,000 £200,000,000 £0 Apr-10 Sep-10 Feb-11 Juki1 Dec-11 May-12 Oct-12 Mar-13 Aug-13 Jan-14 Investment = Development Jun-14 4 > HELICAL: 46
Slide 47: Investment Portfolio Changes
Investment Portfolio Changes Helical Share of Book Value 47
Slide 48: Development Portfolio Changes
Development Portfolio Changes Helical Share of Book Value 48
Slide 49: Geography
Geography By Helical Share 42% of Helical’s equity is deployed in London and the South East 49
Slide 50: Investment Portfolio
Investment Portfolio Helical Share Value (m) Equity (m) % by Value London Offices £274.7 £139.5 39.7% Regional Offices £77.4 £40.1 11.2% Industrial £89.1 £80.9 12.9% In Town Retail £190.4 £82.0 27.5% Out of Town Retail £52.6 £28.9 7.6% Retirement Village £7.4 £7.4 1.1% Total £691.6 £378.8 100% Note:
Slide 51: Trading & Development Portfolio
Trading & Development Portfolio Helical’s Share Book Value Fair Value Surplus Over % Value (Fair) (m) (m) Book Value (m) Office £9.5 £17.3 £7.8 7.6% Retail £26.0 £28.0 £2.0 12.3% Retirement Village £71.5 £86.8 £15.3 38.2% Change of Use £5.0 £9.0 £4.0 4.0% Mixed Use and £25.5 £27.5 £2.0 12.1% Residen
Slide 52: Investment Portfolio Changes
Investment Portfolio Changes Investment Change Mar 12 Mar 13 Mar 14 Sep 14 Portfolio since Mar 14 London Offices 30.2% 35.9% 43.2% 39.7% -3.5% Retail 61.0% 56.0% 40.8% 35.1% -5.7% Industrial 5.3% 2.9% 2.1% 12.9% 10.8% Regional Offices 2.1% 3.7% 12.7% 11.2% -1.5% Other 1.3% 1.5% 1.2% 1.1% -0.1% 100%
Slide 53: Investment Portfolio Key Statistics
Investment Portfolio Key Statistics Valuation increase of 4.9% in half year to September, including capex, sales and purchase % of Equivalent Valuation Reversionary Portfolio Initial Yield Yield Change Yield (HB Share) (True QiA) Industrial 12.9% 0.6% 7.7% 7.4% 7.5% London Offices 39.7% 9.2% 4.1% 6.
Slide 54: Investment Portfolio Key Statistics
Investment Portfolio Key Statistics Average Capital Value Vacancy Rate Unexpired Lease psf (floor area) Term (years) Industrial £60 0.0% 4.9 London Offices £450 23.0% 6.3 Regional Office £152 11.8% 6.5 Retail £137 3.3% 7.5 Total £146 6.0% 6.3 Note: London includes offices held vacant for refurbishme
Slide 55: Investment: London Office Portfolio
Investment: London Office Portfolio Net Rent Property ERV Key Events in the period Sept 2014 £3.6m £5.3m • £1.5m refurbishment completed Shepherds Building, W14 • Open market lettings completed at £37.50 psf (current average rent £24.50 psf) Enterprise House, £1.83m £2.03m Paddington W2 £0.32m £0.8m
Slide 56: Investment: Retail Portfolio
Investment: Retail Portfolio Property Key Events in the period • Phase 1 of Creative Quarter refurbishment completed and fully let. Phase 2 on site Cardiff • Upcoming rent reviews on The Hayes. Uplifts expected • Multiple new lettings and re-gears on-going Corby • Unit sold to JD Wetherspoons for £2
Slide 57: Investment Portfolio: Changes to Rental Values
Investment Portfolio Changes to Rental Values Year to March 2014 Half Year to September 2014 Industrial 0.0% 0.0% London Offices 7.3% 3.6% Regional Offices 0.0% 0.4% All Offices 5.0% 2.6% In Town Retail -0.5% 0.8% Out of Town Retail 0.0% 0.0% All Retail -0.5% 0.7% Total 2.1% 1.4% 57
Slide 58: Investment Portfolio: Lease Expiries
Investment Portfolio Lease Expiries Lease Expiries and Tenant Break Options in: 2015 2016 2017 2018 2019 Percentage of Rent Roll 12.9% 8.7% 14.6% 11.8% 12.2% Number of Leases 123 108 106 82 62 Average Rent per Lease £44,700 £34,300 £58,500 £61,200 £83,800 58
Slide 59: Asset Management Overview
Asset Management Overview Rent % of rent roll Rent lost at break/expiry -£1.3m 3.2% Net rent lost through administration -£0.04m 0.1% New lettings and changes at lease renewal £2.3m 5.5% Rent reviews and RPI uplifts £0.03m 0.1% Net Increase £1.0m 59
Slide 60: Top Tenants
Top Tenants Rank Tenant Tenant Industry Rent % Rent (Helical) Roll 1 Network Rail Infrastructure Limited Infrastructure £2.03m 5.0% 2 Endemol UK Ltd Media £1.58m 3.9% 3 Sainsbury's Supermarkets Ltd Retail £1.25m 3.0% 4 Homebase Ltd Retail £1.01m 2.5% 5 Economic Solutions Ltd Government £0.96m 2.4% 6
Slide 61: Retirement Villages
Retirement Villages May 2014 No. Phase 1 Sold/ Start Complete Forecast Profit Units Reserved Construction Construction Profit to Period come Liphook 151 N/A N/A Q1 ’08 2012 £0.25m 2009-2014 (of which 144 sold) Faygate, 171 48 29 Q2 ’12 2017 £12.5m 2013-2018 Horsham (of which 19 sold) Exeter 164 49 2
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