Commercial property insight

Transcription

1 This document is solely for the use of professionals and is not for general public distribution. The value of an investment and the income from it can fall as well as rise and you may not get back the amount originally invested. Commercial property insight September 2014 Henderson UK Property OEIC

2 Agenda Why commercial property? Centrica HQ, Windsor Recent trends and market outlook Henderson UK Property OEIC Questions 1

3 Why commercial property? Key reasons Diversification Attractive real income with low volatility Pricing comparisons (yields) % 8 6 Asset management opportunities Tight planning, limited supply 4 Attractive lease structures year UK government bond IPD UK All Property Net Initial Yield FTSE All-Share Dec-00 Dec-01 Dec-02 Dec-03 Dec-04 Dec-05 Dec-06 Dec-07 Dec-08 Dec-09 Dec-10 Dec-11 Dec-12 Dec-13 Source: Henderson Global Investors, Thomson Reuters, as at 30 June 2014 IPD UK All Property net initial yield data, as at 30 of June

4 Risk adjusted returns Prime vs secondary Capital value shifts since market trough Index Prime Secondary CBRE benchmark Accentuated by Property risk Quality Tenant strength Location Longevity Market risk Liquidity Economic Access to finance 60 Jun-09 Sep-09 Dec-09 Mar-10 Jun-10 Sep-10 Dec-10 Mar-11 Jun-11 Sep-11 Dec-11 Mar-12 Jun-12 Sep-12 Dec-12 Mar-13 Jun-13 Sep-13 Dec-13 Mar-14 Jun-14 Source: CBRE Monthly Index, as at 30 June 2014 Past performance is not a guide to future performance Pricing is a reflection of perceived risk in secondary market 3

5 Recent trends and market outlook

6 Market backdrop 2014 Key drivers of the property market Strong UK GDP Growth Mallard Park, Bournemouth Volatile equity markets Geopolitical Europe struggling Scottish devolution Steady inflation but below trend Credit conditions improved Occupier caution Hot property investment market Continued weight of money Source: Henderson Global Investors Competition for assets risk on 5

7 Hot or not which sector Prime* verses IPD Sector Portfolio Yield IPD Pricing Spread, 2001q1 to 2014q2 Equivalent yield spread, basis points Standard retail Shopping centres Retail Warehouse Central & Inner London offices South East offices Average 2001 to 2014 Q Q2 Rest of UK offices Industrial Source: IPD Quarterly Digest, as at Q * Represents the 25% quartile of lowest (prime) yielding assets in IPD sector benchmark 6

8 2014 UK market outlook Selective rental driven performance Competitive investment period Long income/prime income focus to wane, less divergent market outlook Progressive move up risk curve aided by improved economic picture Capital growth to rental income driven returns UK forecast total return breakdown, % from direct property Capital growth Income Total return Source: IPD Annual Digest 2013, THRE Forecast, as at Q Past performance is not a guide to future performance. Forecasts cannot be guaranteed. 7

9 Property investing insight

10 Investing in commercial property We consider: Location Lease length Building specification Tenant strength Institutional class (landlord friendly) lease terms Source: Henderson Global Investors All five deemed prime, three out of five considered core 9

11 Prime location and liquidity 440, The Strand Prime, Central London location 440, The Strand Providing an unbroken lease term of 23 years to Coutts (RBS) RBS lease index linked to RPI with annual uplifts Retail portion offers numerous asset management opportunities Highly liquid Location Asset management Liquidity Source: Henderson Global Investors Long income 10

12 Rental growth Ryder Court, St James s Prime, institutional grade office building Ryder Court, St James s Prestigious Central London location Exposure to liquid London office market Multi-let to five principal tenants Accretive asset management opportunities Location Asset management Liquidity Source: Henderson Global Investors Rental growth 11

13 Sourcing assets capital allowances Derby Commercial Park New distribution hub for Heineken Derby Commercial Park Direct access to M1 motorway Top quality specification High spec = 4.9m capital allowances Use of capital allowances improves net distribution from 4.3% to 5.5% Source: Henderson Global Investors Quality Location Income Strong distribution 12

14 Diversification Ironbridge Studios, Exeter Recently developed direct let student hall that provides quality accommodation. All rooms are ensuite. Ironbridge Studios, Exeter Centrally located in a Russell Group university town The current rents are let off low levels as it was not asset managed effectively by the developer, so the asset is well placed for rental growth Source: Henderson Global Investors Location Asset management Liquidity Diversification 13

15 Development Maidenhead development Development site in Maidenhead town centre Maidenhead development 6.6m site acquisition / c. 30m development cost Strong Thames Valley location on London Crossrail Consent for 50,000 sq. feet of offices & hotel Hotel pre let to Premier Inn for 20 years Expertise from Henderson s Development Team Location Quality Growth Source: Henderson Global Investors, as at 31 December 2013 Capital and rental growth 14

16 The benefits of proactive management Proactive asset management to reduce void 12.0% 10.0% 8.0% IPD All Property Vacancy Rate *Fund Vacancy Rate *Top 10 tenants by income % Risk rating** 7.9% Negligible 4.3% Negligible 4.3% Negligible 6.0% 4.0% 3.9% Negligible 3.8% Low 3.8% Maximum 2.0% 3.7% Negligible 0.0% Jun-09 Dec-09 Jun-10 Dec-10 Jun-11 Dec-11 Jun-12 Dec-12 Jun-13 Dec-13 Jun % Negligible 2.8% Negligible 2.3% Negligible Source: IPD IRIS Report Q2 2014, Henderson Global Investors, as at 30 June 2014 Source: Henderson Global Investors, as at 31 July 2014 IPD UK Quarterly Index, as at Q * Henderson UK Property OEIC * Henderson UK Property OEIC ** Risk rating carried out by Dun & Bradstreet Note: The Henderson UK Property OEIC is a Henderson Global Investors product, and the sub-investment manager is TIAA Henderson Real Estate Income protection through a difficult climate 15

17 Responsible property investment Sustainability increasingly important Sustainable buildings an important strength in a typical* portfolio B&Q, Farnborough Aligning landlord and tenant interests EG Photo-voltaics on roofs of two B&Q holdings Energy Performance Certificates first A rating De-risk assets and prevent obsolescence Henderson amongst the market leaders Source: Henderson Global Investors, as at December * Typical fund used is Henderson UK Property OEIC Note: The Henderson UK Property OEIC is a Henderson Global Investors product, and the sub-investment manager is TIAA Henderson Real Estate Future-proofing buildings 16

18 What does it mean on the ground Henderson UK Property OEIC Fund size: 2.1bn 82 assets, 401 tenancies Property Securities 3.6% Alternatives 7.7% Top decile income rating from IPD* 25.4% of leases have fixed uplifts 65.8% South East 10.8 year average lease length Cash 11.8% Industrial 11.9% High Street Retail 13.6% Offices 32.1% Retail Warehouse 16.4% Source: Henderson Global Investors, as at 31 July 2014 * Risk rating carried out by Dun & Bradstreet, Q Note: The Henderson UK Property OEIC is a Henderson Global Investors product, and the sub-investment manager is TIAA Henderson Real Estate Low weighting to high street retail 17

19 Henderson Global Investors 201 Bishopsgate, London EC2M 3AE Tel: Fax: Important information This document is intended solely for the use of professionals and is not for general public distribution. The value of an investment and the income from it can fall as well as rise and you may not get back the amount originally invested. Nothing in this document is intended to or should be construed as advice. This document is not a recommendation to sell or purchase any investment. It does not form part of any contract for the sale or purchase of any investment. Any investment will be made solely on the basis of the information contained in the Prospectus (including all relevant covering documents), which will contain investment restrictions, risks and fees. This document is intended as a summary only and potential investors must read the Prospectus before investing. Issued by Henderson Global Investors Limited (reg. no ), (incorporated and registered in England and Wales with registered office at 201 Bishopsgate, London EC2M 3AE) is authorised and regulated by the Financial Conduct Authority to provide investment products and services. Telephone calls may be recorded and monitored. Ref: 34P \\hds.int\data\distribution\global\business Support\Presentations\Property\UK Property OEIC\September 2014\HUKOEIC.pptx 18