Workspace Group PLC
Delivering Value into the Future
Strategy Presentation to Equity
Research Analysts
Friday 2 November 2007
1
Aims for the Presentation
Reconfirm our strategy:
• We are a property based business
• Clear identifiable brand
• Servicing a vibrant customer base
• Proven acquisition model
• Capability to realise redevelopment potential
• Deliver superior returns
…..and introduce new members of the team
2
Aims for the Presentation - Structure
1. Our Market Place
Harry Platt
2. Acquisition Activity
Patrick Marples
3. Redevelopment Opportunity
Angus Boag
4. Financial Performance
Graham Clemett
5. Summary
Harry Platt
3
The Brand – Hotelier of Space to SMEs
“ We provide affordable, flexible space for new and
small businesses in London”
•
c.4,500 customers over 119 estates; 6.2 million sq .ft
•
Over 10,000 enquiries a year; market leading brand in
fragmented market
•
A simple product offer
•
Superior service from in-house management
•
Customer focused
4
London is our Market Place
• London is THE Global city
• London drives the UK economy
• Most multicultural – home to more than 300 languages
• 42 immigrant populations of 10,000 or more
• Home to 12.5% of UK population, produces 16.5% of its output
• Highest concentration of fastest-growing, most productive
business sectors
London is our Knowledge Base
5
Statistics Support London Growth
•
Population expected to grow from 7.5 million to 8.8 million in 2029
•
Households expected to grow from 3.2 million to 3.6 million by 2021
(source: ONS, Population trends 128; Summer 2007)
Source: GLA Working paper 24: An analysis of London’s
employment by sector
Source: Domestic & International Net Migration in London,
1981-2005
6
London is Key for Business
Registrations per 10,000 of the population
60
56
50
50
Business Starts and Closures
Source: Enterprise Directorate Analytical Unit, Business Starts &
Closures: VAT Registrations & De-Registrations in 2005
40
30
B u s in e s s e s in L o n d o n b y N u m b e r o f E m p lo ye e s (2 0 0 5 )
20
10
5 -9
4%
1 0 -4 9
3%
5 0 p lu s
1%
0
UK
England
South East
London
1 -4
16%
Businesses in London by
number of employees
Source: Enterprise Directorate Analytical Unit, SME Statistics, 2005
N o e m p lo ye e s
76%
7
Workspace Customer Base
Customer base of more than 4,000 small
businesses
1%
5%
2%
1%
12%
10%
Manufacture
6%
Retail
Construction
Utilities/Infrastructure
Organisations
18%
45%
Design & Creative
Services
Storage & Distribution
Unclassified
Classification based on DTI categories
8
Typical Workspace Customer
Entrepreneurs
• Creative industries/professional services (knowledge economy)
• Employs less than 10 people (50% plus employ less than 4)
• Has been in current unit 2-3 years - traded for 5 years plus
• Describe themselves as “going for growth”
• 3 in 10 are serial entrepreneurs - 2 in 10 are portfolio entrepreneurs
9
Typical Workspace Customer
Median
% of median
turnover
Turnover
250,000
—
Overheads
90,000
36
Profits
40,000
16
Rent
12,000
5
•
Rent under 5% of turnover
•
Average rents at 31 March 2007: £11. 34 per sq. ft
•
Average customer occupies 1,100 sq. ft
•
Average rent per week about £240
10
Source: Enterprise & Entrepreneurs: Profiles of the Workspace Customer base, Kingston University, May 2005
Workspace Group Portfolio
11
Clerkenwell Workshops, EC1
Before
After
12
Kennington Park, SW9
13
Kennington Park, SW9
Before
After
14
Patrick Marples
Acquisitions
15
Acquisitions – The Fundamentals
Stock Selection
•
Investment properties with an “angle”
- Undermanaged
- Underlet
- Above average rental growth prospects (areas of change)
- Added value potential (change of use or intensification)
•
Vacant or Part let
- Using the BRAND to create value
16
Acquisition Activity
Acquisitions
£m
2003
60
2004
60
2005
43
2006
127
2007
70
Total
360
Average 72
17
Acquisition Performance
Lightbox (2005)
Greville Street (2006)
Chiswick
EC1
Acquisition Cost
£8m
£4m
Yield at acquisition
1.9%
Nil
Refurbishment cost
£5.5m
£1.5m
November 2006
June 2007
£3.7m
£2m
81%
Nil
- On cost
8.8%
18.3%
- On valuation
6.9%
13.1%
ERV per sq. ft
£16
£55
Completed
March 2007
Valuation surplus
Occupancy
ERV Yield
18
The Lightbox, Chiswick, W4
Before
After
19
Acquisitions Database
Target acquisitions
400 sites
Potentials
600 sites
Adjacent/site assembly
200 sites
Estimated total value
£8.5 billion
“Top 20”
£600 million
Acquisitions
Value
No of Deals
From
Database
Value from
Database
2005
£43m
7
1
14%
2006
£127m
12
3
25%
2007
£70m
11
5
45%
20
Workspace - Components Of Return
Level One:
Customer focus
SME’s
The Brand
Market Share
Churn
Flexibility
Service Sector
21
Workspace - Components Of Return
Brand
Level Two:
Property Skills
Investment
Return
Growing Rents
Area of Change
Gearing
22
Workspace - Components Of Return
Brand
Level Three:
Investment Return
Land
Change of Use
Potential
Development
Intensification
Acquisitions
targeted at all
three types of
return
23
Latest Deal - Neil House, E1
Neil House
24
Neil House, Whitechapel Road, E1
Purchase Price
Floor Area
Value psf
£10.8 m
43,592 sq.ft
£248 per sq.ft
Current Rent
Estimated rental value
£415,260 pa
£879,000
Office Repositioning
Total Area
Vacant
23,260 sq.ft
14,632 sq.ft (62%)
Average Passing Rent
ERV
£13.79 psf
£26.00 psf
25
Angus Boag
Leveraging the Redevelopment
Potential
26
Workspace’s Unique Position
• The London Plan
• Employment led regeneration
• Workspace Brand
• Relationships with local authorities
• Ability to own and manage mixed-use schemes
27
Redevelopment Potential
•
Over 50% portfolio will be subject to
Intensification / Change of Use
over next ten years
•
20% of portfolio on a five year basis
28
Progress to Date
Workspace Portfolio
18 sites identified for immediate progress:
•
3 schemes submitted for planning consent
•
4 schemes in negotiation with planners
•
6 schemes being prepared for negotiation
•
5 schemes being worked up for applications in 2009
Joint Ventures
•
1 Scheme granted consent
•
2 Schemes to Committee imminently
•
1 Scheme in planning negotiation – application 2008
‘
29
Future Intensification
•
18 sites identified for planning consent, development and sale in
next 5 years
•
Land value £185m
•
Currently providing 660,000 sq.ft. workspace
•
Planning consent will provide an estimated:
- 950,000 sq. ft commercial space
- 900 + apartments (35% affordable)
- 110,000 sq. ft other uses
•
Commercial space to be retained within REIT - Apartments and
other uses generally sold
30
Aberdeen Works, Islington, N5
Before
66,000 sq. ft commercial
(Rents £12 - £15 per sq. ft)
After
45 apartments for sale
27 affordable apartments(37%)
66,000 sq. ft commercial
(rents £25 per sq. ft)
Proposed scheme has 2.0 times more floorspace than the existing scheme
31
Greenheath, Bethnal Green, E2
Before
46,000 sq. ft commercial
(rents £8 - £10 per sq. ft)
After
74,000 sq. ft commercial
(rents £20 per sq.ft)
230 student housing rooms
Proposed scheme has 2.6 times more floorspace than existing
32
Wandsworth, SW18
Before
Existing 86,000 sq. ft workspace
(rents £15 per sq. ft)
After
Planning consent for:
156 apartments for sale
53 affordable apartments (25%)
86,000 sq. ft new workspace
(rents £22 per sq. ft)
Consented scheme has 2.5 times more floorspace than existing schemes
33
The Pipeline
• Hopper – continue to feed the development process
with new sites when conditions are correct
• Adding our name and brand to bids for larger strategic
schemes (Silvertown Way, Stratford)
• Ability to acquire and manage mixed-use schemes
34
Graham Clemett
Financial Performance
35
Dynamics of Growth – Next 5 Years
CORE BUSINESS
Strong Rental Growth
High Occupancy
+
ACQUISITIONS
Proven Track Record
Extensive Database
+
REDEVELOPMENT
In-house expertise
USP vs “traditional” developers
36
Core Business Valuation
What if…..
Over next
2 years
Yields
Stable
Yields out
75bps
Yield out
150bps
ERV up 10%
(5% p.a.)
+ £100m
- £10m
- £100m
ERV up 20%
(10% p.a.)
+ £200m
Reversionary
Yield
Rent
per week
£264
+£70m
- £25m
£288
6.5%
7.25%
8.0%
37
Funding Options
REIT
Core Business

Acquisitions

Joint
Ventures
Other
Regeneration
- Commercial
- Residential



38
Summary
Workspace = Robust Business
….with massive opportunities
• The Workspace Difference
- Strength of Brand
- At the Heart of London
- Ability to buy well
- Acceleration of redevelopment potential
- Scale of London market
- We can add scale to the business
39
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