University Challenge: An education in Student Accommodation
Investment into the Private Rented Sector
Robert Weaver : Invista Real Estate Investment Management
11 February 2010
2
Agenda
Invista; who we are
Why UK residential property?
Why invest in a Residential Fund?
3
Who we are
Largest UK listed real estate fund manager
Assets Under Management of £5.3 billion
23 client funds with diverse investment styles
Ability to co-invest
Active in the UK, Continental Europe and Asia
Experienced team of 92 staff
Manage three residential portfolios combined value £400 million of UK residential
+2,000 residential asset
Manage indirect investment in three external funds combined equity investment £60m
Source of data is Invista as at 30 November 2009
Established performance from a dedicated real estate manager
4
Invista; who we are
Why UK residential property?
Why invest in a Residential Fund?
5
Why UK residential?
Largest asset class by far
Good diversifier - low correlation with bonds and equities
Dynamic and diverse market
Larger Market than all other Asset Classes
Source: IPD, IPF, Land Registry, ONS, Thomson Datastream; end Dec 2009; * end Sept 2009
£4,022bn
£564bn
£1,620bn
£553bn
£0bn£500bn
£1,000bn£1,500bn£2,000bn£2,500bn£3,000bn£3,500bn£4,000bn£4,500bn
Residential Commercial Equities GovernmentBonds *
Siz
e of
mar
ket
Better Diversification Benefits than Commercial
Source: Savills IPD, FTA, Barclays Capital, Nationwide, Invista
1974-2009 Correlation
Residential Commercial Equities Bonds
Residential 1.00 0.71 0.09 (0.04)
Commercial 1.00 0.36 0.14
Equities 1.00 0.54
Bonds 1.00
6
Why UK residential? cont’d
Long term out-performance of all other asset classes
Lowest volatility of all asset classes over the long term
Total returns predominantly from capital rather than income growth
Better Long Term Performance
Lower Volatility than Other Asset Classes
Source: Savills, CLG, IPD, FTA, Barclays Capital, Nationwide, Invista
Source: Savills, CLG, IPD, FTA, Barclays Capital, Nationwide, Invista; Performance to end 2009
10% 11%
30%
14%
0%
5%
10%
15%
20%
25%
30%
35%
Residential Commercial Equities Bonds
Sta
ndar
d de
viat
ion
of
retu
rns
1974
-200
9
AnnualisedTotal Returns
Last 12 months
Last 3 years
Last 5 years
Last 10 years
Last 35 years
Residential 6.6% 1.0% 4.0% 10.6% 15.6%
Commercial 3.4% -8.0% 1.6% 6.1% 9.8%
Equities 30.1% -1.3% 5.9% 1.6% 13.3%
Bonds -0.3% 6.9% 5.0% 5.7% 10.7%
7
Low return,High risk
0.0%
2.5%
5.0%
7.5%
10.0%
12.5%
15.0%
17.5%
0% 5% 10% 15% 20% 25% 30%
Volatility
An
nu
alis
ed t
ota
l ret
urn
%
Why UK residential? Cont’d
High return, Low risk
Strong risk return profile
10 years 20 years 35 years
Residential Commercial Equities Government Bonds
Source: Savills, CLG, IPD, FTA, Barclays Capital, Nationwide, Invista Jan 1974 – Dec 2009
Higher return with a lower risk profile
8
Why Not the Institutions
Legacy Issues
Concerns with Scale
Lack of Research Information
Publicity
Level of Net Income
Difficulty of Management
Parapet too high
Long in Residential
Political Intervention
Imperfect Market
Lack of Talent
9
Why invest in UK residential now? Long-term drivers of UK residential
Supply and demand imbalance
Immigration and mobility
Average
0
10,000
20,000
30,000
40,000
50,000
Q3
90
Q3
91
Q3
92
Q3
93
Q3
94
Q3
95
Q3
96
Q3
97
Q3
98
Q3
99
Q3
00
Q3
01
Q3
02
Q3
03
Q3
04
Q3
05
Q3
06
Q3
07
Q3
08
Q3
09
Nu
mb
er o
f h
ou
sin
g s
tart
s in
En
gla
nd
Supply: number of house starts in England
0m5m
10m15m20m25m30m35m40m45m50m55m60m
1981 1991 2001 2008 2013 2023 2033
Nu
mb
er o
f o
ver-
16 y
ear
old
s in
th
e U
K
Source: ONS
Source: DCLG. National data for Q3 2009 is currently available only for England
Demand: number of adults in UKHistorical & Projected
10
Why invest in UK residential now?
Market Fell 17% between Peak to trough Expectations exceed this Indices May be nearing bottom the market Interest rates are historically low Government has implemented steps to
stabilise markets Lack of credit adds to rental demand Development projects being halted or
deferred Continued lack of supply – below
Government target Buy-to-let finance stalled – removes an
over exuberant competitor from market Rented sector is increasingly popular - is
now a tenure of choice More affordable
Nationwide
Halifax
100
125
150
175
200
225
250
275
Jun-
99
Dec-9
9
Jun-
00
Dec-0
0
Jun-
01
Dec-0
1
Jun-
02
Dec-0
2
Jun-
03
Dec-0
3
Jun-
04
Dec-0
4
Jun-
05
Dec-0
5
Jun-
06
Dec-0
6
Jun-
07
Dec-0
7
Jun-
08
Dec-0
8
Jun-
09
Dec-0
9
Ave
rag
e h
ou
se p
rice
ind
ex
(Bas
e Ju
n 9
9 =
100)
Beginning in Aug 2007
Beginning in July 1989
75
80
85
90
95
100
M0
+M6
+M12
+M18
+M24
+M30
+M36
+M42
+M48
+M54
+M60
+M66
+M72
Ave
rag
e h
ou
se p
rice
ind
ex
(Bas
e as
sp
ecif
ied
)
House prices begin to fall in Q3 2007
Prices have fallen faster than in early 1990s
Source: Halifax
Source: Halifax
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Why invest in UK residential now? Alternative measures of affordability
Source: Bank of England, Capital Economics, CML, Thomson Datastream
Affordability is back
12
Invista who we are
Why UK residential property?
Why invest in a Residential Fund
13
Why invest in a residential fund?
Would you……
Concentrate your wealth in a single investment?
Gear this investment heavily?
Be happy with volatile returns?
Not subject it to professional management?
Be reliant on a single counterparty to support your investment?
Not able to purchase at a discount?
Risk a criminal offence?
Want your investment to be diversified and not reliant on a particular asset or income source?
Like to invest in the best performing asset class over the long term?
Seek returns with low volatility over the long term?
Want your investment to be professionally managed?
Like to access a unique product in a large untapped investment class?
No?!
This is the c.£200bn buy-to-let sector
Yes of course!
This is the residential fund sector
14
Why invest in a residential fund? Further fund considerations
SIPPs
SIPP activity has increased since April 2006 “SIPP simplification”
Buy-to-let not permitted in SIPP; but funds are
ISAs
Fund will be ISAable; rises to £10,200 from 6 April 2010
Child Allowance/Child Trust Fund
Suitable for regular payments on behalf of children
Grandparents investing for grandchildren
Suitable for grandparents to invest a single premium
15
Why invest in a residential fund? Investment strategy
Invest in private lettings
Also other residential asset classes
Utilise research based forecasting for regional investment
Strategic investment and active asset management to drive performance
Rebalance portfolio and recycle capital through strategic disposals
(8%)(7%)(6%)(5%)(4%)(3%)(2%)(1%)
0%1%2%3%4%5%
Scotland North West Mids South East London
Dif
fere
nc
e f
rom
a
nn
ua
lis
ed
UK
gro
wth
%
10yr 5yr 3yr 1yr
Source: Halifax, to end December 2009
Cyclical trends in house price growth
16
Not an Invista Fund - How not to do itRelative value growth for all assets
-10%
-9%-8%
-7%
-6%-5%
-4%
-3%-2%
-1%
0%1%
2%3%
4%
5%6%
7%
8%9%
10%
An
nu
alis
ed A
sset
Rel
ativ
e V
alu
e G
row
th %
, Sep
tem
ber
200
9
1999 Purchases 2000 Purchases 2001 - Purchases 2002 - Purchases 2003 Purchases
For illustrative purposes only
Source: Invista, Nationwide (index applied from beginning of quarter in which asset was purchased)
From purchase to end September 2009
Investing can Seriously damage your Wealth
17
Potential acquisitions
Period ConversionModern Ground Rent Portfolio
For illustrative purposes only
18
Potential investment I
Well located development site Attractive size new build
For illustrative purposes only
19
Residential opportunities
Individual leasehold properties not attractive
For illustrative purposes only
20
Summary
Strong Fundamentals
Historically strong investment returns from sector with low volatility over long term
Historically good demand vs. supply fundamentals for long term growth
Asset Class benefits from grouped Investment
Diversified access to sector at minimal investment
SIPPable investment;
Benefit from deal sourcing ability and bargaining power
Professionally managed and actively managed
21
Important information
This document is intended for investment professionals only and should not be relied upon by private investors.
Invista Real Estate Investment Management Limited state that reasonable skill and care has been used in the preparation of this presentation and any forecasts expressed within it. Notwithstanding this warranty Invista shall not be liable for any loss of profit, business, revenues or any special indirect or consequential damage of any nature whatsoever or loss of anticipated saving or for any increased costs sustained by the client or his servants or agents in any way whether arising in any way directly or indirectly as a result of reliance on this model or of any error or defect in this presentation.
This presentation and associated information is the property of Invista Real Estate Investment Management Limited who reserve all intellectual property rights to its use and the components of the forecasts contained herein. It should not be copied or used for any other purpose or distribution to any other parties.
All features in this pack are current at the time of publication but may be subject to change in the future.
Unless otherwise stated, the source of information is Invista Real Estate Investment Management. Unless otherwise stated, any forecasts or opinions are Invista Real Estate’s own at the date of this document and may change. They should not be regarded as a guarantee of future performance.
No modifications or amendments to this presentation may be made without the prior permission of Invista Real Estate. The document is to be used by the intended recipient(s) only and the document may not be forwarded to a third party without prior consent from Invista Real Estate.
The past performance of property funds is not always represented by the performance of the property market as a whole.
The value of an investment as well any related income may go down as well as up, particularly in the short term. The value of an investment and any related income may fluctuate and cannot be guaranteed.
Commercial and residential property have different risk profiles, returns in one market do not necessarily follow the other.
Property funds will not contribute diversification where investors already have a substantial proportion of their investments in property.
The value of property is a matter of a Valuer’s opinion rather than one of fact.
Investments in property are relatively illiquid and more difficult to realise than equities or bonds.
Movements in the value of property funds will be amplified by any gearing within the fund and its underlying investments. There is no guarantee that the price of the fund will fully reflect its underlying net asset value.
Depending on the investor’s currency of reference, currency fluctuations may adversely affect the value of investments and the income there from.
Past performance is not a guide to future performance.
This document should not be considered to be an offer or solicitation to invest in the funds referred to, or in the shares of Invista itself.
Invista Real Estate Investment Management Limited is authorised and regulated by the Financial Services Authority. Registered in England and Wales. Registered Number 04459443. Registered office Exchequer Court, 33 St. Mary Axe, London EC3A 8AA United Kingdom.