Where now for property?  Manchester Andrew Hamilton
The North suffers most in the recession
Rental value loss in 2009 – historic comparison
Rental value loss in 2009 – historic comparison
Broad recovery in take-up across the regions
Recovery favours South
Distribution take-up varied widely between regions
A good recovery for rents
Distribution’s late recovery doesn’t help enough
Values still lie well below the long run trend
Office values recover sharply  - helped by London
But the collapse in some markets takes time to repair
Points to remember <ul><li>Tough economic recovery will act as a drag on rental recovery </li></ul><ul><li>Capital markets...
<ul><li>Hot Properties </li></ul>
<ul><li>HOUSING  </li></ul>
Housing Delivery <ul><li>Planning </li></ul><ul><li>Land Supply </li></ul><ul><li>Affordable Housing </li></ul><ul><li>Fin...
Nominal House Price Growth 6.17% 6.78% 8.31% 8.45% 2.84% 7.73% 3.94% 2.11% 2.75% -1.28% 3.11% 2.63% 3.30% 2010 -6.89% 1.09...
<ul><li>WASTE  </li></ul><ul><li>The property implications </li></ul>
Every day Britain throws away Source:  WRAP & The Independent 1.6 M Bananas 5,500 Chickens 5.1 M Potatoes 1.3 M Yoghurts 2...
Waste Management across Europe Source: Eurostat
EU Landfill Directive <ul><ul><ul><li>EU landfill tax:  </li></ul></ul></ul><ul><ul><ul><ul><li>2009 £40 per tonne, </li><...
The Perfect Storm? <ul><li>Legislatively Driven </li></ul><ul><ul><ul><ul><li>EU Landfill Directive </li></ul></ul></ul></...
Property Opportunities <ul><ul><ul><li>Waste Technologies grouped together into three Groups </li></ul></ul></ul><ul><ul><...
Overview of Different Solutions <ul><ul><ul><ul><li>Materials Recovery Facility (MRF) </li></ul></ul></ul></ul><ul><ul><ul...
Materials Recovery Facility (MRF) <ul><ul><ul><li>A MRF is a facility at which components of a mixed waste stream are extr...
SCA Recycling Southampton MRF
Combustion, Energy from Waste (EfW) <ul><ul><ul><li>EfW facilities combust waste under controlled conditions, to generate ...
Pyrolysis & Gasification <ul><ul><ul><li>Pyrolysis, gasification, is a thermal process where organic materials in the wast...
Anaerobic digestion (AD) <ul><ul><ul><li>Anaerobic digestion (AD) is a method of waste treatment that produces a gas with ...
Composting <ul><ul><ul><li>Composting is a natural biological process in which organic material is broken down by the acti...
Mechanical Biological Treatment (MBT) <ul><ul><ul><li>MBT is a generic term for an integration of several processes found ...
UK Planning Environment <ul><ul><ul><li>Planning is handled at a County level as opposed to District </li></ul></ul></ul><...
Deal Analysis- An Agency Perspective <ul><ul><ul><li>Large amount of new and substantial enquiries </li></ul></ul></ul><ul...
The Property Opportunity? <ul><ul><ul><li>Existing Stock </li></ul></ul></ul><ul><ul><ul><ul><li>Target MRF operators </li...
The property opportunity? By 2015, nearly all MRF capacity is utilised and almost 60%  of areas have insufficient capacity...
Conclusions <ul><ul><ul><li>The Waste & Recycling industry is BIG Business. </li></ul></ul></ul><ul><ul><ul><li>Opportunit...
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Slater Heelis Property Seminar 8 July 2010 - BNP Paribas

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This presentation was given by Andrew Hamilton, Senior Director of BNP Paribas at the Property Seminar hosted by Slater Heelis solicitors on 8 July 2010. Andrew discussed rental performance and trends, waste to energy as a potential investment opportunity and the return of the residential investor.

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  • Waste technologies fall into 3 principle groups
  • Add in land requirements……. Building requirements.
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  • Slater Heelis Property Seminar 8 July 2010 - BNP Paribas

    1. 1. Where now for property? Manchester Andrew Hamilton
    2. 2. The North suffers most in the recession
    3. 3. Rental value loss in 2009 – historic comparison
    4. 4. Rental value loss in 2009 – historic comparison
    5. 5. Broad recovery in take-up across the regions
    6. 6. Recovery favours South
    7. 7. Distribution take-up varied widely between regions
    8. 8. A good recovery for rents
    9. 9. Distribution’s late recovery doesn’t help enough
    10. 10. Values still lie well below the long run trend
    11. 11. Office values recover sharply - helped by London
    12. 12. But the collapse in some markets takes time to repair
    13. 13. Points to remember <ul><li>Tough economic recovery will act as a drag on rental recovery </li></ul><ul><li>Capital markets will run out of steam in 2011 </li></ul>
    14. 14. <ul><li>Hot Properties </li></ul>
    15. 15. <ul><li>HOUSING </li></ul>
    16. 16. Housing Delivery <ul><li>Planning </li></ul><ul><li>Land Supply </li></ul><ul><li>Affordable Housing </li></ul><ul><li>Finance </li></ul>
    17. 17. Nominal House Price Growth 6.17% 6.78% 8.31% 8.45% 2.84% 7.73% 3.94% 2.11% 2.75% -1.28% 3.11% 2.63% 3.30% 2010 -6.89% 1.09% -0.20% 3.84% 7.16% 4.68% 4.46% 22.09% 2.55% 2.74% 2.72% -2.05% 3.37% 2009 -22.0% -2.2% -7.0% -7.4% -5.9% -6.9% -7.9% -7.1% -7.4% -7.3% -7.4% -5.3% -6.8% 2008 43.1% 13.0% 5.8% 8.4% 12.6% 9.1% 7.3% 4.9% 5.1% 4.7% 5.1% 5.5% 8.9% 2007 30.5% 13.0% 5.3% 5.3% 9.7% 5.1% 5.3% 3.3% 3.3% 4.7% 6.0% 2.7% 6.5% 2006 12.8% 10.4% 6.0% 3.9% 3.7% 2.1% 3.8% 4.6% 4.1% 7.8% 8.2% 5.3% 5.4% 2005 15.1% 22.5% 31.5% 15.4% 8.9% 11.9% 14.3% 16.8% 18.4% 27.0% 25.5% 29.5% 16.6% 2004 11.3% 14.8% 26.2% 18.6% 14.5% 18.9% 17.8% 22.6% 25.3% 24.0% 27.5% 32.4% 19.6% 2003 9.2% 13.0% 18.9% 24.5% 18.2% 22.0% 23.1% 21.5% 23.9% 18.7% 22.8% 19.3% 19.8% 2002 8.0% 3.0% 9.0% 11.9% 10.1% 11.7% 14.2% 11.1% 11.7% 10.5% 9.5% 8.4% 10.5% 2001 12.5% 4.6% 8.3% 16.6% 18.9% 19.1% 15.6% 10.7% 11.0% 6.4% 5.8% 4.8% 13.0% 2000 10.4% 3.6% 6.0% 10.6% 10.9% 10.6% 7.5% 7.0% 7.6% 6.3% 4.8% 3.3% 9.1% 1999 Northern Ireland Scotland Wales South West Gtr London Rest of South East East Anglia Midland East Midlands North West Yorks& Hmber North UK
    18. 18. <ul><li>WASTE </li></ul><ul><li>The property implications </li></ul>
    19. 19. Every day Britain throws away Source: WRAP & The Independent 1.6 M Bananas 5,500 Chickens 5.1 M Potatoes 1.3 M Yoghurts 220,000 Loaves of Bread 660,000 Eggs 1.2 M Sausages
    20. 20. Waste Management across Europe Source: Eurostat
    21. 21. EU Landfill Directive <ul><ul><ul><li>EU landfill tax: </li></ul></ul></ul><ul><ul><ul><ul><li>2009 £40 per tonne, </li></ul></ul></ul></ul><ul><ul><ul><ul><li>2013 £72 per tonne. </li></ul></ul></ul></ul><ul><ul><ul><li>EU Landfill reduction targets </li></ul></ul></ul><ul><ul><ul><ul><li>By 2010 - 75% of 1995 levels </li></ul></ul></ul></ul><ul><ul><ul><ul><li>By 2013 - 50% of 1995 levels </li></ul></ul></ul></ul><ul><ul><ul><ul><li>By 2020 - 35% of 1995 levels </li></ul></ul></ul></ul><ul><ul><ul><li>The Landfill Allowance Trading System (LATS) </li></ul></ul></ul><ul><ul><ul><ul><li>Landfill reduction targets for local authorities set by central government </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Local authorities fined £150 for every tonne they exceed target </li></ul></ul></ul></ul>
    22. 22. The Perfect Storm? <ul><li>Legislatively Driven </li></ul><ul><ul><ul><ul><li>EU Landfill Directive </li></ul></ul></ul></ul><ul><ul><ul><ul><li>WEEE Directive </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Waste Incineration Directive </li></ul></ul></ul></ul><ul><li>Increase Energy production to sustainable sources </li></ul><ul><ul><ul><ul><li>20% of UK electricity from renewables by 2020 </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Waste as a carbon alternative </li></ul></ul></ul></ul><ul><li>Over supply of industrial and logistics property and land </li></ul><ul><ul><ul><ul><li>138 million sq ft available in the UK </li></ul></ul></ul></ul><ul><li>Decreased rental values and reducing lease length </li></ul>
    23. 23. Property Opportunities <ul><ul><ul><li>Waste Technologies grouped together into three Groups </li></ul></ul></ul><ul><ul><ul><li>Organic – including composting, anaerobic digestion </li></ul></ul></ul><ul><ul><ul><li>Dry Recycling – including primary segregation and secondary reprocessing </li></ul></ul></ul><ul><ul><ul><li>Recovery – including energy from waste </li></ul></ul></ul>Opportunities for the property sector
    24. 24. Overview of Different Solutions <ul><ul><ul><ul><li>Materials Recovery Facility (MRF) </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Energy from waste - Combustion </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Pyrolysis & Gasification </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Anaerobic Digestion </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Composting </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Mechanical Biological Treatment (MBT) </li></ul></ul></ul></ul>Outputs such as: Gas Oil Charcoal Electricity Some technologies can be employed in existing buildings Waste sorting Can be done in existing buildings
    25. 25. Materials Recovery Facility (MRF) <ul><ul><ul><li>A MRF is a facility at which components of a mixed waste stream are extracted by the use of mechanical separation techniques </li></ul></ul></ul><ul><ul><ul><li>Revenue generated from sale of recovered items </li></ul></ul></ul>£200,000 - £40 million depending on operation complexity Capital Costs 15 – 85 depending on complexity £30 - £55 per tonne treated 0.8 – 2 Ha Staff Levels Operating Costs Land Requirements
    26. 26. SCA Recycling Southampton MRF
    27. 27. Combustion, Energy from Waste (EfW) <ul><ul><ul><li>EfW facilities combust waste under controlled conditions, to generate electricity and/or heat. </li></ul></ul></ul><ul><ul><ul><li>Electricity generated from a 100,000 tpa facility is equivalent to the electricity usage of 10,000 houses </li></ul></ul></ul>Source: Veolia £40 - £46 million for 100,000 tpa plant Capital Costs Around 50 £41 - £64 per tonne treated 2.5 – 3.5 Ha Staff Levels Operating Costs Land Requirements
    28. 28. Pyrolysis & Gasification <ul><ul><ul><li>Pyrolysis, gasification, is a thermal process where organic materials in the waste are broken down under pressure and in the absence of oxygen. </li></ul></ul></ul><ul><ul><ul><li>Allows for energy creation from waste </li></ul></ul></ul>Photo Source: Biogen £19 - £93 million for 100,000 tpa plant (process dependent) Capital Costs 30 - 40 Limited Data Available 0.5– 1.75 Ha Staff Levels Operating Costs Land Requirements
    29. 29. Anaerobic digestion (AD) <ul><ul><ul><li>Anaerobic digestion (AD) is a method of waste treatment that produces a gas with high methane content from organic materials. </li></ul></ul></ul><ul><ul><ul><li>The methane can be used to produce heat, electricity, or a combination of the two. </li></ul></ul></ul>£10m - £29m for 60,000 tpa plant Capital Costs Dependent on unit size £28 per tonne processed Estimated at 1 sq ft per tonne processed. Staff Levels Operating Costs Land Requirements
    30. 30. Composting <ul><ul><ul><li>Composting is a natural biological process in which organic material is broken down by the action of micro-organisms. </li></ul></ul></ul><ul><ul><ul><li>Outputs are sold into the agriculture industry, landscaping and even used in highway building </li></ul></ul></ul>£9 – 12 million for 40,000 tpa plant Capital Costs Size and Technology Dependent £10 - £24 per tonne (hi tech) £14 – £25 per tonne (low tech) 5 – 6 Ha Staff Levels Operating Costs Land Requirements
    31. 31. Mechanical Biological Treatment (MBT) <ul><ul><ul><li>MBT is a generic term for an integration of several processes found in other waste management processes. </li></ul></ul></ul><ul><ul><ul><li>The principle aim on MBT is to stabilise and separate waste stream into less harmful and more beneficial outputs which then go forward to another waste management process. </li></ul></ul></ul>£9 – 30 million for 60,000 tpa plant Capital Costs Size and Technology Dependent £37.5 per tonne average 0.9 – 2 Ha for small facilities 3 – 4 Ha for large facilities Staff Levels Operating Costs Land Requirements
    32. 32. UK Planning Environment <ul><ul><ul><li>Planning is handled at a County level as opposed to District </li></ul></ul></ul><ul><ul><ul><li>Land use class varies, some classify as Sui Generis, others as B2 or B8 </li></ul></ul></ul><ul><ul><ul><li>An environmental permit issued by the Environment Agency under Chapter 1 of Part 2 of the Environmental Permitting Regulations 2007 </li></ul></ul></ul><ul><ul><ul><li>Exceptions include EfW projects that exceed 50MW of generation. </li></ul></ul></ul><ul><ul><ul><ul><li>These potentially can be “called in” by the Secretary of State </li></ul></ul></ul></ul>
    33. 33. Deal Analysis- An Agency Perspective <ul><ul><ul><li>Large amount of new and substantial enquiries </li></ul></ul></ul><ul><ul><ul><li>No “typical” deal </li></ul></ul></ul>Source: BNP Paribas Real Estate Research £2.80 psf 10 year lease 5 year lease break Birmingham 62,000 Recycled Carbon Fibre £7psf 18 year lease Harlow 55,712 Molecular Products £4.75 psf 20 years L & G Spec build Trafford Park Manchester 208,000 Biffa £5.50 psf 25 year lease Goodman D & B Derby 360,000 Cyclamax £1 psf 1 year lease Cardiff 71,127 Site Serve Recycling 4.5 year lease Warrington 67,862 Environmental Waste Controls £7.85 psf 15 year lease 9 months rent free Edmonton, London 190,000 Greenstar £.5.25 psf + incentives Birmingham 237,000 Biffa £7 psf 12 year lease Southampton 125,000 SCA Recycling Terms Location Size (sq ft) Tennant
    34. 34. The Property Opportunity? <ul><ul><ul><li>Existing Stock </li></ul></ul></ul><ul><ul><ul><ul><li>Target MRF operators </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Suitable Waste to Energy Operators </li></ul></ul></ul></ul><ul><ul><ul><li>Development Opportunities </li></ul></ul></ul><ul><ul><ul><ul><li>Waste to Energy operators acting as anchor tenants </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Reassign vehicle movements </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Make remaining units/land more attractive to “traditional” tenants </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Strategic land purchases </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Joint ventures with Energy Providers </li></ul></ul></ul></ul><ul><ul><ul><li>Investment opportunities </li></ul></ul></ul><ul><ul><ul><ul><li>Long term leases </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Attractive to institutional investors </li></ul></ul></ul></ul>
    35. 35. The property opportunity? By 2015, nearly all MRF capacity is utilised and almost 60% of areas have insufficient capacity, with a number of others close to capacity WRAP, MRF Capacity report, 2007 300 landfill sites could close and will need to be replaced by as many as 3,000 smaller sites. Biffa, Future Perfect, 2003 If the targets set out in the Landfill Directive are to be achieved there has to be a rapid and exponential increase in facilities to process waste in other ways. RICS: Can the Waste Planning System Deliver, 2004
    36. 36. Conclusions <ul><ul><ul><li>The Waste & Recycling industry is BIG Business. </li></ul></ul></ul><ul><ul><ul><li>Opportunities in the short term exist for MRF operations in existing buildings designed for logistics and distribution. </li></ul></ul></ul><ul><ul><ul><li>By 2015, the industry will require up to 50 million sq ft </li></ul></ul></ul><ul><ul><ul><ul><li>6 ½ Magna Parks! </li></ul></ul></ul></ul><ul><ul><ul><li>Longer term opportunities exist for investors and developers with large land banks </li></ul></ul></ul><ul><ul><ul><li>The industry has many local authority contracts, in certain cases the local authority leases the property. </li></ul></ul></ul><ul><ul><ul><ul><li>Potential for long and secure income </li></ul></ul></ul></ul><ul><ul><ul><li>The ideal locations for many operations are at or close to “traditional” logistics centres </li></ul></ul></ul>
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