Legal & general investments

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Legal & general investments

  1. 1. March 2013 CITYWIRE WEALTH MANAGER CONFERENCE AND AWARDS Legal & General UK Property Trust Matt Jarvis - Fund ManagerThis is not a consumer advertisement. It is intended for professional financial advisers and should not be relied uponby private investors or any other persons.
  2. 2. CITYWIRE WEALTH MANAGER CONFERENCE AND 2March 2013 CITYWIRE WEALTH MANAGER CONFERENCE AND AWARDS AWARDSUK Commercial Property MarketOccupational markets and forecasts For a choice of other images – please see the Presentation divider slide presentation available from the LGIM menu
  3. 3. CITYWIRE WEALTH MANAGER CONFERENCE AND 3March 2013 CITYWIRE WEALTH MANAGER CONFERENCE AND AWARDS AWARDSIPD All Property Return - 1 month 4 Rental Growth Yield Impact Total return 2 %, 1 Month 0 -2 -4 -6 Dec-06 Jun-07 Dec-07 Jun-08 Dec-08 Jun-09 Dec-09 Jun-10 Dec-10 Jun-11 Dec-11 Jun-12 Dec-12 Capital values declining for secondary stock and short income Source: IPD UK Monthly Index
  4. 4. CITYWIRE WEALTH MANAGER CONFERENCE AND 4March 2013 CITYWIRE WEALTH MANAGER CONFERENCE AND AWARDS AWARDSSome easing in commercial real estate credit conditions Commercial Property Lending Standards• Lending standards easing (positiv e indicates easing) balance of respondents easing less those• New originators Uk Past 3 mths - Debt funds 40 UK Next 3 mths US Past 3 mths - US / emerging market banks 20 0 - tightening Insurers -20 - Non-performing loan specialists -40• Regulatory pressure on banks easing -60 -80 - Introduction of slotting being reworked -100 - Upside surprise on Basel III rules N 2 N 3 4 N 5 N 6 N 7 N 8 9 N 0 N 1 2 -0 -0 -0 -0 -0 -0 -0 -0 -1 -1 -1 ov ov ov ov ov ov ov ov ov ov ov• But let’s not get ahead of ourselves… N N N Source: Bank of England, Federal Reserve
  5. 5. CITYWIRE WEALTH MANAGER CONFERENCE AND 5March 2013 CITYWIRE WEALTH MANAGER CONFERENCE AND AWARDS AWARDS The wide variation in town centre vacancy rates% Increase from ’05 low Walsall Preston Plymouth Cardiff Stockport Croydon Derby Blackpool Nottingham Coventry Ipswich Bournemouth Milton K. Hull Swansea / Swindon Glasgow Liverpool Exeter Hanley Bolton Wolverhampton Richmond Guildford Manchester Birmingham Shrewsbury Bradford Kingston Sheffield Solihull / Cambridge Norwich Reading Doncaster Oxford C. London York Latest town centre vacancy rate (%) Source: PMA
  6. 6. CITYWIRE WEALTH MANAGER CONFERENCE AND 6March 2013 CITYWIRE WEALTH MANAGER CONFERENCE AND AWARDS AWARDSOffice supply• Overall London office vacancy rates are 5.5% compared with a 10yr average of 6.6%• Equity targeting London will turn to development Glasgow: Edinburgh: 11.8%• Regionally, overall vacancy remains inflated at 12.6% 7.3% but selective Grade A shortages• Regional development very Low: 1.75 million sq ft Leeds: across the UK, of which 1 million sq ft is pre-let 10.1% Manchester: 10.7%• Obsolescence to increase: ‘natural’ rate of vacancy Birmingham: structurally higher? 17.1% Cardiff: 9.0% London: 5.5% Bristol: 11.3% Western Corridor 14.8% Source: Legal & General Property
  7. 7. CITYWIRE WEALTH MANAGER CONFERENCE AND 7March 2013 CITYWIRE WEALTH MANAGER CONFERENCE AND AWARDS AWARDSSupply - Industrial estates and distribution warehouses ERV in voids as % of ERV: Industrials• Second hand space increasing, while pockets of 16.00 under supply for the best space 2012 Q3 2007Q4 14.00• Construction activity justified for the best and 12.00 biggest logistics sheds… 10.00• ….Meanwhile demand looks toward design and % 8.00 build 6.00• Yorkshire and Humber ‘unfairly’ inflating UK vacancy rates 4.00 2.00 0.00 Standard London Inner South Outer South Rest of UK Distribution Industrials Eastern Eastern Warehouses Source: Legal & General Property
  8. 8. CITYWIRE WEALTH MANAGER CONFERENCE AND 8March 2013 CITYWIRE WEALTH MANAGER CONFERENCE AND AWARDS AWARDSLegal & General Property central case all property projection – 6% overfive years Income Rental Growth Yield Impact Depreciation Added Value / Lease Effects Total 10 8 6 4 2 0 -2 2013 2014 2015 2016 2017 Source: Legal & General Property
  9. 9. CITYWIRE WEALTH MANAGER CONFERENCE AND 9March 2013 CITYWIRE WEALTH MANAGER CONFERENCE AND AWARDS AWARDSValue in the derivatives curve? % pa LGP Jan-13 Deriv ativ es Pricing Jan-13 10 PMA Dec-12 IPF Concensus Nov -12 8 6 4 2 0 2013 2014 2015 2016 2017 Source: Legal & General Property / RBS / PMA / IPF
  10. 10. CITYWIRE WEALTH MANAGER CONFERENCE AND 10March 2013 CITYWIRE WEALTH MANAGER CONFERENCE AND AWARDS AWARDS Market outlook for 2013 • Growing optimism, but little in the way of new development • Banks maintain an increasingly pro-active stance to exit underperforming loan positions • Debt availability easing with UK institutions to play a larger part • Good assets continue to outperform, due to selective occupiers and investors • Selective opportunities to buy secondary at deep discountsResilience to key risks? • Risk 1 – Economy disappoints expectations - Continued focus on lettability / angles which do not rely on market recovery • Risk 2 – Inflation significantly overshoots - Index-linked leases • Risk 3 – Risk free rates rise - Underweighting ‘bond-style’ assets with limited growth potential • Risk 4 – UK exit from the EU - Low probability but high impact risk. Could shock sentiment. Monitor. Source: Legal & General Property
  11. 11. CITYWIRE WEALTH MANAGER CONFERENCE AND 11March 2013 CITYWIRE WEALTH MANAGER CONFERENCE AND AWARDS AWARDSLegal & General UK Property TrustPerformance and recent activity For a choice of other images – please see the Presentation divider slide presentation available from the LGIM menu
  12. 12. CITYWIRE WEALTH MANAGER CONFERENCE AND 12March 2013 CITYWIRE WEALTH MANAGER CONFERENCE AND AWARDS AWARDSFund profileAs at 31 December 2012Objective: To provide an attractive income yield Sector Weighting and potential for income and capital 4% 2% 11% growth through a diversified portfolio of UK Commercial Property assets 1% 22% 12%Fund value: £728m in assets £154m in cash (21%)No. of direct properties: 64 6% 13%Av. lease length: 9.3 years 2% (IPD Universe 10.2 years) 13% 14%Vacancy rate: 2.1% Retail High Street Retail Shopping Centre Office - London Office - Regional (IPD Monthly Index 10.3%) Industrial Retail Warehouse Leisure Other Cash REITSProperty initial yield: 6% (IPD Monthly at 6.32%) Reserved Cash (Developments)Other assets: 2% REIT holding 0% Derivatives Source: IPD / Legal & General Property
  13. 13. CITYWIRE WEALTH MANAGER CONFERENCE AND 13 March 2013 CITYWIRE WEALTH MANAGER CONFERENCE AND AWARDS AWARDS Legal & General UK Property Trust: Annualised Performance Over 1, 3 and 5 Years 10% 7.4% 7.2% Annualised Return (%) 5% 4.6% 2.8% 2.1% 1.6% 1.5% 0.8% 0.3% 0% -0.3% -0.5% -1.6% -5% L&G Lipper L&G Lipper . L&G Lipper . L&G IPD L&G IPD L&G IPD (1yr) Peers (3yr) Peers (5yr) Peers (1yr) (1yr) (3yr) (3yr) (5yr) (5yr) (1yr) (3yr) (5yr) *Note: Lipper Peers are key comparable UK funds that primarily invest directly in UK property assets: mean, annualised. Outperformance against Lipper Peers and IPD Monthly Source: IPD Monthly December 2012Past performance is not a guide to future performance, and may not be repeated Lipper Property IMA December 2012
  14. 14. CITYWIRE WEALTH MANAGER CONFERENCE AND 14March 2013 CITYWIRE WEALTH MANAGER CONFERENCE AND AWARDS AWARDSIncome focus – Ptarmigan distribution warehouse portfolio Portfolio of four distribution warehouses High income yield of 9.5% – secure tenants, but shorter leases. • Banbury – adjacent to M40 and Let to DHL for 5 years. • Birmingham – Nexus – close to M6 let to Corporate Express for 5 years. • Northampton – Brackmills – close to M1 and let to John Lewis for 5 years. • Manchester – Stakehill – between M60 and M62 and let to Aldi for 3 years. Source: Legal & General Property
  15. 15. CITYWIRE WEALTH MANAGER CONFERENCE AND 15March 2013 CITYWIRE WEALTH MANAGER CONFERENCE AND AWARDS AWARDSDevelopment funding - long RPI or fixed increase leasesGreenwich - Waitrose supermarket funding• Retail element of a residential development by Galliard Homes• £15.6m funding of supermarket pre-let to Waitrose for 25 years with annual fixed increases of 2.5% pa.• Development Funding interest to charge during development at 5%• Site purchase with payments linked to completion of wider 980 unit residential scheme fronting Thames (right).Stirling – Burghmuir Retail Park Development Funding• Supermarket and retail park development with Stirling Development Agency• £18.5m funding of new retail park with A1 planning consent.• 65% pre-let to Waitrose at £17.50 per sq.ft for 25 years with fixed increases of 2.5% pa every 5 years. First Waitrose outside of Edinburgh / Glasgow.• 25% pre-let to TK Maxx at £20 per sq.ft for a minimum of 10 years.• Development Funding interest to charge during development at 5.5%.• Final payments linked to success of letting Unit 3 (10%). Source: Legal & General Property
  16. 16. CITYWIRE WEALTH MANAGER CONFERENCE AND 16March 2013 CITYWIRE WEALTH MANAGER CONFERENCE AND AWARDS AWARDSFuture asset management and development opportunities 67 Tufton Street, London SW1 • Located in Victoria within walking distance of Houses of Parliament. • Let to April 2017 (tenant break) to Secretary of State at a rent of £45 per sq.ft, but is only occupied by a skeleton staff. • Opportunity to convert to residential, subject to planning and vacant possession. • Purchased in November 2013 for £16 million reflecting 5.75% Net Initial Yield. • Development team appointed and plans drawn up for a 22 unit residential scheme. • Terms agreed in principle with the occupier and adjoining owner. • Residential market remains attractive for core Central London product from developers and occupiers alike. Source: Legal & General Property
  17. 17. CITYWIRE WEALTH MANAGER CONFERENCE AND 17March 2013 CITYWIRE WEALTH MANAGER CONFERENCE AND AWARDS AWARDSSummary• Performance track record remains very strong over 1, 3 and 5 years despite growth handicap.• Success on asset management expected in H1 for 2013.• Cash position under control despite significant inflows.• C.20% of all lease income benefits from either fixed or RPI linked increases.• Low void level maintained through the life of the fund. Source: Legal & General Property
  18. 18. CITYWIRE WEALTH MANAGER CONFERENCE AND 18March 2013 CITYWIRE WEALTH MANAGER CONFERENCE AND AWARDS AWARDSAppendixSupporting Slides For a choice of other images – please see the Presentation divider slide presentation available from the LGIM menu
  19. 19. CITYWIRE WEALTH MANAGER CONFERENCE AND 19March 2013 CITYWIRE WEALTH MANAGER CONFERENCE AND AWARDS AWARDSUK Property Trust Michael Barrie Matt Jarvis Director and Lead Fund Manager Fund Manager Recent Career • Joined Legal & General Property Ltd as Director in Recent Career November 2005. • Joined Legal & General Property Ltd as Asset • Currently responsible for UK balanced funds with Manager in November 2004. specific focus as Fund Manager of the UK Property • Currently responsible for UK Property Trust. Trust. • Previously a Commercial Valuer with Jones Lang • Previously a Director with Foreign & Colonial Property LaSalle. Asset Management. • Chartered Surveyor. • Chartered Surveyor. • Degree in Land Management from Reading University. • Degree in Urban Land Economics from Sheffield • Diploma in Property Investment from Cambridge Hallam University and a post graduate Diploma in University. Property Investment from Reading University. Source: Legal & General Property
  20. 20. CITYWIRE WEALTH MANAGER CONFERENCE AND 20March 2013 CITYWIRE WEALTH MANAGER CONFERENCE AND AWARDS AWARDSDiversified property and tenant risk Top 10 Properties % Top 10 Tenants % Whole Rent Fund 1 Tesco Stores Ltd 8.0%1 Cambridge Science. Pk – Amgen 5.6% 2 Amgen Ltd 4.6%2 Hayes – Bulls Bridge I/E 3.7% 3 The Malmaison Hotel (Manchester) Ltd 4.7%3 Islington – Upper Street 3.6%4 Manchester – Malmaison Hotel 3.0% 4 British Airways Plc 4.6%5 Market Deeping – Tesco 2.8% 5 BMI Healthcare Ltd 4.0%6 Darlington – Woodlands Hospital 2.6% 6 National Westminster Bank Plc 3.2%7 Ludlow – Tesco 2.4% 7 Conexant Systems UK Limited 2.4%8 London – Walter House, Strand 2.3% 8 MWB Business Exchange Centres Ltd 2.3%9 Manchester – Royal Buildings 2.2% 9 Homebase Ltd 2.2%10 Leeds – Whitehall One 2.0% 10 Everything Everywhere Ltd 2.1% Source: Legal & General Property
  21. 21. CITYWIRE WEALTH MANAGER CONFERENCE AND 21March 2013 CITYWIRE WEALTH MANAGER CONFERENCE AND AWARDS AWARDSVoid management % pa 14 12 10 8 6 4 2 0 End Mid End Mid End Mid End Mid End Mid End Mid End Mid End 2005 2006 2006 2007 2007 2008 2008 2009 2009 2010 2010 2011 2011 2012 2012 IPD Monthly Index Vacancy Rate Fund Vacancy Rate (%) Source: Legal & General Property/IPD
  22. 22. CITYWIRE WEALTH MANAGER CONFERENCE AND 22March 2013 CITYWIRE WEALTH MANAGER CONFERENCE AND AWARDS AWARDSAsset management – other recent highlights St.Stephen’s Place, Trowbridge • Purchased in June 2010 as part of Castle Place Shopping Centre. Attributed price £1m. • Planning application obtained in Q1 2012 to build a leisure park and provide sorely needed facilities for the town’s residents. • Seven screen cinema pre-let to Odeon for 25 years at £14 per sq.ft. First two rent reviews to be RPI linked (2%-4%). • 80 bed hotel pre-let to Premier Inn for 20 years minimum at £4,100 per room. Rent reviews to CPI (0%-5%). • Six family restaurants and a café pod – currently on the market and attracting good interest. • Contractors appointed with Practical Completion anticipated Q3 2013. Source: Legal & General Property
  23. 23. CITYWIRE WEALTH MANAGER CONFERENCE AND 23March 2013 CITYWIRE WEALTH MANAGER CONFERENCE AND AWARDS AWARDSUK Property Trust Team – Use our platform reach Legal & General Investment Management Macro Economic view Corporate Relationships Tenant Credit Analysis BMW UK Portfolio Experienced Fund Team Real Estate Research Team Sector Specialists Planning,Derivatives Shopping Retail Development Multi-let Logistics Leisure and Retail Centres Offices Warehouses & Industrials REITS Transactions Powerful combination of sector expertise and corporate depth
  24. 24. CITYWIRE WEALTH MANAGER CONFERENCE AND 24March 2013 CITYWIRE WEALTH MANAGER CONFERENCE AND AWARDS AWARDSLegal & General Property KEY FACTS Managing Director: Bill Hughes North Scotland Number of Funds: 18 10% 3% AUM: £10.4bn (US$16.7bn) Number of Properties: 430 Midlands Number of Tenants: c.2200 11% Total Staff: 81 West 9% East 10% London 28% £2,292 £2,546 Retail Office South East Industrial £521 Logistics 29% £648 Other Cash/Derivs/Unlisted £1,251 £2,494 All Figures in £million Entirely UK focussed business Source: Legal & General Property 7 Note: All information as at Dec 2010
  25. 25. CITYWIRE WEALTH MANAGER CONFERENCE AND 25March 2013 CITYWIRE WEALTH MANAGER CONFERENCE AND AWARDS AWARDSSustainability commitment• Legal & General Property has a strong and long-term commitment to sustainability and adopting or investing in pioneering solutions. We believe that through the adoption of sustainable practices, we will deliver enhanced returns to our investors over the medium to long term.• We are working in partnership with Upstream Strategies, the UK Green Building Council and the Better Buildings Partnership to formulate strategies, targets and action plans for the sustainable management of all our property portfolios.• We understand that each of our properties has social, economic and environmental effects on the community in which it is built. We aim to understand this triple bottom line of sustainability through training all staff in the fundamentals of Sustainability in Real Estate Investment. Source: Legal & General Property
  26. 26. CITYWIRE WEALTH MANAGER CONFERENCE AND 26March 2013 CITYWIRE WEALTH MANAGER CONFERENCE AND AWARDS AWARDSDisclaimerImportant informationThis presentation, and any information it contains, has been produced for use by professional investors andfinancial advisers only and should not be distributed without the permission of Legal & General (Unit TrustManagers) Limited.Legal & General UK Property Trust is an authorised unit trust, managed by Legal & General (Unit TrustManagers) Limited. Unit Trust funds are managed by Legal & General Property on behalf of internal andexternal clients of Legal & General.The Fund is designed to be held for the medium to long term of at least five years.The value of property is generally a matter of valuer’s opinion rather than fact. Details of the specific andgeneral risks associated with the fund mentioned are contained within the Key Investor Information Document.The risks associated with the Fund are set out in the Prospectus and this should be understood before makingany investment decisions. Additional information in relation to the Risk Management process is available onrequest. A copy of the Prospectus can be obtained from: Legal & General (Unit Trust Managers) Limited.The value of investments and any income from them can fall as well as rise and is not guaranteed andinvestors may get back less than they invest. The views expressed within this document are those of Legal &General Investment Management Limited, who may or may not have acted upon them. Past performance isnot a guide to future performance.Issued by Legal & General (Unit Trust Managers) Limited. This document should not be taken as an invitationto deal in Legal & General investments or any of the stated investments.

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