100212 Inspired Event Invista Presentation


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Rob Weaver's excellent research into Investment into the Private Rented Sector. On behalf of Invista Real Estate and presented at Inspired Asset Management's Inspired Event.

Why UK residential? £4 trillion asset class (the biggest by far) to start with ! Out performance, low volatility etc.

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100212 Inspired Event Invista Presentation

  1. 1. University Challenge: An education in Student Accommodation Investment into the Private Rented Sector Robert Weaver : Invista Real Estate Investment Management 11 February 2010
  2. 2. Agenda Why invest in a Residential Fund? Why UK residential property? Invista; who we are
  3. 3. Who we are <ul><ul><li>Largest UK listed real estate fund manager </li></ul></ul><ul><ul><li>Assets Under Management of £5.3 billion </li></ul></ul><ul><ul><li>23 client funds with diverse investment styles </li></ul></ul><ul><ul><li>Ability to co-invest </li></ul></ul><ul><ul><li>Active in the UK, Continental Europe and Asia </li></ul></ul><ul><ul><li>Experienced team of 92 staff </li></ul></ul><ul><ul><li>Manage three residential portfolios combined value £400 million of UK residential </li></ul></ul><ul><ul><li>+2,000 residential asset </li></ul></ul><ul><ul><li>Manage indirect investment in three external funds combined equity investment £60m </li></ul></ul>Source of data is Invista as at 30 November 2009 Established performance from a dedicated real estate manager
  4. 4. Why invest in a Residential Fund? Why UK residential property? Invista; who we are
  5. 5. Why UK residential? <ul><ul><li>Largest asset class by far </li></ul></ul><ul><ul><li>Good diversifier - low correlation with bonds and equities </li></ul></ul><ul><ul><li>Dynamic and diverse market </li></ul></ul>Larger Market than all other Asset Classes Source: IPD, IPF, Land Registry, ONS, Thomson Datastream; end Dec 2009; * end Sept 2009 Better Diversification Benefits than Commercial Source: Savills IPD, FTA, Barclays Capital, Nationwide, Invista 1.00 Bonds 0.54 1.00 Equities 0.14 0.36 1.00 Commercial (0.04) 0.09 0.71 1.00 Residential Bonds Equities Commercial Residential 1974-2009 Correlation
  6. 6. Why UK residential? cont’d <ul><ul><li>Long term out-performance of all other asset classes </li></ul></ul><ul><ul><li>Lowest volatility of all asset classes over the long term </li></ul></ul><ul><ul><li>Total returns predominantly from capital rather than income growth </li></ul></ul>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 10.7% 5.7% 5.0% 6.9% -0.3% Bonds 13.3% 1.6% 5.9% -1.3% 30.1% Equities 9.8% 6.1% 1.6% -8.0% 3.4% Commercial 15.6% 10.6% 4.0% 1.0% 6.6% Residential Last 35 years Last 10 years Last 5 years Last 3 years Last 12 months Annualised Total Returns
  7. 7. Why UK residential? Cont’d <ul><ul><li>Higher return with a lower risk profile </li></ul></ul>Low return, High risk High return, Low risk Source: Savills, CLG, IPD, FTA, Barclays Capital, Nationwide, Invista Jan 1974 – Dec 2009 Strong risk return profile 10 years 20 years 35 years Residential Commercial Equities Government Bonds
  8. 8. Why Not the Institutions <ul><ul><li>Legacy Issues </li></ul></ul><ul><ul><li>Concerns with Scale </li></ul></ul><ul><ul><li>Lack of Research Information </li></ul></ul><ul><ul><li>Publicity </li></ul></ul><ul><ul><li>Level of Net Income </li></ul></ul><ul><ul><li>Difficulty of Management </li></ul></ul><ul><ul><li>Parapet too high </li></ul></ul><ul><ul><li>Long in Residential </li></ul></ul><ul><ul><li>Political Intervention </li></ul></ul><ul><ul><li>Imperfect Market </li></ul></ul><ul><ul><li>Lack of Talent </li></ul></ul>
  9. 9. Why invest in UK residential now? Long-term drivers of UK residential <ul><ul><li>Supply and demand imbalance </li></ul></ul><ul><ul><li>Immigration and mobility </li></ul></ul>Supply: number of house starts in England Source: ONS Source: DCLG. National data for Q3 2009 is currently available only for England Demand: number of adults in UK Historical & Projected
  10. 10. Why invest in UK residential now? <ul><ul><li>Market Fell 17% between Peak to trough </li></ul></ul><ul><ul><li>Expectations exceed this </li></ul></ul><ul><ul><li>Indices </li></ul></ul><ul><ul><li>May be nearing bottom the market </li></ul></ul><ul><ul><li>Interest rates are historically low </li></ul></ul><ul><ul><li>Government has implemented steps to stabilise markets </li></ul></ul><ul><ul><li>Lack of credit adds to rental demand </li></ul></ul><ul><ul><li>Development projects being halted or deferred </li></ul></ul><ul><ul><li>Continued lack of supply – below Government target </li></ul></ul><ul><ul><li>Buy-to-let finance stalled – removes an over exuberant competitor from market </li></ul></ul><ul><ul><li>Rented sector is increasingly popular - is now a tenure of choice </li></ul></ul><ul><ul><li>More affordable </li></ul></ul>House prices begin to fall in Q3 2007 Prices have fallen faster than in early 1990s Source: Halifax Source: Halifax
  11. 11. Why invest in UK residential now? Alternative measures of affordability Source: Bank of England, Capital Economics, CML, Thomson Datastream Affordability is back
  12. 12. Why invest in a Residential Fund Why UK residential property? Invista who we are
  13. 13. Why invest in a residential fund? <ul><li>Would you…… </li></ul><ul><ul><li>Concentrate your wealth in a single investment? </li></ul></ul><ul><ul><li>Gear this investment heavily? </li></ul></ul><ul><ul><li>Be happy with volatile returns? </li></ul></ul><ul><ul><li>Not subject it to professional management? </li></ul></ul><ul><ul><li>Be reliant on a single counterparty to support your investment? </li></ul></ul><ul><ul><li>Not able to purchase at a discount? </li></ul></ul><ul><ul><li>Risk a criminal offence? </li></ul></ul><ul><ul><li>Want your investment to be diversified and not reliant on a particular asset or income source? </li></ul></ul><ul><ul><li>Like to invest in the best performing asset class over the long term? </li></ul></ul><ul><ul><li>Seek returns with low volatility over the long term? </li></ul></ul><ul><ul><li>Want your investment to be professionally managed? </li></ul></ul><ul><ul><li>Like to access a unique product in a large untapped investment class? </li></ul></ul>No?! This is the c.£200bn buy-to-let sector Yes of course! This is the residential fund sector
  14. 14. Why invest in a residential fund? Further fund considerations <ul><li>SIPPs </li></ul><ul><ul><li>SIPP activity has increased since April 2006 “SIPP simplification” </li></ul></ul><ul><ul><li>Buy-to-let not permitted in SIPP; but funds are </li></ul></ul><ul><li>ISAs </li></ul><ul><ul><li>Fund will be ISAable; rises to £10,200 from 6 April 2010 </li></ul></ul><ul><li>Child Allowance/Child Trust Fund </li></ul><ul><ul><li>Suitable for regular payments on behalf of children </li></ul></ul><ul><li>Grandparents investing for grandchildren </li></ul><ul><ul><li>Suitable for grandparents to invest a single premium </li></ul></ul>
  15. 15. Why invest in a residential fund? Investment strategy <ul><ul><li>Invest in private lettings </li></ul></ul><ul><ul><li>Also other residential asset classes </li></ul></ul><ul><ul><li>Utilise research based forecasting for regional investment </li></ul></ul><ul><ul><li>Strategic investment and active asset management to drive performance </li></ul></ul><ul><ul><li>Rebalance portfolio and recycle capital through strategic disposals </li></ul></ul>Source: Halifax, to end December 2009 Cyclical trends in house price growth
  16. 16. Not an Invista Fund - How not to do it Relative value growth for all assets 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. 17. Potential acquisitions Period Conversion Modern Ground Rent Portfolio For illustrative purposes only
  18. 18. Potential investment I Well located development site Attractive size new build For illustrative purposes only
  19. 19. Residential opportunities Individual leasehold properties not attractive For illustrative purposes only
  20. 20. Summary <ul><ul><li>Strong Fundamentals </li></ul></ul><ul><ul><li>Historically strong investment returns from sector with low volatility over long term </li></ul></ul><ul><ul><li>Historically good demand vs. supply fundamentals for long term growth </li></ul></ul><ul><ul><li>Asset Class benefits from grouped Investment </li></ul></ul><ul><ul><li>Diversified access to sector at minimal investment </li></ul></ul><ul><ul><li>SIPPable investment; </li></ul></ul><ul><ul><li>Benefit from deal sourcing ability and bargaining power </li></ul></ul><ul><ul><li>Professionally managed and actively managed </li></ul></ul>
  21. 21. Important information <ul><li>This document is intended for investment professionals only and should not be relied upon by private investors. </li></ul><ul><li>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. </li></ul><ul><li>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. </li></ul><ul><li>All features in this pack are current at the time of publication but may be subject to change in the future. </li></ul><ul><li>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. </li></ul><ul><li>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. </li></ul><ul><li>The past performance of property funds is not always represented by the performance of the property market as a whole. </li></ul><ul><li>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. </li></ul><ul><li>Commercial and residential property have different risk profiles, returns in one market do not necessarily follow the other.   </li></ul><ul><li>Property funds will not contribute diversification where investors already have a substantial proportion of their investments in property. </li></ul><ul><li>The value of property is a matter of a Valuer’s opinion rather than one of fact. </li></ul><ul><li>Investments in property are relatively illiquid and more difficult to realise than equities or bonds. </li></ul><ul><li>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. </li></ul><ul><li>Depending on the investor’s currency of reference, currency fluctuations may adversely affect the value of investments and the income there from. </li></ul><ul><li>Past performance is not a guide to future performance. </li></ul><ul><li>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. </li></ul><ul><li>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. </li></ul>