Alternative investment sectors - GVA [PDF]

Thought Leadership

Alternative investment sectors

Spring 2013

Introduction The UK’s traditional property investment sectors have become increasingly polarised with intense competition for prime assets with long leases and good covenants. Sectors outside of the traditional retail, office and industrial markets provide a valuable source of investment opportunities with good covenant strengths and long leases at a time when lease lengths in the mainstream market are falling, the economy is weak and the outlook remains uncertain. A lack of comparable rental or performance data for many of these sectors also means that many leases benefit from fixed rental or RPI linked increases. Our report examines the role that the ‘alternative’ sectors have to play in property investment. We examine those sectors where we see a strong opportunity for investors – hotels, leisure, healthcare, student accommodation, data centres, automotive and waste and energy – and assess the potential benefits and risks that each present.

Contents What are the key features of the alternative sectors? ... 04 Factors to consider with alternative sectors ................. 05 Automotive .................................................................. 06 Data centres.................................................................. 08 Energy and waste management ................................ 10 Healthcare..................................................................... 12 Hotels ........................................................................... 14 Leisure .......................................................................... 16 Student accommodation ........................................... 18 Conclusion ................................................................... 20 Drivers of future growth ................................................. 22


10 Stratton Street London W1J 8JR GVA

I 3

What are the key features of the alternative sectors?

How have the alternative sectors performed?

Total Return %

0 -2 1 year

4 4I GVA I GVA 10 10 Stratton Stratton Street Street London London W1J W1J 8JR8JR

3 years Alternative sectors

Source: IPD, GVA

Retail

5 years

Office

Industrial

Using the IPD ‘other property’ category as a proxy (although some of the properties it contains, such as residential and agricultural assets, are outside the scope of this report), has 160 shown an increased appetite for alternative investment assets in 140 recent years. 120

The number of properties within this ‘other’ category increased 100 by nearly 200% over the 10 years to Q4 2012 compared with a 80 37% increase for the office, retail and industrial sectors. Overall, alternative sectors now account for 7.1% of the IPD index in terms of 60 capital value, compared to 2.3% ten years ago, as Figure 2 shows. 40

65% 40% FT All Share Figure 2 – Non traditional sectors as %RPIof IPD

12% 10%

Policy 5 4

8%

3 6%

2 1

4%

Technology

Economy

0

2% 0% Q4 2002 Q4 2003 Q4 2004 Q4 2005 Q4 2006 Q4 2007 Q4 2008 Q4 2009 Q4 2010 Q4 2011 Q4 2012

Capital value

Properties

Source: IPD

Demographics

Policy 5 4

Jan-13

Jan-12

Jan-11

Jan-10

Jan-09

Jan-08

Jan-07

Jan-06

Jan-05

Jan-04

As this trend continues, and these markets increase in size and 20 maturity, the transparency of the alternative markets will also 0 continue to improve.

Share of IPD Commercial Index

Over the past five-year period (which includes the peak of the market in 2007) returns from the mainstream sectors were negative (-0.7% pa at the all property level), whilst the alternative sectors produced a positive total return of circa 4% pa. Over the past three years alternative sectors also produced higher returns than the mainstream sectors.

4 2

There is no comprehensive index showing the overall performance of alternative assets. This reflects their diverse nature and differing levels of maturity as well as the lower market transparency that characterises some alternative asset classes. We have examined the available data (to the end of 2011), including healthcare, hotels, leisure and student accommodation. Our analysis suggests that the alterative sectors have provided stronger total returns than the traditional office, retail or industrial sectors over periods of one, three and five years. This is illustrated in Figure 1.

6

Jan-03

But many investors are still relatively unfamiliar with the alternative sectors and so perceive a greater degree of risk than traditional commercial property. However, longer leases and fixed uplifts mean that the reverse is frequently true.

8

Jan-02

At the same time, many good quality assets may be under priced in a market where overall supply is limited. Prime yields in these sectors are now at or below 6% with scope for further compression as these markets develop and mature.

10

Jan-01

The alternative sectors are characterised by a prevalence of longer leases. This feature, combined with the relative lack of comparative rental data, means that many leases are index linked or subject to fixed uplifts. The lease term and strength of the covenant is highly important in determining the price.

12

Jan-00

By their nature, the alternative sectors have a lower market transparency than the mainstream market, although there is considerable variation. For example investors in healthcare have access to a relatively large amount of market information, whilst almost no data is readily available in the energy and waste management sector.

Figure 1 – Historic total returns to end 2011

Index: Jan 2000 = 100

There is a diverse range of alternative sectors. Some have a large amount of stock and are currently considered ‘alternative’ simply because they are not in the traditional mainstream sectors. Some are still relatively immature sectors that will grow significantly in size, whilst others are smaller niche sectors, and will probably always be considered ‘alternative’.

1

1

1

1


Factors to consider with alternative sectors Demand from investors in the current market is focused on yield and covenant led deals, ideally with a degree of indexation to provide regular increases over a long term income stream. The strength of the covenant is not only determining the price, but financing and risk evaluation from lenders as well. The maturity and level of evolution of an alternative sector will determine how much yields may compress although it could be argued that for prime assets this is already a narrow band. To ensure medium to long term viability there are other key considerations than just the covenant. This section takes a detailed look at what other considerations are required to ensure that investment into an alternative sector is viable.

Level of maturity One of the first considerations when choosing an alternative property asset is how mature is that market? Entering a market 12 at an early stage provides greater scope for yield compression, 10 improvements in capital values and lower cost compared to one which is more established, larger in size and offering less risk. 8

The quality of the income stream and how sustainable it is ensures that the occupier has the ability to meet rental commitments over the lease term. From an investor angle, it is important to have a clear understanding of the occupier business and its market.

Mitigate risk Most alternative sector businesses are generally linked with the property, providing an opportunity to create an Opco and Propco. This model has been adopted most noticeably with supermarkets but also across the leisure, student and healthcare 100 markets. If this is the case, then it is important to establish whether 90 another occupier in the same field can easily move in if occupier 80 ‘A’ is unable to fulfil its commitments. 70

Jan-13

Jan-12

Jan-11

Jan-10

Jan-09

Jan-08

Jan-07

Jan-06

Jan-05

Jan-04

Jan-03

Jan-02

Some50of the alternative markets, particularly energy and waste 40 management, automotive and data centres remain relatively 30 to outside markets and as such require the help of opaque 20 specialists within the sector to act as a bridge to the established players 10 involved in that industry. However, if the other criteria are adhered to, then this can also be turned to an advantage. There 0 are many instances of premiums for established sites in the more niche sectors given the infrastructure and planning constraints 40% 45% 50% 55% 60% 65% experienced by new sites. Jan-01

6

A lack of comparative evidence means that rents in alternative 4 sectors can sometimes be linked to performance measures such as EBITDA. Whilst widely used across the hotels and healthcare 2 sectors, and often index linked to ensure annual uplifts, this 0 method requires earnings to rise in conjunction with or ideally exceed inflation. There have been several high profile examples -2 of occupiers 1who have failed to manage this, particularly in the year 3 years 5 years healthcare and hotels sectors, and so it is essential that rent is set Alternative sectors Retail Office Industrial at the correct level to start with.

Jan-00

Total Return %

Covenant

Ease60of entry

Commencing rent

Exit strategy

Figure 3 – Earnings growth V RPI inflation

The highly specialist nature of some alternative sector businesses means that there is sometimes very limited flexibility with regards 160 to re-letting, given the smaller pool of demand compared to a 140 such as industrial or retail. Some sectors also provide limited sector scope for alternative uses (including potential planning restrictions) 120 given their specialist nature, although supply constraints in the 100 more specialist sectors such as data centres and energy and waste80management can turn this into an opportunity.

160 140

Index: Jan 2000 = 100

For instance, a lease signed in January 2000 with a rent set at 65% of EBITDA and linked to RPI inflation would be currently equivalent to 96% of EBITDA. In contrast, a rent set at 40% would be equivalent to 60% of EBITDA and hence far more sustainable.

120 100 80 60

60 selection Stock

40

40 As with all property sectors, the key considerations of location, competition, local demographics, supply, demand and a 20 detailed understanding of that sector are key. Just as important is 0 the quality protected 1 of2building 3 4 and 5 whether 6 7 it8is future 9 10proof 11 and 12 13 14 from obsolescence.

65%

40%

FT All Share

Jan-13

Jan-12

Jan-11

Jan-10

Jan-09

Jan-08

Jan-07

Jan-06

Jan-05

Jan-04

Jan-03

Jan-02

Jan-01

0

Jan-00

20

RPI

Series 1

Series 2

Series 4

As highlighted in Figure 3 it is vital that the level of rent is set at a rate that can remain sustainable. Adopting the FT All Share index Policy as a proxy for earnings, the chart illustrates both the volatility of earnings but also limited overall5growth since 2000, which is in 4 sharp contrast to RPI growth over the same period.

Series 6

Series 7

Series 8

As well as an understanding of the sector’s dynamics, it is also important to comprehend how the occupying business operates as well. This is a key component towards reducing risk but also Policy allows the investor to assess the sustainability of rental income 5 and the covenant strength of existing or potential occupiers. 4

3

3

2

2

1 0

Series 5

Understand the business model

Source: GVA, Bank of England

Technology

Series 3

1 Economy

Technology

0

Economy


I 5

Automotive The automotive and roadside industry collectively covers three main property types – car dealerships, petrol stations and motorway service areas. The motor retail industry operates on a franchising model with vehicle manufacturers (VMs) themselves seldom involved in the business of car retailing and servicing. Despite this some manufacturers have utilised their blue-chip covenants through head-lease and under-lease arrangements to recoup their considerable capital investment in land and buildings, creating attractive, high value investment products. Over the last decade the sector’s property network has experienced widespread reorganisation and consolidation. The UK’s car dealership market is undoubtedly the most sophisticated

and mature in Europe, characterised by an extensive network of modern, expansive and bespoke facilities. Covenants within the marketplace include the international VMs, but also a broad spectrum of dealer groups, from regional operators, to major plcs with turnovers in excess of £1 billion. The sector is characterised by long leases and increasingly by rents linked to indexation or minimum gearing mechanisms. In terms of the motor retail business itself, the number of cars on the UK’s roads has more than doubled over the last 40 years (now approximately 31 million). Manufacturers’ product ranges have increased steadily in response to this extra capacity, with car showrooms expanding as a consequence. In general this has involved migration of facilities from town centres to peripheries as planning has been secured for quasi-retail (sui generis) operations often by promoting the sector’s high employment characteristics.

Key deals Town

Tenant

Lease Term

Indexation

Lot size

Yield

Purchaser

Portsmouth

Various including: Snows Motor Group Volkswagen Group

12.9

part

£24,750,000

7.03%

Ignis

Watford

Mercedes-Benz Retail Group UK Ltd

16

yes

£8,100,000

5.88%

Ignis

Glasgow

Pendragon

11

yes

£7,075,000

7.00%

ING REIM

Sittingbourne (PFS)

Somerfield Stores Ltd

15

no

£3,110,000

6.85%

Riverside Capital

Lymington (PFS)

Somerfield Stores Ltd

16

no

£3,160,000

6.75%

Mountcharm

6 I GVA 10 Stratton Street London W1J 8JR


1. W hat are the most important property considerations for an occupier taking new premises?

consumers are turning to more fuel efficient and cost effective vehicles, increasing demand.

• Location: Determined by factors such as prominence, visibility, arterial route, retail provision and proximity to other franchises with a similar target market.

• Finance: In terms of property, banks were quick to retract from lending in the automotive sector post 2008. Nevertheless, more attractive loan offers/debt terms should result in greater demand, and increased property values.

• Lease terms: Many retailers are committed to sale and leasebacks to provide better quality premises. Given the cost of acquiring and developing new sites, which has to be done in accordance with the corporate identity of the manufacturer, retailers are generally prepared to commit to 20-year-plus leases. VW Group has recently announced it will not be taking new leases, but may guarantee a dealer partner’s occupational lease, serving the same purpose of optimising investment value. • Manufacturer: Corporate identity remains a vital consideration. Dealerships are not built speculatively. Input towards design and layout is important, particularly “future-proofing” properties for extension. • Building: There are no specific ratios for built area to external space, but most dealerships are land hungry, as external vehicle display, parking and ability to extend are essential. The majority of dealerships will be 10,000 – 30,000 sq ft and sites are typically 1-2.5 acres.

2. W hat major changes (legislative, economic, demographic or technological) lie ahead for the occupational market?

5. What are the major investor benefits in this sector? • Modern purpose-built facilities are typically let on long institutionally acceptable leases, incorporating inflation-linked or fixed, upward only rent reviews. Exit values are strong when appraising off five or even 10 year hold strategies. • A lack of investor understanding of this sector often translates into lower levels of demand compared with other assets, resulting in more attractive pricing. The franchise model can give landlords attractive asset management opportunities. • Dealers may periodically need to incur significant capital expenditure in improving or extending a property. Maintaining the quality of a dealership will be critical for both dealer and manufacturer, and this can benefit the landlord in terms of investment appeal and reversionary value. • There is appreciable value in modern properties let to more secondary covenants, as ongoing market consolidation could result in larger, cash rich companies acquiring smaller businesses and lease liabilities, enhancing investment value.

• EU Block Exemption: The current regulations make special concessions for the motor industry. From June 2013 these will be removed. The new regulations are more concerned with supply chain efficiencies and facilitating competition, but recognise the value and ownership of a ‘brand’, affording more control to the vehicle manufacturers. • Mergers and Acquisitions: Due to the maturity of the UK network, growth is likely to come from group merger and acquisition, as opposed to development of competing dealerships. This should see further incidences of the top 10 groups buying up smaller businesses. Small but sound operators will become acquisition targets and investors in this area of the market could stand to benefit from covenant windfalls in the coming years.

3. How will occupiers’ property needs change? • Property criteria will continue to be mandated to a large extent by VMs and will be largely dictated by the success of the brand.

GVA transaction – purchase

Site: Motor Park, Bilton Way City: Portsmouth Lease: 12.9 years Tenant: Various Purchaser: Ignis Yield: 7.03% Price: £24.7m

• The largest conurbations to become VM-dominated territories due to their brand awareness initiatives in the form of “super showrooms”, and the prohibitive cost of investment for retailers.

4. W hat are the major challenges and opportunities facing the sector? • Economy: Current economic conditions and impact on disposable income remain a challenge. The performance of sterling against the euro affects the attractiveness of the UK automotive market to manufacturers. Rising fuel prices mean


I 7

Data centres The recent march towards a fully digital society has highlighted the dependency of businesses upon modern technology. Changes in working practices and social use have had a profound effect on demand for data centre space. A greater use of the internet to provide services and the increase in business reliance on technology has led to a significant increase in the amount of data generated. A key need is a large energy supply connected to a facility, ideally at low cost. A data centre campus can require over 100 MW of power, akin to the energy supply for a small city. As a result property costs are minor compared to occupational costs, resulting in low risk and strong returns once the energy source is secured and the necessary fit out complete.

One of the key issues affecting supply is location. With such a high power requirement, data centres need to be located close to a suitable power supply. But they also generally need to be with 40 miles of their client, and the closer the better. Given this, the availability of suitable sites is a major constraint. At present the sector is relatively new and supply is lean with the majority of centres located in or around London. With only a finite number of sites suitable for this use, and the heavy infrastructure investment required, demand outweighs supply; but so far it has been limited to a small section of the potential market. We think that demand is likely to broaden as use becomes more widespread. At present many leading occupier businesses which typically are large global firms in finance, banking services or insurance prefer flexible and capex-free space rather than own the facility outright. Once economic conditions improve, many of these occupiers are likely to shift back towards owner occupation. This will provide an opportunity for the disposal of existing facilities, freeing up space for newer entrants into the market.

Key deals Town

Tenant

Lease Term

Indexation

Lot size

Yield

Purchaser

Glasgow

Clydesdale Bank

30

yes

£19,000,000

5.54%

L&G

Glasgow

Clydesdale Bank

20

yes

£3,450,000

7.06%

L&G

Manchester

Telecity

13.5

yes

£7,600,000

6.50%

Orchard Street

Birmingham

Talk Talk Group

25

yes

£9,412,000

6.98%

SLI

Andover

Atos Origin

19

yes

£24,725,000

6.72%

Gatehouse Bank



1. W hat are the most important property considerations for an occupier taking new premises? • Location: It is estimated that 75% of the UK data centre demand is within 80 km of the London. • Fibre optics: Network providers are keen to enable this resource if not already in place as they benefit as a result. • Power supply: The speed in which a suitable power supply can be established and its connection cost plays a significant role in determining when a site can become operational.

2. W hat major changes (legislative, economic, demographic or technological) lie ahead for the occupational market?

required in delivering a powered shell property. Strong covenant likely from almost all occupiers, including the financial services or insurance sector. From an occupier perspective the building itself is a secondary concern. • Purpose built. Although purpose built data centres are not an established market and have a very bespoke use, the shortfall in supply means that there will be a long list of potential occupiers at the end of the lease, creating a bond like structure. • Whichever type of property is chosen, it will be in a strong location with the necessary security and energy benefits that will improve residual value due to the finite and limited supply of these appropriate sites.

• Technological improvements: Over the course of the next decade we expect improvements that will allow operation at higher temperatures and servers to run more efficiently, reducing the need for cooling. • Economy: Tight budgetary controls favour rental occupation in third party facilities which can provide growth space. With stronger economic growth and greater availability of bank lending, the top end of the market may move towards owner occupation, opening up the occupational market to a larger number of firms who are currently priced out. • Energy costs and policy: Energy costs will remain a constant issue. Energy costs are likely to increase faster than inflation due to factors such as sustainability legislation, which will require offsetting by carbon intensive uses or subsidies for renewable energy.

3. How will occupiers’ property needs change? • The technological advances expected over the next decade could well see the IT infrastructure become compressed and more efficient. However the increased digitalisation of modern society will result in a significant net increase in need for data centre space.

4. W hat are the major challenges and opportunities facing the sector? • Supply: There is unlikely to be any significant increase of supply in the long term, as there are only a certain number of sites which meet all the necessary criteria to host a data centre. Locations that are already established are likely to maintain a strong foothold in the market.

GVA transaction – purchase Site: 100 Great Barr Street City: Birmingham Lease: 25 years Tenant: Talk Talk Group Purchaser: Standard Life investments Yield: 6.98% Price: £9.4m

• Energy security: Arranging for the necessary power supply takes up the majority of time when assembling a potential site. The scale and necessity of this infrastructure to ensure the right environment means that investors will continue to look at new ways of ensuring a continued supply if costs increase or security of supply is threatened.

5. What are the major investor benefits in this sector? • Traditional warehouse conversion. Provision of a long lease (25-30 years) linked to RPI, at higher rents than the background market, sometimes doubled to reflect the additional investment DATA CENTRE SALE & LEASEBACK INVESTMENT 100 GREAT BARR ST BIRMINGHAM


I 9

Energy and waste management The key consideration behind the evolution of the energy and waste management sector is the government’s continued commitment to reducing CO2 emissions to 34% of 1990 levels in 2020 and 80% in 2050. Also by 2020, the aim is for 40% of energy to come from low carbon sources, of which 75% is delivered by renewable energy. Energy produced can be sold back to the grid via Renewable Obligation Certificates (ROCs) and the Feed in Tariff (FIT) while the renewable heat incentive provides reward for alternative heating methods, in conjunction with reduced operating costs. If heat is a by-product of energy production, then this can also be sold, either back to the grid or direct, increasing economic viability further. At the other end of the spectrum, landfill tax is set to increase by £8 per tonne from £64 over the next two years, with incentives

only available for recycling. This is to ensure that by 2015 landfill waste is only 35% of 1995 levels and recycling rates are increased to at least 33%. Opportunities to enter the domestic waste market are few but commercial and industrial waste is a growing area of opportunity and, if used as fuel via gasification or pyrolysis, it can provide a strong hedge against landfill tax when sold off by the tonne. The availability and quality of supply is highly dependent upon the necessary infrastructure being in place. Energy and heat production needs to be linked to the national grid, while access to fuel must also be secured. There has been a growing trend from investors looking at former mills and buildings next to weirs to provide hydro electric power, while sites with waste permits carry a premium regardless of location. One of the main complaints against renewable energy uses, solar power being a good example, is that the initial set up cost for large scale use makes the payback period too long and costly. New technology is also expensive but will become cheaper with increased investment. The newly formed Green Investment Bank is looking to match investment in the most bankable technologies to act as a catalyst for improvements and reduced costs.

Key deals Town

Tenant

Lease Term

Indexation

Lot size

Yield

Purchaser

Hayes

Sita

25

yes

£4,600,000

6.00%

LIM

Blackpool

Sita

25

yes

£1,875,000

7.10%

LIM



1. What are the most important property considerations for an occupier taking new premises? • Land rental values: Occupiers will pay a premium for an established site which has the necessary infrastructure and permits. The availability of sites for this kind of use is unlikely to increase markedly as they are unpopular in terms of NIMBYism and strict planning policy. • Power and fuel supply: It is important to have access to the necessary fuel type, whether it is gas for a power station, food waste for an anaerobic digester or wood for a biomass plant. • Grid connection: It can be costly to set up but it is an essential requirement. Sites which are already established and connected will keep their value. • Size of plot: Government policy is for increased reliance upon renewable and low carbon energy sources towards 2050. For logistical reasons, many existing sites may need to increase in size in order to meet the required capacity asked of them. • Exit strategy: Is there suitable demand for the land and property use or can it easily be amended to an alternative use? Given planning restraints, an established site with a permit can generate a premium.

2. W hat major changes (legislative, economic, demographic or technological) lie ahead for the occupational market? • Legislative: The government’s commitment to the 2050 target is the keystone to all policy surrounding the sector. Policy is largely split between targets, such as 30% of all energy to come from renewable and low carbon sources by 2020, and incentives such as the Renewable Heat Incentive (RHI) or Feed in Tariff (FIT) which help investors in the sector get an understanding of the level of income they can expect to generate. • Technology: Energy from waste (pyrolysis) is a relatively immature sector and scientific advances will increase efficiency and reduce costs. It is currently cheaper to export waste than to use landfill but this waste is a potential fuel type that can also be sold on in modules to other users.

are some which are set to increase in use and popularity. Sheffield City Council is the first in the country to heat all public buildings in the city from a waste-to-energy plant, and owners in the private sector are looking to do similar things. • The municipal waste management market is well established and a relatively closed shop. Commercial and industrial waste however is a growth area with the Green Investment Bank looking to invest in the region of £200 - £300 million into recycling when fully established. • A number of occupiers with strong covenants and fuel supply are looking for sites to exploit potential sale and leaseback opportunities. • An area that is facing greater challenges than most is onshore wind farms. There are currently 333 wind farms in the UK, with 3,500 turbines providing 6,500 megawatts (MW) as of Q1 2012. The target is for 28,000 MW by 2020. A further 960 turbines are under construction and 2,100 more are in planning. It would appear that current government policy is turning against the rapid expansion of onshore facilities, with offshore (leased from the Crown) the main beneficiary. • Both environmental and waste permits as well as planning consent for new sites can be difficult to obtain.

5. What are the major investor benefits in this sector? • Energy and waste management is a growing sector, driven by policy with major potential for long term investment. The limited supply of non-renewable energy and increased pressure from government targets will see the property industry’s relationship with the energy and waste management sector increase beyond the current trend for simple efficiency savings. Technological improvements and increased use will see the cost/benefit of renewable technology improve. Landlords who can generate their own heat and energy will improve the performance of their investment and provide additional income stream from tariffs and subsidies.


3. How will occupiers’ property needs change? • As greater emphasis is placed upon renewable and low carbon energy resources it is inevitable that occupiers within the sector will require more space to meet demand. • Perhaps of greater importance is how occupiers of other property types will look to involve or change to energy and waste management use. A good example of this is Sainsbury’s which is investing in 15-20 anaerobic digesters to provide heat and power for distribution centres and stores. Owners of large portfolios will require all new build to be zero carbon by 2019 and having onsite energy provision is one way of achieving this goal.

Site: Rigby Lane City: Hayes Lease: 25 years Tenant: SITA Purchaser: La Salle Investment Management Yield: 6.00% Price: £4.6m

4. W hat are the major challenges and opportunities facing the sector? • The biggest challenge and opportunity facing this particular sector is energy security. There are some areas of the sector that property investors are unlikely to get involved with but there


I 11

Healthcare As the population of the UK increases towards 70 million, the number of elderly is also set to increase as we live for longer. Consequently there is set to be an ever-increasing demand for services from both a medical treatment and social care perspective. A new government-owned company has been established to streamline the existing NHS freehold Primary Care Trust property portfolio, valued in the region of £4.6 billion and comprising several thousand units. One of the main functions will be to

dispose of property surplus to NHS requirements, providing opportunities for the private medical sector to develop complimentary or specialist centres. In the care home market it is estimated that in 2011 there were 3,000 new beds. However over the next five years up to 50,000 existing beds could be lost as older, smaller, non prime units close down. Between 2010 and 2035, the total population will grow by 12%, while the number of people of pensionable age (65 years plus) will increase by 28%. To put this into context, the number of people in employment age will increase by just 16%. As a share of total population this age group will increase from 19.6% to 22.3%. Average life expectancy has increased by 3% over the last decade.

Key deals Town

Tenant

Lease Term

Indexation

Lot size

Yield

Purchaser

Edinburgh

Spire Healthcare Ltd

25

yes

£19,725,000

5.75%

LIM

Poole

BMI Healthcare

22

yes

£22,700,000

6.25%

Hendersons

Harrogate

BMI Healthcare

27

yes

£13,560,000

5.75%

Private

Brighton (forward funding)

Spire Healthcare Ltd

25

yes

£24,429,000

6.75%

SWIP



1. W hat are the most important property considerations for an occupier taking new premises?

4. W hat are the major challenges and opportunities facing the sector?

• Location: A broad range of factors involved largely based upon sub sector and type of healthcare provision. For long term care, focus tends to be on demographics and incomes, in particular equity wealth and high house prices. For treatment, emphasis moves towards competition and existing provision, particularly with growing focus on support work for NHS. The number of healthcare professionals and professionals likely to have private health insurance is also important.

• Funding: This covers the changing balance between NHS and social care funding, insurance products and private means. In 2012, 41% of all care fees were privately funded.

• Quality of building: Depending on purpose, how does property comply with legislation and market expectations? Hospitals and care homes need to be clean and functional. • Adaptability: Are premises flexible to change with market demands? • Property size: Ability to change with innovations and medical advances. • Alternative uses: Exit strategy can be very limited.

2. W hat major changes (legislative, economic, demographic or technological) lie ahead for the occupational market? • Legislation: With the ongoing reforms to the NHS there are many different policy areas which could have a major impact. With regards to treatment the newest hospitals have 50% fewer bed numbers than those built in the 70s and 80s. The number of beds in the NHS will continue to decline, as will the number of hospitals, as budgets are consolidated under the programme of reform.

• Finance: More innovative ways of financing new development will be required. The healthcare REIT PHP this year raised £75m through a retail bond. Similar measures will be required to support primary debt as lending conditions remain tight. • Adaptability: Care needs are likely to change over the next decade. Property will need to change to reflect that.

5. What are the major investor benefits in this sector? • Private hospital market (treatment): There are easily identifiable benchmarks if operational use is understood. The ongoing reforms to the NHS mean that this specialist sector should play a greater role in supporting the NHS • Long term (elderly) and specialist care (disability, terminal illness etc): This is more reliant on economic performance as household wealth still plays a key role. However funding reform is required to address demographic issues which could see a move towards government subsidised funding being introduced.

• Demographics: The population of the UK is set to increase by 0.8% per annum between 2010 and 2020, faster than any other decade in recent history, with the population set to reach 70 million in 2027. The increase in population, in particular the number of elderly, will have a significant impact on demand for the healthcare sector.

GVA transaction – forward funding

• Medical advances: New treatments will continue to emerge. Emphasis is likely to focus on improving longer term care rather than establishing cures for life threatening illnesses. • Economy: While many of the changes being made to the NHS are based on political reform, the underlying reason for this comes down to funding. The issue of funding for long term care needs to be addressed fully within the next decade due to the pressures of supporting an expanding elderly population. If the state eventually plays a role in funding or guaranteeing these costs, the beneficiaries will be occupier’s covenant strength.

3. How will occupiers’ property needs change?

Site: The Montefiore City: Brighton Lease: 25 years Tenant: Spire Purchaser: SWIP Yield: 6.75% Price: £24.4m

• With greater clinical emphasis on reducing the risk of infection and accommodating patients with intensive nursing requirements, accommodation is likely to focus on single rooms rather than wards. • Hospitals will have fewer overnight beds as well, pushing emphasis towards treatment rather than care.


I 13

Hotels In comparison to some of the other alternative sectors, the hotel sector is considered to be at a reasonably mature stage after a decade of significant expansion from the turn of the century. This strategy saw a real drive to major full service hotel companies becoming ‘asset light’/‘asset right’ through the divestment of their property interests to investors but retention of, primarily, management contracts to continue operating the hotels. The management contract approach also played a strong role in driving the growth in the full service hotel sector by supporting the creation of new hotels by developers. The limited service sector, dominated by Premier Inn and Travelodge, also expanded extensively during the decade, but with the aforementioned companies focussing on the leasing model which better suited the requirements of institutional investors.

In recent years, the UK hotel market has seen differing fortunes with London operational performance strong relative to the majority of regional markets. However, where the correct trading and supply fundamentals are in place, across the country opportunities exist to acquire hotels at prices that are historically low and, in five to ten years time, are likely to have been considered cheap purchases. The current debt challenges faced by the sector are well documented, but we are at a tipping point whereby there is limited benefit in hotels being held if capital investment cannot take place to maintain a competitive operational position. Furthermore, in recent years there has been a growth in niche hotel operators able to operationally manage hotels on behalf of ‘non-hotelier’ owners. The niche operators are also able to link up with global hotel brands to access strong booking systems. However, the challenge for investors is to ensure that they understand how to fully ‘asset manage’ a hotel with an operator in order to maximise future values.

Key deals Town

Tenant

Lease Term

Indexation

Lot size

Yield

Purchaser

Portfolio: Exeter, Lancaster, Poole

Premier Inn

25

yes

£21,200,000

5.31%

SLI

Solihull

Premier Inn

25

yes

£8,335,000

5.50%

Royal London

Balham

Travelodge

25

yes

£6,900,000

6.00%

CBREGI

St Helens (forward funding)

Travelodge

30

yes

£2,790,000

6.50%

Private

Newcastle

MWB Malmaison Holdings Ltd

35

yes

£14,900,000

6.72%

L&G



1. W hat are the most important property considerations? • Location: London has outperformed the rest of the country, while other areas that have seen strong performance in 2012 have been Aberdeen (oil industry), Belfast (Titanic exhibition) and markets such as Bath and Gatwick Airport. Opportunities exist outside of London for those who understand investing in the hotel sector. • Business: Given the heavy reliance on the strength of the operator is there a business in place that can be supported or are changes needed?

• The emerging BRIC countries will provide a greater share of business and tourism revenues as their economies continue to grow, although current visa and immigration requirements are withholding some potential demand from these markets.

5. What are the major investor benefits in this sector? • Even if values fall, the hotel sector is able to provide strong returns if there is a good operator, good asset management and strong underlying business. The sector is just as reliant upon the occupier business as the property itself.

• Property type: Ensuring that the hotel is being operated in a way that is appropriate for its style and location. • Commercial structure: Occupation can be on a lease or management contract basis. This affects the overall return and cost of running the property. • Competition: Rather than being solely reliant upon location, the standard of competition also has a significant bearing. A five star hotel could operate in close proximity to a mid or lower standard hotel.

2. W hat major changes (legislative, economic, demographic or technological) lie ahead for the occupational market? • Economic: This is one of the main areas which will affect the sector, particularly in relation to staff and occupier costs. Inflation and the possible introduction of a living wage have the potential to erode profitability. At a more macro level, the Eurozone crisis and the sterling exchange rate are on-going considerations. • Demographics: A significant increase in population in the UK should logically create greater demand from domestic tourism and business use, while overseas visitors and freedom of movement also remain key. • Legislation: While not as adversely affected as the broader leisure sector, the legislative outlook is always evolving. Major issues such as the Disability Discrimination Act and the smoking ban have been adopted as and when required. An area of more concern in the future may be visa requirements from emerging markets such as China and the other high growth nations.

3. How will occupiers’ property needs change?


Site: Portfolio City: Exeter, Lancaster, Poole Lease: 25 years Tenant: Premier Inn Purchaser: Standard Life Yield: 5.31% Price: £21.2m

• It is unlikely that there will be any significant changes to occupiers property needs in the next five to ten years. Any change is more likely to be driven by brand style of the respective hotel chains.

4. W hat are the major challenges and opportunities facing the sector? • Most of the major challenges and opportunities the hotel sector faces are economics based; from access to funding for investors, occupiers and developers, to corporate and individual guests cutting down on stays due to cost saving measures.


I

15

Leisure The leisure sector is arguably the most transparent and evolved alternative sector, with IPD performance data and comprehensive deals databases, as well as being the most similar to more traditional commercial uses such as retail. Despite this, the reliance upon earnings to measure value puts greater emphasis on the occupational business and covenant strength.

Leisure is also one of the most diverse sectors by type of use. The criteria for choosing a leisure and fitness centre will be very different for a cinema, a casino, or a chain of pubs. Planning policy restrictions have seen the majority of new leisure development concentrated in out of town retail park locations, where land prices are lower and larger clusters of units can be accommodated. However, size requirements within the sector vary greatly, whether for a town centre public house or a prime health and fitness centre requiring 120,000 sq ft plus 10 acres of outside space for pitches and tennis courts. There has been over £1.75 billion in investment transactions in the leisure sector in 2012 (according to Property Data) at an average yield of 6.16%. Several players such as Enterprise Inns have utilised extensive sale and leaseback deals as a way of leveraging

Key deals Town

Tenant

Lease Term

Indexation

Lot size

Yield

Purchaser

Bury St Edmunds

Various including: Cineworld KFC Frankie & Benny’s

17.6

yes

£9,825,000

6.17%

LIM

York

Various including: Vue Chiquito Frankie & Benny’s

10

yes

£15,720,000

6.90%

USS

Telford (forward funding)

Various including: Cineworld Premier Inn Prezzo Pizza Express

25

part

£22,000,000

7.00%

PRUPIM

Newcastle

Various including: Empire cinema Aspinalls casino Tiger Tiger

various

part

£60,000,000

6.25%

Crown Estate

Dagenham

Various including: Vue Pizza Hut Chiquitos McDonalds

12

yes

£18,500,000

9.15%

Under offer



finance in difficult funding conditions. Whilst demand and performance within the sector remains strong, some difficulties remain, as exemplified by the difficulties experienced last year by the Fitness First health centre chain.

1. W hat are the most important property considerations for an occupier taking new premises? • Location: Position is key based on a broad range of factors including demographics, visibility, prominence and access. • Affordability: Levels of wealth in the area and the affordability of the leisure provision will determine whether a site is more suited to a top end or budget operator.

• Values: We think that market values are currently near the bottom of the cycle. Due to the way leisure property is valued, a small fall in turnover can lead to a much greater fall in value. Consequently there are now significant opportunities for uplifts in value, determined on viability and value.

5. What are the major investor benefits in this sector? • Real estate investment in the leisure sector has traditionally focused on retail and leisure parks, based on quality assetbacked deals with a strong covenant. As a whole, the sector is covenant-led and is more mature and transparent than many of the other emerging, alternative sectors.

• Competition: Budget operators (health clubs for instance) sit happily alongside top end rivals as their market, catchment area and property requirements differ. Mid level operators have suffered as a result, with falling revenues and high rents. • Finance: Access to lending can be particularly difficult for all operators at present within the sector, particularly those at the budget end of their respective markets. At the other end of the spectrum, there always remains the risk that those with relatively easy access to funds will expand too quickly. • Total premises costs: With rental commitments often linked to an agreed level of turnover plus inflation linked uplifts, the overall cost of occupation may increase disproportionately if turnover levels fail to increase in line with RPI.

2. W hat major changes (legislative, economic, demographic or technological) lie ahead for the occupational market? • Legislation: The leisure sector has been affected by a mass of legislation in the recent past (smoking ban, Disability Discrimination Act, beer tie, gaming laws, VAT rise) and remains exposed to further interventions. • Demographics: The population is set to grow by 0.8% pa from 2010 – 2020, with the largest increase amongst the over 65s. This will result in increased demand from the “grey pound” in particular. Lifestyle trends among the young and professionals mean that leisure continues to play an integral role. • Economy: Since the turn of the century many working households have become cash rich but time poor. However, wage growth has failed to keep up with the increased cost of living since 2008 and its likely levels of disposable income will remain lower in the short term as the pace of economic recovery remains subdued.

3. How will occupiers’ property needs change? • The leisure centre has had to reinvent itself to match changing consumer demand over the past decade and will continue to need to do so in the future. Trends often match those that are happening in the US and western European markets.

GVA transaction – purchase Site: Portfolio City: Manchester and Neath Lease: 25 years Tenant: Virgin Purchaser: Threadneedle Yield: 6.60% Price: £8.0m

4. W hat are the major challenges and opportunities facing the sector? • Finance: The financial crisis has had a particularly strong impact on funding, which has had a knock-on effect on development and new supply.


I 17

Student accommodation There has been strong investor demand in recent years in this sector, as it has seen consistent rental growth and is broadly considered to be under supplied. The number of students in higher education in the UK is at a record high of 2.5 million as of 2011. An ever growing number of these are from overseas, particularly outside of the EU. Countries with rapidly expanding middle classes such as China, India and Nigeria are sending their children to leading global universities, a good proportion of which are in the UK (three in the top ten).

In the first eight months of 2012 planning applications were submitted for 27,000 new student beds. In London, there are currently 8,300 beds under construction. The private sector market share has increased from 3.8% of all accommodation in 2008/9 to 4.7% in 2010/11 and will continue to grow at the expense of university halls. The traditional private rented sector has the largest share of students at 29.4% of the market. It is the overseas market in particular that is most reliant on purpose-built student accommodation (PBSA), accounting for over 45% of the occupancy for the Unite portfolio in London alone. The increase in tuition fees for the 2012/13 academic year resulted in a 7.7% fall in applicants for that year. This was partly manipulated by a 50% fall in deferrals the year before as many first year students sought to beat the fee hike.

Key deals Town

Tenant

Lease Term

Indexation

Lot size

Yield

Purchaser

Southampton (forward funding)

University of Southampton

30

yes

£93,200,000

4.15%

L&G

Edinburgh (forward funding)

Napier Unviersity

22

yes

£41,830,000

6.46%

SLI

London, Finsbury Park (forward funding)

University of Arts London

25

yes

£57,000,000

unknown

L&G

Newcastle

Unite Portfolio

17 & 20

yes

£23,132,000

5.65%

LIM

London, Clapham

Imperial University

45

yes

£116,000,000

4.50%

L&G



1. W hat are the most important property considerations for an occupier taking new premises? • Location: Proximity to transport facilities, nightlife and the university. • Supply and demand: The number of students and universities versus the number of beds. • University ranking: The new fee structure has created a flight to quality. • Running costs: Property management costs in particular vary considerably across the sector. • Size: How big is the scheme and does it fit with the institution and local area? A large number of beds for a small university in a small town may struggle to maintain the necessary occupancy rate.

2. W hat major changes (legislative, economic, demographic or technological) lie ahead for the occupational market? • Tuition fees: This year saw the first intake of students paying up to £9,000 per annum, resulting in a 7.7% drop in applicants. This was to be expected as those who had the option to avoid the extra fee burden took it. It will take a few years to establish the wider implications the new fee structure has on demand for higher education.

• Planning: Some central London boroughs have witnessed a high degree of supply, resulting in a preference by planners for affordable housing and prohibitive Section 106 agreements. Future development may also be hampered by CIL payments which may lead to more upward rental pressure as central London stock will become more limited. • Supply: Some local markets are close to saturation already. City centres with a high concentration of high density residential stock provide a cheap private rented alternative, whilst many stalled residential schemes were converted to student accommodation between 2008 - 2010.

5. What are the major investor benefits in this sector? • Student accommodation provides a defensive stock let to a university on long index-linked leases, creating annuity style income. • Rents are often underwritten by multiple, often middle class families. • During an economic downturn, more people opt to enter higher education, including mature students looking to retrain and postgraduate options.

• Immigration policy: Overseas students, particularly from outside the EU, are a key component for university funding, providing over 30% of fee income despite accounting for just 12% of the student population. Leading UK institutions compete on a global scale and could be adversely affected if policy were to hinder movement.

3. How will occupiers’ property needs change? • It is estimated that 4.8% of students reside in PBSA, compared to 18% in university halls. While a small market share, the number of students in PBSA has increased 42% since 2009. • As government funding is reduced for universities we can expect to see asset management focus on core academic use over the next decade, increasing the likelihood of oven ready sites or development opportunities in established markets. • GVA estimates that there are over 300,000 beds in university halls, much of which will need upgrading in time.

4. W hat are the major challenges and opportunities facing the sector?


Site: Unite Portfolio City: Newcastle Lease: 17 years & 20 years Tenant: Unite Purchaser: La Salle Investment Management Yield: 5.65% Price: £23.1m

• Finance: Investors were previously able to secure 80% LTV on primary lending, whereas now achieving 55-60% is considered good. Consequently there is a greater need for mezzanine finance, particularly if the site is not considered to be either prime or supported by a strong covenant. • Partnerships: Speculative development has dried up. In order to gain forward funding future income stream needs to be secured by way of a nomination agreement or lease with university partner, preferably with a long lease and fixed uplifts.


I 19

Conclusion As policy, technology and economies advance so does the use of property. Having enjoyed a period of record growth, the traditional commercial property sectors are undergoing a period of correction that has seen markets fracture between prime and secondary, London and non London, resulting in negative impacts on rental values, capital growth and total returns. Alternative sectors do not offer a guarantee of growth but, as the name suggests, they provide an opportunity to diversify into a different type of property which may be better placed to deliver stronger returns and income growth than traditional commercial property. One of the biggest risks is the element of the unknown. Limited transparency and ease of access may be off-putting for some investors, but with the right support and knowledge these issues can be overcome. With assistance from the necessary industry expertise, the rewards in these emerging markets can be reaped. Whilst the sectors themselves may be new, many of the considerations remain the same as they are for all commercial property. Of most importance are the quality of the product and the strength of the occupying business. These are key to ensuring that the prospects for growth and the sustainability of the income stream remain high. Potential investors need to gain a clear understanding of the markets, the competition and the issues they each face. Knowing as best one can what factors are likely to shape a particular market can influence and determine the necessary strategy that enables investors to mitigate risk and gain the most benefit as and when these issues occur. The traditional commercial property market is currently providing limited options for investors seeking long term annuity style products with fixed increases and secure tenants. The specialist nature of many alternatives means that quite often the occupier business is reliant upon the property itself, reducing the chance of breaks or re-lets. The topic of rent affordability is one potential area for concern. Adopting 65% of EBITDA (often as a means to maximise capital receipts in a sale and leaseback transaction) coupled with indexlinked leases has been a contributing factor in the demise of some major corporate occupiers. Index linked rents are one of the defining factors which make alternatives an attractive option, but commencing rents of 40% to 50% of EBITDA are far more sustainable.




I 21

Index: Jan 2000

80

30 120 60

60

20 100 40 10 80 20 0

65%

20

40%

FT All Share

65%

Jan-13 Jan-13

Jan-11 Jan-11

60%

Jan-12 Jan-12

55%

Jan-10 Jan-10

Jan-08 Jan-08

Jan-09 Jan-09

50%

Jan-07 Jan-07

45%

Jan-06 Jan-06

40%

Jan-05 Jan-05

Jan-03 Jan-03

Jan-04 Jan-04

Jan-01 Jan-01

40

20 Jan-02 Jan-02

0

40

Jan-00 Jan-00

60

RPI

0 1

2

Series 1

3 Series 2

4

5

6

Series 3

7

8

Series 4

9

Series 5

10

11

Series 6

12

13

Series 7

14 Series 8

Jan-13

0 1

2

3

4

5

6

7

8

9

Drivers of future growth Series 1 160

Series 2

Series 3

Series 4

Sector 120

10

11

Series 6

12

13

Series 7

14 Series 8 Policy 5

Drivers of growth

4 3

100

Automotive 80 60

Series 5

Policy 5

140

Technology

2 The main factors affecting growth in the automotive 1 sector are economic and policy driven. Technology will Technology Economy play a small part as 0the industry moves more towards electric and hybrid vehicles, while demographics play a role in influencing the nature and level of demand.

Economy

0 3 2

20

1

0 Technology 1 2 Series 1

0 3 Series 2

4

5

6

4 3

Policy 2 5 1 4

40

Jan-13

Jan-12

50

140 80 40

7

8

9

Series 3 Series 4 Series 5 Demographics

10

Economy 11 12 13

Series 6

Series 7

14 Series 8

Demographics

Demographics

Data centres

Technology Technology

Policy 5 4 Policy 5 3 4 2 3 1 Policy 2 5 0 1 4

Economy Economy

0 3

Policy Growth in the data centre market will be principally 5 4 determined by technological factors. Economic factors will determine how widespread demand becomes, 3 2 whilst energy costs and the role of sustainability 1 legislation are also considerations. Technology

Economy

0

2 1 Technology

0 Demographics

Economy

Demographics

Demographics

Energy and waste management

Government policy in terms of emissions targets will have the greatest influence on the energy and waste management sector, closely followed by improvements in technology. Economic strength will also play a role as costs remain high at present, limiting the level of take up.

Demographics Policy 5 4 3 2 1 Technology

0

Economy

Demographics

Healthcare

Policy 5 4 3 2 1

Technology

0

Demographics

Economy

Demographics will have the largest impact on growth Policy 5 within the healthcare sector, although government 4 policy and the economy will also play a role in 3 determining the level of demand across the different 2 aspects of the sector. Technological advances, 1 particularly in medicine and treatment, may reduce Technology Economy 0 the need for bed spaces in some instances although this will not be universal.

Demographics

22 I GVA 10 Stratton Street London W1J 8JR Policy

Policy

Retail

Industrial

40%

45%

Demographics

160

Jan-13

Jan-12

Jan-11

Jan-10

Jan-07

Jan-08

Jan-09 60%

65%

160

120

120 Policy 5 4

80

3

60

2

65%

FT All Share

Jan-13

Jan-12

Jan-11

Jan-10

Jan-09

Jan-07

40%

Jan-08

Economy

Jan-05

Jan-04

Jan-00

0

Jan-03

0

Jan-02

1

20 Technology Jan-01

40

Jan-06

Index: Jan 2000 = 100

55%

Drivers of growth 140

100 Hotels

RPI

Policy The strength of the economy has the greatest 5 100 impact on the hotel sector, closely followed by 4 80 demographics, with tourism and movement of 3 60 2 people key. With businesses looking to keep costs 40 1 down for the foreseeable future, technological Technology 20 Economy may reduce 0 alternatives such as video-conferencing 0 demand slightly but this is marginal in terms of overall 1 2 3 4 5 6 7 8 9 10 11 12 13 14 demand.

Series 1

Series 2

Demographics Policy 5

13

2 0

Technology

Economy

1 Technology

Series 4

Series 5

Series 6

Series 7

Series 8

Policy

4 2 5

Series 3

Demographics

4 Policy 35

Leisure

Score: 0 = none, 5 = high

50%

Demographics

Sector 140

4

Jan-05

5 years

Office

Jan-06

3 years Alternative sectors

Jan-04

-2

Economy

0

Jan-03

0 1 year

Technology

10

Jan-02

Economy

0


1

20

Jan-01

Technology

2

30

1

0

3

40

2

2

4

50

3

4

5

60

4

Jan-00

Total Return %

5

6

Economy

0

3

By and large, the leisure 5 market is influenced the most by the strength of4 the economy, be it access to 3 funding for future development or disposable income 2 of customers. Legislation will continue to play a key 1 role in shaping future growth of occupiers’ businesses Technology Economy while demographics, in0 particular population growth, will help to boost demand.

Demographics

2

Demographics

1

0 Student accomodation Leisure

Hotels

Policy

Healthcare

Student

Demographics

Automotive

EconomyPolicyDemographics 5

Energy

Data Centres

Technology

4 3 Policy 5 2 4 1 Technology

3

02

Student accommodation is driven primarily by legislation, whether it is tuition fees, migration targets or planning policy. Demographics also play a part, particularly the numberPolicy of 18 - 20 year olds, while 5 the strength of the economy also determines rent 4 affordability and access to finance for development. 3

Economy

2

1 Technology

0

1 Economy

Technology

Economy

0

Demographics

Demographics

Demographics

ta Centres


I 23

London West End 10 Stratton Street London W1J 8JR London City 80 Cheapside London EC2V 6EE Belfast Rose Building Third Floor 16 Howard Street Belfast BT1 6PA Birmingham 3 Brindleyplace Birmingham B1 2JB Bristol St Catherine’s Court Berkeley Place Bristol BS8 1BQ Cardiff One Kingsway Cardiff CF10 3AN Edinburgh Quayside House 127 Fountainbridge Edinburgh EH3 9QG Glasgow 206 St Vincent Street Glasgow G2 5SG Leeds City Point First Floor 29 King Street Leeds LS1 2HL Liverpool Exchange Station Tithebarn Street Liverpool L2 2QP Manchester 81 Fountain Street Manchester M2 2EE Newcastle Central Square Forth Street Newcastle upon Tyne NE1 3PJ

Published by GVA 10 Stratton Street, London W1J 8JR ©2013 Copyright GVA GVA is the trading name of GVA Grimley Limited and is a principal shareholder of GVA Worldwide, an independent partnership of property advisers operating globally

gvaworldwide.com

For further information please contact:

Investment Mark Beaumont Head of Investment [email protected] 020 7911 2183 Neil Dovey Senior Director [email protected] 020 7911 2168 Research Daniel Francis Head of Research [email protected] 020 7911 2363 Automotive Paul Taylor Senior Director [email protected] 020 7911 8455 Data Centres Chris Jones Senior Director [email protected] 020 7911 2525 Energy & Waste Management Chris Lockwood Director [email protected] 020 7911 2884 Healthcare Adam Burchell Director [email protected] 0121 609 8420 Hotels James Williamson Director [email protected] 020 7911 2109 Leisure Gavin Brent Director [email protected] 020 7911 2228 Student Accommodation Roger Lown Senior Director [email protected] 020 7911 2862

08449 02 03 04

gva.co.uk

This report has been prepared by GVA for general information purposes only. Whilst GVA endeavour to ensure that the information in this report is correct it does not warrant completeness or accuracy. You should not rely on it without seeking professional advice. GVA assumes no responsibility for errors or omissions in this publication or other documents which are referenced by or linked to this report. To the maximum extent permitted by law and without limitation GVA exclude all representations, warranties and conditions relating to this report and the use of this report. All intellectual property rights are reserved and prior written permission is required from GVA to reproduce material contained in this report. GVA is the trading name of GVA Grimley Limited © GVA 2013. 08872