A Multi-Asset Company

Transcription

1 A Multi-Asset Company

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3 WELCOME TO BERKELEY Berkeley is a multi-asset company with a strong, diversified portfolio of investments across the real estate, hospitality, logistics and technologies sectors. For over 12 years, our founders have been utilising personal and institutional capital to invest in and manage an innovative portfolio of projects and businesses to deliver strong, sustainable yields. Our values remain the same today as when we first started business; a steadfast focus on capital preservation, achieved by investing in real estate projects and asset-backed businesses which elicit strong market demand. 3

4 THE BERKELEY PROPERTY PORTFOLIO To date Berkeley has secured development finance deals worth over 250MM, secured against physical assets predominantly in the UK markets. Our long established portfolio of properties spans multiple sectors and includes both existing and newto-market assets in some of the world s most sought after locations including in Central, North and West London, New York s Manhattan district and Miami s Ocean Drive and South Beach, totalling $28MM. By recognising and understanding changing market trends, such as the need for more flexibility and quicker lending for developers in the UK property market, the increasing demand for social housing or even the latest hospitality trends, our expert team is able to invest early in order to benefit from higher returns. Berkeley invest in both property development projects, bridging and development finance projects. Our aim is to continue to develop a diversified portfolio of both existing assets and new-to-market concepts as well as businesses as part of a low-risk, yield-based strategy. We achieve this by ensuring the total capital raised does not exceed 10% of the total value of assets managed. 4

5 Property Development: Selecting the Right Opportunities for our Clients Berkeley s success is driven by our extensive experience in identifying undervalued assets, which are consequently developed by our in-house design and construction teams to deliver above market growth and impressive exit timeframes. By adhering to a defined and proven success criteria when selecting projects and businesses to invest in, we can ensure we are able to add value and thus increase profitability. 5

6 OPPORTUNITY SELECTION STRATEGY Product Focus Location Focus Low to middle-income housing projects with specific selection parameters Built on land with full planning permission project is virtually shovel ready In areas with an inherent demand mitigating potential downside Selling price of the finished apartments / houses to be less than 1MM (maximum price limit under the UK Government Help to Buy scheme) Quick turnaround time with construction period of months and the total investment cycle not exceeding 30 months, thereby reducing the market risk Could be potentially sold to housing associations who buy at a discount to market rate without compromising the hurdle rate return to the investor Focus on Greater London, London suburbs and other upcountry towns Sites closer to transportation links such as CrossRail, railway stations, etc. and amenities such as supermarkets, health care, town centres, etc. Near to mid-term positive outlook because of infrastructural improvements, large regeneration projects and transportation upgrades Exit Options Open market sales to individual buyers Block sales to buy-to-let landlords (which could be off-plan or after project completion) Sales to housing associations who typically are willing to sign a definitive contract to buy before construction begins 6

7 RISK MITIGATION Equity risk is mitigated through an A- rated insurance provider. This covers the principal and profit if the property is not sold in the prescribed time period. Asset Holding Company (AHC) The company 100% owns the property asset Two categories of share A: Covers Equity Contribution B: Covers Floating Rate Coupon Berkeley (Developer) Contract between Asset Holding Company to develop and sell the property asset Calculations on a case-by-case basis Sale will have to stipulate a backstop date this covers the exit Insurance will cover the developer s contract with the AHC. Shareholders in the AHC are the beneficiary of the insurance The Developer is NHBC-registered Payment to contractor only made after quantity surveyor sign-off Contractor Developer signs Joint Contracts Tribunal contract with the contractor The contractor provides a nonperformance bond and collateral warranties The contractor has its own professional indemnity insurance The contractors are all NHBC registered Only completed work will be paid for by the developer 7

8 TRANSACTION PROCESS & RISK MANAGEMENT Investment / Development / Value Add Exit & Returns Project Stages Feasibility & Acquisition Programme, Design & Planning Financing & Completion Site Execution Sales & Exit Function Site selection Basic project appraisal Due diligence Partner negotiation Documentation Appoint lawyers Incorporate Special Purpose Vehicle (SPV) Refine project appraisal Master planning Appoint architects & technical consultants Schedule costing & value engineering Project structuring Engage with lenders Liaising with the lawyers & sellers Check for condition precedents, if any Project management Procurement & appointment of contractors Regulatory compliance Action Exchange or Reject Completion Sales Funding Sources Equity Residual Equity & Debt Timeline 2 to 4 months 12 to 24 months Risks Feasibility Negotiations Acquisition Mitigation Market study Thorough due diligence Clear documentation with all counterparties Delay in master planning Change in cost / development plans Established industry partners Planning skills Lack of construction finance Delay in completion Continuous liaison with institutions Developer willing to enhance security Equity insurance Cost overuns Delays Experienced contractors Active management at site Fixed price contracts with contingencies Implement pre-sale plans & marketing material Compliance reports Pay bank Pay taxes Pay stakeholders Wind-up SPV Slow retail sales Price lower than estimated Preferred returns Hold assets to rent Buy-to-let landlords Housing Associations Help to Buy scheme 8

9 TRANSACTION STRUCTURE Investor Advisory Senior Debt Bank only releases funds on Quantity Surveyor Certification Class A Shares Principal Equity Investment Class B Shares Floating Rate Coupon Asset Holding Company (SPV) Development Contract Investment Managers to be responsible for: Assessing the Investment opportunity Determining and supervise the investment policy & strategy Approving all investment / exit decisions Overall strategic oversight and management of investments Project structuring and financing Corporate governance & financial reporting Berkeley Developer Contractor JCT Contract Non-performance Bond Collateral Warranties 9

10 10 DELIVERING EXCELLENCE

11 COMPLETED PROJECTS Address of property Description Purchase price ( ) Development cost ( ) Sales price ( ) % Returns before fees Flat 2, 169 Cromwell Road, SW5 Ground floor, 2 Bedroom flat - creating mezzanine 450, , ,000 58% 25 Radcliffe Gardens, SW10 1 Bedroom flat - refurbishment 329,000 50, ,000 56% 121 Finborough Road, SW10 2 Bedroom flat - refurbishment 560,000 65, ,000 41% 281 Kings Road, SW3 2 Bedroom maisonette - refurbishment 941, ,000 1,635,000 37% 17 Cromwell Road, SW7 3 Bedroom penthouse - duplex refurbishment 1,330, ,000 2,260,000 46% Flat 56, Coleheme Court, SW5 3 Bedroom flat - refurbishment 1,300, ,000 1,896,000 26% 14 Carlyle Mansions, L3 2 Bedroom flat - refurbishment 1,200,000 60,000 1,600,000 27% 75 Cromwall Gardens, SW7 2 Bedroom flat - refurbishment 1,038, ,000 1,750,000 41% 25 Burgess Wood Road South, HP9 Demolish 1 house to produce 2, 4200sqft houses 950,000 1,200,000 3,400,000 58% 44 Bramham Gardens, SW5 2 Bedroom penthouse - refurbishment & mezzanine 1,575, ,000 2,500,000 32% Behind Alvechurch Road, B31 12x 2&3 Bedroom houses & 2x 1 Bedroom flats 430,000 1,240,000 2,500,000 49% 11

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14 BRIDGING & DEVELOPMENT FINANCE PROJECTS Berkeley offers bridging and development finance to property developers, benefitting from favourable interest repayment rates or equity. We have recognised the need for innovative, dynamic loan facilities for property developers and our experienced team has developed a proven strategy to achieve strong returns with high levels of capital security. Lending against physical assets offers us a secure, reliable way to generate yield from our capital without assuming equity risk. We take a security charge on all assets that we lend against, guaranteeing our capital in the unlikely event of a default. We have a mixed portfolio of projects, across residential and commercial developments of varying sizes. The primary geographical location for our development finance team to focus on has always been London due to consistent demand and the city s constant wave of development. In the event of loan defaults, Berkeley will assume ownership of assets in order to assure capital security for our clients. Private Project, Belgravia, London This project is a 12-unit ultra-luxury apartment development in London s most prestigious address. Construction is still underway with the development in its final stage and with practical completion expected in Q3, Situated within the Borough of Kensington and Chelsea this is one of the most luxurious assets on the market and its location in the city s upmarket Belgravia, its on-site amenities and high quality design and finish present limited competition from other developments. Active sales commenced in June 2017 and currently one residence has already been pre-sold to an unaffiliated buyer for 5,750 PSF with further sales of 3-5 residences per annum expected. 14

15 Loan Summary Loan Request 285,000,000 Loan Term Loan Type 2-year; with one, 1-year extension Floating Property Value 454,418,200 (Gross Sales proceeds) LTV* 59.8% *Based on the Loan to Gross Sales proceeds adjusted for the proceeds application of the pre-sold unit and not including sales costs Collateral Summary Property Address Grosvenor Crescent, Belgravia, London SW1X Square Feet 83,054 Floors 5 Year Built 2017 Parking spaces secured underground via car lift 15

16 TRANSACTIONAL HIGHLIGHTS LOW-LEVERED LOAN The financing is low-levered at 59.8% LTV. The sales prices would need to drop to 38% to break-even with the loan, after deducting sales costs. GLOBAL CENTRE FOR LUXURY RESIDENTIAL The asset is well positioned in relation to global capital flows for ultra-luxury residential. Demand for high-value London property remains resilient, as the number of transactions above 30MM increased 100% year-over-year between 2015 and PRIME CENTRAL LOCATION Central London and more specifically Belgravia is known as London s Golden Postcode with direct access to world renowned parks and hotels. LIMITED COMPETITIVE SUPPLY The property s 12 units are the only proposed ultra-luxury new construction options in Belgravia coming on-line for the next five years. There is no competing ultra-luxury new-build supply being delivered until 2019 in Super Prime Central London. 16

17 BELGRAVIA - REVENUE BELGRAVIA - BUDGET REVENUE Total Revenue ( ) Revenue PSF ( ) Apartments Sales Proceeds (1) 454,424,950 5,471 Other Income (inc. furniture, parking, interest) 160,468 2 Less: Sales Costs 8,879, Total Revenue 445,706,098 5,366 (1) One apartment was pre-sold for 32.8MM including an extra parking space. Closing of the apartment is expected within a month of the closing of the new financing. COSTS Total Costs ( ) Costs PSF ( ) Acquisition Costs 120,380,674 1,449 Professional Fees 14,445, Construction Costs 97,043,158 1,168 Furniture & Fittings 2,905, General Admin. 1,104, Taxes, Insurance & Utilities 16,025, Public Relations & Marketing 3,012, Other Project Costs 3,196, Unallocated Contingency 4,110, Net Project VAT 297,904 4 Legacy Development Costs 262,522,492 3,161 Legacy Financing Costs 64,227, Total Legacy Costs (Prior to Refinancing) 326,749,836 3,934 Add: Void Costs 2,644, Add: New Loan Costs (1) 22,345, Total Sponsor Basis (Post Refinancing) 351,739,117 4,235 Overage to Grosvenor( 2) 25,557, Total Sponsor Basis with Overage 377,296,726 4,543 (1) Includes estimated interest expense and financing costs for the new loan (2) Paid to Grosvenor from last units sale or upon practical completion + 24 months, whichever is first. Payment is 25% of excess if Net Sales exceed 362MM and 50% over 414MM 17

18 SALES PRICE SENSITIVITY ANALYSIS SALES PRICE DISCOUNT SENSITIVITY - NO EQUITY LEAKAGE Sales Price Discount Sales Price PSF ( ) (1) Sales Proceeds Available For Loan Paydown ( MM) Excess Proceeds Available over Loan ( MM) Excess Proceeds Available over Loan 0.0% 5, % 5.0% 5, % 10.0% 4, % 15.0% 4, % 20.0% 4, % 25.0% 4, % 30.0% 3, % 35.0% 3, % 40.0% 3, % 45.0% 2, % 50.0% 2, % (1) Average sales PSF for 11 unsold units *Sales proceeds do not cover total loan (%) 18

19 The sensitivity analysis below demonstrates LTV to unit sales at various price points and assumes all sales proceeds goes towards loan paydown. The base case scenario assumes average unit sales of 5,447 PSF. At this level there is a rapid deleveraging as units are sold, resulting in a total loan payoff after only 8 of the 12 units are sold. LTV - DISCOUNT/PREMIUM TO PROJECTED SALES PRICE Units Sold (1) -40% 3,268-30% 3,813-20% 4, % 87% 77% 69% 63% 57% 53% 1 100% 85% 75% 66% 60% 54% 50% 2 100% 84% 72% 63% 56% 50% 45% 3 100% 82% 69% 59% 51% 44% 39% 4 100% 80% 65% 54% 45% 37% 31% 5 100% 77% 60% 47% 37% 28% 21% 6 99% 73% 54% 39% 26% 16% 8% 7 99% 68% 44% 26% 12% 0% 0% 8 99% 60% 31% 8% 0% 0% 0% 9 99% 47% 7% 0% 0% 0% 0% 10 98% 20% 0% 0% 0% 0% 0% 11 97% 0% 0% 0% 0% 0% 0% 12 NA NA NA NA NA NA NA -10% 4,902 (1) Assumes one presale unit is sold for 32.8MM and all remaining 11 units are sold at the same total price (2) Base line assumption of 5,447 PSF (3) Value for LTV calculation is gross of 2% sales costs 0% (2) 5,447 10% 5,992 20% 6,537 (4) Initial loan amount is 285.0MM 19

20 MARKET OVERVIEW PRIME CENTRAL LONDON SALES ACTIVITY Although overall luxury sales activity has slowed from a peak in owing to the increased tax burden and more recently from the uncertainty surrounding Brexit - the ultraluxury market ( 30MM+) has proven to be resilient with a 100% increase in sales transactions in 2015 As noted Frank Knight, UK real estate consultants, there has been no diminution of London s standing as a place to live for many of the world s wealthiest families since the referendum. 5MM - 10MM 10MM - 20MM 20MM - 30MM 30MM+ New build 30MM /2016 % Difference Source: Savills The favourable currency movement has made London property increasingly attractive for foreign buyers Belgravia Gate targets the ultra-luxury market ( 30MM+) and is expected to generate strong interest given its uniqueness, low number of units and virtual lack of competing supply 20

21 SALES COMPARABLES Listed below are recently completed transactions of luxury apartment sales in the Prime Central London market: # Submarket Type Beds Date of Sale Price Price PSF Sale 1 Knightsbridge Flat - Q ,000,000 7,288 Sale 2 Knightsbridge Flat - Q ,000,000 11,921 Sale 3 Knightsbridge Flat 2 Q ,500,000 6,344 Sale 4 Mayfair Flat - Q ,500,000 5,068 Sale 5 Knightsbridge Flat 3 Q ,500,000 5,311 Sale 6 Belgravia Flat 4 Q ,500,000 5,875 Sale 7 Belgravia Flat - Q ,500,000 5,513 Sale 8 Knightsbridge Flat - Q ,000,000 7,083 Sale 9 Knightsbridge Flat 3 Q ,990,000 5,513 Sale 10 Knightsbridge Flat - Q ,660,000 5,594 Sale 11 Belgravia Flat 3 Q ,750,000 5,178 Sale 12 Knightsbridge Flat - Q ,000,000 5,087 Sale 13 Knightsbridge Flat 4 Q ,500,000 7,014 21

22 Student Accommodation, Cardiff Development site with planning for student accommodation, within 0.5 miles of Cardiff Metropolitan University s main campus. Comprising 6 detached 3-storey buildings and a total of 249 self-contained, open plan, studio rooms: type 1 (15.6sq.m); type 2 disabled access (26.2sq.m); type 3 (18.8sq.m); type 4 penthouse (33.2sq.m). There is a strong demand, with 85 units already exchanged with deposits of 1.34MM taken and development finance representing only 25% of Gross Development Value. Development works currently paused in expectation of revised planning approval to increase the development to around 400 units. Announcement due in November Cardiff University is a part of the prestigious Russell Group and stands among Britain s leading teaching and research institutions - ranked 5th for quality of research and 2nd for impact of research in the UK. 22

23 Herculaneum Quay, Liverpool A luxury residential development situated along the banks of Liverpool s River Mersey. Consisting of 119, one, two and threebedroom apartments over 16 storeys with car parking, office, restaurant and retail space at ground level and three levels of basement to provide further car and cycle storage. This development is well underway and scheduled for completion around January Already 77 apartments have exchanged with deposits taken. Development finance represents only 45% of Gross Development Value. 23

24 JML House, Regis Road, London NW5 The property comprises a warehouse and office building, which has planning approval for change of use to offices. A planning application has been submitted to create over 60,000 sq.ft, of office space more than doubling that of the current planning permission. Purchasers have bid over 13.5MM for the property which equates to a 59% Loan to Value. A sale has now been agreed and this investment should mature in the following months. 24

25 OTHER CURRENT DEVELOPMENTS Student Accommodation, Cardiff 25% GDV / Experienced builder / 30% already exchanged Planning for extra rooms should be passed in November 2017, which will significantly improve the value of the site. The loan will need to be extended and security revalued. Exeter Quayside, Exeter 70% GDV / Development completed except for snagging list. Loan extension given until end of July but essentially in the sale or refinance process. Student Accommodation, Huddersfield 28% GDV / Development part completed and on hold in order to complete Block C. A loan extension is being agreed. JML House, London, NW5 63% LTV / Security worth more than valuation. A sale has been agreed - expected for completion by September Herculaneum Quay, Liverpool 45% GDV / High demand, upmarket apartment development. More than half the apartments are sold off-plan. Development running on schedule to be completed around January 2018 and with good security (175 year leasehold). Old Hall St, Liverpool 60% GDV / High demand - converting offices to residential. More than half the apartments are sold off-plan. Slightly behind schedule with loan extension being considered. Student Accommodation, Newcastle-under-Lyme 60% LTV / A refinance to be repaid by off-plan sales. An extension of the facility will be required. Borrower looking to fund development through off-plan sales. Sunbeam Factory, Wolverhampton 60% GDV / 116 Residential apartment development. An extension of the facility will be required. On target for completion by October 2017 Victoria Mill, Manchester 70% LTV / Awaiting planning permission to refinance for development. Facility being extended. Building is currently part let and income producing with value to be much higher fully let. The Abbey, Wymondham 60% GDV / Development completed. Apartments awaiting sales to pay off finance - expected November/December

26 Disclaimer: The information contained in this document is for general information purposes only. The information is provided by Berkeley Assets and while we endeavour to keep the information up to date and correct, we make no representations or warranties of any kind, express or implied, about the completeness, accuracy, reliability, suitability or availability with respect to the document or the information, products, services, or related graphics contained within the document for any purpose. Any reliance you place on such information is therefore strictly at your own risk. In no event will we be liable for any loss or damage including without limitation, indirect or consequential loss or damage, or any loss or damage whatsoever arising from loss of data or profits arising out of, or in connection with, the use of this document.