University Challenge: An education in Student Accommodation

Investment into the Private Rented Sector

Robert Weaver : Invista Real Estate Investment Management

11 February 2010

2

Agenda

Invista; who we are

Why UK residential property?

Why invest in a Residential Fund?

3

Who we are

Largest UK listed real estate fund manager

Assets Under Management of £5.3 billion

23 client funds with diverse investment styles

Ability to co-invest

Active in the UK, Continental Europe and Asia

Experienced team of 92 staff

Manage three residential portfolios combined value £400 million of UK residential

+2,000 residential asset

Manage indirect investment in three external funds combined equity investment £60m

Source of data is Invista as at 30 November 2009

Established performance from a dedicated real estate manager

4

Invista; who we are

Why UK residential property?

Why invest in a Residential Fund?

5

Why UK residential?

Largest asset class by far

Good diversifier - low correlation with bonds and equities

Dynamic and diverse market

Larger Market than all other Asset Classes

Source: IPD, IPF, Land Registry, ONS, Thomson Datastream; end Dec 2009; * end Sept 2009

£4,022bn

£564bn

£1,620bn

£553bn

£0bn£500bn

£1,000bn£1,500bn£2,000bn£2,500bn£3,000bn£3,500bn£4,000bn£4,500bn

Residential Commercial Equities GovernmentBonds *

Siz

e of

mar

ket

Better Diversification Benefits than Commercial

Source: Savills IPD, FTA, Barclays Capital, Nationwide, Invista

1974-2009 Correlation

Residential Commercial Equities Bonds

Residential 1.00 0.71 0.09 (0.04)

Commercial 1.00 0.36 0.14

Equities 1.00 0.54

Bonds 1.00

6

Why UK residential? cont’d

Long term out-performance of all other asset classes

Lowest volatility of all asset classes over the long term

Total returns predominantly from capital rather than income growth

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% 11%

30%

14%

0%

5%

10%

15%

20%

25%

30%

35%

Residential Commercial Equities Bonds

Sta

ndar

d de

viat

ion

of

retu

rns

1974

-200

9

AnnualisedTotal Returns

Last 12 months

Last 3 years

Last 5 years

Last 10 years

Last 35 years

Residential 6.6% 1.0% 4.0% 10.6% 15.6%

Commercial 3.4% -8.0% 1.6% 6.1% 9.8%

Equities 30.1% -1.3% 5.9% 1.6% 13.3%

Bonds -0.3% 6.9% 5.0% 5.7% 10.7%

7

Low return,High risk

0.0%

2.5%

5.0%

7.5%

10.0%

12.5%

15.0%

17.5%

0% 5% 10% 15% 20% 25% 30%

Volatility

An

nu

alis

ed t

ota

l ret

urn

%

Why UK residential? Cont’d

High return, Low risk

Strong risk return profile

10 years 20 years 35 years

Residential Commercial Equities Government Bonds

Source: Savills, CLG, IPD, FTA, Barclays Capital, Nationwide, Invista Jan 1974 – Dec 2009

Higher return with a lower risk profile

8

Why Not the Institutions

Legacy Issues

Concerns with Scale

Lack of Research Information

Publicity

Level of Net Income

Difficulty of Management

Parapet too high

Long in Residential

Political Intervention

Imperfect Market

Lack of Talent

9

Why invest in UK residential now? Long-term drivers of UK residential

Supply and demand imbalance

Immigration and mobility

Average

0

10,000

20,000

30,000

40,000

50,000

Q3

90

Q3

91

Q3

92

Q3

93

Q3

94

Q3

95

Q3

96

Q3

97

Q3

98

Q3

99

Q3

00

Q3

01

Q3

02

Q3

03

Q3

04

Q3

05

Q3

06

Q3

07

Q3

08

Q3

09

Nu

mb

er o

f h

ou

sin

g s

tart

s in

En

gla

nd

Supply: number of house starts in England

0m5m

10m15m20m25m30m35m40m45m50m55m60m

1981 1991 2001 2008 2013 2023 2033

Nu

mb

er o

f o

ver-

16 y

ear

old

s in

th

e U

K

Source: ONS

Source: DCLG. National data for Q3 2009 is currently available only for England

Demand: number of adults in UKHistorical & Projected

10

Why invest in UK residential now?

Market Fell 17% between Peak to trough Expectations exceed this Indices May be nearing bottom the market Interest rates are historically low Government has implemented steps to

stabilise markets Lack of credit adds to rental demand Development projects being halted or

deferred Continued lack of supply – below

Government target Buy-to-let finance stalled – removes an

over exuberant competitor from market Rented sector is increasingly popular - is

now a tenure of choice More affordable

Nationwide

Halifax

100

125

150

175

200

225

250

275

Jun-

99

Dec-9

9

Jun-

00

Dec-0

0

Jun-

01

Dec-0

1

Jun-

02

Dec-0

2

Jun-

03

Dec-0

3

Jun-

04

Dec-0

4

Jun-

05

Dec-0

5

Jun-

06

Dec-0

6

Jun-

07

Dec-0

7

Jun-

08

Dec-0

8

Jun-

09

Dec-0

9

Ave

rag

e h

ou

se p

rice

ind

ex

(Bas

e Ju

n 9

9 =

100)

Beginning in Aug 2007

Beginning in July 1989

75

80

85

90

95

100

M0

+M6

+M12

+M18

+M24

+M30

+M36

+M42

+M48

+M54

+M60

+M66

+M72

Ave

rag

e h

ou

se p

rice

ind

ex

(Bas

e as

sp

ecif

ied

)

House prices begin to fall in Q3 2007

Prices have fallen faster than in early 1990s

Source: Halifax

Source: Halifax

11

Why invest in UK residential now? Alternative measures of affordability

Source: Bank of England, Capital Economics, CML, Thomson Datastream

Affordability is back

12

Invista who we are

Why UK residential property?

Why invest in a Residential Fund

13

Why invest in a residential fund?

Would you……

Concentrate your wealth in a single investment?

Gear this investment heavily?

Be happy with volatile returns?

Not subject it to professional management?

Be reliant on a single counterparty to support your investment?

Not able to purchase at a discount?

Risk a criminal offence?

Want your investment to be diversified and not reliant on a particular asset or income source?

Like to invest in the best performing asset class over the long term?

Seek returns with low volatility over the long term?

Want your investment to be professionally managed?

Like to access a unique product in a large untapped investment class?

No?!

This is the c.£200bn buy-to-let sector

Yes of course!

This is the residential fund sector

14

Why invest in a residential fund? Further fund considerations

SIPPs

SIPP activity has increased since April 2006 “SIPP simplification”

Buy-to-let not permitted in SIPP; but funds are

ISAs

Fund will be ISAable; rises to £10,200 from 6 April 2010

Child Allowance/Child Trust Fund

Suitable for regular payments on behalf of children

Grandparents investing for grandchildren

Suitable for grandparents to invest a single premium

15

Why invest in a residential fund? Investment strategy

Invest in private lettings

Also other residential asset classes

Utilise research based forecasting for regional investment

Strategic investment and active asset management to drive performance

Rebalance portfolio and recycle capital through strategic disposals

(8%)(7%)(6%)(5%)(4%)(3%)(2%)(1%)

0%1%2%3%4%5%

Scotland North West Mids South East London

Dif

fere

nc

e f

rom

a

nn

ua

lis

ed

UK

gro

wth

%

10yr 5yr 3yr 1yr

Source: Halifax, to end December 2009

Cyclical trends in house price growth

16

Not an Invista Fund - How not to do itRelative value growth for all assets

-10%

-9%-8%

-7%

-6%-5%

-4%

-3%-2%

-1%

0%1%

2%3%

4%

5%6%

7%

8%9%

10%

An

nu

alis

ed A

sset

Rel

ativ

e V

alu

e G

row

th %

, Sep

tem

ber

200

9

1999 Purchases 2000 Purchases 2001 - Purchases 2002 - Purchases 2003 Purchases

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

Potential acquisitions

Period ConversionModern Ground Rent Portfolio

For illustrative purposes only

18

Potential investment I

Well located development site Attractive size new build

For illustrative purposes only

19

Residential opportunities

Individual leasehold properties not attractive

For illustrative purposes only

20

Summary

Strong Fundamentals

Historically strong investment returns from sector with low volatility over long term

Historically good demand vs. supply fundamentals for long term growth

Asset Class benefits from grouped Investment

Diversified access to sector at minimal investment

SIPPable investment;

Benefit from deal sourcing ability and bargaining power

Professionally managed and actively managed

21

Important information

This document is intended for investment professionals only and should not be relied upon by private investors.

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.

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.

All features in this pack are current at the time of publication but may be subject to change in the future.

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.

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.

The past performance of property funds is not always represented by the performance of the property market as a whole.

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.

Commercial and residential property have different risk profiles, returns in one market do not necessarily follow the other.  

Property funds will not contribute diversification where investors already have a substantial proportion of their investments in property.

The value of property is a matter of a Valuer’s opinion rather than one of fact.

Investments in property are relatively illiquid and more difficult to realise than equities or bonds.

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.

Depending on the investor’s currency of reference, currency fluctuations may adversely affect the value of investments and the income there from.

Past performance is not a guide to future performance.

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.

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.