Download - Uauim Gm Ppt 13april11
-
8/6/2019 Uauim Gm Ppt 13april11
1/15
1
LONDON SOUTH BAN K
UNIVERSITY
Evaluarea Riscului Financiar in DezvoltareaCladirilor Comerciale
The Cit of London
LONDON SOUTH BAN K
UNIVERSITY
DEPARTMENT OF
THE BUILT ENVIRONMENT
Dr Gheorghe Multescu
Senior Lecturer
Agenda London South Bank University
The City of London
DEPARTMENT OF
THE BUILT ENVIRONMENT
Value & Risk Assessment for Commercial Property
Discounted Cash Flow / Gearing Ratio of Capital
The Gherkin / Plantation Place
Dr Gheorghe MultescuBArch PgDip MSc Arch PhD ACIAT
Graduate from UAU Ion Mincu 1996
Advanced Studies Diploma / MSc from UAU Ion Mincu 1998
PhD fromLondon South BankUniversit 2009
DEPARTMENT OF
THE BUILT ENVIRONMENT
2001 2004 Research Assistant London South Bank University
2004 present Senior Lecturer at LSBU
Course Director for RICS accredited
BSc (Hons) Surveying (Building Surveying &
Quantity Surveying) and MBA International Real
Estate Management (London Block)
Erasmus programme Co-ordinator, etc
LSBU HistoryWeve been providing inspiring education with a strong focus onour students future employability for 115 years.
Originally called Borough Polytechnic Institute and established1892.
DEPARTMENT OF
THE BUILT ENVIRONMENT
Became a university in 1992.
In 2003 was namedLondon South Bank
University.
Mission:
To provide students with relevantand practical employment skills tosupport local employers
Over 23 500 students
DEPARTMENT OF
THE BUILT ENVIRONMENT
Arts and Human Sciences
Business
Engineering, Science & the Built Environment
Health and Social Care
StructureWe have 4 faculties: ARTS AND HUMAN SCIENCES (AHS)
Media, English & Performing Arts, Law, Criminology, Psychology , Social& Policy Studies and Tourism & Hospitality
FACULTY OF BUSINESS (BUS)
Accounting & Finance, Business, Marketing, BIT, Computing and
DEPARTMENT OF
THE BUILT ENVIRONMENT
International foundation course
ENGINEERING, SCIENCE AND THE BUILT ENVIRONMENT (ESBE)
Architecture, Surveying & Construction, Product Design, Engineering,Applied Sciences and Forensic Science
HEALTH AND SOCIAL CARE (HSC)
Nursing, Social Work, Physiotherapy, Occupational Therapy andRadiography
-
8/6/2019 Uauim Gm Ppt 13april11
2/15
2
We have over 23,500 students from over 120 different countries! 10% Built Environment students 57% are full time students 69% are undergraduate students 44% are international students
A few facts
DEPARTMENT OF
THE BUILT ENVIRONMENT
63% are over 25 years of age 42% are male 1 in 5 nurses are taught at LSBU We have over 600 courses to chose from!
We have strong links within the industry and the local community. We host the oldest bakery school in the world! It was established 1894 Kevin Spacey, Desmond Tutu and Tessa Sanderson are honouree
graduates of the University
Ranked 3rd in Engineering research amongst modern(post-1992) UK universities in Research Assessment
Exercise RAE 2008.
FACULTY OF ENGINEERING, SCIENCE AND THE BUILTFACULTY OF ENGINEERING, SCIENCE AND THE BUILTENVIRONMENTENVIRONMENT
Department of The Built Environment
DEPARTMENT OF
THE BUILT ENVIRONMENT
.
Departments within Our Faculty
Applied Science Built Environment Engineering & Design Urban Engineering
2012 Olympics
Regeneration Projects
Thames Gateway
Environmental andsustainabilit
Opportunities and ThreatsOpportunities and Threats
Department of The Built Environment
DEPARTMENT OF
THE BUILT ENVIRONMENT
Performance ofbuildings
Property maintenanceand asset management
DEPARTMENT OF THE BUILT ENVIRONMENT
Approximately 1,900 students split between Full-Time and Part-Time (sponsored by employers).
50 staff.
DEPARTMENT OF
THE BUILT ENVIRONMENT
All courses accredited by:
RIBA (Royal Institute of British Architects)
RICS (Royal Institution of Chartered Surveyors)
CIOB (Chartered Institute of Builders)
CIAT (Chartered Institute of Architectural Technology)
APM (Association of Project Managers)
ARCHITECTURE
UNDERGRADUATE &POSTGRADUATE
PROPERTY,SURVEYING &
CONSTRUCTION
POSTGRADUATE
PROPERTY,SURVEYING &
CONSTRUCTION
UNDERGRADUATE
BA ArchitectureDiploma ArchitectureRIBA Part3
MSc Real EstateMSc Property,Development & Planning
FdSc ConstructionExtended DegreeHNC Construction
DEPARTMENT OF
THE BUILT ENVIRONMENT
RIBAaccredited
MSc Quantity SurveyingMSc Construction ProjectManagementMSc Planning Buildingsfor Health
RICS, APM accredited
TechnologyBSc ConstructionManagementBSc CommercialManagementBSc PropertyManagementBSc Surveying
RICS, CIOB, CIAT
Programme LeaderMary-Jane Rooney
Programme LeaderSteve Pearson
Programme LeaderPeter Haywood
1 Semester including min 3 units + practice
1 LSBU unit = 20 CAT credits = 10 ECTS credits
(3 units = 30 ECTS + practice = 40 ECTS)
Cost per Semester 1690.00 (2010-11*)Units offered are from Semesters 5/6 of UG courses:
STUDENT EXCHANGE PROGRAMMESTUDENT EXCHANGE PROGRAMME
Department of The Built Environment
DEPARTMENT OF
THE BUILT ENVIRONMENT
BSc Surveying (Building or Quantity Surveying)
BSc Commercial Management (Quantity Surveying)
BSc Property Management (Building Surveying)
BSc Construction Management
Architectural Technology
LONDON SOUTH BANK UNIVERSITY
-
8/6/2019 Uauim Gm Ppt 13april11
3/15
3
WHERE ARE WE?
DEPARTMENT OF
THE BUILT ENVIRONMENT
WHERE ARE WE?
DEPARTMENT OF
THE BUILT ENVIRONMENT
WHERE ARE WE?
DEPARTMENT OF
THE BUILT ENVIRONMENT
WHERE ARE WE?
DEPARTMENT OF
THE BUILT ENVIRONMENT
WHERE ARE WE?
DEPARTMENT OF
THE BUILT ENVIRONMENT
WHERE ARE WE GOING TO BE?
DEPARTMENT OF
THE BUILT ENVIRONMENT
-
8/6/2019 Uauim Gm Ppt 13april11
4/15
4
UNITED KINGDOM BRITISH
UnitsFeet/inches 1 foot = 0.305m10 sq ft approx = 1 sq mE.g. 500,000 sq ft building approx = 50,000 sq m
Area 1 acre = 0.405 hectare
DEPARTMENT OF
THE BUILT ENVIRONMENT
urrency pounds 1 = 1.15 euros
Will UK EVER join the euro! (will there be one tojoin?)
Lease structuresRents are paid quarterly in advance and quoted per annumE.g. 35 per sq ft per annum approx = 410 euros per sq m
Life Cycle of CommercialProperty
Stakeholders:
DEPARTMENT OF
THE BUILT ENVIRONMENT
1) Developer / Investors + Financial Institutions2) Planning (Professional Services include: Architects,
Planners, Surveyors, Engineers, Services, etc)3) Contractor + Project Manager + Professional Services4) Real Estate Services
5) Asset Management
6) Developer + Contractor + Professional Services
Developers inthe City of London
Major: British Land, Land Securities,
DEPARTMENT OF
THE BUILT ENVIRONMENT
, ,
Other: Legal & General, Swiss RE, etc
What Risk?
DEPARTMENT OF
THE BUILT ENVIRONMENT
....../ Investment and Financial Perspective
over Commercial Buildings!!!
FINANCIAL DECISION MAKING
COMMERCIAL
DEPARTMENT OF
THE BUILT ENVIRONMENT
CITY OF LONDON
LONDON PROPERTY MARKET
DEPARTMENT OF
THE BUILT ENVIRONMENT
-
8/6/2019 Uauim Gm Ppt 13april11
5/15
5
LONDON OFFICE MARKET
The London office market is made up of several
distinct markets:City 8.4 million sq mWest End 9.9 million sq m
Docklands 1.8 million sq m
DEPARTMENT OF
THE BUILT ENVIRONMENT
The City is driven by Londons status as a globalfinancial centre.
Market value of City offices:
8.0m sq m @ 400 psm @ 6% yield = 53bn
CITY OFFICES OWNERSHIP BY NATIONALITY
Nationality 2005 1995 1985
UK 53.5% 74.7% 87.4%
Germany 18.0% 2.8% 0.7%
W. Europe 10.9% 4.8% 4.4%
DEPARTMENT OF
THE BUILT ENVIRONMENT
USA 6.8% 0.7% 0.5%
Japan 2.5% 10.0% 3.0%
International 4.6% 0.3% 0.0%
Other 3.7% 6.8% 4.0%Source: University of Reading
CITY OFFICES OWNERSHIP BY ORGANISATION
Organisation 2005 1995 1985
Traditional 7.0% 15.0% 25.0%
Institutional 28.0% 38.0% 37.0%
Pro ert Com an 24 0% 25 0% 15 0%
DEPARTMENT OF
THE BUILT ENVIRONMENT
. . .
Private vehicle 14.0% 1.0% 0.0%
Other Financial 20.0% 16.0% 19.0%
Other 7.0% 5.0% 4.0%Source: University of Reading
Core FringeCity Central
Nationality City City Total London (%)
UK 60.6 87.3 68.5 76.1
USA 16.5 6.5 13.4 12.0
Germany 6.3 0.3 4.4 2.0
W Euro e 9 0 2 5 7 3 6 4
CITY OFFICES OCCUPATION BY NATIONALITY
DEPARTMENT OF
THE BUILT ENVIRONMENT
. . . . .
Japan 3.5 0.5 2.8 1.5
Other Asian 0.6 0.2 0.5 0.2Other 3.5 2.7 3.1 1.8
Not Known 5.1 14.2 5.7 7.1
Source: University of Reading
6 The Gherkin
DEPARTMENT OF
THE BUILT ENVIRONMENT
DEPARTMENT OF
THE BUILT ENVIRONMENT
-
8/6/2019 Uauim Gm Ppt 13april11
6/15
6
1 - THE HERON TOWER
230m tower (46 storey 40,000 sq m)
Built speculatively
March 2011 completion
10 x 3 floor villages and 1 x 6 floor village individualself sufficient units
DEPARTMENT OF
THE BUILT ENVIRONMENT
Developer Heron International PLC
Architect Kohn Pedersen Fox Associates
Quantity Surveyor Davis Langdon LLP
Services Engineer Foreman Roberts
Structural Engineer Arup Group
Main Contractor Skanska
Concrete Frame Contractor Byrne Brothers
2 - THE PINNACLE
Helter-skelter 288m tower (60 storey 95,000 sq m)
Scheme put together by German fund Union
Investment Real Estate (formerly known as DIFA). May 2007: Sale to Khalis Affaras Arab Investments for
200m (Shariah compliant fund).
DEPARTMENT OF
THE BUILT ENVIRONMENT
Developer Arab Investments (current)
Architect Kohn Pedersen Fox Associates
Services Engineer Hilson Moran Partnership
Structural Engineer Arup Group
Main Contractor Brookfield Group
Lift Supplier Schindler
4 - WALBROOK SQUARE
2006: Legal & General get French architect JeanNouvel to design 107m tall Darth Vader helmet toweras part of 500,000 sq m scheme.
Sep 2007: L&G get Spanish developer
Metrovacesa excited and sell it to them for 240m.
DEPARTMENT OF
THE BUILT ENVIRONMENT
MARKET CRASHES
Aug 2009: Force Metrovacesa to pay 100m in return
for walking away from the deal which has cost it 162mto date (including previous payment of 40m to L&G).
Discussion DriversQuestions:
Why Commercial Buildings (Offices)?
What is the Value of Commercial Buildings?
What are the Financial Risks?
DEPARTMENT OF
THE BUILT ENVIRONMENT
How do these influence the value ofbuildings?
How important is the Architectural Design forthe Value of Buildings?
Landmark Design vs. Shoebox Design
FINANCIAL DECISION MAKING
The word value is often used to describe threedistinct, albeit related, concepts. In these notes,the following convention is adopted:
DEPARTMENT OF
THE BUILT ENVIRONMENT
WORTH
PRICE
VALUE
FINANCIAL DECISION MAKING - WORTH
Worth is a specific investors perception ofthe capital sum that he/she would beprepared to pay (or accept) for the stream of
DEPARTMENT OF
THE BUILT ENVIRONMENT
benefits that he/she expects to be producedby the investment.
Worth = value in use (economics)
-
8/6/2019 Uauim Gm Ppt 13april11
7/15
7
FINANCIAL DECISION MAKING - PRICE
Price is the actual observable exchange pointin the open market.
DEPARTMENT OF
THE BUILT ENVIRONMENT
FINANCIAL DECISION MAKING - VALUE
Value (or Market Value) is an estimation of theprice that would be achieved if the propertywere to be sold in the market (subject to certain
DEPARTMENT OF
THE BUILT ENVIRONMENT
assumptions) .
Price & Value = value in exchange(economics)
Valuations: Definitions
DEPARTMENT OF
THE BUILT ENVIRONMENT
Valuations: Definitions
DEPARTMENT OF
THE BUILT ENVIRONMENT
FINANCIAL DECISION MAKING
When the decisions we make turn out to be
DEPARTMENT OF
THE BUILT ENVIRONMENT
result of our own ability. However, when they go
wrong we usually blame the market.
Known & Unknown
There are known knowns. There are thingswe know that we know. There are knownunknowns. That is to say, there are thingsthat we now know we dont know. But there
DEPARTMENT OF
THE BUILT ENVIRONMENT
are also unknown unknowns. There arethings we do not know we dont know.
Statement made by Donald Rumsfeld (2002) at a Defense Department Briefing
-
8/6/2019 Uauim Gm Ppt 13april11
8/15
8
UNCERTAINTY & RISK
Measurable uncertainty
Risk can be quantified mathematical models usingprobability.
DEPARTMENT OF
THE BUILT ENVIRONMENT
Immeasurable uncertainty
RISK & HISTORICAL DATA
Uncertainty is present in the decision-making
process, not so much because there is a future asthat there is, and will be, a past . . . . . We are
prisoners of the future because we will be ensnaredby our past.
Robert Dixon, 1986 (Australian economist)
DEPARTMENT OF
THE BUILT ENVIRONMENT
100,000
120,000
140,000
160,000
LAND REGISTRYSALES VOLUME
DEPARTMENT OF
THE BUILT ENVIRONMENT
0
20,000
40,000
60,000
80,000
Apr00
Jul00
Oct00
Jan01
Apr01
Jul01
Oct01
Jan02
Apr02
Jul02
Oct02
Jan03
Apr03
Jul03
Oct03
Jan04
Apr04
Jul04
Oct04
Jan05
Apr05
Jul05
Oct05
Jan06
Apr06
Jul06
Oct06
Jan07
Apr07
Jul07
Oct07
Jan08
Apr08
Oct-
10
80
100
120
140
160
UK MORTGAGE APPROVALS 1993 to date
DEPARTMENT OF
THE BUILT ENVIRONMENT
0
20
40
60
88 89 90 91 92 93 94 95 96 97 98 99 0 1 2 3 4 5 6 7 8
Source: Bank Of England
10
MORTGAGE APPROVALS
BANK OF ENGLAND
DEPARTMENT OF
THE BUILT ENVIRONMENT
Oct-10
RISK & ECONOMIC DATA
Financial Markets
Economic figures
DEPARTMENT OF
THE BUILT ENVIRONMENT
Demand & Supply
-
8/6/2019 Uauim Gm Ppt 13april11
9/15
9
FINANCIAL TIMES2008 Headlines
September 15Fight for survival on Wall Street
Ground prepared for Lehman BankruptcyMerrill Lynch and B of A in merger talks
September 17Markets rise amid hope of loan for AIGFinancial Turbulence for second day
DEPARTMENT OF
THE BUILT ENVIRONMENT
September 18Panic grips credit markets
HBOS takeover Government grips credit marketsTurmoil Worsens Volatility sparks biggest flight to safety since second world war
Lending between banks grind to a haltUS Treasury yields lowest since 1941
Jobless claims riseLloyds TSB poised to rescue HBOS
Global markets;Three month Treasury bill yield 0.02%
FTSE 100 2.25%S&P 500 4.7%
Russia: Its two main stock exchanges were closed to halt a market rout
FINANCIAL TIMES2009 Headlines
September 22
Mansfield offers 100% mortgage
DEPARTMENT OF
THE BUILT ENVIRONMENT
Landsecs sells Bullring stake to Australian fund
Bank of England Report drives sterling lower
September 23Rich increase wealth in spite of crisis
Banks hit back at tax avoidance crackdown
FINANCIAL TIMES2009 Headlines
September 23
Bank crisis bring long-lasting scarsBarratt and Redrow set for 850m cash call
DEPARTMENT OF
THE BUILT ENVIRONMENT
Minerva breathing space
Distressed hotels fund
Level the global playing field for the horrid hedgiesDollars weakness reinvigorates equity traders
M&S climbs 1.7% on hopes of a positive update
PROPERTY WEEK2009 Headlines
August 7
Hammerson and Liberty post big first-
DEPARTMENT OF
THE BUILT ENVIRONMENT
September 18
Anglo Irish compelled to exitYorkshire Shopping Centre
Pramerica heralds UK return with inflation-linked fund
ESTATES GAZETTE2009 Headlines
September 12
Valuations appear to have passedlowest oint
DEPARTMENT OF
THE BUILT ENVIRONMENT
September 19Forced shopping centre sales to test investment markets appetite
Irelands bad bank could push loans to UK marketStrong prices see Allsop raise 32m
Competitive bidding hands Savills 92%Surveyors report more price rises than falls
FINANCIAL TIMES2010 Headlines
September 13
Greece seeks to woo investors
DEPARTMENT OF
THE BUILT ENVIRONMENT
Borrowing by Europes banks hits fastest rate for almost
six months
Merrill property team buy-outBasel brings acceptance mixed with relief
Deutsche Bank calls for 9.8bn
-
8/6/2019 Uauim Gm Ppt 13april11
10/15
10
FINANCIAL TIMES2010 Headlines
September 13
Basel deal reached on banks
DEPARTMENT OF
THE BUILT ENVIRONMENT
reservesSlowdown fears ease as China hits a sweet
spot
No Irish Lazarus -Dublin should let banking sector zombies die
ESTATES GAZETTE2010 Headlines
September 11
RBS hunts for lenders for 3bnloan vehicle
DEPARTMENT OF
THE BUILT ENVIRONMENT
Anglo Irish to be split into two separate parts
Investream City portfolio sinks intonegative equity
Latest IMA figures reveal inflows are falling
C&Ws $2.4m loss is up on Q1Sinking share price sees SEGRO slip out of FTSE 100
No rush of sales as Nama tries to keep borrowers afloat
LONDON PROPERTY MARKET
DEPARTMENT OF
THE BUILT ENVIRONMENT
LONDON PROPERTY MARKET
DEPARTMENT OF
THE BUILT ENVIRONMENT
LONDON PROPERTY MARKET
DEPARTMENT OF
THE BUILT ENVIRONMENT
FINANCIAL RISKS
1. Discounted Cash Flow (development risk assessment)
Indicele de Discount (financial risk)
Costul Mediu al capitalului investit (financial risk)
Yields (project risk)
DEPARTMENT OF
THE BUILT ENVIRONMENT
2. Gearing Ratio (investment lending risk assessment)
Indicele de indatorare
3. Securitization (investment risk assessment)
Valoarea certificatelor de securitizare
-
8/6/2019 Uauim Gm Ppt 13april11
11/15
11
FINANCIAL DECISION MAKING
The most common approach to evaluating a project
is to use a discounted cash flow analysis.
A project is a series of cash flows inflows and
outflows.
DEPARTMENT OF
THE BUILT ENVIRONMENT
The worth of the cash flows is derived by discounting
them back to the present day by using a suitablediscount rate.
The discount rate should reflect the riskiness of thecash flows.
Discount rate 7.0
Income growth rate 2.0
Exit yield 6.5 NPV 1,737,426
Rent per annum 100000 IY 5.76%
Period ERV Rent Exit value Net flow PV NPV
0 100000 100000 100000 1.00000 100000
1 102000 100000 100000 0.93458 93458
2 104040 100000 100000 0.87344 87344
3 106121 100000 100000 0.81630 81630
4 108243 100000 100000 0.76290 76290
DISCOUNTED CASH FLOW
DEPARTMENT OF
THE BUILT ENVIRONMENT
.
5 110408 110408 110408 0.71299 78719
6 112616 110408 110408 0.66634 73570
7 114869 110408 110408 0.62275 68757
8 117166 110408 110408 0.58201 64259
9 119509 110408 110408 0.54393 60055
10 121899 1875376 1875376 0.50835 953346
1737426
NPV rental income 784080 45.1%
NPV exit value 953346 54.9%
FINANCIAL DECISION MAKING
How do we know what discount rate to use?
Experience from previous projects
Weighted average cost of capital
Modigliani & Miller
DEPARTMENT OF
THE BUILT ENVIRONMENT
Yield= annual rate of return on an investment (i.e.
real estate) expressed as a percentage
Net Income / Capital value x 100/1 = Yield
High Yields = Low Capital values
Low Yields = High Capital values
Weighted Average Cost of Capital
Cost of Debt Capital
DEPARTMENT OF
THE BUILT ENVIRONMENT
Cost of Equity Capital
COST OF DEBT CAPITAL
Base rate 5.0% (2008)Short-term Long term
Libor 5.15% 20 year Gilt 4.60%Risk premium 0.75% 20 year Swap 4.90%
5.90% Risk premium 1.00%
5.90%
The above figures reflect an expectation that base rate will becut.
DEPARTMENT OF
THE BUILT ENVIRONMENT
Normally the longer the term the higher the rate to reflectmore risk.
Base rate 0.5% (2009)Short-term Long term
Libor 0.61% 20 year Gilt 4.60%
Risk premium 3.75% 20 year Swap 4.90%4.36% Risk premium 1.00%
5.90%
COST OF EQUITY CAPITAL
Risk Free Rate + Risk Premium
RFR usually taken as GRY on Government Gilts
say 4.60%
Risk Premium = Equity Risk Premium * Beta Coefficient
DEPARTMENT OF
THE BUILT ENVIRONMENT
ERP = 4.0% (long run average)
Beta = how risky is company compared to the market
Blue chip property companies = 0.8
CoE = 4.60 + (4.0*0.8) = 7.8%
-
8/6/2019 Uauim Gm Ppt 13april11
12/15
12
WEIGHTED AVERAGE COST OF CAPITAL
Assume a capital structure of 40% equity and 60%
debt.
2008
* *
DEPARTMENT OF
THE BUILT ENVIRONMENT
= . . . . = .
2009
WACC = (0.4 * 7.8) + (0.6 * 4.3) = 5.7%
THE MAGIC OF GEARING
Scenario 1: Capital values fall 25%
Scenario 2: Capital values fall a further 20%
Scenario 3: Capital values fall a further 20% but 25 worth ofproperty is sold first and used to repay debt
Scenario 1 2 3
DEPARTMENT OF
THE BUILT ENVIRONMENT
Year 1 2 3 3
Assets 100 75 60 40
Debt 50 50 50 25
Equity 50 25 10 15
Gearing 100% 200% 500% 167%
LTV 50% 67% 83.3% 62.5%
6 THE GHERKIN
(30 Mary St Axe /SwissRE)
DEPARTMENT OF
THE BUILT ENVIRONMENT
Primary Use:
OfficeFloorspace (sq m):
76,641.00Car Parking Spaces
5Land Costs
90,600,000.00Date of Purchase
DEPARTMENT OF
THE BUILT ENVIRONMENT
1998
Construction Cost
138,000,000.00Last Sale Value (2006)
595,000,000.00
Developer:
Swiss ReArchitect:
Foster + PartnersCost Consultant:
Gardiner & Theobald MainContractor:
SkanskaPlanning Consultant:
DEPARTMENT OF
THE BUILT ENVIRONMENT
ontague vansQuantity Surveyor:
Gardiner & TheobaldServices Engineer:
Hilson Moran PartnershipStructural Engineer:
Arup Group
Public / Investors Surveyfinds Gherkin is ugly !?
2007
IVG Asticus (AssetManagement) buys TheGherkin at top price (almost600,000,000.00)2006
DEPARTMENT OF
THE BUILT ENVIRONMENT
Why would Swiss RE sellThe Gherkin? 27,000,000.00 rent / year
top commercial propertyprices in 2006 (property
cycles)
4.5 yield
-
8/6/2019 Uauim Gm Ppt 13april11
13/15
13
7 PLANTATION PLACE
DEPARTMENT OF
THE BUILT ENVIRONMENT
Primary Use:
Office
Floorspace (sq m):50,170.00
DEPARTMENT OF
THE BUILT ENVIRONMENT
Construction Cost:134,000,000.00
Budget Date:2004
Developer:British Land
Architect:Arup Group
Main Contractor:Bovis Lend Lease
DEPARTMENT OF
THE BUILT ENVIRONMENT
Gardiner & Theobald
Services Engineer:Hayden Young
Structural Engineer:Arup Group
DEPARTMENT OF
THE BUILT ENVIRONMENT
Plantation Place occupies almost an entire block ofapproximately 1.02 hectares bounded by Fenchurch St,Mincing Lane, Eastcheap and Rood Lane
Plantation Place is built on on the remains of the old
Roman colony of Londonium burned down by Boadicea inAD 60. A hoard of gold coins from the 2nd century was found
DEPARTMENT OF
THE BUILT ENVIRONMENT
on site.
The complex contains almost three quarters of an acre of
roof gardens.
The central focal point of the development is a 43 metre tallsouth facing main atrium.
DEPARTMENT OF
THE BUILT ENVIRONMENT
-
8/6/2019 Uauim Gm Ppt 13april11
14/15
14
DEPARTMENT OF
THE BUILT ENVIRONMENT
PLANTATION PLACE
Completed in 2004 by British Land.
545,000 sqft of Grade A office space. Net rental income of 27,084,070 (49.50 psf).
72% of rent covered by Accenture Ltd on 25 year
lease.
DEPARTMENT OF
THE BUILT ENVIRONMENT
,
Insurance and Royal & Sun Alliance.
Bought in March 2006 for 527m by joint venturebetween Invista fund management, Stobart Group
and consortium of private investors.
Valued in June 2006 at 560m by CBRE.
PLANTATION PLACE - SECURITIZATION
Securitisation
435m of Secured Floating Rate Notes due 2016.
Loan to Value ratio 77.68%
Interest Cover ratio 120%
Remaining Term 6.94 years
DEPARTMENT OF
THE BUILT ENVIRONMENT
21 years unexpired on Accenture lease
Average weighted unexpired lease length 17.5 years
PLANTATION PLACE
Class Amount Libor + S&P rating
A 295m 0.23% AAA
B 40m 0.32% AA
C 45m 0.55% A
D 40m 0.90% BBB
DEPARTMENT OF
THE BUILT ENVIRONMENT
m . -
Expected maturity July 2013Legal Final maturity July 2016
Interest Rate Swap
PLANTATION PLACE
In 2007 value rises over 600m and owners consider
selling.
By June 2008 value has fallen to 477m.
In September 2008 Invista writes off equity.
In January 2009 value has fallen to 385m (Knight
Frank
DEPARTMENT OF
THE BUILT ENVIRONMENT
.
CBRE asked to report on likely sale:
Amount Net IY Likelihood
368m 7.25% 25%
356m 7.50% 40%
345m 7.75% 60%
332m 8.00% 80%
PLANTATION PLACE
If building sold with loan of around 300m, chances
of achieving a higher consideration much better.
In all scenarios a sale would result in a loss to some
note holders.
Loss compounded by need to sever existing interest
rate swap. Break cost estimated at 34m.
DEPARTMENT OF
THE BUILT ENVIRONMENT
Small chance even AAA note holders would seesome loss on a sale of the property.
-
8/6/2019 Uauim Gm Ppt 13april11
15/15
Discussion Drivers
Questions:
Why Commercial Buildings (Offices)? What is the Value of Commercial Buildings?
What are the Financial Risks?
DEPARTMENT OF
THE BUILT ENVIRONMENT
How do these influence the value ofbuildings?
How important is the Architectural Design forthe Value of Buildings?
Landmark Design vs. Shoebox Design
COMMERCIAL PROPERTY
Question?
To answer this question we need to think about theinfluence of architectural design over:
-
DEPARTMENT OF
THE BUILT ENVIRONMENT
-
- Profile and strength of tenants
THANK YOU
QUESTIONS?
DEPARTMENT OF
THE BUILT ENVIRONMENT