Grainger Plc · LSE:GRI
Grainger — Investor Presentation (2020)
29 slides from Grainger's investor presentation, Oct 21, 2020
Slide 1: A strong business in a resilient sector
Grainger plc and the UK private rented sector: A strong business in a resilient sector Our investment case H1 2020
Slide 2: A snapshot of Grainger
A snapshot of Grainger Originate Invest Operate Renting homes, enriching lives A fully integrated business Founded in 1912, the UK’s largest and leading We do it all when it comes to the rental market. publicly listed residential landlord in the build to rent and private rented sector (“PRS”) We ori
Slide 3: The market leader in a compelling sector
The market leader in a Originate Invest Operate compelling sector Why the private rented sector (PRS) Why Grainger Resilient long-term returns Market leader with the largest operational PRS portfolio Inflation linked rent growth £2.0bn pipeline to come Underpinned by structural supply Fully integrat
Slide 4: Portfolio overview
Portfolio overview Originate Invest Operate Regulated tenancies Private rented sector (PRS) Tenant has the right to live in the property for the rest Leases with typical duration of 1-3 years of their life Market rents Sub-market rent set by Valuation Office Agency Returns based on Upon vacancy Grai
Slide 5: Income resilience
Income resilience Originate Invest Operate Low volatility, stable income profile Diverse customer Income profiles Residential rental income is robust ▪ Mid market price point 5% 6% Retired ▪ Diverse customer profiles 27% Employment Benefits ▪ Strength of inhouse operations MOD Backed Strong rent col
Slide 6: Regulated tenancy portfolio
Regulated tenancy portfolio Originate Invest Operate Moor Pool Chelsea, Grainger has owned and managed regulated Estate, London tenancy assets since 1912 Birmingham Strong investment market albeit number of units are declining. Grainger is one of the largest owners with 2,732 units and market value
Slide 7: Regulated tenancy portfolio
Regulated tenancy portfolio Originate Invest Operate Predictable cashflow generation underpins funding for growth Scalegivespredictable vacancyrate... ...resultinginresilient cashflowgeneration Average 6.7% £m 300 7.8% 7.4% 7.1% Average £188m 6.7% 6.9% 6.4% 6.6% 6.7% 6.0% 6.2% 5.9% 200 100 0 '09 '10
Slide 8: PRS portfolio
PRS portfolio Originate Invest Operate Argo Apts, Clippers Quay, Largest listed private residential landlord, having Canning Town, Manchester owned and managed PRS since 1912 London PRS makes up 73% of group net rental income (HY20) 5,891 units with a total value of £1.6bn (HY20) High levels of occu
Slide 9: Robust market fundamentals
Robust market fundamentals Originate Invest Operate Resilience of residential Supply: new homes delivery shortfall in UK 350 Structural demand / supply imbalance Government target 300 Strong history of resilience relative to the 250 wider market Shortfall 135,000 homes Supply constraints expected to
Slide 10: PRS structural drivers
PRS structural drivers Originate Invest Operate Near term uncertainty supports long term structural drivers Rental demand set to increase during Housing undersupply set to worsen economic uncertainty 35% reduction in housing +24% +32% +81% +77% +43% +20% supply forecast by Knight Frank, underpinning
Slide 11: Grainger's investment strategy delivering
Grainger’s investment strategy Originate Invest Operate delivering Selecting the strongest cities Selecting the right site locations Strong demographics Cluster strategy Strong economy Proximity to public transport/ commuter lines Inward investment Good local services Good infrastructure Safe neighb
Slide 12: Research backed capital allocation
Research backed capital allocation Originate Invest Operate Driving outperformance through proprietary research Weak existing Strong existing London Schemes secured tenant demand tenant demand but strong growth & strong growth Target locations prospects prospects Birmingham Manchester Under review B
Slide 13: A strong pipeline for growth
A strong pipeline for growth Originate Invest Operate £1,048m secured pipeline, post equity raise HY20 OPERATIONAL PORTFOLIO PIPELINE 9,270 homes, £2.8bn 8,536 homes, £2.0bn £349m c.£600m £1,090m £1,683m £1,048m Planning/ TfL* Regulated tenancies PRS* Secured pipeline Legals c.3,000 3,225 homes 6,04
Slide 14: Net rental income progression
Net rental income progression Originate Invest Operate Pipeline of significant NRI growth aligned to dividend progression Planning / legals Secured pipeline: £1,048m TfL: £600m* £349m +2.3x +£24m £172m +£17m +£18m £131m +1.8x +£14m +£13m +£11m £74m +£1m *TfL Partnership – indicative estimate of Grai
Slide 15: Building strategic clusters across the UK
Building strategic clusters across Originate Invest Operate the UK LEEDS & SHEFFIELD (PRS Homes) 1,508 Clustering approach delivers operational efficiencies Operational 418 (inc 237 at Brook Place) MANCHESTER (PRS Homes) 1,673 Pipeline Well Meadow, Sheffield 284 Operational 1,297 1,297 (inc 614 at C
Slide 16: Secured pipeline projects
Secured pipeline projects Originate Invest Operate 18 high quality PRS schemes Secured Secured H1 2020 Forward funding/ Acquisitions Gore Street, East Street, Yorkshire Post, Hale Wharf, Fabrik, Manchester Southampton Leeds Tottenham Leeds Gilders Yard, YMCA, Milton Well Meadow. Canning Town Capital
Slide 17: Pipeline delivery continues
Pipeline delivery continues Originate Invest Operate Delivered this half Delivering next half Solstice Apartments, Apex Gardens, Apex Silbury Blvd, Milton House, London Keynes 163 PRS homes 139 PRS homes £60m investment £32m investment c.6.5% gross yield c.6% gross yield targeted targeted Millet Pla
Slide 18: Case study: Hawkins & George (Bristol)
Case study: Hawkins & George (Bristol) Originate Invest Operate Apartments 5 studios 194 104 one beds 85 two beds Amenities Roof terrace and rooftop lounge Gym & co-working space Leasing velocity 60 60 3.5 deals a month months to full lease up 8-10 move-ins per week Customer profile Average age Cust
Slide 19: A fully integrated business model with strong value creation
A fully integrated business model Originate Invest Operate with strong value creation Creating great homes & Sourcing great communities opportunities ▪ Successful ▪ Capital allocation partnerships ▪ Cluster strategy ▪ Great buildings ▪ £2bn pipeline ▪ 1,152 PRS homes delivered this year Large market
Slide 20: Operating platform designed around our customer journey
Operating platform designed Originate Invest Operate around our customer journey Digital Social Skype & Online Online Dynamic Online Event marketing media FaceTime reservations payments pricing community management campaigns viewings choices Personalised ATTRACT CONVERT customer comms Website Virtua
Slide 21: Focus on Operational Excellence evermore important
Focus on Operational Excellence Originate Invest Operate evermore important Customer Operating Licence to experience efficiency operate Enhancing Increases Live.Safe 2.0 customer platform satisfaction scalability Action Action Action taken: taken: taken: Enhanced standard Entering testing phase Lead
Slide 22: PRS portfolio
PRS portfolio Originate Invest Operate Rent per calendar month (% of units) 7.4% £1500+ 18.0% 15.3% £1000-1500 7.9% 18.0% £750-£1000 3.3% 25.5% Under £750 4.6% Regions London +3.3% 97.2% 5-year Avg Annual Rental Growth Occupancy Grainger Plc | www.graingerplc.co.uk 22
Slide 23: Partnerships delivering sustainable returns
Partnerships delivering sustainable Originate Invest Operate returns Why focus on partnerships Besson Street, London London 7 sites, 162 Indicates trust, integrity and long term thinking 324 homes homes Supports growth in our pipeline *Completed* Unlocks land opportunities Virtuous circle Hale Wharf
Slide 24: ESG: Securing our long-term future
ESG: Securing our long-term future Originate Invest Operate 4 long-term ESG People: 1 Measure and deliver positive social value commitments 2 Diverse workforce reflective of our customer base Enhance investment decisions further by Assets: 3 integrating ESG considerations Net zero carbon of our oper
Slide 25: ESG: Securing our long-term future
ESG: Securing our long-term future Originate Invest Operate Being a responsible business through Covid-19 ▪ Continuing to serve customers who need a new home Supporting our ▪ Delivering virtual viewings and socially distant move-ins customers ▪ Organising virtual residents event programme ▪ Providin
Slide 26: Strong balance sheet
Strong balance sheet Originate Invest Operate LTV at a 6 year low and liquidity headroom at a 6 year high HY 20 LTV at lowest level of recent times LTV Net debt £1,000m 6.5% 60% 6.0% Loan to value 32.9% 55% 5.5% 50% Cost of debt (weighted average) 3.0% 5.0% 4.5% 45% Incremental cost of debt 1.7% 4.0
Slide 27: Liquidity and capex
Liquidity and capex Originate Invest Operate £527m headroom to fund investment pipeline Strong liquidity Current liquidity position (£m) Strong headroom of £527m from cash and available facilities 329 ▪ £198m of cash 527 ▪ £329m available facilities 198 Committed capex funded Capital expenditure pla
Slide 28: Strong financial position
Strong financial position Originate Invest Operate Strong H1 performance; positive lead indicators for H2 Greater reliance on PRS assets and rental income: over 60% of profits from net rental income and over 60% PRS assets Strong rental growth: March YTD +3.4% and April stable at +3.3% Strong cash c
Slide 29: Market leader in residential for rent
Market leader in residential for rent Originate Invest Operate Importance of product and quality of offering Grainger’s Operational Strength Grainger’s Investment Strength Experienced operational team – managing Balance sheet strength – balanced and our properties and supporting our customers. flexi