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1 Workspace Group PLC Delivering Value into the Future Strategy Presentation to Equity Research Analysts Friday 2 November 2007.

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Presentation on theme: "1 Workspace Group PLC Delivering Value into the Future Strategy Presentation to Equity Research Analysts Friday 2 November 2007."— Presentation transcript:

1 1 Workspace Group PLC Delivering Value into the Future Strategy Presentation to Equity Research Analysts Friday 2 November 2007

2 2 Reconfirm our strategy: We are a property based business Clear identifiable brand Servicing a vibrant customer base Proven acquisition model Capability to realise redevelopment potential Deliver superior returns …..and introduce new members of the team Aims for the Presentation

3 3 Aims for the Presentation - Structure 1.Our Market PlaceHarry Platt 2.Acquisition ActivityPatrick Marples 3.Redevelopment OpportunityAngus Boag 4.Financial PerformanceGraham Clemett 5.SummaryHarry Platt

4 4 “ We provide affordable, flexible space for new and small businesses in London” c.4,500 customers over 119 estates; 6.2 million sq.ft Over 10,000 enquiries a year; market leading brand in fragmented market A simple product offer Superior service from in-house management Customer focused The Brand – Hotelier of Space to SMEs

5 5 London is our Market Place London is THE Global city London drives the UK economy Most multicultural – home to more than 300 languages 42 immigrant populations of 10,000 or more Home to 12.5% of UK population, produces 16.5% of its output Highest concentration of fastest-growing, most productive business sectors London is our Knowledge Base

6 6 Statistics Support London Growth Population expected to grow from 7.5 million to 8.8 million in 2029 Households expected to grow from 3.2 million to 3.6 million by 2021 (source: ONS, Population trends 128; Summer 2007) Source: Domestic & International Net Migration in London, 1981-2005 Source: GLA Working paper 24: An analysis of London’s employment by sector

7 7 Source: Enterprise Directorate Analytical Unit, Business Starts & Closures: VAT Registrations & De-Registrations in 2005 Business Starts and Closures Source: Enterprise Directorate Analytical Unit, SME Statistics, 2005 Businesses in London by number of employees London is Key for Business

8 8 Workspace Customer Base Classification based on DTI categories

9 9 Typical Workspace Customer Entrepreneurs Creative industries/professional services (knowledge economy) Employs less than 10 people (50% plus employ less than 4) Has been in current unit 2-3 years - traded for 5 years plus Describe themselves as “going for growth” 3 in 10 are serial entrepreneurs - 2 in 10 are portfolio entrepreneurs

10 10 Typical Workspace Customer Rent under 5% of turnover Average rents at 31 March 2007: £11. 34 per sq. ft Average customer occupies 1,100 sq. ft Average rent per week about £240 Source: Enterprise & Entrepreneurs: Profiles of the Workspace Customer base, Kingston University, May 2005 Median % of median turnover Turnover250,000— Overheads90,00036 Profits40,00016 Rent12,0005

11 11 Workspace Group Portfolio

12 12 Clerkenwell Workshops, EC1 Before After

13 13 Kennington Park, SW9

14 14 Kennington Park, SW9 Before After

15 15 Patrick Marples Acquisitions

16 16 Acquisitions – The Fundamentals Stock Selection Investment properties with an “angle” - Undermanaged - Underlet - Above average rental growth prospects (areas of change) - Added value potential (change of use or intensification) Vacant or Part let - Using the BRAND to create value

17 17 Acquisition Activity Acquisitions £m 2003 60 2004 60 2005 43 2006127 2007 70 Total360 Average 72

18 18 Acquisition Performance Acquisition Cost£8m£4m Yield at acquisition1.9%Nil Refurbishment cost£5.5m£1.5m CompletedNovember 2006June 2007 March 2007 Valuation surplus£3.7m£2m Occupancy81%Nil ERV Yield - On cost8.8%18.3% - On valuation6.9%13.1% ERV per sq. ft£16£55 Lightbox (2005) Chiswick Greville Street (2006) EC1

19 19 The Lightbox, Chiswick, W4 Before After

20 20 Acquisitions Database Target acquisitions400 sites Potentials600 sites Adjacent/site assembly200 sites Estimated total value£8.5 billion “Top 20”£600 million AcquisitionsValueNo of DealsFrom Database Value from Database 2005£43m7114% 2006£127m12325% 2007£70m11545%

21 21 Customer focus SME’s Market Share Churn Flexibility Service Sector Level One: The Brand Workspace - Components Of Return

22 22 Level Two: Investment Return Workspace - Components Of Return Property Skills Growing Rents Area of Change Gearing Brand

23 23 Level Three: Land Potential Workspace - Components Of Return Change of Use Development Intensification Acquisitions targeted at all three types of return Brand Investment Return

24 24 Latest Deal - Neil House, E1 Neil House

25 25 Neil House, Whitechapel Road, E1 Purchase Price£10.8 m Floor Area43,592 sq.ft Value psf£248 per sq.ft Current Rent£415,260 pa Estimated rental value£879,000 Office Repositioning Total Area 23,260 sq.ft Vacant 14,632 sq.ft (62%) Average Passing Rent£13.79 psf ERV£26.00 psf

26 26 Angus Boag Leveraging the Redevelopment Potential

27 27 Workspace’s Unique Position The London Plan Employment led regeneration Workspace Brand Relationships with local authorities Ability to own and manage mixed-use schemes

28 28 Redevelopment Potential Over 50% portfolio will be subject to Intensification / Change of Use over next ten years 20% of portfolio on a five year basis

29 29 Progress to Date Workspace Portfolio 18 sites identified for immediate progress: 3 schemes submitted for planning consent 4 schemes in negotiation with planners 6 schemes being prepared for negotiation 5 schemes being worked up for applications in 2009 Joint Ventures 1 Scheme granted consent 2 Schemes to Committee imminently 1 Scheme in planning negotiation – application 2008 ‘

30 30 Future Intensification 18 sites identified for planning consent, development and sale in next 5 years Land value £185m Currently providing 660,000 sq.ft. workspace Planning consent will provide an estimated: - 950,000 sq. ft commercial space - 900 + apartments (35% affordable) - 110,000 sq. ft other uses Commercial space to be retained within REIT - Apartments and other uses generally sold

31 31 Aberdeen Works, Islington, N5 Before 66,000 sq. ft commercial (Rents £12 - £15 per sq. ft) After 45 apartments for sale 27 affordable apartments(37%) 66,000 sq. ft commercial (rents £25 per sq. ft) Proposed scheme has 2.0 times more floorspace than the existing scheme

32 32 Greenheath, Bethnal Green, E2 Before 46,000 sq. ft commercial (rents £8 - £10 per sq. ft) After 74,000 sq. ft commercial (rents £20 per sq.ft) 230 student housing rooms Proposed scheme has 2.6 times more floorspace than existing

33 33 Wandsworth, SW18 Before Existing 86,000 sq. ft workspace (rents £15 per sq. ft) After Planning consent for: 156 apartments for sale 53 affordable apartments (25%) 86,000 sq. ft new workspace (rents £22 per sq. ft) Consented scheme has 2.5 times more floorspace than existing schemes

34 34 The Pipeline Hopper – continue to feed the development process with new sites when conditions are correct Adding our name and brand to bids for larger strategic schemes (Silvertown Way, Stratford) Ability to acquire and manage mixed-use schemes

35 35 Graham Clemett Financial Performance

36 36 Dynamics of Growth – Next 5 Years CORE BUSINESS Strong Rental Growth High Occupancy Proven Track Record Extensive Database In-house expertise USP vs “traditional” developers ACQUISITIONS REDEVELOPMENT + +

37 37 Core Business Valuation Over next 2 years Yields Stable Yields out 75bps Yield out 150bps ERV up 10% (5% p.a.) + £100m- £10m- £100m ERV up 20% (10% p.a.) + £200m+£70m- £25m Reversionary Yield 6.5%7.25%8.0% Rent per week £264 £288 What if…..

38 38 Funding Options Core Business Acquisitions Regeneration - Commercial - Residential REIT Joint Ventures Other

39 39 Summary Workspace = Robust Business ….with massive opportunities The Workspace Difference - Strength of Brand - At the Heart of London - Ability to buy well - Acceleration of redevelopment potential - Scale of London market - We can add scale to the business

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