First World Hybrid Real Estate plc
Investor presentation
Updated Nov 2016
First World Hybrid Real Estate Key features
Regulated Fund
Listed on the Channel Island Stock Exchange
Hybrid structure - invested in UK commercial real estate,
global REITs and cash
Cash
Listed REITS
Direct Property
• Liquid
• Liquid • Priced on stock market • Diversified
• UK real estate, yielding approximately 6% • Each property independently valued at
least annually
First World Hybrid Real Estate Key features
Regulated Fund
Listed on the Channel Island Stock Exchange
Hybrid structure - invested in UK commercial real estate, global REITs and cash
Robust, highly predictable rental flows
Prudent levels of debt funding
Offers liquidity and transparent pricing
Reputable professional team
Also consider
Performance stats
Brexit
UK Property market
Type of property
Geographic location
Ticket size - £3 to £12m
Unexpired lease term
Lease type FRI, 5 yearly reviews
Lease covenant
Rentals at market?
Yield
The Property Acquisition Filter Process
Portfolio – Geographic Locations
Portfolio – Sector & Lease Profile
Robust, predictable net rental - Strong distribution / warehousing bias
- WAULT >12 years, no short dated expiries
- All leases FRI - > income certainty
- All tenants D&B 5A1 – top business rating
Bidvest Food Services – Cannock, Birmingham
Single storey, purpose built distribution
warehouse (including ambient, cold and
freezer storage) with two floors of ancillary
office accommodation, totalling
66 114 sq ft (site cover of 26%)
Acquired in Nov 2013 at initial yield of 7.8%
and currently valued at 6.42%
FRI lease, upwards only 5 yearly market
reviews, expiring Oct 2025
Matthew Clark – Runcorn, Liverpool
Single storey, modern distribution
warehouse with 2 floors of ancillary office
accommodation, totalling 52 391 sq ft
(site cover of 31%)
Acquired in Dec 2013 at initial yield of 7%
and currently valued at 6.25%
FRI lease, upwards only 5 yearly market
reviews, expiring Dec 2024
DPD – Snetterton, East Anglia
Single storey, purpose built modern
distribution warehouse with two floors of
ancillary office accommodation, totalling
37 242 sq ft (site cover of 26%)
Acquired Jan 2015 at initial yield of 6.5%
and currently valued at 5.65%
FRI lease, upwards only 5 yearly market
reviews, expiring May 2033
Sheffield Insulations – Cardiff, Wales
Two modern warehouse terraces,
totalling 55 552 sq ft (site cover of 49%)
Acquired in March 2015 at initial yield of
6.8% and currently valued at 6.2%
FRI lease, upwards only 5 yearly market
reviews, expiring Aug 2028
Booker Cash and Carry – Lincoln, Midlands
Single storey, modern warehouse used
as a cash and carry operation,
comprising 47 822 sq ft (site cover of
39%)
Acquired in May 2015 at initial yield of
6.8% and currently valued at 6.5%
FRI lease, upwards only 5 yearly market
reviews, expiring March 2024
B&M Retail – Towcester, Northamptonshire
Single storey, modern stand alone retail
warehouse, totalling 21 174 sq ft (site
cover of 25%)
Acquired in Aug 2015 at initial yield of 6%
and currently valued at 5.96%
FRI lease, upwards only 5 yearly market
reviews, expiring Sept 2028
FPE Seals - Darlington, Durham
Single storey, purpose built modern
warehouse with two floors of office
accommodation, totalling 34 002 sq ft
(site cover of 34%)
Acquired in Aug 2015 at an initial yield of
5.7% and currently valued at 5.66%
FRI lease, subject to 2.5% fixed increases
compounded and effective 5 yearly,
expiring Aug 2030
Keepmoat – Lakeside, Doncaster
High specification office accommodation over 3 floors, totalling 17 557 sq ft, used as national headquarters
Acquired in Feb 2016 at initial yield of 6.75% and currently valued at 6.70%
FRI lease, subject to compounded RPI linked rent reviews effective 5 yearly (with Collar and Cap of 2 and 4% respectively), expiring
Feb 2031 with tenant break in Feb 2028, (subject to 12mth advance notice)
Iron Mountain – Premier Park, Leeds
Single story, modern warehouse with 2
floors of ancillary office accommodation,
totalling 71 186 sq ft (site cover of 33%)
Acquired in Feb 2016 at initial yield of 5.7%
and yet to be revalued
FRI lease, subject to annual 2.5% fixed
increases compounded and effective 5
yearly, expiring Jan 2030
A single story, modern stand alone retail warehouse with office and mezzanine areas, totalling 27 061 sq ft (site cover of 28%)
Acquired in May 2016 at initial yield of 6.45% and currently valued at 6.40%
FRI lease, upwards only 5 yearly rental reviews (capped at 3.0% pa compounded), expires April 2035 with tenant break April 2030
(subject to 6 months advance notice)
Wickes – Grimsby, East Lincolnshire
Vanquis Bank – Chatham, Thames Gateway, Kent
Building comprises 32 890 square foot
office accommodation together with
a link block of 688 square foot
Acquired in September 2016 at initial
yield of 7.15%
FRI lease, subject to annual 2.5% fixed
increases compounded and effective
5 yearly, expires September 2031,with
tenant break September 2026
Spectrum Brands – Wombourne, Wolverhampton
Modern distribution warehouse with
ancillary office accommodation,
totalling 131 984 square foot (site cover
of 43%)
Acquired in October 2016 at initial
yield of 6.25%
FRI lease, subject to upwards only
open market reviews every five years,
expires 28 January 2030
First World Hybrid Real Estate Prudent levels of debt funding
Max 50% LTV
- of direct properties (45% overall on target weightings)
Interest rate hedging - 100% variable
- Benefit of lower rates
- Quarterly review
At 2.5% debt funding cost, prudent debt funding is well justified
Debt covenants – well within agreement levels
First World Hybrid Real Estate Liquidity and Pricing
REITs and Cash - Overweight direct property (based on investment metrics) but liquidity very important
- Portfolio of substantial, liquid REITs
Pricing - Direct property valuation policy - Independent valuation of each property by Cushman & Wakefield
- Initially as part of due diligence process, including
Investment valuation – based on Red Book principles
Vacant Possession valuation (VP)
Estimated rental valuation (ERV)
Replacement costs valuation
- Thereafter each property is revalued annually on the anniversary date of the acquisition
Weekly pricing and trade - Rolling valuations, NAV based pricing results in reduced volatility
- Weekly trade – redemptions subject to 5 business days notice
- No exit fees
First World Hybrid Real Estate Promoters and professional team
Fund Manager - FIM Capital
Property Manager - Sequelprops
Distribution & Marketing - Marriott
Fiduciary custodian - EFG Fund Services
Legal advisors - Olswang & Callin Wild
Bankers & debt providers – Barclays
Property Valuers – Cushman & Wakefield
Building & Environmental - Paragon
Investment Surveyors - LMD Real Estate
First World Hybrid Real Estate Performance stats
Investment returns – period ending 30 September 2016 Net of all fees and expenses, excluding the Investment Management Fee
Current price is marginally above pre Brexit levels
Post Brexit inflows well above weekly averages
First World Hybrid Real Estate Brexit actions
Short term actions taken following Brexit - Liquidity levels increased – anticipating possible redemptions
- Took advantage of “oversold” REITS – which corrected
- Direct property investments were put on hold pending pricing clarity
Now, Back to Business as Usual
First World Hybrid Real Estate The UK property market
Context: FWHRE property - Single tenant, well let properties (all FRI ) with long leases (Current WAULT >12.years)
- No exposure to over-priced London Market (greatest risk)
- No international head office properties (potentially vulnerable post-Brexit)
- Strongest tenant covenant on offer, LSE-listed or nationals (all D&B 5A1)
- Ticket size – under radar of major institutions, in sweet spot private investors / trusts
Market Conditions - Occupational market remains strong
Especially distribution warehousing
- Investment demand remains firm
Independent valuations, transactional activity, REIT proxies
- Lower interest rates / weaker Pound
Positive for cost of funding – income returns and supports investment demand
Comparatively cheaper for foreign investors
First World Hybrid Real Estate Summary
Robust and attractive 5% dividend yield - Underpinned by predictable net rental from a diversified property portfolio
- Yield growth (and capital growth) will be influenced by occupational market
Capital appreciation prospects - Stable investment yields
- Income growth is fundamental driver of property values over time
Better liquidity and pricing certainty than typical direct property
investments
The benefit of a Regulated investment