london serviced offices space as a service · flexible office space (c.7% of central london)...
TRANSCRIPT
London Serviced OfficesSpace as a service
Peel Hunt Real Estate Conference1 May 2019
rdireit.com
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Peel Hunt Real Estate Conference
RDI's partnership with Office Space in TownExperienced operator with strong alignment of interests
Transaction summary and deal rationale• Acquisition of four London serviced offices valued
at £161.7m (January 2018)
• Office Space in Town partnership
• Retained 20% holding in properties
• Management agreement
• Non-compete arrangements and right of first refusals on future OSIT developments
• High quality London serviced office portfolio yielding >6%
• Asset management opportunities
• Scalable operational platform
• Highly cash generative
Ownership structure
HoldCo
PropCo OpCo
80% 20%
Assets
Little Britain, St Paul's & Farringdon
Boundary Row, Waterloo
New Broad Street, Liverpool Street
St Dunstans, Monument
Man
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Amelia WoolleyGeneral Manager, Monument
Roy JonesGeneral Manager, St Paul's & Farringdon
Katie RiceGeneral Manager, Waterloo
Georgia SandomGeneral Manager, Liverpool Street
Simon EastlakeDevelopment Director
Sarah SinglehurstSales Director
Julie WardFinancial Director
Tracey HollowayQuality & Control Director
Niki FuchsManaging Director
Giles FuchsChief Executive
Introducing the Office Space in Town team
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Peel Hunt Real Estate Conference
Exposure to Crossrail and Southbank markets
Strong real estate fundamentalsWell located assets complementing existing portfolio
Waterloo
Cannon Street
Moorgate
Fenchurch StreetBlackfriars
Charing Cross
Liverpool StreetFarringdon
Tottenham CourtRoad
Leicester Square
Embankment
Covent Garden
Temple
Holborn
Chancery Lane
Monument
London Bridge
Mansion House
Southwark
BankSt Paul’sAldgate
Borough
Tower Hill
Barbican
Office
Hotel
Serviced office
Holiday Inn, Southwark
Coburg HouseNewington House
127 Charing Cross Road
Boundary Row,Waterloo
Little Britain,St Paul’s
New Broad Street,Liverpool Street
St Dunstans,Monument
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Peel Hunt Real Estate Conference
Structural and behavioural change set to continue driving demandJLL expects London flexible workspace to increase from c.7% to over 30% by 2030
• Technology supports mobility
• Millennials will make up 75% of workforce by 2025
• Demanding work-life balance
• More collaborative and creative work environments
Workforce behavioural change One size does not fit all
Deeper potential customer baseShorter leases/licences
Cost efficient
• Allow for space to grow with requirements
• Businesses can be more agile in growth and manage risk more effectively
• From 2019 long leases will be reflected as liabilities on the balance sheet
• Broadening demand
• Corporates are increasingly taking up flexible space
• Creating a presence anywhere
• Traditional office leases continue to shorten (IPD)
• Brexit uncertainty exacerbates demand for shorter term commitment
• Economical for both occupier and landlord
• Avoid set up costs and need for capital investment
• Ability to outsource non-core business activities
Lease accounting changes
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Landscape changing from product to high quality serviceOffice Space in Town does not compete directly with lower margin co-working models
Traditional office space (c.93% of Central London)• Providing a product• Inflexible longer leases• Generally larger, corporate tenants
Tre
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.7%
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Serviced offices (c.80% of flexible office space)• Providing a high quality and tailored service• Occupier demand from large corporates and smaller,
growing businesses• Flexibility to manage costs and adapt• More ‘corporate’ space
Co-working space (c.20% of flexible office space)• Provides greater community and creative freedom• Experiencing significant growth and demand from small companies and
start ups• High density, but generally shorter average stay and less profitable• Generally noisy, disruptive and confidentiality risk
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Peel Hunt Real Estate Conference
Southbank£650 – £800
City Core£500 – £800
Strand£650 – £750
Eastern Fringe£450 – £550
Midtown£500 – £650
Northern Fringe/Shoreditch£450 – £600
North£600 – £800
Higher value Lower value
Cost per desk per month
Waterloo£627 average
Monument£751 average
Liverpool Street£650 average
St Paul’s & Farringdon
£669 average
90
% o
f in
com
e co
ntr
acte
d
Delivering a sustainable yield premium
Additional services (incl. meeting room hire,
catering etc.)
£45 – £55 per sqft
Rent generated by traditional
offices
>£20 per sqft
Premium for densification
High proportion of shared and amenity space
150sqft per desk
Traditional offices
c.80sqft per desk
RDI serviced offices
Office Space in Town portfolio provides premium serviced space at mid-market rates
Source: Knight Frank, Flexible Office Services.
c£75 Average net EBITDA per
sqft for flexible space
50sqft per desk
WeWork
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Peel Hunt Real Estate Conference
Continued strong operational performanceAs at 28 February 2019
Longevity of incomeOwning the assets and profit margin
£69.0 (+0.9%) EBITDA per sqft
94.5% (+230bps) Average desk occupancy
63.4% EBITDA as % of total revenue
30 months Average length of stay
£685 (+0.1%) Average desk rate (licence fee only)
£826 (+0.9%) Total revenue per available desk
Performance relative to 31 August 2018.
Positive operational performanceIncome longevity and resilience delivered through asset ownership
Owned model
Leased model(c.20% EBITDA margin)
• Market leading operator with aligned interest
• Service-led approach, consistent 5-star Google ratings
• Quality and personalised service is a key differentiator
• No co-working, lower density, higher amenity space and good sound insulation
• Strong property fundamentals
• Demand remains strong
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Appendices
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The Office Space in Town offeringPremium product and service at mid-market rates
Included for all clients:• Direct access to the hands-on management team• Inspiring office space and reliable business
facilities• Quiet, professional and confidential work
environment• Moving-in made easy• Bespoke tailoring of packages and flexible
terms to allow for growth and change of client requirements
• Lower upfront costs• Personalised call answering, message
management, mail forwarding and general administration
• 'Access all areas' lounge card• Regular client socials and community networking• Cleaning, free UK landline calls and more…
Additional service fee:• High quality IT service, bandwidth and WiFi at
a flat rate, with no hidden costs• Hi-tech audio-visual and communications
facilities• Tailored catering options• Office customisation• Luxury bedrooms (St Dunstans only)• Venues and catering for private functions• Additional support services, e.g. photocopying,
dry cleaning, etc
Premium office space• Fit for purpose design• Natural light• Sound insulation• Industry leading IT• No branding
Premium meeting rooms
High proportion of shared space:• Kitchen areas• Breakout areas• Cafés• Gym• Reception
Physical product Premium and personable service
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Peel Hunt Real Estate Conference
Revenue driversPipeline of further asset management and revenue opportunities
Membership/product
Indicative contribution Description Desks/Clients Pricing Average length
Office/ desk rental(2) 80%
• Private offices with capacity for 1-60 people
• Flexible terms to allow for growth and change
• Access to all buildings in the portfolio
1,826 desks153 clients(1)
Pricing based per room per month:• £500 – £900+ implied rate
per desk
• Initial contract average 12 months
• Average length of stay over 30(1) months
Contracted service fees
10%
• Contracted IT and telephony, including bandwidth, handsets, call charges, IP, rack rental, etc.
• Beverage charges
Pricing based on individual tailored packages:• Introduced target package
price of £90-95 per head in 2019
Average annual spend:• Over £80 per desk at 100%
occupancy, including call charges
Meeting rooms
7%
• 37 individually designed meeting rooms• Capacity for 4-100 people• Suitable for bespoke meetings, training
courses, seminars, interviews, product launches, etc.
• Catering facility provided
Pricing based on a per room per hour basis:• £20-£250 per hour• Larger spaces and
meetings are done on a delegate rate
Average annual spend, including catering:• Over £6.5k per internal
client• Over £250k by external
clients
Adhoc service fees
3%• Including office customisation, support
services, photocopying, postage, etcPricing per product or service
• n/a
(1) As of February 2019.(2) Licence fee only.
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London Monument – St Dunstans‘Sunseekers Luxury Yachts’
Market value: £66.0m
Capital value per sqft: £1,129
Nearest tube: Monument
Lettable area: 58,432 sqft
Number of desks: 693
Sqft per desk: 84
Number of clients: 55
EBITDA per sqft: £79
Average stay: 24 months
International Property Awards UK 2016Best office interior London
71
2016
90
2017
94
2018
694
2016
777
2017
754
2018
Notes
Data as at 28 February 2019.
Average monthly desk rate (£) licence fees only
Historic performanceOccupancy (%)
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Peel Hunt Real Estate Conference
Market value: £33.1m
Capital value per sqft: £897
Nearest tube: St Paul's & Farringdon
Lettable area: 36,908 sqft
Number of desks: 328
Sqft per desk: 81
Number of clients: 31
EBITDA per sqft: £58(1)
Average stay: 31 months
Serviced office – St Paul's & Farringdon‘Old English culture and English authors’
Roy JonesGeneral Manager, St Paul's & Farringdon
90 93
2016
95
20152014
92
2017
96
2018
661
2016
613
2015
577
2014
663
2017
659
2018
Data as at 28 February 2019.(1) £71 excluding gym area and rent.
Average monthly desk rate (£) licence fees only
Historic performanceOccupancy (%)
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Peel Hunt Real Estate Conference
Serviced office – Waterloo‘Alice in Wonderland’
Market value: £30.5m
Capital value per sqft: £852
Nearest tube: Southwark & Waterloo
Lettable area: 35,796 sqft
Number of desks: 453
Sqft per desk: 79
Number of clients: 32
EBITDA per sqft: £71
Average stay: 40 months
96
2016
96
2015
81
2014
99
2017
87
2018
606
2016
584
2015
495
2014
639
2017
628
2018
Data as at 28 February 2019.
Katie RiceGeneral Manager, Waterloo
Average monthly desk rate (£) licence fees only
Historic performanceOccupancy (%)
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Serviced office – Liverpool Street‘Historic London board game’
Georgia SandomGeneral Manager, Liverpool Street
Market value: £33.8m
Capital value per sqft: £954
Nearest tube: Liverpool Street
Lettable area: 35,422 sqft
Number of desks: 352
Sqft per desk: 71
Number of clients: 35
EBITDA per sqft: £62(1)
Average stay: 30 months
Data as at 28 February 2019. (1) £70 excluding gym.
91
2016
90
2015
93
2014
92
2018
96
2017
623
2016
640
2015
545
2014
641
2018
644
2017
Historic performanceOccupancy (%) Average monthly desk rate (£)
licence fees only
Peel Hunt Real Estate Conference
Mike WattersChief Executive Officere: [email protected]
Stephen OakenfullDeputy Chief Executive Officere: [email protected]
Donald GrantChief Financial Officere: [email protected]
Adrian HorsburghProperty Directore: [email protected]
RDI REIT P.L.C.33 Regent StreetLondon SW1Y 4NBt: +44 (0)20 7811 0100
Visit us online
www.rdireit.com
@RDIREIT
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