FOTBW_PPT_Feb_2023

Total Return -0.9% One Month

Income Return 0.5% One Month

Yield Impact -1.6% One Month

Rental Value Change 0.0% One Month 1.6% One Year

SPECIALIST SECTORS FLY ON THE BROKERS' WALL

-2.6% One Year

6.1% One Year

-10.7% One Year

Source: MSCI UK Monthly Property Index, December 2022

VIEW ON THE GROUND

DEAL WATCH

PRICING Initial yields (%)

Residential: £4.01bn was invested into BTR in 2022, 5% below 2021. Q4 2022 saw a big drop off, with £330m transacted. Sentiment has improved, but the lack of deals is causing pricing issues and making investors nervous. Despite debt costs, yields are likely to have only moved 25-40 bps since September. A large amount of capital, a lack of opportunity and strong rental growth is preventing large price falls. The Patrizia, Realstar and Package Living deals demonstrate little yield movement. C&W is launching a funding deal in Guildford and relaunching Greenman Lane, key deals to watch. Student: 2022 was a record year with £7.5bn invested. A large chunk was Greystar & GIC acquiring from Brookfield (£3.3bn), without that Q4 would have only had £400m transact, the lowest in 10 years. There is a stalemate in the market with lots of capital to deploy but a need for pricing to move. On the other hand, stock isn’t coming to the market, rationale is to wait for rental growth to come through (8 10% forecast this year) and hopefully see utility costs fall, and therefore even if yields move out, values will not have fallen significantly. There are a couple of funding deals and stabilised investment opportunities in the market, with a need for a first mover to step in and decide pricing. Healthcare: Healthcare (Propco) saw £2.15bn invested in 2022, down slightly on 2021 (£2.45bn). Primary Care experienced a strong year with £300m invested, C&W sold 28% of that, which was Project Bell. Care Homes remained robust with £1.4bn invested (most in Q1-Q3), specialist healthcare investment funds and REITS were the main players. Private Hospital investment was down in 2022 with £360m invested, there were no major big deals. CareTech Holdings was the biggest deal in 2022, £870m deal to take it private. Special educational needs schools are a big growth area. There is an estimated £3bn of capital committed to Integrated Retirement Communities, but there is difficulty finding supply, with most entry routes via development. Hotels: There was little activity in the back end of 2022. Regional yields have softened by 100-125bps, less so in Prime London. There has been limited stock coming to the market and we expect to see that continue until there is consensus between buyers and sellers on where pricing sits. A key deal in 2022 was the sale of The Dilly to Fattal Group, a £90m deal with a further £90m planned in CapEx. Cushman & Wakefield acted on the sale side. . Source: Cushman & Wakefield

BTR: Guildford Station

Feb-23

Dec-22 Outlook

Lot Size: £68m

Student Accom (Greater London)

4.00-4.25% 4.00-4.25% Outward

Yield: 4.15%

Student Accom (Prime Regional)

5.25-5.75% 5.25-5.75% Outward

Status: Coming to the market

Build to Rent (Greater London)

3.50-3.90% 3.50-3.80% Stable

Build to Rent (Prime Regional)

4.00-4.90% 4.00-4.80% Stable

Comments: Purpose Built BTR funding of 179 units – C&W selling

Care Homes (Prime)

3.75-4.00% 3.75-4.00% Outward

Care Homes (Prime SPV)

5.50-5.75% 5.50-5.75% Outward

BTR: Uncle Leeds

Primary Care Modern Purpose Build

4.00-4.25% 4.00-4.25% Outward

Lot Size: £108m

Primary Care Secondary Non Purpose Build

5.50-5.75% 5.50-5.75% Outward

Yield: sub 5%

Private Hospitals (Greater London)

4.00-4.25% 4.00-4.25% Outward

Status: Sold

Private Hospitals (Prime Regional)

5.00-5.25% 5.00-5.25% Outward

Comments: Realstar has agreed a forward funding deal for the 2nd phase – 488 BTR apartments due for completion in 2025.

Hotel Fixed Income (Prime London)

4.00-4.25% 4.00-4.25% Outward

Hotel Fixed Income (Prime Regional)

4.75-5.00% 4.50-4.75% Outward

Hotel Trading (Prime London)

4.75-5.00% 4.50-4.75% Outward

BTR: Bow Square, Southampton

Hotel Trading (Prime Regional)

7.50-7.75% 7.00-7.25% Outward

Lot Size: c.£60m

Source: Cushman & Wakefield

Yield: 4.50%

Quarterly investment volume (£m)

Status: Exchanged

Comments: Patrizia has exchanged on this operational block of 102 apartments. Hotels: The Dilly

£8,000

£6,000

Lot Size: £90m

£4,000

Status: Sold

Comments: Archer Hotel Capital has completed the sale to Fattal Group, owner of Leonardo Hotels UK & Ireland. C&W advised on the sale.

£2,000

£0

2010

2015

2020

Source: Real Capital Analytics

Source: Cushman & Wakefield