Place Resi Conference 4 February 2014

Introduction

• We aim to create the largest new build, professionally managed PRS portfolio in the UK

• Agreed Equity Terms with Gatehouse bank announced November

• Initial Phase of 2000 units, with Equity options for a further 5000 units

• Access to land through existing Partnerships / Partners,  We have long term relationships that will ensure the project pipeline

• Agreed Construction Terms with our Construction Partners

• Agreed Lettings strategy and delivery team; • The project will provide thousands of new homes, new

jobs and will provide a massive boost to the local economies. The Rt Hon. David Cameron, MP, Prime

Minister, said, “As part of our plan to help Britain succeed, we are determined to build a rebalanced economy across the country. As we compete in a tough global race, Sigma’s joint venture with Gatehouse is brilliant news for the North West and for Britain, showing that we are open for business.

Integrated Approach

• Sigma and its partners have been working on this for over 2 years

• As an investment class incredibly immature • Most institutional investors do not have the ability to

deal with the complexities • Major communications issues Sigma Integrated Approach • Management • Funding • Land • Development • Lettings • Maintenance • Proven partnerships in operation

Sigma Capital Group Plc

• Sigma Capital Plc is an AIM Listed specialist in the Investment and Regeneration Sector

• Currently have 3 Groundbreaking Long Term Partnerships with English Local Authorities creating long term land supply;

• Currently Managing Largest Residential mixed use Development in Scotland;

• Sigma is an industry leader in the creation of public sector partnerships and its Salford partnership is widely recognised as the UK’s first Asset Backed Vehicle.

• Unique Management Team – Investment, Fund Raising / Management, Planning, House-building/ Development, Schools Procurement, Regeneration and Local Government;

• High Quality Team Established to Roll Out the largest new build PRS Portfolio in the UK

The Rt Hon Vince Cable, UK Secretary of State for Business, Innovation and Skills, said,  “Today’s announcement from Sigma Capital Group and Gatehouse Bank will create thousands of modern new homes to rent as well as new jobs in Liverpool and Greater Manchester, with similar plans for other regions in the country.”

Project – Salford Partnership

• Partnership with Salford City Council & RBS • Innovative Structure – First of its Kind • Asset Backed Vehicle • Land, Finance, Management • 32-Acre Master Plan – Phased Delivery • Attractive to Investors & Grant Bodies

• 330 New Homes Built and sold • New Community & Sports Facility completed • School improvements as a consequence • New 3-GP Practice, Tesco Food-store, Dental

Practice, & local retail. On Site 2013 • Award winning • Final Site for development – for PRS

• Partnership with Liverpool City Council • City Wide Partnership Initial 100 Acres Optioned; • Additional Land put in at discretion of Council • Mix of Residential and Commercial • Partnership Delivery Aligned with Mayoral Targets; • 1500 new homes; 1100 new jobs • JV with Countryside Homes for housing delivery • 300 new homes completed by 2013 • New Schools and Health Care Facilities • £250m of planned city centre investment

Project – Liverpool Partnership

Project - Solihull Partnership

• 1,000 acres • 8,500 new homes • 2,500 retained homes improved • 10 primary schools • 5 village centres • New health care facilities • Mixed use development • Local environment and transport improvements • Partnership with SMBC, Bellway Homes and WM

Project - Winchburgh

•Project Founded by Sigma •1,000 acre development, • 3,450 new homes • 5 new schools • New town centre & park • Retail facilities & commercial park • Associated Infrastructure • New motorway junction & train station, •Park and ride facilities

• 20 Year programme of development and regeneration activity which is one of the UK’s largest mixed use projects located 6 miles west of Edinburgh.

• Total potential investment currently estimated at £1.5Bn –

• Sigma – Founder & Development Manager

GATEHOUSE BANK1. Sigma Capital Group Plc

Gatehouse Bank

• Gatehouse Bank plc was founded in 2008, and is a wholesale Shariah compliant investment bank based in the city of London;

• The Bank is authorised and regulated by the Prudential Regulation Authority and further regulated by the Financial Conduct Authority;

• The two majority shareholders are - the Securities House in Kuwait;  and Kuwait Investment Authority

• The Bank has maintained a successful track record in real-

estate acquisitions and has profitably realised a number of investments. To date, Gatehouse Bank plc manages $1.7 Billion assets in the USA and United Kingdom.

Business Case – PRS

The growing importance of the Private Rental Sector (PRS)

•Housing is at the top of the political agenda given the supply of UK housing stock continues to fall further behind the growth in demand. The Joseph Rowntree Foundation predicts the UK will be 1.1 million homes short by 2022 without a dramatic increase in supply •Resulting in the growth of the PRS: growing from 10% of all households in 2000, to 17.4% in 2012 and predicted to grow to 20% by 2020 and continue to grow •PRS has now overtaken the social rented category in terms of size & importance •This at a time the Government is under pressure to continue to cut state assistance into social housing ensuring PRS will continue to have an important role to play in the UK housing sector for some time to come

Business Case – PRS

Who occupies Private Rental properties? The pattern of occupancy in PRS has driven the selection of property type and the marketing strategy to attract the optimum tenant profile we are targeting •Given the reduction in available mortgage lending, under 40’s are a strong driver of growth in PRS and they now account for half of all tenants.

•Multi – person households make up 75% of private rented households with children forming part of 33% of all rental households.

• As a result we are creating a portfolio of 2, 3 & 4 bed roomed houses designed for our optimum tenant profile of young couples and aspiring families.

Business Case – PRS

The Rental Sector

•Despite the growing importance of the PRS it remains fragmented – 80% of all properties being owned by landlords with 4 or less properties – There are several thousand individual / independent letting agents servicing the

sector

•This fragmentation of the sector has resulted in – Poor quality and under investment in housing stock – Poor customer service to both landlords & tenants

•This has resulted in growing political pressure to legislate and police the lettings sector •The property management solution has been designed to provide a dedicated, coordinated professional approach , to ensure that

– The properties are professionally managed and cared for – Tenants are properly looked after and become advocates

Business Case

The Solution; •Build a geographically balanced Portfolio of privately rented properties in locations across the UK where there is a strong demand for rental Property and a lack of quality product available. It is intended that the Portfolio will stabilise at a high occupancy level, underpinned by this demand.

•Implement a branded, institutional management platform which will maintain a high occupancy level and maintain the original high quality of the Portfolio.

•The JV strongly believe that a well managed, new build Portfolio of privately rented Properties will create an attractive investment opportunity with multiple exit strategies.

•There is an evident gap in the market and the unique structure put in place by Sigma provides the perfect platform;

Business Case

Economies of Scale: •Due to the size of commitment, and the D&B nature of the procurement process, the JV is able to deliver the units at a discount to Market value. With all national forecasts pointing to capital and rental growth, the investment is effectively de-risked.

•The volume of units allows the JV to implement an institutional management platform which will target 95% plus occupancy once stabilised

•High Quality product, matched with professional tenant management will ensure minimal voids and significant repeat business. – in what is currently a hugely fragmented sector;

•Direct Lettings will be appointed as lettings and property manager, allowing us to access their 30 strong branch network

Programme

A delivery programme has been established for each of the phase 1 22 sites. It should be noted that some of the sites will commence immediately the debt finance is committed. All Sites have planning status, detailed, outline or are zoned for residential in established communities. There are no green-field sites in the portfolio;There is virtually no planning risk in the structure, all planning authorities are known to us, and have had pre-development discussions where appropriate. Phase 1 to be completed within 12 months from commencement – with first occupancies summer 2014.Phases 1-4 (Tranche 1) to be completed within 24 months

PIPELINE FOR NEW SITESSite Example – New Broughton Ph6

NEW BROUGHTON VILLAGE: PHASE 6 MANCHESTER, M7 1GJ Phase 1: 66 Units

Location

Location New Broughton Village is situated approximately 1 mile (1.6km) north west of Manchester City Centre in a highly accessible location adjacent to the A5066 which is a principal thoroughfare linking onto the inner ring road and from there into Manchester City Centre or out to the wider road and motorway network. Salford Crescent Railway Station is 1.5 miles (2.4km), Piccadilly Main Station is 2.5 miles (4km) and Manchester Airport is 12.5 miles (20.1km).

Salford was originally a township in the parish of Manchester but now has its own City status and has in recent years seen significant regeneration and development most notably in the Salford Quays area including MediaCityUK (home amongst others to the new major BBC complex and Granada Television), Imperial War Museum North and Lowry Centre. Other major attractions include Salford University which has approximately 19,000 students.

New Broughton Village is conveniently located in the south east periphery of Salford close to Manchester City Centre, Salford University 1 mile (1.6km) and Salford Quays 1 mile (1.6km). In addition the site is adjacent to Peel Park and more locally Albert Park and excellent local amenities and shopping. The £500m development of Lower Broughton is one of the largest regeneration projects in the UK and is widely acclaimed for the transformation of the area including the new River View Primary School and Lower Broughton Children’s Centre on site.

PIPELINE FOR NEW SITESSite Example – New Broughton Ph6

The original housing on the site has been demolished leaving cleared sites ready for development. The subject sites form part of the larger New Broughton Village development by Countryside Properties which has been a great success. The development is to comprise a mix of houses and apartments with to date approximately 206 private for sale houses and 200 private for sale apartments completed. The majority of the latter in the Vibe residential block which also comprises local amenities. In addition to residential and local amenities the new River View Primary School and Lower Broughton Children’s Centre have been completed on the site with excellent facilities for the local community. This site is held subject to a ground lease from Salford Council for a term of 999 years at a peppercorn. New Broughton Outline Planning Consent Application No: 06/52316/OUT Proposal: Demolition, conversion and redevelopment of 22.8ha of land and buildings for residential, leisure, education, business, retail, cafes, restaurants etc Status: Outline Consent Approved March 2006. Reserved Matters application for Phase 6 Approved for 66 Dwellings and associated works. Ref: 12/62502/EIAHYP, Dated 08 March 2013

Lettings Suitability & Strategy

• New build Product. Specification equivalent to same price point for sale units.

• Care in selection of finishes, to ensure quality, durability and low maintenance;

• All units come with 10 year NHBC & all equipment / white goods with 5 year manufacturers warranties;

• Design attention to quality of environment, and outlook.

• Above industry standard in external site landscaping, plot positioning

5.DL letting stuff

Key Messages •New housing product being built in areas of high demand, but often poor / ageing choice of rental product;

•Sites in area of high employment, adjacent or within regeneration areas. JV benefits from but helps to underpin previous investment, in the likes of schools, local retail and health care facilities;

•In order to achieve the predicted absorption rates - we only need a maximum of 5% of a sustainably buoyant and plentiful local rental market with a superior and local market appropriate housing product . We have significant confidence in the absorption rates implicit in the model;

•We will generate sufficient interest from quality tenants to let the available stock and given the phased ramp up of development look to create a waiting list to minimise voids at completion

•We will do that in a way that looks to establish a local brand presence and reputation for customer experience to support the growth in yield over time, that is warranted by the premium product being offered.

Letting Suitability

Local Demand for Private Rental Properties Between May 2012 and May 2013 the average rents have increased by 2.5% nationally All three areas exceed the national proportion of households in the PRS • Salford has 19% in PRS or 19,420 properties with an

estimated 900 new tenancies created every month • Liverpool has 23% in PRS or 48,290 properties and has an

estimated 2,400 new tenancies created every month These figures ignore the obvious benefit that we have by having a new premium product compared to the indigenous rented housing stock which is generally of poor quality and the opportunity this gives us to create an accelerated demand for “switchers” looking to trade up to a higher quality home

 

England Salford Liverpool

Households Percentage Households Percentage Households Percentage

Owner Occupied 13,975,024 63.3 52,126 50.3 96,947 46.9

Social Housing 3,903,550 17.7 29,819 28.8 57,485 27.8

Private Rented 3,715,924 16.8 19,420 18.8 48,290 23.4

Lettings Strategy - Securing tenantsLettings Strategy - Securing tenants Lettings Strategy Local Markets – Salford & Liverpool

Quality & Availability of Housing Stock - Properties listed on Rightmove within 3 miles of the site Salford: We need less than 2.5% of the monthly churn of the rental properties within 3 miles and price range - with a superior product

Liverpool: We need less than 5% of the monthly churn of the rental properties within 3 miles and price range - with a superior product

Lettings Strategy Local Markets – Salford, Liverpool

Marketing Strategy: Taking account of the national and local data & aims not to just attract tenants - but the right tenants

Persistency of rental payments and property upkeep being key goals - well kept homes in a tidy street scene, drives a growth in yield over time To do this we will not only attract the right tenants but expertly manage them in a way that encourages longevity and creates advocacy - minimises voids

Advertising & PR: To generate and maintain demand and awareness By differentiating this brand as a product - and as a landlord By building significant awareness of each development to create a waiting list Via Press & PR, online marketing, local media and portals, signage

Fulfilment: We ensure that our Lettings Negotiators have the relevant skills and resources to let the available stock and create pent up demand

Real-time enquiry management & data mining Proactive sales management Personalised local service for prospective tenants

Key features - Establishes the brand and reputation Professional landlord - In it for the long term Purpose built, quality properties - Designed and built to attract quality tenants

- Well maintained and energy efficient Expertly managed & maintained - Customer-centric approach - we care about tenants

- 24 hour emergency support

Lettings Strategy - Securing tenants

All properties will be managed centrally from Shepherds offices in Nottingham with local presence being provided by our Letting Agents and our own in-house maintenance team.

Taking Care of the Tenants

Conclusion

• Integrated Approach • Ability to kick start Regeneration and Housing projects

• Short time span of delivery

• Based on sound funding principles

• Increasing value of investment

• Good management and quality of portfolio

• Large scale housing delivery outside London