Opportunities and Hurdles for Investors in Light Industrial Properties Experiences from the German Market Tom de Witte CFRO Geneba Properties NV Sommerconferenz Darmstadt, 7 July 2016 15.07.16
Contents 1 Introduction Geneba 3 2 Examples of Light Industrial Acquisitions 10 3 Requirements from Capital Markets Investors - Hurdles and Opportunities 15 4 Recommendations 21 GENEBA PROPERTIES N.V. 15.07.16 2
GENEBA PROPERTIES N.V. Introduction Geneba
Company profile Geneba Properties N.V. Shareholder structure Ø European commercial real estate company Ø Focusing on CORE Europe: Germany and the Netherlands 14% owned by retail investors ( > 5,000 individual investors Ø Headquartered in Amsterdam with an additional representative office in Munich Ø Started business in March 2014 Ø Portfolio of around EUR 750 million Ø Listed at NPEX Ø AIFM license 86% owned by two private equity funds managed by Catalyst Capital Group Inc., Canada GENEBA PROPERTIES N.V. 15.07.16 4
Mission and strategy Internally managed Asset Manager: Ø Geneba manages its assets through local offices and in close contact with its tenants. Consequently, Geneba provides home to the businesses of its tenants. Strong Corporate Focus: Ø Geneba s portfolio consists of commercial properties - leased to large and medium-sized quality tenants - which are strategically essential/crucial for the purposes of the tenant s operational activities in their specific industries. Continued Growth with good, stable and sustainable results: Ø Geneba follows a clear growth strategy and continues to expand its property portfolio through acquisitions. The investment focus and growth strategy is on Logistics and Light Industrial properties in Germany and the Netherlands. Modern Compliance and Governance: Ø Based on its AIFMD license a state of the art compliance, property valuation and governance system was installed and is implemented from the top. GENEBA PROPERTIES N.V. 15.07.16 5
Investment profile The investment strategy is focused on real estate assets that serve corporates and large Mittelstand companies as bases for their operational business 1 Sector(s) Logistic properties Light Industrial properties 2 Geographical focus Germany The Netherlands 3 Tenant focus Real estate assets that serve corporates as a base for their operational business Special focus will be given to properties occupied by Mittelstand companies and big industrial businesses, including Sale and Leaseback transactions 4 Investment term Focus on long-term leased properties providing a stable rental income Minimum lease term of 7 years 5 Management Active management focussing on operational growth and support of the business on site including development, re-development and expansion 6 Investment size Minimum investment size of EUR 10 million GENEBA PROPERTIES N.V. 15.07.16 6
Geneba at a glance Total portfolio value Geneba Total value Properties portfolio: approx. N.V. EUR is a 775 European million* commercial real estate company that commenced business in 2014 and is headquartered in Amsterdam, the Netherlands. The company owns and manages a property portfolio of more than EUR 700 million consisting of long-term leased commercial real estate at strategic Portfolio locations. Portfolio Sector Geographical The portfolio consists of corporate real estate assets which serve its tenants as operational basis, providing a home for their businesses. Geneba s shares are traded at NPEX. Geneba is subject to the supervision of the AFM. For more information, please go to www.geneba.com * Note: fully invested, un-audited and recent acquisitions at cost Selection of tenants Geneba Properties N.V. is a European commercial real estate company that commenced business in 2014 and is headquartered in Amsterdam, the Netherlands. The company owns and manages a property portfolio of more than EUR 700 million consisting of long-term leased commercial real estate at strategic locations. The portfolio consists of corporate real estate assets which serve its tenants as operational basis, providing a home for their businesses. Geneba s shares are traded at NPEX. Geneba is subject to the supervision of the AFM. For more information, please go to www.geneba.com Key metrics (April 2016) Annualized rental income Rental area Occupancy WALT 8 years EUR 70.8 million 789,000 m² 99.2% Rating 62% of income from tenants rated investment grade GENEBA PROPERTIES N.V. 15.07.16 7
Key metrics Tenant base New tenants In EUR millions In EUR millions Annualized rental income Note: financials based on pro forma, annualized fully invested figures excluding pipeline 2016 FFO CAGR 23% Note: financials based on pro forma, annualized fully invested figures excluding pipeline 2016 CAGR 85% 40 26 12 GENEBA PROPERTIES N.V. 15.07.16 8
Portfolio profile Tenant diversification by sector Food Logistics Automotive Geographical diversification Geneba office Properties Based on rent income Industrial GENEBA PROPERTIES N.V. 15.07.16 9
Examples of Light Industrial Acquisitions GENEBA PROPERTIES N.V.
Geneba s investment criteria for Light Industrial investments Pricing Acquisition yields (unleveraged) around 8% or higher Location Key established business locations in Germany and The Netherlands Light Industrial Tenant focus Investment term Building Special focus will be given to properties occupied by Mittelstand companies and big industrial businesses, including Sale and Leaseback transactions Focus on long-term leased properties providing a stable rental income Minimum lease term of 7 years High quality or newly developed Re-letting options/potential (also usable for logistics / distribution) Tenant Strong financial performance (listed, reputation or subsidiary) Strong credit rating Financing Financing available (bank or finance provider) against market conditions GENEBA PROPERTIES N.V. 15.07.16 11
Example 1: META Portfolio, South-East Germany Snapshot Three single-tenant properties Light Industrial Tenants Geneba office Properties Combined NLA: ±40,000 SQM Automotive suppliers Investment rationale + Attractive acquisition yield + Strong tenants (solid and stable financial performance, reputation and excellent credit performance) + Alternative use possible (suitable for value-add distribution due to high quality of construction) + Strong and exceptional location (adjacent to the Porsche and Volkswagen factories) + Long term leased (average WALT of 7 years) + Banks willing to finance at attractive rates Key areas of focus 1. Acquisition from developer 2. Invest in the relationship with tenants, adjusted contract with one tenant before acquisition 3. Keep an open dialogue with respect to tenant specific investments and investments for the owner 4. Capex requirements 5. Additional developments GENEBA PROPERTIES N.V. 15.07.16 12
Example 2: Constellium, Gottmadingen Snapshot Single-tenant property Light Industrial Tenant Geneba office Properties Combined NLA: ±50,000 SQM Automotive supplier Investment rationale + Attractive acquisition yield + Strong tenant (solid financial performance, listed entity (NYSE:CSTM) and S&P rating) + Strong location (established business location for Germany, French and Swiss industrial companies) + Contains multiple warehouses with proper ceiling heights and load floor capacity + Long term leased (average WALT of 12 years) + Banks willing to finance at attractive rates + Additional on-site value adding developments possible at attractive yields Key areas of focus 1. Continuously invest in the relationship with tenant 2. Keep an open dialogue with respect to tenant specific investments and investments for the owner 3. Closely monitor business on side and the quality of the buildings (capex budget) 4. Additional developments, adjacent plots GENEBA PROPERTIES N.V. 15.07.16 13
Example 3: Geneba Industriepark, Mülheim Snapshot Multi-tenant property Light Industrial Main tenant (74%) Geneba office Properties Combined NLA: 123,000 SQM Industrial products Investment rationale + Attractive acquisition yield (>10%) + Strong tenant (solid and stable financial performance, listed entity (ETR:SIE), S&P and Moody s A rating) + Medium plus location (established business location for tenants recurring business) + Long term leased (average WALT of 8 years) + Banks willing to finance at attractive rates + Additional on-site value adding developments possible at attractive yields Key areas of focus 1. Long and complex acquisition process 2. Multi-tenant makes it more management intensive 3. Invest in the relationship with existing and new tenants 4. Relatively large office exposure 5. Closely monitor business on side and the quality of the buildings (capex budget/ageing of buildings) 6. Additional developments (unused plot) GENEBA PROPERTIES N.V. 15.07.16 14
Requirements from Capital Markets Investors Hurdles and opportunities GENEBA PROPERTIES N.V.
Requirements from (institutional) investors Focus Light Industrial Long term contracts Quality buildings Quality of tenants, well spread lease structure Industry spread Size At least Eur. 1 billion Mitigates default risk Liquidity EPRA Index Institutional investment requirements Financing Conservative leverage Well-spread maturity schedule Diversification of the debt providers Corporate Governance Well managed and structured company Compliance processes and guidelines in place GENEBA PROPERTIES N.V. 15.07.16 16
Feedback from investors / investment banks on Geneba portfolio Size and diversification: further growth required Combination of logistics and Light Industrial: positive Assets located in or near urban areas / good infrastructure Light Industrial / logistics provide attractive risk / return profile Germany well perceived as investment country: high quality of production companies, strong economy Value creation evidence (some doubts in ability to create value on these type of assets) Risk on residual value of some assets, mitigated by long lease duration GENEBA PROPERTIES N.V. 15.07.16 17
Risk of residual value: How to mitigate? Be involved at early stage in development / construction process Invest in well located / connected urban areas Higher retention rate compared to other asset classes, especially when the tenant is also investing a significant portion Investment in relationship / knowledge of your tenant / its business model Create spread in portfolio with mix in industry, geographical location, limited size per property / exposure to tenants GENEBA PROPERTIES N.V. 15.07.16 18
Hurdles on lights industrial assets Acquisition process A. Owner not always willing to sell B. Acquisition process can be time-consuming and complex C. Part of the assets are tenant specific without alternative usage D. Discussions on rent levels Financing A. Difficulty to convince banks on residual value B. We finance the company instead of the real estate C. Maintenance commitments Management A. In most cases not management intensive (double/triple net contracts), except for multi-tenant properties GENEBA PROPERTIES N.V. 15.07.16 19
Market opportunities for Light Industrial real estate Higher yielding Higher retention rate Above average long term leases Low management Double/Triple Net Germany as quality producing country Option to cherry pick Market not yet developed GENEBA PROPERTIES N.V. 15.07.16 20
GENEBA PROPERTIES N.V. Recommendations
Recommendations on creating more appetite for Light Industrial 1 Additional research on retention risk of Light Industrial properties, including factors which determines the retention rate 2 From supply side: industrial companies should be more open for sale / lease back 3 Early involvement from investors in construction phase (flexibility of building for alternative usage) 4 Research on risk / return profile of Light Industrial properties compared to other asset classes 5 Create awareness under banks and finance providers on Light Industrial as specific asset class with clear metrics GENEBA PROPERTIES N.V. 15.07.16 22
Disclaimer This document and any accompanying presentation is strictly private and confidential and intended for discussion purposes only and does not create any legally binding obligations on the part of Geneba Properties N.V. ("Geneba") or its affiliates. Without limitation, this document does not constitute an offer, an invitation to offer or a recommendation to enter into any transaction. Geneba is not acting as your financial adviser or in any other fiduciary capacity with respect to any of the proposed transactions set out herein. The proposed transactions may not be appropriate for you and before entering into any transaction you should take steps to ensure you fully understand the transaction and have made an independent assessment of the appropriateness of the transaction in light of your own objectives and circumstances, including the possible risks and benefits of entering into such transaction When making a decision whether to enter into any transaction, you should rely solely on the final documentation relating to the transaction and not any summary contained herein. You should also consider seeking advice from your own advisers in making this assessment. No reliance may be placed for any purpose whatsoever on the information contained in the document and any accompanying verbal presentation or the completeness or accuracy of such information. If you decide to enter into a transaction with Geneba, you do so in reliance on your own judgment. The information contained in this document is based on material we believe to be reliable; however, no representation or warranty, express or implied, is given by or on behalf of the Geneba or its respective shareholders, directors, officers or employees or any other person as to the accuracy or completeness of the information or opinions contained in the document and any accompanying verbal presentation, and no liability is accepted for any such information or opinions (including in the case of negligence, but excluding any liability for fraud). Assumptions, estimates and opinions contained in this document constitute our judgment as of the date of the document and are subject to change without notice. Geneba accepts no obligation to disseminate any updates or revisions to any forward-looking statements. Any projections are based on a number of assumptions as to market conditions and there can be no guarantee that any projected results will be achieved. Past performance is not a guarantee of future results. The contents of this document are confidential and should not be copied, distributed, published or reproduced (in whole or in part) or disclosed by recipients to any other person without our express written permission. Geneba specifically disclaims all liability for any direct, indirect, consequential or other losses or damages, including loss of profits, incurred by you or any third party that may arise from any reliance on this document or for the reliability, accuracy, completeness or timeliness thereof. GENEBA PROPERTIES N.V. 15.07.16 23
Geneba Properties N.V. Home to Corporate Businesses in Core Europe Geneba Properties N.V. Apollolaan 153 1077 AS Amsterdam The Netherlands T +31 (0)20 26 107 13 E info@geneba.com W www.geneba.com Geneba Deutschland Advisory GmbH Seitzstraβe 23 80538 München Germany T +49 (0)89 2109 3680 24