DISCLAIMER This presentation has been prepared by Property For - - PowerPoint PPT Presentation

DISCLAIMER

2 This presentation has been prepared by Property For Industry Limited (PFI or the Issuer) in relation to the offer of bonds described in this presentation (Bonds). The offer of the Bonds is made in the product disclosure statement dated 2 November 2017 (PDS),which has been lodged in accordance with the Financial Markets Conduct Act 2013 (FMCA). The PDS is available through www.companiesoffice.govt.nz/disclose or by contacting a Joint Lead Manager or any other Primary Market Participant, and must be given to investors before they decide to acquire any Bonds. No applications will be accepted or money received unless the applicant has been given the PDS. Capitalised terms used but not defined in this presentation have the meanings given to them in the PDS. The information in this presentation is of a general nature and does not constitute financial product advice, investment advice or any recommendation by the Issuer, the Supervisor, the Arranger, the Organising Participant, the Joint Lead Managers or any of their respective directors, officers, employees, affiliates, agents or advisers to subscribe for, or purchase, any

• f the Bonds. Nothing in this presentation constitutes legal, financial, tax or other advice.

The information in this presentation does not take into account the particular investment

• bjectives, financial situation, taxation position or needs of any person. You should make your
• wn assessment of an investment in the Issuer based on the PDS and should not rely on this
• presentation. In all cases, you should conduct your own research on the Issuer and analysis
• f any offer, the financial condition, assets and liabilities, financial position and performance,

profits and losses, prospects and business affairs of the Issuer, and the contents of this presentation. PROPERTY FOR INDUSTRY DISCLAIMER This presentation contains certain forward-looking statements with respect to the Issuer. All

• f these forward-looking statements are based on estimates, projections and assumptions

made by the Issuer about circumstances and events that have not yet occurred. Although the Issuer believes these estimates, projections and assumptions to be reasonable, they are inherently uncertain. Therefore, reliance should not be placed upon these estimates or forward-looking statements and they should not be regarded as a representation or warranty by the Issuer, the directors of the Issuer or any other person that those forward- looking statements will be achieved or that the assumptions underlying the forwarding- looking statements will in fact be correct. It is likely that actual results will vary from those contemplated by these forward-looking statements and such variations may be material. The information in this document is given in good faith and has been obtained from sources believed to be reliable and accurate at the date of preparation, but its accuracy, correctness and completeness cannot be guaranteed. None of the Joint Lead Managers or Supervisor nor any of their respective directors,

• fficers, employees, affiliates or agents have independently verified the information

contained in this presentation. The offer of Bonds is being made only in New Zealand. The Bonds may not be offered or sold directly or indirectly, and neither this presentation nor any other offering material may be distributed or published, in any jurisdiction other than New Zealand. Application has been made to NZX for permission to quote the Bonds on the NZX Debt Market and all the requirements of NZX relating thereto that can be complied with on or before the distribution of this presentation have been duly complied with. However, NZX accepts no responsibility for any statement in this document. NZX is a licensed market

• perator, and the NZX Debt Market is a licensed market under the FMCA.

Unless otherwise stated, all figures are given as at and for the period ended 30 June 2017.

▪ PFI is offering up to $75m (plus up to $25m in oversubscriptions) of senior secured fixed rate 7 year bonds (the “Bonds”) (the “Offer”) ▪ The proceeds of the Offer are expected to be used to repay existing bank debt of the PFI Group and result in PFI having a more diversified funding base with a longer debt maturity profile ▪ The Bonds will be secured by the Mortgages granted by P.F.I. Property No. 1 Limited (“PFI Property”, a subsidiary of PFI) as Guarantor over the Mortgaged Properties which will have a total value of approximately $1.14bn1 ▪ The interest rate on the Bonds is expected to be set on 10 November 2017, and will not be less than 4.55%, with an indicative margin range of 1.65%-1.80% ▪ The Bonds are expected to be quoted on the NZX Debt Market on 29 November 2017

OVERVIEW OF THE OFFER

5 PROPERTY FOR INDUSTRY OVERVIEW

Fletcher Building Products, 30-32 Bowden Road

1. The total value of the Mortgaged Properties was approximately $1,062.7m as at 30 June 2017. The total value of the Mortgaged Properties is expected to increase to $1,135.4m on registration

• f the Mortgages over the nine properties recently acquired by PFI (the “Acquisition”). Registration is expected to occur before the Issue Date

INTRODUCTION & CREDIT STRENGTHS

6 PROPERTY FOR INDUSTRY OVERVIEW

Fisher & Paykel Appliances, 78 Springs Road, East Tamaki 686 Rosebank Road, Avondale 78 Springs Road, East Tamaki

Note: all statistics pro forma as at 30 June 2017, adjusted for the Acquisition and the corresponding $70m renounceable rights issue expected to complete on 7 November 2017 (the “Equity Raising”)

▪ Established in 1993, PFI is the only NZX listed property vehicle focused on industrial property ▪ $1.17bn portfolio with an 82% weighting to Auckland, New Zealand’s gateway and commercial hub ▪ Experienced internalised management team supported by a strong governance framework ▪ Proven track record with a history of stable earnings and 99.6% occupancy ▪ Sound risk management and portfolio metrics with company gearing of 32.3% and a 5.4 year WALT ▪ Liquid assets with an average size of $13m

Founded Listed Managed by AMP Managed by PFIM Merger Rights Issue Internalisation

• 200

400 600 800 1,000 1,200 Investment Properties $m

Rights Issue

7

MANAGEMENT & GOVERNANCE

▪ The management of PFI was internalised in June 2017 ▪ The management team is widely regarded and has extensive experience in the ownership, management and development of industrial property ▪ The board comprises five directors: four independent, including the Chair, and one Managing Director

PROPERTY FOR INDUSTRY OVERVIEW PFI’s growth in Investment Properties since listing

STRATEGY

8

▪ PFI’s strategy has always been to invest in quality industrial property in prime locations, believing that this investment focus has the potential to deliver attractive returns to shareholders with a low level of volatility: our average annual return to shareholders since inception has been ~9.6%1 ▪ The group aims to drive returns by:

• Active asset management: Managing vacancy

and upcoming lease expiries

• Acquisitions: Opportunistically pursuing both core

and value-add industrial acquisitions

• Development: Maximising utilisation of surplus

land

• Divestments: Divesting when value has been

maximised and an opportunity to recycle capital into industrial property arises 232 Cavendish Drive, Manukau

PROPERTY FOR INDUSTRY OVERVIEW

1. As at 30 June 2017

PORTFOLIO SNAPSHOT & CHARACTERISTICS

10

▪ PFI’s portfolio is diversified across 92 properties and 148 tenants, with 99.6% occupancy and a WALT of 5.4 years, weighted towards Auckland industrial property

PROPERTY FOR INDUSTRY PORTFOLIO & MARKET

▪ Industrial property is a unique asset class, assets are typically:

• Smaller (PFI average: ~7,700 sqm) and consequently more

liquid (PFI average: ~$13m)

• Generic and occupied by a single or small number of tenants

(PFI average: 1.6 tenants per property), making them less management intensive

• Requiring lower levels of capex and present a reduced

seismic risk

Note: all statistics pro forma as at 30 June 2017, adjusted for the Acquisition

11

TENANTS & LEASES

▪ PFI’s smooth lease expiry profile supports low volatility of rental income ▪ Since 30 June 2017, a further 3.8% of 2017 expiries and 0.3% of vacancy has been leased, leaving just 1.4% through to 31 December 2017 ▪ PFI’s top 10 tenants (featuring leading local and international companies) lease 25 properties and pay ~35% of the company’s rent

PROPERTY FOR INDUSTRY PORTFOLIO & MARKET

Note: all statistics pro forma as at 30 June 2017, adjusted for the Acquisition, unless otherwise stated

12 PROPERTY FOR INDUSTRY PORTFOLIO & MARKET

HISTORICAL OPERATIONAL PERFORMANCE

▪ Since 2007, PFI has achieved a year end average occupancy of 98.6% and WALT of 4.8 years

MARKET UPDATE

13

▪ CBRE’s August 2017 report showed high levels of occupier demand for industrial property, with Auckland industrial vacancy of just 1.6% or 196,900 sqm ▪ Colliers International October 2017 “Commercial Property Investor Confidence Survey” showed a high level of investor confidence in industrial property ▪ ANZ’s “Truckometer” (see graph on right) illustrates a strong correlation between Prime Industrial Yields and the Heavy Traffic Index, and the Truckometer “direction

• f travel” suggests yields could tighten further

▪ A mix of strong economic growth, favourable occupier supply and demand dynamics and high levels of investor market confidence has seen industrial property yields falling a further ~30 basis points (0.3%) in the past year (CBRE, October 2017)

PROPERTY FOR INDUSTRY PORTFOLIO & MARKET

1H17 RESULTS SUMMARY

15

▪ Successful internalisation of the management of PFI while ensuring the continuity of the highly experienced management team ▪ Including the impact of the internalisation, PFI recorded a loss after tax for the six months to 30 June 2017 of $5.6 million

• r 1.25 cents per share and net tangible assets of 155.6 cents per share

▪ Excluding the impact of the internalisation, PFI recorded profit after tax for the six months to 30 June 2017 of $25.2 million or 5.58 cents per share (up 12.2% on the prior period) ▪ Distributable profit for the six months to 30 June 2017 up 2.4% on the prior period to 3.86 cents per share ▪ Increased guidance: distributable profit of between 7.70 and 7.90 cents per share, cash dividend of 7.45 cents per share ▪ $6.0 million uplift from independent revaluation of seven properties, independent desktop review of remainder of the portfolio

Notes: extracted from PFI’s interim results announcement, refer https://www.nzx.com/companies/PFI/announcements/305229 for more detail. The internalisation of management is a significant one-

• ff event. In order to provide a basis for comparison, some measures have been presented excluding the impact of internalisation. Further, distributable profit is non-GAAP financial information used

by the PFI Board to assist in determining dividends to shareholders (calculated in note 4.1 of the 30 June 2017 financial statements). Please refer to the interim results announcement for more detail as to how these measures were calculated.

PROPERTY FOR INDUSTRY FINANCIAL RESULTS & CAPITAL MANAGEMENT

PFI TOTAL SHAREHOLDER RETURN1 (“TSR”)

16

▪ PFI’s average annual return to shareholders since inception has been ~9.6%2 ▪ 10 year TSR

• utperformed NZX50 &

Property indices

PROPERTY FOR INDUSTRY FINANCIAL RESULTS & CAPITAL MANAGEMENT

1. Cash dividends plus change in share price, assuming dividends are reinvested. Source: IRESS 2. As at 30 June 2017

PFI TSR relative to NZX 50 Gross Index and Property Gross Index (Rebased to 100)

17

FIVE YEAR FINANCIAL SUMMARY

($m, unless noted) Dec-12 Dec-13 Dec-14 Dec-15 Dec-16 Operating revenue 29.4 48.1 63.8 66.9 71.1 Total operating earnings 17.2 26.9 36.9 36.6 43.1 Total comprehensive income after tax 26.9 40.5 59.9 72.8 123.4 Total assets 384.6 877.0 906.9 1,027.2 1,121.8 Total liabilities 134.5 341.8 341.9 369.2 365.7 Total equity 250.1 535.2 565.0 658.0 756.1 Banking covenants: Company gearing (threshold 50%) 29.9% 37.4% 35.8% 33.3% 30.1% Interest cover ratio 3.1x 3.2x 3.0x 2.9x 3.4x

PROPERTY FOR INDUSTRY FINANCIAL RESULTS & CAPITAL MANAGEMENT

▪ The last five years has seen strong growth in rents and values whilst keeping gearing at low levels and maintaining a high ratio of interest cover

CAPITAL MANAGEMENT

18 30 June 2017 Drawn debt $375.6m1 Facilities limit2 $415.0m Facilities headroom $39.4m1 Weighted average debt term to expiry (“WATE”) 3.1 years Facilities banks ANZ, BNZ, CBA, Westpac Company gearing 32.3%1 Interest cover ratio 3.6 times Weighted average cost of debt 4.78%

▪ PFI enjoys strong banking relationships in the NZ market but values diversification, tenor and

• ptionality

PROPERTY FOR INDUSTRY FINANCIAL RESULTS & CAPITAL MANAGEMENT

▪ Mortgaged Properties are mortgaged in favour of a non-bank security trustee, who holds mortgages for the benefit of all secured lenders

1. Pro forma as at 30 June 2017, adjusted for the Acquisition and Equity Raising 2. Excludes the $70m short-term institutional credit facility established for the Acquisition which is expected to be cancelled upon allotment of the Equity Raising

PFI’s swap cover and swap interest rate

187.5 187.5 75.0 25.0 50 100 150 200 FY17 FY18 FY19 FY20 FY21 FY22 FY23 FY24 FY25 Bank facilities Bonds

▪ Proceeds of the Offer are expected to be used to repay existing bank debt of the PFI Group, resulting in PFI having a more diversified funding base with a longer debt maturity profile ▪ PFI currently has a WATE of debt facilities of 3.1 years. Post the completion of the Offer, the WATE is expected to increase to 4.0 years1 on a pro forma basis

DEBT FACILITY MATURITY PROFILE

19 PROPERTY FOR INDUSTRY FINANCIAL RESULTS & CAPITAL MANAGEMENT

Pro forma debt facility maturity profile ($m)1

1. Assumes $100m (including oversubscriptions of $25m) of Bonds are issued and the existing $40m institutional credit facility is cancelled. The calculation excludes the $70m short-term institutional credit facility established for the Acquisition which is expected to be cancelled upon allotment of the Equity Raising

KEY TERMS OF THE OFFER

21

Full details of the offer are contained in the Product Disclosure Statement (PDS) which was lodged 2 November 2017 1. Refer to Section 5 of the PDS for more details

Issuer Property for Industry Limited Description of the Bonds Senior secured fixed rate bonds Guarantee and Security Guaranteed by PFI Property No. 1 Limited (“PFI Property”), which holds all property assets of the PFI Group. Secured by Mortgages granted by PFI Property as Guarantor over the Mortgaged Properties Term 7 years, maturing 28 November 2024 Offer amount Up to $75 million (with the ability to accept oversubscriptions of up to $25 million at PFI’s discretion) Interest Rate Set following the bookbuild on 10 November 2017 as the higher of the sum of the applicable swap rate and issue margin, and the minimum rate, as determined by the Issuer and the JLMs, and announced via NZX shortly thereafter Minimum rate 4.55% Indicative issue margin 1.65%-1.80% Interest payments Quarterly in arrear in equal payments on 28 February, 28 May, 28 August and 28 November each year until the Maturity Date Bond financial covenant (LVR) Outstanding borrowed money secured by Mortgages is not more than 50% of the value of Mortgaged Properties1 Purpose Proceeds are expected to be used to repay existing bank debt of the PFI Group Minimum application amount $5,000 and multiples of $1,000 thereafter Brokerage 0.50% brokerage plus 0.50% firm fee Quotation It is expected that the Bonds will be quoted on the NZX Debt Market under the ticker code PFI010 Credit rating PFI and the Bonds are not rated

PROPERTY FOR INDUSTRY BOND OFFER

SECURITY

22

▪ The Bonds will be secured over the Mortgaged Properties, via the Guarantee granted by PFI Property ▪ PFI estimates that (based on pro forma 30 June 2017 financial position1): ▪ The amount secured by the Mortgages is approximately $388.5m2 including borrowings of $375.6m ▪ The Mortgaged Properties will have a total value of approximately $1,135.4m3

Bond financial covenant (LVR)1 Total borrowings $375.6m Mortgaged Properties3 $1,135.4m Bond financial covenant (LVR) 33.1%

1. Based on PFI’s pro forma financial position as at 30 June 2017 adjusted for the Acquisition and Equity Raising 2. Includes interest rate swap liabilities of $10.8m and accrued interest and bank fees of $2.1m 3. The total value of the Mortgaged Properties was approximately $1,062.7m as at 30 June 2017. The total value of the Mortgaged Properties is expected to increase to $1,135.4m on registration

• f the Mortgages over the Acquisition properties. Registration is expected to occur before the Issue Date. It is PFI’s policy to mortgage all properties except in exceptional circumstances. As at

30 June 2017 there were $31.1m of properties not mortgaged 4. The property portfolio for gearing calculations is calculated using the most recent independent valuation of the property portfolio, plus the value of the Acquisition at cost

PROPERTY FOR INDUSTRY BOND OFFER

Company gearing1 Total borrowings $375.6m Property portfolio4 $1,163.6m Company gearing 32.3%

COVENANT AND DEFAULT

23

▪ The bond financial covenant (LVR) limits the ability of the PFI Group to borrow money secured by the Mortgages ▪ Restricts total borrowings secured by Mortgages to no more than 50% of the total value of Mortgaged Properties ▪ PFI will have approximately 13 months to remedy a breach of the bond financial covenant (LVR) before it will be an Event of Default, reflecting: ▪ 6 months to correct breach ▪ If breach not corrected, 20 business days to give notice of breach, including plan to remedy ▪ Further 6 months to remedy before event of default occurs ▪ Other events of default include: ▪ Failure to make payments on the Bonds ▪ Insolvency ▪ Cross-acceleration

PROPERTY FOR INDUSTRY BOND OFFER

124 Hewletts Road, Tauranga

KEY DATES

24

Event Date

PDS lodged Thursday, 2 November 2017 Firm bids due 10am, Friday, 10 November 2017 Rate Set Date Friday, 10 November 2017 Opening Date Monday, 13 November 2017 Closing Date Friday, 24 November 2017 at 5.00pm Issue Date and allotment date Tuesday, 28 November 2017 Expected date of initial quotation and trading of the Bonds on the NZX Debt Market Wednesday, 29 November 2017 Interest Payment Dates 28 February, 28 May, 28 August and 28 November First Interest Payment Date 28 February 2018 Maturity Date 28 November 2024

PROPERTY FOR INDUSTRY BOND OFFER

26

▪ Key credit strengths include: ✓ NZX listed property vehicle focused on industrial property ✓ $1.17bn portfolio with 82% weighting to Auckland1 ✓ Experienced internalised management team supported by a strong governance framework ✓ Proven track record with history of stable earnings and high occupancy ✓ Sound risk management and portfolio metrics ✓ Liquid assets

PROPERTY FOR INDUSTRY SUMMARY

SUMMARY

1. As at all statistics pro forma as at 30 June 2017, adjusted for the Acquisition