INVESTOR PRESENTATION – Q3 2018 Investing in Quality European Commercial Real Estate Assets
Why Invest in Inovalis REIT ? Strong Marke t Fundamentals in REIT’s Key Markets, France and Germany 1 Beneficial Relationship with Inovalis SA, the REIT’s External Manager 2 3 Potential to Accretively Grow NAV through Joint Ventures and Asset Repositioning Inovalis’ High Quality Portfolio Trading at Attractive Valuation Level 4 5 Attractive Distribution Yield Secured by Low AFFO Payout Ratio Office $630M 93.0% 8.06% $300.3M Asset Class Valuation Market Cap (2) (3) Occupancy Rate Distribution Yield (2) $35.7M 1,333,386 4.8 years $10.46 50.7% Unit Price (2) Weighted Average Debt-to-book value Projected NOI 2018 Gross Leasable Area Lease Term (1) (Sq. Ft.) Note : Key figures as at September 30, 2018. The closing EUR/CAD exchange rate as at this date was 1.5064. (1) Represents weighted average lease term for end of lease period. Weighted average lease term including early termination rights equal to 4.0 years. (2) Unit price, distribution yield and market cap have been calculated based on the unit price as at September 28, 2018 (3) Includes units related to the promissory notes Investor Presentation: Q3 2018 2
STRONG MARKET FUNDAMENTALS IN REIT’S KEY MARKETS, FRANCE AND GERMANY
1. Investing in the Greater Paris Region and Germany Greater Paris Region Germany 0.5% 1,005 €3,467 billion Harmonized consumer €650 billion price index. Eurozone Population density per average 0.2% German GDP. Share of 1,300 km² EU’s GDP around 30% The GDP of the Paris region - 31% of the The number of GDP of France identified areas of economic activity 82.7 million Population 3.4% Unemployment rate. Fewer than 2.8 million unemployed 12.1 million 2.2% The number of inhabitants, 18% of the GDP growth. EU French population 53.1 million m² average 1.5% 1,054,800 Of leasable office space 87% Companies 44.7 million €58.2 billion The share of employment People in employment. Investment turnover. Highest figures since concentrated in the over 2017; +40%, best reunification service sector result since 2007 Sources: Johan / BNPParibas Real Estate Research Investor Presentation: Q3 2018 4
2. Investing in the Largest Global Office Markets Office Real Estate Inventory (M sq.ft) France Germany 2 nd largest economy in the Eurozone ▪ ▪ Largest economy in the Eurozone 5 th largest economy and 6 th largest exporter in the world 4 th largest economy and 3 rd largest exporter in the world ▪ ▪ ▪ ▪ HQ for 31 Fortune 500 companies HQ for 32 Fortune 500 companies ▪ ▪ Historically low interest rates Historically low interest rates ▪ ▪ A diverse tenant base and a healthy level of occupier demand Product diversity matching a broad range of investment criteria ▪ ▪ A strong investment market Low rental price level leaves room for future upside ▪ ▪ Limited office supply with potential rental growth Asset liquidity facilitates smooth entry and exit ▪ ▪ A world leading high-end retail market Strong investor appetite proves attractiveness of German property ▪ ▪ Logistics hotspot, the place to be for hotels Structural stability minimizes external risks Sources: Cushman & Wakefield LLP, C&W for USA GLA, CBRE for Canada GLA, JLL for New York GLA, Organisation Régionale de l’im mobilier d’entreprise for France GLA, BulwienGesa AG Statistic for German GLA, and JLL for Greater London GLA. Investor Presentation: Q3 2018 5
3. Overview of France and Germany’s economic conditions France and Germany – GDP Growth France Germany Canada 5% 4.1% 4% 3.7% 3.1% The French and German economies 3.1% 3.1% 3% 2.9% have grown at a resilient pace since 2.5% 2.2% 2.2% 2.2% 2.2% 2.2% 2.1% 2.1% 2% 1.9% 1.9% the global financial crisis 1.8% 1.8% 1.7% 1.7% 1.7% 1.7% 1.6% 1.5% 1.4% 1.2% 1.1% 1.0% 1.0% 1% 0.6% 0.5% 0.5% 0.3% 0% 2010 2011 2012 2013 2014 2015 2016 2017 2018F 2019F 2020F France and Germany – Unemployment Rates France Germany 12% 10.3% 10.4% 10.3% 10.1% 10% 9.8% 9.4% 9.3% 9.2% 9.1% 9.0% 8.6% 8.1% Unemployment rates in France and 8.1% 8% 7.7% 7.0% 6.8% 6.8% 6.7% Germany have steadily declined 6.4% 6.1% 6% 5.7% in recent years and are expected to 5.2% 4.9% 4.8% decrease going forward. 4% 2% 0% Source: BMO Capital Markets, Bloomberg 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018F 2019F 2020F Investor Presentation: Q3 2018 6
4. Interest rate and inflation environment: France and Germany France & Germany – Inflation Rates Rising inflation rates in the French and German economies provide tailwinds for future office rent growth. France and Germany – Interest Rates Interest rates in France and Germany have steadily declined in recent years. Source: BMO Capital Markets, Bloomberg Investor Presentation: Q3 2018 7
5 . Overview of Paris’ and Germany’s office market Greater Paris Region – Office Cap Rates Office cap rates in the Greater Paris Region continue to compress since Inovalis REIT’s IPO, providing further upside to the REIT’s valuation Germany – Office Cap Rates Office cap rates in all major German cities have continued to decline steadily since 2014 and are currently in the low-3% range Source: BMO Capital Markets, Colliers Investor Presentation: Q3 2018 8
6. Portfolio Overview ▪ Capital appreciation & AFFO growth | Economic trends ▪ Long lease terms | Stable revenue streams ▪ High asset liquidity | Financial flexibility ▪ High quality tenants | Security of cash flow Baldi Courbevoie Diamants Hamburg GREATER Jeûneurs Hanover PARIS Berlin REGION Metropolitain Rueil Malmaison Duisburg GERMANY Düsseldorf Sabliere Cologne Vanves Arcueil Bad Homburg Frankfurt Paris Existing Properties FRANCE Ingolstadt Stuttgart Munich Portfolio Overview - As at Portfolio Overview - As Bad Jeuneurs Courbevoie Vanves Sablière Baldi Metrop Arcueil Diamant France Hanover Duisburg Stuttgart Neu-Isenburg Kösching Germany September 30, 2018 at September 30, 2018 Homburg Gross Leasable Area (GLA) Gross Leasable Area 50 407 95 903 258 673 41 043 123 657 78 818 83 633 71 627 803 761 124 074 108 959 54 553 121 416 67 566 53 058 529 626 (sq.ft) (GLA) (sq.ft) WALT (end of lease) 11,3 2,3 4,6 5,4 4,5 9,2 5,7 WALT (end of lease) (Years) 2,3 3,2 3,2 4,3 3,7 6,8 4,4 3,3 3,9 (Years) Investor Presentation: Q3 2018 3
BENEFICIAL RELATIONSHIP WITH INOVALIS SA, THE REIT’S EXTERNAL MANAGER
1. Inovalis – a history of value creation Since inception in 2013, Inovalis REIT is externally managed by Inovalis SA, which is a privately-owned- European real estate and investment company with around C$10bn in real estate and financial assets under asset management. With its asset management team of professionals, which brings in a 20-year-experience in the European real estate markets, it has extensive control of the value-added chain : ▪ Sourcing and managing core + assets in France, Germany and a selected number of other European countries; teams with hands-on experience and knowledge of the local markets; ▪ Sourcing and managing development and forward financing deals, thus achieving high margins. This has been the case on the Rueil Malmaison and Kösching deals; ▪ Raising funds worldwide ▪ either through joint-ventures or private placement, thus creating additional growth and diversification opportunities for the REIT; ▪ but also profit enhancing deal structuring opportunities, as on the Arcueil deal. Inovalis REIT has continued to distributed over 8% per annum, exceeding what most competitors are able to deliver on comparable markets for the same category of products. Investor Presentation: Q3 2018 11
2. Overview of Inovalis S.A. – A Major Local Market operator 1998 | Inovalis was established in 1998 in Paris | Inovalis manages € 7 billion ($10 billion) of real estate and financial assets, owing to its fully CAD 10 BN integrated services. 1,000+ assets managed by our affiliates. | Inovalis creates investment vehicles and provides advisory services through its Fund, Investment & 350 Asset Management, Real Estate services and Wealth Management teams comprising 350 professionals . 2nd largest French commercial property management team and 3rd wealth management salesforce in France for private investors. | With offices in Europe, America and Middle-East Inovalis partners with Institutional and Private investors. Strong relationships with lenders, developers, property brokers, and tenants. | Co-investment on average of 10% to 20% with mainly non-European partners: sovereign wealth and pension funds, private banks, family offices Investor Presentation: Q3 2018 12
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