IOF INVESTA OFFICE FUND Unitholders Meeting 27 March 2012 - - PowerPoint PPT Presentation

INVESTA OFFICE FUND

IOF

27 March 2012

Unitholders’ Meeting

CHAIRMAN’S WELCOME

3 | IOF Unitholders’ Meeting Presentation | 27 March 2012

AGENDA

• 1. CHAIRMAN’S WELCOME
• 2. FUND UPDATE
• 3. PROPOSED ACQUISITIONS
• 4. FORMAL BUSINESS
• 5. CONCLUSION

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Overarching strategy: to be Australia’s pre-eminent CBD office fund

Completed buyback



 Completed on-market 10% unit buyback in four months  Average purchase price of $0.608 or a 17% discount to the 30 June 2011 NTA per unit

Offshore asset sales



 Well progressed with offshore asset sales  Completed sale of US portfolio and Paris asset  Asset sales since December last year completed at an overall premium

• f 9.7% to book value

 Reduce number of units on issue  Improves market perception and broadens investor universe  Sale facility for unitholders with small unitholdings for no brokerage  Expect documents to be sent to unitholders during Q2 2012

Unit consolidation and sale facility



Refocus portfolio on high quality Australian assets

Proposed acquisition of 25% interest in 126 Phillip Street, Sydney and 50% interest in 242 Exhibition Street, Melbourne

The Proposal 

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• Assessment of the merits of the Proposal was only

considered by the Independent Directors, Executive Directors abstained from the consideration

• Verification by an external valuer that the purchase price for

the interests in the properties represents market value

• KPMG was appointed to provide an independent expert’s
• report. It was concluded the proposal is on arm’s length

terms and is fair and reasonable

The Independent Directors unanimously recommend that you vote in favour of the Proposal

Proposal Evaluation Independent Expert Opinion Valuation

FUND UPDATE

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Last 6 months

• Distributions of 1.95 cpu in line with guidance
• Earnings impacted by offshore portfolio
• Material increase in NTA to $0.79 per unit
• Gearing of 24.5% at low end of targeted range
• 19.5% of the portfolio re-leased
• Improved occupancy to 97%
• Extended average lease expiry to 5.3 years
• Progress on major lease expiries
• Executing on strategic initiatives
• Significant progress with offshore sales
• Further repositioning with targeted acquisitions

Financial Australian Portfolio Strategy

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Half Year to 31 December 2011

31 Dec 2011 31 Dec 2010 Net profit (statutory) $172.3m $117.6m Operating income $63.3m $70.3m3 Operating income per unit 2.4c 2.6c Distributions per unit 1.95c 1.95c Unit closing price1 $0.60 $0.55 31 Dec 2011 30 Jun 2011 Gearing (look through)2 24.5% 20.5% Net tangible assets per unit (NTA) $0.79 $0.73

• 1. Source: IRESS
• 2. Based on debt to total assets, including share of associates’ and DOF’s assets and debt
• 3. Prior year historical operating income adjusted for revised accounting treatment of amortisation of leasing commissions, previously reported $71.7m
• Net profit driven by positive revaluations
• Operating income impacted by offshore NPI and portfolio repositioning
• Gearing impacted as a result of completed buyback
• NTA uplift driven by improving valuations and offshore sales results

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Australian portfolio and offshore sales drive NTA

• 1. Includes deferred tax liability and retained earnings

Movement in NTA per unit

0.73 0.79 0.04 0.01 0.01 0.60 0.65 0.70 0.75 0.80 30-Jun-11 Revaluations Buyback FX impact & other 31-Dec-11 $

1

+8.2%

• Australian values driven by Bond Street completion and lease renewals
• Sale of US and Paris assets above book drives offshore values
• Positive contribution from completed buyback on NTA per unit

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Robust performance and improved market conditions

Key Metrics 31 Dec 2011 Net property income (NPI)1 $60.3m Like-for-like NPI growth1 1.5% Average face rental increase on renewals2 7.5% Occupancy (by income) 97% Leased 70,684 sqm Tenant retention (by income) 90% Weighted average lease expiry3 5.3 years Weighted average cap rate 7.8% Number of properties 16

• 19.5% of Australian portfolio re-leased
• Positive income growth maintained
• High tenant retention and rental growth

achieved on renewals

• 1. Effective like-for-like income growth including amortisation of leasing incentives
• 2. Percentage increase in face rents from previous passing rent to new rent post renewal
• 3. Includes leasing completed post balance sheet date

383 La Trobe Street, Melbourne

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Portfolio needs re-balancing

Classification Asset Characteristics Risk/Return Core Assets

• Premium / A-grade assets
• Longer lease expiry (4 years +)
• Higher credit tenants
• Limited capex requirements
• Stable rate of return
• Stable income profile
• Income base for distribution payments

Core Plus / Value Add

• Capable of being A-grade
• Lease expiry to match market opportunity
• Opportunity to add value through lease-up,

refurbishment or redevelopment

• Higher rate of return
• Potential short-term income volatility
• Likely higher capex spend

Tactical

• Secondary markets or fringe CBD locations
• Smaller, potentially more liquid assets
• Higher rate of return
• Limited longer term return potential
• IOF portfolio currently overweight tactical assets while underweight core and value-add assets

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To be the pre-eminent Australian CBD office fund

Redeploy capital from

• ffshore assets

Active investment management Optimise risk adjusted returns

• Sell remaining
• ffshore assets
• Further re-balance

Australian portfolio

• Continue pro-active

management of balance sheet

• Improve quality of

Australian portfolio

• Increase exposure

to core assets

• Increase exposure

to Melbourne

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A transformational opportunity

25% interest in 126 Phillip Street, Sydney 50% interest in 242 Exhibition Street, Melbourne Price: $176.3m Price: $217.5 m

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Proposed acquisitions are earnings accretive

Assumed acquisition price (before costs) Yield (before costs) Yield (after costs) Incremental Cost of Debt1 Look through gearing NTA per unit Effect of Proposal $393.75m 6.8% 6.6% 5.2% 25% $0.782 Incremental earnings impact3 (cents per unit) Forecast FY 2012 0.03 - 0.04c Forecast FY 2013 0.21 – 0.29c

• 1. Calculated as the incremental cost of debt required to fund the Proposal as at 14 February 2012 taking into account undrawn debt capacity under the existing facility and a new

tranche of debt under that facility and includes, where appropriate, base rates, margins, line fees and amortisation of established fees. The majority of the debt drawn is Australian dollar denominated with a small portion being Euro denominated. Assumed Australian base interest rate is 4.25%

• 2. NTA per unit decreases by approximately $0.01 due to writing off stamp duty and other acquisition costs immediately after the proposed acquisitions
• 3. Incremental earnings on a pre-consolidated basis of the proposal as compared to a base case of no acquisition and pay off debt. The range shows the outcome assuming Australian

base interest rates of 4.0% to 4.5%

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Advantages Disadvantages/Risks

• Efficient redeployment of capital
• Earnings accretive
• Higher risk adjusted returns
• Increases geographic weighting to key

CBD markets

• High quality tenants
• Reduced portfolio vacancy
• Minimal capital expenditure

requirements

• A unique opportunity
• Fair Price
• No direct change to Responsible Entity

fee

• Risks associated with commercial

property

• Cost of debt
• Gearing levels
• Joint ownership arrangements
• Completion of sale of 900 Third

Avenue, New York

• Unitholders may disagree with the

conclusions of the Independent Directors

FORMAL BUSINESS

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Proposed acquisition of:

• A 25% interest in the iconic 126 Phillip Street, Sydney, one of the premier

CBD office properties in Australia; and

• A 50% interest in 242 Exhibition Street, Melbourne, an A-Grade CBD
• ffice property that serves as the Telstra Global Headquarters

from members of the Investa Property Group

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The acquisition of interests

To consider and, if thought fit, to pass the following resolution as an ordinary resolution: “That, for the purposes of rule 10.1 of the Listing Rules of the Australian Securities Exchange and for all other purposes, the acquisition of a 50% interest in 242 Exhibition Street, Melbourne, Victoria and up to a 50% interest in 126 Phillip Street, Sydney, New South Wales as described in the notice accompanying this resolution be approved.”

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Results of proxy voting

Total valid votes: For Open Against

Resolution

As at proxy close: 10am Sunday 25 March 2012

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The acquisition of interests

To consider and, if thought fit, to pass the following resolution as an ordinary resolution: “That, for the purposes of rule 10.1 of the Listing Rules of the Australian Securities Exchange and for all other purposes, the acquisition of a 50% interest in 242 Exhibition Street, Melbourne, Victoria and up to a 50% interest in 126 Phillip Street, Sydney, New South Wales as described in the notice accompanying this resolution be approved.”

CONCLUSION

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Following the outcome of the voting

• Formal outcome of the voting will be lodged with the ASX later today and

will be available on the website below: www.investa.com.au/IOF (ASX & Media section)

• If the Resolution is approved, it is expected that the Proposal will be

completed by 2nd April 2012

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Position IOF to be Australia’s pre-eminent CBD office fund

Summary

• Significant progress made leasing Australian portfolio
• Four offshore assets sold
• Refined portfolio to have greater domestic focus
• Completed 10% unit buyback
• Potential transformational transaction underway

Outlook

• Forecast FY12 EPU expected to be 4.9c and

DPU to remain at 3.9c (subject to prevailing market conditions) Reminder

• Distribution payment cycle changed to half yearly

(approved by unitholders)

388 George Street, Sydney

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This presentation was prepared by Investa Listed Funds Management Limited (ACN 149 175 655 and AFSL 401414) (“Investa”) in respect

• f Investa Office Fund, which comprises of the Prime Credit Property Trust (ARSN 089 849 196) and the Armstrong Jones Office Fund

(ARSN 090 242 229). Information contained in this presentation is current as at 27 March 2012. This presentation is provided for general information purposes only and has been prepared without taking account of any particular reader’s financial situation, objectives or needs. Nothing contained in this presentation constitutes investment, legal, tax or other advice. Accordingly, readers should conduct their own due diligence in relation to any information contained in this presentation and, before acting

• n any information in this presentation, consider its appropriateness, having regard to their objectives, financial situation and needs, and

seek the assistance of their financial or other licensed professional adviser before making any investment decision. This presentation does not constitute an offer, invitation, solicitation or recommendation with respect to the subscription for, purchase or sale of any security, nor does it form the basis of any contract or commitment. Except as required by law, no representation or warranty, express or implied, is made as to the fairness, accuracy or completeness of the information, opinions and conclusions, or as to the reasonableness of any assumption, contained in this presentation. This presentation may include forward-looking statements, which are not guarantees or predictions of future performance. Any forward-looking statements contained in this presentation involve known and unknown risks and uncertainties which may be cause actual results to differ from those contained in this presentation. By reading this presentation and to the extent permitted by law, the reader releases Investa and its affiliates, and any of their respective directors, officers, employees, representatives or advisers from any liability (including, without limitation, in respect of direct, indirect or consequential loss or damage arising by negligence) arising in relation to any reader relying on anything contained in or omitted from this presentation.