PRESENTATION FULL-YEAR 2017 RESULTS 1 Strictly confidential - - PowerPoint PPT Presentation

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PRESENTATION FULL-YEAR 2017 RESULTS 1 Strictly confidential - - PowerPoint PPT Presentation

PRESENTATION FULL-YEAR 2017 RESULTS 1 Strictly confidential IMPORTANT NOTICE This presentation includes forward-looking information and Although we believe that its expectations reflected in any statements, including statements concerning the


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PRESENTATION

FULL-YEAR 2017 RESULTS

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IMPORTANT NOTICE

This presentation includes forward-looking information and statements, including statements concerning the outlook for

  • ur business. These statements are based on current

expectations, estimates and projections about the factors that may affect our future performance, including the economic conditions in the property markets relevant to us. These expectations, estimates and projections are generally identifiable by statements containing words such as “expects,” “believes,” “estimates,” “targets,” “plans,” “outlook” or similar expressions. There are numerous risks and uncertainties, many of which are beyond our control, that could cause our actual results to differ materially from the forward-looking information and statements made in this presentation and which could affect

  • ur ability to achieve any or all of our stated targets. The

important factors that could cause such differences include, among others: – business risks associated with the volatile economic environment and political conditions – costs associated with natural disasters affecting our properties – changes in governmental regulations – changes in currency exchange and interest rates, and – such other factors as may be discussed from time to time in prospectuses Although we believe that its expectations reflected in any such forward-looking statement are based upon reasonable assumptions, it can give no assurance that those expectations will be achieved. This presentation contains non-GAAP measures

  • f

performance. We provide definitions of these measures and reconciliations between these measures and their IFRS counterparts as we believe are appropriate.

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AGENDA

APRIL 13, 2018 Key achievements Financials Portfolio and growth strategy Outlook Q&A

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TODAY’S SPEAKERS

■ Vice Chairman, Varia US Properties AG ■ CEO of Stoneweg SA, the Asset Manager of Varia US Properties AG ■ Delegate of the Board of Directors, Varia US Properties AG ■ Head of US Investments

  • f Stoneweg SA,

the Asset Manager of Varia US Properties AG JAUME SABATER MARTOS PATRICK RICHARD MANUEL LEUTHOLD ■ Chairman, Varia US Properties AG

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KEY ACHIEVEMENTS

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2017 KEY ACHIEVEMENTS (1/2)

■ GROWTH ■ Size of the portfolio doubled ■ Full investment of the equity raised at IPO by end of June ■ Value-add strategy implemented ■ Strong real estate market ■ Average leverage of 60.52% ■ Average interest rate of 4.19% ■ DISTRIBUTION AND PERFORMANCE ■ USD 4.15 earnings per share (including a USD 4.8M profit from tax reform. Earnings per share without tax reform impact would be USD 3.4) ■ NAV growth to USD 34.38 (2016: USD 33.65) ■ CHF 3.45 distributed in 2017 ■ Share price increase by 9.53%

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2017 KEY ACHIEVEMENTS (2/2)

■ CONSOLIDATION ■ Reinforced acquisition and asset management team in the US ■ Additional resources for the Board of Directors ■ Strong reputation in the real estate market

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FINANCIALS FY 2017

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2017 KEY FIGURES (1/2)

EFFECTIVE GROSS INCOME

2016: USD 39.1 million

USD million

65.8

FAIR VALUE PORTFOLIO ADJUSTMENT

2016: USD 21.2 million

USD million

22.4

TOTAL INCOME

2016: USD 64.6 million

USD million

88.2

TOTAL OPERATING EXPENSES

2016: USD 33.9 million

USD million

39.2

REPAIR AND CAPEX BELOW THRESHOLD

2016: USD 5.8 million

USD million

4.9

YEAR I CAPEX INVESTED

2016: No data

USD million

6.9

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2017 KEY FIGURES (2/2)

NET OPERATING PROFIT

2016: USD 30.6 million

USD million

48.9

PROFIT FOR THE PERIOD

2016: USD 16.2 million

USD million

34.9

EARNINGS PER SHARE

2016: USD 3.37

USD

4.15

NAV PER SHARE

2016: USD 33.65

USD

34.38

NAV PER SHARE

(EXCLUDING DEFERRED TAXES)

2016: USD 35.93

USD

35.74

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PROFIT AND LOSS (CONSOLIDATED)

In USD million As of December 31, 2017 Period from Sept. 28, 2015 through Dec. 31, 2016 Rental income 59.9 36.5 Other income 5.8 2.6 Bargain on purchase of subsidiary

  • 4.2

Net gain from fair value adjustment on invest. property 22.4 21.2 Total income 88.2 64.6 Total operating expenses 39.2 33.9 Operating profit 48.9 30.6 Profit before income tax 35.7 22.0 Profit for the period 34.9 16.2 Profit attributable to: Varia US Properties AG shareholders (in USD million) 28.1 8.9 Non-controlling interests (in USD million) 6.8 7.3 NAV & Earnings per share Net asset value (NAV) per share (in USD) 34.38 33.65 Basic and diluted earnings per share (in USD) 4.15 3.37

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FINANCIAL POSITION (CONSOLIDATED)

Assets in USD million As of December 31, 2017 As of December 31, 2016 Total current assets 94.7 98.0 Total non-current assets 573.5 351.8 Total assets 668.2 449.8 Liabilities and equity in USD million As of December 31, 2017 As of December 31, 2016 Total current liabilities 47.3 8.7 Total non-current liabilities 350.6 216.2 Total liabilities 397.9 224.8 Equity attributable to Varia US Properties AG shareholders 247.6 208.4 Non-Controlling Interest (NCI) 22.8 16.6 Total equity 270.4 225.0 Total liabilities and equity 668.2 449.8

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OPERATING RESULTS (not audited)

In USD million

As of December 31, 2017 As of December 31, 2016

Realized income 65.8 39.1 Total Operating expenses (36.5) (19.2) Net Operating Income 29.3 19.9 Finance cost (13.6) (8.4) Operating results before taxes and exceptional 15.7 9.0 Expensed capex (2.6) (2.6) Exceptional expenses/gain 0.2 (9.9) Realized operating profit 13.3 (3.6) Non realized profit 22.4 25.4 Tax provision (0.8) (5.7) Profit attributable to Non-Controlling Interests (6.8) (7.3) Profit attributable to Varia 28.1 8.9

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PORTFOLIO AND GROWTH STRATEGY

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THREE INDIVIDUAL INVESTMENT STRATEGIES

■ Investment in US multifamily real estate properties situated in strong urban locations in supply-constrained markets ■ Mid- to long-term investment perspective through three individual investment strategies:

 Acquisition, refurbishment, improvement and optimizing

  • perations of real estate properties to maximize rent potential

and increase long-term value  B and C products: 15-35 years old buildings well maintained with potential to add value through refurbishments allowing rent increases  Apartments specifically built for the American workforce

Value-adding strategy

 Transition of rent and income restricted properties to non- restricted status over a defined multi-year period

Transition strategy for rent restricted properties (LIHTC)

 Further optimization of revenues and operating expenses sometimes coupled with opportunistic "value-add" to a stabilized base

Strategy for stabilized properties

Value Time

A B C

LIHTC Market rent property* Stabilized property*

Transition Value-adding

* Cycle-optimized disposals possible

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PORTFOLIO DEVELOPMENT

■ Portfolio value of USD 617.9 million ■ 50 assets ■ 8,245 units ■ 18 different States in the US ■ Florida down to 24% (2016: 41%) ■ Geographical diversification ■ Larger assets ■ Closer to metropolitan areas

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PORTFOLIO 2017 KEY FIGURES (1/2)

AVERAGE MONTHLY RENT PER UNIT

2016: USD 674

USD

716

GROSS POTENTIAL INCOME

2016: USD 49.7 million

USD million

83.9

AVERAGE MARKET VALUE PER UNIT

2016: USD 64,160

USD

74,950

OCCUPANCY RATE

2016: 95.5%

94.3%

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PORTFOLIO 2017 KEY FIGURES (2/2)

NET CASH FLOW

2016: USD 8.2 million

USD million

16.7

ANNUALIZED CASH FLOW

2016: USD 8.6 million

USD million

19.7

CASH ON CASH YIELD

2016: 7.7%

7.82%

ANNUALIZED CASH ON CASH YIELD

2016: 8.37%

9.22%

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PORTFOLIO GROWTH IN 2017

Washington Montana South Dakota North Dakota Colorado

Utah

Arizona California Oregon Nevada Idaho Wyoming New Mexico Texas Georgia Florida Kansas Oklahoma Alabama Louisiana Mississippi Tennessee Kentucky Virginia North Carolina Illinois Nebraska Iowa Wisconsin Michigan Missouri Arkansas Maine Vermont New York Minnesota Indiana Ohio Pennsylvania West Virginia Maryland South Carolina

States with Varia properties Seattle to Portland Sacramento, Reno Las Vegas, Phoenix Dallas, San Antonio Indianapolis, Louisville Richmond, Atlanta, Raleigh-Durham New acquisitions 2017 Varia properties Jacksonville

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ADDING VALUE TO THE PORTFOLIO

▪ In 2017, a total of 239 units have been rehabbed (compared to the plan of rehabbing 207 units) ▪ An average rent increase of USD 107 per month has been achieved, resulting in a rent uplift of more than 10% (average rents are close to USD 850 per month in rehabbed units) ▪ The average rehab cost per unit is USD 4,921 ▪ ROCE ranges from 16% to 35% at each property, which is ahead of schedule ▪ Average ROCE 26%

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REHABBED UNITS

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STRONG PERFORMANCE OF 2017 PORTFOLIO

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OUTLOOK

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ALREADY 4 ASSETS ACQUIRED IN 2018

NAME LOCATION PRICE

USD m

UNIT EQUITY EXPECTED

  • AV. YIELD

River Oaks Tucson (AZ) 20.5 300 9.8 9.4% Tierra Pointe Albuquerque (NM) 26.0 352 11.3 9.2% Cinnamon Tree Albuquerque (NM) 21.5 398 9.8 9.3% Meadows Memphis (TE) 13.5 200 6.2 9.0%

River Oaks Tierra Pointe Cinnamon Tree Meadows

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TARGETS 2018

INVESTMENT → Deploy the new capital raised by the end of June 2018 with new property acquisitions in line with Varia’s strategy → Finalize the acquisition of the Non-Controlling Interests of the portfolio STRATEGY → Focus on the existing portfolio, especially in terms of renovation, in order to optimize portfolio’s performance to deliver expected returns → Implementation of planned works, rents increase and returns optimization → Continuous expansion of the presence of Varia’s asset manager in the US FINANCIALS → Delivery of solid results in US Dollar by continuing to implement the Company’s growth strategy → Further increase of the value of the portfolio with a strong distribution from the properties → Target a dividend of CHF 2.50 per share for the business year 2018 to be paid after the 2019 Annual General Meeting

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TAX REFORM IMPACT

■ Varia will significantly benefit from the tax reform that was adopted at the end of 2017, among others because of the reduction of the tax rates for companies. ■ Total estimated tax burden: ■ 24.4% before tax reform ■ 15.4% after tax reform ■ In 2017, the impact was the following: ■ USD 6.5 million deferred tax provision reduction ■ USD 4.8 million extraordinary profit

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■ Significant increase of the interest rates in the first two months of the year (now flattening) ■ Interest rates applicable currently 4.3% - 4.5% ■ Targeted yield over duration of the loan (7-10 years) still between 9-10% ■ Interest only

INTEREST RATE INCREASE

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SUMMARY

MARKET PEOPLE COMPANY

▪ Well-performing multifamily property portfolio in the U.S. ▪ Promising acquisition pipeline in growing urban submarkets ▪ Board of Directors with broad experience in real estate and financial services ▪ Reputable Swiss asset manager optimizing performance with tailored investment

strategies

▪ Strong rental income growth and low vacancy rates in multifamily housing ▪ Investment focus on B and C properties, in low to moderate income neighborhoods

located in greater metro areas with increasing populations and job growth

▪ Shift from home ownership to renting in the U.S. with demand for rented properties

  • utpacing supply

▪ Cash flow optimization through attractive financing and rehabilitation as well as

solid cash flow generation allowing for high distribution to shareholders

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FINANCIAL CALENDAR

■ Annual General Meeting 2018 ■ Half-Year Results 2018 24 May 2018 30 August 2018

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Q&A