Valad Capital Services (VCS) Seminar 19 th November 2007 Presenters - - PowerPoint PPT Presentation

Valad Capital Services (VCS) Seminar

19th November 2007

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Presenters

Paul Notaras – Group Head Valad Capital Services

VCS Overview

Alastair Wright – Head of Valad Capital Services – Asia Pacific

VCS Asia Pacific Overview

Peter McAvoy – CEO, Petrac

Valad and Petrac Relationship

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VCS Overview

Paul Notaras

69 Boulevard du General Leclerc, Clichy, France

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VCS Overview

Objective:

• Provide property investment banking

services and structured finance solutions to third party sponsors/customers

• Long term sustainable growth within

disciplined risk management framework

Products

• Project Equity Investment (Preferred,

Parri Passu)

• Structured Finance – Senior

Debt/Underwrite/Guarantees

• Mezzanine Debt
• Private Equity Investment (ordinary

equity, convertible note, equity warrants)

Sector:

• Commercial, industrial, retail
• Retirement/lifestyle
• Opportunistic residential
• Mixed use – residential/commercial

Markets:

• Major cities and regional centres
• Supported by established or emerging demand drivers

and supply dynamics

• Sponsor proven experience and expertise in selected

market

• Sponsor sourced from internal contacts, market

knowledge, introducers including agents, banks etc

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VCS Strategic Rationale

• Growth platform to further diversify Valad income stream and markets
• Facilitate Valad entry into new geographic markets
• Could lead to more strategic initiatives with developer groups
• Opportunities may be presented to take a more strategic position in a sector or build a

principle business such as retirement or residential land subdivision

• Opportunity to set up a product specific fund or sell down to other funds (e.g. VOF)
• Opportunity for Valad Property Group (VPG) to access investment grade product by

providing a takeout for appropriate projects or ROFOS

Specialised skills to provide a growth platform

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VCS Competition

• The above are generally “financiers”; Valad as a property company can take a real property / project

position.

• Differentiating aspects of the Valad offer are:
• Flexible/creative approach to deal structure
• Recourse to project only
• Consistent and responsive approval process
• Genuine relationship to be long term joint venture partner – assist growth
• Ability to value-add with skills and experience in project execution and takeout

Valad offers a differentiated product

Asia Pacific UK/Europe Banks: MBL, BBL, Investec, GE, Lehmans, HBOS, RBS RBS, HBOS, Anglo Irish, Lehmans, GE Opportunity Funds: AMP, LL REP, APN, Eureka, Challenger, Fortress Capmak, Morgan Stanley, Revcap Mezzanine Funds: Gresham, AMW, JF Aqua, City Pacific Numerous Private Investors: Numerous Numerous

Mature and competitive market – point of difference required

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Product Range Summary

Project Equity Investment Product Senior Debt Mezzanine Debt Preferred Equity Parri Passu Equity Private Equity Investment Funding Sponsor Valad 35/40% Sponsor Equity 65/60% Valad Debt 15/25% Sponsor Equity 15/25% Valad Debt Valad Equity 50-80% Sponsor Equity 50-20% Valad Equity 50% Sponsor Equity 50% Convertible Note/Ord equity b/w 20-50% Purpose Investment, Repositioning, Development Repositioning and Development Repositioning and Development Repositioning and Development Business Investment for value and strategic reasons (pipeline, corporate acq, new markets) Structure First Ranking Secured Position. Strong protective mechanisms Generally commit or underwrite then sell- down Second Ranking Security (behind senior debt). Strong protective mechanisms Second ranking security. Strong protective mechanisms. Valad equity and coupon ranks ahead of sponsor Sponsor promote for Valad priority No priority ranking

• r security. Less

prescriptive protective mechanisms All parties rank equally on upside and downside Can be secured (convertible note) or straight equity High operational involvement and Board seat etc

Portfolio Differentiation and Segmentation ensures appropriate risk based pricing Lower Higher

Risk based return metrics 25-60% 9-15% 1-5% Profit Share Coupon

• Est. Fees

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VCS Risk Return

Risk and return profiles Land Planning Development Construction Repositioning Leasing Income Generating

RISK

Return

Senior Debt Preferred Equity Private Equity Mezzanine Debt

8+%

IRR

• 25%+

Zoning

Return lower higher

15 – 20%

Target

• Underlying assets/projects

typically development, enhanced/value add assets

• Strict risk based structure

and pricing

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Risk/Return Assessment

Track Record Sector Experience Financial Position and equity contribution Key People Sponsor Asset Strategy Location Features Property Project Margins (Profit/Cost, IRR) Assessment of key financial assumptions Sensitivities to identify key risk items Project Gearing Financial Difficulty of execution plan Planning/leasing/exit/construction Strategy Supply/Demand dynamics/Drivers Rent/Sale comparables Trends/Research Market Tax/Accounting Legal and regulatory Political and economic New Markets Cost estimation and build-ability issues Environmental Engineering (incl. civil/Geotech Technical

Structure and Pricing

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Core Product - Preferred Equity

• Senior debt ranks first
• Valad’s VCS investment ranks

ahead of developer equity

• VCS equity secured with “step-in”

rights

VCS Equity Senior Debt

Rank

1 2 3

c60%* c30%* c10%*

*Splits indicative, will vary

Risk

Sponsor (Developer)

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• Investment – term structure
• Upfront fee for Advisory Services
• Yields periodic coupons, revenue recognised
• Profit share at maturity
• Return of investment capital and accumm coupon at

maturity

1 2 3 4 5

Investment Income

$ $ $ $ $ $ $$$

Up front fee Coupon Coupon Coupon Accumm Coupon Return

• f

Capital Invest Capital

Time Year

Cash Receipts

Coupon Profit share

Preferred Equity Structural Features

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VCS Results to Date

25 8 Number of positions 15 6 Number of customers 9 5 Team members 411 7 Number of properties $4.1bn $1.2bn End value $570m $160m VPG equity committed FY07 as at 30/09/2007 FY06

• Strong growth

1 Includes Crownstone properties 2 Includes 3 people in UK

• Track record

31% Chifley 20% Claremont 26% Noosa North Shore Equity IRR

• Pipeline
• Estimate of active Asia Pacific pipeline is approximately A$1.5 billion in end value
• Estimate of active UK/Europe pipeline is approximately A$465 million in end value

$713m $5.4bn 44 28 17 142

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Europe 39% NZ 6% VIC 1% QLD 20% NSW 34%

VCS - Diversification

Industrial 12% Residential 10% Retirement 11% Commercial 44% Retail 16% Mixed 7%

Equity Committed by Property Sector

• Sector
• Portfolio well diversified by sector with six asset classes represented
• High relative weighting to income producing commercial/office asset class – gives exposure

to improving market segment

• Geography
• International markets now represented with investments in New Zealand and across Europe
• 39% European weighting represents investment in Crownstone portfolio where coupon to

VPG is underpinned by rental income

Equity Committed by Location

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VCS – Risk Management

Development 40% Investment 44% Active re-positioning 14% Private Equity 2%

Equity Committed by Risk Profile

• Risk management:
• Approx 60% of the portfolio is underpinned by rental income

(investment and active repositioning)

• Cash accounted approx 70% of total VCS returns in FY07
• Rigorous approach to sponsor and project selection
• Portfolio profit participation is well spread over coming years

% of portfolio by equity committed Expected Timing of Valad Profit Share 16% 21% 19% 15% 14% 15% 0% 5% 10% 15% 20% 25% 2008 2009 2010 2011 2012 2013+

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VCS Management Team

Asia Pacific UK and Europe Group Head VCS Paul Notaras

Stephen McBride Legal Accounting Tax HR Marketing/Corp Shared Support Resources

Team and Platform Established – Structured for Growth

Alastair Wright 10 staff 3 staff

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VCS Europe - Opportunity

Scarborough/Teesland have undertaken JVs previously

• Established platform from which to leverage (19 offices, 11 countries)

Current credit market conditions:

• Provide pricing advantages/ margin expansion
• Competitors who have been mis-pricing risk eliminated
• Underlying property fundamentals attractive

– Some markets improving – Other markets have been re-priced

• Team established in UK, currently team of three lead by Stephen McBride
• Expect to add resources to European regional offices
• Already assessing deal opportunities in UK, Denmark, Romania and Hungary

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Questions

M a r i t i m e T

• w

e r – 2

• 1

C u s t

• m

h

• u

s e Q u a y , W e l l i n g t

• n

, N e w Z e a l a n d

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Transaction Case Studies

Noosa North Shore, Noosa, New South Wales, Australia

Alastair Wright

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Transaction Case Studies

Land Planning Development Construction Repositioning Leasing Income Generating

RISK

Return

Senior Debt – M4/M7 Preferred Equity – Top Ryde Private Equity – Petrac Mezzanine Debt – Maritime Tower

8+%

IRR

• 25%+

Zoning

Return lower higher

15 – 20%

Target

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Transaction Case Studies

• 1. Senior Debt

M4/M7

• 2. Mezzanine / Preferred Equity – Active Repositioning

Buckingham - Maritime Tower/West Plaza

• 3. Preferred Equity

Beville - Top Ryde

• 4. Private Equity Investment

Petrac

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Case Study 1 - Senior Debt: M4/M7

Project Overview

• Acquired 93ha industrial land and

half quarry

• Subsequently acquired other half of

quarry – total 123ha

• Structured sale with tax effective

vendor financing

• Purchaser – land fill operator
• First mortgage security

M4/M7

Senior Debt

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Case Study 2 – Mezzanine: Maritime Tower

Project Overview

• Existing premium grade office building in

Wellington

• 13,940 sqm NLA
• Lease up & completion risk at the time of

initial investment (initially 76% leased, now 98%)

• Opportunity to benefit from future rental

growth

Maritime Tower

Mezzanine

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Case Study 2 - Preferred Equity: West Plaza (cont’d)

West Plaza

Pref Equity

West Plaza

• Existing B Grade office building in

Auckland

• Prime position, active repositioning

strategy

Valad Participation

• Initial mezzanine position on

Maritime

• Subsequently assisted with West

Plaza acquisition

• Converted mezzanine debt to

preferred equity position

• Cross collarteralisation

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Case Study 3 - Preferred Equity: Top Ryde

Top Ryde Shopping Centre

Pref Equity

Project Overview

• $840 million redevelopment of

Beville Group's Top Ryde Shopping Centre in Sydney

• Initial $60.6 million of preferred

equity

• Redevelop the existing

20,000sqm centre into a multi- level retail complex of 78,000sqm

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Case Study 4 - Private Equity: Petrac

Corporate Rationale

• Strategic relationship
• Capital solution required to fund

growth

• Retirement and land subdivision focus
• Various downstream opportunities

including funds management

Lennox Head – residential/retirement/retail

Private Equity

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Case Study 4 - Private Equity: Petrac (cont’d)

Private Equity Investment

• Convertible note structure
• Coupon serviced
• Valad option to convert based
• n value today
• Exit strategy includes trade

sale, 100% acquisition or listing

Redland Bay – retirement

Private Equity

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Questions

W e s t P l a z a , 3 A l b e r t S t r e e t , A u c k l a n d , N e w Z e a l a n d

PETRAC PRESENTATION

Peter McAvoy Chief Executive Officer

19 November 2007

Corporate History

• Formed 1992
• Same Shareholders & Directors since (until Valad investment mid 2007)
• Strong residential development focus
• Expansion to Retirement Sector as core focus in 2003
• Election to grow portfolio organically and not by acquisition
• 48 staff as at 30 September 2007
• Rapid growth 2003 -2007
• Policy of in-house control of entire development process
• Will enter 2008 with established platform able to significantly grow business at

marginal operating cost increase

Corporate History (Cont’d)

• Strong National and International Partnerships.
• Transforming into National Property company as a consequence of Valad

Harvest Petrac (VHP) Retirement footprint

• Strong executive management team
• Founding shareholders actively involved in business
• Recognition of need to maintain corporate culture

Peter McAvoy:

• 11 years senior management

experience in tourism & hospitality, development & marketing prior to founding Petrac in 1992

• Responsible for acquisitions, project

marketing & sales of all Petrac projects

• Currently CEO of Petrac

Mark Spedding:

• 13 years experience in engineering &

construction industry before founding Petrac in 1992

• Responsible for Project Management

& Development of all Petrac projects

• Currently Executive Director of

Project Evaluation, Financing & Risk Management of Petrac

Mark Spedding – BE Civil, ME Civil, MBA

Corporate History - The Founders

Peter McAvoy – MBA

Organisational Chart

Specialist Sectors & Regions

Masterplanned Communities Boutique Residential Leisure Life Holiday Living (VHP)

Specialist Sectors & Regions

Masterplanned Communities Boutique Residential

• Develop boutique residential projects primarily for affluent >50

yr market

• Property in premium locations
• Develop large parcels of land in strategic locations that have

the potential to yield >400 residential lots plus one or more complementary retirement or commercial precincts.

Specialist Sectors & Regions

Holiday Living

• Lifestyle communities seeking to integrate active adult retirees with

surrounding catchment

• Strong focus on providing a resort like experience – service oriented

Leisure Life

• Semi-independent seniors seeking a high quality of life in later years
• Alternative business model for senior Australians
• Fully inclusive rental option

November 2007

QLD NSW VIC

GLADSTONE MACKAY BUNDABERG TOW NSVILLE BRISBANE COFFS HARBOUR BALLINA CANBERRA SYDNEY NEW CASTLE PORT MACQUARIE MELBOURNE

Specialist Sectors & Regions

W ynnum Redland Bay Lennox Head Buderim Holiday Living Master Plan Leisure Life Boutique Noosa Kellyville Glenhaven Harbour Quays Toow oom ba Seacliffs Sandstone Point Ocean View Lancaster Gate Shellharbour

What does Petrac look for in each development deal

Masterplanned Communities

• Future capital growth to out

perform

• Key sites within macro site
• Unique locations
• Return >25% plus return on

equity (including coupon) Boutique Residential

• Iconic locations
• Constraints create barriers to

entry for competitors

• High demand – low supply
• Not repeatable
• Return >25% plus return on

equity (including coupon)

What does Petrac look for in each development deal (cont’d)

Leisure Life

• Coastal locations
• Scale > 300 dwellings
• Capital growth to out perform
• Proximity to significant population

catchment

• Access (air, road)
• Lifestyle amenity
• Return >25% return on equity

(including coupon & business value) Holiday Living

• 50,000+ population base
• Age profile > 75 years old
• Wealth profile – high level of

home ownership

• High exposure – catchment

marketing

• Low/medium entry price –

site value

• Stabilised rental yield >11%

Joint Venture with Harvest

Harvest is successor to Holiday Retirement Corporation (HRC) Largest Retirement Owner/Operator in the World Harvest sold Holiday to Fortress early 2007 for US$6.6 billion (sub 6% cap rate) Early 2005 Study Tour by Petrac led to discussions February 2006 Joint Venture Formed Initial Tranche – 10 Communities with Valad (see Case Study following)

Why Valad?

Not Just Money Significant Property Experience Exhaustive Due Diligence Process Great Cultural Fit Complementary Product Offerings Valad Processes Offer Fast Response Strong Focus on Adding Value Early in Project Life

Current Projects with Valad

Noosa North Shore Resort Beach Road Holiday Homes at Noosa The Boulevards - Redland Bay Lennox Head Seacliffs at Byron Bay Sandstone Point Holiday Living – Harbour Quays, Kellyville, Toowoomba, Lancaster Gate, Glenhaven

Case Study – Formation of VHP

Early 2005 Petrac meets Holiday on Research Tour Holiday is largest Owner/Operator of retirement product in the world (North America, Canada, UK, France) Holiday Board visits Australia February 2006 Holiday and Petrac agree Australia is a suitable market and is ready for the Holiday Retirement Corporation Rental Model (developed and refined since 1976)

Case Study – Formation of VHP (cont’d)

Holiday (now Harvest) and Petrac form Joint Venture Intensive analysis and business planning determines Australian market will support ten (10) communities initially and approximately forty (40) over medium long term Valad identified as financial partner for product rollout

Case Study – Formation of VHP (cont’d)

The Deal Petrac to manage business Harvest to inject IP and training Valad to provide money and expertise Each Community Senior debt 60% Valad mezzanine Common equity by Valad, Harvest and Petrac Ownership Valad 50% Harvest 32.5% Petrac 17.5%

Wynnum Leisure Life

Lennox Head

Sandstone Point

Shellharbour

Petrac Pipeline

Masterplanned Communities Noosa North Shore Resort Lennox Head Boutique Residential Beach Road Holiday Homes at Noosa Buderim Seacliffs at Byron Bay Glen Eden, Gympie

Petrac Pipeline (Cont’d)

Leisure Life The Boulevards - Redland Bay Wynnum Ocean View Banora Point Lennox Head (part of) Sandstone Point Holiday Living Toowoomba Harbour Quays Kellyville Lancaster Gate Glenhaven Total end value of pipeline 31/10/07: > $1.5 billion

November PCG 8/11/07 – ‘adding value’

Questions

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• securities. It contains general information only and does not take into account the investment
• bjectives, financial situation and particular needs of individual investors. Investors should obtain their
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• f the information and opinions expressed in the course of this presentation. To the maximum extent

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