VALUE Investor Presentation Fourth Quarter & Year End 2019 - - PowerPoint PPT Presentation

DELIVERING VALUE

Investor Presentation Fourth Quarter & Year End 2019

FORWARD LOOKING INFORMATION

This presentation is for informational purposes only and may not be reproduced or distributed to any

• ther person or published, in whole or in part, for any purpose. This presentation has been prepared

by Summit Industrial Income REIT (the “REIT”) solely for use as a presentation. No reliance may be placed for any purpose whatsoever on the information contained in this presentation or the completeness or accuracy of such information. This presentation does not purport to contain all information that you may desire and is subject to updating, revision and amendment. In furnishing this presentation, the REIT does not undertake or agree to any obligation to provide attendees with access to any additional information or to update this presentation or to correct any inaccuracies in,

• r omissions from, this presentation which may become apparent. The information and opinions

contained in this presentation are provided as at the date of this presentation and are subject to change without notice. No representation or warranty, express or implied, is given by or on behalf of the REIT, its unitholders, trustees or officers nor any other person as to the accuracy or completeness of the information or opinions contained in the presentation. This presentation and its contents are confidential and are being supplied for informational purposes and may not be reproduced, further distributed to any other person or published, in whole or in part, for any purpose. By attending this presentation or receiving a copy of this presentation, you agree to be bound by the foregoing provisions NON-IFRS (NON-GAAP) Financial Measures Readers are cautioned that certain terms used in this presentation such as Funds from Operations (“FFO”), Net Operating Income (“NOI”) and any related per Unit amounts used by Management to measure, compare and explain the operating results and financial performance of the Trust do not have any standardized meaning prescribed under IFRS general accepted accounting principles (“GAAP”) and, therefore, should not be construed as alternatives to net income or cash flow from

• perating activities calculated in accordance with IFRS. Such terms do not have a standardized

meaning prescribed by IFRS and the computation of these non-GAAP performance measures may not be comparable to similarly titled measures presented by other publicly traded entities. Caution Regarding Forward-Looking Information This presentation contains forward-looking statements and forward-looking information within the meaning of applicable securities laws. These statements reflect management’s expectations regarding the REIT’s future growth, results of operations, performance and business prospects and

• pportunities, and include, but are not limited to, statements with respect to management’s beliefs,

plans, estimates and intentions and similar statements concerning anticipated future events, results, circumstances, performance or expectations that are not historical factors. Because such forward- looking statements reflect management’s current beliefs, they are based on information currently available to management. The use of any of the words “can”, "expect", “does not expect”, “budget”, “schedule”, "anticipate", "continue", "estimate", "objective", "ongoing", "may", “might”, "will", "project", "should", "believe", "plan", "intend" and similar expressions are intended to identify forward-looking information or statements. Although management believes that the expectations and assumptions on which such forward- looking statements and information are based are reasonable, undue reliance should not be placed

• n the forward-looking statements and information because there can be no assurance that they will

prove to be correct. By its nature, such forward-looking information is subject to various risks and uncertainties, which could cause the actual results and expectations to differ materially from the anticipated results or expectations expressed. These risks and uncertainties, include, but are not limited to, risks associated with property ownership, debt financing, interest and financing costs, capital requirements, general uninsured losses, development of real property, future property acquisitions, environmental matters, land leases, potential conflicts of interest, governmental regulations, the relative illiquidity of real property and taxation, reliance on key personnel, as well as general business, economic and competitive uncertainties. Material factors or assumptions that were applied in drawing a conclusion or making an estimate set out in the forward-looking statements include that the general economy remains stable; interest rates remain relatively stable; capitalization rates remain stable; competition for acquisition of high quality industrial properties remains strong; and capital markets continue to provide access to capital. Readers are cautioned not to place undue reliance on this forward-looking information, which is given as of the date hereof, and to not use such forward-looking information for anything other than its intended purpose. The REIT undertakes no obligation to update publicly or revise any forward-looking information, whether as a result of new information, future events or otherwise, except as required by law. 2

TABLE OF CONTENTS

3

1. Decades of Experience page 4 2. Property Portfolio page 8 3. GTA Market page 12 4. GTA Development Projects page 19 5. Alberta Market page 21 6. Montreal Market page 27 7. Financial Review page 31 8. Growth Strategy page 40 9. Management Team page 42

DECADES OF EXPERIENCE

4

A PROVEN TRACK RECORD

(Summit I: 1996 – 2006)

Proven track record of growth:

• Accretively acquired over 33 million square feet of industrial assets
• Assembled Canada’s largest industrial portfolio

Best-in-class asset managers:

• Built a national operating platform
• Steady, stable occupancies and tenant retention

Industry leaders:

• Innovative leasing, cost savings and operating programs
• Proven track record in raising growth capital

Value-add expertise:

• Assembled 900 acre land portfolio
• Developed / re-developed over 4 million square feet

National relationships:

• Well-connected, respected management team
• Successfully created partnerships to enhance value

5

Proven Value Creation

PROVEN VALUE CREATION

(Summit I: 1996 – 2006)

6

Over 20% Total Annualized Return 1996-2006

Sale at C$30.00 per unit

Total Assets $ millions

ING Acquires Summit for C$3.3 billion

Growth Accelerates With Increased Size & Scale

IPO at C$12.50 per unit

BUILDING ON OUR EXPERIENCE

7

Summit I Summit II

(as of Feb. 19, 2020)

Average Tenant Size (sq. ft.) 13,000 54,000 Single Tenant Properties (% of portfolio) 36% 60% Targeted Regional Markets 7 3 Occupancy Range 90% - 95% 98% - 100% Weighted Avg. Lease Term 3.5 years 5.3 years

STRONG & DIVERSE PORTFOLIO

8

9

RECORD PORTFOLIO GROWTH

$0 $500,000 $1,000,000 $1,500,000 $2,000,000 $2,500,000 $3,000,000 2016 2017 2018 2019

Total Assets

at December 31,

• Acquired 4.2 million sq. ft. in 2019
• $709.2 million invested
• Well-located in target markets
• Purchase price well below

replacement cost

• Benefiting from increased size

and scale

A FOCUSED DIVERSIFIED PORTFOLIO

10

51.9% 18.7% 29.1% 0.3%

Ontario Alberta Quebec N.S. / B.C.

As at February 19, 2020

154 light industrial properties 18.0 million sq. ft. of GLA 98.5% occupied 5 property management offices Targeting Three Growth Markets (% of total sq. ft.)

PORTFOLIO SNAPSHOT

11

As at February 19, 2020 Number of properties 154 Total square footage 18.0 million sq. ft. Total asset value $2.7 billion Strong GTA presence 42.5% of total portfolio Current GTA Developments 232,500 sq. ft.

EXPANDING PRESENCE IN GTA

12

GTA – CANADA’S LARGEST MARKET

13

Year ended December 31

($,000 except where noted)

2019 2018

Number of properties

54 53

Square feet

7,159,008 7,030,637

Occupancy

99.4% 99.4%

Same property NOI increase

6.4% 4.5%

Rent increase on renewals (from in-place rent)

16.0% 12.6%

Retention ratio

100.0% 99.3%

Contractual in-place rent increases

1.6% 1.2%

Square feet under development / expansion

232,500 sf. 292,140 sf.

14

Replacement costs rising:

– High land costs / low land availability – Increased development charges, tight labour market

Industrial availability falling:

– Demand outstripping supply, tenants expanding current space

Lowest availability & vacancy rates in Canada

– 1.1% availability / 0.4% vacancy

Demand for quality industrial space accelerating:

– Driven by e-commerce & population growth

Monthly rents rising:

– Leases renewing at rates well above in-place rents

STRONG GTA MARKET FUNDAMENTALS Canada’s Largest Industrial Market

15

SUCCESSFUL GTA LEASING PROGRAMS

Strong leasing performance in GTA

• Maintaining high, stable occupancy

– 99.4% at December 31, 2019 – High tenant retention – 100.0% for 2019 renewals – Renewing & expanding tenants – 64,860 sq. ft. of expansions in 2019

• Strong rental growth

– 12.6% increase in rents on 2018 renewals – 16.0% increase in rents on 2019 renewals – 24.2% increase in rents on 2020 renewals

• Current in-place rents approx. $6.35 per sq. ft.

– Significant room to grow

• Same property NOI up 6.4% in 2019

16

EXPANDING OUR PRESENCE IN GTA

GTA Growth Strategy:

• Target acquisition profile:

– Purchase price well below replacement cost – Current rents below market – Single tenant vs multiple tenant – Modern space, high ceilings, multiple bays, loading access – Excess land for development / expansion

• Targeting $200 - $250 million in GTA acquisitions in 2020
• Property developments & expansions

– 1 million square feet in pipeline – 615,000 square feet built by 2020/2021

17

CASE STUDY 1

Cornwall Road, Oakville, Ontario:

• 51,490 square feet of

Class A space

• $13.3 million purchase price –

4.7% cap rate

• Single tenant property

100% occupied

• Only 30% site coverage –

45,000 sq. ft. expansion potential

• Nine-year lease term with

34% rental growth over term

18

CASE STUDY 2

Markham sale leaseback:

• 184,561 square feet

Class A space

• $29.8 million purchase price
• > 5.0% cap rate
• Single tenant property

100% occupied

• Only 36% site coverage –

60,000 sq. ft. expansion planned

• Short-term lease while

tenant moves to new space

ACCRETIVE GTA DEVELOPMENTS

19

ACCRETIVE DEVELOPMENT PROGRAM

20

Property expansions:

– Added 64,860 sq ft to GTA property in 2019 – 8% return on $6.6 million cost

Property developments:

– Building 92,500 sq ft on excess GTA land – completion in 2020 – Building 140,000 sq ft on excess land in GTA – completion in 2021 – Two buildings in Guelph to add 387,000 sq ft – completion in 2020 – Future new project to add 387,000 sq ft in Guelph

Growth potential:

– Low site coverage on several properties provides for future expansion potential – Highly accretive investments as no land cost

STRONG PRESENCE IN ALBERTA

21

ALBERTA – STRENGTHENING FUNDAMENTALS

22

Year ended December 31

($,000 except where noted)

2019 2018

Number of properties

49 12

Square feet

5,230,412 1,925,771

Occupancy

96.2% 100.0%

Same property NOI increase (decrease)

15.6% (16.8%)

Rent increase on renewals (from in-place rent)

N/A N/A

Retention ratio

N/A 0.0%

Contractual in-place rent increases

1.8% 1.7%

Square feet under development / expansion

0 sf. 0 sf.

RENEWED POTENTIAL IN ALBERTA

23

Prudent Growth

Potential new growth market:

⁻ Calgary and Edmonton ⁻ Historically strong markets ⁻ Strengthening fundamentals

Current Fundamentals:

⁻ Highly accretive acquisitions ⁻ Reduced competition for assets

Calgary Market Stabilized

24

MAJOR ALBERTA EXPANSION IN 2019

• Acquired 37 institutional-quality

properties

– 3.3 million square feet in Edmonton / Calgary – $588 million purchase price / strong 5.5% cap rate – Modern high-quality assets

• Significant increase in size and scale
• Diversified, stable tenant base

– Only 17% in oil & gas business

• Opportunity to enhance yield

– Leasing vacant space – occupancy only 91% – Development & expansion potential on owned land – Low 21% site coverage

25

CALGARY – STABLE GROWING MARKET

• Fully recovered

from past economic slowdown

• 97.0% portfolio occupancy
• Leased approx. 73,000 sq. ft.

since acquisition of Alberta portfolio

• 5.7 yr weighted avg. lease term

26

EDMONTON – A PRO-ACTIVE APPROACH

• Taking pro-active defensive

approach

• Consolidating \ Restructuring

portfolio

• Non-core sales to fund GTA

growth

• 95.2% portfolio occupancy
• Leased approx. 107,000 sq. ft.

since acquisition of Alberta portfolio

• 4.2 yr weighted avg. lease term

MONTREAL – ANOTHER STRONG MARKET

27

MONTREAL – CANADA’S SECOND LARGEST MARKET

28

Year ended December 31

($,000 except where noted)

2019 2018

Number of properties

28 27

Square feet

3,365,742 3,132,989

Occupancy

100.0% 99.8%

Same property NOI increase

2.8% 4.7%

Rent increase on renewals (from in-place rent)

12.1% 0.0%

Retention ratio

100.0% 100.0%

Contractual in-place rent increases

1.8% 1.4%

Square feet under development / expansion

0 sf. 0 sf.

GREATER MONTREAL AREA

29

High Quality Assets Strong Fundamentals:

⁻ Availability and vacancy declining ⁻ Port expansion to increase demand ⁻ Close to strengthening US economy

Solid Portfolio Fundamentals:

⁻ High quality assets ⁻ Newer properties ⁻ Longer term leases

Canada’s 2nd Largest Industrial Market

30

MONTREAL – DELIVERING VALUE

High 100.0% occupancy:

– Highly stable market

Developments / Expansions:

– Seeking development partnerships

Availability approaching 3%:

– Trigger for higher rental growth

FINANCIAL REVIEW

31

STRONG GROWTH SINCE INCEPTION

32

$0 $50,000 $100,000 $150,000 2012 2103 2014 2015 2016 2017 2018 2019

Revenues & Occupancy

$0 $20,000 $40,000 $60,000 $80,000 2012 2013 2014 2015 2016 2017 2018 2019

FFO

Years ended December 31

($,000)

99.4% 98.4% 98.9% 98.1% 100% 98.9% 97.0%

Focused on Growing FFO per Unit

98.5%

RECORD RESULTS IN 2019

33

Year ended December 31

($,000 except per Unit amounts)

2019 2018

Revenue from investment properties

142,193 92,150

Net rental income

103,075 64,840

Same property NOI*

+6.0% +1.3%

G&A as percentage of asset value

0.24% 0.30%

Funds from operations* (FFO)

67,156 43,591

FFO per Unit*

$0.582 $0.560

FFO payout ratio* (without DRIP benefit)

91.5% 92.1%

FFO payout ratio* (including DRIP benefit)

80.1% 79.1%

Weighted avg. Units outstanding**

115,465 77,803

*Non-GAAP measures. Refer to the REIT’s latest MD&A for further information, including definitions and reconciliations, on non-GAAP measures ** Includes REIT Units and Class B Exchangeable Units

G&A Lowest in Industry Since Internalization

RECORD RESULTS IN Q4 2019

Revenue from investment properties Net rental income Same property NOI* Funds from operations* (FFO) FFO per Unit* G&A as percentage of net rental income

Up 54% Up 59% Up 6.9% Up 54% Up 2.1% 5.22%

*Non-GAAP measures. Refer to the REIT’s latest MD&A for further information, including definitions and reconciliations, on non-GAAP measures

SOLID FINANCIAL POSITION

35

As at December 31

2019 2018 Total assets ($,000) 2,608,679 1,774,604 Leverage ratio* 43.2% 47.0% Weighted avg. effective interest rate 3.68% 3.72% Debt service* (times) 1.80 1.79 Debt to adjusted EBITDA* (times) 11.04 13.24

*Non-GAAP measures. Refer to the REIT’s latest MD&A for further information, including definitions and reconciliations, on non-GAAP measures

$350 million Acquisition Capacity

WELL-BALANCED MORTGAGE PORTFOLIO

36

Mortgage Maturities by Year

(at December 31, 2019)

0.00% 0.50% 1.00% 1.50% 2.00% 2.50% 3.00% 3.50% 4.00% 4.50% $0 $50 $100 $150 $200 $250 $300

2020 2021 2022 2023 2024 2025 Thereafter

• Wtd. Avg. Effective Interest Rate

Principal Repayments $ millions Weighted Average Interest Rate

LOW LEASE RENEWAL EXPOSURE

37

0.00 1,000.00 2,000.00 3,000.00 4,000.00 5,000.00 6,000.00 7,000.00 8,000.00 9,000.00

2020 2021 2022 2023 2024 Thereafter Lease Rollover (sq .ft.) 8.3% 6.0% 11.9% 16.2% 12.4% 45.1%

Lease Maturities by Year

(at December 31, 2019)

Stable and Sustainable Cash Flow

OPPORTUNISTIC CAPITAL DEPLOYMENT

38

• Sold interest in data centre project

– $107.5 million cash proceeds in September 2019

• Repayment of working capital and mezzanine loans of $69.6

million

• Recycling proceeds into core industrial property growth
• Two mezzanine loans remaining at $26.7 million

– Allows participation in gains when projects completed

• Special distribution on realized gain

– $41.5 million ($0.35 per Unit) realized gain – $0.07 per Unit special distribution paid to Unitholders

$0.07

Per Unit in Special Distributions

ENHANCING UNITHOLDER VALUE

39

$ 0.54 per unit Annualized

June 2019

4.7%

increase

Continuing Stable Occupancies Continuing Accretive Investments Continuing Positive Outlook

PROVEN GROWTH PROGRAMS

40

PROVEN GROWTH STRATEGIES

41

Newer, well maintained Below replacement cost Focused on GTA

ACCRETIVE ACQUISITIONS

Strong fundamentals Economies of scale Low G&A costs Development Re-development Tenant Expansion

ORGANIC GROWTH DEVELOPMENT

EXPERIENCED MANAGEMENT

42

PROVEN MANAGEMENT TEAM

43

Lou Maroun | Chairman

⚫

38 years experience in the commercial real estate industry

⚫

Previously CEO of Summit REIT, Canada’s largest industrial REIT

Paul Dykeman | CEO

⚫

30 years experience in the commercial real estate industry

⚫

Previously CFO of Summit REIT, Canada’s largest industrial REIT

Ross Drake | CFO

⚫

28 years experience in the commercial real estate industry

⚫

Previously Senior Vice President of Research & Analysis at ING Real Estate Canada

Jonathan Robbins | VP of Acquisitions

⚫

29 years experience in the commercial real estate industry

⚫

Previously the Vice President of Investments at Summit REIT

Kimberley Hill | VP of Asset Management

⚫

29 years experience in the commercial real estate industry

⚫

Previously the Senior Vice President of Asset Management at ING Real Estate Canada

INVESTOR RELATIONS CONTACT

Paul Dykeman, CEO 1801 Hollis Street, Suite 1120 Halifax, Nova Scotia B3J 3N4

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