Pro Kapital Grupp AS · OMXTSE:PKG1T

Pro Kapital Grupp AS — AS Pro Kapital Grupp — Debt Investor Presentation (April 2016)

55 slides from Pro Kapital Grupp AS's debt investor presentation, April 2016

  1. Slide 1: Investor Presentation – AS Pro Kapital Grupp

    Investor Presentation – AS Pro Kapital Grupp Contemplated tap issue of minimum EUR 15 million April 2016

  2. Slide 2: Disclaimer

    Disclaimer This presentation (the “Presentation”) has been produced by AS Pro Kapital Grupp (“PKG”, “Pro Kapital”, the “Company”, associations and other persons to whom it may lawfully be communicated, falling within Article 49(2)(a) to (d) of the Order (all the “Issuer” and the “Group”, which terms

  3. Slide 3: Summary of risk factors (1/2)

    Summary of risk factors (1/2) Investing in the Bonds involves inherent risks. A number of risk factors and The Group will not be able to develop its projects according to its plans if it fails to uncertainties may adversely affect the Company and the Group. These risk factors raise additional capita

  4. Slide 4: Summary of risk factors (2/2)

    Summary of risk factors (2/2) pledges, the Bonds represent unsecured obligations of the Company. Each investor Construction and development risk should be aware that there is a risk that an investor in the Bonds may lose all or part If the construction company fails to complete the construction work

  5. Slide 5: Contents

    Contents 1. Investment highlights 2. Company overview 3. Portfolio overview 4. T1 Shopping Centre 5. Financials 6. The Baltic market Appendix 5

  6. Slide 6: Investment highlights

    Investment highlights  Leading property development and management company in the Baltic region with focus on modern, large-scale commercial and residential properties in prime locations of the capitals of the Baltics Market leading  Founded in 1994, Pro Kapital was an early mover into the Baltics

  7. Slide 7: Legal structure and security overview

    Legal structure and security overview Security package AS Pro Kapital  Share pledges in all subsidiaries except Grupp from Investhotel SIA (entity owning the hotel (Issuer) in Riga), which is pledge to Swedbank, and AS Tallinna Moekombinaat (owner of the T1 Pro Kapital Shopping Centre) Pro Kapital

  8. Slide 8: Solid asset backing with share pledges in material subsidiaries

    Solid asset backing with share pledges in material subsidiaries EURm EURm 140,0 140,0 Other* 120,0 120,0 Zvaigznes Centre, Riga Other debt 100,0 Ulemiste, Tallinn 100,0 Convertible bonds Tallinas, Riga Min tap issue 80,0 80,0 Outstanding bond Kalaranna, Tallinn Secured/sr debt 60,0 Kliversala, Riga

  9. Slide 9: Summary of terms

    Summary of terms Issuer AS Pro Kapital Grupp Status Senior secured Maturity June 1st 2020 Outstanding amount EUR 14.3m, borrowing limit of EUR 50m Subsequent bond issue Minimum EUR 15m Coupon 8.0% p.a., payable semi-annual in arrears Issue price [97]%, excl. accrued but unpaid interest The net proce

  10. Slide 10: Contents

    Contents 1. Investment highlights 2. Company overview 3. Portfolio overview 4. T1 Shopping Centre 5. Financials 6. The Baltic market Appendix 10

  11. Slide 11: Pro Kapital Grupp in brief

    Pro Kapital Grupp in brief Company overview Geographical footprint and market value share  Pro Kapital is one of the leading property development and management companies in the Baltic region with focus on modern, large-scale commercial and residential properties in prime locations of the capitals

  12. Slide 12: History and development of Pro Kapital Grupp

    History and development of Pro Kapital Grupp Comments Key financials 1998-2015  The Company was established in 1994 by Mr. Ernesto Preatoni, making it EURm EURm one of the first major players in the Estonian real estate market 400 200  Pro Kapital Grupp expanded to Latvia and Lithuania in 1996-199

  13. Slide 13: Business segments

    Business segments Residential Commercial Hotels Development of large-scale high-end residential areas. Development and management of large-scale Owns and operates three four stars hotels (German Pro Kapital ensures flexible contracts that allow for commercial properties, including office buildings a

  14. Slide 14: Strategy and competitive advantages

    Strategy and competitive advantages Clear strategy to focus on prime locations, large-scale development and conservative financial structure Geography Organisation Project size  Prime locations in the city centre of the Baltic  Small and efficient organisation  Development of large-scale commerci

  15. Slide 15: Development process

    Development process Project development process - Illustration Project planning Sales and marketing Construction/execution Aftermarket  Focus on modern large-scale  Shopping centres are marketed by  Reputable builders on fixed-price  In-house property management commercial properties in central

  16. Slide 16: Focus on risk management and well reputed counterparties

    Focus on risk management and well reputed counterparties Risk Mitigants Funding  Pro Kapital has on occasion invited co-investors into individual projects both as a source of funding and to reduce investment requirement  Projects are split into stages with monthly payments in arrears based on comp

  17. Slide 17: Management with considerable industry experience

    Management with considerable industry experience Paolo Vittorio Michelozzi, CEO  Born 1961, Italian citizen Angelika Annus, CFO  22 years work experience within PKG  Born 1971, Estonian citizen  Member of the Management Board and CEO since 2001  18 years work experience within PKG  Extensive e

  18. Slide 18: Organization chart

    Organization chart Supervisory Board (3) CEO Technical CFO Country Manager Country Manager COO Head of Legal Hotels department (3) Management board Financial controller Sales & marketing (1) Sales & marketing (2) Sales & Marketing (1) Lawyer (1) Hotel (21) (1) Accounting (2) Technical (1) Technical

  19. Slide 19: Contents

    Contents 1. Investment highlights 2. Company overview 3. Portfolio overview 4. T1 Shopping Centre 5. Financials 6. The Baltic market Appendix 19

  20. Slide 20: Current portfolio

    Current portfolio Project Type Location Development Valuation date Market value Status Means of exit 1 Detail plan approved and building license obtained. Sale after T1 Shopping Centre Commercial Tallinn 2014 – 2018 31.12.15 26.3 management and Construction started stabilization phase 1 Tallinas St

  21. Slide 21: Current backlog and expected realization of sales

    Current backlog and expected realization of sales Residential Comments Sold apartments (%)  The table illustrates the stage wise Project # apartments 2016e 2017e 2018e 2019e 2020e >2020e construction strategy of the Company Tallinas St Residential complex 269 0% 3% 6% 14% 20% 57%  As the Company h

  22. Slide 22: Portfolio valuation

    Portfolio valuation Book value to market value of property portfolio(1) Comments EURm  According to IFRS accounting principles, some of the 160 2,2 1,4 2,2 133,1 Company’s properties are not accounted for at market 140 121,5 5,8 120 value but in book value due to a short term of realization 100 – F

  23. Slide 23: Current developments and track record - Tallinn

    Current developments and track record - Tallinn Tallinn: Current projects and Kalaranna properties Tondi Quarter Ilmarine Quarter Development of properties, primarily residential and secondarily commercial, in PK Ilmarine Hotel the Kristiine district close to Tallinn City Old Town Centre. Jegorovi T

  24. Slide 24: Current developments and track record - Riga

    Current developments and track record - Riga Zvaigznes Tallinas Domina Shopping Centre PK Hotel Riga Riga: Current projects and Pulkveža Brieža 11 properties Kliversala Stabu 19 Development of residential and commercial properties at the Daugava river waterfront enjoying views of the Old Town on the

  25. Slide 25: Current developments and track record - Vilnius

    Current developments and track record - Vilnius Vilnius: Current projects Saltiniu Namai 2 Second phase of the Saltiniu Namai development. A residential property consisting of one new apartment building of 44 premises and land plot with building volume of over 13,000m2 of NSA. The property is locate

  26. Slide 26: Hotels

    Hotels Comments Revenues, GOP and occupancy rates EURm %  The Company owns three hotels located in Tallinn, Riga 7,0 72% and Bad Kreuznach (Germany) 6,0 70%  The hotels are important for the Group as a steady cash 5,0 68% 4,0 66% flow generator 3,0 64%  However, the Company would consider a sale

  27. Slide 27: Contents

    Contents 1. Investment highlights 2. Company overview 3. Portfolio overview 4. T1 Shopping Centre 5. Financials 6. The Baltic market Appendix 27

  28. Slide 28: T1 – New generation shopping and entertainment centre

    T1 – New generation shopping and entertainment centre Overview  Pro Kapital Grupp signed in June 2015 a construction contract with AS Merko Ehitus Eesti for the T1 Shopping Centre (the “T1”) with construction start in Q2’15 and expected completion in the Q1’18 – Total project cost of EUR 76m of whi

  29. Slide 29: Customer experience in focus

    Customer experience in focus Comments Gross leasable area by segment Clothing  With increasing competition from e-commerce, newer 4,7% Shoes shopping malls have increased their focus to provide Sport 5,2% customers with experiences and leisure activities Children stores 29,5%  The T1 has dedicated

  30. Slide 30: T1 – Contract status

    T1 – Contract status Contract status Comments Rent (EURm) Rental  Currently signed in excess of 53% of available retail space (50% coverage coverage of expected base rent) with a rental income weighted 10,0 100% average contract duration of seven years 78% – The majority of the contract that are si

  31. Slide 31: T1 – Comparable transactions and valuation

    T1 – Comparable transactions and valuation Valuation Comments EURm LTV  Following the tap issue, bondholders will receive a share pledge 250 90% over all of Pro Kapital’s shares in the entity owning the T1 Shopping 81% Centre (90.3%) 209 80% 70% 68%  Based on the Pro Kapital’s realized shopping ce

  32. Slide 32: T1 – Construction process

    T1 – Construction process Construction and capex development Merko Ehitus – Construction company EURm  AS Merko Ehitus is the parent company (100% owned) of AS Merko Ehitus 80,0 69,2 71,2 Eesti, the construction counterparty of the T1 Shopping Centre 59,8  The group has been listed on NASDAQ OMX B

  33. Slide 33: Case study: Kristiine Shopping Centre

    Case study: Kristiine Shopping Centre Kristiine Shopping Centre Historical revenue and occupancy rate  Kristiine Shopping Centre is the one of the first and largest EURm shopping Centres in Tallinn, located in the proximity of the CBD 10,0 100%  The shopping Centre was opened in 1999 – Total const

  34. Slide 34: Case study: Domina Shopping Centre

    Case study: Domina Shopping Centre Domina Historical revenue and occupancy rate  Domina Shopping Centre is one of the first and largest shopping EURm centres in Riga, located on one of Riga’s main streets 10,0 100%  The centre fully opened in 2004 – After acquisition of industrial land plot in 199

  35. Slide 35: Contents

    Contents 1. Investment highlights 2. Company overview 3. Portfolio overview 4. T1 Shopping Centre 5. Financials 6. The Baltic market Appendix 35

  36. Slide 36: Income statement

    Income statement Comments Income statement  Pro Kapital’s income stems from the sale of real estate, Income statement (EUR ‘000) 2013 2014 2015* rental of real estate, hotel operations and some ancillary Revenue 12,287 10,335 18,322 services Cost of goods sold (9,199) (7,840) (13,874) Gross profit

  37. Slide 37: Balance sheet

    Balance sheet Comments Balance sheet  At the end of 2014, Pro Kapital made a strategical Assets (EUR ‘000) Current Assets 2013 2014 2015* decision to transfer the properties recorded as Cash and cash equivalents 2,759 1,881 6,392 Current receivables 2,738 2,463 1,608 inventories at cost value and n

  38. Slide 38: Cash flow

    Cash flow Comments Cash flow statement  There has been limited changes in cash flow the recent Cash flow statement (EUR ‘000) 2013 2014 2015* Cash flows from operating activities year due to low sales activities Profit (loss) for the year (2,578) 21,235 (2,010) Depreciation and amortisation of non-

  39. Slide 39: Debt overview

    Debt overview Debt overview as of year end 2015 Debt repayment profile1 Outstanding EURm Debt Lender Status Interest Maturity (EUR ’000) 40,0 AS Pro Kapital Eesti Swedbank Secured 1,405 2.65% + 6mE 11/1/2018 AS Pro Kapital Eesti Swedbank Secured 2,107 2.50% + 6mE 8/9/2018 30,0 OÜ Marsi Elu Nordea Se

  40. Slide 40: Contents

    Contents 1. Investment highlights 2. Company overview 3. Portfolio overview 4. T1 Shopping Centre 5. Financials 6. The Baltic market Appendix 40

  41. Slide 41: The Baltic property market

    The Baltic property market Comments Transaction volume per country  Total transaction volume in the Baltic countries reached EUR 425m EURm in 2014 whereas Lithuania accounted for ~40% 600  The office market remains as the most active segment covering 500 ~50% of all Baltic investment volume 400 

  42. Slide 42: The Baltic property market – Residential

    The Baltic property market – Residential Comments Residential Riga  The residential prices in Tallinn has increased significantly the last # EUR/m2 years with an average price increase of ~10% to an average price of 5 000 3 000 1,450 EUR/m2 in 2014 4 000 2 500 – The main drivers for the increase ar

  43. Slide 43: Tallinn retail market

    Tallinn retail market Comments Supply of Shopping Centres  The supply in the retail market is still below demand, so the retail ‘000m2 m2 segment continues to be ruled by landlords 600 1 000  Due to the end of terms of many tenant agreements in 2014, the 500 800 marked experienced differentiation

  44. Slide 44: Contents

    Contents 1. Investment highlights 2. Company overview 3. Portfolio overview 4. T1 Shopping Centre 5. Financials 6. The Baltic market Appendix 44

  45. Slide 45: Shareholder overview and supervisory council

    Shareholder overview and supervisory council Comments Supervisory council  As of 31.03.2016, 44.1% of the shares are controlled by the founder of Pro Kapital, Mr. Ernesto Preatoni with affiliates, through different companies and nominee accounts Emanuele Bozzone, Chairman  Born 1964, Swiss citizen

  46. Slide 46: Nasdaq OMX Baltic Stock Exchanges

    Nasdaq OMX Baltic Stock Exchanges History Share price development  Pro Kapital listed its shares for the first time in 1998 on the Tallinn EUR # shares Stock Exchange 3,0 70 000  On 28 August 2001, the Listing Committee of NASDAQ OMX Tallinn AS adopted resolution regarding the delisting of shares

  47. Slide 47: Related party transactions

    Related party transactions Comments Related party transactions  Transactions with related parties are considered to be transactions Transaction with related parties (in thousands of euros) 2015 2014 between the entities within the consolidated Group, its Significant owners, management and related c

  48. Slide 48: Priority Projects to be developed (1/2)

    Priority Projects to be developed (1/2) 1 2 3 Parameter T1 Shopping centre Tondi Quarter (7 ap. houses) Tallinas St. residential complex Location Tallinn, Estonia Tallinn, Estonia Riga, Latvia Project scope Shopping centre Residential Residential / commercial Tondi Quarter is a large premium residen

  49. Slide 49: Priority Projects to be developed (1/2)

    Priority Projects to be developed (1/2) 4 5 Parameter Kliversala Residential Complex (1st phase) Saltiniu Namai Residential Complex Location Riga, Latvia Vilnius, Lithuania Project scope Residential Residential Development of premium residential and Development of two of the apartment houses in comm

  50. Slide 50: Selection of completed and exited projects

    Selection of completed and exited projects Parameter Type GSA/GLA Development Description Means of exit Domina Shopping was one of the largest shopping centres in Riga Sold to German investors in 2007 for Domina Shopping Centre Commercial 48,500m2 2001-2007 when opened in 2003 EUR 147m Kristiine Sho

  51. Slide 51: Main Shopping Centres in Tallinn

    Main Shopping Centres in Tallinn Porto Franco Viru Keskus  Planned mixed-use development  Opened in 2004 with GLA of retail 40,000m2  GLA of 23,000m2  Status: Opening planned 2019  Owned by a group of investors  Owned by Porto Franco OÜ Rocca Al Mare  Opened in 1999; expanded in 2009 Old Town

  52. Slide 52: The Baltics – Key country information

    The Baltics – Key country information Country Estonia Lithuania Latvia Sovereign rating (S&P/Moody’s/Fitch) AA-/A1/A+ A-/A3/A- A-/A3/A- Outlook Stable/Stable/Stable Stable/Stable/Stable Stable/Stable/Stable Key economic factors (2014) GDP per capita USD 17,562 USD 14,560 USD 13,996 GDP growth local

  53. Slide 53: Macroeconomic development

    Macroeconomic development GDP per capita (USD) GDP growth1 (%) 70 000 15% 60 000 10% 50 000 5% 40 000 - 30 000 -5% 20 000 10 000 -10% - -15% 2007 2000 2001 2002 2003 2004 2005 2006 2008 2009 2010 2011 2012 2013 2014 2007 2015e 2016e 2017e 2018e 2019e 2020e 2000 2001 2002 2003 2004 2005 2006 2008 200

  54. Slide 54: Country statistics

    Country statistics Population (millions) Unemployment (%) 12 20% 10 15% 8 6 10% 4 5% 2 - - 2013 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2014 2006 2015e 2016e 2017e 2018e 2019e 2020e 2000 2001 2002 2003 2004 2005 2007 2008 2009 2010 2011 2012 2013 2014 2015e 2016e 2017e 2018e

  55. Slide 55: Contacts: Investor Relation Allan Remmelkoor

    Contacts: Investor Relation Allan Remmelkoor [email protected] www.prokapital.com 55

AS Pro Kapital Grupp — Debt Investor Presentation (April 2016) on 6ix