Property for Industry Limited · NZX:PFI
Property for Industry — Merger or Acquisition (May 2013)
29 slides from Property for Industry's merger presentation, May 22, 2013
Slide 1: Better Together: Merger with Direct Property Fund
BETTER TOGETHER PROPERTY FOR INDUSTRY MERGER WITH DIRECT PROPERTY FUND P DIRECT 22 May 2013
Slide 2: Agenda
Agenda 1. Introduction 3 2. Strategy and portfolio 7 3. Financials 13 4. Board and management 19 5. Independent opinions and summary 24 6. Questions 28 22 MAY 2013 PROPERTY FOR INDUSTRY DIRECT PROPERTY FUND MERGER 2
Slide 3: Introduction
22 MAY 2013 PROPERTY FOR INDUSTRY DIRECT PROPERTY FUND MERGER 3
Slide 4: Transaction overview
Transaction overview The boards of PFI and DPF have agreed to merge, with PFI as the continuing entity • Merger structured as a Scheme of Arrangement under Part 15 of the Company’s Act 1993 • DPF shareholders to receive 123.2180084 PFI shares for each DPF share they hold • Exchange ratio reflects 10
Slide 5: Transaction benefits
Transaction benefits Strong strategic Brings together two successful, complementary property investment companies rationale Consistent with key strategic objectives of PFI and DPF Compelling growth opportunity at an attractive point in the property cycle A larger and more Significant increase in ass
Slide 6: Transaction benefits (cont.)
Transaction benefits (cont.) Financial and Merger and associated treasury initiatives are forecast to increase dividends per share for scale benefits PFI (+10.7%) and DPF (+4.0%) shareholders The merger is forecast to increase net tangible assets per share for PFI, and will preserve the market value
Slide 7: Strategy and portfolio
22 MAY 2013 PROPERTY FOR INDUSTRY DIRECT PROPERTY FUND MERGER 7
Slide 8: Direct Property Fund
Direct Property Fund www.directproperty.co.nz • Unlisted limited liability company formed late in 2003 to invest in the commercial property sector, with a focus on industrial property • Designed and managed to represent as close a surrogate to direct property ownership as possible, with its performa
Slide 9: Merged Group strategy
Merged Group strategy The merger provides a solid foundation to build future earnings growth • The core strategic focus will be on industrial property • The strategy for the Merged Group will be to: Manage the vacancy and upcoming lease expiries Consider the acquisition of quality industrial propert
Slide 10: A larger, more diverse, property portfolio
A larger, more diverse, property portfolio The Merged Group will benefit from a significantly larger, more diversified, property portfolio PFI DPF MERGED GROUP Properties 50 33 83 Portfolio value $400m $414m $814m Average property value $8.0m $12.6m $9.8m Tenants 84 55 137 WALT 4.8 years 6.4 years 5
Slide 11: Enhanced portfolio characteristics
Enhanced portfolio characteristics The merger diversifies PFI and DPF’s rent rolls • The Merged Group’s top 10 tenants will make up 33.6% of the lease portfolio, by rent roll, compared to 42.4% for PFI and 52.0% for DPF before the merger • The reduction in tenant concentration improves the defensive
Slide 12: Enhanced portfolio characteristics (cont.)
Enhanced portfolio characteristics (cont.) The merger results in a smoothing of PFI and DPF’s lease expiry profiles • PFI’s expiry concentrations in FY16 and FY17 and DPF’s expiry concentrations in FY15 and FY19 smoothed • No more than 13.1% of the Merged Group’s leases will expire in any one year f
Slide 13: Financials
22 MAY 2013 PROPERTY FOR INDUSTRY DIRECT PROPERTY FUND MERGER 13
Slide 14: Financial performance
Financial performance The merger and associated treasury initiatives are forecast to increase dividends per share for PFI and DPF shareholders DPF MERGER MERGED GROUP FYE 31 DECEMBER 2013 (PRO FORMA FY13) PFI (PRO FORMA) ADJUSTMENTS (PRO FORMA) Operating revenue $31.6m $32.1m - $63.7m Operating expe
Slide 15: Financial position
Financial position The merger is forecast to increase net tangible assets per share for PFI, and will preserve the market value of DPF shareholders’ investment DPF MERGER MERGED GROUP AS AT 31 DECEMBER 2013 (PRO FORMA FY13) PFI (PRO FORMA) ADJUSTMENTS (PRO FORMA) Investment properties $396.4m $415.7
Slide 16: Treasury and capital management
Treasury and capital management The merger provides the opportunity to re-evaluate certain capital management policies • The term and pricing of PFI and DPF’s current banking facilities will be maintained or improved, with DPF’s facilities “folded into” PFI's facilities: • Facility A: expiring 31 Ma
Slide 17: Comparison to NZX Main Board LPVs
Comparison to NZX Main Board LPVs The Merged Group will become one of the largest specialist listed industrial property investors in New Zealand MERGED KIP GMT PCT ARG DNZ PFI DPF GROUP Total portfolio value $2,076m $1,822m $1,461m $1,065m $814m $647m $400m $414m WALT 4.1 yrs 5.6 yrs 5.5 yrs 6.1 yrs
Slide 18: Financial and scale benefits
Financial and scale benefits The merger significantly improves PFI’s index positioning and investment profile • Merged Group expected to become the 5th largest LPV on the NZX Property Index with an implied market capitalisation of more than $500 million and expected NZX 50 Gross Index expected ranki
Slide 19: Board and management
22 MAY 2013 PROPERTY FOR INDUSTRY DIRECT PROPERTY FUND MERGER 19
Slide 20: Board
Board The board of the Merged Group will comprise the current PFI independent directors, as well as two DPF directors, along with manager representation 1 • Chairman and • Independent • Independent • Chairman of DPF • Independent • Director of PFI and Independent Director of PFI Director of PFI Dire
Slide 21: Senior management
Senior management Management will continue to be undertaken by PFIM, the current manager of PFI, pursuant to an amended PFI management agreement • See previous slide • Currently General • Currently General • Chief Financial Manager of PFI Manager of DPF Officer and • Will be joint General • Will be
Slide 22: Management fees
Management fees The Merged Group’s base management fees represent a simple blend of the current PFI and DPF base management fees • Three tiers of base management fee: • (1) up to $425M of total tangible assets under management (AUM) – 0.725% of AUM • (2) above $425M up to $775M – 0.45% of AUM • (3)
Slide 23: Management expense ratio
Management expense ratio Merged Group’s management expense ratio (MER) below sector average • Manager cannot charge fees for other services • PWC estimate fees for other services add 0.21-0.33% per annum other LPV’s MER • When these fees are taken into account, the Merged Group’s MER is the lowest o
Slide 24: Independent opinions and summary
22 MAY 2013 PROPERTY FOR INDUSTRY DIRECT PROPERTY FUND MERGER 24
Slide 25: Independent opinions
Independent opinions The PFI and DPF boards have received independent advice on the transaction and fee arrangements from third parties • Deloitte, acting as independent expert assessing the merits and fairness of the transaction, concluded: “In our opinion, after having regard to all relevant facto
Slide 26: Timetable
Timetable PFI SHAREHOLDERS DPF SHAREHOLDERS Documents mailed to shareholders by 7 June Notice period 7 June – 24 June Voting / proxy forms to be returned by 3.00pm on 22 June 11.30am on 22 June Shareholder meetings 3.00pm on 24 June 11.30am on 24 June Last day for notices of opposition or 24 June ap
Slide 27: Transaction summary
Transaction summary Better together Significant increase in assets and contracted rental income at an attractive point in the property cycle Cost effective means of bringing the equity from DPF shareholders into PFI Enhanced portfolio characteristics, more diversified by rental income, lease expiry,
Slide 28: Questions
22 MAY 2013 PROPERTY FOR INDUSTRY DIRECT PROPERTY FUND MERGER 28
Slide 29: Disclaimer
Disclaimer This presentation includes information extracted from an Information Memorandum in relation to the proposed merger which is dated 22 May 2013. Please refer to the Information Memorandum for further detail. Terms used in this presentation have the meaning ascribed to them in the Informatio
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