BUSINESS PLAN MAINLAND REAL ESTATE LTD

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2 BUSINESS PLAN MAINLAND REAL ESTATE LTD

3 2 TABLE OF CONTENTS Page 1. Corporate Information 3 2. Incorporation and Listing 3 3. Overview of Mainland 3 4. Investment Policy 4 5. Shareholders Capital Raises on Listing on the SEM and Alt X Debt Funding Market Research Investments Risks Personnel Key Service Providers SWOT Analysis Structure Diagram Financial Data 24 Annexure A Curriculum Vitae of Board Members 30 Annexure B Details of Securities Identified for Potential Investment 322

4 3 1. Corporate Information 1.1. Name of Company: Mainland Real Estate Ltd ( Mainland or the Company ) Registered Address: c/o Intercontinental Fund Services Limited ( IFSL ) Level 5, Alexander House 35, Cybercity Ebene Republic of Mauritius 1.2. Regulatory Bodies: Financial Services Commission ( FSC ) and, once listed, the Stock Exchange of Mauritius Ltd ( SEM ) and the Johannesburg Stock Exchange, the JSE Limited ( JSE ) 1.3. Constitutive Document: Constitution 1.4. Date of incorporation: 2 February Incorporation and listing Mainland was incorporated and registered in Mauritius on 2 February 2016 and holds a Category 1 Global Business License in accordance with the Mauritian Companies Act 2001 and the Financial Services Act 2007 of Mauritius. The Company s shares are not currently listed on any exchange. It is envisaged that the Company will seek to list its shares on the Official List of the SEM and the Alternative Exchange of the JSE ( AltX ). 3. Overview of Mainland Mainland has been established with the primary objective of investing opportunistically in undervalued, high quality, investment grade real estate assets and companies which deliver suitable returns for investors through both income and capital growth. The Company was established to meet the demand for this type of offering in this market, and the Company intends to take advantage of the business relationships, skills, market knowledge and experience if its management and board of directors to fulfil its business objective. Mainland will invest in listed and unlisted shares and securities of real estate companies, and in a portfolio of fixed property assets which it will own either directly or through subsidiaries. In addition, the Company may invest in cash and other debt securities. The Company will follow a value-added strategy with a strong income focus. Accordingly, the Company will target the acquisition of assets that offer a combination of quality income generating property assets and those requiring value-added asset management. Mainland is led by a team of individuals with significant experience and a successful track record in real estate investment, asset and fund management. Through the management of previous funds the team comprises individuals with a proven track record in value-added intensive asset

5 4 management and the management of significant real estate businesses. Furthermore, the team s wide ranging experience of debt financing can be employed to further enhance fund level performance. Management s first-hand experience, knowledge and network across the targeted jurisdictions is considered invaluable to the strategic direction and day-today management of Mainland. The property management function of Mainland will be outsourced on market related terms to the Property Manager. As such, the ongoing management of all property investments is to be undertaken by the appointed Property Manager. The Company conducts its business from Mauritius because of the business-friendly environment, the spread of double-tax agreements that Mauritius has with many of the jurisdictions that the Company will invest in and to allow access to a global investor base. Consequently, Mainland s board comprises a number of Mauritian resident directors. The Company s reporting currency is GBP, with the financial year-end of the Company being 31 March each year. 4. Investment policy 4.1. Objectives, Geographic and Sectoral Focus The Company s primary objective is to acquire and invest in global real estate assets and companies, predominantly situated in the United Kingdom and selected Western European jurisdictions, specifically the Netherlands and Germany, which the board believes will deliver suitable returns for investors through both income and capital growth. Investments will be made predominantly in the Office, Warehousing and Logistics sectors. Mainland will consider opportunistic investments outside of the United Kingdom and Western Europe where the commercial merits of the opportunistic investments support Mainland s overall investment strategy Investment Strategy Mainland will follow a dual strategy approach to its real estate investments whereby it will gain exposure to real estate through: (1) investments in listed and unlisted shares and securities of real estate companies (indirect exposure); and (2) portfolios of fixed property assets which it will own either directly or through subsidiaries (direct exposure). In addition the company may invest in cash and other debt securities. The Company s investments may be held directly or through subsidiaries incorporated in various appropriate jurisdictions for the purpose of maximizing tax efficiencies of the Company s investments.

6 5 Initially, Mainland s investments will comprise listed real estate securities in the United Kingdom and Western Europe, pursuant to its primary objective of investing in real estate assets and companies which deliver suitable returns. In respect of the indirect exposure, investments in listed property securities may be made from time to time where this is justified by pricing differentials between direct property and property securities, however the majority of assets will always comprise fixed properties. In respect of the direct exposure, the directors of Mainland wish to follow a value-added strategy with a strong income focus and believe attractive real estate investment opportunities exist in these sectors and region and as such, the Company will target the acquisition of real estate assets that offer a combination of quality income generating assets and those requiring value-added asset management, comprising: Income generating assets comprising properties with strong sustainable income from high quality tenants on medium to longer term lease expiry profiles with a high probabilities of renewal; and Properties requiring value-added asset management through upgrade, refurbishment, redevelopment or other improvement to existing brownfield buildings Investment Weighting Management anticipates having 50% by value of the Company s assets in income generating assets and 50% in value-added asset management opportunities. Mainland s weighting of income generating investments to value-added opportunities, its re-investment of profits from rentals or occasional disposals, and its retention of completed re-developments as investments rather than their sale and resultant realisation of development profits, are intended to optimise long-term sustainable capital growth and enhance total returns to shareholders Investment Criteria Investment decisions will be based on the following criteria: Regional analysis; Country specific analysis; Macro and micro analysis; Geographic analysis; Sector analysis; Listed sector analysis and security size analysis;

7 6 Quality and location of asset analysis; Tenant quality, tenure and sustainability analysis; Value-added asset management opportunity analysis; Income and capital growth potential; and Total return analysis Investment Source All direct property investments will be sourced through management, the appointed property managers, and a select network of property sector contacts principally based in London. Management expects to source all of its property investments off-market due to the collective team s extensive network and relationships across the targeted geographical jurisdictions Investment Process The Company s directors will set the investment policy, parameters and objectives and review and approve each purchase or sale of investment assets. Management together with the appointed Property Manager is responsible for identifying and reporting, to the Company s directors, the availability of new investment opportunities that fall within the investment policy and objectives. Following the identification of a potential new investment opportunity and approval by the Board, Management is responsible for negotiating the terms of investment and ongoing management of the investment assets. The ongoing management of all investments is to be undertaken by the appointed property manager Medium Term Goals and Capital Raising The Company anticipates investing GBP150 million in the first year of operation, which will be funded through a combination of third-party debt and equity capital. Equity capital will be raised through private placements after securing a listing on the Official Market of the Stock Exchange of Mauritius Ltd ( SEM ) as well as a secondary listing on the Alternative Exchange ( AltX ) of the Johannesburg Stock Exchange ( JSE ). Mainland has already identified a solid pipeline of potential acquisitions and value-added asset management opportunities, which will offer investors exposure to investments that are geographically diversified, and provide a blend of income and capital growth. The Company s medium term target is to grow the value of investments to GBP350 million by the end of the financial year ending 31 March 2019.

8 Gearing Policy The Company intends taking advantage of the current low interest rate environment in the United Kingdom and Europe to enhance returns through gearing. In order to fund future value-accretive acquisitions, management will look to raise debt financing with a targeted loan to value ratio at, or below, 60%. The Company will generally hedge a substantial portion of its debt for periods between 2 and 10 years at current indicative rates, and may increase this to 100% should the directors believe that this is in the best interests of the Company. Mainland will not take speculative positions on interest rate contracts. Any such contracts will only be taken as hedges, taking into account the Company s debt portfolio and cash holdings and the near to medium-term expected debt portfolio and cash holdings Exchange Rate Policy The company will not take speculative positions on currency exchange contracts. Any such contracts will only be taken as hedges, taking into account its current debt portfolio and cash holdings and the near to medium-term expected debt portfolio and cash holdings Distribution Policy The Company will receive regular distributions from its investments which it will aggregate, and after making provision for expenses, interest and loan repayment obligations, maintenance, capital expenditure, and its current and anticipated operational cash requirements, declare a net amount to investors as dividends on a semi-annual basis, subject to all applicable laws Targeted Investment Jurisdictions and Returns More detail on each of the targeted geographical jurisdictions and sectors is provided below: Geographic focus The dominant geographic focus of the company will be the United Kingdom and parts of Western Europe, in particular the Netherlands and Germany. The directors and executive management of the company have extensive experience in these locations together with successful track records and are of the opinion that there are attractive real estate investment opportunities in these jurisdictions. They have fundamentally sound economies with an enduring property market. The world markets are retreating from investments in emerging markets and seeking more stable growth, reduced risk investments in more established markets.

9 8 Mainland will consider opportunistic investments outside of the United Kingdom and Western Europe where the commercial merits of the opportunistic investments support Mainland s overall investment strategy. In the real estate sector in South Africa, the rate of growth is slowing significantly and returns diminishing. This coupled with a negative economic outlook and a volatile local currency which has experienced enormous weakness against the British Pound, Euro and the US Dollar means that investments into other real estate jurisdictions with hard currency are appearing appropriately attractive. Real estate investments into the UK, Germany and the Netherlands are supported by supply and demand, and lower funding costs versus acquisition yields. The UK and Eurozone growth prospects are sound and therefore these factors enhance the decisions to invest in a compelling investment asset class and location. The potential hedge against a weakening local currency in SA is an added advantage which could further enhance returns when compared to those of onshore SA REITS Economic backdrop The UK: The UK economy has seen an extended period of growth and although this rate of growth has slowed, the economy continues to expand steadily. The forecasts for 2016 are for a rate of growth of between 2,0% and 2,5%. The UK GDP now-cast for Q fell back slightly, from 0.62% to 0.60% quarter-on-quarter. This was caused by the release of data showing that the volume of Industrial Production fell in November. The UK is still expected by the IMF to be among the fastest growing advanced economies in the world over the next few years, outstripped only by the US. Until recently, the UK was able to borrow money for close to record low costs. Yields have started to rise again as part of a general sell-off of European bonds, but remain low by historic standards. The main UK interest rate has been at a record low of 0.5 per cent for more than five years, but while economists expect the first rise in the summer of 2016, markets have pushed out their bets into The Eurozone: The recovery in the 19-strong euro area is continuing but the pace has been slackening of late. Growth had picked up to 0.5% in the first quarter of 2015 (compared with the final quarter of 2014), the perkiest since the upswing started in the spring of Since then, however, it has slackened, to 0.4% in the second quarter and 0.3% in the third. That pace is disappointing given the fact that the euro area has been benefiting from 1 FT The UK Economy at a glance (

10 9 a double fillip. First, the fall in energy prices caused by the collapse in the oil price has acted in much the same way as a tax cut, boosting consumer spending - the main engine of the recovery. Second, the European Central Bank has been conducting quantitative easing creating money to buy financial assets since March. Among other things this has kept the euro weak, helping exporters and contributing to a big current-account surplus of 3.7% of GDP in Looking ahead, the euro zone is likely to maintain a steady if unglamorous pace of recovery. That reflects two conflicting forces. On the one hand, the slowdown in China and emerging economies, which account for a quarter of euro-zone exports. On the other hand, the European Central Bank is poised to loosen monetary policy still further. And spending on refugees, especially in Germany, will provide a modest fiscal stimulus. Netherlands: Economic growth is projected to strengthen further and to remain broad-based. Private consumption and residential investment will remain robust thanks to the housing market recovery, employment growth and a reduction in income taxes. The brighter economic outlook should further support business investment. The relatively strong performance of the Netherlands key export markets will underpin export growth 3 Germany: Economic growth is projected to strengthen in 2016, as a robust labour market, low interest rates and low oil prices underpin private consumption. Weaker demand from emerging market economies will gradually be offset by stronger exports to other euro area economies. Business investment is expected to recover with rising capacity utilisation. The unemployment rate will remain historically low. The current account surplus will narrow somewhat but will remain very high. 4 The Economist forecasts for GDP in the Netherlands for 2016 is between 2,00% to 2,9% and that of Germany for 2016 between 1,00% to 1,9% Real Estate Markets The Company will be focussed on the UK, the Netherlands and Germany as locations and within these locations on offices, light industrial sheds and logistics and warehousing. 2 The Economist European Economy Guide 13/11/2016. (

11 10 The investment fundamentals of property are expected to become paramount in 2016, with much greater focus being placed on the income producing potential of the various asset classes and the ability to unlock the latent value of individual assets through management action. Savills Key themes for UK Real Estate The UK Various research into the UK property market has shown that it has experienced significant growth of the last couple of years and this is expected to continue, albeit at slightly lower rates of growth. Extracts of Colliers Internationals 2016 UK snapshot show that UK direct investment topped 64bn according to Property Data Ltd, surpassing last year s 63bn. December 2015 s volume ( 4.4bn) was much lower than December 2014 s phenomenal result ( 11.3bn). Property Archive, though, reports that 2015 transactions topped 70bn, surpassing last year s 69bn total. On balance, it looks as though 2015 volumes were robust, but that the year was front loaded. Foreign investors continue to dominate the market taking a 50%+ share of purchases in Q4 15. Conditions look set for a continuation of cross border investment into the UK given the weight of international capital and on-going political and economic uncertainty globally. January 2016 looks to be off to a reasonable start, no doubt driven by deal overhang from December. UK institutions remain well funded with net cash inflows stable in November ( 176m), although down by half against November 2014 ( 344m). Foreign investor demand is set to continue in 2016 with interest in alternative assets increasing. Property yields remain stable for core assets. 6 Offices: Central London: The London vacancy rate has been falling for almost three years and has fallen to just below 3% -- a 15 year low. Grade- A availability at the end of 2015 is down by 43% against the end of 2014 and Grade-B space down by 23%. Demand is coming from a wide range of sectors, including Fintech and the traditional City FBS sectors as well as Media and Tech in the West End. Demand across non-core submarkets continues to come from a wide

12 11 range of occupiers looking for affordable Grade-A space. Supply continues to lag, with a considerable quantum of new space already pre-let. Regional: Rental growth is beginning to look entrenched, with IPD reporting positive year on year growth for the third consecutive quarter across all regions in Q3 15 in line with regional employment growth. New quarterly employment figures are due out this month, followed by the IPD index in early February. Colliers' view: Unchanged. Occupier fundamentals continue to strengthen and demand across UK regions is holding up, supporting good to strong rental growth. Industrial: The strength of domestic consumer goods demand continues to be the main support for the industrial manufacturing and distribution sectors, with exports continuing to struggle with weak global trade and exchange rate volatility. The headline purchasing manager data in December (51.9) suggests little respite. In contrast, rental growth remains strong UK-wide. IPD data shows a further acceleration in London to 8.9% pa growth in November, the highest since the series began in 1994, surpassing the previous high in 1998 of 8.7%. Likewise, the aggregate figure for the Rest of UK (ex-london and the South East) reached 3.6% pa, the highest level since 2000 when growth reached 4.2%. Given weak PMI and industrial production data, the lack of supply continues to look like the prime candidate for explaining this performance. Conventional bank development finance is still very limited for spec development, but developers claim that the real constraints are issues with the planning regime and lack of suitable sites, many of which have higher use values for residential. Colliers' view: Phenomenal rental growth continues across the sector due to lack of quality space and strength of the domestic economy. Global trading remains tough The Eurozone According to the Colliers latest 2016 forecast, their survey reveals that low yields in UK prime markets have not put off investors. The UK remains a primary target for 65% of all investors with an EMEA focus. This is followed by Germany (37%), France (22%) and Spain (16%). The Netherlands and the Nordics captured the same amount of preferences (14%), while Italy and Poland were singled out more often as secondary markets. Overseas investors have similar preferences

13 12 The Netherlands Savills reports that, as the economy is growing and forecasts for 2015 and 2016 are positive, the leasing market has picked up pace in the past 12 months, in turn positively affecting the investment market. The investment market reached a peak in 2014 when total investments in offices, industrial, retail, hotels and residential reached 9.7bn. As pricing of Dutch property was relatively attractive compared to other European countries, the Dutch market has become one of the key markets for cross-border investors. Despite the fact that foreign demand remains high and many international investors are keen to invest more in the Netherlands, the overall share of non-domestic investments has dropped significantly in 2015 H1. This has very much to do with the lack of large portfolio transactions so far. The by far largest portfolio transaction in this period concerned Klepierre selling nine shopping centres to the Dutch listed retail investor Wereldhave, for a total volume of 770m, being one-fifth of the total investment volume so far Targeted Acquisition Yields Management aims to acquire assets with a net forward acquisition yield between 6,5% and 8,5%, averaging 7,5% Targeted Dividend Returns The company s core objective is to provide shareholders with an investment in a real estate asset class that yields above average returns on a continual basis with capital growth potential. This is intended to be achieved through active value-added management of the acquired portfolio to grow rents and control costs, and through future acquisitions of earnings enhancing properties. In line with this objective, the Board of Directors expects to generate a dividend yield between 7% and 9% from its real estate investments in the targeted geographical jurisdictions, with modest to stable positive earnings growth. Comparing Mainland to similar Mauritian listed based UK and European focused funds, it is anticipated that Mainland will produce an above-average yield with strong rental growth, which should in turn result in meaningful capital appreciation for its investors. 5. Shareholders The initial shareholder of the Company is Mr. Paul Reid (UK) who own 100% of the ordinary shares in the Company. On incorporation the Company was capitalised by its founder shareholder in an amount of GBP

14 13 Following incorporation, the Company intends to raise funds with proceeds derived from private placements on the SEM and/or the JSE. It is anticipated that the equity funding will be raised from investors in Mauritius, international investors, South Africa as well as investors from the Common Monetary Area. SEM and the JSE are well-regulated and efficient stock markets. The Company will seek a listing on the SEM and will seek a secondary listing on the JSE. These listings will provide the Company with the ability to issue shares to both off-shore and South African and Common-Monetary Area investors including to vendors of potential acquisitions, having regard to the strength of managements relationships and the known interest of investors in the targeted geographical jurisdictions. The dual listings will provide Mainland with access to a global investor base of institutional investors, managed funds, high net worth individuals, retail investors and other sources of capital who view Mauritius as an attractive investment destination. 6. Capital Raises on Listing on the SEM and Alt X It is anticipated that Mainland will raise GBP670,000 on listing on the SEM. Mainland intends investing these proceeds into a portfolio of listed property securities. A number of securities have been identified for potential investment once capital has been raised. Details of these are included in Annexure B. Post listing, larger capital raisings will be undertaken on both the Mauritian and South African register, depending on demand. These proceeds will be invested in line with Mainland s investment policy. In line with its acquisition targets, Mainland intends raising a mix of capital and debt funding to acquire GBP150 million in the first year of operation and GBP100 million per year in the two successive years thereafter. Thereafter Mainland intends undertaking subsequent capital raises through private placements over the medium term. 7. Debt Funding Interest rates in the UK, and most other advanced economies, tumbled in the wake of the financial crisis to their current record lows, resulting in a LIBOR base rate of 0,5%. With the economic recovery well, investors are not too concerned with possible rate rises and the timing thereof, as a result of the Bank of England confirming that when rate are increased, such rate increases will be low and gradual. Of importance, rates are expected to remain below pre-crisis levels for some time

15 14 Whilst economists have warned that interest rates may rise by mid-2016, this is unlikely to occur until 2017, as indicated by the UK yield curve per the above graph. Mainland intends to capitalise and take advantage of the prevailing low interest rate environment, through the utilisation of appropriate debt funding as detailed in the gearing policy contained in paragraph 4 above. 8. Market Research Industry Trends The continued devaluation of the Rand has had a noticeable impact on foreign investment returns from listed property counters, resulting in the majority of offshore total returns by REITS outperforming those in South Africa. This coupled with the base economic fundamentals in the targeted jurisdictions supports Mainland s investment philosophy outlined in paragraph 4 above. The recovery of the UK and Eurozone economies, cheaper borrowing costs and higher acquisition yields on properties in various jurisdictions as well as rand weakness all contributed to the bull run of offshore stocks. For the 12 months to December , the South African currency weakened against the dollar, pound and euro by 33.37%, 26.46% and 18.93%, respectively. On a global scale, the UK was the top performing Real Estate Investment Trust (Reit) market delivering total returns of 42%. 10 Total return by Reit market (ZAR) Ranking Market Total return 1 United Kingdom 42% 2 Europe 40% 3 United States 38% 10 Avior Capital Markets.

16 15 4 Australia 36% 5 Asia 24% 6 South Africa 8% Source: Avior Capital Markets. 11 Anticipated demand for the Mainland Shares There is little doubt that South African investors are continually seeking to increase their exposure to hard-currency investments, particularly in light of the Rand s continual volatility and the weakening of SA 10 year bond yield. A recent article posted on Moneyweb comments that A look at the top three biggest real estate companies by market capitalisation reveals that offshore and rand-hedge property counters are now in vogue for investors looking to hedge their bets in developed markets The article continues to highlight the recovery of the UK economy and the benefit of low interest rates The recovery of the UK since the 2008/9 global financial crisis has benefited Intu and Capco. The region offers cheaper borrowing costs and higher acquisition yields on properties, which has contributed to the bull run of offshore stocks in light of the depreciation of the rand. In light of the increasing investor appetite for quality offshore property counters, Management believes that there will be a significant demand from investors wanting to subscribe for Mainland shares. The Company is therefore committed to meeting the demands of this market, and taking advantage of the business relationships, skills, market knowledge and experience of its Management team, to fulfil its business objectives. Competitive Advantage Management is of the opinion that Mainland is relatively unique, due to its investment focus and offering being different from similar funds listed on SEM. Whilst other funds may be focusing on acquisitions in similar jurisdictions to those targeted by Mainland, management believes Mainland value-proposition differentiates itself through its strategic sectoral, income and valueadded focus. Mainland will be competing for capital from the same investor base in South African. Management is however confident that its value proposition is unique, which will provide it with a competitive advantage over similar newly listed funds (e.g. New Frontier Ltd, Green Flash, Atlantic Leaf, Delta Africa, Schroeder, etc.), thereby enabling it to attract the capital required to meet its growth expectations. Marketing Strategy Management believes that Mainland will present an attractive opportunity to South African property investors, who have enjoyed strong and stable returns from the South African real estate sector over the last few years and now see comparatively attractive value in carefully selected 11

17 16 opportunities in real estate markets outside of South Africa. In order to take advantage of these opportunities it is necessary for the Company to be able to raise capital timeously, to enable it to grow its assets. It therefore intends actively market itself to selected investors shortly after listing on the SEM and the JSE. Conclusion The market analysis performed by Mainland shows that there are significant opportunities in the real estate sector in the targeted geographic jurisdictions. Mainland intends to capitalise on these opportunities by making a series of acquisitions in the next 12 to 36 months. As referred to in paragraph 4, the Company aims to benefit from above-market returns earned through its investment in a real estate assets offering strong income returns and value-added asset management opportunities. Whilst undertaking its market analysis, a number of possible real estate acquisition targets have been identified by Mainland. Discussions with the relevant parties are still at an early stage. As discussions are at an early stage, and the details are highly confidential, details of these potential acquisitions cannot be disclosed at this stage. Note that the proposed listing of Mainland on SEM is not dependent on these conclusion of these potential investments. 9. Investments Mainland s stated investment strategy is to invest opportunistically in undervalued high quality, investment grade real estate assets and companies which deliver suitable returns for investors through both income and capital growth, and will follow a value-added strategy with a strong income focus. Details of the criteria that will be considered when evaluating the types of investments that the Company will target can be found in paragraph 4 above. Given that the Company is newly incorporated and that the Company s primary capital raising exercise will only take place concurrently with the listing of the Company s shares on the SEM and JSE, the Company does not currently hold any major assets. However, a number of securities have been identified for potential investment once capital has been raised. Details of listed securities that have been identified are included in Annexure B. In anticipation of the approval to list on both SEM and the JSE, the Company has identified a number of real estate opportunities to acquire in line with Mainland s investment policy. 10. Risks The risks of the Company are all of the risks that would typically be associated with investing in real estate and listed real estate securities. The board of Mainland understands these inherent risks and will take reasonable and, where possible, appropriate steps to mitigate such risks. The Company is considering to raise further capital once it is listed on the SEM and JSE, to avail itself of any investment opportunities that may arise in order to pursue its

18 17 investment policy. Although there is always a risk that the Company does not raise the capital they intended to, such failure to do so would not impact on the operations of the Company Capital and Portfolio Risk The acquisition of assets, whether listed or unlisted securities, carries the investment risk of a loss of capital and there can be no assurance that the Company will not incur losses. Returns generated from the investments of the Company may not adequately compensate shareholders for the business and financial risks assumed. An investor should be aware that it may lose all or part of its investment in the Company. Many unforeseeable events, including actions by various government agencies and domestic and international economic and political developments may cause sharp market fluctuations which could adversely affect the Company s portfolios and performance both in the short and longer terms Currency Risk Most of the investments that the Company will seek to acquire are located in foreign jurisdictions other than Mauritius and denominated in currencies ( the foreign currency ) predominantly in pound sterling. For those investors whose base or home currency is not the same as the relevant foreign currency, there is a risk of currency losses if the foreign currency depreciates against the investors base currency Stock Market Risk The investments of and in the Company could decrease in value as a result of a decline in global stock markets Liquidity Risk The Company may invest in securities for which no liquid market exists. The market prices, if any, for such securities tend to be volatile and may not be readily ascertainable and the Company may not be able to sell them when it desires to do so or to realize what it perceives to be their fair value in the event of a sale. The sale of restricted and illiquid securities often requires more time and results in higher brokerage charges or dealer discounts and other selling expenses than does the sale of securities eligible for trading on national securities exchanges or in the over-the-counter markets. The Company may not be able to readily dispose of such illiquid investments and, in some cases, may be contractually prohibited from disposing of such investments for a specified period of time. In addition, in certain circumstances, governmental or regulatory approvals may be required for the Company to dispose of an investment. Restricted securities may sell at a price lower than similar securities that are not subject to restrictions on resale. Further, direct real estate is a relatively illiquid investment and long lead times are sometimes required to divest direct real estate holdings. This may affect the liquidity of

19 18 the Company and the ability to repay investors, if required. Land for development has no income return during the development stage and may be a drain on cash resources Leverage and Financing Risk The capital of the Company may be leveraged so as to achieve a higher rate of return. Accordingly, the Company may pledge its securities in order to borrow additional funds for investment purposes. While leverage presents opportunities for increasing the total return of the Company, it has the effect of potentially increasing losses as well. Accordingly, any event which adversely affects the value of an investment by the Company would be magnified to the extent the Company is leveraged. The cumulative effect of the use of leverage by the Company in a market that moves adversely to the Company s investments could result in a substantial loss which would be greater than if the Company were not leveraged. In general, the anticipated use of short-term margin borrowings results in certain additional risks to the Company. For example, should the securities pledged to brokers to secure the margin accounts decline in value, the Company could be subject to a "margin call", pursuant to which the Company must either deposit additional funds or securities with the leverage provider, or suffer mandatory liquidation of the pledged securities to compensate for the decline in value. In the event of a sudden drop in the value of its assets, the Company might not be able to liquidate assets quickly enough to satisfy its margin requirements Global Political, Economic and Financial Risk As the Company will invest in global real estate and securities, it will be exposed to adverse political, economic and financial events globally. The value of the investments could decline as a result of economic developments such as poor or negative economic growth, poor balance of payments data, high interest rates or rising inflation. A similar situation would prevail due to political instability in certain jurisdictions. The Company will take reasonable steps to mitigate against these risks, including risk insurance cover. Valuations of real estate and real estate -related assets are inherently subjective due to the individual nature of each real estate. As a result, valuations are subject to uncertainty and, in determining market value, valuers are required to make certain assumptions and such assumptions may prove to be inaccurate. This is particularly so in periods of volatility or when there is limited real estate transactional data against which real estate valuations can be benchmarked. There can also be no assurance that these valuations will be reflected in the actual transaction prices, even where any such transactions occur shortly after the relevant valuation date, or that the estimated yield and annual rental income will prove to be attainable Regulatory change may affect the Company

20 19 Legal or regulatory change may affect the Company and impose potential limits on the Company s flexibility in implementing its strategy. Any change to landlord and tenant, planning, trust, tax (including stamp duty and stamp duty land tax) or other laws and regulations relating to the areas in which the Company operates may have an adverse effect on the Company. The levels of, and relief from, taxation may change, adversely affecting the financial prospects of the Company and/or the returns to shareholders. The Company is subject to the tax authorities within the jurisdictions it operates and taxes and tax dispensations accorded to the Company may change over time. The nature and amount of tax payable is dependent on the availability of relief under tax treaties in a number of jurisdictions and is subject to changes to the tax laws or practice in any other tax jurisdiction affecting the Company. Any change in the terms of tax treaties or any changes in tax law, interpretation or practice could increase the amount of tax payable by the Company and could affect the value of the investments held by the Company or affect its ability to achieve its investment objective and alter the post-tax returns to shareholders. The level of dividends the Company is able to pay would also be likely to be adversely affected. 11. Personnel Board of Directors The board of Mainland will be responsible for the management of the Company and strategic decision making and implementation. Annexure A contains the curriculum vitae of the Company s board members. Attention is drawn to the significant experience and expertise of the board members in the real estate investment, asset and fund management professions. On incorporation, the majority of the directors are resident in Mauritius and the board has ensured that each member has the requisite advisory and management experience and expertise. The Company will at all times seek to uphold corporate governance standards commensurate with international best practice. It is further anticipated that the Board will set up an Investment Committee that will comprise of directors and other members as may be appointed by the board. The Investment Committee s primary role will be to assess identified investment opportunities and to make recommendations to the Board Management and Operational Team A key component to the ultimate success of Mainland and the investment in and ongoing management of suitable properties is the management and operations team, comprising Paul Reid, Tim Wheeler, Francesca Chung, Lyndon Kan and Andrew Glencross.

21 20 The team jointly has over 140 years of extensive real estate investment, fund and asset management experience. Collectively, management s experience provides the company with deep rooted expertise in: Real Estate Investment, Finance, Asset and Fund Management; Business Origination, negotiation, structuring, investment and acquisition; Financial and Portfolio Management; Mergers and Acquisitions; and Commercial Banking. Their careers have provided them with first-hand experience of managing real estate businesses through wide ranging economic cycles and across varying geographic locations including Mainland s targeted geographical jurisdictions, thereby enabling a fundamental understanding of the real estate asset class, and its respective risks and returns. A key component of the acquisitions set out in Annexure C will include the integration of a highly qualified and experienced operations team. As and when other businesses are acquired by the Company, the operations team will expand to include additional experts joining the group. 12. Key Service Providers Company Administrator It is anticipated that the board will leverage off existing operations within its duly appointed Company Administrator in Mauritius, Intercontinental Trust Limited ( ITL ) and its associated companies. ITL is licensed by the Mauritius Financial Services Commission to provide a comprehensive range of financial and fiduciary services to international businesses. All administrative business functions of the Company shall be carried out by ITL in Mauritius, and they will also act as the company secretary to Mainland Property Manager No external investment manager is to be appointed. Mainland will enter into a property management agreement with Red Tarn LLP, a UK based property Management Company. The property management team comprises Paul Reid and Tim Wheeler (See brief CV below). The combined experience of the Management team and the Property Manager provides the business a sound foundation to acquire and manage assets in the UK and also understand the dynamics for SA investors.

22 21 The property manager will manage the properties on a day-to-day basis per the property management agreement. The property managers comprise individuals with significant experience and successful track records in real estate investment and fund management, with a proven track record in value-added intensive asset management. Through the management of previous funds, the team has sufficient and satisfactory experience in the management of significant real estate businesses. The team s knowledge advantage and entrepreneurial outlook enables it to exploit market inefficiencies through rigorous market research, focused stock selection and intensive asset management to provide superior risk-adjusted returns. Paul Reid - Paul is currently running a GBP200m portfolio on behalf of Aberdeen Asset Management. He has also recently co-invested in a GBP100m Fund with ISG Longbow. Paul was Head of Asset Management at Centurion Properties Ltd managing a portfolio of GBP300m, and previously held positions at Jones Lang LaSalle between , before joining Brixton plc where he worked in the acquisitions, development, and asset management teams, being made Director of the main operations board from Between , Paul set up and ran the London operation of developer Equity Estates. From he was CEO of Parkridge Business centres, before setting up his asset management company, RIAM Properties, in Tim Wheeler - Tim and Paul worked with each other for 15 years up until the early 2000s and they are now re-united as fellow directors of Easedale Estates and East Street Developments. Tim is a Director and a founding shareholder of Howtown Investments, East Street Homes (Southern), East Street Homes (South East), East Street Developments and Easedale Estates and has operated at the top of the UK Property world for a significant number of years. Having graduated from Reading University in 1980 and qualifying as a Chartered Surveyor, Tim worked in private practice and for two development companies before joining Brixton plc in 1985 where he was ultimately promoted to Chief Executive in During his tenure as CEO, the size of Brixton s gross assets increased to well in excess of 2bn a rise of more than 50%, with a peak market capitalisation of approximately 1.5bn, placing Brixton in the top 200 listed companies in the UK. Tim expressed his wish to step down from the CEO role to the Board in mid Tim left the company in 2009 and since then has concentrated on a select number of private interests, through the companies mentioned above Management Performance Managing Similar Assets Management has a proven track record in value-added investment through its management of previous funds, and believes that its knowledge advantage and entrepreneurial outlook enables it to exploit market inefficiencies to provide superior risk-adjusted returns. Previous managed portfolios have generated total returns well in excess of the comparable IPD index. Through its network and previous experience,

23 22 management plans to acquire mispriced assets where it considers there is an opportunity to create additional value through active asset management. Specific examples can be provided (per the example below), but these will need to be on a non-disclosure basis. (i.e. no names, values etc. can be provided, only the Index per below). The diagram above shows the performance of a previous fund that was managed by the individuals of the management team of Mainland versus the IPD index. In the above table, the orange line indicates the Total Return of the subject portfolio, whilst the blue line indicates the comparable IPD Monthly Property Index Total Return over the same period Other Third-Party Service Providers In addition, it is envisaged that the Company will outsource a number of functions to specialist third-party service providers. Such service providers may include without limitation: investor relations managers; company administrators; legal counsel; accountants and auditors; and bankers. The Company may also employ the services of a global securities broker and custody for the trading and custody of listed, unlisted, over the counter securities, and corporate or real estate bonds. In this regard, the board of Mainland will engage only with reputable, internationallyrecognised institutions with established track records for the provision of such services. 13. SWOT Analysis An analysis of the Company s strengths, weaknesses, opportunities and threats is detailed below: Strengths: The Management Team is an experienced team with a proven track record in deal sourcing, asset and fund management; The management team is a highly qualified, technically strong team with a good work ethic;

24 23 Mainland is very focused on specific sectors and geographic locations; Investments are being made into hard currency assets in targeted geographical jurisdictions which have low interest rates, strong and stable economies, growing GDP s, low unemployment, with stable political environments and investment policies. Mainland does not have an external investment manager. As such there is therefore no perception of conflict of interest associated with the Company s activities; Debt and equity are currently available to acquire the properties in the pipeline; The company will have a strong and experience board of directors and committees in place; The company will have appropriate governance in place. The company will be differentiated through its focus on acquiring properties in the Office, Warehousing and Logistic properties with value-added asset management opportunities in the UK, Germany and the Netherlands; Weaknesses: Lack of a substantial balance sheet at listing may hamper growth opportunities; The different legal and tax frameworks in the targeted geographical jurisdictions will require specialist technical expertise. Whilst the Company s management does have the necessary experience and skills to deal with these challenges, specialists are readily available and accessible; Different languages in the targeted geographical jurisdictions. Opportunities: There are planned investments into properties that offer strong rental income with valueadded asset management opportunities, representing capital appreciation opportunities; The Company intends to source off-market acquisition opportunities through its strong networks across the targeted geographic jurisdictions; The Company intends to tap into prime assets and enhance rental yields; Threats: Economic slowdown and deflation in the targeted geographical jurisdictions; The volatility of the ZAR against the GBP and EUR, and movements between the GBP and EUR.

25 Structure Diagram Investors on the Mauritian register Investors on the South African register Mainland Real Estate Ltd SEM primary listing AltX secondary listing Property Management Agreement Property Management Fees Red Tarn LLP UK incorporated property manager Asset Holding Companies Potentially holding companies in various jurisdictions, where relevant Portfolio of real estate securities (Indirect Assets) Portfolio of fixed property assets (Direct Assets) 15. Financial Data The Company will be wholly financed by its shareholders and, in due course, third party funding, and will generate sufficient cash-flow to meet expenses as they arise. The financial data is a representation of the expected statement of financial position, statement of comprehensive income and statement of cash flows of the Company for the next three financial years ending 31 March 2017, 31 March 2018 and 31 March The projected forecasts are reasonable given the assumptions, and the board and advisors are confident in the ability of the Company to raise the capital required to acquire a portfolio of real estate securities and fixed property assets. The key assumptions in respect of the financial forecasts are also set out after the forecast financial information.

26 25 Forecast statement of financial position of Mainland Mar-16 Mar-17 Mar-18 Mar-19 1 Mnth 12 Mnths 12 Mnths 12 Mnths GBP GBP GBP GBP Assets Investment Property 0 153,672, ,049, ,168,763 Acquisition of Properties 0 140,000, ,000, ,000,000 Acquisition costs 0 9,520,000 15,640,000 22,440,000 Growth in property value 0 4,152,103 10,409,266 20,728,763 Listed securities 670,000 10,990,100 21,619,803 22,268,397 Acquisition of listed securities 670,000 10,670,000 20,670,000 20,670,000 Growth in listed security value 0 320, ,803 1,598,397 Cash (15,267) 246, , , , ,908, ,108, ,029,943 Equity and liabilities Share capital 654,733 82,878, ,324, ,498,277 Equities raised 1,182,100 79,882, ,882, ,482,100 Listing costs (512,000) (512,000) (512,000) (512,000) Retained earnings 0 4,152,103 10,409,266 20,728,763 Revaluation reserve 0 320, ,803 1,598,397 Capital raise fees (15,367) (964,188) (1,404,483) (1,798,983) Non-current borrowings 0 81,881, ,468, ,056,250 Initial borrowings 0 82,500, ,500, ,500,000

27 26 Debt raise fees 0 (618,750) (1,031,250) (1,443,750) Current liabilities Current tax liability 0 149, , , , ,908, ,108, ,029,943 No of shares in issue 591,100 39,941,100 65,183,818 89,648,935 NAV per share

28 27 Income statement Mar-16 Mar-17 Mar-18 Mar-19 1 Mnth 12 Mnths 12 Mnths 12 Mnths GBP GBP GBP GBP Property income - 8,458,333 16,370,206 24,427,162 Income from listed securities - 533,500 1,033,500 1,033,500 Gains arising from changes in fair value of investment property - 4,152,103 10,409,266 20,728,763 Non-recoverable Property Related Costs - (596,615) (726,909) (771,861) Property Management Fee - (338,333) (654,808) (977,086) Primebroking and custodian fees Salaries and directors fees - (272,977) (401,815) (540,960) General and admin expenses - (329,228) (463,045) (586,063) Interest paid - (2,486,458) (4,652,083) (6,737,500) Pre-tax income 0 9,120,325 20,914,311 36,575,955 Tax 0 (149,047) (315,151) (475,416) Profit for the year 0 8,971,278 20,599,160 36,100,539 Other comprehensive income Gain / (loss) on available-for-sale financial assets 0 320, ,803 1,598,397

29 28 Profit for the year attributable to equity holders - 9,291,378 21,548,963 37,698,936 Dividend to shareholders 0 (4,819,176) (10,189,894) (15,371,776) EPS Statement of Cash flow Mar-16 Mar-17 Mar-18 Mar-19 1 Mnth 12 Mnths 12 Mnths 12 Mnths GBP GBP GBP GBP Operating activities Cash generated from operations - 9,120,325 20,914,311 36,575,955 Non-cash items: FV adjustment re investment property - (4,152,103) (10,409,266) (20,728,763) Tax paid - - (149,047) (315,151) Dividend to shareholders - (4,819,176) (10,189,894) (15,371,776) Investing activities Acquisition of investment property - (140,000,000) (90,000,000) (100,000,000) Acquisition of listed securities (670,000) (10,000,000) (10,000,000) - Acquisition costs (10,138,750) (6,532,500) (7,212,500) Listing expenses Financing activities

30 29 Raising of share capital 1,182,000 78,700,000 52,000,000 52,600,000 Capital Raise Fees (15,367) (948,821) (440,295) (394,500) Borrowings (512,000) 82,500,000 55,000,000 55,000,000 Increase in cash and cash equivalents (15,367) 261, , ,264 Cash and cash equivalents at beginning of year 100 (15,267) 246, ,518 Cash and cash equivalents at end of year (15,267) 246, , ,783 Share capital Revaluation reserves Retained earnings Statement of changes in equity GBP GBP GBP Balance at 1 April Issue of shares 654,633 - Profit for the year - Payment of dividend - Balance at 1 April , Issue of shares 77,751,179 Revaluation of Properties and Securities 320,100 Profit for the year 8,971,278 Payment of dividend (4,819,176)

31 30 Balance at 1 April ,405, ,100 4,152,103 Share capital 51,559,705 Revaluation of Properties and Securities 629,703 Profit for the year 20,599,160 Payment of dividend (10,189,894) Balance at 1 April ,965, ,803 10,409,266 Issue of shares 52,205,500 Revaluation of Properties and Securities 648,594 Profit for the year 36,100,539 Payment of dividend (15,371,776) Balance at 1 April ,171,117 1,598,397 20,728,763

32 29 Set out below are the key assumptions in respect of the forecast financial statements of Mainland: Balance sheet assumptions: The model assumes property investment acquisitions are made on 1 April each year. The model assumes listed security investment acquisitions are made on 1 April each year. Income statement assumptions: 7.0 % - Property acquisition yield (year 1) 6.5 % - Property acquisition yield (year 2 onwards) 5 % - Forward yield on listed securities 3.5% - Annual anticipated rental increase 3.5% - Average Cost of Bank Debt Cash flow statement assumptions: 1.3% - Capital raise fee (first GBP50m) 1% - Capital raise fee (second GBP50m) 0.75% - Capital raise fee (third GBP50m) 6.8% - Acquisition cost 0.75% - Bank debt raising fee

33 30 Annexure A Curricula vitae of board members Director Name Role Qualifications Profile Kamal Taposeea Independent chairman LLB, LLM Mr Taposeea is a lawyer with a wide ranging experience in general banking, investment banking and financial services. His experience extends to diverse sectors, which include Law (Barrister-at-Law), Financial Services, Financial Regulation and Airlines & Tourism. He currently holds Non- Executive Directorship of various financial services companies and global funds, as well as in the steel industry sector. He also served on the boards of Mauritius domestic listed companies and have underwritten companies listed on the Mauritian Stock Exchange. Previously Mr Taposeea has been a member of the Monetary Policy Committee of the Bank of Mauritius, non-executive Chairman of Air Mauritius, General Manager (Investment Banking Group) of Al Rajhi Bank in Saudi Arabia, Regional Managing Director at Standard Bank Mauritius, Managing Director at Barclays Bank PLC Mauritius and Commercial Director of Cedel Bank. Mr Taposeea started his banking career with JP Morgan in Francoise Chan Francesca Chung Non-executive director Chief financial officer MSc DEA TEP Fellow member of ACCA; BCom; Françoise Chan is an Executive Director of Intercontinental Trust Ltd (ITL). She has joined the Global Business Sector in Mauritius since 1994 and has since been assisting multinationals, fund managers and high net worth individuals in the structuring and administration of companies, funds and trusts in Mauritius. Prior to joining ITL, Francoise held senior positions in a management company, which was the local representative firm of Arthur Andersen and in the International Banking Division of Barclays Bank Plc. Françoise is a member of both the International Fiscal Association (IFA) and the Society of Trust and Estate Practitioners (STEP) and serves as director on the board of several Global Business companies. Francesca is a Director of CMB Holdings and Executive Director of Extell Investments. She qualified as a Chartered Certified Accountant in the UK and completed her articles at Higgins Fairbairn & Co, London. Prior to joining Extell Investments in 2007, she spent 5 years as the Finance and Administrative Accountant at Serec Investments Limited. Paul Reid Lyndon Kan Non-executive director Chief executive officer BSc MRICS BSc Construction; Dip APP; Dip Credit; Paul is currently running a GBP200m portfolio on behalf of Aberdeen Asset Management. He has also recently coinvested in a GBP100m Fund with ISG Longbow. Paul was Head of Asset Management at Centurion Properties Ltd managing a portfolio of GBP300m, and previously held positions at Jones Lang LaSalle between , before joining Brixton plc where he worked in the acquisitions, development, and asset management teams, being made Director of the main operations board from Between , Paul set up and ran the London operation of developer Equity Estates. From he was CEO of Parkridge Business centres, before setting up his asset management company, RIAM Properties, in Lyndon has 20 years of broad, cross sector exposure in a myriad of senior executive and strategic positions in the Real Estate and Financial Services sectors. Prior roles include Chief Operating Officer of Texton Property Fund Limited, where he played a key role in the strategic management and growth of Texton s property portfolio. Lyndon spent 10 years with Absa in various leadership positions, with the last few years as an EXCO member and Head of Lending for the Business Banking franchise where he was responsible for managing an advance book in excess of R100bn. He was the Managing Director of Guma Property Holdings and an Executive of the Guma Group for 4 years, and also worked for Standard Bank, Colliers RMS and Murray and Roberts Construction. Lyndon has developed an extensive network and understanding across both developed and emerging markets, having travelled and worked on transactions across Germany, France, the Netherlands, United Kingdom and Africa.

34 31 Andrew Glencross Chief investment officer B(Tech) Real Estate, N Dip Prop Valuation, N Dip Prop Practice, Registered Property Valuer with SAIV and SACPVP Andrew has 25 years experience in Real Estate Investments, Developments and in Real Estate Financial Services at a senior executive and board level. Prior roles include Head of Asset management for Texton Property Fund Ltd. He worked for CB Richard Ellis as a property valuer before moving into banking for 14 years. At Standard Bank he headed up the structured property finance team. Andrew was appointed as a General Manager at Absa in property finance, which included 3 years in London at Absa London as head of property finance and investments including working with Bankhaus Wolbern in Hamburg on their closed end Real Estate funds. His time in London included a period at Anglo Irish Bank. He was a director and shareholder of Equity Estates (Pty) Ltd for 8 years, focussing on asset management of a R1,4bn property fund.