Invista Foundation Property Trust Limited

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1 Invista Foundation Property Trust Limited Full Year End Results Presentation Duncan Owen Nick Montgomery Melinda Knatchbull 11 July 2011

2 Invista update Highlights Market overview Financials Property portfolio Summary Appendix 2

3 Invista Update Acquisition of IREIM did not progress due to Invista plc terminating discussions Invista investment committee and fund management team unchanged Company terminated Investment Management Agreement ending March 2012 Board reviewed many proposals and considered them all in detail Board and its independent advisors invited selective presentations Board is now seeking to finalise the terms of the proposal which, in its opinion, provides the best prospects of enhancing the value of the Company and its investment portfolio, with due regard to potential returns, costs and risks Board hopes to make an announcement in the near future An early handover is possible before March

Team structure Duncan Owen Lead Fund Manager Mel

Fund and Asset Manager Andrew MacDonald Debt and

Industrial Team Specialist Office Team Research Team

4 Team structure Duncan Owen Lead Fund Manager Mel Knatchbull Finance and Accounting Nick Montgomery Fund and Asset Manager Andrew MacDonald Debt and joint ventures Specialist Retail Team Specialist Industrial Team Specialist Office Team Research Team Core team unchanged and highly focused on delivering strategy 4

5 Invista update Highlights Market overview Financials Property portfolio Summary Appendix 5

6 Summary results to 31 March 2011 NAV of 181m or 50.9 pence per share ( pps ) vs m or 52.4pps as at 31 March 2010 Shareholders received dividends of 3.52pps over the period NAV total return of 4.2% over the period 12.3m of capital raised via a tap issuance of 32.3m new shares in August 2010 Like for like change in NAV, adjusting for capital raised, of -0.2pps or -0.4% Total GAV of 386.9m (31 March 2010: 379.1m) Profit before tax of 9.2m EPS (basic and diluted) of 2.5pps NAV depressed by negative marked to market swap value of m or 6.5pps 6

7 Company strategy Orderly transition to a stable, secure platform ensuring continuity of the Company s strategy and ongoing implementation of detailed asset management plans across the portfolio Manage and improve net income growth to grow dividend cover to a more sustainable level Deliver key NAV enhancing initiatives over 2011 and 2012 Narrow share price discount to NAV Plan the most effective route to refinance before 2014 Then consider growth (organic or other) with improved share rating No change to strategic objectives 7

8 Strategic highlights Good long-term relative property performance of +1% p.a. vs. IPD since inception (eight year period) Secure loan facility with net LTV of 38.8% vs. bank covenant of 60% and refinance in July 2014 Secure balance sheet with cash of 56.7m Growing dividend cover through asset management initiatives, accretive acquisitions and disposals of lower yielding assets where business plans completed: Acquisition of Keith House in Edinburgh in December 2010 for 8.05m at 14% NIY Post year end disposal of York retail property for 5.5m at 5% NIY Post year end acquisition of Liverpool retail property for 5.6m at 11.3% NIY 3m+ of additional contracted annual rental uplifts by May 2014 Reduced fund costs, fees and expenses (new manager appointment) Potentially significant NAV growth through active management (e.g. Reynards, Brentford), disposal of joint ventures (e.g. Plantation Place) and West Bromwich completion Progress implementing agreed strategy to maximise NAV and income 8

9 Rental profile adopting valuation assumptions 31 March 2011 updated for post year end transactions 29m Reversionary rent (Knight Frank valuation) 29m 28m 28m 27m Balance of reversion 27m Passing Rent 26m 25m 24m Fareham Uxbridge Brighton Brentford, Gate Centre Other Alfreton 26m 25m 24m 23m West Bromwich 23m 22m Liverpool (New Purchase) 22m 21m Passing rent (June 2011) 21m 20m Jun-11 Sep-11 Dec-11 Mar-12 Jun-12 Sep-12 Dec-12 Mar-13 Jun-13 Sep-13 Dec-13 Mar-14 Jun-14 20m Source: Invista REIM, Knight Frank 9

2m Good interest in the remaining vacant space. Potential for reversionary yield of 16% by year-end with value uplift Edinburgh, Keith House Exchanged contracts at 5.6m reflecting a NIY of 11.

10 Key transactions Acquired for 8.05m reflecting a NIY of 14% Business plan being implemented to re-brand and let vacant (20% by area) and extend existing leases Terms agreed to let 8,326 sq ft at 75,000 p.a. or 9 psf Letting subject to ongoing refurbishment and installation of airconditioning at a total cost of 0.2m Good interest in the remaining vacant space. Potential for reversionary yield of 16% by year-end with value uplift Edinburgh, Keith House Exchanged contracts at 5.6m reflecting a NIY of 11.3% Retail with offices above on Church Street in Liverpool Edge of prime location with valuable A2 consent Let to Lloyds Bank until December 2014 at 0.664m p.a. Yield reflects over-rent, with a rental value of c. 0.4m p.a. reflecting 175 ZA and 6 per sq ft on offices Liverpool, Church Street Potential to extend the Lloyds lease on lower floors and lease office upper parts to existing sub-tenants 10

Key transactions Actual image will be used Forward commitment to acquire 75,000 sq ft Grade A office building for 14.9m reflecting a NIY of 7.6% Let to BT plc for 15 years at 1.2m p.a. or 16 psf Lease benefits from 3% p.

48m reflecting a NIY of 5% Sold following a five year lease extension and a small rental uplift. Let to Superdrug until December 2027 at 0.

11 Key transactions Actual image will be used Forward commitment to acquire 75,000 sq ft Grade A office building for 14.9m reflecting a NIY of 7.6% Let to BT plc for 15 years at 1.2m p.a. or 16 psf Lease benefits from 3% p.a. uplifts, paid annually Deposit of 0.75m with completion targeted for October 2011 Comparable market evidence at c. 6.25%, or c. 18m West Bromwich, All Saints Sold for 5.48m reflecting a NIY of 5% Sold following a five year lease extension and a small rental uplift. Let to Superdrug until December 2027 at 0.29m per annum Sold following completion of business plan and forecast to underperform vs. target return Price reflected an 1.2m or 27% uplift compared with value immediately prior to the asset management York, Market Street 11

430m loan outstanding and - 34m swap Strong momentum in City office market likely to generate further uplift over 2011 Potential for significant NAV uplift London, Plantation Place Brentford,

12 Key asset management initiatives 0.55m sq ft City office building let for 16 years Valuation of 478m reflects a NIY of 5.7%, an increase of 53m or 12.5% compared with 31 March 2010 Held at nil in at 31 March 2011 due to LTV of 90% vs % covenant. 430m loan outstanding and - 34m swap Strong momentum in City office market likely to generate further uplift over 2011 Potential for significant NAV uplift London, Plantation Place Brentford, Reynards Six acre site surrounded by new residential Produces 0.15m p.a. following BBC expiry in April m dilapidations monies received with vacant possession by 2013 Planning application submitted. Positive feedback from planners and final decision expected Q Valued at 12m at 31 March 2011 Comparable residential land values up to 3m per acre 12

Key asset management initiatives Hinckley, Coventry Road Nine acre site close to the town centre Historic outline planning consent for 100,000 sq ft retail warehousing did not satisfy current

13m with no obligation to build B8 Pre-let terms agreed with Matalan and Pets at Home for 26,501 sq ft.

13 Key asset management initiatives Hinckley, Coventry Road Nine acre site close to the town centre Historic outline planning consent for 100,000 sq ft retail warehousing did not satisfy current retailer requirements Revised planning received in April 2011 for 120,000 sq ft of retail and B8. Secured a reduction in 106 obligation from 0.53m to 0.13m with no obligation to build B8 Pre-let terms agreed with Matalan and Pets at Home for 26,501 sq ft. Requires anchor tenant to proceed, marketing ongoing Potential for high return through prelet development Good quality industrial estate fronting A4 Berry BMW withdrew from new lease discussions on vacant space due to underestimating their fit-out cost Ongoing refurbishment at a total cost of c. 0.4m. Two lettings recently exchanged at 0.13m p.a. Four remaining units with rental value of 0.26m p.a. One under offer at 0.5m p.a. Potential to increase total income from 0.5m to 0.92m p.a. through lettings and ongoing rent reviews Brentford, Gate Centre 13

3m or 18%, generating a total return of 27% over the period Now in discussions with the tenant for a building extension Good secondary industrial estate in Norwich.

14 Key asset management initiatives Alfreton, Recticel 150,000 sq ft manufacturing facility close to J28 M1. Let to Recticel Limited, with a guarantee from Recticel SA, who manufacture foam based products Lease extended over the period from seven to 20 years, at 0.73m p.a., an increase from 0.71 p.a. Tenant receives 41 months half rent from November 2010 Initiative increased the value by 1.3m or 18%, generating a total return of 27% over the period Now in discussions with the tenant for a building extension Good secondary industrial estate in Norwich. Management intensive with 27 tenants Was 30% vacant in March 2010, producing 0.69m p.a. Minimising void costs such as empty rates Now produces 0.75m p.a. with additional 0.1m p.a. of guaranteed uplifts by January 2012 Pro-active letting strategy with an additional 0.14m of income under offer Norwich, Union Park 14

15 Off-balance sheet Joint Ventures as at 31 March 2011 Merchant Property Unit Trust ( MPUT ) % Share 32 properties let to Travis Perkins on 19 year leases with 3% compound fixed rental uplifts Company s NAV increased by 0.42m to 2.71m Underlying valuation of 40.4m reflects a NIY of 6%, increasing to 6.6% by 2013 Non-recourse loan of 24.65m, maturing September Current LTV 61% vs. covenant of 100%, reducing to 85% in 01/12 and 75% in 01/13 Company s NAV in MPUT diluted by m due to negative mark to market swap Crendon Industrial Partnership ( CIPL ) - 50% Share 453,000 sq ft multi-let industrial estate in Oxfordshire provides asset management and development opportunities. Underlying valuation of 24.8m reflects a NIY of 8.2% Company s NAV increased by 0.7m to 1.2m New lettings and renewals over the period increased rent from 1.9m to 2.14m p.a. Planning application being submitted for 60,000 sq ft of new warehousing Non-recourse loan of 26.1m maturing in May 2013 with 2.6m of cash in the structure. No LTV covenant and ICR is 1.9X vs. covenant of 1.35X Potential increase in NAV through disposal of JVs prior to

16 Invista update Highlights Market overview Financials Property portfolio Summary Appendix 16

17 Market context Pace of average capital value growth has slowed since 2010 yield compression now to pause IPD Monthly Index capital growth over 2011 YTD of 0.87% Market now 17.3% above July 2009 cycle low with average running yields at 6.4% Rental value growth is weak with zero growth over 2011 YTD Pace of recovery in UK economy is slow vs. previous recessions Derivative pricing implies a total return for calendar 2011 of +7% and +4.0% for Implies capital value movement of 0.9% and -2.0% respectively Still wide divergences across the market with limited prime property available Secure, long term income over-priced compared to good quality secondary Banking sector likely to have a significant influence over capital valuations in the next months with increasing bank sales of lower quality assets 17

18 UK total returns 12 months to 31 March 2011 Low yield ( prime proxy) vs. high yield ( secondary proxy) Std Retail: Low Yield High Yield Shopping Centre: Low Yield High Yield Retail Warehouse: Low Yield High Yield Ctrl London Office: Low Yield High Yield Rest SE Office: Low Yield High Yield Rest UK Office: Low Yield High Yield Industrial: Low Yield High Yield First 6 months Second 6 months -2% 0% 2% 4% 6% 8% 10% 12% 14% 16% 18% 20% Total returns Source: IPD Quarterly Index, to end March 2011 Secondary performance emerging in certain sectors 18

19 Invista update Highlights Market overview Financials Property portfolio Summary Appendix 19

20 Profit and loss account 31 March March 2010 Year to million million Net rental and related income Profit on disposal of investment property Expenses (6.0) (5.6) Net valuation profit/(loss) on investment property Net finance costs (11.1) (17.0) Joint venture gains Profit before tax Taxation (0.8) (1.3) Profit after tax Earnings per share (p) 2.5p 10.7p 20

21 Balance sheet 31 March March 2010 million million Investment Properties Investments in joint ventures Total non current assets Trade and other receivables Cash Total Assets Current liabilities & other payables (10.1) (9.7) Debt (182.6) (182.0) Hedge reserve (23.2) (26.5) Net Asset Value NAV (pence per share) 50.9p 52.4p Adjusted* NAV for 2010 (pence per share) 50.9p 51.1p Shares in issue (number in millions) *Adjusted for 12.3m capital raised in August

22 Financing as at 31 March 2011 Amount ( m) Fixed rate (%) Margin (%) Total interest rate (%) Swap expiry M2M 31/03/2011 ( m) M2M 31/03/2010 ( m) Loan /07/2014 (6.3) (7.5) Loan /07/2016 (16.9) (18.9) Loan total N/A (23.2) (26.4) Liquidity facility* 11.2 LIBOR 0.66 LIBOR N/A N/A N/A * Liquidity facility has a neutral impact on NAV and is a standard feature in securitised loans Securitised loan matures in July 2014 and considering re-financing strategy Net loan to value ( LTV ) as at 31 March 2011 of 38.8% Assumes cash as at 31 March 2011 of 44.9m: 28.6m in the security pool for property acquisitions and qualifying capital expenditure 16.3m outside the security pool Interest Cover Ratio of 2X vs. covenant of 1.5X 22

23 Invista update Highlights Market overview Financials Property portfolio Summary Appendix 23

24 Property portfolio as at 31 March property assets totalling m Total annual rent 22.87m, reflecting a net initial yield of 6.52% Contracted transactions and asset management add an additional 3m+ p.a. by May 2014 Annual rental value 27m reflecting a reversionary yield of 7.8% Average unexpired lease term of 8.3 years, to earlier of lease expiry or break. Should increase to 8.8 years following acquisition of West Bromwich Portfolio void rate of 10.7%, increasing to approximately 13% following BBC lease expiries at Reynards Approximately 3% of voids under offer Lease Expiry Profile (exc. West Brom) 50% 40% 30% 20% 10% 0% Up to 5 5 to to to 20 Over 20 Company Benchmark Lease Break Profile (exc. West Brom) 50% 40% 30% 20% 10% 0% Up to 5 5 to to to 20 Over 20 Company Benchmark 24

25 Weightings as at 31 March 2011 Retail Office Other Sector Retail Warehouse Industrial Top 10 Assets by Market Value* 4% 15% m % 9% Minerva House, London 8.37% Trafalgar Place, Brighton 7.18% 47% Region Chuchway West, Salisbury Oxford Road, Uxbridge The Galaxy, Luton 4.59% 4.35% 4.30% Central London Rest of South North & Scotland 14% 8% South East Excl. CL Midlands & Wales Olympic Office Centre, Wembley Reynard Business Park, Brentford The Gate Centre, Brentford 3.70% 3.62% 3.27% Churchill Way, Basingstoke 3.21% 16% The Portergate, Sheffield 2.99% 14% Source: Invista REIM Ltd as at 31 March % Offices Retail Industrial 25

26 Tenancies as at 31 March 2011 IPD IRIS analysis Top ten tenants m Wickes Building Supplies Limited 60 Norwich Union Life and Pensions Ltd 50 % BUPA Insurance Services Limited Synovate Limited Buckinghamshire New University Mott MacDonald Ltd 0 Recticel SA Maximum (%) High (%) Medium-High (%) Low-Medium(%) Low(%) Negligible(%) Unscored(%) The British Broadcasting Corporation Winkworth Sherwood LLP Irwin Mitchell LLP Companys Portfolio IPD Benchmark Years IPD rank the portfolio on the 9 th percentile in terms of tenant quality 26

27 Invista update Highlights Market overview Financials Property portfolio Summary Appendix 27

28 Summary Company has secure balance sheet and time to plan re-financing in July 2014 Potentially significant upside in NAV linked to implementing key asset management initiatives Continuity of team and a stable platform important to implementing strategy Dividend cover increasing through fixed rental uplifts, asset management and new acquisitions Long-term out-performance vs. IPD Benchmark Successful ongoing implementation of strategy should reduce share price discount whilst presenting future growth opportunities 28

29 Strategy Manage and improve net income growth to grow dividend cover to a sustainable level Sales of JV s and low yielding assets e.g. York and Brentford New acquisitions e.g. Edinburgh (NIY 14%) and Liverpool (NIY 11.3%) Reduce share price discount remove manager uncertainty reduce costs and improve dividend cover Plan the most effective route to refinance before 2014 Discussions commenced with target lenders and phased maturities Orderly transition to preserve NAV avoid delay in execution of strategy In the longer term, consider growth (organic or other) against an improved rating Ongoing progress with strategic objectives 29

30 Invista update Highlights Market overview Financials Property portfolio Summary Appendix 30

31 Void schedule as at 31 March 2011 (all properties where void ERV exceeds 0.1m) Property Description Void ERV ( m) Void ERV as % total Strategy Brentford, Reynards Secondary estate in good location Planning application made for change of use to residential Norwich, Union Park Secondary estate offering a range of unit sizes m of income under offer which would reduce void from 33.5% to 13%. Luton, The Galaxy Leisure scheme in town centre m of income under offer at c. 50% of ERV. Brentford, Gate Centre Peterborough, Orton Southgate Good quality, well-located industrial estate on A4 Secondary warehouse in a good location in Peterborough One unit under offer to Berry BMW at 0.05m p.a. Three units left after this letting with refurbishment ongoing Gone back under offer to Daniels for 10 year lease at 0.35m p.a. 12 months rent free and cap ex of 1.5m. Daniels UK Board approved and awaiting SATS approval. Fareham, Delme Good secondary out of town office Terms out to three parties. Fleet, Beech and Cedar Secondary offices located on an established park with high void Balance available following letting to Panoptech. Edinburgh, Keith House Good secondary out of town office Being re-branded as Haston House with refurbished common parts. One floor under offer at 0.08m p.a. Bristol, Kingsland Good secondary industrial estate on outskirts of City centre Recently vacated and dilapidations should be agreed at c. 0.3m. Could suit trade counter use. Ilkeston, Albion Centre Secondary shopping centre Four vacant units with one under offer. Fleet, Technology House Havant, Solent Road Industrial Estate Secondary office located on an established park with high void Tertiary estate in good retail/trade location Total Very limited demand and currently not rent sensitive Working on planning/redevelopment strategy. Per-let interest from Travis Perkins. 31

32 UK commercial property in nominal terms Yield impact Rental value growth Total return Long-term total return Long-term income return 40% 30% 20% 8.9% 10% 7.2% 0% -10% -20% -30% -40% -50% Source: IPD Monthly Index (Full history) Stability in capital values with some minor movements now expected 32 Quarterly annualised % Mar-87 Mar-88 Mar-89 Mar-90 Mar-91 Mar-92 Mar-93 Mar-94 Mar-95 Mar-96 Mar-97 Mar-98 Mar-99 Mar-00 Mar-01 Mar-02 Mar-03 Mar-04 Mar-05 Mar-06 Mar-07 Mar-08 Mar-09 Mar-10 Mar-11

33 Current vs. historical yields West End Offices approach historical low yields 8 7 Current 20 yr ave. 30 yr ave. Min 6 Prime yields % Retail Units Retail Warehouses City Offices West End Offices M25 Offices Prov offices Lon Industrials Source: IPD, C&W, Michael Laurie, Allsops, PMA Real yields are above average outside central London and this offers selective opportunities given mis-pricing 33

34 Sale by receivers increasing foreclosure and sell not only strategy available to lenders bn Increased sales by receivers for banks Notes, books or CMBS sold Write offs Consensual sale Equity injections Debt for equity swaps positions often sold Early repayment Loans transferred to state support e.g. NAMA ( 21 billion by end 2010) YTD Source: Propertydata, PMA, May 2011 * Source DTZ 34

35 UK real estate debt to shrink by a third? 0% -20% -40% -60% Decline in real estate debt 70s 90s This cycle estimate More regulation, Basel III, Banking commission, Macro prudential supervision Reduction in govt support Pressure on state owned banks (Not just UK, Germans too) CMBS - reawakening or slumbering beast? Solvency II encouraging lending by insurers, but still small part of the market Nominal Real -80% Source: BoE, PMA Equity to be invested in Europe is 19% higher than the debt and much is targeted at the UK first time since before

36 Important notice We would also like to point out that: Invista Real Estate Investment Management Limited ("Invista") confirms that reasonable skill and care has been used in the preparation of this presentation and any forecasts expressed within it. Notwithstanding this warranty, Invista shall not be liable for any loss of profit, business, revenues or any special indirect or consequential damage of any nature whatsoever or loss of anticipated saving or for any increased costs sustained by the attendee or his servants or agents in any way, whether arising in any way directly or indirectly as a result of reliance on this model or of any error or defect in this presentation. This presentation and associated information is the property of Invista which reserves all intellectual property rights in it. This document is not intended for, nor is it directed at any person resident in a jurisdiction in which the sale of the Fund s interests would be restricted by law or regulation. Nothing in this document is intended to constitute an offer of the Fund s interests. It is the responsibility of the recipients of this document to ensure that it is possible for them to acquire interests in the Fund without local laws or regulations being infringed. This document is exempt from the general restriction (contained in section 21 of the Financial Services and Markets Act 2000) on the communication of invitations or inducements to engage in investment activity on the grounds that, to the extent that it is communicated in the UK, the communication is made by Invista Real Estate Investment Management Limited to persons falling within one of the categories set out below: (a) a person having professional experience in matters relating to investments, within the meaning of article 14 of the Financial Services and Markets Act 2000 (Promotion of Collective Investment Schemes) (Exemptions) Order 2001, including a person whose ordinary activities involve him in investing in shares for the purposes of a business carried on by him; or (b) a high net worth body within the meaning of article 22 of the Financial Services and Markets Act 2000 (Promotion of Collective Investment Schemes) (Exemptions) Order 2001, including a corporation, unincorporated association or partnership with net assets of at least 5 million and the trustee of a trust comprising cash and investment assets of at least 10 million. Communication of this document to any person in the United Kingdom, other than a person falling within one of the categories described above, is unauthorised and may constitute a criminal offence. All features in this pack are current at the time of publication but may be subject to change in the future. Unless otherwise stated, the source of information is Invista's. Any forecast, opinion, projection or target where provided is indicative only, is not guaranteed in any way and may change in the future. No modifications or amendments to this presentation may be made without the prior permission of Invista and this document or copies of it may not be distributed to recipients. Depending on the investor s currency of reference, currency fluctuations may adversely affect the value of investments and the income there from. Past performance is not a guide to future performance and the past performance of property funds is not always represented by the performance of the property market as a whole. The value of an investment as well any related income may go down as well as up, particularly in the short term. The value of an investment and any related income may fluctuate and cannot be guaranteed. Property funds will not contribute diversification where investors already have a substantial proportion of their investments in property. The value of property is a matter of a valuer s opinion rather than one of fact. Movements in the value of property funds will be amplified by any gearing within the fund and its underlying investments. There is no guarantee that the price of the fund will fully reflect its underlying net asset value. Invista Real Estate Investment Management Limited, authorised and regulated by the Financial Services Authority. Registered in England and Wales. Registered Number Registered office Exchequer Court, 33 St.Mary Axe, London, EC3A 8AA, United Kingdom. 36

Invista Foundation Property Trust Limited

Invista Foundation Property Trust Limited Interim Results Presentation Duncan Owen Nick Montgomery November 2010 Invista corporate overview Interim results executive summary Market overview Financials