Terry Devitt Investment Director

Terry Devitt Investment Director

Model Portfolio Cash 14% Split by Asset Class Absolute Return 14% Equities 40% Private Equity 5% Commodities 0% Property 27% Bonds 0%

Property vs Equities vs Bonds over 20 Years

Investment Option 1 - Funds and REITs Advantages 1. Ease of Investment 2. Liquidity 3. Diversification 4. Income Disadvantages 1. Costs? 2. Lower Returns?

Funds and REITs cont d - Example SSGA Property Fund 250m portfolio of prime commercial property 80% Ireland and 20% UK Investment Access Monthly Distributes c.4% per annum Minimum investment of 100,000 Open to Pensions, ARFs and other investors Warnings: Investment in property involves special risks that could lead to a loss of all or a substantial portion of your investment. If you invest in this QIAIF you may lose some or all of the money you invest. If you invest in this QIAIF you will have restricted access to your money as the minimum holding in the QIAIF at all times is 100,000 and as redemption of units is restricted to 4 times a year. The projected figure is an estimate only and is not a reliable guide to the future annual payment from this QIAIF. The income you get from this QIAIF may go down as well as up and will fluctuate in accordance with market conditions and taxation arrangements. Warnings: Past performance is not a reliable guide to future performance. This QIAIF may be affected by changes in currency exchange rates. Changes in exchange rates may have an adverse effect on the value price or income of the QIAIF. The value of the QIAIF may be subject to sudden and large falls in value. State Street Global Advisors Ireland Limited is regulated by the Central Bank of Ireland

Funds and REITs cont d IPUT -10 Year Price Chart 2008 Still c.20% off its 2007 high but holders compensated by c.50% in distributions over 10 years Today 2012

Investment Option 2 Syndicated Investments Advantages 1. Smaller Investment Group 2. Greater Influence for Individual Investors Disadvantages 1. Illiquidity 2. Lack of Diversification 3. Gearing

What are they? Investment Option 3 Development Partnerships This is where a consortium of investors wholly or partly replace the bank to finance a property development (usually residential). Funds usually attract an interest rate of c.10% per annum and receive a share of the profits on completion. Investment term is usually around 2 years

Development Partnerships cont d Advantages 1. Entry Levels Reasonable 2. Timing Looks Right Currently 3. Attractive Returns Disadvantages 1. Very High Risk 2. Illiquid

Development cont d - Example Scheme Residential Development in Islington in 2013/14 Two townhouses and four flats Gross development value of 3.5 million Loan notes at 12.5% plus 50% profit share Investors get second charge on assets Development completed in 18 months returning capital plus 65%

Investment Option 4 Direct Investment Advantages 1. Direct Ownership and Control 2. Transparency 3. Non Recourse Borrowing 4. Cost? Disadvantages 1. Management Hassle 2. Lack of Diversification

Niall McBride Head of Galway Office

Property Purchase Through Pensions Direct Investment How can I purchase a property through my pension? Who can do it? Can I use my existing pension? Are there restrictions? Can I borrow to fund the purchase? Why would I purchase a property though my pension rather than personally?

How can I purchase a property through my pension? You select the property (some rules apply) Organise to have funds in place (in pension) Professionals involved include: Pensioneer Trustee/QFM Solicitor Property Manager

Who can do it? Self-Employed Employed Retired Self Administered PRSA Self Administered SSAS/PRB Self Administered ARF Personal Contributions up to 40% NRE ( 115K cap) Employer & Employee contributions (multiple times salary) Transfer in from most pensions (except defined benefit) Investment Options the same for all e.g. deposits, shares, funds, property.

How can I fund it? Transfer existing pensions Personal Contributions, restricted to a percentage of NRE cap 115K Company Contributions

Example - Funds built up in company available for distribution Purchase Personally* Purchase with Pension* Gross Funds Available 653,061 320,000 Income Tax 261,224 Nil USC 71,837 Nil Funds available for investment Corporation Tax Deduction (12.5%) 320,000 320,000 81,633 40,000 *Based on tax, USC & PRSI rates in 2015. Source Harvest Financial Services Ltd 23/09/15

Comparison between purchasing property in Pension and Personally Assumptions Purchase Price 300,000 Fees & Stamp Duty 5,000 Rental Yield 5% Annual increase in rental income 2% Letting Agent Fee 10% Annual increase in value of property 6% Income tax 40% USC & PRSI 11% CGT 33%

Rental Income Year 8 Personal Pension Value of Property 478,154 478,154 Gross Annual Rental Income 17,230 17,230 Gross Annual Rental Income less costs 14,007 14,007 Income Tax 5,603 0 PRSI & USC 1,541 0 Income 6,679 14,007 Yield 2.09% 4.67% Source Harvest Financial Services Ltd 23/09/15

Investment Return on Disposal Year 8 Personal Pension Gain on Disposal* 178,154 178,154 CGT on Disposal** 56,553 0 Net Capital Gain 114,830 171,373 Investment Return 35.88% 53.55% * Assume 6% growth in capital value per annum **Allowable costs of sale deducted Source Harvest Financial Services Ltd 23/09/15

Investment Return in Year 8 Personal Pension Total Gain* 167,800 282,195 Net Gain** 167,800 174,255 Initial Capital Invested 653,061 320,000 Return on Capital*** 71% 148% * Capital growth & income over the term **Assume 25% lump sum at retirement is tax free and balance is taken as taxable cash ***Return on initial cost Source Harvest Financial Services Ltd 23/09/15

Are there restrictions? Arms length rule othe vendor must not be related to you, your employer, it s directors and associated companies. othe property cannot be sold or let to relatives, your employer or its directors and associated companies. opersonal use of the property is prohibited. The development of a property with a view to its disposal is not allowed.

Can I borrow to fund the purchase? Yes, but the loan must comply with certain rules including; Limited Recourse the bank has security over the property only. Maximum loan term of 15 years or NRA. Subject to bank s lending criteria. Cannot borrow retrospectively. Banks currently looking at commercial property only with strong lease covanent.

Direct Investment - Advantages/Disadvantages Advantages Generous tax reliefs on funds to purchase property. All purchase costs are met by the pension. Rental income is exempt from income tax, PRSI and USC. There is no CGT on the sale of the property. Disadvantages You cannot use the property it must be for investment only. Gearing significantly increases the risk profile of the investment. It is an illiquid asset.

The information contained herein is based on Harvest Financial Services Limited's understanding of current Revenue practice as at September 2015 and may change in the future. The material is not intended to provide advice and is provided for general information purposes only. **Please note that the provision of this product or service does not require licensing, authorisation, or registration with the Central Bank of Ireland and, as a result, it is not covered by the Central Bank's requirements designed to protect consumers or by a statutory compensation scheme. *Harvest Financial Services Limited is regulated by the Central Bank of Ireland

Rosemary Casey

INVESTMENT MARKET ANALYSIS INVESTMENT MARKET 2015 Rosemary Casey

TWM Set up in 2010 2014 Three new Directors opened in Galway and moved to new offices on Dawson Street Owned by the 4 Directors 100% Irish! Experienced team of 8 now Focused on Investment and Advisory business Each instruction is dealt with by a Director with experienced backup. twmproperty.ie

Content Overview of the national investment market year to date Regional / Local Market 2016 Trends twmproperty.ie

Investment Market 9 years since the start of the property market crash and 3 years into recovery Portfolio and Loan sales allowed NAMA/Banks & Receivers to dispose of blocks of property quickly and efficiently Given the expiration of the CGT relief incentive on 31 December 2014, Q4 2014 was a flurry of activity with 137 deals completed resulting in approximately 4.3bn of transactions for the entire year. It is unlikely that Q4 2015 will represent the same high level of activity, and in turn result in another bumper year particularly as the year to date value investment spend equates to a substantially lower 2.3bn. The fact that the level of portfolio sales are reducing will impact upon the end of year figures, which are forecast to reach a total investment spend of over 3.0bn for the year. twmproperty.ie

Investment Market Year on Year Volume Turnover ( 000 s) No. of transactions Avg deal size ( 000 s) Q3 2014 1,217,281 49 24,842 Q3 2015 530,713 45 11,793 YoY Total to Q3 2,954,288 160 18,464 2014 YoY Total to Q3 2015 2,322,428 144 10,500 Source: TWM Research (Approximate Figures) Q3 2014 stats were buoyed by large portfolio transactions including Redwood Portfolio ( 215m), Project Orange ( 211.25m) and The Acorn Portfolio ( 171.5m). The top 5 transactions accounted for 74.26% of the total turnover in Q3 2015 as against 47.47% for the same period in 2014. In Q3 2015 asset sales accounted for 39% of the total turnover, this is broadly in line with Q3 2014 where the asset / portfolio split was 47% / 53% of the total figure. Running total for 2015 remains 21.4% below 2014. Market trends are reflective of the reducing volumes of portfolio sales over the past 12 months. twmproperty.ie

Investment Volumes Source: Investment Agents Statistics / TWM Analysis twmproperty.ie

Investment Market Profile of investors has changed and increase in activity into regions as the market moves through its cycle Up until this year most investors were Opportunity Funds e.g. Marathon (Eyre Square), Irish institutions and REITS. Towards the end of 2015 we have seen more foreign institutional investors appear in the market in 2015 Institutional Buyer on Exchange House & Golden Island Shopping Centre Foreign Institutional Investor Names like - F&C acquired Kilkenny Retail Park Union Investment (Grand Canal Square), Credit Suisse (One Grand Canal Plaza), Standard Life (Custom House Plaza), Invesco (Frascati Shopping Centre), and German fund, Realis (Beaux Lane House). Smaller funds/private investors/developers 250,000-10,000,000 investment demand competitive (Private Investor Suite 3 The Plaza Region 325,000 and Private Investor Dockgate Region 9m) Improved occupier demand is underpinning confidence in security of cash flow to private investors twmproperty.ie

Investment Volumes Profile of Buyers Source: Investment Agents Statistics / TWM Analysis twmproperty.ie

Investment Volumes Portfolio v s Asset Re-trade Assets / Portfolios Q1 2015 to Q1 2014 Volume of Re-trade Assets / 774,175,00 Portfolios 0 No of Re-trade Assets / Portfolios 8 Average Re-trade Deal Size 96,771,875 Re-trade Assets / Portfolios as % of Total 14.09% Source: Investment Agents Statistics / TWM Analysis twmproperty.ie

Investment Volumes Asset Sector Source: Investment Agents Statistics / TWM Analysis twmproperty.ie

Investment Volumes Yield Gap Average Yield Over 19.75 years Government Bond 4.77 Average Yield Gap Sept 2015 Yield Gap NIY All Property 6.79 2.02 3.97 NIY Retail 6.18 1.40 4.57 NIY Office 7.01 2.23 3.57 NIY Industrial 8.69 3.32 6.67 Government Bond Yield November 2015 1.03 Source: IPD Ireland Quarterly Property Digest Dec 2014 twmproperty.ie

Investment Volumes - Yields Sectors where yields are still at or above the long term average are: Retail Provincial South East Dublin Industrial Dublin Offices (excl. Central Dublin) Dublin City Centre Retail (excl. Grafton Street and Henry / Mary Street) Source: IPD Ireland Quarterly Property Digest Dec 2014 twmproperty.ie

2015 Regional Market KILKENNY ATHLONE KILLARNEY WATERFORD CASTLEBAR GALWAY twmproperty.ie

Regional Investors Investors who have direct knowledge of regional locations are active

2016 Forecast Improving Occupier Demand Increased Confidence in Regional Assets Less prime smaller acquisitions still heavily cash funded but funding becoming a feature of the market again Opportunities Loan book asset sales coming through NAMA wrap up sales and receivership sales twmproperty.ie

Thank you