PFI OVERVIEW Property for Industry (PFI) is an NZX listed property vehicle focused on industrial property PFI s strategy is to invest in quality industrial property in prime locations in order to deliver attractive returns with a low level of volatility PFI has: A $1.1bn property portfolio with an 85% weighting to Auckland An experienced and internalised management team supported by a strong governance framework A proven track record with a history of stable earnings and sound risk management Robust portfolio metrics with a WALT of 4.8 years and occupancy of 99.5% A strong balance sheet with an LVR of 34.2% and an ICR of 3.6 times Delivered an average annual return to shareholders since inception of ~9.6% and over the past 10 years has outperformed the NZX50 and the NZX Property Index Note: all statistics as at 30 June 2017 and prior to the Acquisition and Offer Fletcher Building Products, 30-32 Bowden Road PROPERTY FOR INDUSTRY EXECUTIVE SUMMARY 4
PORTFOLIO ACQUISITION PFI has secured a portfolio of eight industrial properties and one head office for an acquisition price of $69.5m (the Acquisition) The portfolio includes seven properties leased to the Transport Investments Limited Group (TIL), one of New Zealand s largest private domestic freight and logistics businesses The two additional properties are leased to NZ Post, Aviagen and Rockgas The portfolio is comprised of quality properties with attractive lease terms The acquisition portfolio has a WALT of 13.9 years which will increase PFI s overall portfolio WALT by 0.6 years 1 All TIL properties benefit from fixed rent reviews of 4.55% every two years, providing future rental growth The acquisition portfolio also provides for significant medium to long-term development potential with low site coverage of ~25% across the nine acquisition sites 1. Pro forma as at 30 June 2017, under the assumption that the portfolio was acquired on 30 June 2017 PROPERTY FOR INDUSTRY EXECUTIVE SUMMARY 5
EQUITY RAISING To support the Acquisition and ongoing activity in its portfolio, PFI is seeking to raise approximately $70m of new equity via a fully underwritten pro rata rights issue (the Offer) 1 for 10 rights issue, at an Issue Price of $1.54 fully underwritten by Forsyth Barr Group Limited PFI Board and senior executives have committed to take up all Rights in respect of their beneficial shareholdings under the Offer Post the Acquisition and the Offer: PFI s LVR will decrease from 34.2% to 32.3% 1 The PFI Board confirms the previously provided guidance for distributable profit of between 7.70 and 7.90 cents per share and a cash dividend of 7.45 cents per share for FY17 is unchanged 1. Based on PFI s Consolidated Statement of Financial Position as at 30 June 2017. Calculated as the value of borrowings (adjusted for the value of the Acquisition, the proceeds of the Offer and transaction costs) divided by the value of investment properties (adjusted for the value of the Acquisition). PROPERTY FOR INDUSTRY EXECUTIVE SUMMARY 6
EXISTING PORTFOLIO SNAPSHOT PFI s existing property portfolio: is diversified across 83 properties and 144 tenants has 99.5% occupancy and a WALT of 4.78 years has an 85.3% weighting towards Auckland and an 85.4% weighting towards industrial property PFI has consistently delivered robust portfolio metrics with average occupancy of 98.6% and an average WALT of 4.8 years since 2008 Note: all statistics as at 30 June 2017 and prior to the Acquisition PROPERTY FOR INDUSTRY PFI OVERVIEW 8
EXISTING TENANTS & LEASES PFI s smooth lease expiry profile supports low volatility of rental income PFI s top 10 tenants (featuring leading local and international companies) lease 19 properties and pay ~33% of the company s rent PFI s leases have a balanced spread of lease events in any given year, ~13% of events in H2 2017 are market related Since 30 June 2017, a further 3.5% of 2017 expiries and 0.2% of vacancy has been leased, leaving just 2.3% through to 31 December 2017 Note: all statistics as at 30 June 2017 and prior to the Acquisition PROPERTY FOR INDUSTRY PFI OVERVIEW 9
MARKET UPDATE CBRE s August 2017 report showed high levels of occupier demand for industrial property, with Auckland industrial vacancy of just 1.6% or 196,900 sqm Colliers International July 2017 Commercial Property Investor Confidence Survey showed high levels of investor confidence in industrial property, with all three main centres experiencing net positive confidence and an increase in confidence from the prior survey ANZ s Truckometer (see graph on right) illustrates a strong correlation between Prime Industrial Yields and the Heavy Traffic Index, and the Truckometer direction of travel suggests yields could tighten further A mix of strong economic growth, favourable occupier supply and demand dynamics and high levels of investor market confidence has seen industrial property yields falling a further ~30 basis points (0.3%) in the first six months of 2017 (CBRE, July 2017) PROPERTY FOR INDUSTRY PFI OVERVIEW 10
1H17 RESULTS SUMMARY Successful internalisation of the management of PFI while ensuring the continuity of the highly experienced management team Including the impact of the internalisation, PFI recorded a loss after tax for the six months to 30 June 2017 of $5.6 million or 1.25 cents per share and net tangible assets of 155.6 cents per share Excluding the impact of the internalisation, PFI recorded profit after tax for the six months to 30 June 2017 of $25.2 million or 5.58 cents per share (up 12.2% on the prior period) Distributable profit for the six months to 30 June 2017 up 2.4% on the prior period to 3.86 cents per share Increased guidance: distributable profit of between 7.70 and 7.90 cents per share, cash dividend of 7.45 cents per share Strong balance sheet: $40 million short-term facility obtained to complete the internalisation, gearing of 34.2% $6.0 million uplift from independent revaluation of seven properties, independent desktop review of remainder of the portfolio Notes: extracted from PFI s interim results announcement, refer https://www.nzx.com/companies/pfi/announcements/305229 for more detail. The internalisation of management is a significant oneoff event. In order to provide a basis for comparison, some measures have been presented excluding the impact of internalisation. Further, distributable profit is non-gaap financial information used by the PFI Board to assist in determining dividends to shareholders (calculated in note 4.1 of the 30 June 2017 financial statements). Please refer to the interim results announcement for more detail as to how these measures were calculated. PROPERTY FOR INDUSTRY PFI OVERVIEW 11
ACQUISITION OVERVIEW PFI has secured a portfolio of nine quality properties for an acquisition price of $69.5m Purchase price by location Includes seven properties leased to the Transport Investments Limited Group, one of New Zealand s largest private domestic freight and logistics businesses The two additional properties are leased to NZ Post, Aviagen and Rockgas The portfolio has a WALT of 13.9 years and the acquisition price reflects a passing yield of 7.22% Settlement of the Acquisition is scheduled to occur on 31 October 2017 PROPERTY FOR INDUSTRY PORTFOLIO ACQUISITION 13
STRATEGIC RATIONALE The Acquisition portfolio comprises eight quality industrial properties and TIL s head office located in Auckland, New Plymouth, Napier, Nelson, Blenheim and Christchurch The Acquisition portfolio: Establishes PFI s presence in additional centres across New Zealand, whilst maintaining a high weighting towards the attractive Auckland property market Will improve a number of PFI s portfolio metrics, including an extension of PFI s WALT by 0.6 years 1 Has been purchased with attractive lease terms, with all TIL properties benefiting from fixed rent reviews of 4.55% every two years, providing future rental growth Has low site coverage of ~25% across the nine acquisition sites providing for significant medium to long-term development potential Establishes a strategic partnership with a quality nationwide tenant 1. Pro forma as at 30 June 2017, under the assumption that the portfolio was acquired on 30 June 2017 PROPERTY FOR INDUSTRY PORTFOLIO ACQUISITION 14
OVERVIEW OF TIL One of New Zealand s largest privately owned domestic freight and logistics businesses, TIL: Is the parent company for a number of well known New Zealand transport and logistics brands including Hooker Pacific, TNL, Roadstar, Pacific Fuel Haul and MOVE Logistics Has a comprehensive nationwide freight platform, including a significant regional presence, operating from approximately 50 branches with over 1,600 employees Owns and operates a fleet of approximately 800 trucks, including one of the largest privately owned tanker fleets in New Zealand Provides freight, warehousing and logistics, heavy haulage and specialised equipment services Has a history of successful strategic acquisitions PROPERTY FOR INDUSTRY PORTFOLIO ACQUISITION 15
PORTFOLIO SUMMARY Property 63 McLaughlins Road, Auckland 39 Edmundson Street, Napier 330 Devon Street East, New Plymouth 28 Paraite Road, New Plymouth 11 Sheffield Street, Blenheim Description Industrial warehouse Industrial warehouse TIL Head Office Industrial warehouse Industrial warehouse Tenant TIL TIL TIL TIL TIL Lease term 1 15 years 15 years 15 years 15 years 15 years Rent ($000 s) 1,150 220 112 1,195 490 Rent review mechanism 4.55% two-yearly 4.55% two-yearly 4.55% two-yearly 4.55% two-yearly 4.55% two-yearly Net lettable area (sqm) 2 7,123 2,449 482 12,521 4,823 Site area (sqm) 2 23,976 12,140 1,051 40,324 20,724 Site coverage 29.7% 20.2% 45.9% 31.1% 23.3% 1. Lease term remaining as at expected settlement of 31 October 2017 2. Net lettable area comprises all areas for the purposes of site coverage calculations and therefore does not represent some internal lettable areas such as mezzanines PROPERTY FOR INDUSTRY PORTFOLIO ACQUISITION 16
PORTFOLIO SUMMARY Property 15 Artillery Place, Nelson 41 & 55 Foremans Road, Christchurch 2 Smart Road, New Plymouth 20 Constance Street, New Plymouth Weighted Average / Total Description Industrial warehouse Industrial warehouse Industrial warehouse Manufacturing N/A Tenant TIL TIL NZ Post, Rockgas Aviagen N/A Lease term 1 15 years 15 years 7.8 years 5.3 years 13.9 years Rent ($000 s) 540 670 275 387 5,039 Rent review mechanism 4.55% two-yearly 4.55% two-yearly Market, fixed CPI annually N/A Net lettable area (sqm) 2 2,907 4,584 2,342 1,432 38,663 Site area (sqm) 2 22,343 24,907 6,121 3,312 154,898 Site coverage 13.0% 18.4% 38.3% 43.2% 25.0% 1. Lease term remaining as at expected settlement of 31 October 2017 2. Net lettable area comprises all areas for the purposes of site coverage calculations and therefore does not represent some internal lettable areas such as mezzanines PROPERTY FOR INDUSTRY PORTFOLIO ACQUISITION 17
IMPACT OF THE ACQUISITION The Acquisition will improve a range of PFI s portfolio metrics: Pre Acquisition 1 Acquisition 2 Post Acquisition 3 Investment properties ($m) 1,096.0 69.8 1,165.8 Number of properties 83 9 92 Number of tenants 144 4 148 Contract rent ($m) 73.2 5.0 78.2 Occupancy 99.5% 100.0% 99.6% WALT 4.8 years 13.9 years 5.4 years Industrial property 85.4% 97.9% 86.2% Auckland property 85.3% 30.0% 81.8% Passing yield 6.69% 7.22% 6.72% 1. As at 30 June 2017 2. As at expected settlement of 31 October 2017 3. Pro forma as at 30 June 2017, under the assumption that the portfolio was acquired on 30 June 2017 PROPERTY FOR INDUSTRY PORTFOLIO ACQUISITION 18
EQUITY RAISING OVERVIEW PFI to raise approximately $70m through a pro rata renounceable rights issue 1 for 10 pro rata renounceable rights issue, fully underwritten at an Issue Price of $1.54 per New Share Traditional rights issue, with Rights trading, provides all Eligible Shareholders with the opportunity to participate PFI Board and senior executives have committed to take up all Rights in respect of their beneficial shareholdings under the Offer The Offer is fully underwritten by Forsyth Barr Group Limited Purpose of the Offer PFI will initially fund the Acquisition via an extension of banking facilities with the proceeds of the proposed Offer being used to repay debt and reduce gearing PFI expects that the post Offer gearing position provides appropriate funding for committed development projects and further portfolio activity Impact of the Acquisition and Offer Post the Acquisition and the Offer: PFI will have pro forma June 2017 gearing of 32.3% 1 PFI continues to provide guidance for distributable profit of between 7.70 and 7.90 cents per share and a cash dividend of 7.45 cents per share for FY17 1. Based on PFI s Consolidated Statement of Financial Position as at 30 June 2017. Calculated as the value of borrowings (adjusted for the value of the Acquisition, the proceeds of the Offer and transaction costs) divided by the value of investment properties (adjusted for the value of the Acquisition). PROPERTY FOR INDUSTRY EQUITY RAISING 20
EQUITY RAISING TERMS Entitlement ratio 1 New Share for every 10 Existing Shares held at 5.00pm on 12 October 2017 Offer size Approximately $70m Maximum New Shares to be issued 45,338,605 Issue Price $1.54 Offer discount 7.1% to TERP 1 Ranking Eligibility Options for Eligible Shareholders New Shares issued on completion of the Offer will rank equally with Existing Shares and will be quoted on the NZX Main Board Available to persons recorded on PFI s share register on the Record Date, with a registered address in New Zealand or Australia (Eligible Shareholders) Each Eligible Shareholder may choose to take up all or some of your Rights, sell all or some of your Rights on market, take up some of your Rights and sell all or some of your balance on market or do nothing with all or some of your Rights. If you do nothing, your Rights will lapse and you will not be able to subscribe for any New Shares or realise any other value for your Rights The PFI Board encourages you to either take up your Rights in full or sell your Rights on market 1. TERP is the theoretical ex-rights price of $1.658 which is equal to the average price of 1 New Share at the Issue Price of $1.54 and 10 Existing Shares at $1.67 being the closing price as at 3 October 2017 PROPERTY FOR INDUSTRY EQUITY RAISING 21
TIMETABLE 1 Announcement of the Offer 4 October 2017 Rights trading commences on the NZX Main Board 11 October 2017 Record Date for determining Entitlements 5.00 pm, 12 October 2017 Offer Document, Entitlement and Acceptance Forms sent to Eligible Shareholders 13 October 2017 Rights trading ends on the NZX Main Board 5.00 pm, 26 October 2017 Closing Date for the Offer (last day for receipt of the completed Entitlement and Acceptance Form with payment) 1 November 2017 Allotment of New Shares under the Offer (Issue Date) 7 November 2017 Expected date for quotation of New Shares issued under the Offer 7 November 2017 Mailing of holding statements By 13 November 2017 1. These dates are subject to change and are indicative only. PFI reserves the right to amend this timetable (including by extending the Closing Date of the Offer) subject to applicable laws and the Listing Rules PROPERTY FOR INDUSTRY EQUITY RAISING 22
DISCLAIMER IMPORTANT NOTICE The information included in this presentation is provided by Property For Industry Limited (PFI) as at 4 October 2017 and is provided in relation to a pro rata renounceable Rights Offer of New Shares in PFI to be made to Eligible Shareholders under clause 19 of Schedule 1 of the Financial Markets Conduct Act 2013 (New Shares). PFI does not guarantee the repayment of capital or the performance referred to in this presentation. Information This presentation contains summary information about PFI and its activities which is current as at the date of this presentation. The information in this presentation is of a general nature and does not purport to be complete nor does it contain all the information which a prospective investor may require in evaluating a possible investment in PFI or that would be required in a product disclosure statement under the Financial Markets Conduct Act 2013. Any historical information in this presentation is, or is based upon, information that has been released to NZX Limited (NZX). This presentation should be read in conjunction with PFI s periodic and continuous disclosure announcements, which are available at www.nzx.com. This presentation is for information purposes only and is not an invitation or offer of securities or financial products for subscription, purchase or sale in any jurisdiction. Any decision to acquire New Shares should be made on the basis of the separate offer document to be lodged with NZX (the Offer Document). Any Eligible Shareholder who wishes to participate in the Offer should review the Offer Document and apply in accordance with the instructions set out in the Offer Document and the Entitlement and Acceptance Form accompanying the Offer Document. The Offer is only made to Eligible Shareholders, being Shareholders with a registered address in New Zealand or Australia (who are not in the United States and that are not acting for the account or benefit of a person in the United States). This presentation and the Offer Document do not constitute an offer, advertisement or invitation in any place in which, or to any person to whom, it would not be lawful to make such an offer, advertisement or invitation. NZX The New Shares have been accepted for quotation by NZX and will be quoted on the NZX Main Board after the completion of the allotment process. The NZX Main Board is a licensed market under the Financial Markets Conduct Act 2013. NZX accepts no responsibility for any statement in this presentation. Australia This document and the offer of New Shares are being made available in Australia in reliance on the Australian Securities and Investments Commission Corporations (Foreign Rights Issues) Instrument 2015/356. This document is not a prospectus, product disclosure statement or any other formal disclosure document for the purposes of the Australian Corporations Act 2001 ("Australian Corporations Act") and is not required to, and does not, contain all the information which would be required in a "disclosure document" under the Australian Corporations Act. This document has not been, and will not be, lodged or registered with the Australian Securities and Investments Commission or the Australian Securities Exchange and the issuer is not subject to the continuous disclosure requirements that apply in Australia. Prospective investors should not construe anything in this document as legal, business or tax advice nor as financial product advice for the purposes of Chapter 7 of the Australian Corporations Act. Past Performance Past performance is not a reliable indicator of future performance. Future Performance The presentation includes a number of forward looking statements. Forward looking statements, by their nature, involve inherent risks and uncertainties. Many of those risks and uncertainties are matters which are beyond PFI s control and could cause actual results to differ from those predicted. Variations could either be materially positive or materially negative. Except as required by law or regulation, PFI undertakes no obligation to provide any additional or updated information whether as a result of new information, future events or results or otherwise. Not Financial Advice This presentation has been prepared for the purpose of providing general information, without taking account of any particular investor s objectives, financial situation or needs. An investor should, before making any investment decisions, consider the appropriateness of the information in this presentation, and seek professional advice, having regard to the investor s objectives, financial situation and needs. Disclaimer None of Forsyth Barr Limited (the Lead Manager), Forsyth Barr Group Limited (the Underwriter), PFI s advisers nor any of their respective affiliates, related bodies corporate, directors, officers, partners, employees and agents (the Associated Persons), have authorised or cause the issue or provision of this presentation and, except to the extent set out in this presentation, none of them makes or purports to make any statement in this presentation and there is no statement which is based on any statement by any of them. To the maximum extent permitted by law, PFI, the Lead Manager, the Underwriter and the Associated Persons exclude and disclaim all liability for any expenses, losses, damages or costs incurred in respect of the Offer and any decision to acquire New Shares. The Lead Manager, the Underwriter and the Associated Persons make no representation or warranty as to the information in this presentation and make no recommendation as to whether any person should participate in the Offer. Note All capitalised terms used in this presentation have the meanings given in the Glossary of PFI s Offer Document dated 4 October 2017. PROPERTY FOR INDUSTRY DISCLAIMER 24