Highlands Spin-Off & Student Housing Transaction Webcast January 18, 2016
Disclaimer Forward-Looking Statements in this presentation, which are not historical facts, are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are statements that are not historical, including statements regarding management s intentions, beliefs, expectations, plans or predictions of the future and are typically identified by words such as may, could, expect, intend, plan, seek, anticipate, believe, estimate, predict, potential, continue, likely, will, would and variations of these terms and similar expressions, or the negative of these terms or similar expressions. These statements include statements about our plans and strategies and future events, including the sale of the student housing platform and proposed spin-off of our non-core assets; the anticipated timing to close the spin-off and University House transactions; anticipated tax consequences of the spin-off; the retail strategy; and anticipated timing with respect to publishing our new estimated share value, among other things. Such forward-looking statements are necessarily based upon estimates and assumptions that, while considered reasonable by us and our management, are inherently uncertain and involve known and unknown risks that are difficult to predict. Factors that may cause actual results to differ materially from current expectations include, among others, if the SEC fails to declare Highlands preliminary registration statement on Form 10 effective in a timely manner or at all; our current expectations with respect to the timing of the potential spin-off and/or the potential failure to satisfy closing conditions with respect to the transaction; InvenTrust s board of directors may determine that the completion of the spin-off is not in our best interests and determine not to consummate the spin-off; our ability to execute on our strategy; the timing of our new estimated share value; Highlands ability (or lack thereof) to operate successfully as a self-managed REIT and execute on its strategy; our ability to return value to our stockholders and the availability of cash flow from operating activities to fund distributions. For further discussion of factors that could materially affect the outcome of our forward-looking statements and our future results and financial condition, see the Risk Factors included in the preliminary registration statement on Form 10 filed with the Securities and Exchange Commission by Highlands REIT, Inc. and InvenTrust s most recent Annual Report on Form 10-K, as updated by any subsequent Quarterly Report on Form 10-Q, in each case as filed with the Securities and Exchange Commission. InvenTrust intends that such forward-looking statements be subject to the safe harbors created by Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, except as may be required by applicable law. We caution you not to place undue reliance on any forward-looking statements, which are made as of the date of this press release. We undertake no obligation to update publicly any of these forward-looking statements to reflect actual results, new information or future events, changes in assumptions or changes in other factors affecting forward-looking statements, except to the extent required by applicable laws. If we update one or more forward-looking statements, no inference should be drawn that we will make additional updates with respect to those or other forward-looking statements. 1
InvenTrust s Complex History The assembly of our $12 billion portfolio primarily focused on credit quality of tenants and length of lease term. A large percentage of assets in the portfolio were purchased before the great recession. The diversified portfolio was effective during the great recession and allowed us to pay a 5% distribution. Asset and JV values declined during the real estate crisis. Announced new strategy in 2012, focusing on the 3 platforms of retail, hotels and student housing. 2
Many Large, Complex Transactions Were Necessary to Achieve Strategy $460 million apartment portfolio sale to 2013 Announced $1.8 billion sale of net lease assets to $395 million modified Dutch Auction tender offer (Repurchased shares at high-end of the range and all shares properly tendered were repurchased) 2014 $1.1 billion sale of select service lodging portfolio to joint venture between From 2012 to 2014, portfolio repositioning = approx. $4.1B (not including transactions above or Xenia) $1.9B in dispositions / $2.2B in acquisitions Internalization of management 3
Execution of Our Strategy Continues Successful liquidity event: spin-off & listing of Xenia on the NYSE Highlighted and developed independent brands and business plans for multi-tenant retail and student housing platforms 2015 Closed on $300M term loan to address upcoming maturities Acquisition of high performing, trophy retail assets in key markets Announced our intent to spin off our non-core assets into a standalone REIT to be called Highlands REIT, Inc. 2016 Signed an agreement to sell our student housing platform for $1.4 billion 44
Highlands Spin-Off Details On December 23, 2015, we announced our intent to spin off our noncore assets into a stand-alone company. Company is called Highlands REIT, Inc. Highlands will be an independent, self-managed, public non-traded REIT. Dedicated management team will focus solely on the Highlands portfolio. InvenTrust stockholders will own shares in both InvenTrust and Highlands. The number of InvenTrust shares held by stockholders will not change. Please review the initial Form 10 filed with the SEC and available on www.sec.gov. 5
Highlands Spin-Off Why Take this Action? We expect that Highlands REIT, as a separate company, will be betterpositioned to focus on this non-core portfolio of assets. Highlands business plan is to liquidate and distribute net proceeds from the disposition of Highlands assets to its stockholders. Highlands portfolio is expected to consist of: 7 office assets 2 industrial assets 6 retail assets 2 correctional facilities 4 parcels of unimproved land 1 bank branch o These are non-core or non-strategic assets in InvenTrust s portfolio InvenTrust currently expects the spin-off to be completed in approximately four months. 6
Student Housing Transaction - Details On January 4, 2016, we announced that we entered into a definitive purchase agreement to sell our student housing platform. The agreement s gross all-cash value is $1.4 billion. Final net proceeds will be determined at the closing of the transaction following the determination of several events and closing considerations The transaction is expected to close in mid-2016 subject to certain closing conditions. The Board and management are exploring all option for the use of the proceeds. Buyer is a JV between: The Canada Pension Plan Investment Board / GIC (located in Singapore) / Scion Communities Investors LLC (a student housing owner and operator) 7
Student Housing Transaction Why Now? After a thorough assessment of the landscape for student housing, we believe now is the right time to sell our student housing platform. We conducted a robust evaluation process to maximize the value we receive for the platform. The selling price for this portfolio is above total investment in the assets. This positions Inventrust to become a pure-play retail company and continues its focus on the retail platform. 8
Estimated Share Value & Distributions InvenTrust is deferring the publication of a new estimated share value Expect a new value to be announced in the next four to six months Closer proximity to the completion of the spin-off and student housing transaction. InvenTrust has engaged an independent, third-party valuation firm to assist in the valuation. We expect the value of InvenTrust shares to be lower immediately following the Highlands spin-off, as the value of the InvenTrust stock will no longer reflect the value of the Highlands portfolio. We also anticipate distribution payments to decrease following the completion of the Highlands spin-off and student housing transaction. Both platforms and portfolios produced significant cash flow for InvenTrust. We plan to announce a new sustainable distribution correlated to the cash generated from the remaining portfolio of assets. 9
Update on Estimated Tax Impact of Xenia Distribution February 2015 At the time of the Xenia spinoff and listing, we announced that the distribution was going to be a taxable event for InvenTrust stockholders. December 2015 Although InvenTrust previously estimated the Xenia transaction would result in a significant gain, real estate property sales and internal company restructurings have significantly offset that gain. 10
What Does This All Mean? Will mark the culmination of our non-retail portfolio evolution strategy After completion of transactions, InvenTrust will be a pure-play retail REIT Continue & enhance our focus on our retail platform Rotate capital out of non-strategic retail assets Move capital into markets with population & income growth 11
Multi-Tenant Retail Platform Strategy
Retail Landscape Minimal New Development Retailers are Expanding Again - Cautiously Bricks and Clicks VS. Bricks or Clicks Consumer Experience is Important 13
Retail Segment Is Designed for Growth InvenTrust Retail Strategy Results Key Market Concentration Hub & Spoke Investments in markets with high job, population and income growth Premium yielding assets with strong demographics Significant Improved Average Base Rents Vertically Integrated Management Strong Tenant Relationships Creates operating efficiencies and cost synergies Enhance local market knowledge Leverage relationships to execute favorable lease terms Heightened Cash Flow Growth Profile Targeted Acquisitions & Redevelopment Recycle capital to acquire assets in key growth markets versus low-growth markets Attractive Risk-Adjusted Returns The InvenTrust retail strategy is expected to lead to above average performance over the long term 14
Multi-Tenant Retail Snapshot* Portfolio Breakdown by Square Feet Power Centers 68% Community & Neighborhood Center 32% 128 24 18.9 94% # of Properties # of States Million Retail Sq. Ft. Occupancy *Includes 18 centers in the IAGM JV / As of 9/30/15 15
Retail Strategy Core Markets* InvenTrust s largest markets are expected to have high job growth, population growth, and income growth in the next five years 16.0% Top Markets by Gross Leasable Area (GLA) 12.0% 13.0% 12.4% 8.0% 7.8% 6.6% 4.0% 5.1% 4.2% 4.1% 4.1% 2.6% 2.4% 0.0% Dallas Houston Altanta Oklahoma City/Tulsa Raleigh San Antonio Chicago Tampa Charlotte Austin (1) Job Growth ( 15 19E) 9.1% 10.2% 9.5% 11.0% 11.8% 8.7% 5.6% 9.6% 10.2% 12.2% Pop. Growth ( 15 19E) 8.2% 9.7% 8.5% 7.5% 10.9% 8.7% 2.4% 6.2% 11.7% 11.5% Income Growth ( 15 19E) 18.3% 15.7% 17.5% 16.5% 16.4% 15.0% 16.9% 19.9% 12.7% 14.1% Source: Green Street Advisors, Charlotte Chamber of Commerce, North Carolina Department of Commerce. (1) Population growth and income growth based on Mecklenburg County estimates. *Includes 18 centers in the IAGM JV / As of 9/30/15 16
Retail Lease Expiration Brings Value Creation Opportunity Leases rolling during predicted inflationary time period = opportunity to grow rental rates Lease Expiration by % of Total Annualized Rent 20.0% 15.0% 15.2% 13.6% 16.0% 14.4% 10.0% 8.8% 5.0% 0.0% 2016 2017 2018 2019 2020 As of 9/30/15 Growing Average Base Rent (ABR) over the next 24 months will be a focus of the retail team 17
Focus on Deep Tenant Relationships InvenTrust s scale and locations in growing vibrant markets promotes favorable relationships with top local and national tenants 18
Capital Allocation and Rotation Strategies / Balance Sheet Management
Timing: In-Step with Retail Market Opportunity Current Estimated Location in Retail Cycle Low levels of supply and new development U.S. retail is in recovery phase Retailers are expanding again Retail sales continue to grow moderately and are above pre-recession peak *Source: REIS - Q2 2015/ Dividend Capital Research Report; Mueller Real Estate Finance Q1 2015 as of May 2015). Analysis consistent with current latest research. 20
Multi-Tenant Retail Acquisition Strategies Open-Air Centers - grocery-anchored centers, necessity-based community centers and power centers Location, Location, Location Properties with strong demographics Job & wage growth Population growth High education rate Focus on key retail markets With current competitive environment, we are being strategic and creative when sourcing deals Investment opportunities exist - retailers continue to place a premium on retail space at premier properties in key locations 21
Retail Market Concentration Matches Expected Demographic Growth Growth in Top 30 Markets (1) Scale: From 4 (Strong) to (4) Weak 4 3 3 2 2 2 2 2 2 2 1 0 1 1 1 1 1 1 1 1 1 1 0 0 0 InvenTrust Current Market Focus (1) (2) (3) (4) (5) (1) (1) (2) (2) (2) (3) (3) (3) (4) (4) Dallas / Fort Worth Austin San Diego Portland Las Vegas San Antonio Houston Orange County San Jose Fort Lauderdale / Miami Seattle Oakland-East Bay Los Angeles Orlando Denver San Francisco Tampa-St. Petersburgh Pheonix Raleigh-Durham Atlanta Philadelphia Inland Empire D.C. Metro Boston New York Columbus St. Louis Northern New Jersey Chicago Baltimore InvenTrust is primarily focusing on markets with above average expected demographic growth Source: Green Street Advisors (1) Market growth is based on scores of income and population growth. 22
Recent Retail Acquisitions Match Our Strategy The Highlands of Flower Mound Outside Dallas Acquired June 2015 as part of IAGM JV Power Center $45.8M 169K sq. ft. 3-mile Avg. HH Income - $144,000 3-mile Population 65,000 Rio Pinar Plaza Orlando, FL Acquired Nov. 2015 Grocery Anchored - Publix 100% Occupied $34M 124K sq. ft. ABR of $16.73 psf 3-mile Population 102,000 23
Recent Retail Acquisitions Match Our Strategy Price Plaza Katy, TX Acquired Nov. 2015 as part of IAGM Power Center $35.8M 206K sq. ft. 3-mile Avg. HH Income - $101,000 3-mile Population 116,000 Sonterra Village San Antonio, TX Acquired Dec. 2015 Grocery Anchored $21.5M 42.5K sq. ft. 3-mile Avg. HH Income - $119,000 3-mile Population 74,000 24
Balance Sheet Management Declining Debt & Improving LTV 1 Balance Sheet Composition $8.0 $6.0 54.6% $6.0 45.7% 36.9% 37.2% 60% 40% 13% $4.0 $2.0 $3.6 $3.2 20% 87% $1.9 $- 2012 2013 2014 Q3 2015 Total Debt in Billions LTV% 0% Fixed Rate Debt Floating Rate Debt $1,000 $750 Manageable Mortgage Debt Maturities as of 9/30/15 * The New Term Loan Executed in the 4 th Quarter will Further Position the Company to Address the Upcoming Debt Maturities. $500 $250 $- 2016 2017* 2018 2019 Thereafter Fixed Variable 1 Line of Credit covenant calculations 25
Final Thoughts on InvenTrust & Remaining Challenges Announced two significant transactions, need to complete execution on both New sustainable distribution will correlate to the cash generated from the remaining portfolio of assets New estimated share value will be lower immediately following the Highlands spin-off and published in closer proximity to the completion of the spin-off Committed to executing on retail platform strategies with experienced management team in place to execute Additional time needed to complete retail recycling of capital to acquire retail properties in key growth markets versus low-growth markets Strong, flexible balance sheet & capital structure 26
Q&A
Appendix
GAAP to Non-GAAP Reconciliations For the three months ended For the nine months ended September 30, September 30, 2015 2014 2015 2014 Net income (loss) attributable to Company $ (95,647) $ 52,552 $ (27,757) $ 192,523 Add: Depreciation and amortization related to investment properties 37,333 86,138 122,914 259,566 Depreciation and amortization related to investment in unconsolidated entities 3,417 6,800 9,641 32,698 Provision for asset impairment 92,167 670 92,167 75,616 Loss on contribution of real estate to an unconsolidated joint venture 12,919-12,919 - Provision for asset impairment included in discontinued operations - 1,667-4,665 Less: Gain from property sales and transfer of assets 729 13,187 7,957 171,148 Gain from sales reflected in equity in earnings of unconsolidated entities - 1,766 11,875 1,766 Gain from sales of investment in unconsolidated entities - - - 4,509 NAREIT FFO Applicable to Common Shares $ 49,460 $ 132,874 $ 190,052 $ 387,645 29