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Investor Presentation - True North Commercial REIT€¦ · Ottawa, Ontario 61 Bill Leathem Drive...
Transcript of Investor Presentation - True North Commercial REIT€¦ · Ottawa, Ontario 61 Bill Leathem Drive...
TNT.UN
Investor PresentationNovember 2017
TSX:TNT.UN
1595 16th Avenue, Toronto
TNT.UN I INVESTOR PRESENTATION 2
Certain statements contained in this presentation constitute forward-looking information within the meaning of Canadian securities laws. Forward-looking
information is provided for the purposes of assisting the reader in understanding the REIT's financial performance, financial position and cash flows as at and for
the periods ended on certain dates and to present information about management's current expectations and plans relating to the future and readers are
cautioned such statements may not be appropriate for other purposes. Forward-looking information may relate to the REIT's future results, performance,
achievements, events, prospects or opportunities for the REIT or the real estate industry, and may include statements regarding the financial position, business
strategy, budgets, projected costs, capital expenditures, financial results, taxes, plans and objectives of or involving the REIT. In some cases, forward-looking
information can be identified by such terms as “may”, “might”, “will”, “could”, “should”, “would”, “expect”, “plan”, “anticipate”, “believe”, “intend”, “seek”, “aim”,
“estimate”, “target”, “project”, “goal”, “predict”, “forecast”, “potential”, “continue”, “likely”, or the negative thereof or other similar expressions concerning matters
that are not historical facts.
Forward-looking information involves known and unknown risks and uncertainties, which may be general or specific and which give rise to the possibility that
expectations, forecasts, predictions, projections or conclusions will not prove to be accurate, assumptions may not be correct and objectives, strategic goals and
priorities may not be achieved. A variety of factors, many of which are beyond the REIT’s control, affect the operations, performance and results of the REIT and
its business, and could cause actual results to differ materially from current expectations of estimated or anticipated events or results. These factors include, but
are not limited to, risks related to the Units and discussed in the REIT’s materials filed with Canadian securities regulatory authorities from time to time on
www.sedar.com. The reader is cautioned to consider these and other factors, uncertainties and potential events carefully and not to put undue reliance on
forward-looking information as there can be no assurance actual results will be consistent with such forward-looking information.
Information contained in forward-looking information is based upon certain material assumptions that were applied in drawing a conclusion or making a forecast
or projection, including management’s perceptions of historical trends, current conditions and expected future developments, as well as other considerations
believed to be appropriate in the circumstances including the following: the Canadian economy will remain stable over the next 12 months; inflation will remain
relatively low; interest rates will remain stable; conditions within the real estate market, including competition for acquisitions, will be consistent with the current
climate; the Canadian capital markets will provide the REIT with access to equity and/or debt at reasonable rates when required; Starlight Investments Ltd. will
continue its involvement as asset manager of the REIT in accordance with its current asset management agreement, and the risks referenced above,
collectively, will not have a material impact on the REIT. While management considers these assumptions to be reasonable based on currently available
information, they may prove to be incorrect.
The forward-looking information included in this presentation relate only to events or information, as of the date on which the information is made in this
presentation. Except as specifically required by applicable Canadian law, the REIT undertakes no obligation to update or revise publicly any forward-looking
information, whether as a result of new information, future events or otherwise, after the date on which the statements are made or to reflect the occurrence of
unanticipated events.
Certain terms used in this presentation such as funds from operations (“FFO”), adjusted funds from operations (“AFFO”), net operating income (“NOI”), Same
Property NOI, indebtedness to gross book value (“Gross Book Value”) ratio, Gross Book Value, indebtedness, indebtedness coverage ratio and interest
coverage ratio are not measures defined under IFRS as prescribed by the International Accounting Standards Board (“IASB”), do not have standardized
meanings prescribed by IFRS and should not be compared to or construed as alternatives to profit/loss, cash flow from operating activities or other measures of
financial performance calculated in accordance with IFRS. FFO, AFFO, NOI, Same Property NOI, Gross Book Value, indebtedness, indebtedness coverage
ratio and interest coverage ratio as computed by the REIT may not be comparable to similar measures as reported by other reporting issuers in similar or
different industries. Details on non-IFRS measures are set out in the REIT’s Management’s Discussion and Analysis for the period ended September 30, 2017
and available on the REIT’s profile at www.sedar.com.
Forward Looking Information
TNT.UN I INVESTOR PRESENTATION 3
True North at a Glance
38 PropertiesComprising 2.7 million sq. ft.
across four provinces
84.1%Gross revenues generated
from government and
credit-rated tenants
96.7%1
Occupancy
9.0%2
Yield
$641MAssets
1. Includes acquisitions described on slide 7.
2. As at November 20, 2017.
4.3 YRAvg. remaining
lease term
400 Maple Road Road
Ottawa, ON5900 Explorer Drive
Toronto, Ontario
3650 Victoria Park Avenue
Toronto, Ontario
1
1
1
1
TNT.UN I INVESTOR PRESENTATION 4
Our Strategy
Focus on government and credit-rated tenants
and strong long-term leases with visible cash
flow
Build scale through the acquisition of accretive,
high-quality properties in urban markets
Leverage the infrastructure and network of
Starlight Investments: ‘Off Market’ transactions
expected to drive deal flow
Use best in class local and national property
managers
Maintain a conservative financial position
777 Brock Road
Pickering, ON
340 Laurier Avenue West
Ottawa, ON
TNT.UN I INVESTOR PRESENTATION 5
GOVERNMENT TENANTS43.9%
Government
Tenants
Highest Quality Tenant Base
SELECT CREDIT-RATED TENANTS
40.2%Credit-Rated
Tenants
84.1%Total Government
and Credit-Rated
Tenants
1
1
1
1. Includes acquisitions described on slide 7.
Strong Tenant Base
TNT.UN I INVESTOR PRESENTATION 6
Tenants % of Total Rent Location W.A.L.T GovernmentCredit
Rated
Federal Government - Correctional Services ON 3.4 -
Federal Government - Public Safety ON 2.4 -
Lumentum Ottawa Inc. ON 5.3 -
Ontario Power Generation Inc. ON 5.4 -
EMS Technologies Canada, Ltd. (Honeywell) ON 6.9 -
Sobeys Capital Incorporated o/a Sobeys AB 2.2 -
Federal Government-HMQ Ministry of Supply & Services NB 4.9 -
Federal Government-Veterans Affairs CDA ON 4.5 -
Brewers Retail Inc. o/a Beer Store ON 2.9 -
Federal Government-Public Works and Gov’t Services NB 4.4 -1.7%
1.8%
2.3%
2.4%
3.4%
3.5%
4.4%
4.7%
5.7%
9.2%
• True North’s top 10 tenants, which account for approximately 40% of it’s revenue, include either
government or credit-rated tenants.
✓
✓
✓
✓
✓
✓
✓
✓
✓
As at September 30, 2017.
✓
TNT.UN I INVESTOR PRESENTATION 7
77% Government/Credit-Rated Tenants 4.3 YR Avg. Remaining Lease Term
2017 Acquisitions
721K8 Properties
Growth
in Assets$159MSquare
feet
1595 16th Avenue
Toronto, Ontario
5160 Orbitor Drive
Mississauga, Ontario
301 & 303 Moodie Drive
Ottawa, Ontario61 Bill Leathem Drive
Ottawa, Ontario
810 Blanshard Street
Victoria, British Columbia231 Shearson Crescent
Cambridge, Ontario
727 Fisgard Street
Victoria, British Columbia
36 & 38 Solutions Drive
Halifax, Nova Scotia
TNT.UN I INVESTOR PRESENTATION 8
38Properties
2,656,600Sq. ft.
3
24
8
2
British Columbia
2 properties
82,000 sq. ft.
100% occupancy
Alberta
3 properties
250,100 sq. ft.
99.2% occupancy
Ontario
24 properties
1,721,700 sq. ft
97.5% occupancy
New Brunswick
8 properties
473,100 sq. ft.
92.1% occupancy
Nova Scotia
1 property
129,700 sq. ft.
95.1% occupancy
1
Includes acquisitions described on slide 7.
Strategic Urban Markets
2017 New Urban Markets:
➢ Victoria, British Columbia
➢ Halifax, Nova Scotia
TNT.UN I INVESTOR PRESENTATION 9
NOI Growth Driven through Acquisitions
1. Compound Annual Growth Rate does not include post Q3 2017 acquisitions.
$318 $325 $309$346 $347 $347 $347
$390
$456 $462$499
$535
Q4-14 Q1-15 Q2-15 Q3-15 Q4-15 Q1-16 Q2-16 Q3-16 Q4-16 Q1-17 Q2-17 Q3-17
Asset Base
$4.1
$5.4 $5.6 $5.9 $6.1 $5.9 $5.9 $6.2$6.9
$7.8 $8.1$8.8
Q4-14 Q1-15 Q2-15 Q3-15 Q4-15 Q1-16 Q2-16 Q3-16 Q4-16 Q1-17 Q2-17 Q3-17
NOI Since Q4-14
$106.1 million of
acquisitions post Q3
TNT.UN I INVESTOR PRESENTATION 10
4.3 YR(1)
Average
remaining
lease
term
1. Based on annualized gross revenue as at September 30, 2017 (including acquisitions described on slide 7)
Portfolio Lease Maturity
SELECTED CREDIT-RATED TENANTS
• Reliable, long-standing tenant base with significant tenant capital investments
reduces rollover risk
• Long-term visible cash flows
• Early lease renewals with EMS Technologies (Honeywell) (107,243 sq. ft.) at
400 Maple Grove Road, Ottawa and Cash Money Cheque Cashing Inc.
(26,754 sq. ft.) at 400 Carlingview Drive, Toronto
1.7%3.9%
8.6%
16.2%13.8%
52.5%
2017 2018 2019 2020 2021 2022+
Lease Maturity by % of GLA
TNT.UN I INVESTOR PRESENTATION 11
Industry Leading Occupancy Rate of 97.3%
* Based on publicly-filed industry data as at September 30, 2017; H&R, Inovalis and Agellan as at June 30, 2017.
97.3% 96.3% 96.2% 95.2% 94.9% 94.0% 93.6% 92.2%90.3% 90.0%
85.9%
TNT H&R Inovalis Agellan CREIT Morguard Artis Cominar DreamOffice
BTB SlateOffice
98.5% 98.5%99.2%
98.3%98.0%
97.5% 97.7%98.0%
97.5% 97.5% 97.4% 97.3%
Q4-14 Q1-15 Q2-15 Q3-15 Q4-15 Q1-16 Q2-16 Q3-16 Q4-16 Q1-17 Q2-17 Q3-17
Historical Occupancy
Comparison of Occupancy*
Average: 98.0%
Prudent Use of Leverage
TNT.UN I INVESTOR PRESENTATION 12
–
$29.7$24.8
$76.4
$29.0
$79.2
$14.4
2017 2018 2019 2020 2021 2022 Thereafter
Mortgage Maturity
Mortgage Maturity
Debt Maturity Profile
(millions)
TNT.UN I INVESTOR PRESENTATION 13
Investment Performance
(20.0%)
(10.0%)
–
10.0%
20.0%
30.0%
40.0%
50.0%
Nov-15 Jan-16 Mar-16 May-16 Jul-16 Oct-16 Dec-16 Feb-17 Apr-17 Jun-17 Aug-17 Nov-17
True North Commercial REIT Canadian Office REITs S&P / TSX Capped REIT
Notes: As at November 7, 2017; Source: Bloomberg
*Canadian Office REITs including Dream Office REIT, Allied Properties REIT, NorthWest Healthcare Properties REIT, Inovalis REIT, Dream Global REIT,
and Slate Office REIT and excluding True North Commercial REIT. True North Commercial is excluded from the calculation of its peers return.
Two Year Relative Return (Total Return – Distributions Reinvested)
24.8%
40.5%
44.6%
(1)
TNT.UN I INVESTOR PRESENTATION 14
• Starlight Investments is aligned via its 11% ownership in True North Commercial REIT.
• Starlight provides institutional-quality asset management services to over $7.5 billion of real estate,
encompassing over 5 million square feet of commercial space throughout Canada and more than
35,000 multi-family units across Canada and the southern United States.
• Home to more than 120 real estate professionals with an extensive network of local, national and
international joint venture partners, financial institutions, brokers, property managers, and other real
estate professionals.
• Asset manager for Canadian commercial real estate, Canadian Multi-Family and U.S. Multi-Family
assets for public, institutional and private ventures including joint ventures with three institutional
partners.
• Fees are consistent with market
• Acquisitions/Dispositions
• Corporate finance and capital market relationships
• Capital expenditure project oversight
• Energy management
• Financial reporting (IFRS and ASPE)
• Investor relations
• Legal
• Operations and revenue management
• Tax structuring
Alignment
TNT.UN I INVESTOR PRESENTATION 15
True North is well positioned for significant, accretive growth
• Opportunities to enhance portfolio value through organic growth:
Outlook
Roadmap for Continued Success
Active portfolio
management
Maintain/extend
long-term tenant
relationships
Optimize portfolio
revenue
• Focus on accretive acquisitions in urban segment, where True North has a
competitive advantage and is established as a preferred buyer:
9.0%1
Yield
84.1%2
Revenue from government
or credit-rated tenants
100%Return of Capital
Transaction size of
$10-35 millionFocus on select
urban markets
1. As at November 20, 2017.
2. Includes acquisitions described on slide 7.
TNT.UN I INVESTOR PRESENTATION 16
• Founder, President, and Chief Executive Officer of Starlight Investments, which manages over $7.5 billion of commercial and residential properties comprising over 5.0 million square feet of commercial space throughout Canada and more than 35,000 multi-family units across Canada and the southern United States
• Founder and Chief Executive Officer, Starlight U.S. Multi-Family Core Funds
• Founder, True North Apartment REIT which combined with Northern Property REIT to form Northview Apartment REIT, Canada’s third largest publicly traded multi-family REIT
• Founder, TransGlobe Apartment REIT, which returned 60% to IPO unitholders upon privatization
• Led more than $15 billion worth of acquisition and financing transactions in commercial and residential real estate
• Between 1997 and 2009, assembled an extensive portfolio of approximately $800 million in Canadian commercial properties
Daniel Drimmer – Founder, Chairman of the Board, President and Chief Executive Officer
• Chief Financial Officer and Group Head, Commercial, Starlight Investments
• Possesses over 20 years of corporate accounting and public company experience
• Chief Financial Officer and Corporate Secretary, Holloway Lodging REIT
• Chief Financial Officer, Pacrim Hospitality Services Inc.
• Chief Financial Officer, Pacrim International Capital Inc.
• Extensive experience in asset management, acquisitions, due diligence, operations management, construction, investor relations and long-term financing
Tracy Sherren – CPA, CA, Chief Financial Officer
Management
Yash Sankpal, CIBC Capital Markets
(416) 594-7399
Equity Analyst Coverage
TNT.UN I INVESTOR PRESENTATION 17
True North Commercial REIT is covered by the analysts listed below.
Johann Rodrigues, Raymond James Ltd.
(416) 777-7189
Dawoon Chung, National Bank Financial
(416) 507-8102
TNT.UN Daniel DrimmerPresident & Chief Executive Officer
Tracy SherrenChief Financial Officer
w w w. t r u e n o r t h r e i t . c o m