Noteholder Presentation TREASURY HOLDINGS · 10/20/2011 · Battersea Power Station Kirtling...

www.treasuryholdings.comIRELAND • UK • CHINA • SINGAPORE • RUSSIA

Noteholder Presentation

TREASURY HOLDINGS

SpeakersJohn Bruder, MD Ireland

Niall O’Buachalla, Group Finance Director

20 October 2011


• Treasury Holdings Overview

• Financial Review

• Market Context

• Portfolio Overview

• Summary & Conclusions

• AppendicesManagement Biographies

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• Established in Dublin in 1989

• Globally employ over 500

• Operates in eight countries across two continents

• 130+ Projects: 55% Investment45% Development

• REO & TCT – Public Limited Companies

• Largest Western real estate investment company in China

TREASURY HOLDINGS OVERVIEW

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Ireland2.5 million sq.m of mixed‐use development

250,000 sq.m of income producing real estate

United Kingdom765,000 sq.m of mixed‐use development

China240,000 sq.m of income producing real estate

706,000 sq.m of mixed‐use development

Russia140,000 sq.m of mixed‐use development

OUR PORTFOLIO Overview

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6

The Group controls in excess of 130 projects worldwide: 55% investment and 45% development.

Convention Centre DublinSpencer DockDublin 1, Ireland

Ritz‐Carlton HotelPowerscourt, Co. Wicklow, Ireland

Battersea Power StationKirtling StreetLondon, UK

Shanghai City CentreChina

Vodafone BuildingCentral Park, LeopardstownDublin 18, Ireland

Connaught House1 Burlington RoadDublin 4, Ireland

The Catherine Palace St. Petersburg Russia

PwC HeadquartersSpencer DockDublin 1, Ireland

OUR PORTFOLIOOverview

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• Sale of Montevetro to Google

• Largest Urban Regeneration project at Spencer Dock, Dublin

• Central Park, office park, Dublin

• The Convention Centre Dublin ‐ Opened in September 2010

• First and only Ritz‐Carlton Hotel in Ireland/UK

OUR RECORD OF ACHIEVEMENT IN IRELAND

The Ritz-Carlton, PowerscourtCounty Wicklow, Ireland

Overview

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OPERA FINANCE

• Opera Finance (CMH) plc issued €375m of commercial mortgage backed notes with a legal maturity of January 2015. The proceeds of issuance were used to fund a term loan to CMH CMBS Borrower Ltd originated by Eurohypo AG

• The notes are secured on a single cross‐collateralised loan facility secured by the 16 properties in the portfolio

• Interest only loan, maturing January 2013

• Surplus of rents retained by Facility Agent since Q1 2010 (balance currently €6.3m)

• Portfolio valued at €291.5m by DTZ at February 2011 (vs. €500.5m at closing)

• Interest cover ratio at September 2011 is 156% (vs.164% at closing)

• 100% of the loan interest is fixed via interest rate swaps to Jan 2013

Finance

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• Launch: 2006• Loan Maturity: January 2013• Notes Maturity: January 2015• Issue Size: €375m• Hedge counterparty: Eurohypo• Liquidity facility: Lloyds TSB• Junior Lender: Anglo Irish Bank, €50m at launch• Total Debt Capital: €425m• LTVs at Launch:

‐ Senior 75%‐ Total 85%

TRANSACTION SUMMARYFinance

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NOTES SUMMARY

Class Original Margin Rating at Closing Current Rating

Face Value

(€mm) Fitch S&P Fitch S&P

A 250 0.19% AAA AAA BBB BBB

B 50 0.30% AA AA CCC BB

C 40 0.50% A A CC B

D 35 0.80% BBB BBB C B‐

Finance

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Valuation• Loan to Value: 129% (vs. 75% at closing)• LTV Covenant: none

Income• ICR: 156% (vs. 164% at closing)• Interest Cover Minimum: 110%• Headroom (fall in NOI required): 30%• Net Rent €25.3m• Passing Rent €26.5m• Annual interest cost €16.2m • Headroom: €9.1m

SUMMARYFinance

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JUNIOR LOAN SUMMARY

• Lender: Originally Anglo Irish Bank, now NAMA• Initial loan: €50m• An additional €40m net borrowed from Anglo in September 2008

• Current balance €85.5m• NAMA – Business Plan, MoU• Interest of c. €6.5m p.a. continues to be paid to NAMA• Junior LTV breach – no action being taken by NAMA• CMBS running costs and creditors – NAMA’s view

Finance

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IRISH PROPERTY MARKET

• IPD Index down 63% since 2007

• Average investment yield at all time high – 8.2%

• Dublin office vacancy rate peaked at 25%

• Banking sector out of market

• NAMA hold € 70 bn of Irish property loans

• And if that wasn’t bad enough.............

Market

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…..RETROSPECTIVE LEGISLATION ON UPWARD ONLY RENT REVIEWS !

CONSEQUENCE IS VIRTUAL MARKET SHUTDOWN

JUST 3 INVESTMENT TRANSACTIONS IN H1 2011

(Totalling €150m value)

IRISH PROPERTY MARKET Market

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UPWARD ONLY RENT REVIEWS

• Standard commercial lease

• Law introduced in 2010 – new leases cannot include UORR provision.

• Proposal for all existing leases to allow tenants trigger rent review to market value.

• Draft legislation due end 2011.

• Likely constitutional challenge.

• Implications for OPERA Finance (CMH):‐

€m

Current rent roll 26.5

OMRV ‐ 21.8

Exposure (%) €4.7 (18%)

Impact on ICR: a reduction from 156% to 128%

Market

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AGAINST THAT BACKGROUND

We have done well: • Occupancy maintained at 98.8%

• Value decline “only” 42% on closing valuation

(v’s average 63%)

• Income yield 9.1%

• Rent arrears below 4.5% over 90 days

• Passing Rent only 1.9% lower than on closing

Market

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ASSET MANAGEMENT

• In‐house dedicated asset management team

• Portfolio managed directly – we stay close to the tenants

• Track Record:‐ Valuations v IPD‐ IPD down 63% since 2007‐ Opera portfolio down 42% on closing valuation

Portfolio Overview

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INTENSIVE ASSET MANAGEMENT

1) Strategy

To protect and enhance value through

hands‐on asset management

2) Asset Management Plan for each property

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Stillorgan SC ‐ Business plan 20121) Continue to replace soft deals with exciting new brands – eg.

Kilkenny Design, Donnybrook Fair and Carluccios2) Tesco plan to invest €4m in 2012 on the upgrade of their existing

units and extend leases3) Further enhance the mix and leisure element4) Reposition and rebrand the centre5) Bring forward significant value add extension‐ (additional €5.5M

value increase possible with circa €2.5M spend predicated on pre‐lettings to quality retailers)

6) Continue to closely manage arrears, reviews, sub‐lettings, assignments etc

7) Link the Shopping Centre into the overall Masterplan for Stillorgan. Aldi will shortly be constructed on adjacent TH site

8) Significant opportunity exists to increase value through effective asset management and build on recent successes

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Russell CourtSignificant work is underway to;

1) Identify solutions to keep KPMG on the property past their lease expiry dates including

refurbishment and redevelopment options.

2) Identify other re‐development opportunities which would add value

3) Continue to closely manage the property

Baggot Buildings1) Continue negotiations with FAS to ensure that a new lease is entered into to retain them

as a tenant in the building

2) Monitor redevelopment opportunities including the existing planning permission which has been secured for 22,222 sq. m together with 125 car parking spaces.

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Mespil1) Currently occupied by Bank of Ireland Asset Management

2) Maintain and build on relationship to maximise possibility of lease renewal


South Bank House1) Currently occupied by Mason Hayes + Curran



Marks & Spencer ‐ Cork1) Examine extension options



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RESULT OF INTENSIVE ASSET MANAGEMENT

3) In last 2 years alone: • 19 New lettings

• 17 Rent renegotiations

• 20 Rent reviews

• 15 Lease expiries / Break options and renewals

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PORTFOLIO OVERVIEW

• Diverse portfolio in Ireland

• Total Value: €291.5 million as at end February 2011. This compares to €500.5m at close.

• No of properties: 16

• Total area (sq ft): 674,718

• Number of leases: 94

Portfolio Overview

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• 92% rent roll is prepaid quarterly

• Passing rent pa: €26.5 million (€27.0m at launch in 2006)

• Portfolio ERV pa: €21.8 million

• 80% rent subject to upward only reviews

• Rent weighted average lease length, to earlier of first break and lease expiry: 11.6 years

• Occupancy: 98.8%

• No significant tenants in default: 4.5% over 90 days in arrears

Top 10 tenants represent 80% of total rent

1 KPMG 20.4%

2 Bank of Ireland 17.0%

3 FAS (Irish Government) 12.1%

4 Mason, Hayes & Curran (mid size law firm)

10.9%

5 Marks & Spencer 6.2%

6 Tesco Ireland Ltd 4.3%

7 Beckton Properties 3.9%

8 Pantry Franchise (MacDonalds) 1.9%

9 Dunnes Stores 1.8%

10 Hutchinson 3G 1.6%

Asset Management

PORTFOLIO ASSET MANAGEMENTPortfolio Overview

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LEASE BREAKS & MATURITIES

• Weighted average lease expiry: 13.3 years

• Weighted average lease break: 11.6 years

• Charlemont House break option in 2010 ‐ extended by agreement with tenant to 2015

• Stillorgan Shopping Centre: short term extensions

• Baggot Buildings: let to FAS expiring in 2013

Portfolio Overview

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PORTFOLIO ANALYSIS

Portfolio rent by sectorPortfolio valuation by sector

Retail Office

62%38%

Retail Office

68%32%

Portfolio Overview

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TREASURY / NAMA

• Memorandum of Understanding (“MOU”) ‐ December 2010

• Term Sheets October 2011

• Flexibility within Approved Budget

• Progressing with Business Plan

• Good day to day working relationship

Portfolio Overview

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• Business Plan approved, MOU executed• Prime locations & quality assets

– Strong tenant list– High occupancy– Rent weighted average lease length: 13.3 years

• Asset management expertise and track record• Development management expertise and track record• Management platform – professional team• Geographic diversification

NAMA ‐WHY TREASURY IS WELL POSITIONED

Portfolio Overview

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IRELAND INC.

• 10 Year Irish government bonds yield below 8%

• IMF/EU targets being met

• Competitiveness improvements driving:‐‐ Exports‐ FDI

• GDP growth

• Domestic economy weak

• 14.5% Unemployment

• 2/3 More years of austerity before target budget deficit (3% of GNP)

• Banking system deleveragingongoing.

• UORR Legislation• Eurozone issues

Worst may be over However

Portfolio Overview

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Stillorgan Shopping CentreCo. Dublin

•60+ retail units in two pedestrian malls

•145,000 sqft (13,500 sqm) retail accommodation

•700 car parking spaces

•Tenants include: Tesco, DunnesStores, McDonalds, Vodafone, Donnybrook Fair, Bank of Ireland

PROPERTIES IN FOCUSPortfolio Overview

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PROPERTIES IN FOCUS

Baggot BuildingsUpper Baggot Street, Dublin 4

•92,000 sq.ft (8,500 sq.m) of office space

•close to Dublin city centre

•let to FAS (Irish government agency)

•Lease expires in 2013

Portfolio Overview

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Russell CourtSt Stephens Green, Dublin

•4 office buildings totaling 138,000 sqft (12,800 sqm)

•In the very centre of Dublin

•Tenants include: KPMGGovernment of Finland Hapag Lloyd

•Main KPMG lease expired in 2007


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40‐42 Mespil RoadDublin 4

•Impressive 5 storey modern office building facing the Grand Canal.

•101,000 sqft (9,400 sqm) of office accommodation

•The Governor & Company of Bank of Ireland Asset Management Headquarters


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South Bank HouseDublin 4

•Mason Hayes + Curran Headquarters (mid size Irish law firm)

•Beside Google Headquarters in Grand Canal Docks

•Comprising of 59,950 sqft(5,672 sq m) office accommodation


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Merchant's Quay Shopping CentreCork City Centre

•74,000 sq.ft (7,000 sq.m) of prime retail space

•Let to Marks & Spencer


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SUMMARY & CONCLUSIONS

• Worst downturn since 1920’s

• Income flow held firm

• Quality of portfolio and asset management

• Capital values under water

• Ireland Inc. turned corner

• Property market will respond

• Value can be recovered via asset management

• Support required

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Questions & Answers

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MANAGEMENT: TREASURY HOLDINGS IRELAND

John BruderManaging Director, Treasury Holdings IrelandJohn is Managing Director of Treasury Holdings Ireland. He has over 30 years experience in property and investment management and was previously Head of Property with AIB Investment Managers Ltd. In 2001 he served as President of the Society of Chartered Surveyors in Ireland. He has an MBA from University College Dublin.

Niall O’BuachallaGroup Finance Director Niall joined Treasury in 2003 and became Group Finance Director in early 2011, having previously worked primarily on raising finance for the acquisition and development of the Group’s properties. He has worked on Treasury Holdings projects in Ireland, Spain and China, across a range of asset types including offices, industrial, shopping centres, hotels and residential. Niall is a fellow of the Institute of Chartered Accountants in Ireland, having qualified with Arthur Andersen in Dublin.

Niall KavanaghProperty Director Niall joined Treasury Holdings in 2005 and is responsible for both the Investment and Development property functions. Niall previously worked for Scott Wilson in Ireland. Niall is a chartered member of the Institution of Engineers of Ireland and has a degree in Engineering from Trinity College, Dublin.

Richard BarrettFounding ShareholderOn qualifying as a barrister and economist, Richard Barrett developed his interest in property law, finance and taxation and was involved in property development before setting up Treasury Holdings with John Ronan in 1989. He is a member of the Advisory Board of Harvard University Graduate School of Design for Urban Development and the Advisory Committee for the Regeneration of the city of Nanjing, China.

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John RonanFounding ShareholderJohn Ronan has been involved in the Irish property market for over 30 years. He trained as a Chartered Accountant with PricewaterhouseCoopers before he founded Treasury Holdings together with Richard Barrett in 1989. He is a Fellow of the Institute of Chartered Accountants in Ireland and a member of the Marketing Institute of Ireland.

Kevin KellyChairman / Non‐Executive DirectorKevin Kelly joined Treasury Holdings in 2000. Kevin was previously Managing Director of John Sisk & Son Ltd, Ireland’s leading building contractors, where he worked on a number of substantial construction projects both in the UK and Africa.

Paddy TeahonNon‐Executive DirectorPaddy Teahon is a Non‐Executive Director of Treasury Holdings. He has almost four decades of experience in the Irish Civil Service, having worked for seven years as Head of the Department of the Taoiseach (Prime Minister) from 1993‐2000. He is currently a Director of Teahon Consulting Ltd, which advises a number of Irish and multinational companies.

Rory WilliamsGeneral CounselRory joined Treasury Holdings in 2001 as Head of Legal and was appointed a director in 2002. He has overall responsibility for all legal aspects of the business and operational activities of the Treasury Holdings group. He was previously a partner at Arthur Cox, a leading Irish law firm. Rory has been very active in the Company's China expansion since 2003 and oversees all legal matters relating to the acquisition and management of properties in China together with corporate governance for CREO.

MANAGEMENT: TREASURY HOLDINGS IRELAND

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Thank You

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Noteholder Presentation TREASURY HOLDINGS · 10/20/2011 · Battersea Power Station Kirtling...

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