360 CAPITAL TOTAL RETURN FUND (ASX: TOT) FY18 Results Presentation - PowerPoint PPT Presentation

360 CAPITAL TOTAL RETURN FUND (ASX: TOT) FY18 Results Presentation 22 August 2018 The stapled fund comprising 360 Capital Total Return Passive Fund (ARSN 602 304 432) and 360 Capital Total Return Active Fund (ARSN 602 303 613) 360 Capital Total Return Fund | FY18 Annual Results August 2018

Table of Contents Section 1 FY18 Results and Investment Strategy 3 2 Distribution History and Trading Performance 6 3 Real Estate Credit and AMF Finance 8 4 Loan Portfolio 14 5 Financial Results 20 6 Capital Management 23 7 Outlook and Guidance 26 360 Capital Total Return Fund 2 | FY18 Annual Results August 2018

1. FY18 Results and Investment Strategy 360 Capital Total Return Fund 3 | FY18 Annual Results August 2018

FY18 Results $5.9m 9.0 cpu 9.0 cpu Operating Profit FY18 Operating EPU FY18 DPU 22.2% $1.19 $111.0m FY18 Loan Book 2,3 Net Tangible Assets Total Unitholder Return 1 per Unit 1. Total Unitholder Return is the movement in unit price and distributions (assumed to be reinvested) over the 12-month period 2. Facility amount including capitalised interest and fees 3. Inclusive of Port Coogee facility (terms agreed) 360 Capital Total Return Fund 4 | FY18 Annual Results August 2018

TOT’s Investment Strategy Why Real Estate Debt? Current Focus Real Estate Debt • Late stages of real estate cycle • Focus on capital preservation, step-out of first loss position • Changes in prudential regulation have further created non-bank lending opportunities • Secured loans with higher risk-adjusted returns than equity Indirect Real Estate - AMF Direct Real Estate • AMF Finance Pty Ltd 50% owned by TOT Real Estate Debt • AMF originates all 360 Capital and TOT’s real estate debt transactions • Provides TOT with growing fee revenue streams and debt investment opportunities • AMF revenue will continue to enhance TOT’s earnings and provide dividends Self liquidating debt investments provide flexibility if market conditions change Capital Risk Protection Capital Growth Non Indirect performing Real Estate Real Estate Debt Debt Investing Equity Investing Capital Returning From Loan Book Capital Available to Redeploy in Debt or Equity 360 Capital Total Return Fund 5 | FY18 Annual Results August 2018

2. Distribution History and Trading Performance 360 Capital Total Return Fund 6 | FY18 Annual Results August 2018

Distribution History and Trading Performance Distributions enhanced by distributable gains Index outperformance TOT FY18 Total Unitholder Return 1 – 12mths: 22.2% vs. ASX 300 A-REIT Index – 12mths: 14.5% 12.0cpu 9.0cpu 2.4cpu 1.2cpu 8.1cpu 7.3cpu Jul-2017 Aug-2017 Sep-2017 Oct-2017 Nov-2017 Dec-2017 Jan-2018 Feb-2018 Mar-2018 Apr-2018 May-2018 Jun-2018 FY16 FY17 FY18 FY19 Ordinary Special TOT Total Return S&P/ASX 300 A-REIT Accumulation Index 1. Total Unitholder Return is the movement in unit price and distributions (assumed to be reinvested) over the 12-month period 7 360 Capital Total Return Fund | FY18 Annual Results August 2018

3. Real Estate Credit and AMF Finance 360 Capital Total Return Fund 8 | FY18 Annual Results August 2018

Why Real Estate Credit - the Capital Stack AMF Finance takes senior and mezzanine positions secured by registered mortgages against the underlying assets Typical A-REIT Investment Equity First loss position, late cycle potential for capital loss Preferred Equity Priority Ahead of Typical Equity Investment Second Loss Position, higher returns not commensurate with late cycle risk Mezzanine Second Ranking Security Subordinated to senior/first ranking position Senior Debt First Ranking Security First ranking position same as a typical bank mortgage 9 360 Capital Total Return Fund | FY18 Annual Results August 2018

Why Real Estate Credit - An Example, Melbourne Hotel Market Correction -31.6% decline in commercial real estate values Current Market Valuation $53.0m@6.5% Cap Rate Equity Equity Market Correction $0.0m $16.7m $36.3m@9.4% Initial Yield Capital buffer if market conditions change Debt Debt $36.3m $36.3m Value per room = $327,160 Value per room = $327,160 Normalised EBITDA = $3.4m Normalised EBITDA = $3.4m EBITDA/Debt = 9.4% Initial yield = 6.5% 10 360 Capital Total Return Fund | FY18 Annual Results August 2018

Australia’s Evolving Real Estate Credit Market Foreign Banks Increasing Exposures, a sign of increased regulatory pressures on local major banks $bn Traditional banks are unable to service the demand for real estate 50 lending, creating a funding gap for non-bank lenders 1 45 40 Non-Banks 35 A $30bn opportunity 20% Non-Banks 30 40% Banks Banks 25 60% The non-bank lending 80% market is set to double 20 15 10 Currently, the market share of commercial real estate debt held by banks is approximately 80%. 5 It is expected that this share will decline to 60% over time, - creating a A$30+ billion opportunity for non-bank lenders 1 Mar '16 Jun '16 Sep '16 Dec '16 Mar '17 Jun '17 Sep '17 Dec '17 Mar '18 Foreign Banks' Exposure Foreign Banks' Limit 1. Source: Goldman Sachs research 2017 Source: APRA ADI Commercial Property Exposures March 2018 11 360 Capital Total Return Fund | FY18 Annual Results August 2018

AMF Finance – Origination is Key to Quality Transactions • Over 7,500 finance brokers get regular updates • Broker accreditation and login • Tracks every DA submitted in Australia updated up to four times per day • Introducer incentivisation program • On-line applications across eight loan products • Over 33,000 developer, advisors, agents, architects etc receiving regular correspondence • Standardised loan documentation; capable of financial close within 24 hours • Digital marketing strategy has generated significant deal flow and market awareness www.amf-finance.com.au 360 Capital Total Return Fund 12 | FY18 Annual Results August 2018

AMF Finance – 8 Months of Operation Snapshot after 8 Months AMF Finance Deal Flow $1,800m $69m Completed Deals 1 $1,600m $1,400m Total Deal Pipeline $1,579m $2.1m $111.0m $1,200m $1,000m Loan Closed 1 Gross Revenue 1 $800m $600m $32m $400m $10m $200m $347m 71 588 $244m $- FY 18 Jul-18 Aug-18 Accredited Brokers Monthly Website Visitors 1. Inclusive of Port Coogee facility (terms agreed) 13 360 Capital Total Return Fund | FY18 Annual Results August 2018

4. Loan Portfolio 360 Capital Total Return Fund 14 | FY18 Annual Results August 2018

Loan Portfolio 7 $111.0m $234.9m Loan Investments 1 Loan Book 1,2 Projected End Value 1,2,3 $77.7m 66.1% 11.6% First loss buffer 1,3,4 Loan to Value Ratio 1,2,3 Average Interest Rate 1,5 1. Inclusive of Port Coogee facility (terms agreed) 2. Facility amount including capitalised interest and fees 3. Based on “As if Complete” valuation (net of GST) 4. Calculated as “As if Complete” valuation (net of GST) less facility amounts (including capitalised interest and fees) and senior facility on 900 Hay Street, Perth WA 5. Weighed average interest rate inclusive of line-fee and interest margin 360 Capital Total Return Fund 15 | FY18 Annual Results August 2018

Loan Portfolio Investment Type 1,2 Geography 1,2 Asset Type 1,2 Accommodation WA Mezzanine 7.2% 16.0% 7.0% NSW Residential 43.0% 44.9% Hotel 39.5% VIC Medical Centre Senior 41.0% 8.3% 93.0% 1. Based on facility amount including capitalised interest and fees 2. Inclusive of Port Coogee facility (terms agreed) 360 Capital Total Return Fund 16 | FY18 Annual Results August 2018

Loan Portfolio Hotel Melbourne Medical Centre Accommodation Mezzanine loan Progressively drawn senior loan Progressively drawn senior loan Loan Type Development of 2,396 sqm (GLA) medical centre in Sunbury, Development of 28 room residential accommodation facility Construction of pre-leased hotel in Perth, WA Project Description VIC in Coogee NSW  Gross Realisation: $76.0m  Gross Realisation: $13.0m  Gross Realisation: $11.4m  Facility Amount: $7.6m  Facility Amount: $9.3m  Facility Amount: $8.0m Size 1 (70% LVR / 78% LTC) (71% LVR / 82% LTC) (70% LVR / 79% LTC)  12.0% p.a. month 0-15; Interest rate / Line fee: 15.0% Interest Rate  15.0% p.a. month 15-18 10.0% / 2.0% Term 24 months 18 months 13 months  Registered 2 nd mortgage  Registered 1 st mortgage  Registered 1 st mortgage  Personal guarantees  Personal Corporate guarantee  Personal guarantees Credit Enhancements  2 nd Ranking Security Deed  1 st -ranking Security Deed  1 st -ranking Security Deed  Inter-creditor deed Repaid via refinance with term debt at practical Repaid via refinance with term debt at practical completion Repaid via refinance with term debt at practical completion Exit / Repayment completion 1. Gross Realisation based on “As If Complete” valuation (net of GST) 360 Capital Total Return Fund 17 | FY18 Annual Results August 2018