INVESTOR PRESENTATION – Q4 2019 Investing in Europe’s Deepest and Strongest Markets
2 Why Invest in Inovalis REIT ? 1 2 3 4 5 Strong Market High Occupancy Rate Potential to Accretively Inovalis’ High Quality Attractive Distribution Fundamentals in REIT’s on the portfolio with Grow NAV through Portfolio Trading at Yield Secured by Low Key Markets, France tenant risk Joint Ventures and Attractive Valuation AFFO Payout Ratio and Germany diversification Asset Repositioning Level Office 92.1 % 7.58 % $ 317.8 M $ 652 M Asset Class Occupancy Rate Distribution Yield (2) Valuation (2) Market Cap (2) (3) $ 34.8 M 1,409,103 4.4 years 42.4 % $ 10.89 Unit Price (2) NOI 2019 Gross Leasable Area Weighted Average Debt-to-book value (Sq. Ft.) Lease Term (1) Note : Key figures as at Dec 31, 2019. The closing EUR/CAD exchange rate as at this date was 1.4565 (1) Represents weighted average lease term for end of lease period. Weighted average lease term including early termination rights equal to 3.9 years. (2) Unit price, distribution yield and market cap have been calculated based on the unit price as at January 24, 2020 (3) Includes units related to the promissory notes Investor Presentation: Q4 2019
3 1. Investing in the Greater Paris Region and Germany Greater Paris Region Germany 18 17 19 Dusseldorf Hamburg 9 10 8 2 3 20 1 11 16 7 4 6 Cologne Berlin 5 12 15 14 13 Frankurt Munich €680 billion 52.2 million m² €3,846 billion 3.1% The GDP of the Paris region - 31% Of leasable office space German GDP. Share of EU’s GDP Unemployment rate. Fewer than of the GDP of France around 30% 2.4 million unemployed 87% 1,010 82.8 million 45.3 million The share of employment Population density per km² Population People in employment. Highest concentrated in the service sector figures since reunification 1,300 0.6% 1,093,800 €61.5 billion The number of identified areas of GDP growth. EU average 0.3% Companies Investment turnover. over 2018; + economic activity 12.1 million 1.5% The number of inhabitants, 18% of Harmonized consumer price index. the French population Eurozone average 1.2% Sources: BNPParibas Real Estate Research & French customs, Insee (National Investor Presentation: Q4 2019 Institute of Statistics and Economic Studies)
4 2. Investing in the Largest Global Office Markets Office Real Estate Inventory (M sq.ft) GLA (M sq.ft) 4149 572 3444 451 358 2120 177 459 greater paris new york greater london toronto united states germany france canada region metropolitan area France Germany 2 nd largest economy in the Eurozone • • Largest economy in the Eurozone 5 th largest economy and 6th largest exporter in the world 4 th largest economy and 3 rd largest exporter in the world • • • HQ for 31 Fortune 500 companies • HQ for 32 Fortune 500 companies • Historically low interest rates • Historically low interest rates • A diverse tenant base and a healthy level of occupier demand • Product diversity matching a broad range of investment criteria • A strong investment market • Low rental price level leaves room for future upside • Limited office supply with potential rental growth • Asset liquidity facilitates smooth entry and exit • A world leading high-end retail market • Strong investor appetite proves attractiveness of German property • Logistics hotspot, the place to be for hotels • Structural stability minimizes external risks Sources: Cushman & Wakefield LLP, C&W for USA GLA, CBRE for Canada GLA, JLL for New York GLA, Organisation Régionale de Investor Presentation: Q4 2019 l’immobilier d’entreprise for France GLA, BulwienGesa AG Statistic for German GLA, and JLL for Greater London GLA.
5 3. Real Estate Office Market Q1 2020 - France France CRE investment in France • Central Banks have reaffirmed their commitment to maintain financial liquidity in the midst of a global health crisis and emerging global recession. The ECB announced a new massive QE package of 750 billion euros to buy back private and public debt. • If the various transactions initiated in H2 2019 are completed, Q1 will record an excellent investment volume of nearly €7 billion. • Although the number of transactions has declined y-o-y), the market performed well thanks to an overall increase in average transaction volume, and particularly major transactions. These consist primarily of transactions > €100 million • Investors remain interested in high quality or wel- located assets, and those in areas where demand is clearly high or rising. Investors consider portfolios with a high asset value, but also the security of the tenant in terms of type of business and resilience in periods of upheaval Sources: Cushman & Wakefield LLP, C&W for USA GLA, CBRE for Canada GLA, JLL for New York GLA, Organisation Régionale de Investor Presentation: Q4 2019 l’immobilier d’entreprise for France GLA, BulwienGesa AG Statistic for German GLA, and JLL for Greater London GLA.
6 3. Real Estate Office Market Q1 2020 - Germany Germany Investment by origin of capital Q1 2020 • The first quarter of 2020 saw €8.17bn invested in in % Germany’s office market. Compared with the first 2,3 quarter of 2019, this marks an increase of 44% 1,1 • 80% of the transaction volume in the first quarter of 2020 was attributable to the Top 7 cities. Berlin 7,4 Germany proved to be the strongest office investment market with 31% of the overall volume, followed by 10,2 Middle East Frankfurt (20%), Düsseldorf (10%), Munich (9%) and Hamburg (7%) North America • The prime yields in the Top 7 markets averaged Europe 2.89%, reflecting a decline of 0.3 %-points 57,4 compared with the first quarter of 2019 21,6 Asia • Portfolio transactions were much more prominent in the first quarter and took a share of 35%, which Other was due to a series of large-scale portfolio deals • Investment momentum could lose some of its momentum. Nevertheless, negotiations are continuing as planned without delay and transactions including large-volume transactions are taking place in all asset classes. Sources: Cushman & Wakefield LLP, C&W for USA GLA, CBRE for Canada GLA, JLL for New York GLA, Organisation Régionale de Investor Presentation: Q4 2019 l’immobilier d’entreprise for France GLA, BulwienGesa AG Statistic for German GLA, and JLL for Greater London GLA.
7 3. Inflation Rates vs Rents in Europe Europe – Inflation Rates 2016 2017 2018 2,5% Rising inflation rates in 2,0% the top European 1,5% economies provide 1,0% tailwinds for future office 0,5% rent growth. 0,0% France Germany Spain Portugal Belgium Netherlands Luxembourg -0,5% European – Prime Rent €/sq.m/year Paris Frankfurt Madrid Lisbon Brussels Amsterdam Luxembourg The European Office €900 €880 Market has thrived in €800 2019. Lack of supply has €700 pushed rental values €600 €600 €540 €500 even higher with €460 €400 increases registered €315 €300 among all among €200 Europe’s liveliest office 2014 2015 2016 2017 2018 2019 markets. Investor Presentation: Q4 2019 Source: BNP real estate research Global Outlook / Eurostat
8 4. Property Lending Rates vs Prime Cap Rates 4,5% 4,2% 4,0% 4,0% 3,8% 3,6% Comparing the cost of lending to 3,5% 3,5% 3,4% prime Cap Rates in Europe, there is still a noticeable gap especially in established markets such as 3,0% Berlin, Madrid, Paris, Amsterdam 2,6% 2,6% 2,5% 2,5% 2,3% 2,3% 2,0% 2,0% 1,8% 1,5% Prime office yields are decreasing 1,2% throughout Europe. Among the 1,0% largest office markets, Berlin and Munich, Paris remained the most expensive in Europe, with the 0,5% prime office yield at 2.60% 0,0% Paris Berlin Madrid Lisbon Brussels Amsterdam Luxembourg Prime Cap Rates Lending Rates Source: Source: Knight Frank, Newmark Knight Frank, Macrobond. Note: The cost of finance equates to the relevant Investor Presentation: Q4 2019 10 year swap rate, plus an estimated lending margin compiled by Inovalis in December 2019.
9 5. Portfolio Overview Existing Properties Hamburg Baldi Courbevoie Diamants Berlin Duisburg Jeûneurs GERMANY Düsseldorf GREATER Metropolitain Cologne PARIS REGION Bad Homburg Rueil Neu-Isenburg Malmaison Frankfurt Sabliere Arcueil Ingolstadt Stuttgart Munich Stable revenue Capital appreciation & Long lease terms Economic trends AFFO growth streams High quality tenants High asset liquidity Security of cash flow Financial flexibility Investor Presentation: Q4 2019
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