Portfolio Acquisition – Webcast Presentation January 18, 2017
Disclaimer Terrafina (BMV:TERRA13) is a Mexican real estate investment trust formed primarily to acquire, develop, lease and manage industrial real estate properties in Mexico. Terrafina’s portfolio consists of attractive, strategically located warehouses and other light manufacturing properties throughout the Central, Bajio and Northern regions of Mexico. It is internally managed by highly qualified industry specialists, and externally advised by PGIM Real Estate. The information contained herein is provided by Terrafina and consists of publicly available information concerning the Company and the industries in which it participates. It is information in summary form and does not purport to be complete. Certain information in this document has been obtained from sources that Terrafina believes to be reliable as of the date presented; however, Terrafina cannot guarantee the accuracy of such information, assure its completeness, or warrant such information will not be changed. The information contained herein is current as of the date of issuance (or such earlier date as referenced herein) and is subject to change without notice. Terrafina has no obligation to update any or all of such information; nor do we make any express or implied warranties or representations as to its completeness or accuracy. These materials are not intended as an offer or solicitation with respect to the purchase or sale of any security or other financial instrument or any investment management services. These materials do not take into account individual client circumstances, objectives, or needs. No determination has been made regarding the suitability of any securities, financial instruments or strategies for particular clients or prospects. These materials do not constitute investment advice and should not be used as the basis for any investment decision. The information contained herein is provided on the basis and subject to the explanations, caveats and warnings set out in this notice and elsewhere herein. Any discussion of risk management is intended to describe Terrafina’s efforts to monitor and manage risk but does not imply low risk. This presentation includes forward-looking statements. All statements other than statements of historical fact included in this presentation, including, without limitation, those regarding our prospective resources, contingent resources, financial position, business strategy, management plans and objectives, future operations and synergies are forward-looking statements. These forward-looking statements involve known and unknown risks, uncertainties and other factors, which may cause our actual resources, reserves, results, performance or achievements to be materially different from those expressed or implied by these forward-looking statements. These forward-looking statements are based on numerous assumptions regarding our present and future business operations and strategies and the environment in which we expect to operate in the future. Forward-looking statements speak only as of the date of this presentation and we expressly disclaim any obligation or undertaking to release any update of or revisions to any forward-looking statements in this presentation, any change in our expectations or any change in events, conditions or circumstances on which these forward-looking statements are based. All performance and/or targets contained herein are subject to revision by Terrafina and are provided solely as a guide to current expectations. There can be no assurance that any product or strategy described herein will achieve any targets or that there will be any return of capital. Past performance is no guarantee or reliable indicator of future results. No representations are made by Terrafina as to the actual composition or performance of any account. These materials do not purport to provide any legal, tax or accounting advice. These materials are not intended for distribution to or use by any person in any jurisdiction where such distribution would be contrary to local law or regulation. Risk Factors: Investments in commercial real estate and real estate-related entities are subject to various risks, including adverse changes in domestic or international economic conditions, local market conditions and the financial conditions of tenants; changes in the number of buyers and sellers of properties; increases in the availability of supply of property relative to demand; changes in availability of debt financing; increases in interest rates, exchange rate fluctuations, the incidence of taxation on real estate, energy prices and other operating expenses; changes in environmental laws and regulations, planning laws and other governmental rules and fiscal policies; changes in the relative popularity of properties risks due to the dependence on cash flow; risks and operating problems arising out of the presence of certain construction materials, uninsurable losses and other factors which are beyond the control of Terrafina. In addition, as recent experience has demonstrated, real estate is subject to long-term cyclical trends that give rise to significant volatility in real estate values. There can be no assurance that Terrafina will meet any performance targets referenced herein. An investor could lose some or all of its investment in Terrafina. Investments are not guaranteed by Terrafina, the Advisor (PGIM Real Estate), their respective affiliates, or any governmental agency. This presentation does not constitute or form part of any offer for sale or solicitation of any offer to buy any securities in the United States or elsewhere nor shall it or any part of it form the basis of or be relied on in connection with any contract or commitment to purchase shares. Securities may not be offered or sold in the United States absent registration or an exemption from registration under the US Securities Act of 1933, as amended (the “Act”). This presentation is being made only to investors that, by means of their attendance at this presentation, represent that they are “Qualified Institutional Buyers” as that term is defined in the Act. Terrafina has not and does not intend to register any securities under the Act or offer any securities to the public in the United States. Any decision to purchase shares in any offering should be made solely on the basis of the information to be contained in the Mexican prospectus to be registered with the Comisión Nacional Bancaria y de Valores (“CNBV”) or any offering circular to be published in due course in relation to any such offering. No reliance may be placed for any purposes whatsoever on the information contained in this document or on its completeness. Neither the CNBV nor any other authority have approved or disapproved the information contained in this presentation, or the accuracy or the veracity of the information contained herein.
Transaction Rationale Portfolio A Size Financial Improvements • Portfolio comprised of 45 industrial • Next 12 months cap rate of 7.6% properties • Annual NOI to increase in an estimated • 5.6 million square feet of Gross Leasable range of 20% to 22% Area (“GLA”) • AFFO will increase by approximately 23% to • Transaction price US$381mm excluding 25% in 2017 transaction and tax costs 1 Attractive Markets Properties • Main presence in the Ciudad Juarez and • Young Class A Industrial Portfolio with a 8.5 Chihuahua markets year average age • Occupancy rate of 99.9% • 100% USD-denominated lease contracts • 83% of the portfolio located in the North and • US$5.11 per square foot average rental rate 17% in the Bajio region Past performance is not a guarantee or a reliable indicator of future results. (1) Acquisition has been funded with a combination of cash and debt. 3
Portfolio Characteristics Main Portfolio Features Portfolio Diversification by Market North 83% o 45 properties adding 5.6 million square feet of GLA located in Ciudad Juarez Bajio 17% Mexico’s most important industrial markets Hermosillo o Occupancy rate of 99.9% 1 o US$5.11 2 per square foot average rental rate Chihuahua o Portfolio diversification in line with Terrafina’s current portfolio o 100% USD-denominated lease contracts and triple net leases o 8.5 year 3 average portfolio age Monterrey Mexico Main Industrial Portfolios 4 Reynosa Durango Guadalajara PF Silao Past performance is not a guarantee or a reliable indicator of future results. (4) Million square feet; Company data as of September 30, 2016, Terrafina proforma after portfolio acquisition. (1) 92.8% occupancy as of September 30, 2016. 4 (2) US$4.89 Average Rental Rate as of September 30, 2016. (3) 13.4 years for Terrafina’s portfolio average age as of September 30, 2016.
Geographic Diversification by State Geographic diversification as a percentage of GLA State Terrafina 3Q16 Portfolio Acquired Terrafina Proforma Aguascalientes 2.5% 0.0% 2.1% Baja California 3.7% 0.0% 3.2% Chihuahua 31.9% 70.8% 37.9% Coahuila 11.6% 0.0% 9.8% Mexico City 0.1% 0.0% 0.1% Durango 1.5% 5.6% 2.2% State of Mexico 17.5% 0.0% 14.7% Guanajuato 2.6% 7.9% 3.4% Jalisco 4.3% 9.4% 5.1% Nuevo Leon 3.9% 3.2% 3.7% Puebla 0.6% 0.0% 0.5% Queretaro 6.6% 0.0% 5.5% San Luis Potosi 9.1% 0.0% 7.7% Sonora 0.9% 0.9% 0.9% Tabasco 2.2% 0.0% 1.8% Tamaulipas 1.1% 2.2% 1.3% North Bajio Central As of September 30, 2016. 5
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