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2018REIT INVESTOR PRESENTATION
Fall 2018
| 1 |
Melcor REIT | TSX: MR.UNMelcor Developments | TSX: MRD
AGENDA Who We Are What We Do The Melcor REIT Advantage Q&A
| 2 |MR.UN
FORWARD-LOOKING STATEMENTSThis presentation may contain forward-looking statements. Forward-looking statements are disclosures regarding possible events, conditions, or results of operations that are based on assumptions about future economic conditions, courses of action and include future-oriented financial information. These statements represent Melcor REIT’s intentions, plans, expectations, and beliefs and are based on our experience and our assessment of historical and future trends, and the application of key assumptions relating to future events and circumstances. Forward-looking statements may involve, but are not limited to, comments with respect to our strategic initiatives for 2018 and beyond, future development plans and objectives, targets, expectations of the real estate, financing and economic environments, our financial condition or the results of or outlook of our operations.
By their nature, forward-looking statements require assumptions and involve risks and uncertainties related to the business and general economic environment, many beyond our control. There is significant risk that the predictions, forecasts, valuations, conclusions or projections we make will not prove to be accurate and that our actual results will be materially different from targets, expectations, estimates or intentions expressed in forward-looking statements. We caution readers of this document not to place undue reliance on forward-looking statements. Assumptions about the performance of the Canadian and US economies and how this performance will affect Melcor REIT’s business are material factors we consider in determining our forward-looking statements. For additional information regarding material risks and assumptions, please see the discussion under Risk Factors throughout our annual MD&A.
Readers should carefully consider these factors, as well as other uncertainties and potential events, and the inherent uncertainty of forward-looking statements. Except as may be required by law, we do not undertake to update any forward-looking statement, whether written or oral, made by the company or on its behalf.
| 3 |MR.UN
WHO WE ARE
| 4 |MR.UN
EXPERIENCED MANAGEMENT
YEARS AVERAGE PORTFOLIO OWNERSHIP
13.3
YEARS PROPERTY & ASSET
MANAGEMENT EXPERIENCE
500+
GLA BUILT OR REDEVELOPED
65%
Andy MeltonPresident & CEO39 years
Naomi StefuraCFO11 years
Darin RayburnMRD President & CEO 25 years
Bob BrownVP - Property Management24 years
Brandon ParkDirector – Asset Management11 years
Greg StevensonGM – Acquisitions & Asset Management 13 years
| 5 |MR.UN
Kelsey KelemenDirector – Financial Planning & Analysis6 years
Brian HuntCalgary, ABAudit Chair
Patrick KirbyEdmonton, AB
Don LowryEdmonton, AB
Governance Chair Lead Director
Larry PollockEdmonton, AB
Investment Chair
TRUSTEES
Andy MeltonCalgary, AB
Ralph YoungEdmonton, AB
Board Chair
Darin RayburnEdmonton, AB
| 6 |MR.UN
MELCOR DEVELOPMENTSTSX: MRD
0
200,000
400,000
600,000
800,000
1,000,000
1,200,000
1,400,000
1,600,000
1,800,000
2,000,000
1968
1970
1972
1974
1976
1978
1980
1982
1984
1986
1988
1990
1992
1994
1996
1998
2000
2002
2004
2006
2008
2010
2012
2014
2016
Assets ($000s)
History of creating value in real estate for shareholders
Melton Building – 1960s Melton Building today
$1.99B
1968PUBLICSINCE
53+%
FAMILY OWNED
53.0%
REITINTEREST
30 YRS
PAID DIVIDENDS
1923FOUNDED
| 7 |
37
92%
$676m
WHO WE ARE
LEASE
ACQUIRE
MANAGE $67m
| 8 |
OWN
MR.UN
Fiscal Year 2017 First Half 2018
36$36m
ASSETS
REVENUE
OCCUPANCY
TOTAL ASSETS
90%
$711m
4VEND-INS
$3.66TOTAL
DISTRIBUTIONS
1.38mSF ACQUIRED
5 YEARS OF MELCOR REIT
80% GLA GROWTH
| 9 |MR.UN
3rd Party Acq.$12.3M
3rd Party Acq.$13.2M
3rd Party Acq.$5.9M
VEND-IN 1$13.5M
3rd Party Acq.$5.5M
VEND-IN 2$138.3M
VEND-IN 3$15.25M DISPOSITION
$8.0M
VEND-IN 4$80.9M
DISPOSITION$6.9M
DISPOSITION $13.8M
$35
$40
$45
$50
$55
$60
$65
$70
1.50
1.70
1.90
2.10
2.30
2.50
2.70
2.90
3.10
Reve
nue
at D
ecem
ber 3
1 (M
illio
ns)
GLA
(Mill
ions
of S
quar
e Fe
et)
GLA REVENUE
VEND-IN 4 METRICS
LEASED100%
SQUARE FEET+172,629
PURCHASE PRICE
PUBLIC FLOAT18.3%
$80.88M 2.035M@ $8.50 PER
UNIT
| 10 |MR.UN
PUBLICOFFERING
$23M@ 5.25%
CONVERTIBLEDEBENTURE
Closed: January 12, 2018
600a
616a473a2,317a
1,657a
719a
1,684a
EdmontonSpruce Grove
Leduc
ReginaKelowna CalgaryAirdrie
Chestermere
1
1
1
2 2
1
1
2 3
13 4
1
1Red Deer
Lethbridge
1
1
2.86M owned square feet
REIT PROPERTY PORTFOLIO
OFFICERETAILINDUSTRIALLAND LEASE
1
MR.UN
1
537a
8,697aCANADIAN LAND BANK
MRD
MR.UN
| 11 |
PORTFOLIO
39%
20%
41%
GLA by TENANT PROFILE
Local Regional National
9%
8%
7%
5%
7%
4%
8%20%
32%
GLA by TENANT INDUSTRY
Finance Government HospitalityIndustrial Medical Oil & GasOther Professional Retail
| 12 |MR.UN
As of May 1, 2018
25,2
95
28,5
81
41,3
13
42,3
29
42,1
01
42,9
26
93%
89%
80%
87%86%
95%
-
5,000
10,000
15,000
20,000
25,000
30,000
35,000
40,000
45,000
50,000
2013 2014 2015 2016 2017 2017 Q3 - 2018 Q2
NOI ($000s) & Payout Ratio
**
STABLE BUSINESS
| 13 |MR.UN* Implemented RealPac White Paper on FFO & AFFO – restated for 2016 and 2017
STABLE BUSINESS43
7
250
246
216
255
1,08
3
285
-
200
400
600
800
1,000
1,200
2018 2019 2020 2021 2022 Thereafter
GLA Expiring (000s)
GLA Expiring
Renewals YTD
16.1%
9.2% 9.1%8.0%
9.4%
40.0%
| 14 |MR.UN
As of September 30, 2018
0
20000
40000
60000
80000
100000
120000
2018 2019 2020 2021 2022 Thereafter
Debt Repayment Schedule ($000's)
STABLE FINANCING
13.0%
27.5%
4.7%
12.2%
14.0%
28.4%
| 15 |MR.UN
As of June 30, 2018
THE ALBERTA IMPACT
SOLID CONSISTENT
RESULTS
GLA0%
DT CALGARY
GLA16%
DT EDMONTON
OCCUPANCY*76%
DT EDMONTON
RENEWALS*95%
DT EDMONTON
| 16 |MR.UN
MR.UN
WTI
* As at June 30, 2018
WHAT WE DO
| 17 |MR.UN
GROWTH SINCE IPO
SF ACQUIRED1.38m
GROSS LEASABLE AREA
80%
REVENUE
69%
| 18 |MR.UN
ANNUAL RESULTS ($000S)
0
10,000
20,000
30,000
40,000
50,000
60,000
70,000
80,000
2013 2014 2015 2016 2017 2017 Q3 - 2018 Q2
Revenue NOI FFO AFFO
| 19 |MR.UN
2017 KEY PERFORMANCE INDICATORS
DISTRIBUTIONS
PAYOUT RATIO86%
NOI$42.1M
AFFO
FFO$26.7M
$20.2M $0.68
| 20 |MR.UN
CUMULATIVE RETURN
$0
$2
$4
$6
$8
$10
$12
$14
Apr-
13
Jun-
13
Aug-
13
Oct
-13
Dec-
13
Feb-
14
Apr-
14
Jun-
14
Aug-
14
Oct
-14
Dec-
14
Feb-
15
Apr-
15
Jun-
15
Aug-
15
Oct
-15
Dec-
15
Feb-
16
Apr-
16
Jun-
16
Aug-
16
Oct
-16
Dec-
16
Feb-
17
Apr-
17
Jun-
17
Aug-
17
Oct
-17
Dec-
17
Feb-
18
Apr-
18
Jun-
18
Aug-
18
Closing Unit Price Cumulative Return
| 21 |MR.UN
As of September 28, 2018
THE REIT ADVANTAGE
| 22 |MR.UN
38%
62%
40%
44%
8%
8%
GLA for Future Development
OFFICE
NORTHERN AB
FUTURE GROWTH VIA MELCOR’SDEVELOPMENT PIPELINE
100%
43%
57%
GLA Under Development
125,300 sf 6,700,000 sf
| 23 |MR.UN
RETAILOUTER - ASSET CLASS:
INNER - REGION:
OFFICE
NORTHERN AB
RETAILOUTER - ASSET CLASS:
INNER - REGION:
INDUSTRIAL RESIDENTIAL
SOUTHERN AB
FUTURE GROWTH VIA MELCOR’SDEVELOPMENT PIPELINE
| 24 |MR.UN
Village at Blackmud Creek (office - above)
Jensen Lakes Crossing (retail – left)
THE REIT ADVANTAGE
DIVERSIFIED PORTFOLIO
GROWTH PIPELINE
STABLE BUSINESS
ALIGNMENT OF INTERESTS
EXPERIENCED MANAGEMENT
SIGNATURE CUSTOMER
CARE
| 25 |MR.UN
QUESTIONS& ANSWERS
| 26 |MR.UN
LANDLORD OF CHOICE
ON TIME RESPONSE
99%
PM TEAM APPROVAL
94%
94%
OPERATOR TEAM APPROVAL
95%
OVERALL SATISFACTION
| 27 |MR.UN
TOP TENANTS (DECEMBER 31, 2017)
Tenant % of Total Rent
% of Owned GLA
Remaining Term (yrs)
Locations Credit RatingS&P/Moody/DBRS
Government of Alberta 4.4% 4.0% 4 5 A+/Aa1/AA
Royal Bank of Canada 3.7% 2.2% 3 5 AA-/A1/AA
Shoppers Drug Mart 2.9% 1.6% 9 3 BBB/-/BBB
Alberta Health Services 3.5% 3.3% 8 2 ---
BasinTek LLC 2.5% 3.3% 6 1 ---
Fountain Tire 2.1% 1.1% 11 1 ---
TD Bank 1.6% 0.9% 4 4 AA-/Aa1/AA
The Brick Warehouse 1.5% 1.5% 5 3 ---
Melcor Developments 1.3% 1.3% 4 3 ---
Select Engineering 1.1% 0.9% 9 1 ---
TOTAL 24.6% 20.1%
| 28 |MR.UN
AGREEMENTS WITH MELCOR
ASSET MANAGEMENT
Asset Management Fee 0.25% of Gross Book Value
Capital Expenditures Fee 5% of hard construction costs, per project, on projects over $0.1 million
Acquisition Fee 1.0% of property purchase price on first $100 million per fiscal year; 0.75% on next $100 million; 0.50% thereafter
Financing Fee 0.25% of debt and equity; cost reimbursement
Term Five years, five-year renewal
Internalization Once assets reach $1.15 billion, with 12 months notice (or payment in lieu)
PROPERTY MANAGEMENT
Property Management Fee 3.0% of gross property revenue
Leasing Fees 5.0% of aggregate base rent for new leases over first 5 years, 2.5% over next 5 years2.5% of aggregate base rent for lease renewals & expansions
Term Five years, automatic renewal unless terminated
Internalization Once assets reach $1.15 billion, on 90 days notice (or payment in lieu)
DEVELOPMENT & OPPORTUNITIES AGREEMENT
ROFO Right of first opportunity to acquire properties from Melcor
Other Opportunity to participate in future investments, joint ventures, development properties and mezzanine financing
| 29 |MR.UN
STRONG GOVERNANCE
Trustee Position Committees Principal Occupation
Ralph Young Chair of the Board Governance Corporate Director, former President & CEO of Melcor Developments
Directorships: Melcor Developments, ZCL Composites
Andrew Melton Trustee Investment President & CEO, Melcor REIT
Directorships: Melcor Developments
Darin Rayburn Trustee Investment President & CEO, Melcor Developments
Patrick Kirby Independent Trustee Governance Corporate Director, former Counsel, Felesky Flynn LLP
Donald Lowry Independent TrusteeLEAD TRUSTEE
AuditGovernance (Chair)
Corporate Director, former President & CEO of EPCOR
Directorships: Capital Power, Hydrogenics Corporation, Stantec
Larry Pollock Independent Trustee AuditInvestment (Chair)
Corporate Director, former President, CEO and Director of Canadian Western Bank
Brian Hunt Independent Trustee Audit (Chair)Investment
President & Director of Taviston Inc.
| 30 |MR.UN
REIT PROPERTIES - RETAIL
| 31 |
Chestermere Station – 84,500 sf |CHESTERMERE, AB
Coast Centre – 59,700 sf | EDMONTON, AB
Kingsview Market – 100,000 sf | AIRDRIE, AB
Leduc Common – 283,300 sf | LEDUC, AB
REIT PROPERTIES - RETAIL
| 32 |
Liberty Crossing – 63,300 sf | RED DEER, AB
Market Mall – 42,900 sf | REGINA, SK
Miller Crossing – 27,300 sf | EDMONTON, AB
Towers Mall – 114,300 sf | REGINA, SK
University Park Mall – 41,200 sf | REGINA, SK
REIT PROPERTIES - RETAIL
| 33 |
West Henday Promenade – 77,100 sf | EDMONTON, AB
The Village at Blackmud Creek – 9,000 sf | EDMONTON, AB
Westgrove Common – 29,200 sf | SPRUCE GROVE, AB
White Oaks – 158,300 sf | EDMONTON, AB
The District – 23,200 sf | CALGARY, AB
REIT PROPERTIES - OFFICE
| 34 |
100 Street Place – 44,300 sfEDMONTON, AB
Royal Bank Building – 132,400 sfEDMONTON, AB
Melton Building – 114,600 sfEDMONTON, AB
MR.UN
REIT PROPERTIES - OFFICE
| 35 |
Birks Building – 34,000 sf | EDMONTON, AB Capilano Building – 45,500 sf | EDMONTON, AB
Crowfoot – 67,300 sf | CALGARY, AB Executive Terrace – 42,800 sf | REGINA, SK
MR.UN
REIT PROPERTIES - OFFICE
| 36 |
Richter Street Building – 29,000 sf | KELOWNA, BC Kensington Road Building – 24,000 sf | CALGARY, AB
Kelowna Business Centre – 72,100 sf | KELOWNA, BC Parliament Place – 24,400 sf | REGINA, SK
MR.UN
REIT PROPERTIES - OFFICE
| 37 |
Westcor Building – 72,800 sf | EDMONTON, AB The Stanley Buildings – 35,000 sf | EDMONTON, AB
Select Building – 23,400 sf | EDMONTON, AB
MR.UN
REIT PROPERTIES - OFFICE
| 38 |
The Village at Blackmud Creek – 47,800 sf | EDMONTON, AB
Westgate Business Centre – 75,100 sf | EDMONTON, AB Princeton Place – 59,100 sf | EDMONTON, AB
MR.UN
REIT PROPERTIES - OFFICE
| 39 |
Trail Building – 77,300 sf | EDMONTON, AB
Sterling Business Centre – 67,900 sf | EDMONTON, ABLethbridge Centre – 449,900 sfLETHBRIDGE, AB
MR.UN
REIT PROPERTIES - INDUSTRIAL
| 40 |
Lethbridge Industrial – 49,000 sf | LETHBRIDGE, AB
Telford Industrial – 143,000 sf | LEDUC, ABTKE Building – 16,000 sf | EDMONTON, AB
MR.UN
MELCOR REIT VEND-IN #4
| 41 |MR.UN
Telford Industrial – 44,328 sf | LEDUC, AB
Kingsview Market II & IV– 52,469 sf | AIRDRIE, AB
The District Phase I – 23,159 sf | CALGARY, AB
West Henday II– 42,142 sf | AIRDRIE, AB
Chestermere VII– 21,062 sf | CHESTERMERE, AB