ticon freehold and leasehold real estate investment...
TRANSCRIPT
1 August 2018
Proposed Acquisition of TICON Industrial Properties
TICON Freehold and Leasehold Real Estate Investment Trust
Extraordinary General Meeting of Trust Unitholders No.1/2018
Bangkok Marriott Marquis Queen’s Park Hotel
5th Floor, Sala Thai Ballroom
1
Board of directors of TICON Management Co.,Ltd. (REIT Manager)
Chairman of The Meeting
Chairman of The Board
and
Independent Director
Mr.Sun Vithespongse
Mr.Sopon
PunyaratabandhuIndependent Director
Mr.Sopon
RacharaksaDirector
Mr.Uten
LohachitpitaksDirector
Mr.Michio
MaedaDirector
Mr.Peerapat
SrisukontManaging Director
2
Trustee, IFA and Legal Advisor
Mr.Thawatchai
Lueangsurarungse
Trustee
Senior vice President
BBL Asset Management
Co.,Ltd.
Ms.Krongkarn
Noppawarn
IFA
Associate Director
Baker Tilly Corporate
Advisory Services
(Thailand) Ltd.
Mr.Charin
Satchayan
Legal Advisor
Partner
Charin & Associates
Limited
4
To acknowledge the minutes of the 2018 Annual General
Meeting of Trust Unitholders
3
Agenda 1
Voting Require: N/A
Summary Overall Information Before Agenda 2 and 3
4
Right to Invest in Properties of TICON and/or TICON’s Subsidiaries and
Investment plan of TREIT
▪ TICON agrees that TREIT will have the right to invest in the assets used in
the business operation of warehouse and/or factory which TICON and/or its
subsidiaries is entitled to or has the leasehold right after the Conversion
(Right to Invest) by investment in the form of purchase and/or lease and/or
others.
▪ TICON agrees that it shall procure the amount of Assets under Right to
Invest to have the total investment value of not less than Baht 3,500,000,000
(Three Thousand Five Hundred Million Baht)
▪ TREIT shall complete the investment transaction by 31 December 2018
Based on TREIT’s unitholders approved in EGM No.1/2017 Dated 19 October 2017.
TREIT shall invest in asset with value not less than THB 3,500 mm
6
To consider and approve the investment in the Additional
Investment Assets
5
Agenda 2
Range of Property
Appraised Value/(4)
Transaction Summary
6
Acquisition
Structure
Property
Purchase Price/(1)
Range of Fair Value of
the Transaction Assets
by IFA/(3)
Premium from
purchasing
Proposed
Funding
Acquisition of high quality standard of factories and warehouses in 11 prime
industrial/logistic locations in Thailand (“Units”) and purchase assets which convert from
leasehold to freehold (“Conversion assets”)
▪ New Assets 58 Units (17 Factories and 41 Warehouses)
▪ Conversion assets 23 Units (16 Factories and 7 Warehouses)
Not over THB 3,600.13 million (approximately USD 112.50 million)
▪ New Assets THB 3,345.63 million (approximately USD 104.55 million)
▪ Conversion assets THB 254.50 million (approximately USD 7.95 million)
Range of Fair Value of assets: THB 3,279.90 – 4,230.98 million
(approximately USD 102.50 – 132.22 million)
Approximately 9.76%/(2) over appraised valuation which appraised by independent appraisers
▪ Invest and Transfer assets within December 31, 2018Key Date
Proposed funding for the acquisition comprises of
▪ Debentures and/or Bridging loan and/or;
▪ Excess Cash of TREIT
1
2
3
5
6
7
Note: An exchange rate of 1 USD = 32 THB
1.Based on proposal from TICON Industrial connection PCL
2. Calculated based on Purchasing Price over low-end valuation price
3. Fair value of asset by Independent Financial Advisor reference from Enclosure 5
4Range of Appraised Value: THB 3,279.90 – 3,587.70 million
(approximately USD 102.50 – 112.12 million)
4. Appraised value by independent appraisers (Enclosure 3)
Target Portfolio Overview – “New Assets"
7
Operational benefits from greater size and scale of portfolio strategically located in Key Industrial Zones
58 New
Units/(4)
Properties
Ages
5.59 Years/(5)
Pro-Forma
Revenue (Per Year)/(6)
THB 242.7 mm
151,881SQ.M
Net Leasable
Area/(3)
~90%Occupancy
Rate/(1)
1.5 YearsWeighted Average
Lease Expiry
(“WALE”)/(2)
Note: 1.Based on Rent Roll as of 31 May 2018, OCR of Factory = 90.7% and OCR of Warehouse = 89.3% (blend 89.7%)
2. Based on Gross Rental Income (“GRI”) being the contracted rental income and estimated recoverable outgoing for the month of May’18
3. NLA of new assets = 151,881 SQ.M, 4. Factory = 17 units and Warehouse = 41 units 5. As of 31 July 2018 6. Reference from Enclosure 6
FH = 101,889 SQ.M
LH = 49,992 SQ.M
Overview of Proposed Acquisition Assets – Conversion Assets
8
Zone Eastern Economic Corridor
Type of Assets Factory Warehouse
Freehold Value (MB)/2 1,217 493
Leasehold Value (MB)/2 1,038 418
Investment Value
(MB)(FH-LH)179 76
No of Unit 16 7
Type of Right on assets Convert Leasehold to Freehold
Net Leasable Area
(Sq.m)43,700 19,650
No of Tenants 15 2
Zone Occupancy Rate% 85%/(1)
Location AMATA NAKORN CHONBURI
Note: 1.Performance as of 31 May 2018
2:Based on appraisal value (Enclosure 3)
Key Investment Highlight
• Amata Nakorn Industrial Estate is one of the largest area of industrial estate in
Thailand, and important manufacturing cluster, connected manufacturers in various
industries.
• Land price of AMN has dramatically increased and rental rate is very high. Thus,
Invest in freehold right will boost up the property value in long term and reduce
effect from unrealized loss from reduction of remaining lease period.
Key manufacturing hub for Thailand
✓ A key production hub for automobile, foundation for further
development of automobile industry as well as for aviation and
robotics & automation industry development.
✓ Foundation for development of plastics, rubbers& polymers for value-
added industries.
Occupied 83%
3,966,670 SQ.M
Net Asset Yield for Convert Assets
Total Revenue Per Year (MB) 129.0
OPEX (MB) (9.7)
NPI (MB) 119.3
Book Value (MB) 1,360.3
+ FH Investment (MB) 254.5
Total Asset Value (MB) 1,614.8
No Premium for Conversion assets
Kaga Electronics (Thailand)
W3
Plaloc Asia(Thailand)
B3.8
Todenko (Thailand)
M2.7/2
Ohizumi MFG (Thailand)
M2.4
Summary Overall TREIT Post – Proposed Acquisition
9
No of Unit
NLA
Portfolio Value
Geographical
Diversification/(3)
Proportion of
Freehold to
Leasehold assets
WALE/(5)
Existing Portfolio(As of May 31st ,2018)
+Proposed
Acquisition
Post-Proposed
Acquisition
489 Units/(6)
1,483,610 SQ.M/(6)
THB 30,403.90 million/(4)(6)
(USD 950.12 million)
• Northern BKK 26%
• Eastern BKK 12%
• EEC 62%
• Freehold 69%
• Leasehold 31%
~2 Years
Occupancy Rate 79%
+58 New
Units
+151,881 SQ.M
~90%(100%)/(2)
THB 3,345.63 million/(1)
(USD 104.55 million)
• Northern BKK 17%
• Eastern BKK 46%
• EEC 37%
• Freehold 67%
• Leasehold 33%
~1.5 Years
547 Unit
1,635,491 SQ.M
80%(81%)
THB 34,004.03 million(USD 1,062.62 million)
• Northern BKK 25%
• Eastern BKK 15%
• EEC 60%
• Freehold 73%
• Leasehold 27%
~2 Years
1.Based on TMAN BOD approval to invest in TICON assets.
2.TICON will provide performance guarantee for vacant unit for 12 months after acquisition.
6.Deduct unit M1.6/2(Plot P 12) in Pinthong 1 which sale to Thai Sankyo on 28/5/2018
3.Based on existing portfolio and proposed acquisition NLA and type of right on assets
4.Based on latest appraisal value on Dec 15,2017
5. WALE = Weighted % of GRI X remaining lease period under agreement.
+Conversion
Assets
23 Conversion
Units
Area to be Converted
-
THB 254.50 million/(1)
(USD 7.95 million)
-
63,350 SQ.M
Freehold 100%
-
Transaction Rationale and Highlights
10
1
2
3
4
New Assets located in Prime and Strategic Industrial/Logistic locations
in Thailand with International asset Quality
New Assets Enlarge and Diversify TREIT Portfolio
Consistent with the REIT Manager’s Investment Strategy
Enhance TREIT Performance and DPU Accretive Based on a
Management Pro formaThe acquisition is Enhance both of revenue and DPU to TREIT’s unitholders
Proposed acquisition is in line with TREIT’s key objectives
Reduces concentration risks through further diversification
All proposed acquisition assets are located in prime industrial location which shall boost overall TREIT’s
performance
New Assets located Prime and Strategic Industrial/Logistic locations in Thailand
with International asset Quality
11
1
Prime location
in Thailand
Thailand Industrial Property Market Demonstrates Signs of Stabilization
Summary Demand and Supply/1
Supply of SILP/3
+3.3% y-o-y
Demand of SILP/3
+1.0% y-o-y
Supply of RBF/4
-0.2% y-o-y
Demand of RBF/4
+1.9% y-o-y
Supply of MLP/5
+16.0% y-o-y
Demand of MLP/5
+15.3% y-o-y
Key Indicators/1
• Net Flows of foreign direct investment to the manufacturing sector in
1QDY2018 increased by 74% Y-o-Y compared to 1QFY2017
• The total supply of Ready built factories (RBFs) in 1QFY2018
remained at 2,357,000 SQ.M. the occupancy rate increase from 70.4%
in 4QFY2017 to 71% 1QFY2018.
• The total supply of Modern logistics properties (MLPs) in
1QFY2018 was 3,426,000 SQ.M, an increase of 16.0% Y-o-Y. the net
new take up in 1QFY2018 was 32,800 SQ.M
Note 1. CBRE Thailand Industrial, 1QFY2018
2. JLL
Thailand Property Clock 2018/2
Prime Residential
Property (Q1’18)
Prime Retail
Property (Q1’18)
Grade A Office
Property (Q1’18)
Industrial Property (Q1’18)/6
Rental Growth
1.0% y-o-y
Rental Rate
THB 160
Per Sq.m
Stage in Cycle
Growth
Slowing
• OCR Q1 2018 increase from
70.4% in Q4 2017 to 70.9%
• The net take-up was 11,500
SQ.M.
• The total supply in this quarter
approx. 2.36 million Sq.m
Ready Built Factories(RBF)
Modern Logistic Properties(MLP)
3. SILP = The Serviced Industrial Land Plots (SILPs)
4. RBF = Ready Built Factories
5. MLP = Modern Logistics Properties
6. Analyst Industrial Outlook by TMAN
• OCR Q1 2018 increase from
79.5% in Q4 2017 to 80.4%
• The net take-up was 5,000
SQ.M.
• The total supply in this quarter
approx. 3.43 million Sq.m
Industrial Properties 1QFY2018
New Assets located Prime and Strategic Industrial/Logistic locations in Thailand
with International asset Quality
12
1
Prime location
in Thailand
All proposed assets are located in EEC area , Northern BKK and Eastern BKK which are Thailand’s prime industrial area
TREIT have over 1 million sq. m of factory and warehouse space
in EEC and adjacent areas
EECd (EEC of Digital Park)
EECi (EEC of Innovation)
Double-track railway Motorway
EEC Area and Eastern BKK
High-quality infrastructure to support industries
✓ Double – track Railway from Bangkok down to Map Tha Put.
✓ Motorway No.7 linking Bangkok & Rayong.
✓ U-Tapao Airport with annual capacity to serve 3million passengers.
✓ 20 power plants and plan for high speed train.
A Key manufacturing hub for Thailand
✓ A key production hub for automobile, foundation for further
development of automobile industry as well as for aviation and robotics
& automation industry development.
✓ Foundation for development of plastics, rubbers& polymers for value-
added industries.
✓ 29 industrial estates – production base for over 3,800 factories.
Summary Key Location Highlights
TREIT’s Portfolio NLA in Eastern BKK and EEC
453,925
SQ.M
643,695
SQ.M
Current Portfolio
468,125
SQ.M
755,201
SQ.M
After acquisition
Factory Warehouse
OCR 83%OCR 84%OCR 91%
+125,706 SQ.M
• FAC 14,200 SQ.M
• WH 111,506 SQ.M1,097,620 SQ.M1,223,326 SQ.M
236 250 250 291 296 295 290 291
317
97%
68%62%
56% 60%63%
67% 68%69%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
200
250
300
350
400
450
500
BeforeFlood
2012 2013 2014 2015 2016 2017 May'18 AfterAcquisition
NLA (Thousand SQ.M)
13
1
Prime location
in Thailand
All proposed assets are located in EEC area , Northern BKK and Eastern BKK which are Thailand’s prime industrial area
Government Flood Protection System Summary Key Location Highlights
Strong and Renowned Tenants
Strategic located on highway network, convenient for transporting and
distributing. One of important electronics manufacturing cluster.
Tenants has come back to open factories to produce electronics products
in Northern Bangkok area and demand of warehouse of this area
commands an occupancy rate around 70%%.(2)
Northern Bangkok zone (Ayutthaya, Wangnoi, Prachinburi) is a strategic
gateway to Northern and North Eastern part of Thailand which cater to F&B
tenants requirements
Government completed elevated road projects and flooded protection wall
to protect industrial estate from disaster.(1)
Source: 1 Industrial Estate Authority of Thailand 2. Khight Frank: Logistics property market overview H2 2017
▪ MPM Technology is one of leading Hard-Disk-Drive
producers of Asia. MPM has rented factory with TREIT in
Navanakorn since 2015.
▪ Qual-Pro is a electronic manufacturing service (EMS)
provider which rented factory with TREIT since 2015.
New Assets located Prime and Strategic Industrial/Logistic locations in Thailand
with International asset Quality
Factory Performance in Northern BKK Area (2011 – 2018)/(3)
Occupancy Rate%
3. Reference from Asset management of TICON Industrial Connection PCL
- Constructed and operational - Under construction Under approval
process
Electronics and Automotive came back to Northern BKK Area in FY2018/4
Spare Part
producers have
rented factory area
from TREIT around
8,000 Sq.m
Electronics
producers have
rented factory area
from TREIT around
4,500 Sq.m
4.As of 31 July 2018
14
High Quality Standard of TREIT Assets
Prime location
in ThailandDiversification
Of Portfolio
1New Assets located Prime and Strategic Industrial/Logistic locations in Thailand with
International asset Quality
Average Size 1,500 – 3,000 sqm.
Average Height 5 – 7 meters
Floor Loading 1 – 3 Tons/sqm.
Location 11
Factory Warehouse
1.Well maintained common area
• Wide Road with lots of parking• Lot of Green area
2.Floor Quality
• High compressive strength concrete
• Burnished floor or hard trowel finishing technique
• Expansion joint
• Super flat and level floor
3.Roof – Design to improve air circulation
International Quality Standard
4.Green Buildings certified by LEED & EDGE
Total Solutions for Industrial Properties
√ Superior quality
Strategic locations
One-stop Services
√
√
Ready built and/or customized buildings
Flexibility for business
Prime location in industrial estate,
general industrial zones, exportprocessing zone or Duty-Free Zones
√
√
√
Average Size 1,000 – 3,000 sqm.
Average Height 8 – 12 meters
Floor Loading 3 – 5 Tons/sqm.
Location 18
Prime location
in Thailand
Source: TICON and TPARK
Prime location
in Thailand
LEED GOLD Certified EDGE Certified
69%
31%
73%
27%
New Assets Enlarge and Diversify TREIT Portfolio
15
2
Prime location
in ThailandDiversification
Of Portfolio
Increased Proportion of Freehold Assets
Pre-Proposed Acquisition Post-Proposed Acquisition
Freehold
1,027,598 SQ.M
Leasehold
456,012 SQ.M
Freehold
1,192,837 SQ.M
Leasehold
442,654 SQ.M
Key Rationale to convert leasehold to freehold
✓ Amatarnakorn considered as the prime industrial area ,
complete with infrastructures and utilities to support
production and/or use as logistic hub by far from
Bangkok only 57 KM.
✓ With qualification above, rental rate on this area growth
average 1.25% - 1.50% p.a and land cost for this area
dramatically increase during past 3-5 years.
✓ Therefore, Investment in freehold of these assets shall
boost up investment property value in long-term
✓ Cost to extend leasehold in next 25 years shall
expensive than invest in freehold today.
✓ Convert right on assets
from Leasehold to Freehold
area 63,350 SQ.M
✓ Acquire new assets (FH) total
area 101,889 SQ.M
Enhanced Geographical Diversification
Pre-Proposed Acquisition Post-Proposed Acquisition
Before After
Data As of 31 May 2018
74%
26%
75%
25%
Eastern BKK and EEC
1,097,620 SQ.M
Northern BKK
385,990 SQ.M
Northern BKK
412,165 SQ.M
Before After
Proportion of Factory and Warehouse
50%50% 52%48%
Warehouse
739,125 SQ.M
Factory
744,485 SQ.M
Warehouse
850,631 SQ.M
Factory
784,860 SQ.M
Before After
Pre-Proposed Acquisition Post-Proposed Acquisition
✓ Acquire new assets (LH) total
area 49,992 SQ.M
Eastern BKK and EEC
1,223,326 SQ.M
49%
21%
13%
12%
5%
US
51%
21%
12%
12%
4%
European
29%
21%24%
2%
11%
2%
11%
30%
22%22%
2%
11%
2%
11%
New Assets Enlarge and Diversify TREIT Portfolio
16
Prime location
in ThailandDiversification
Of Portfolio
Tenants Breakdown by Industry/1
Pre-Proposed Acquisition Post-Proposed Acquisition
Automotive
Enhanced Geographical Diversification/1
Pre-Proposed Acquisition Post-Proposed Acquisition
Before
Data As of 31 May 2018
ElectronicsLogistics
Packaging
Retail
FMCG
Others
After
Electronics
Automotive
Logistics
Packaging
Retail
FMCG
Others
Before AfterJapanese
Thai
Asian (Except)
Japanese
Japanese
European
Asian (Except)
Japanese
Thai
US
More diversification of Industry
✓ Increase in logistic industry 2% which
logistic is in increasing trend and
maintain automotive and electronics
industry in same proportionate before
invest in new asset
Nationality of Tenants
✓ Well-diversify nationality of tenants in
the same proportion before proposed
acquisition
Diversification
Of Portfolio
Diversification
Of Portfolio
2
1.Breakdown by GRI as of May’18L
New Assets Enlarge and Diversify TREIT Portfolio
17
Diversified tenant base underpinned by primary industries of Thailand
Logistic Services
18%10%
15%
46%
10%
TenantMix
Automotive
Others Electronics
E-Commerce
1.Breakdown by GRI for the month ended May’18
2.As of 31 May 2018
Warehouses and Distribution Center
Warehouses and
Factory
Warehouses and
Distribution Center
Factory Factory
Diversify tenant base including multinational companies
and leading domestic companies therefore reduces
concentration of trust after acquisition.
1
2
3
4
5
Tenants are in Thailand’s primary industry sectors which
are logistic services, Automotive, E-commerce, Stationary
business and Electronics
28 high quality tenants with no single tenant contributing
more than 12% of GRI of proposed acquisition assets.
Tenants have strong financial performance thus tenant
likely to extend lease contract to support their production
and/or business activities.
Most of tenants are renowned and have strong brand
thus It will support TREIT’s image to be the largest
industrial space provider to brand companies in Thailand.
2
Prime location
in ThailandDiversification
Of Portfolio
Note: Detail of tenant breakdown in each locations is in Pages A4- A14
5.33%
2.51%2.19% 2.13%
1.88% 1.77% 1.71% 1.59% 1.56% 1.47%
Siam Makro Leschaco BJC Kintetsu Schenker Lazada Denso DTSDraexlmaier
DHL Panalpina
New Assets Enlarge and Diversify TREIT Portfolio
18
Reduced concentration risk in the top 10 tenants
1. Breakdown by GRI for the month ended May’18
2
Prime location
in ThailandDiversification
Of Portfolio
Pre-Proposed Acquisition
Post-Proposed Acquisition
Top 10 Tenants by GRI(1)
20.55%Pro Forma Top
10 tenants by
GRI
22.15% Pro Forma Top
10 tenants by
GRI
4.83%
2.27%2.05% 1.99% 1.93%
1.70% 1.55% 1.47% 1.44% 1.33%
Siam Makro Leschaco Lazada BJC Kintetsu Schenker Denso DHL DTSDraexlmaier
Panalpina Reduce 1.6%
+3 Rank +1 Rank
Consistent with the REIT Manager’s Investment Strategy
19
Consistent
With strategy
“Maximize Benefit to All Unitholders”
Increase
NAV per Unit
Leading Industrial REIT of Region
Constant Growth in
TAV
Maintain High
OCRHigh Quality Assets
In Prime Location
Maintain Lowest
Cost of DebtMaintain Appropriate
Leverage %
Constant Growth in
DPU
Comprise prime and predominantly freehold logistics and industrial properties.
Enlarged TREIT portfolio value and maintain status “ the largest industrial REIT in Thailand”.
High quality Tenants.
Increase freehold assets in portfolio.
Reduces concentration risks through geographical diversification and tenant mix.
Potential to extend or rearrange size of factory/warehouse due to economical scale from
asset size in each location.
Ob
jec
tive
Ou
tco
me
Proposed acquisition is in line with TREIT’s Investment objective
3
Enhance TREIT Performance and DPU Accretive Based on
a Management Pro forma
20
Current Portfolio
(May’18)
+ Proposed
Acquisition
After Proposed
Acquisition% Change
No. of Assets 489 58 547 +12%
No. of Occupied Unit 396 55 451 +14%
NLA (sqm) 1,483,610 151,881 1,635,491 +10%
Occupied Area (sqm) 1,171,565 136,251 1,307,816 +12%
Occupancy 79.0% 89.7%79.9%
(80.9%)/(1)
+0.9%
(+1.9%)
Asset Value (THB'm) 30,404.0 3,600.1 34,004.1 +12%
Debt ratio 17.2%/(2) ~100%/(3) 25.5%/(2) +7.8%
1.OCR including guarantee performance for 1Y after transfer assets to TREIT
2.Debt Ratio = total IBD / Assume TAV equal on 1QFY2018 plus asset value from acquisition.
▪ Pro-forma DPU accretive for approx. THB 0.0315 per unit and accretive for approx. THB 0.0402 per unit (case including guarantee)
▪ Positive portfolio impact, provide stable increase in income stream and stable rental growth rate.
4Enhance
DPU
Pro-forma DPU (THB cents)/Enclosure 6
Case Current Performance0.6451 0.0315 0.6766 +4.9%
Pro-forma DPU (THB cents)/Enclosure 6
Case Current Performance + Guarantee 1Y0.6451 0.0402 0.6853 +6.2%
3. Assume use Debt THB 3,600 mm
Portfolio growth since IPO
21
YE 2014/5
1st Investment IPO 2014
▪ 45 units of WH/FA
▪ Value THB 4,228 mm/2 4
▪ NLA 214,523 Sq.m.
▪ 53 units of WH/FA
▪ Value THB 3,159 mm/2 4
▪ NLA 155,182 Sq.m.
2nd Investment 2015
YE 2015/5 YE 2017/5
3rd Investment 2017
May’18 Within Dec’18
▪ 392 units of WH/FA
▪ Value THB 23,241 mm/2 4
▪ NLA 1,114,955 Sq.m.
TICON 3.6 Billion Baht
▪ Value around THB 3.6 billion
▪ NLA 151,881 Sq.m
Sponsor Assets
Sponsor Assets acquisitionIn period
+THB 30 Billion
Since IPOConversion
PFPOs to TREIT
THB 4.2 bn/1
(USD 0.13 bn)/3
THB 7.3 bn/1
(USD 0.23 bn)/3
THB 30.4 bn/1
(USD 0.95 bn)/3
THB 30.4 bn/1
(USD 0.95 bn)/3
≥THB 34.0 bn/1
(USD 1.06 bn)/3
▪ 489 units of WH/FA
▪ Value THB 30,404 mm
▪ NLA 1,483,610 Sq.m.
Current Portfolio May’18
Note 1 : Expected after acquire TICON assets. 4. Acquisition value2: All prices is based on acquisition Price (without effect of revaluation in each year 5. In the End of each year
3. Assume all fiscal year use Exchange rate at USD 1 = THB 32
4th Investment 2018
Transaction timeline and Key Date
22
TMAN BOD No.5/2018
approve to invest in
TICON asset value not
over THB 3,600 mm
12 June 2018
TREIT EGM
No.1/2018
1 August 2018
Transfer assets to
TREIT and Payment
cash for acquisition
Vote required
:Not Less than 3 of 4 of trust units which
attending the meeting and having the
right to vote(TICON group cannot vote Agenda 2
and Agenda 3)
Based on TREIT’s unitholders approved in EGM No.1/2017 Dated 19 October 2017.
The acquisition must be completed and transfer within 31 December 2018
Within
31 December 2018
1 2 3
Strictly Private and ConfidentialPrepared by Baker Tilly Corporate Advisory Services (Thailand) Limited
IFA’s Opinionfor unitholders of TREIT
BY BAKER T ILLY CORPORATE ADVISORY SERVICES (THAILAND) L IMITED
August 1, 2018
23
Strictly Private and ConfidentialPrepared by Baker Tilly Corporate Advisory Services (Thailand) Limited 25
BackgroundTICON Management Co., Ltd. (“TMAN”) as the REIT Manager of TICON Freehold and Leasehold Real Estate Investment Trust (“TREIT”) plans to invest in the Additional Assets and the Conversion Assets (“the Transaction Assets”) total of 81 units as followings:
Type of Investment UnitsBuilding Area
(sq.m.)Net Assets Value
(THB million)
The Additional Assets
Freehold rights of warehouse 26 61,514
3,345.63Leasehold rights of warehouse 15 49,992
Freehold rights of factory 17 40,375
The Conversion Assets
Conversion of leasehold right to freehold rights of warehouse
7 19,650
254.50Conversion of leasehold right to
freehold rights of factory16 43,700
Total 81 215,231 3,600.13
Net price for the Transaction Assets is approximately THB 3,600.13 million.
24
Strictly Private and ConfidentialPrepared by Baker Tilly Corporate Advisory Services (Thailand) Limited 26
Opinion of the IFA to the Transaction Assets PriceThe IFA has considered the appropriateness of the transaction price by using 2 methods which are 1) Valuation by Independent Appraisers and 2) The Financial Projection by the IFA as follows:
The Financial Projection by the IFA
Fair Value of the Assets(THB Million)
Total fair value of the Transaction Assets
3,746.04 – 4,230.98
Fair value of the Transaction Assets is in the range of THB 3,279.90 – 4,230.98 M
The Appraisal by the Independent Appraisers
Appraisal value (THB Million)15 Business
Advisory LimitedNexus Property
Consultant Co., Ltd.Minimum
appraisal valueMaximum
appraisal valueAdditional Investment Assets
Total of warehouse 2,006.10 2,124.00Total of factory 1,019.30 1,053.90
Total of factory and warehouse (1) 3,025.40 3,177.90 3,025.40 3,177.90 Assets to be Converted into Freehold
Freehold 1,840.70 1,710.10 Leasehold 1,430.90 1,455.60
Difference between freehold and leasehold value (2)
409.80 254.50 254.50 409.80
Summary of total appraisal value (1) + (2)
3,435.20 3,432.40 3,279.90 3,587.70
The Valuation by the Independent Appraisers: Two independent appraisers valuedthe Transaction Assets by the income approach.
The Financial Projection by the IFA: This approach analyzes the historical operating performance, actual rental and service agreements ,and the estimations of REIT and property manager.
After the investment in the Transaction Assets, IRR to unitholders is estimated to increase from 7.17% to 7.86%.
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Reasonableness of the Asset Acquisition
1. Enhance the ability to generate more income within a shortperiod of time; The Additional Investment Assets were occupied,accounting for 89.71% of all rental areas.
2. The Additional Investment Assets being in a good location;The 41 warehouse units are situated in strategic locations forlogistics services. Also, the 17 factory are in industrial estates.
3. The Assets to be Converted into Freehold can procurebenefits indefinitely; The Assets to be Converted can procurebenefits indefinitely after entering into the Transaction.
4. Improve quality of assets in the portfolio• The proportion of investment in freehold rights will increase
from 69.29% to 72.95%.• The Additional Investment Assets are still in a good condition
with an average age of 5.59 years, comparing with the current assets which is 9.20 year. (As of 31 July 2018)
5. No dilution effects; This transaction will be funded from loans, there will be no impact on TREIT’s existing trust unitholders.Advantages from Entering into the Transaction
6. Benefit from the Eastern Economic Corridor (“EEC”)Programe; Parts of the Additional Investment Assets are located in areas supported by the EEC programme
7. Economy of scale; The Additional Investment Assets are located in the same area as the assets currently owned by TREIT.
Disadvantages from Entering into the Transaction
1. Higher debt burden due to the additional borrowing/bond issuance; After the Transaction, TREIT’s interest expense is estimated to increase from THB 13.16M/month to THB 25.95M/month.
2. Higher debt to total asset ratio; After the Transaction, interest-bearing debt to total assets ratio edging up from 17.26% to 25.60%.(Refer to review financial statement as of 31 March 2018). Accordingto management account as of 31 May 2018 the ratio will increasefrom 17.20% to 25.52%
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Reasonableness of the Asset Acquisition
1. Risk from default of rentals and/or service fees and premature termination of rental contracts and service contracts by tenants
2. Risk from the contract parties’ breach of the contract to buyand to sell land and construction, the contract to buy and to sellconstruction, and the land lease/sub-lease contract
3. Risk of not getting the rental contract renewal upon expiry ofthe existing contracts
4. Risk of finding tenants for unoccupied warehouses and factories
Risk Factor
5. Risk of flooding in future industrial zone
6. Risk of TREIT for being unable to invest in the Additional Investment Assets and the Assets to be Converted into Freehold with the total investment value of THB 3,500 M in accordance with the resolution of the EGM of trust unitholders No. 1/2017 of TREIT and the 2018 AGM of trust unitholders of TREIT.
7. Risk related to the lease agreement for the option to early terminate
8. Risk relating to the option-to-swap condition in the rentalcontracts
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IFA’s Opinion
Fair value of the Transaction Assets is in the range of THB 3,279.90 – 4,230.98 M
IRR to unitholders is estimated to increase from 7.17% to 7.86%.
Net price for the Transaction Assets is approximately THB 3,600.13 million.
The trust unitholders should approve the transaction for TREIT’s Acquisition and Disposal of Assets and
Related Party Transactions
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TREIT Post Acquisition and Key highlight
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The Largest asset size
amount Industrial REIT in Thailand
THB 34,004 mm(USD 1,063 mm/1)
FinancialSoundness
TRIS Credit Rating
A(Stable Outlook)
Low Leverage Ratio
~ 25.52%/4Compare to Industry
Low Cost of Debt
~3.50%/3Compare to Industry
TREIT Key Highlight
Available Debt headroom for growth
1 2 3
4
NLA 1,635,491 SQ.M“The Best Industrial REIT Credit Rating in Thailand”
Key Portfolio Metrics
Avg. Occupancy
80%
High Renewal Rate
≥80%
WALE
~2 Years/2
Asset in EEC
974,980 SQ.M
Moderate WALE of Industrial Properties
5 9
Largest assets provider in EEC
7
LH/FH
27% / 73%
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High Freehold Portion
(1) Exchange Rate @ THB 32 per 1 USD
(2) Weighted lease expiry by GRI of each lease agreement
(3) It may be change based on market interest rate
(4) Assume Total Asset value as of 31 May 2018 Plus Additional Investment THB 3,600.13 mm
(TAV 31/5/2018 = 32,291.05 IBD as of 31/5/2018 = 5,540 plus debt 3,600.13 (assume use debt 100%)
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Agenda 3To consider and approve the amendments of TREIT’s Trust Deed, including the
entry and/or the amendments to other agreements relating to the operation of
TREIT and seek for benefits from the immovable properties in order to be in line
with the investment in the Additional Investment Assets
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Agenda 3
➢ Consideration and Approval of the Amendments to the trust deed and other agreement by
✓ Amending and/or adding details of the additional assets for investment in Trust deed
✓ Adjusting information and other details related thereto in order to be in line with
investment in the additional assets for investment;
To consider and approve the amendments of TREIT’s Trust Deed, including the entry and/or the
amendments to other agreements relating to the operation of TREIT and seek for benefits from the
immovable properties in order to be in line with the investment in the Additional Investment Assets
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Other Matters (If any)
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Agenda 4