35 Graham Street – shareholder meeting presentation

NZX RELEASE
17 June 2019

35 Graham Street – shareholder meeting presentation

Attached is a copy of the presentation being made to shareholders at the shareholder meeting being held
at 2.30pm today to vote on the proposed acquisition of 35 Graham Street, Auckland.

-ENDS-

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17 June 2019
Special Meeting of Shareholders
Purchase of 35 Graham Street, Auckland CBD

1. Chairman’s Introduction and Address.
2. Presentation on 35 Graham Street, Auckland Central.
3. Q & A.
4.Shareholder vote on the following resolution:
Resolution (as an Ordinary Resolution):
“That the purchase of the property located at 35 Graham Street,
Auckland Central for $58.0 million plus GST (if any) by Asset Plus
Investments Limited, a wholly-owned subsidiary of Asset Plus Limited,
from Auckland Council (as described in further detail in the
Explanatory Notes within the Notice of Special Meeting dated 29 May
2019), be approved.”
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Special Meeting Agenda

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Introduction & Background
Asset Plus Investments Limited (a
wholly owned subsidiary of Asset
Plus) has entered into a sale and
purchase agreement with
Auckland Council to acquire 35
Graham Street.
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Why is the resolution required?
The Transaction with
Auckland Council is
conditional on approval
by the Company’s
Shareholders.
NZX Main Board Listing Rule 9.1.1(b) requires approval of an ordinary
resolution of shareholders if the Company enters into a series of
linked or related transactions to acquire assets in respect of which
the value is in excess of 50% of the Average Market Capitalisation of
the Company.
The acquisition will result in the Company acquiring assets in respect
of which the gross value is in excess of 50% of the Company’s
Average Market Capitalisation.
Accordingly, the approval of Shareholders to the acquisition of 35
Graham Street, Auckland is being sought by Ordinary Resolution.

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35 Graham St -Presentation Overview
JoelLindsey,ChiefOperating Officer
AugustaFundsManagement
1. Key Terms and Conditions of the purchase
2. Transaction Rationale
3. Valuation Summary
5. Market Outlook
6. Investment Strategy
7. How will the Value-Add strategy be funded?
8. Impact of the Transaction
9. What are the key risks of the Transaction?
10. What are the implications of the Transaction not
proceeding?

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Key Terms and Conditions of the Purchase
The Property 35 Graham Street, Auckland Central
VendorAuckland Council
PurchaserAsset Plus Investments Limited
Date of Agreement29 April 2019
Purchase Price$58.0 million
Deposit10% of the purchase price
Settlement Date28th June 2019
Unconditional Date
Shareholder condition to be satisfied on or
before 35 working days from the date of
the agreement (being 18 June 2019)
Key Lease Terms ▪A term of two (2) years commencing on
the settlement date.
▪The tenant has no further rights of
renewal.
▪The annual rental for the term of the
lease is fixed at $3.975 million + GST (if
any)
“The local area has attracted circa $1.5
billion of foreign investment in the last 18
months, examples include Building C Spark
City $77million (SC Capital Partners),
Viaduct VXV Office Portfolio $635million
(Blackstone) and 155 Fanshawe St $247
million.”
>

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Transaction Rationale
•The Property comprises circa 9,990m
2
of net lettable area
across circa 3,000 to 3,500 m
2
floor plates.
•Building is located on an elevated position above Fanshawe St
and is only a short walk to the CBD, Viaduct, Wynyard Quarter
and Victoria Park.
•The Property has the benefit of a large existing structure to
upgrade and the possibility of adding additional floors
(subject to resource consent) that will have expansive views
and large floor plates.
•The Auckland Council lease provides two years of holding
income and time to work through design, consenting and pre-
leasing.
•The repositioned building should attract high quality tenants
on long leases, similar to those in the neighbouring Grade-A
office buildings, making it a highly desirable asset.
•Delivers the ‘Yield plus Growth’ investment strategy.

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Valuation Summary
>
The Property has been valued on an “as is” basis by Kane Sweetman
of Colliers International at $58.0 million as at 1 April 2019 in
accordance with International Valuation Standards and API/PINZ
Valuation Standards.
Valuation
$58,000,000
Annual Net Contract Income p.a.
$3,975,000
Market Rental Income p.a.
$3,960,428
Passing Yield %
6.85%
Equivalent Market Yield %
5.99%
WALE (years)
2.00

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Market Outlook
•The availability of Auckland office accommodation is under pressure with just 18,000m
2
of Prime / A Grade office
space currently available within the Auckland CBD Market and 21,000m
2
in the metropolitan market.
•Currently 90,000m
2
of new office space is under construction in Auckland and due for completion in 2020.
•40,000m
2
of this space has already been leased leaving 50,000m
2
available.
•The Property’s large floor plates with expansive views are a distinguishing feature.
(Source: Colliers Office Research Report February 2019).

Option 1 –the Manager’s Preferred Add Value Asset Strategy –Full refurbishment and addition of new
floors to “Premium/A Grade” office building:
•Council’s two-year lease term allows time for design and consenting to be underway before the end of the lease.
•On expiry the property is left “as is” with no remedial works completed by the departing tenant.
•The existing structure is ‘stripped back’ to a shell and subject to resource consent approval, the building extended by up tothree
additional floors.
•The gross floor area (GFA) increased to circa 19,400m
2
(adding circa 6,400m
2
GFA (within the permitted height and maximum FAR).
•Construction is expected to take between eighteen months and two years.
•The target development margin will be 15% with a target yield on cost of circa 6.6%.
•$90m-100m development expenditure
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Investment Strategy

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Investment Strategy (Cont.)
•Would apply if market conditions have been assessed as
‘unsupportive’ of an extensive redevelopment of the asset.
•The refurbishment is expected to take one year to
complete.
•The key downside of implementation of this option is there
is unlikely to be the same potential for valuation increase.
•However, the running yield will be maintained.
•This option does not prevent Option 1 being implemented
at a later date when market conditions are more
supportive.
•Development Expenditure $15-20m (this is ultimately
subject to the level of refurbishment which will be
determined by future tenant requirements).
•In addition to the above options, there is also the option to lease the
Property as it is with some small refurbishments of the office floors.
•The returns on this would be subject to the rental amounts agreed
with tenants but, in the Board and Manager’s opinion, are likely to be
less than the above two options (as extensive refurbishments are
necessary to attract higher rental amounts).
•However, this would allow income to be produced from the Property
with much lower capital requirements.
•This option would only proceed if market conditions did not allow any
form of redevelopment or extensive refurbishment to be undertaken.
Option 3 –Light Refurbishment
Option 2 –Extensive Refurbishment to
“Upper B Grade” office space:

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How will the Value-Add Strategy be Funded?
•Post-acquisition, Augusta will commence the concept design
phase and progress toward a resource consent application.
•Pre-construction spend for the design and consenting phase
will be funded by the expected $6.0 million of undrawn debt
facility and working capital.
•The funding for the potential development phase will be
contingent on the Asset Plus balance sheet at the time.
•Development funding will likely be made available through the
recycling of one or more existing assets, creating sufficient
balance sheet capability to fund a material portion of the
forecast development spend.
•Additional debt will be sought to fund the balance of the
development and / or future capital may need to be raised if
the portfolio gearing ratio exceeds 40% (on an ‘as if’ complete
basis).
•Asset Plus will update shareholders in due course on the
redevelopment and potential funding.
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Impact of the Transaction
If the Transaction is approved, the impact for Asset
Plus is summarised in the following pro-forma financial
information:
Note: the pro-forma financial information following
the potential divestment of the HeinzWatties
distribution centre, Hastings has also been included
[1]
Earnings per share is calculated based on net profit after tax.
Current
portfolio of 3
existing
assets
35 Graham
Street
Acquisition
Post -35
Graham
Street
Acquisition
Post Heinz
Watties
Divestment
Asset Value$123.10m$58.72m$181.82m$152.90m
WALE5.5 Years2.0 Years4.5 years3.6 years
Occupancy96.7%100%97.7%97.5%
Net Rental
Yield
6.82%6.85%6.83%6.71%
LVR8.5%-38.0%26.1%
EPS (1)3.12cps0.64cps3.76cps3.35cps

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Key Risks
IssueMitigation
Material size of development
relative to the current balance
sheet
Any development is unlikely to be committed to without:
•Tenant pre-commitments; and
•Construction programme being sufficiently advanced; and
•Final feasibility
Cost escalation impacting margin •Due diligence has already been undertaken on likely construction costs by an experienced
quantity surveying firm and included in feasibilities conducted to date.
•An extensive level of design will be undertaken before commencement of the development.
•Fixed price construction contracts will likely be sought.
•Robust financial due diligence will be undertaken on the contractor
Inability to lease the Property•Greater lease incentives may need to be paid (impacting margin) or allow more time to pre-
lease (impacting the internal rate of return (IRR) from the acquisition and start of
development).
•The level of development may be reduced to meet leasing commitments that are able to be
secured.
A change in market conditions after
completion of the Transaction
•Asset Plus and Augusta will monitor market conditions following completion of the
Transaction, with the development being able to be postponed or reduced in scale if
necessary.
•Appropriate interest rate hedging will be considered to mitigate the risk of any change in the
interest rate applying to a loan facility taken out to fund a redevelopment of 35 Graham
Street.

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What are the implications of the Transaction
not proceeding?
•The Sale and Purchase Agreement is conditional on Asset Plus
shareholders approving the Transaction.
•Should the resolution not be approved, the Transaction will not
complete.
•Asset Plus will not incur financial penalties under the Sale and
Purchase Agreement if the Transaction is not approved but will
incur some due diligence costs for consultants already engaged.
•If the Transaction does not proceed, Asset Plus will continue to
look for opportunities that are consistent with its ‘Yield Plus
Growth’ investment strategy.
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Q & A

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Resolution
“That the purchase of the property located at 35 Graham Street, Auckland Central for $58.0 million plus GST
(if any) by Asset Plus Investments Limited, a wholly-owned subsidiary of Asset Plus Limited, from Auckland
Council (as described in further detail in the Explanatory Notes within the Notice of Special Meeting dated 29
May 2019), be approved.”
The board of directors recommend voting in favour of the proposed resolution (as an Ordinary Resolution):