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Disclaimer
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About this Presentation This presentation is dated November 10, 2020 and is strictly intended to provide general information about PRO Real Estate Investment Trust (“PROREIT”) and its business. This presentation does not constitute an offer to sell or the solicitation of an offer to buy any securities of PROREIT. The information in this presentation is stated as at September 30, 2020, unless otherwise indicated.
Non-IFRS Measures PROREIT’s consolidated financial statements are prepared in accordance with International Financial Reporting Standards (“IFRS”). In this presentation, as a complement to results provided in accordance with IFRS, PROREIT discloses and discusses certain non-IFRS financial measures, including Adjusted Funds From Operations (“AFFO”), Funds From Operations (“FFO”), Gross Book Value (“Gross Book Value”), Debt to Gross Book Value (“Debt to Gross Book Value”), Net Operating Income (“NOI”), interest coverage ratio and payout ratios as well as other measures discussed elsewhere in this presentation. These non-IFRS measures are not defined by IFRS, do not have a standardized meaning and may not be comparable with similar measures presented by other issuers. PROREIT has presented such non-IFRS measures as Management believes they are relevant measures of PROREIT’s underlying operating performance and debt management. Non-IFRS measures should not be considered as alternatives to net income, cash generated from (utilized in) operating activities or comparable metrics determined in accordance with IFRS as indicators of PROREIT’s performance, liquidity, cash flow, and profitability. For a full description of these measures and, where applicable, a reconciliation to the most directly comparable measure calculated in accordance with IFRS, please refer to the “Non-IFRS and Operational Key Performance Indicators” section in PROREIT’s Management’s Discussion and Analysis for the quarter ended September 30, 2020 available on SEDAR at www.sedar.com.
Forward-Looking Information Certain statements contained in this presentation constitute forward-looking information within the meaning of applicable securities laws. In some cases, forward-looking information can be identified by such terms such as “may”, “might”, “will”, “could”, “should”, “would”, “occur”, “expect”, “plan”, “anticipate”, “believe”, “intend”, “estimate”, “predict”, “potential”, “continue”, “likely”, “schedule”, or the negative thereof or other similar expressions concerning matters that are not historical facts. Some of the specific forward-looking statements in this presentation include, but are not limited to, statements with respect to PROREIT’s future financial performance; the ability of PROREIT to execute its growth strategies; and PROREIT’s ability to continue paying monthly distributions and PROREIT’s ability to raise capital. Forward-looking statements are based on a number of assumptions and are subject to a number of risks and uncertainties, many of which are beyond PROREIT’s control, that could cause actual results and events to differ materially from those that are disclosed in or implied by such forward-looking statements. PROREIT’s objectives and forward-looking statements are based on certain assumptions, including that (i) PROREIT will receive financing on favourable terms; (ii) the future level of indebtedness of PROREIT and its future growth potential will remain consistent with PROREIT’s current expectations; (iii) there will be no changes to tax laws adversely affecting PROREIT’s financing capacity or operations; (iv) the impact of the current economic climate and the current global financial conditions on PROREIT’s operations, including its financing capacity and asset value, will remain consistent with PROREIT’s current expectations; (v) the performance of PROREIT’s investments in Canada will proceed on a basis consistent with PROREIT’s current expectations; and (vi) capital markets will provide PROREIT with readily available access to equity and/or debt. Additional information about these assumptions and risks and uncertainties is contained under “Risk Factors” in PROREIT’s latest annual information form, and in other filings that PROREIT has made and may make with applicable securities authorities in the future, all of which are or will be available on SEDAR at www.sedar.com.
The forward-looking statements contained in this presentation are expressly qualified in their entirety by this cautionary statement. Investors are cautioned not to put undue reliance on forward-looking statements. All forward-looking statements in this presentation are made as of the date of this presentation. PROREIT does not undertake to update any such forward-looking information whether as a result of new information, future events or otherwise, except as required by law.
Additional Information Information appearing in this presentation is a select summary of PROREIT’s business, operations and results. The latest annual information form of PROREIT and its consolidated financial statements and management’s discussion and analysis thereon for the quarter ended September 30, 2020 are available on SEDAR at www.sedar.com.
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INVESTOR PRESENTATION
November 2020
INVESTOR PRESENTATION
November 2020
Section 1. PROREIT AT A GLANCE Section 2. PROVEN EXECUTION Section 3. 2020 THIRD QUARTER PERFORMANCE Section 4. POSITIONED FOR GROWTH Section 5. APPENDICES
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BC: 5 AB: 11
SK: 4 MB: 6
PEI: 1
Established in 2013, PROREIT owns $634 million of diversified commercial real estate properties in Canada, representing close to 4.6 million square feet of gross leasable area. PROREIT is mainly focused on strong secondary markets in Québec, Atlantic Canada and Ontario, with selective exposure in Western Canada.
Quick Facts (As at November 10, 2020)
Ticker Symbol (TSX) PRV.UN
Tax Deferred Distribution 100% (estimated)
Monthly Distributions $0.45 on an annualized basis
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Revenue by Asset Class (3 months ended September 30, 2020)
Retail 29.7%
Industrial 28.5%
INVESTOR PRESENTATION
November 2020
Our Vision
To become a mid-cap diversified Canadian REIT with high-quality commercial real estate in specific segments of the industrial, retail, commercial mixed-use and office sectors, recognized for its ability to:
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PRODUCE STABLE AND GROWING RETURNS
GROW UNITHOLDER VALUE PER UNIT
INVESTOR PRESENTATION
November 2020
Strong Performance in COVID-19 Environment
99.2% of gross rent collected in Q3 2020 and 99.6% collected in October 2020
92.5% of leases maturing in 2020 renewed with average 4% year one rent increase
86% of tenant base are national and government tenants
68% of retail base rent comes from grocery stores, pharmacies, financial institutions, government and medical offices
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A BREAKOUT YEAR Internalization
397K sq. ft. GLA TSX-V listing
(PRV.UN)
of 7 properties for $97.8M
$57.6M equity offering
Acquisition of property management platform
Achieved $500M asset target
4.6M sq. ft. GLA
Acquisition of light industrial property in Moncton, NB, for $8.4M
Sale of retail property in Saint John, NB for $5.1M
INVESTOR PRESENTATION
November 2020
1,628
9,189
1,404 0,155
4,465 3,568
2013 2014 2015 2016 2017 2018 2019
1,410 2,944 6,258 7,619
Property Revenues ($ Millions)
Adjusted Funds from Operations (3)
($ Millions)
70,2
397
CAGR (1)
Net Operating Income(3)
78%
(1) CAGR: compound annual growth rate (2) 2013 was for 13 months ended (3) Non-IFRS measure. See “Disclaimer – Non-IFRS Measures”.
(2) (2) (2)
(2) (2) (2)
September 2019 Strategic Acquisitions Acquisitions of 7 institutional quality properties totaling
$97.8 million for total 696,000 square feet of GLA
Boutique office tower in Ottawa’s business district
Class-A mixed-used industrial property in Ottawa suburbs
Five-property light industrial portfolio in Halifax, NS
Acquisitions significantly strengthen the portfolio and immediately accretive to AFFO per unit(1)
August 2019 Successful Bought-deal Raised $57.6 million in equity on a bought-deal basis,
including full exercise of over-allotment option
Largest equity offering in PROREIT’s history
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INVESTOR PRESENTATION
November 2020
70+ years of collective asset management and property management experience
Former CANMARC REIT team Sold to Cominar in 2012
for $1.9B (43% annual ROI since IPO)
Extensive network of real estate and capital markets relationships
Alignment with unitholders: officers and trustees own or control 5.2% of outstanding units
Competitive, objectives-based asset management structure
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James W. Beckerleg Chief Executive Officer and Trustee
Gordon Lawlor, CPA, CA Executive Vice President, Chief Financial Officer and Secretary
Mark O'Brien Managing Director, Operations
Alison Schafer, CPA, CA Director of Finance
Chris Andrea President Compass Commercial Realty
INTERNALIZATION OF ASSET MANAGEMENT FUNCTION COMPLETED ON APRIL 1, 2019 WILL ADD VALUE FOR UNITHOLDERS
INVESTOR PRESENTATION
November 2020
Internalization of Property and Asset Management (2018-2019)
Increases cash flow and adds value
Creates significant economies of scale
Provides additional transparency in accounting and financial reporting
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quality acquisitions
Decreases risk with greater diversification and reduced dependency on top tenants
Increases potential for internal growth: rent increases, densification, etc.
LEVERAGE TO IMPROVE COST OF CAPITAL AND INCREASED GROWTH PER UNIT
INVESTOR PRESENTATION
November 2020
INVESTOR PRESENTATION
November 2020
CAD $ thousands except for unit amounts unless otherwise stated
Three months ended September 30, 2020
Three months ended September 30, 2019 Change YoY %
Total assets $634,079 $628,604 0.9%
Property revenue $17,302 $13,241 30.7%
NOI(1) $10,399 $8,525 22.0%
Debt to Gross Book Value(1) 58.72% 56.72% –
Interest Coverage Ratio(1) 2.8x 2.8x –
Net cash flows provided from operating activities $8,936 $5,339 67.4%
FFO(1) $5,527 $4,410 –
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INVESTOR PRESENTATION
November 2020
Nine months ended September 30, 2020
Nine months ended September 30, 2019 Change YoY %
Total assets $634,079 $628,604 0.9%
Property revenue $52,221 $40,312 29.5%
NOI(1) $30,527 $25,431 20.0%
Debt to Gross Book Value(1) 58.72% 56.72% –
Interest Coverage Ratio(1) 2.7x 2.7x –
Net cash flows provided from operating activities $13,137 $9,498 38.3%
FFO(1) $16,119 $10,279 56.8%
AFFO(1) $17,070 $14,747 15.8%
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INVESTOR PRESENTATION
November 2020
March 2020 Acquisition
Acquisition of 100% interest in light industrial building in Moncton, New Brunswick Acquired for $8.4 million before closing costs, 6.80% going-in capitalization rate 135,494 square foot temperature-controlled building Built in 1979 and expanded in 2000, building is located adjacent to the Trans-Canada Highway 100% occupied by a national logistics company with long-term lease that includes annual rent
steps up until December 2032 Property includes additional 6 acres of land that could be used for building expansion or other
opportunities Financed by the proceeds from new $5.75 million 7-year first mortgage
at historically-low rate of 2.64%.
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Retail Industrial
(2) Based on in-place and committed base rent as of September 30, 2019 and September 30, 2020
Base Rent by Region (%)(2)
35.4
30.1
15.6
18.9
41.6
29.4
14.7
14.3
Asset Class Number of Properties Occupancy (%)(1) GLA (sq. ft.)
Retail 48 96.7 1,068,856 Office 10 92.1 492,446 Commercial Mixed-use 8 98.4 723,066 Industrial 26 99.8 2,286,943 Total 92 98.1 4,571,311
(1) Based on in-place and committed base rent as of September 30, 2020
Operational Highlights (As at September 30, 2020)
37.8
28.2
17.9
16.2
40.6
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# Tenant % of In-Place Base Rent (1) GLA (sq. ft.) WALT (2)
(years) Credit Rating (3)
2 5.9% 222,491 6.9 na/BBB-/BBB-
3 5.6% 127,334 4.3 Ba1/BB+/BBB-
4 3.5% 81,611 3.9 Aaa/AAA/AA+
5 3.4% 98,057 9.3 na
6 3.4% 66,083 4.6 na/BBB/BBB
7 3.3% 224,334 9.3 na
8 2.1% 185,633 7.8 Ba1/BBB-/BB+
9 1.7% 176,070 4.7 Baa3/BBB-/na
10 1.6% 40,901 6.0 na/BBB-/BBB-
TOP TEN SUBTOTAL 36.7 1,327,443 6.7 OTHER TENANTS 63.3 3,154,621 3.9 VACANT 89,247 TOTAL 100.00 4,580,932 5.4
(1) Based on annualized in-place and committed base rent at September 30, 2020 (2) WALT: weighted average lease term (3) Source: Moody’s, S&P, and DBRS. Credit rating assigned to tenant or its parent.
Highlights
86% of base rent is from national and government tenants
Top ten tenants account for 37% of base rent
Credit quality tenants account for 47% of in-place base rent
INVESTOR PRESENTATION
November 2020
2020 2021 2022 2023 2024 2025-2036
92.5% of leases maturing in 2020 renewed with average 4% rent increase in year 1
Overall weighted occupancy rate of 98.1% with a weighted average remaining lease term of 5.2 years
Top ten tenants have a weighted average remaining lease term of 6.7 years
Staggered lease maturity profile Not more than 14.5% of base rent matures in any given lease year
0.3%
Internal Growth Nurture existing client
relationship, ensuring tenant retention and growth
Implement operating improvements and preventative maintenance programs
Pursue expansion and redevelopment opportunities within the portfolio
Exploit lease-up opportunities
Staggered mortgage and lease maturity profile
Targeted Debt to Gross Book Value ratio
Access to multiple sources of capital
Prudent capital management
producing commercial properties in strong secondary markets
Focus on Class B, high-quality commercial real estate
Seek properties with selective development, expansion opportunities and geographical diversification
Pursue off-market opportunities allowing access to unique pipeline
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What Differentiates Us
OUR ABILITY TO IDENTIFY AND BUILD A STABLE, LOW RISK PORTFOLIO WHERE LARGER REITs ARE CURRENTLY DIVESTING
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Urban markets and regional economic centres outside Central Vancouver and Toronto
Often higher capitalization rates
Our size permits us to be opportunistic
Strong Secondary MARKETS
Community retail service centres
INVESTOR PRESENTATION
November 2020
Typically brand grocery or pharmacy anchored Brand names Long-term leases Excellent covenants
Banks, medical professionals, government services, restaurants Upside potential from rent increases, vacancy fill-up and pad development is available
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Single or multi-tenant, light industrial buildings (typically 22 feet clearance or higher) Located on major transportation routes with strategic access to:
Airports Large cities Border crossings
Currently focused on 50,000 sq. ft. to 200,000 sq. ft. buildings where increased occupancy and increased annual revenues are available
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Focused on Mixed-Use Commercial / Office
Buildings are often in industrial parks Flex office with loading docks Retail in industrial buildings (e.g. - décor, wholesale) Light industrial with office space
Currently, the right buildings in the right sectors are seeing increasing demand from a growing economy
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Case Studies and Ongoing Opportunities
HALLS CREEK (2016-2017) New pad development completed > 10% Return on invested capital (1) 100% leased Approximately $140 thousand NOI(1) on annualized basis
ST. MARGARET’S BAY (ONGOING) 41,500 sq. ft. in development opportunity
KING GEORGE HIGHWAY (2017) Pad developments complete 6,400 sq. ft. of new GLA Rogers, Subway and Cara signed >9% ROIC on Cara pad, >18% ROIC on Rogers and Subway pads
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(pad development) 50 Empire Lane, Windsor, NS
(pad development) 1455 Mountain Ave., Winnipeg MB
(building expansion) 10 Bentall Street, Winnipeg, MB
(vacant land, industrial opportunity) 31 Auriga Drive, Ottawa, ON
(potential building expansion)
INVESTOR PRESENTATION
November 2020
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First mortgages $322.9
Total debt $373.1M
Total first mortgage debt weighted average term 4.6 years
Debt Maturity Profile As of September 30, 2020
Debt Maturing During Year
0
20
40
60
80
100
120
140
1 year 1-2 years 2-3 years 3-4 years 4-5 years later
$54.8 $59.8
(2)
INVESTOR PRESENTATION
November 2020
Solid track record of growth and unitholder value creation
Diversified portfolio and high-quality, low-risk tenants with long-term leases
Experienced management team and solid relationships in the investment banking and lending businesses
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Acquisition focused when opportunities arise
Opportunistic and well-positioned to benefit from current real estate market transformation
Clear strategy to grow earnings and net asset value
Favourable Canadian real estate market
INVESTOR PRESENTATION
November 2020
INVESTOR PRESENTATION
November 2020
The Former CANMARC REIT
143 properties
Acquired by Cominar in 2012 for $1.9 billion
43% compound annual rate of return since IPO, compared to 28% for the REIT index
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0%
25%
50%
75%
100%
S&P/TSX Capped REIT Index
CANMARC REIT
INVESTOR PRESENTATION
November 2020
Operates autonomously from Halifax headquarters
Manages 38 third-party properties
Manages 85 PROREIT properties
Significant room for expansion
Halifax Light Industrial Properties, Nova Scotia $28.1 5 357,824 93%
251 Laurier Avenue West, Ottawa, Ontario $21.2 1 58,203 100%
171 John Savage Avenue, Halifax, Nova Scotia $8.4 1 50,000 100%
500 Palladium Drive, Ottawa, Ontario $48.5 1 279,388 100%
Total Acquisitions $106.2 8 745,415
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1750 Jean-Berchmans-Michaud St. Drummondville, QC (50%) $4.39 1 85,560 100%
Winnipeg, MB Industrial Portfolio $27.3 6 237,430 100%
598 Union St., Frederiction, NB $4.5 1 32,258 100%
Quebec Retail Portfolio $8.95 4 13,606 100%
Ottawa ON Office Portfolio $51.7 5 282,000 97.3%
Saint Hyacinthe, QC light industrial property $10.0 1 176,070 100%
Southwest Ontario Industrial properties $15.4 2 202,000 100%
Total Acquisitions $122.24 20 1,028,924
Total Sales ($0.895) (1) (11,700)
Net Acquisitions $121.34 19 1,017,224
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