ST. PAUL'S PROPERTY TRUST PLC

Overview

St. Paul’s Property Trust PLC (the “Company” or “St. Paul’s”) exists as a very tax efficient commercial real estate investment company, run by people with a life-long association with Kenya for Kenyans, that is to be listed on the Nairobi Securities Exchange.

The company aims to invest in properties ranging from between GBP 1.5m – GBP 20m (KES 220m – KES 3bn), which will have a combination of low risk long-term leases and short-term higher risk leases in order to focus on yield compression.

The company’s objective is to target individual commercial properties let to the Central & Local Government in major cities throughout the United Kingdom excluding the City of London.

The Board will seek to achieve a minimum hurdle rate of return of 8-10% which is projected to increase to over 15% with the use of leverage and active management.

St. Paul’s has entered into a property management contract with Kenswick Capital Management Limited (“KCML”) at a competitive pricing and at the same time capture the resource of Colliers International as the lead property advisors and Knight Frank as the fund valuers or ‘Gate Keepers’.

Patrick Walker – Non-executive Director (Chairman)

Patrick Walker is a Chartered Surveyor and a founder-member of the Institute of Surveyors of Kenya. He started work at Tysons in 1959. He left in the mid-70s, after heading the company for several years, to pursue development and construction interests throughout Africa. In the early 90s he opened Knight Frank offices in Tanzania, Kenya and Uganda, serving as regional director until retirement in 2005. He has since maintained a Kenya based development/project management practice, acting for institutional and private clients. Recent projects include the ICEA Lion Centre at Riverside Park and continuing phases of the Junction Mall, where he holds a semi-executive directorship.

Richard Britten-Long - Non-Executive Director/Founder

Richard was born and brought up in Kenya and has more than 40 years of capital markets experience. He was the CEO of Wichford Property Management Ltd, building $1 billion Funds Under Management (FUM) between 2003 and 2007, entirely focused on government occupiers in the UK and Europe. The company successfully listed on the London Stock Exchange (LSE) in 2006. Richard is also the founder of Laird Finance Group, a property structured finance placement house. Richard has been financing and advising Kenya property investors since 1980. He speaks fluent Swahili.

Board of Directors (1/2)

Bernard Swain - Non-Executive Director

Bernard is a Fellow of the Royal Institution of Chartered Surveyors (FRICS) and holder of the Institute of Director’s Diploma in Company Direction. He has 18 years of professional property experience which includes investment, development and asset Management as well as the underwriting and structuring of commercial and residential property debt. He currently acts as a director on a number of real estate boards investing in and developing a variety of UK and continental European based real estate, including major shopping centres, office buildings and prime city-centre residential developments.

Vincent Rague – Non-Executive Director

Vincent is a Co-Founder and Director of Catalyst Principal Partners, a Nairobi-based private equity manager and Chairman of FSD Africa, a DFID-funded program to support the development of financial markets in Africa. He also serves as an Independent Non-Executive Director of Group Five, a JSE-Listed Engineering consulting and construction company,the Pan-Africa Infrastructure Development Fund(PAIDF); and Kenya Airways.

Board of Directors (2/2)

Siôn Roberts – Non Executive Director

Siôn has over ten years’ experience working in the financial sector, having started out at a large international bank before joining IQE Limited in 2008 where he now heads up their finance department. In addition to being a director of IQE Real Estate Limited, Siôn is also a director of a number of other companies, all of whom have particular exposure to property investment and development. Siôn is a member of the Association of Chartered Certified Accounts (ACCA) and has excellent knowledge of Isle of Man and UK tax legislation, with significant experience in dealing with tax and accounting matters in both jurisdictions.

Select KCML Team

Nicholas Britten-Long Peter Gingell Ramesh Pathak

Mark Sheardown – FRICS

Fellow of the Royal Institution of Chartered Surveyors. Founder of GP Group, the largest developers of Primary Care Centers in the UK, occupied by doctors and health professionals providing a quasi government covenant. Former non-executive Director of Wichford PLC. Strategically involved in property development and investment in the UK & Europe since 1974.

Richard Britten-Long

[Profile as in St. Paul’s Board of Directors]

Key Senior Management – KCML (1/2)

Nicholas Britten-Long

Real Estate Director of Kenswick Property Management Limited. He trained at Brown Cooper Marples, (BCM) and was formerly with Investream Limited, (a business dedicated to high net worth individual investors) responsible for acquiring & asset managing Real Estate in the UK and Europe. He joined Kenswick to lend his expertise to head up property management and strategic property acquisitions.

Peter Gingell

Prior to joining Kenswick Capital Management Limited as COO, Peter was previously with Wichford PLC until the reverse take-over by Redefine International. Subsequently Peter was CFO & COO for Seymour Pierce, a LSE Nomad and Investment Bank. Prior to joining Wichford he worked in senior finance roles for CBRE and George Wimpey (now Taylor Wimpey), as well as in other industries. He started his career at Blue Circle Industries, then the largest cement manufacturer in the UK.

Key Senior Management – KCML (2/2)

Ramesh Pathak - B-com, FCA

Previously worked as Group Accountant with Wichford PLC and prior to that was Financial Controller with the Japanese Real Estate Group.

The Professional TeamLead Transaction Advisor Legal Advisor – Kenya

Reporting Accountant

Property Advisors

Fund Valuers

Public Relations

Tax Advisors

Company Secretaries

Property Management Company

Investment highlights (1/2)

Active Management

Management Team

The key management staff of Kenswick Capital Management Limited, the management company of St. Paul’s Property Trust PLC, have a proven track record, having constituted part of the core management team that founded and managed the assets of Wichford PLC (now Redefine International PLC (“Redefine”)), from an unlisted $50m company in 2003 to a fully London Stock Exchange listed $1bn company by 2008.

Mark Sheardown, a principal at KCML, is a co-founder of General Practice Investment Corporation (GPI), http://www.gpgroup.co.uk, which has worked for over 20 years with G.P’s and other National Health Services providers in the UK to deliver new fit for purpose building. During this period it has been involved with over 250 separate units with a market capitalization in excess of $750m.

The Management will seek to invest into a combination of low risk long-term leases and opportunistic short-term higher risk leases to achive a balanced platform with the ability to focus on yield compression and substantial profit that will then be paid out to shareholders in the form of special dividends.

Highly Secure Income Stream

The Management will be driven by strength, integrity and risk averse strategy to deliver a Sterling return derived from UK property with a bi-annual progressive dividend payout which will include special dividends. The returns will provide a substantial margin over triple A rated UK Treasury equivalent bonds.

Tax Efficient Structure

The Company has been structured as an off-shore holding company incorporated in the Isle of Man with Special Purpose Vehicles holding the properties in tax efficient jurisdictions with a sole aim of optimizing relief of capital gains, inheritance, withholding, income and other taxes. This will ensure maximum returns to the shareholders of the Company for distribution as dividends.

Currency Hedging

The portfolio of properties to be held by the Company will be providing an income stream in hard currency i.e. in pound sterling (GBP). This will therefore deliver exposure to hard currency (GBP) assets and loans and could therefore provide a hedge against the Kenyan Shilling (KES).

Investment highlights (2/2)

KES performance against GBP – Last 10 years

Source: Reuters

SA Rand performance against GBP – Last 10 years

Source: Reuters

Zambian Kwacha performance against GBP – Last 10 years

Source: Reuters

(Enhanced yield)

St Paul’s (ListCo)Isle of Man

Kenyan Branch

Core HoldCoIOM

Opportunity HoldCo

IOM

SPV

PLATFORM PROPERTIES

SPVSPVSPVSPV SPVSPV SPV

OPPORTUNISTIC PROPERTIES

St. Paul’s Group Structure

Major Cities in the UK

Norman House is owned by an offshore vehicle controlled by the Directors of KCML. Portsmouth is well serviced by road communications with the M275 linking the city to the M27, which in turn links with the M3. There are direct rail links to London. The city contains the Country's second largest ferry port, providing services to the Isle of White and many European destinations. Norman House is situated on Kettering Terrace which gives direct access to the M275 and connections onto the M27 motorway network.

The surrounding area is predominantly industrial buildings with Port related uses. Norman House is immediately adjacent to the short term car park for the continental ferry port and is located within the operational area of the commercial port used for the import and export of goods containers. The office is therefore strategically located for the Border Agency and Customs and Excise who are the main tenants.

Norman House comprises a self contained office building on part basement and three upper floors of brick framed construction surmounted by a flat roof. The property benefits from a secure, barrier controlled, on site parking for 19 vehicles. There is a further site adjacent to the building which is marked out for and additional 30 car parking spaces and 14 further visitors spaces to the front of the building.

The building was constructed in the 1970’s and provides 22,698 sq.ft of office accommodation. The property benefits from a central communal entrance from which, there is a central access stairway and passenger lift providing access to all floors. Each floor is self contained and benefits from both male and female WC’s. The property is let in accordance with the following tenancy schedule highlighting that the building is let to 4 tenants on 4 leases, and produces a total net income of £161,809 per annum.

The Government occupies a large proportion of the building (73% of the lettable area) and is used as their “dockside” office and houses the Departments of Immigration (Boarder Agency) and the HMRC (Customs & Excise) . The Government have been situated in the building for well in excess of 10 years and this building is core to their dockside operations.

The remainder of the building is let to two further tenants accounting for 27% of the income, there is 1,634 sq.ft of vacant space in a single ground floor suite, which is due to be refurbished and placed in the open market for rent raising the net rental received to £174,800. The building is held through a long leasehold interest from Portsmouth City Council at a peppercorn rent until 2089. KCML have agreed to transfer this asset into the Company. The valuation is expected to be c. £1.4 million to £1.6 million.

Norman House, Kettering Terrace, Portsmouth, UK

Property Contributed by KCML

Six months to Year to Year to Year to Year to Year to31 March 2016 31 March 2017 31 March 2018 31 March 2019 31 March 2020 31 March 2021

Return on Capital (ROC) £ £ £ £ £ £FY FY16 FY17 FY18 FY19 FY20 FY21Dividends:

Ordinary 750,047 2,500,156 2,750,172 3,000,187 3,250,203 3,500,218 Special1 - - 1,000,062 1,000,062 7,500,468 1,000,062

Total dividends 750,047 2,500,156 3,750,234 4,000,250 10,750,671 4,500,281 Cummulative dividends 750,047 3,250,203 7,000,437 11,000,686 21,751,357 26,251,637

Cash & cash equivalents 8,103,369

Investment in properties2 55,839,000

Total assets plus dividend 90,194,006

Less Total Liabilities:Senior debt (4,000,000)

Taxation (262,549) Total liabilities (4,262,549)

Total return 85,931,457

Share capital invested 50,003,119

ROC (5.5 year period) - in GBP 71.9%Annual Av. Return (in GBP) 13.1%

Expected Return

1 Special dividends are paid on anticipated sale of property. The Board of St. Paul’s may instead make a re-investment decision

2The investment in properties has been valued at cost.

The Company’s business model is to target individual commercial properties outside of the City of London in major cities such as and amongst others, Manchester, Birmingham, Leeds, Glasgow, Edinburgh, Newcastle, Liverpool, Swansea & Bristol, with lot sizes between GBP 1.5 million to GBP 20 million with leases that have under 10 years to their expiry. These are typically lot sizes that are too small for institutional buyers and too big for the private investor. However, this is not exclusive and the Company will also consider targeting larger lot sizes whenever they become available.

Specifically, the Company targets properties let on Full Repairing and Insuring leases to Trillium (now known as Telereal Trillium) and Mapeley or direct to the Government or a Government guaranteed covenant where they view the property to be a core asset to the Government Estate. This is because the Company views these short leases as opportunities to add value through tenant incentives in order to renegotiate new leases on institutional length contracts. On core assets there is a strong probability the Government will renegotiate to remain in occupancy. There have been examples of this recently where there is either political or socio-economic reason to remain in situ.

In the event a lease is unlikely to renew, the Company would expect to identify this early and would immediately serve a schedule of dilapidations, refurbish the building and let into the open market. Should the property have a higher underlying value for alternate use such as residential, hotel or student accommodation, planning permissions would be sought without delay. Once achieved the property could be sold with planning in place or redeveloped.

Strategy

Focus on government occupied properties in regional UK

Create initially, a solid portfolio of platform assets having contracts with at least 12 years unexpired lease terms (Platform Properties)

Focus on properties having unexpired leases of less than 10 years to establish “value added” opportunity (Opportunistic Properties)

Renewal of occupational leases (re-gearing) for 10-25 year terms through management incentives

Focus on major cities outside central London such as and amongst others, Manchester, Birmingham, Leeds, Glasgow, Edinburgh, Newcastle, Liverpool, Swansea and Bristol .

Initial target of 10% return rising to over 15% (leveraged), including an annual progressive dividend policy

Targeting acquisitions through the team’s extensive personal contacts and relationship with central government bodies developed over many years.

Target buildings let to doctors’ surgeries, NHS Foundation Trust, statutory undertakers such as BRE Trust (“BT”) and those with a 5A1 status.

Focus on Tax efficient off-shore investment vehicle structures aimed at optimising relief of capital gains, inheritance and other taxes.

 

Operational Overview St. Paul’s Property Trust PLC – Business Model

Appendix 1

In 1996 the Department of Social Security (DSS) inherited responsibility for some 700 buildings encompassing around 1.7 million sq.m across the UK, with the responsibility for payments of rents, rates, maintenance and facilities management which were in excess of £350m. In implementing the recommendations from Sir Michael Lyons’ report, the Government Estate proceeded with the PFI (Private Financial Initiative) project so as to provide value for money by transfer of risk and responsibility and enabling the public sector to benefit from private sector skills and delivery of services.

In July 1997 the DSS announced a 20 year PFI contract with commenced in April 1998 with Land Securities Trillium. This initiative was known as PRIME (Private sector Resource Initiative for the Management of the Estate). In June 2001 the DWP (Department for Work and Pensions) was created from the former DSS and parts of the former Department for Education and Employment. The DWP is responsible for the provision of social security benefits and pensions throughout the UK. The Trillium contract expires in April 2018, leaving the question as to what will happen post this date.

According to Colliers International, the DWP cannot vacate all the properties it occupies; there are three possible outcomes:

The current contract with Trillium is held over for a term, likely to be no less than three years whilst a new contract is agreed for no less than a ten year term.

The current contract is extinguished and a new mandate is awarded to a new operator for a term of no less than 10 years.

The Government bring the estate back in house and manage it themselves. Market experts expect to see occupational leases granted for minimum terms of 10 years.

In 2001 the departments of the Inland Revenue and HM Customs & Excise signed a 20 year contract with Mapeley under STEPS (Strategic Transfer of the Estate to the Private Sector). The Departments transferred ownership and management of 600 properties within their estate. The contract awarded to Mapeley is due to expire in 2021. In this case, just like in the Trillium scenario, it is a practical impossibility that all Governmental departments will vacate their buildings and the outcome mirrors that of Trillium.

The opportunity

Since 2007, the Government made strategic cost cuts to their Property Estate. There have been a number of Governmental Departments that have consolidated into more use efficient buildings. It is felt the majority of the “estate reduction” has been completed and buildings that are now surplus to requirement have been identified. This enables The Company to identify Government occupied buildings that are deemed core to the Estate.

The Directors and Kenswick Capital Management Limited consider there is a window of opportunity in creating bespoke portfolios to meet the demands of the market for packages of strong UK Government income from properties let to UK government occupiers and capital by maximizing the yield on assets through targeting those properties traditionally discounted by the investment property market.

The History of UK Government Property Estate and the Current Opportunity For Investment

Operational Overview: Background information on the opportunity in the market of operation

Appendix 2

Rental expectations

Employment growth is expected to continue on an upward trend over the next decade, according to research conducted by Savills, UK. This will drive floor space demand from companies, of all sizes, and this will contribute to rental growth trends.

Increased occupier demand will be driven by the need to acquire/expand their office space as the UK economy continues to grow. Due to the expanding economy, other issues including attracting and retaining staff has become a much more important issue to SMEs over the past couple of years.

The map on the right shows that there will also be more significant growth throughout the Midlands and the North West regions. This will increase the competition for the scarce supply of office space.

Market Overview

Appendix 3

Size of the market

The size of the Government estate in the UK is approximately 8.75 million sq.m (94,185,000 sq ft). This is held in some 5,250 buildings which are either freehold, owned by the Government or through leases. The Estate is defined as offices and other property used to deliver Government departments’ activities which are owned, leased or occupied by a Government body which include:-

Ministerial and non-ministerial departments Executive agencies Executive non-departmental public bodies Special health authorities in the UK

The operational NHS estate is separate, as is the FCO overseas estate, DEFRA rural estate and the MOD estate. The major Government departments which make up the majority of the estate are;

Dept of Work & Pensions – 16% of the estate HMRC – 15% of the estate Dept of Constitutional Affairs – 13% of the estate Dept of Trade & Industry – 11% of the estate Dept for Transport – 10% of the estate

Source: Colliers International

Market Overview (1/2)Appendix 4

 

 

 

 

Market Overview (2/2)Forecasts for total returns, 2015 to 2017

10 Years Trend on Monthly Investment Yields

Property Margins over Bonds

Margin over 10 year government bond yield (bps)

Appendix 5

Market Indicators - First Quarter 2016Appendix 6

Hypothetical Isle of Man SPVNet Initial Yield 8%

GBP Property cost including acquisition costs 10,180,000

Financed byExternal borrowings 5,000,000 Shareholders loan 3,000,000 Total debt 8,000,000

Shareholders equity 2,180,000 10,180,000

Rental income 800,000

Total overheads 110,000 Profit before tax and interest 690,000 Loan interest 500,000

Profit before tax 190,000

Taxation subject to availability of capital allowances 38,000 Profit after tax 152,000

Available for distributionLoan interest to shareholders 300,000 Profit after tax 152,000

452,000

Annual return to shareholders 8.71%

Appendix 7

Hypothetical Isle of Man SPVNet Initial Yield 7%

GBP Property cost including acquisition costs 10,180,000

Financed byExternal borrowings 5,000,000 Shareholders loan 3,000,000 Total debt 8,000,000

Shareholders equity 2,180,000 10,180,000

Rental income 700,000

Total overheads 110,000 Profit before tax and interest 590,000 Loan interest 500,000

Profit before tax 90,000

Taxation subject to availability of capital allowances 18,000 Profit after tax 72,000

Available for distributionLoan interest to shareholders 300,000 Profit after tax 72,000

372,000

Annual return to shareholders 7.17%

Appendix 8

Appendix 9

EndQ&A

This document has been prepared by Kenswick Capital Management Ltd solely for information purposes and for use in presentation of the strategies and developments. The information contained herein has not been independently verified. No representation or warranty, express or implied, is made as to, and no reliance should be placed on the fairness, accuracy, completeness or correctness of the information or opinions contained herein. None of the company, their advisors or representatives shall have any liability whatsoever (in contract, tort or otherwise) for any loss howsoever arising from any use of this document or its contents or otherwise arising in connection with this document. The forward-looking information contained herein has been prepared on the basis of a number of assumptions which may prove to be incorrect and, accordingly, actual results may vary. This document does not constitute an offer or invitation to purchase or subscribe for any shares and no part of it shall form the basis of or be relied upon in connection with any contract or commitment whatsoever.

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