Slide 1: Investor Presentation – Company Overview
Investor Presentation Company Overview 14 May 2018
Slide 2: Disclaimer
Disclaimer STRICTLY PRIVATE AND CONFIDENTIAL: NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION IN THE UNITED STATES, AUSTRALIA, CANADA, HONG KONG, JAPAN OR SINGAPORE OR TO THE PUBLIC IMPORTANT: You must read the following before continuing. This presentation (the “Presentation”) has been prepared by AS
Slide 3: Investment Highlights I
Investment Highlights I Opportunity to capitalize on recovering Baltic real estate market Real estate company mainly focusing on development of retail and upscale residential properties in the capitals of Baltic States Track record of successful project development in the Baltic since mid 1990s
Slide 4: Investment Highlights II
Investment Highlights II Geography Prime locations in the city centres of the Baltic capitals Shopping Centres constructed with good access to public communications Investment grade rated countries Sizeable Projects Development of large-scale commercial and residential properties Ensures economi
Slide 5: Agenda
Agenda 1 Introduction to the Baltic property market 2 Business model 3 Project portfolio 4 Financials 5 Conclusion 6 Risks 5
Slide 6: Megatrends – Urbanisation Changing Consumer Demands
Megatrends – Urbanisation Changing Consumer Demands CHANGES IN CONSUMER BEHAVIOUR AND WAYS OF WORKING Permanent workstations are becoming a thing of the past – we work at home, in cafés, etc. AGEING INCREASE IN PROSPERITY POPULATION & SERVICE CULTURE Need for services and facilities Leisure-time and
Slide 7: Macroeconomic Development – Healthy and Solid Growth
Macroeconomic Development – Healthy and Solid Growth GDP Development Debt to GDP% in 2016 Estonia Latvia Lithuania Higher historical GDP growth 90% Finland EU 28 average rates shown by Baltic countries compared to the European average 10% and the GDP growth in Finland. 64% 5% 4.9% Positive marke
Slide 8: Baltic Market vs. Other EU – Significant Upside Compared to EU
Baltic Market vs. Other EU – Significant Upside Compared to EU The Baltic market is young and still early in its evolution. After gaining independence in 1990-1991, the real estate Average apartment price in city center (€/m2) market started functioning when state property was privatized. Unavai
Slide 9: Industry Overview – Rapid Growth in Real Estate Prices
Industry Overview – Rapid Growth in Real Estate Prices INTEREST RATES ON MORTGAGES HOUSEHOLD DEBT TO INCOME 4,5% 100% Estonia Latvia Lithuania Estonia Latvia Lithuania Rapid growth in real estate since 90% 2014 driven by improved economic 4,0% conditions. 80% 3,5% Healthier and more resilient re
Slide 10: Agenda
Agenda 1 Introduction to the Baltic property market 2 Business model 3 Project portfolio 4 Financials 5 Conclusion 6 Risks 10
Slide 11: Pro Kapital at a Glance – Leading Development Company
Pro Kapital at a Glance – Leading Development Company WHAT IS PRO KAPITAL WHY PRO KAPITAL EXISTS WHAT PRO KAPITAL OFFERS HOW PRO KAPITAL DELIVERS • Pro Kapital is a leading and • In the mid 1990s, Pro Kapital • The Group is focusing on • Expertise in development one of the first Baltic real saw an o
Slide 12: CEO & Other Key Executives
CEO & Other Key Executives Paolo Vittorio Michelozzi, Angelika Annus, CEO since 2001 (21 years in Pro Kapital) CFO since 2014 (20 years in Pro Kapital) • Born 1971, Estonian citizen • Degree in Business Administration from Estonian • Born 1961, Italian citizen Business School • General Certificate o
Slide 13: Pro Kapital's Value Creation – Extensive Land Bank to be Developed
Pro Kapital’s Value Creation – Extensive Land Bank to be Developed Group Vision: “Our vision is to be the leading developer of prime quality residential and retail real estate in the capital cities of the Baltic States. Using our top expertise proven through our track record of completed projects, w
Slide 14: Pro Kapital in a Nutshell – Premium Development in Prime Locations
Pro Kapital in a Nutshell – Premium Development in Prime Locations 100% equity financed land bank – Key advantage of the Group is the OPERATIONS IN 4 COUNTRIES extensive land bank with development projects for the next 5-10 years WITH ~90 EMPLOYEES in prime locations. Wide range of real estate t
Slide 15: Key Milestones – Over 20 Years of Industry Experience
Key Milestones – Over 20 Years of Industry Experience Over 20 years of industry experience – Established in 1994, the Group is one of the first major players in the Baltic real estate market. Focus on the Baltic capitals – The Group is focused on development in the Baltic capitals and expanded i
Slide 16: Business Model – Across the Value Chain Operations
Business Model – Across the Value Chain Operations ACROSS THE VALUE CHAIN OPERATIONS WITH IN-HOUSE COMPETENCE Land plot acquisition Project planning Execution Sales & marketing Aftermarket Analysis of location Strategic positioning Initiation of construction Retail properties are Residents
Slide 17: Historical Track Record
Historical Track Record Over 20 completed projects with ~190,000 sqm of net saleable area. The company has received high IRRs from its previous projects. SELECTED COMPLETED PROJECTS Domina Shopping Centre Kristiine Shopping Centre Kuģu street 26 Pulkveža Brieža street 11 One of the first and large
Slide 18: Agenda
Agenda 1 Introduction to the Baltic property market 2 Business model 3 Project portfolio 4 Financials 5 Conclusion 6 Risks 18
Slide 19: Group Portfolio Overview – Appraisal Value of EUR 236m
Group Portfolio Overview – Appraisal Value of EUR 236m The appraisal investment value of the current portfolio is EUR 236 million in December 2016 – Colliers has made an appraisal of the current investment value PORTFOLIO VALUE BY COUNTRY (Colliers 20161) of the portfolio consisting of the ongoing
Slide 20: WACC calculation
WACC calculation Colliers used for estimation of the Investment Value of the properties the following assumptions for calculating WACC (weighed average cost of capital): DEVELOPMENT PROPERTIES HOTELS Country WACC 2016 RoE Country WACC 2016 RoE Estonia 7.05 9.85 Estonia 6.61 9.13 Latvia 7.53 10.43 La
Slide 21: Agenda
Agenda 1 Introduction to the Baltic property market 2 Business model 3 Project portfolio 4 Financials 5 Conclusion 6 Risks 21
Slide 22: Balance Sheet
Balance Sheet 2011 - 2017 € thousand 2017 2016 2015 2014 2013 2012 2011 121,929 118,313 109,885 106,152 47,210 48,166 48,784 Investment property and inventories, which include Non-current assets finished real estate and real estate under construction, Current Assets 53,229 24,001 20,438 18,879 51,
Slide 23: Income Statement
Income Statement 2011 - 2017 In 2011 the Company recorded the sale of Kristiine Shopping Centre and booked € 50,1 m of net profit (before minority € thousand 2017 2016 2015 2014 2013 2012 2011 adjustments). Recurring Revenues 14,098 20,652 18,322 10,335 12,287 16,078 17,449 Cost of goods/services
Slide 24: Agenda
Agenda 1 Introduction to the Baltic property market 2 Business model 3 Project portfolio 4 Financials 5 Conclusion 6 Risks 24
Slide 25: Why Pro Kapital?
Why Pro Kapital? Promising Baltic real estate market Successful project development in the Baltic since mid 1990s Listed on Nasdaq Baltic and Frankfurt Stock Exchange Unique project portfolio Experienced loyal team Intention to distribute dividends regularly 25
Slide 26: Agenda
Agenda 1 Introduction to the Baltic property market 2 Business model 3 Project portfolio 4 Financials 5 Conclusion 6 Risks 26
Slide 27: Overview of Risks (1/7)
Overview of Risks (1/7) Risk factors Investment in Aktsiaselts Pro Kapital Grupp’s (the “Company” and the “Group”, which terms shall include its subsidiaries, unless otherwise indicated in the context) involves various risks. Prospective investors should consider carefully, among other things, the r
Slide 28: Overview of Risks (2/7)
Overview of Risks (2/7) Long duration of projects may result in inaccuracy of the forecasts The Group develops its properties on the basis of business plans elaborated for respective properties. Such plans are inter alia based on forecasts of future circumstances. Long duration of the projects aggra
Slide 29: Overview of Risks (3/7)
Overview of Risks (3/7) The Group must comply with various covenants arising from financing agreements. Any failure to do that may result in Group losing its rights to its assets The Group has raised external debt financing by borrowing from credit institutions pursuant to several financing agreemen
Slide 30: Overview of Risks (4/7)
Overview of Risks (4/7) The Group is exposed to the credit risk of its customers and other counterparties The Group is exposed to credit risk. The Group is continuously monitoring the payment behaviour of its customers and other counterparties. Moreover, in addition to contractual monetary obligatio
Slide 31: Overview of Risks (5/7)
Overview of Risks (5/7) The trading in the shares on the regulated market may be suspended or terminated The shares of the Company are traded in the secondary market of the regulated market of Nasdaq OMX Tallinn, and the trading in the shares on the regulated market may be suspended or terminated. F
Slide 32: Overview of Risks (6/7)
Overview of Risks (6/7) Profitability of Group’s future developments and new acquisitions can be significantly impacted by increase of renovation and construction costs if competitors will pursue their developments. Additionally, if competitors will commence intended and announced projects the compe
Slide 33: Overview of Risks (7/7)
Overview of Risks (7/7) The shares may not be a suitable investment for all investors Each potential investor in the shares must determine the suitability of that investment in light of its own circumstances. In particular, each potential investor should: have sufficient knowledge and experience to
Slide 34: Annexes
Annexes 1 Estonian retail market and T1 Mall 2 Portfolio and track record 3 Debt composition 34
Slide 35: Annex 1: Estonian Retail Market – Existing Stock Over 10 Years Old
Annex 1: Estonian Retail Market – Existing Stock Over 10 Years Old Retail Space Prices in Tallinn in 2017 Existing shopping centres projected and built close to 10 years ago. None of the shopping centers has entertainment areas adapted to market demand. Negligible vacancies in any existing shopp
Slide 36: Annex 1: Estonian Retail Market Overview
Annex 1: Estonian Retail Market Overview Rocca Al Mare Viru Keskus Porto Franco Opened in 1999; expanded in 2009 Opened in 2004 GLA of 57,400 sq.m. GLA of 26,800 sq.m. Planned mixed-use develpoment with GLA ca 40,000 sq.m. Owned by Citycon Oyj. Owned by a group of investors. Status:
Slide 37: Annex 1: T1 Shopping & Entertainment Center
Annex 1: T1 Shopping & Entertainment Center FIRST NEXT GENERATION SHOPPING CENTRE KEY ADVANTAGES IN THE BALTIC AREA First next generation shopping centre in the Baltics with unique Ferris wheel with top 3 shopping levels height of 120m architecture, high quality construction and technical features
Slide 38: Annex 2: Tallinn Portfolio and Track Record
Annex 2: Tallinn Portfolio and Track Record 1. KRISTIINE CITY 2. KALARANNA RESIDENTIAL COMPLEX RESIDENTIAL COMPLEX Development of primarily Development of residential property on the northern residential and some commercial waterfront. A residential area very close to Tallinn property close to City
Slide 39: Annex 2: Riga Portfolio and Track Record
Annex 2: Riga Portfolio and Track Record 1. KLIVERSALA RESIDENTIAL 2. TALLINAS RESIDENTIAL COMPLEX COMPLEX Development of residential and commercial property in Riga at the Development of residential and commercial Daugava river waterfront enjoying views property in Riga next to the border of Riga’s
Slide 40: Annex 2: Vilnius Portfolio and Track Record
Annex 2: Vilnius Portfolio and Track Record 1. SALTINIU NAMAI RESIDENTIAL COMPLEX Second phase of the Saltiniu Namai development. A residential property consisting of a land plot with building volume of over 13,000 sq.m. of NSA. The property is located on the border of Vilnius old town. Saltiniu Nam
Slide 41: Annex 3: Balance Sheet – debt details
Annex 3: Balance Sheet – debt details 2012 - 2017 Lenders € thousand 2017 2016 2015 2014 2013 2012 Debt details and split Luminor Bank AS (former Nordea Bank AB) (EE) 474 501 220 659 0 0 Debt 2017 2016 2015 2914 2013 2012 Swedbank AS (EE) 0 1,303 1,405 1,507 1,647 1,731 € thousand Current debt, fina