Gpt Group · ASX:GPT
Gpt — Merger or Acquisition (February 2005)
51 slides from Gpt's merger presentation, Feb 17, 2005
Slide 1: GPT Internalisation Proposal Investor Presentation
Slide 2: Table of Contents
Table of Contents 1. Background 2.0.0... cece cece eee cee eee ee eee eee ee eeeeeeeeeeneneees 3 2. Proposal Overview ..............:cccccee cece ee eeeeeeeeeeeeeeeeeeeeeanees 5 3. Financial Impact and Benefits for GPT.......................00ee 17 4. Joint Venture with Babcock & Brown..............
Slide 3: 1. Background
Slide 4: 1. Background
1. Background > Consistent feedback from investors » Strong support for an internalisation > Create a platform for ongoing growth >» Maintain investor choice in the sector > GPT Independent Directors recommend unit holders reject Stockland’s offer > GPT approached Babcock & Brown with proposal to fo
Slide 5: 2. Proposal Overview
Slide 6: 2. Proposal Overview
2. Proposal Overview Internalisation of GPT > GPT will internalise to create a new independently managed group > Enter into a Joint Venture with Babcock & Brown initially capitalised at $1.0 billion and growing to $1.4 billion within 18 months > Establish a strategic alliance with Babcock & Brown to
Slide 7: Internalisation process
Internalisation process > GPTML to requisition and convene a meeting to implement the proposal > Passed via ordinary resolutions requiring a 50% vote Management and governance > Key senior executives of GPT to continue under new structure > GPT Chairman and Independent Directors to remain > Appropri
Slide 8: Estimated Financial Impact
2. Proposal Overview Estimated Financial Impact 220), nla fe onyear) 2c%—<“‘ CS 21% on, not annualised. Assumes proposal effective 1 July 2005. > DPS growth of 6.6% - CY2006 vs 2HCY2005 annualised? > Superior growth prospects going forward > No material change in NTA - $3.00 vs. $3.02 > Pro forma De
Slide 9: 2. Proposal Overview
2. Proposal Overview Strong focus on extracting value from GPT’s existing high quality, diversified, $8bn+ investment portfolio $1 billion Joint Venture with Babcock & Brown > GPT’s target allocation to Joint Venture — up to 15% of GPT’s assets contributing up to 20% of GPT’s EBIT' Vv Growth driven
Slide 10: $1 billion Joint Venture with Babcock & Brown (cont.)
$1 billion Joint Venture with Babcock & Brown (cont.) > $1 billion 50:50 Joint Venture capitalised as to > $900m from GPT ($700m cumulative preferred 9% capital and $200m ordinary equity) > $100m from Babcock & Brown in ordinary equity » Expected to grow to $1.4 billion within 18 months > Joint Vent
Slide 11: $1 billion Joint Venture with Babcock & Brown (cont.)
$1 billion Joint Venture with Babcock & Brown (cont.) > Joint Venture funds management business > Asset management for Australian listed and wholesale funds and Global Property Vehicle > Opportunity for proposed externally managed hotel fund seeded with GPT and TAHL assets totalling $1.8 billion’ >
Slide 12: Arrangement with Babcock & Brown
2. Proposal Overview Arrangement with Babcock & Brown (cont.) > Joint Venture benefits from Babcock & Brown’s global real estate platform > Extensive track record in wide range of asset classes and geographies > Deal sourcing and execution capability via established relationships and 50 real estate
Slide 13: Arrangement with Babcock & Brown (cont.)
2. Proposal Overview Arrangement with Babcock & Brown (cont.) Babcock & Brown invests $100m for a 50% ordinary equity interest alongside GPT GPT GENERAL PROPERTY TRUST Babcock & Brown $50m capital uplift is subject to both parties receiving 10% IRR over 3 years on cash invested Hurdle requires minim
Slide 14: Partial sell down of assets to Westfield
2. Proposal Overview Partial sell down of assets to Westfield > GPT to sell 50% interests in Penrith and Woden plus a 25% interest in Sunshine’ to Westfield > Westfield to manage jointly owned assets! > Sale proceeds of $744m - above December 2004 valuations > Weighted average sale yield - below 6%
Slide 15: Key benefits to GPT investors
2. Proposal Overview Key benefits to GPT investors > Creates an independent, internally managed group > Delivers GPT investors enhanced income and capital growth prospects > Maintains investor choice in the listed property trust sector > Continuity of management > Provides a superior alternative to
Slide 16: Independent Directors' recommendation
2. Proposal Overview GPT’s Independent Directors‘ intend to recommend the Proposal subject to > Confirmation by the Independent Expert that it is in the best interests of unit holders > No superior proposal emerging 1 For this purpose the Independent Directors comprise Peter Joseph (Chairman), Ken M
Slide 17: 3. Financial Impact and Benefits for GPT
Slide 18: Estimated Distribution impact
3. Financial Impact and Benefits for GP Estimated Distribution impact , 20% —“‘C istribution, not annualised. Assumes proposal effective 1 July 2005. > DPS growth of 6.6% - CY2006 vs 2HCY2005 annualised? > DPS 12 months to 30 June 2006 = 26.7cps > No material change in NTA - $3.00 vs. $3.02 > Pro-fo
Slide 19: FY06 DPS yield versus peers
FY06 DPS yield versus peers Re-rate potential > 8.7% y Tt DRT MGR SGP MGQ WDC CNP MXG GPT GPT (post transaction} {current} GPT implied DPS yield derived using 16/2/2005 close price and estimated DPS for the 12 months to 30 June 2006 of 26.7c Source: Broker consensus DPS (IBES), security prices at cl
Slide 20: FY06 DPS growth
3. Financial Impact and Benefits for GPT FY06 DPS growth 7.5% wobc 6.6% GPT (post transaction) 6.2% Hl 6.2% Bs 8% 5.8% 4.8% Bl 4.4% 3.1% SGP MGQ MXG DRT CNP. MGR GPT (standalone) GPT (post transaction) growth is CYO6 on CY05 annuatised for the impact of internalisation and the Joint Venture. GPT sta
Slide 21: FY06 DPS growth
3. Financial Impact and Benefits for GP FY06 DPS growth > Growth beyond forecast expected to come from > Joint Venture trading and consequent recycling of capital > Development projects driving higher returns on equity > Joint Venture funds management activities > Increased opportunities for interna
Slide 22: Moderate gearing
Moderate gearing 46.0% BB 44.8% 36.5% 31.3% 28.2% MM 27.7% MM 27.5% GPT CNI DRT WDC MGQ MGR GPT {post P MXG SGP transaction} (standalone) Gearing based on total interest bearing liabilities to gross assets. Source: December results / MRE estimates. > GPT has restated its own target gearing range as
Slide 23: Premium to NTA
Premium to NTA of yxy 103% JM 102% FI ooo, 46% FE 46% TB 45% 26% | [aay 5% a MGQ MXG MGR WDC CNP SGP GPT {post GPT ORT transaction) (standalone) GPT post transaction assumes trading price of $3.77, being the closing price at 16 February 2005. Source: December results | MRE estimates. > Relatively lo
Slide 24: Prudent mix of core and enhanced earnings
Prudent mix of core and enhanced earnings FY06 forecast EBIT split 84% 99% 16% | MGR SGP CNP GPT (post MGQ GPT transaction)* (standalone) Corporate @ Trust GPT “corporate” earnings defined as enhanced earnings from Joint Venture plus GPT’s interest in Rouse Hill and Twin Waters for CY06 Source: MRE
Slide 25: Implied value
3. Financial Impact and Benefits for GPT Implied value FY06 DPS Yield Implied value ($ per unit) > GPT's last price of $3.77 implies a yield of 7.1% on estimated FY06 distributions > Significant re-rate potential based on > Immediate uplift in earnings and platform for long term growth > Distributio
Slide 26: Risk Mitigation through Diversification
3. Financial Impact and Benefits for GP Risk Mitigation through Diversification > Appropriate balance between core and enhanced earnings Remains predominantly weighted to high quality investment earnings Stable rental income underpins Joint Venture earnings > Diversification benefits GPT GENERAL PRO
Slide 27: 4. Joint Venture with Babcock & Brown
Slide 28: Proposed Joint Venture Structure
4. Joint Venture with Babcock & Brown Structure Proposed Joint Venture Structure Babcock & Brown Preferred Capital mmm ~ Joint Venture Property Funds Management Business GPT 28 GENERAL PROPERTY TRUST
Slide 29: Global Property Vehicle: Investment Strategy
4. Joint Venture with Babcock & Brown Global Property Vehicle > Investment Strategy > GPT GENERAL PROPERTY TRUST Investment in a broad range of asset classes and geographic markets with appropriate risk controls in place Significant upside potential from active management, development opportunities,
Slide 30: Global Property Vehicle: Initial focus on Europe
4. Joint Venture with Babcock & Brown Global Property Vehicle > Initial focus on Europe GPT GENERAL PROPERTY TRUST > Size of market — world’s second largest investment grade property market after North America Low level of securitised property asset ownership — 36% in Germany versus 60 ~ 70% in Aust
Slide 31: Global Property Vehicle: Target returns to GPT
4. Joint Venture with Babcock & Brown Global Property Vehicle > Target returns to GPT in 2005 > 72% of return to GPT via cumulative 9% coupon on preferred capital > 28% of return to GPT via 50% equity interest > Targeting minimum 15% IRR on ordinary equity > Historically Babcock & Brown has delivere
Slide 32: Global Property Vehicle: Capital structure
4. Joint Venture with Babcock & Brown Global Property Vehicle > Capital structure > Initial average 65% (agreed maximum 75%) debt / total assets inclusive of Joint Venture debt > Fully non-recourse, long dated Euro denominated debt > Hedging policy > Interest rate swaps covering 100% of senior debt
Slide 33: Initial Portfolio
4. Joint Venture with Babcock & Brown Initial Portfolio > Currently controlled by Babcock & Brown — will contribute to Joint Venture on implementation (assumed to be 1 July 2005) > 5 assets / portfolios worth circa $1.1b — underpinned by secure rental income > German medium density, low rise residen
Slide 34: Indicative Joint Venture asset diversification
4. Joint Venture with Babcock & Brown Indicative Joint Venture asset diversification — Initial and Follow-On assets Joint Venture assets by class Joint Venture assets by region/country Australia Development 3% 6% Residential Other 33% European 19% ‘| Czech Re Li Industrial a ic ‘O ae Germany 67% Ret
Slide 35: Property Funds management business
4. Joint Venture with Babcock & Brown Property Funds management business > Focus on creation of new listed and wholesale products > Opportunity for GPT and Babcock & Brown to seed a listed hotel property trust > GPT in strong position to seed and co-invest in other listed and wholesale funds > Marri
Slide 36: Governance
4. Joint Venture with Babcock & Brown Governance > Joint Venture Board - equal representation from GPT and Babcock & Brown nominees > Termination triggers > On a change of control > Failure to achieve minimum return requirements > Refusal to continue to invest in Joint Venture > Consequence of termi
Slide 37: 5. Implementation
Slide 38: Implementation
9. Implementation Resolutions > Subject to unit holder approvals — all ordinary 50% Timetable > Announcement of proposal 17 February 2005 > Explanatory Memorandum available April 2005 > Unit holder meeting May 2005 > Effective Date June 2005 This timetable is indicative only and will be updated when
Slide 39: Key Benefits
5. Key Benefits >» Creates an independent, internally managed group >» Delivers GPT investors enhanced income and capital growth prospects >» Maintains investor choice in the listed property trust sector >» Continuity of management >» Provides a superior alternative to the Stockland offer >» Reserve
Slide 40: Questions
Slide 41: Appendix A – Initial Portfolio
Slide 42: German Residential — Kiel Portfolio
Appendix A - Initial Portfolio German Residential — Kiel Portfolio Location Asset type Purchase price Initial yield Occupancy Characteristics Market description Investment strategy GPT GENERAL PROPERTY TRUST Northern Germany (Eastern Kiel) Residential Apartments (affordable housing sector) €40.0m pl
Slide 43: German Residential — Salzgitter Portfolio
Appendix A - Initial Portfolio German Residential — Salzgitter Portfolio Location City of Salzgitter, north western Germany Asset type Residential Apartments (affordable housing sector) Purchase price €290m Initial yield 6.6% on passing income after maintenance, modernisation and repairs Occupancy 8
Slide 44: German Residential — AMB Generali Portfolio
Appendix A - Initial Portfolio German Residential — AMB Generali Portfolio Location Asset type Purchase price Initial yield Occupancy Characteristics Market description Investment strategy GPT GENERAL PROPERTY TRUST Western Germany Residential Apartments (affordable housing sector) €130m exclusive o
Slide 45: Cologne Business Park, Germany
Cologne Business Park, Germany Location Asset type Purchase price Initial yield Occupancy Characteristics Market description Investment strategy GPT GENERAL PROPERTY TRUST 5km west of city centre of Cologne, Germany’s 6" largest economic city Office / technology park €70.6m 6.2% 90% 30% interest in
Slide 46: Galerie Butovice, Prague
Location 6km south west of central Prague Asset type New Retail and office Purchase price €106.8m Initial yield 8.0% Occupancy Approx. 93% income is pre-committed Characteristics *37,475 sqm retail NLA (Ahold supermarket, 13,941m?) *9,154 sqm office NLA (70% pre- committed to Ahold) *1,377 parking s
Slide 47: Appendix B – Financials
Slide 48: Estimated Distribution impact
Appendix B - Financials Estimated Distribution impact > Key assumptions > Internalisation eliminates management fee leakage of $20m in CY05 Asset sale to Westfield realises $744m' at an average sale yield below 6% on passing income. Proceeds applied to fund investment in Joint Venture Initial $886m
Slide 49: GPT Estimated Distribution Statement
Appendix B - Financials GPT Estimated Distribution Statement 1:2 FY06 YO6 ($m) ($m) ($m) GPT stand alone* 459 466 473 Add back management fees 37 38 39 Less management expenses (17) (17) (17) Total earnings after internalisation 479 486 494 Less net rental from assets sold to Westfield (42) (43) (43
Slide 50: GPT Summary Balance sheet
Appendix B - Financials GPT Summary Balance sheet Assets Trust properties Investment in joint venture Other assets Total assets Interest bearing liabilities Other liabilities Total liabilities Net assets Gearing? NTA per unit * Pro forma assuming the proposal was implemented 31 December 2004 ? Inter
Slide 51: Disclaimer
Disclaimer : This presentation has been prepared by GPT Management Limited (ABN 94 000 335 473) as the responsible entity of General Property Trust (ARSN 090 110 357) and Babcock and Brown Limited (ABN 53 108 614 955). The details in this presentation provide general information only. It is not inte