360 Capital Reit · ASX:TOT
360 Capital Reit — 1H19 Earnings Presentation
33 slides from 360 Capital Reit's earnings presentation, Feb 27, 2019
Slide 1: 360 Capital Total Return Fund 1H19 Results Presentation
360 CAPITAL TOTAL RETURN FUND (ASX: TOT) 1H191H19 Results Presentation Results February 2019 27 February 2019 360 Capital Total Return Fund
Slide 2: Table of Contents
Table of Contents Section 1 Snapshot and Investment Strategy 3 2 Australian Banking Market and AMF Finance 6 3 Loan Portfolio 10 4 360 Capital Residual Stock Credit Fund 22 5 360 Capital Construction Credit Fund 25 6 Financial Results 28 7 Distribution History and Guidance 31 2 1H19 Results February
Slide 3: 1. Snapshot and Investment Strategy
1. Snapshot and Investment Strategy 3 1H19 Results February 2019 360 Capital Total Return Fund
Slide 4: Snapshot
Snapshot Nimble investment strategy provides flexibility should market conditions deteriorate • Statutory net profit of $3.1m and Operating Profit $4.0m • 6.0cps Operating Earnings per Security (EPS) and 6.0cps Distributions per Security (DPS), in line with guidance • The Fund’s closing price1 refle
Slide 5: TOT's Investment Strategy – Debt remains attractive
TOT’s Investment Strategy – Debt remains attractive Why real estate debt? Current Focus Real Estate Debt • Late stages of real estate cycle, focus on capital preservation, step-out of first loss position • Banking Royal Commission and changes to prudential regulation continue to benefit non-bank sec
Slide 6: 2. Australian Banking Market and AMF Finance
2. Australian Banking Market and AMF Finance 6 1H19 Results February 2019 360 Capital Total Return Fund
Slide 7: Australian Banking Market
Australian Banking Market • Based on APRA data, Australia’s $279 billion commercial real estate banking market is 78% funded by the major banks and 17% by foreign banks and their subsidiaries. • Since 2016, foreign banks exposure to commercial real estate has increased dramatically mainly through di
Slide 8: Addressing the funding gap – AMF Finance
Addressing the funding gap – AMF Finance • Continuing to invest in systems and processes • New online application process • Digital marketing strategy has generated significant deal flow and market awareness • Scalable business with growing market presence • Over $3b of transactions reviewed, with t
Slide 9: Risk management – robust credit approval and monitoring
Risk management – robust credit approval and monitoring Inbound Heightened focus on: ✓ Pre-sale reviews i.e. purchasers capacity to Enquiry complete and contract price vs. current value ✓ Registered mortgage ✓ Valuations ✓ Tripartite deed ✓ Builder’s financial position ✓ Facility documentation Loan
Slide 10: 3. Loan Portfolio
3. Loan Portfolio 10 1H19 Results February 2019 360 Capital Total Return Fund
Slide 11: Loan Portfolio
Loan Portfolio 7 $110.2m $236.9m Loan Investments Loan Book1,2 Projected End Value1,2,3 $80.5m 65.4% 11.6% First loss buffer1,2,3 Loan to Value Ratio1,2,3 Average Interest Rate1,4 1. Facility amount including capitalised interest and fees 2. Based on “As if Complete” valuation (net of GST) 3. Calcul
Slide 12: Loan Portfolio
Loan Portfolio Loan Type1 Geography1 Mezzanine WA 7.0% 15.0% NSW 44.0% Senior VIC 93.0% 41.0% 1. Based on facility amount including capitalised interest and fees 12 1H19 Results February 2019 360 Capital Total Return Fund
Slide 13: Loan Portfolio
Loan Portfolio Asset Type1 Loan Expiry1 Accommodation Loan Portfolio Expiry 7.3% 45,000,000 Residential 44.5% 40,000,000 35,000,000 30,000,000 25,000,000 20,000,000 15,000,000 10,000,000 Hotel 39.8% 5,000,000 - Medical Centre 8.4% 1. Based on facility amount including capitalised interest and fees 1
Slide 14: Loan Portfolio: Melbourne hotel development
Loan Portfolio: Melbourne hotel development Property Type Commercial construction and development Developer profit $5.8M First loss Loan Type Senior buffer Developer $16.7m equity Project has reached practical completion. Facility has been $10.9M Loan Status extended by 1.5 months to allow for excha
Slide 15: Portfolio Update – Melbourne medical centre
Portfolio Update – Melbourne medical centre Developer profit Property Type Commercial construction and development $1.7M First loss •r buffer $3.7m Developer equity Loan Type Senior $2.0M Project has reached practical completion, tenants have commenced Loan Status occupation expected repayment inlin
Slide 16: Loan Portfolio: Western Sydney apartments
Loan Portfolio: Western Sydney apartments 1 Developer profit Property Type Residential construction and development $2.1M Loan Type Senior First loss buffer Project has reached practical completion, delay in achieving $10.1M Loan Status Final Occupancy Certificate due to completion of project in Dev
Slide 17: Loan Portfolio: Western Sydney apartments
Loan Portfolio: Western Sydney apartments 2 Developer profit Property Type Residential construction and development $5.2M First loss buffer Loan Type Senior $13.6M Developer equity $8.4M Loan continues to perform. Construction currently 2-months Loan Status ahead of schedule. Debt covered by pre-sal
Slide 18: Loan Portfolio: Eastern Sydney boarding house
Loan Portfolio: Eastern Sydney boarding house Developer profit Property Type Commercial construction and development $1.4M First loss buffer $3.4m Developer Loan Type Senior equity $2.0M Loan Status Loan continues to perform. ✓ Net Realisation: $11.4m (ex GST) ✓ Facility Amount: $8.0m Size ✓ Loan to
Slide 19: Loan Portfolio: Perth hotel development
Loan Portfolio: Perth hotel development Developer profit $6.8M Property Type Commercial construction and development First loss buffer Developer equity $22.2M $15.4M Loan Type Mezzanine Project is progressing well, with no major impact to the original Junior debt Loan Status 2nd mortgage forecasted
Slide 20: Loan Portfolio: Perth residual stock
Loan Portfolio: Perth residual stock Property Type Residential residual stock facility Loan Type Senior Loan continues to perform, 3 sales achieved to date, 33 Loan Status Developer equity apartments remaining. Facility Amount reduced by $1.5m First loss buffer $11.8M $11.8M ✓ Net Realisation: $20.0
Slide 21: Loan Portfolio: repayment and reinvestment
Loan Portfolio: repayment and reinvestment Forecast Cash Repayment and Reinvestment 80,000,000 60,000,000 40,000,000 Construction Fund 20,000,000 TOT to seed Residual Stock - Fund with Port Coogee Jan-19 Feb-19 Mar-19 Apr-19 May-19 Jun-19 Jul-19 Aug-19 Sep-19 Oct-19 Nov-19 Dec-19 Jan-20 Feb-20 Mar-2
Slide 22: 4. 360 Capital Residual Stock Credit Fund
4. 360 Capital Residual Stock Credit Fund 22 1H19 Results February 2019 360 Capital Total Return Fund
Slide 23: Summary of Fund Terms
Summary of Fund Terms Target Fund Return: • 8.0% Internal Rate of Return p.a. Investment Manager • 360 Capital Group (ASX: TGP) Co-investment: • 360 Capital Total Return Fund has committed up to A$25 million to the Fund as co-investment Minimum Investment: • Subject to the Investment Managers discre
Slide 24: Underlying Loan Investment Parameters
Underlying Loan Investment Parameters Geographic Restrictions: • Australian capital cities only • Any individual loan investment must not exceed a Loan to Value Ratio (“LTV”) of 70.0% net of GST and selling costs Loan to Value Ratio: • The aggregate loan portfolio will target a portfolio LTV of 65.0
Slide 25: 5. 360 Capital Construction Credit Fund
5. 360 Capital Construction Credit Fund 25 1H19 Results February 2019 360 Capital Total Return Fund
Slide 26: Summary of Fund Terms
Summary of Fund Terms Target Fund Return: • 10.0%+ Internal Rate of Return p.a. Investment Manager • 360 Capital Group (ASX: TGP) Co-investment: • 360 Capital Total Return Fund will commit up to A$25 million to the Fund as co-investment Minimum Investment: • Subject to the Investment Managers discre
Slide 27: Underlying Loan Investment Parameters
Underlying Loan Investment Parameters Geographic Restrictions: • Australian capital cities only Asset Classes: • Residential, Commercial, Industrial, Retail & other real estate Loan to Value Ratio: • Any individual loan investment must not exceed a Loan to Value Ratio (“LVR”) of 70.0% net of GST and
Slide 28: 6. Financial Results
6. Financial Results 28 1H19 Results February 2019 360 Capital Total Return Fund
Slide 29: Earnings and Distributions
Earnings and Distributions HY19 HY18 CHANGE Statutory net profit ($’000) ($’000) Statutory net profit attributable to attributable to Distribution income 2 3 securityholders higher than prior half year securityholders reflecting growth of finance revenue on Finance revenue 4,195 766 $3.1m real estat
Slide 30: Assets and Liabilities
Assets and Liabilities 31 Dec 18 30 Jun 18 CHANGE Loan Book 360 Capital’s dedicated debt team has ($’000) ($’000) grown to four, which has led to a $110.2m significant increase in deal flow with Cash Receivables 9,718 25 40,089 1 (30,371) 24 Comprising 93% senior loans the Fund growing its loan book
Slide 31: 7. Distribution History and Guidance
7. Distribution History and Guidance 31 1H19 Results February 2019 360 Capital Total Return Fund
Slide 32: Distribution history and composition
Distribution history and composition Regular quarterly distributions, enhanced by special distributions and active earnings through AMF Finance Distribution History Distribution Composition 3.00 3.00 2.81 2.81 Active Return 0-2 cps 2.40 2.40 2.25 2.25 2.25 2.25 1.90 1.90 1.90 2.4cps 1.50 1.50 1.50 1
Slide 33: Peer comparison and guidance
Peer comparison and guidance FORECAST FY19 EPS YIELD OUTLOOK 9.8% 7.5% 8.0% • Regulatory changes, coupled with the implementation of Basel IV capital controls have restricted Australian banks’ exposure to real estate 5.0% construction and development. MXT QRI EDC TOT • These conditions have created