Arena Reit · ASX:ARF
Arena Reit — Merger or Acquisition (November 2014)
25 slides from Arena Reit's merger presentation, Nov 4, 2014
Slide 1: Internalisation Proposal
For personal use only Arena REIT (ASX code: ARF) Internalisation Proposal Creating enhanced alignment and competitive advantages 4 November 2014
Slide 2: Contents
Contents 1 Executive Summary 3 For personal use only 2 Background 4 3 Proposal overview 5-7 4 Investor meeting 8 5 Board and management 9-11 6 Financial impact 12-14 7 Potential disadvantages and risks 15 8 Other alternatives considered 16 9 Independent expert’s opinion 17 10 Independent directors’
Slide 3: Executive summary
1 Executive summary Internalisation Proposal to be presented to ARF Investors • Arena REIT to internalise its management structure subject to conditions precedent including ARF Investor For personal use only approval and no superior proposal (Internalisation Proposal). • If the Proposal is approved
Slide 4: Background
2 Background Internalisation opportunity flagged to market on 25 August 2014 For personal use only • On 25 August 2014, Arena announced that it had entered into an exclusivity agreement for a period of six months with Citrus II Investments Pty Ltd (the ultimate owner of Arena Investment Management L
Slide 5: Proposal overview
3 Proposal overview Key elements of the Proposal are ….. • Consideration - ARF is to pay consideration to Citrus II which implies a purchase price of approximately $10.7 For personal use only million for the ARF and wholesale funds management (intangible) rights plus net asset adjustments of approxi
Slide 6: Proposal overview (cont)
3 Proposal overview (cont) Key elements of the Proposal are ….. For personal use only • Retain Existing Name & Branding – ARF will retain the existing Arena brand, investor goodwill and intellectual property built up over the past few years. • Other Management Services – CISL ( which post implementa
Slide 7: Proposal overview (cont)
3 Proposal overview (cont) No changes required to constitutions • The Proposal will enhance alignment of the Board and For personal use only management with Investors’ interests and will be Post implemented via: o the distribution to Investors of one fully paid ordinary share in Arena REIT Limited (
Slide 8: Investor meeting
4 Investor meeting Scheduled for 5 December 2014 • An Investor Meeting is scheduled to be held at 11.00am Friday 5 December 2014 at West Tower Suite, Level 35, For personal use only Sofitel Hotel, 25 Collins Street, Melbourne. • Investors will be requested to consider, and if thought fit, pass the f
Slide 9: Board & management team
5 Board & management team Experienced and resourced For personal use only Arena REIT Limited David Ross (Independent Chairman) Dennis Wildenburg (Independent Non-executive Director) Simon Parsons (Independent Non-executive Director) Bryce Mitchelson (Managing Director) Managing Director Admin Suppor
Slide 10: Remuneration Structure
5 Remuneration Structure Aligning performance with investor returns For personal use only • The Board has adopted a remuneration policy that recognises the need to motivate, attract, and retain employees to deliver sustainable and superior business performance. • The Independent Board Committee cons
Slide 11: Managing Director's REM for FY15
5 Managing Director’s REM for FY15 Designed in line with market practice For personal use only • The annualised remuneration for the Managing Director, Bryce Mitchelson, for FY15 has been set at: Employee Total Fixed REM Max FY15 STI % Max FY15 LTI (TFR) of TFR % of TFR Bryce Mitchelson $475k $237.5
Slide 12: Financial impact
6 Financial impact Annualised pro-forma management costs For personal use only $ million Pre Adjustments Pro forma 1 Internalisation Post internalisation 2 Base management fee 3.1 (3.1) - 3 Other management operating costs 0.3 2.3 2.6 4 Management fee income - (0.3) (0.3) Net Management Costs 3.4 (1
Slide 13: Financial impact (cont): Upgraded FY15 distribution guidance
6 Financial impact (cont) Upgraded FY15 distribution guidance For personal use only Cents per security 10.50 10.01,2 14.3% 10.00 9.751 FY15 expected DPS growth 9.50 1 On a status quo basis 9.00 assuming no new 8.65 8.75 acquisitions and developments in 8.50 progress are completed 8.2 in line with bu
Slide 14: Financial impact (cont): Balance sheet pro-forma
6 Financial impact (cont) Balance sheet pro-forma (as at 30 June 2014) For personal use only Notes: A – Settlement of asset sales and committed development capital expenditure B – Acquisition of management business on implementation of the Internalisation Proposal C – Transaction costs Arena REIT In
Slide 15: Potential disadvantages and risks
7 Potential disadvantages and risks Taking a balanced view For personal use only Issue Description Comment Change in risk profile • Change in ARF will be taking on funds and These services are ancillary to owning property investment property management business and allow better control of investment
Slide 16: Other alternatives considered
8 Other alternatives considered • In considering the Internalisation Proposal and in forming the view that the Internalisation Proposal is in the best For personal use only interests of Investors, the Independent Directors have had regard to possible alternatives, and the potential implications of t
Slide 17: Independent expert's opinion
9 Independent expert’s opinion Assessed valuation higher than consideration • The Independent Directors appointed KPMG Corporate Finance to prepare an independent expert’s report to For personal use only opine on the Internalisation Proposal. • The Independent Expert assessed that the present value
Slide 18: Independent directors' recommendation
10 Independent directors’ recommendation Unanimously recommend the Internalisation Proposal • The Arena Board established an Independent Board Committee (comprising only the independent directors) to For personal use only consider the Internalisation Proposal and the available alternatives to determ
Slide 19: Indicative timetable
11 Indicative timetable If the internalisation is implemented For personal use only Indicative only and subject to change. Arena REIT Internalisation Proposal | www.arenainvest.com.au 19
Slide 20: Summary
12 Summary Why the Internalisation Proposal is in the investors best interests The Independent Directors believe that the advantages of the Internalisation Proposal outweigh the potential For personal use only disadvantages. The key benefits of the Internalisation Proposal are summarised as follows:
Slide 21: Transaction evidence – management internalisations
A Transaction evidence – management internalisations For personal use only Source: KPMG Corporate Finance Report, page 46 Arena REIT Internalisation Proposal | www.arenainvest.com.au 21
Slide 22: Current management fee entitlements
B Current management fee entitlements Fees to be removed following Internalisation For personal use only Type of fee Entitlements under the Constitution Fees Paid or cost FY14 $ Ongoing 0.8% of total assets up to $400m 2,377k management 0.7% on total assets between $400m and $950m fees 0.6% on total
Slide 23: Unlisted wholesale funds
C Unlisted wholesale funds Single asset vehicles owning well performing healthcare assets to be managed by ARF For personal use only PHC Darlinghurst Syndicate & Trust BSH Joint Venture No. Investors 40 No. Investors 19 Asset Large scale medical clinic leased Asset Pathology laboratory asset to Prim
Slide 24: Important Note
Important Note This document has been prepared by Arena Investment Management Limited ACN 077 235 879 AFSL No. 233190 (“Arena”) as For personal use only responsible entity of the managed investment scheme(s) referred to on page 1. The information contained in this document is current only as at the
Slide 25: For personal use only
For personal use only