Download Plazacorp Investor Presentation

Plazacorp Retail Properties Ltd.
Acquisition of KEYreit
March 25, 2013
Plazacorp and Transaction Overview
 Plazacorp Retail Properties Ltd. (“PLZ”) has reached an agreement to acquire
KEYreit (“KRE”) (the “Transaction”)
 This acquisition further solidifies PLZ’s position as Eastern Canada’s leading
property owner, developer and manager of unenclosed and enclosed retail real
estate
 What sets Plazacorp apart:
− Proven value-added development and operating capabilities with local market presence
− Fully internalized management team and platform
− Management and Directors own a significant (~40%) stake in the company
− Unparalleled dividend growth record (11 dividend increases in 10 consecutive years)
− Strong relationships with leading national and regional tenants
Annual Dividend
per Share (C$)
− Plazacorp compound annualized shareholder returns since going public in July 1999 of ~17%*
www.plaza.ca
* As of March, 2013. Compound annualized rate of return includes capital appreciation and dividend income
2
Transaction Rationale
 Expected high single digit percentage AFFO per share accretion for PLZ
Immediate
Accretion
 Further reduces PLZ’s industry leading AFFO payout ratio based on
PLZ’s current dividend of $0.225/share
 Ability to leverage PLZ’s fully internalized management platform to
generate significant synergies (~$3 million on a run-rate basis)
Significant
Immediate
Synergies
 Synergies include elimination of asset and property management fees
to JBM Properties Inc. as well as public company G&A cost efficiencies
 Many of KRE’s leases are “quadruple net”
 Shoppers Drug Mart is the largest tenant for both PLZ and KRE
Compatible
Property
Portfolio
– Shoppers will remain as PLZ’s largest tenant on a pro forma basis,
representing ~26% of PLZ’s min rent
 Weighted average lease terms: ~8 years (KRE) and ~7.3 years (PLZ)
Enhanced
Geographic
Diversification
Improved
Profile for KRE
Unitholders
Taking PLZ
Shares
 PLZ’s geographic concentration in Atlantic Canada changes from
~71% to ~60%, and Ontario changes from ~5% to ~12% (by GLA)
 Sustainable 2013E consensus AFFO payout ratio of ~80% & debt/GBV
between ~57-58%
 Greater tenant diversification
 Internal management & in-house development/redevelopment expertise
 ~3.3x larger market cap relative to KRE*, and enhanced trading liquidity
 Access to lower cost capital to fuel growth
www.plaza.ca
* For illustrative purposes, PLZ’s market cap assumes convertible debentures are converted into shares and
calculation is based on an illustrative PLZ share price of $4.90/share
3
Terms of the Transaction
 $8.00 total consideration per KRE unit
Offer Price
 29.4% premium to unaffected price of $6.18/unit*
– 6.7% premium to Huntingdon’s $7.50/unit offer
 50% cash / 50% shares for KRE units outstanding, subject to proration
Form of
Consideration
 Lock-up agreement with John Bitove, KRE’s CEO and largest unitholder
 1.6326 PLZ shares for each KRE unit outstanding
 Tax-free rollover for unitholders electing for PLZ shares
Transaction
Support
Deal
Protection
 Unanimous support of both the PLZ and KRE Boards of Trustees
 KRE Trustees will tender their units to the bid
 $5 million break fee
 5-business-day right-to-match
 50% equity consideration financed with ~12.15 million PLZ shares
 Committed debt financing provided by RBC to fund cash consideration
Financing
– PLZ does not intend to issue any equity to fund the cash portion
– Modest de-levering may occur after the transaction as a result of a small
number of property sales
Expected
Timeline
www.plaza.ca
 Mailing of Take-over Bid and Director’s Circular expected early to mid
April, 2013
* Unaffected date of as close on January 28, 2013 (day prior to Huntingdon's announced intention to acquire
45% of KRE’s shares)
4
Strong Pro Forma Operating Metrics
Plazacorp (Pre-Transaction)
Plazacorp (Post-Transaction)
118
+193%
5.2M
+23%
7.3 yrs
+3%
7.5 yrs
$607M
+55%
~$930M
~$334M
+20%
properties
sq. ft. of GLA
weighted avg.
lease term
www.plaza.ca
properties
6.4M
sq. ft. of GLA
weighted avg.
lease term
total assets
total assets
market cap*
346
~$400M
market cap*
* For illustrative purposes, PLZ’s market cap assumes convertible debentures are converted into shares and
calculation is based on an illustrative PLZ share price of $4.90/share
5
Enhanced Geographic Diversification
Total GLA ('000s sq. ft.)
PLZ
KRE
PF PLZ
Province
Properties
Newfoundland
118
228
621
-
621
Nova Scotia
1,071
76
1,147
New Brunswick
1,557
17
1,573
P.E.I.
426
68
493
Québec
1,224
432
1,656
Ontario
262
485
746
Manitoba
-
38
38
Saskatchewan
-
5
5
Alberta
-
114
114
British Columbia
-
10
10
5,160
1,244
6,403
(1)
Total
(1) Totals may not add due to rounding
6
10
16
1
26
9
93
14
8
76
23
9
346
properties
www.plaza.ca
10
provinces
2
6.4M
sq. ft. of GLA
37
16
96.2%*
occupancy
* Pro forma occupancy based on KRE committed occupancy of 97.1% as disclosed in KRE’s 2012 Annual
Report as Dec. 31, 2012
6
Compatibility of Major Tenants
Pro Forma
+
=
Current PLZ Top 10 Tenants
KRE Top 10 Tenants
% of
Tenant
Shopper's Drug Mart
Min Rent
26%
Pro Forma PLZ Top 10 Tenants
% of
Tenant
Min Rent
% of
Tenant
Shopper's Drug Mart
26%
Shopper's Drug Mart
Min Rent
26%
Dollarama
7%
Soul Foods (KFC)
19%
Soul Foods (KFC)
7%
Staples
4%
Olympus Food (KFC)
12%
Dollarama
4%
Marks Work Warehouse
3%
Pharma Plus
6%
Olympus Food (KFC)
4%
Best Buy / Future Shop
3%
Hi-Flyer Food (KFC)
5%
Staples
3%
Reitmans
3%
FMI Atlantic (KFC)
5%
Marks Work Warehouse
2%
Bulk Barn
3%
Staples
3%
Pharma Plus
2%
Winners
3%
Home Outfitters
3%
Best Buy / Future Shop
2%
Sobeys
2%
Financial Institutions
2%
Reitmans
2%
Michaels
2%
Prime Restaurants
1%
Hi-Flyer Food (KFC)
2%
55%
Total Top 10 tenants
81%
Total Top 10 tenants
54%
Total Top 10 tenants
www.plaza.ca
7
Summary Financial Highlights
Percentage AFFO per share accretion in high single digit range
serves to further reduce PLZ’s current industry leading 2013E
consensus AFFO payout ratio of ~80%
Expect ~$3 million of G&A synergies on a run-rate basis
− Elimination of asset and property management fees to JBM
− Public company G&A cost efficiencies
Manageable pro forma debt/GBV between ~57-58%*
− Close to PLZ’s target debt/GBV ratio of 55%
Given the higher coupon rates on many of KRE’s mortgages and its
convertible debentures, it is expected that many favourable
refinancing opportunities will exist over time
www.plaza.ca
* Including KRE’s convertible debentures, but excluding PLZ’s well-in-the-money convertible debentures
8
Contact Information for Questions
More information available at:
KEYreit’s website: www.keyreit.com
SEDAR: www.sedar.com
Contact us at:
Michael Zakuta, CEO
Floriana Cipollone, CFO
(514) 457-0997, ext. #228
(416) 848-4583
Plazacorp Retail Properties Ltd. (TSX-V:PLZ)
527 Queen Street, Suite 200
Fredericton, NB E3B 1B8
Phone: (506) 451-1826
Fax: (506) 451-1802
Email: [email protected]
Web Site: www.plaza.ca
www.plaza.ca
9
Forward-Looking Disclaimer
Certain statements made in this presentation are forward-looking and are subject to risks,
uncertainties and assumptions concerning future conditions that may ultimately prove to
be inaccurate and may cause actual results and events to be materially different than
those predicted.
www.plaza.ca
10