Investment in The Coconut Industry by Nancy Cheruiyot
Infrastructure & Property Briefing Seminar 4th September 2014
1. Irish Infrastructure &
Irish Property Seminar
Patrick Burke
4th September 2014
Managing Director
2. Irish Infrastructure &
Irish Property Seminar
4th September 2014
Eunice Dreelan
Director – Investment Development
3. Irish Life
Investment Managers
The Infrastructure Journey
Minimising Risk and Maximising Returns
September 2014
Simon Ellis
Head of Origination, AMP
4. Local and global expertise
A key strategic cornerstone investor, local fund manager and experienced international infrastructure manager
The Irish Infrastructure Fund
Flagship Investor Manager
Independent Infrastructure
Investment Manager
Experience > Established in 2001 to fund Ireland's
social welfare and public service
pensions
> NPRF Fund value of €19.9bn(2)
> Broad experience in traditional and
alternative investments, including
significant private equity holdings
> Investment mandate to change to
focus solely on commercial
investments in Ireland
> Functions managed by the National
Treasury Management Agency
> Regulated by the Central Bank of
Ireland
> Part of Great-West Lifeco
> Ireland’s largest fund manager with
€39.4bn in assets under
management(2)
> Managing assets since 1939
> 900+ domestic and international
institutional clients
> Manages assets for 24 of the 30
largest pension funds in Ireland
> Regulated by the Australian Securities and
Investments Commission
> €100bn funds under management
> One of the longest standing participants in global
infrastructure investing with 25 years experience and
over 60 infrastructure investment professionals
> A top ten global infrastructure manager(1) with
€5.3bn infrastructure FUM(2)
> Over 100 infrastructure equity and debt investments
made globally since 1988, across a range of sectors
and lifecycles
> Invested almost £1 billion in infrastructure assets
over the past 18 months
Note: (1) Towers Watson Global Alternatives Survey 2012.
(2) As of December 31st, 2013
4
5. AMP Capital Infrastructure Track Record 5
6.0% 15.4%
GROSS IRR AND 2.2X
16.9% GROSS IRR
SINCE
INCEPTION
MONEY MULTIPLE
ON REALISED
ASSETS
Global Track Record
of deals within the AMP
Global Infrastructure Fund’s
investment strategy(1)
The Irish Infrastructure Fund
ASSETS 26 CASH YIELD
SINCE
INCEPTION
€3.4
BILLION INVESTED
1) As at 30 June 2014 in euro. Track Record represents the investment performance of AMP Capital’s infrastructure equity investments which are similar to the strategy of the Fund, as at 30 June 2014 and not the actual performance of the Fund.
See the Appendix for detailed footnotes and the full composition of the Track Record. In considering prior performance information, prospective investors should bear in mind that past performance is not necessarily indicative of future results, and
there can be no assurance that the Fund will achieve comparable results or be able to avoid losses. Historical returns show aggregate data from multiple investment vehicles across different economic cycles and include unrealised valuations.
Therefore, no Investor has received the stated returns. Performance listed is gross and does not account for fees paid to the manager.
6. Benefits of Investing in Infrastructure
The Irish Infrastructure Fund
Stable inflation
- linked cash flows
Cash flows often indexed to reflect increases in inflation or
long-term interest rates. Provides a good match for long-term inflation linked liabilities
Regulated /
Contracted Regulation and/or long-term contracts make cash flow generation highly visible and stable
Long Term Mature assets have long life spans and give predictable cash flows
Income + Growth Stable long-term yields, with the potential for capital growth
Potential for value enhancement through active management
Reduced risk
Attractive risk-adjusted returns
Low correlation and volatility compared with traditional asset classes
Defensive characteristics
6
7. Returns Across Asset Classes 7
The Irish Infrastructure Fund
Attractive Yield & Capital Growth Relative to other Asset Classes
12.00%
10.00%
8.00%
6.00%
4.00%
2.00%
0.00%
10 Year German
Bond Yield
10 Year Irish Govt
Bond Yield
Cash - 12 Month
Euribor
Irish Infr IRR
(Net) since
inception
Irish Infr Yield
(Net) since
inception
Irish Property
Yield
World Equity
Dividend Yield
Source: as of the 29th of August - Bloomberg, FT, AMP/Irish Life
8. Infrastructure offers a wide spectrum of investment opportunities across multiple sectors and lifecycles with different return
The Irish Infrastructure Fund
and risk characteristics
Infrastructure universe: risk vs. return
Returnturn
Risk
Unregulated Assets
Partially Regulated
User Pays Assets
Regulated Assets
Availability Based
Assets
Housing
Hospitals
Education
Prisons
Courts
Gas Transmission
& Distribution
Electricity Transmission
& Distribution
Water & Wastewater
Airports
Toll Roads
Rail
Ports
Telecoms
Motorway Service
Stations
Storage
Metering
Ferry Operators
Power Generation -
Merchant
Social Infrastructure Economic Infrastructure
Greenfield Assets
New projects which are
approaching or under
construction
Source: B Capital partners, JP Morgan Asset Management, ING Bank
8
10. The opportunity: delivering value relative to other European markets 10
Focus on assets combining a stable cash yield (5%+) and growth opportunities to produce a target IRR of 12%+
> First two assets acquired and performing well. €150m invested to date
> Immediate access to a projected 5 year average gross cash yield of 7.5%
> Excellent growth opportunities, leveraging the strategic platforms established in key sectors
The Irish Infrastructure Fund
Attractive portfolio of
seed assets
> First mover advantage, on the ground since 2011 and the only infrastructure fund entirely focused on Ireland
> Strong relationships established with existing owners, advisors and key Government departments
> Preferred party for management and vendors
Leading competitive
position
> Significant private sector investment in infrastructure pre global financial crisis
> State-owned assets with major capex requirements
> Live opportunities across a range of infrastructure sectors - pipeline with estimated equity requirement in
excess of €300m identified. 3 transactions targeted to close before the year end
Strong pipeline of
opportunities
> Willing / forced sellers as private sector owners look to delever balance sheets, exit non core assets and
recycle capital
> Bilateral opportunities
> Limited competition as mid-sized transactions fall underneath the radar of larger funds
Delivering relative
value
11. Fund performance: vindicating the relative value thesis 11
The Irish Infrastructure Fund
To date, the Fund has delivered on its investment mandate
The Fund’s first two investments continue to deliver strong performance
The first two investments for the Fund are projected to generate a gross 5 year average cash yield of 7.5% based on capital
invested
First dividend paid in October 2013
As at 30 June 2014 6 month Return 12 month Return IRR since acquisition
Gross cash yield since
acquisition
Cyclone Wind Farms 3.7% 9.7% 11.6% 5.5%
Towercom 10.3% N/A (1) 13.2% 5.3%
Note: (1) Towercom was acquired 12 September 2013.
12. Fund investment strategy 12
Stable, cash-yielding Irish infrastructure assets with the potential to add value through active asset management
Inflation or GDP
correlated revenues
The Irish Infrastructure Fund
Key characteristics of targeted investments
Monopolistic
characteristics or clear
competitive advantage
Cash flow growth
potential through
operational efficiencies
and capital projects
The Irish
Infrastructure
Fund
Sustainable and
predictable long-term
cash flows
High barriers to entry
that limit competition at
the asset level
Cash flow growth potential
through operational
efficiencies, capital projects
or revenue enhancing
activities
Provision of essential
services
The Fund seeks to invest in
assets that meet the
following criteria:
> Wholly or substantially
located or based in Ireland
> Predominantly operational
infrastructure assets
> Capability to invest in core
greenfield assets
> Acquired on the primary or
secondary market
> Provide potential to create
value through active asset
management
> Diversified across sectors
(energy/utilities, transport,
telecoms and PPPs) and risk
factors
13. Investment universe 13
The Irish Infrastructure Fund
Ireland has a large universe of operational infrastructure assets
c. 230 assets
c. €10bn equity value
c. 120 assets
c. €6.0bn equity
value
10 – 15 assets
€0.5 - 1bn
Irish infrastructure
universe(1)
Identified Fund target
assets
Target portfolio
Opportunities across a range of sectors
Transport
Airports
Ports
Roads
Rail
Energy /
Utilities
Gas distribution
Electricity generation
Wind
Water
Waste
Telecoms
Towers infrastructure
Broadband network
PPPs
Convention centre
Education
Justice
Health
Note: (1) Includes operational and Government committed (e.g. new PPP projects announced under the Government Stimulus package) infrastructure assets across the energy/utilities,
transport, telecoms and PPP sectors. Does not include wind farm projects currently under construction or planning.
14. Deal prioritisation and likely funding requirements 14
There exists a sizeable pipeline of attractive opportunities which can be executed upon by the end of the year
Asset Timing – start of process Timing – funding
Target 4 Sep / Oct 2014 Nov / Dec 2014
Target 5 Q4 2014 Q1 2015
Target 6 2015 H2 2015/2016
Total priority 2 opportunities equity cheque €125 – 175m
The Irish Infrastructure Fund
1
Asset Timing – start of process Timing – funding
Target 1 September Nov / Dec 2014
Target 2 Now Oct / Nov 2014
Target 3 Now Nov / Dec 2014
Total priority 1 opportunities equity cheque €120 – 170m
2
3
Asset Timing – start of process Timing – funding
Target 7 Q4 2014 Q4 2014
Target 8 2015 2015
Total priority 3 opportunities equity cheque €40 – 50m
15. Seed asset: Towercom Limited 15
A combination of strong cash conversion and excellent growth potential (both organic and via acquisition)
Overview • Towercom is the largest independent towers company in Ireland with a
The Irish Infrastructure Fund
portfolio of c.400 towers
• Originally spun out of eircom, the incumbent Irish telecom operator in
2007 for €155m.
• Acquired by IIF in September 2013
Key investment
highlights
• Portfolio includes many key strategic locations - planning permission for
competing towers extremely difficult to obtain
• Most revenues are derived from major MNO’s (88% of revenue comes
from top 6 customers), and most revenue is under long term customer
contracts
• A strong and experienced management team (c. 5.0% CAGR for
revenues between 2008 - 2012)
• EBITDA margin of c.85% and modest future capex => strong cash
conversion
• Conservative financing structure
Attractive pricing and
return metrics
• Acquired for a price representing of just under 10x EBITDA
• IRR since acquisition of 13.2% (as at 30 June 2014)
• Cash yield since acquisition of 5.3% (as at 30 June 2014)
Significant upside
potential
• Management forecasts assume Towercom will see more revenue
growth from network sharing than our acquisition case
• The Towercom management team could manage significantly more
towers with minimal additional cost
• Expect to use Towercom as an acquisition vehicle for further tower
opportunities in the Irish market
16. Seed asset: Cyclone Wind Farms 16
Diverse portfolio with strong operational track record, delivering attractive cash yield potential
Overview • Portfolio of operational wind farms with an enterprise value of c.€200m
The Irish Infrastructure Fund
completed in June 2012
• Majority interest in two wind farm portfolios in Ireland
– 75% of an 8 wind farm portfolio in the Republic of Ireland (53MW)
– 80% of a 2 wind farm portfolio in Northern Ireland (51MW)
Key investment
highlights
• Long term Power Purchase Agreements in place for all projects
• 3rd party O&M contracts in place for up to 15 years
• Excellent wind resources with P50 wind factors of up between 27-32%
• Strong cash yield – 10 year average yield of c.10% p.a. on invested equity
projected
• Conservative financing in place with gearing of c.50%
• Strong operating/availability track record reflecting strong management team
established by Viridian (co-shareholder)
• Portfolio diversified across sites (10) and regulatory regimes
Performance update • Operating well, with availability running around 97%
• Financial performance for the most recent financial year was in line with budget
• Cash yield since inception of 5.5%
Platform for growth • The Cyclone portfolio provides rare access to a controlling interest in an
existing portfolio of operational assets
• Strong on-going relationship with Viridian provides access to the development
pipeline of one of the largest developers in Ireland
17. Investing now is the key to seizing the full opportunity 17
> Currently working on an attractive pipeline of transactions with a number of motivated sellers
> Live opportunities in the PPP, energy, roads and transport sectors
> In discussions with vendors on bilateral opportunities
The Irish Infrastructure Fund
Live deals in the next
6 months
> First two assets acquired at prices which compare favourably to those seen in similar transactions
across Europe
> Returns in the target range of 12 – 15% demonstrably available
> Projected 5 year average gross cash yields of 7.5%
Relative value thesis
demonstrated
> Ireland is returning to growth and is underpinned by stable and improving fundamentals
> Committing now is crucial to take advantage of the attractive market environment – limited competition and a
number of motivated sellers across a range of sectors
> Over time, as Ireland recovers further, the interest in Irish infrastructure assets will only increase
Attractive market
environment
> Given the strong pipeline of investment opportunities, we are confident that investor commitments can
be drawn-down over the next 6 months
Near term drawdown
of commitments
18. Important note
18
The information contained in this document, including any attachments (collectively, "Information") is issued by Irish Life Investment Managers Limited (regulated by the Central
Bank of Ireland) (“ILIM”) for providing general information about the investment capabilities referred to in the Information (“Capabilities”) and is qualified in its entirety by any
Prospectus, Supplement, Trust Deed or other relevant documentation. The Information is not intended for distribution or use in any jurisdiction where it would be contrary to
applicable laws, regulations or directives and does not constitute a recommendation, offer, solicitation or invitation to invest regarding the Capabilities.
Prospective investors should make their own inquiries and consult professional advisers as to applicable laws, regulations and directives (including any requisite governmental or
other consents or prescribed formalities) in any particular jurisdiction (including, where the Information is received) and the consequences arising from any failure to comply with
them.
While every care has been taken in preparing the Information; except as required by law, none of ILIM or their associates makes any representation or warranty as to accuracy
or completeness, including, without limitation, of any forecasts, or takes any responsibility for any loss or damage suffered as a result.
Photographic images used are for illustrative purposes only and may not represent actual images of assets or opportunities described in the Information.
The Information does not purport to be complete, does not necessarily contain all information which a prospective investor would consider material, and has been prepared
without taking account of any particular person’s objectives, financial situation or needs. Accordingly, the Information should not form the basis of any investment decision. A
person should, before deciding, consider the appropriateness of the Information, and seek professional advice, having regard to the person’s objectives, financial situation and
needs.
Past performance, forecasts and simulated performance may not be a reliable guide to future performance. The value of investments may fall as well as rise.
The Information is provided on a confidential basis and must be kept strictly confidential (with the exception of providing it to your professional advisors who are also contractually
and/or professionally bound to keep it confidential) and may not be reproduced or redistributed (in whole or in part) or otherwise made available to any other person in any format
without the express written consent of ILIM.
The Information should not be construed as an offer to sell or a solicitation of an offer to buy any security. Any sale or purchase of a security may only be made pursuant to an
offering memorandum.
The Irish Infrastructure Fund
20. Agenda
Property Market Prospects
Irish Life Pension Irish Property Fund
21. Drivers of Property Investment Return
Income Return Rental income > Paid by tenants
Capital growth 1. Change in yield > Asset pricing
> Liquidity pressures
> Rental growth prospects
2. Rental value change > Demand for space
> Supply of space
3. Value add > Asset management
22. Total Return Attribution (by sector)
Office Yield compression & strong Rental growth
Retail Yield compression with Rental values stabilising
All sectors Rental income high
24. Asset Pricing
Property & Bonds Yields
Current Spread
Irish Property 7.3%
Irish long bond 1.9%
Spread 5.4%
Risk premium c.2%
25. Prime Property Yields
Peak Trough Current Trend
Office 3.75% 7.25% 5.0% Sub 5%
Retail 2.5% 6.0% 4.5% Stronger
Industrial 5.0% 10.0% 8.0% Stronger
11.00%
10.00%
9.00%
8.00%
7.00%
6.00%
5.00%
4.00%
EQUIVALENT YIELD
Office yield since 2012
26. Rental growth - Office
Vacancy rate falling
Shortage of Grade A offices
Strong letting activity
Pre-let activity
Prime Office rent €40psf
Lease terms strengthening
Rents at economic rebuild levels
Selective development underway
Site sales activity
Source: JLL
Vacancy rates
Dublin Overall 16.6%
Grade A 4.9%
Grade B/C 11.7%
Dublin 2 Overall 11.7%
Grade A 3.5%
Grade B/C 8.2%
27. Rental growth - Retail
Consumer sentiment improving
Retail environment challenging
Prime streets & Centres v The rest
Occupancy rates improving / New entrants
Rents stabilising in prime locations
Prime Retail Rent €400 psf Zone A
Vacancy Rates
Grafton Street 2.2%
Henry Street 4.7%
Recent Irish Life lettings
Rents set to recover from recession levels
Source JLL
28. Value Add
Improving the value by direct intervention in the asset
30 Herbert Street, Dublin 2
50,000 sq.ft
Being refurbished & to let
40,000 sq ft let BBH & LGT Bank
3 Georges Dock, IFSC
25,000 sq.ft
Being refurbished & to let
2 floors let
30. Trends & Prospects
Current Outlook
Liquidity Activity at record levels
Weight of active buyers
Volume of active sellers
To continue
Changing focus
New entrants
Yields Strong yield compression
Lead by offices
High yield gap with bonds
Prime office to stabilise
Retail & industrial to fall
To close with risk premium
Rental Growth Office strong with little supply
Retail & industrial prime
stabilising
Strong growth to continue
Recover from distressed levels
Income return High & roburst at c.7% Cornerstone trending at c.6%
32. ILIM Strategic Approach
Market & Sector Forecasting
Investment style Growth - rental & capital
Value-added - refurb etc.
Core income - secure & high
Income management High Occupancy
Tenant issues
Grow rents
Portfolio Risk Management
33. Irish Life Pension Irish Property Fund
Key Fund Features
Structure Unit linked policyholder fund
Vintage Established 1971
Investor type ILIM institutional direct and managed fund clients
Liquidity Exiting investors phased over 3 years
Leverage None
Cash mandate Target 2.5%
Income Unit encashment
Sector Office, Retail, Industrial & Residential
Geography Ireland only (focus on Dublin)
Strategy Maximum total return through Income, Growth and Value add
Valuation Fair value – monthly external valuation
Pricing basis Acquisition
34. Irish Life Pension Irish Property Fund
Key Fund Data
Property Portfolio Value €756m
Cash €48m
Number of Properties 55
Number of Leases 350+
Annual Rent Roll €52m
Vacancy Rate 5%
Average lease length 8 yrs
Current yield 7%
74%
22%
4%
Offices 21 properties
Retail 21 properties
Industrial 13
properties
Property Sector Weighting July 2014
94%
6%
Dublin
Provincial
Provincial vs Dublin
35. Office Portfolio
City Centre
2 Grand Canal Square
30 Herbert Street
3 Georges Dock
87/89 Pembroke Road
Stephen Court
Hambledon House
26-28 City Quay
Earl Court/Segrave House
80 Harcourt Street
Blks C&D Georges Quay
1 Adelaide Road
Baggott Bridge House
Blks 2 Irish Life Centre
Out of town
Belfield Office Park Clonskeagh
Block 7 Beech Hill Office Park
City Gate, Mahon, Cork
% of Office Rents by Business Sector
40%
28%
25%
7% Banking & Finance
Public Admin & Semi
State
Other Business Services
TMT
36. Retail Portfolio
Shopping Centres
St Stephens Green
ILAC Centre
Pavilions Swords
High Street
Grafton Street (6)
Henry/Mary Street (3+)
Patrick Street (2)
Others (5)
Retail Parks
Coolock Retail Park (9)
Retail Sub-sector Weighting
37%
8%
41%
14%
High Street Other City Centre
Shopping Centre Retail Park
37. Recent Acquisitions
87/89 Pembroke Road, Ballsbridge
• 30,000 sq.ft
• Passing Rent €1m
• Bank of Ireland, ECDL, US Embassy
• WAULT 21 years
1 Adelaide Road, Dublin 2
• 60,000 sq.ft
• Passing Rent €2.375m
• AIB
• Unexpired lease term 10 years
2 Grand Canal Square, Dublin 2
• 149,000 sq.ft - BREAM Excellent
• Rent Passing €4.44m
• William Fry & Capita
• WAULT 14.7 yrs
Blocks A & B City Gate Park, Cork
• New Office development
• 216,000sq.ft
• Let to EMC Information Systems, FireEye, RDJ solicitors, DFS,
Starbucks, Energie
30 Herbert Street, Dublin 2
• 50,000 sq.ft
• Being refurbished & to let
• 40,000 sq ft in advanced negotiation
3 Georges Dock, IFSC
• 25,000 sq.ft
• Being refurbished & to let
• 2 floors let
38. Exclusive
Irish Life under exclusivity on new acquisition
Henry Street Dublin 1
Prime retail parade
100% prime pitch
Strong retailer line up
Rents primed for recovery
Opportunities to add value
39. Reasons Why
Irish Life Pension Irish Property Fund
High quality property portfolio
Strong & experienced team
Clear strategy & process
Strong track record
41. Case Study
60%
40%
Long Dated Matching Bonds
Growth Assets
Considerations for Growth Assets
Return Expectations
Diversification
Drawdown
Liquidity
Defined Benefit
Closed to new entrants since 2007
Significant active membership
Growth Assets, targeting Bond return + 3%
44. Liquidity
Infrastructure
Long term investment
Exit Options
Matching buyers
Asset sales
Changes to gearing within fund
Venture Capital?
Access
Direct investment
Irish Life unit linked fund
Irish Property
Medium to long term investment
Exit Terms
DC demographic exits: Immediate access
Scheme exits: Phased over 3 years
Schemes in wind up: Exit facilitated
Net acquirer of property through the
Global Financial Crisis
45. Growth Asset Allocation
40%
7%
43%
10%
Long Dated Matching Bonds
Risk Managed Equities
Absolute Return
Real Assets
5.7%
2.5%
1.8%
Irish Property
European Property
Infrastructure
Irish Property Infrastructure
Long term return
expectations
6% 8% +
Short term return
expectation
8% + 8% +
Cash Distribution 5% - 6%
Diversification Improved Improved
Drawdown Potentially high Low
Liquidity Spread over 3 years Managed
