proreit investment presentation mar2020 hres mar25 · investor presentation march 2020 our growth...

INVESTORPRESENTATION

March 2020

INVESTORPRESENTATIONMarch 2020


March 2020

Disclaimer

2

About this PresentationThis presentation is dated March 25, 2020 and is strictly intended to provide general information about PRO Real Estate Investment Trust (“PROREIT”) and its business. This presentation doesnot constitute an offer to sell or the solicitation of an offer to buy any securities of PROREIT. The information in this presentation is stated as at December 31, 2019, unless otherwise indicated.

Non-IFRS MeasuresPROREIT’s consolidated financial statements are prepared in accordance with International Financial Reporting Standards (“IFRS”). In this presentation, as a complement to resultsprovided in accordance with IFRS, PROREIT discloses and discusses certain non-IFRS financial measures, including Adjusted Funds From Operations (“AFFO”), Funds From Operations(“FFO”), Gross Book Value (“GBV”), debt-to-GBV, Net Operating Income (“NOI”), interest coverage ratio and payout ratios as well as other measures discussed elsewhere in thispresentation. These non-IFRS measures are not defined by IFRS, do not have a standardized meaning and may not be comparable with similar measures presented by other issuers.PROREIT has presented such non-IFRS measures as Management believes they are relevant measures of PROREIT’s underlying operating performance and debt management.Non-IFRS measures should not be considered as alternatives to net income, cash generated from (utilized in) operating activities or comparable metrics determined in accordance withIFRS as indicators of PROREIT’s performance, liquidity, cash flow, and profitability. For a full description of these measures and, where applicable, a reconciliation to the most directlycomparable measure calculated in accordance with IFRS, please refer to the “Non-IFRS and Operational Key Performance Indicators” section in PROREIT’s Management’s Discussion andAnalysis for the year ended December 31, 2019 available on SEDAR at www.sedar.com.

Forward-Looking InformationCertain statements contained in this presentation constitute forward-looking information within the meaning of applicable securities laws. In some cases, forward-looking information can beidentified by such terms such as “may”, “might”, “will”, “could”, “should”, “would”, “occur”, “expect”, “plan”, “anticipate”, “believe”, “intend”, “estimate”, “predict”, “potential”, “continue”, “likely”,“schedule”, or the negative thereof or other similar expressions concerning matters that are not historical facts. Some of the specific forward-looking statements in this presentation include,but are not limited to, statements with respect to PROREIT’s future financial performance; the ability of PROREIT to execute its growth strategies; and PROREIT’s ability to continue payingmonthly distributions and PROREIT’s ability to raise capital. Forward-looking statements are based on a number of assumptions and are subject to a number of risks and uncertainties,many of which are beyond PROREIT’s control, that could cause actual results and events to differ materially from those that are disclosed in or implied by such forward-looking statements.PROREIT’s objectives and forward-looking statements are based on certain assumptions, including that (i) PROREIT will receive financing on favourable terms; (ii) the future level ofindebtedness of PROREIT and its future growth potential will remain consistent with PROREIT’s current expectations; (iii) there will be no changes to tax laws adversely affectingPROREIT’s financing capacity or operations; (iv) the impact of the current economic climate and the current global financial conditions on PROREIT’s operations, including its financingcapacity and asset value, will remain consistent with PROREIT’s current expectations; (v) the performance of PROREIT’s investments in Canada will proceed on a basis consistent withPROREIT’s current expectations; and (vi) capital markets will provide PROREIT with readily available access to equity and/or debt. Additional information about these assumptions and risksand uncertainties is contained under “Risk Factors” in PROREIT’s latest annual information form, and in other filings that PROREIT has made and may make with applicable securitiesauthorities in the future, all of which are or will be available on SEDAR at www.sedar.com.The forward-looking statements contained in this presentation are expressly qualified in their entirety by this cautionary statement. Investors are cautioned not to put undue reliance onforward-looking statements. All forward-looking statements in this presentation are made as of the date of this presentation. PROREIT does not undertake to update any suchforward-looking information whether as a result of new information, future events or otherwise, except as required by law.

Additional InformationInformation appearing in this presentation is a select summary of PROREIT’s business, operations and results. The latest annual information form of PROREIT and its consolidated financialstatements and management’s discussion and analysis thereon for the year ended December 31, 2019 are available on SEDAR at www.sedar.com.


March 2020


March 2020

BUILDING A MID-CAP DIVERSIFIED COMMERCIAL REIT IN CANADA

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March 2020


March 2020

Section 1. PROREIT AT A GLANCESection 2. PROVEN EXECUTIONSection 3. ROBUST 2019 RESULTSSection 4. POSITIONED FOR GROWTHSection 5. APPENDICES

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March 2020


March 2020

PROREIT AT A GLANCE

5

SECTION 1.


March 2020

About PROREIT

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93PROPERTIES

IN 9 PROVINCES

BC: 5AB: 11

SK: 4

MB: 6

ON: 12 QC: 16

NS: 15NB: 23

PEI: 1

Established in 2013, PROREIT owns $635 million of diversified commercial real estate properties in Canada, representing close to 4.6 million square feet of gross leasable area. PROREIT is mainly focused on strong secondary markets in Québec, Atlantic Canada and Ontario, with selective exposure in Western Canada.

Quick Facts(As at December 31, 2019)

Ticker Symbol (TSX)PRV.UN

DRIP Eligible3% bonus units

Tax Deferred Distribution100% (estimated)

Annual Distribution$0.63 (post-consolidation)

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Revenue by Asset Class(12 months ended December 31, 2019)

Retail 38.3%

Industrial 26.3%

Office 20.2%

Commercial Mixed-use 15.2%

(1) One property acquired in March 2020, subsequent to year-end.

(1)


March 2020

Our Vision

To become a mid-cap diversified Canadian REIT with high-quality commercial real estate in specific segmentsof the industrial, retail, commercial mixed-use and office sectors, recognized for its ability to:

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WITH A CLEAR STRATEGY TO GROW FFO AND NAV

PRODUCESTABLE AND GROWING RETURNS

GROWUNITHOLDER VALUE PER UNIT


March 2020


March 2020

PROVEN EXECUTIONSECTION 2.

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March 2020

Our Growth History

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► 23 properties, 1.0M sq. ft. GLA




A BREAKOUT YEAR► Internalization

of asset management

► Graduation to TSX ► Consolidation

of Units 3:1

PROREIT has consistently paid attractive distributions every month, since January 2014

PROREIT CREATION BY FORMER CANMARC MANAGEMENT► One $6 million

property, 397K sq. ft. GLA

► TSX-V listing (PRV.UN)

► 92 properties, 4.4 M sq. ft. GLA► Acquisitions

of 7 propertiesfor $97.8M

► $57.6M equity offering

► $69.1 million in new equity capital raised

► Acquisition of property management platform

► Achieved $500M asset target


FOCUSED ON THE FUTURE► 93 properties,

4.6 M sq. ft. GLA

2013 2014 2015 2016 2017 2018 20202019


March 2020

A Solid Track Record – Seven Years Of Growth

1.628

9.189

18.19022.963

29.639

40.889

57.627

0

10

20

30

40

50

60

2013 2014 2015 2016 2017 2018 2019

1.4040.155

4.4653.568

9.053

14.100

17.435

0

2

4

6

8

10

12

14

16

18

2013 2014 2015 2016 2017 2018 2019

1.4102.944

6.258 7.61910.325

14.340

20.422

0

10

20

30

40

2013 2014 2015 2016 2017 2018 2019

Property Revenues($ Millions)

Net Cash Flows Provided from Operating Activities($ Millions)

Adjusted funds from operations (2)

($ Millions)

Total Assets($ Millions)

Gross Leasable Area (‘000 sq. ft.)

70.2

141.5

203.2258.0

365.9

509.7

634.7

0

100

200

300

400

500

600

700

2013 2014 2015 2016 2017 2018 2019

397

1,044

1,6702,005

2,690

3,703

4,445

0

1,000

2,000

3,000

4,000

5,000

2013 2014 2015 2016 2017 2018 2019

CAGR 81%

CAGR 52%

CAGR 44%

CAGR 50%

CAGR 56%

10

1.126

5.758

11.20714.105

18.266

26.049

35.481

0

10

20

30

40

2013 2014 2015 2016 2017 2018 2019

Net Operating Income(2)

($ Millions)

CAGR 78%

(1) 2013 was for 13 months ended(2) Non-IFRS measure. See “Disclaimer – Non-IFRS measure”.

(1) (1) (1)

(1) (1) (1)


March 2020

Building on Our Strong Momentum

September 2019 Strategic Acquisitions► Acquisitions of 7 institutional quality properties totaling

$97.8 million for total 696,000 square feet of GLA

► Boutique office tower in Ottawa’s business district

► Class-A mixed-used industrial property in Ottawa suburbs

► Five-property light industrial portfolio in Halifax, NS

► Acquisitions significantly strengthen the portfolio and immediately accretive to AFFO per unit(1)

August 2019 Successful Bought-deal► Raised $57.6 million in equity on a bought-deal basis,

including full exercise of over-allotment option

► Largest equity offering in PROREIT’s history

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(1) Non-IFRS measure. See “Disclaimer – Non-IFRS measure”.


March 2020

Experienced Management Team with Deep Industry

Knowledge

► 70+ years of collective asset management and property management experience

► Former CANMARC REIT team► Sold to Cominar in 2012

for $1.9B (43% annual ROI since IPO)

► Extensive network of real estate and capital markets relationships

► Alignment with unitholders: officers and trustees own 5.5% of outstanding units

► Competitive, objectives-based asset management structure

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James W.

Beckerleg

Chief Executive Officerand Trustee

Gordon Lawlor, CPA, CAExecutive Vice President, Chief Financial Officer and Secretary

Mark O'Brien

Managing Director,Operations

Alison Schafer, CPA, CADirector of Finance

Chris Andrea

PresidentCompass Commercial Realty

INTERNALIZATION OF ASSET MANAGEMENT FUNCTION

COMPLETED ON APRIL 1, 2019 WILL ADD VALUE FOR UNITHOLDERS


March 2020

Scale Brings Transformational Growth Opportunities

Internalization of Property and Asset Management (2018-2019)

► Increases cash flow and adds value

► Creates significant economies of scale

► Provides additional transparency in accounting and financial reporting

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Increased Scale ► Increases access to larger and higher

quality acquisitions

► Decreases risk with greater diversification and reduced dependency on top tenants

► Increases potential for internal growth: rent increases, densification, etc.

LEVERAGE TO IMPROVE COST OF CAPITAL AND INCREASED GROWTH PER UNIT


March 2020


March 2020

ROBUST 2019 FOURTH QUARTER PERFORMANCE

SECTION 3.

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March 2020

2019 Fourth Quarter Financial Results

CAD $ thousands except for unit amounts

unless otherwise stated

Three months ended

December 31, 2019

Three months ended

December 31, 2018Change YoY %

Total assets $634,737 $509,663 24.5%

Property revenue $17,315 $12,207 41.8%

NOI(1) $10,050 $7,661 31.2%

Same property NOI(1) $6,688 $6,556 2.0%

Debt to Gross Book Value(1) 57.52% 58.63% (1.9)%

Interest Coverage Ratio(1) 2.6x 2.6x -

Net cash flows provided

from operating activities7,937 $5,076 56.4%

FFO(1) $5,017 $3,921 28.0%

AFFO(1) $5,676 $4,234 34.1%

AFFO Payout Ratio (Basic)(1) 110.5% 116.7% (5.3)%

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March 2020

2019 Financial Results

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CAD $ thousands except for unit amounts

unless otherwise stated

Year ended

December 31, 2019

Year ended

December 31, 2018Change YoY %

Total assets $634,737 $509,663 24.5%

Property revenue $57,627 $40,889 40.9%

NOI(1) $35,481 $26,049 36.2%

Same property NOI(1) $23,556 $22,700 3.8%

Debt to Gross Book Value(1) 57.52% 58.63% (1.9)%

Interest Coverage Ratio(1) 2.6x 2.6x -

Net cash flows provided

from operating activities$17,435 $14,100 23.7%

FFO(1) $15,296 $12,255 24.8%

AFFO(1) $20,422 $14,340 42.4%

AFFO Payout Ratio (Basic)(1) 106.8% 115.1% (7.2)%



March 2020

An Increasingly Diversified Portfolio Over the Last Year

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Base Rent by Asset Class (%)(2)

Retail

Industrial

(2) Based on in-place and committed base rent as of Dec. 31, 2018 and Dec. 31, 2019

Base Rent by Region (%)(2)

36.7

29.2

16.1

18.0

41.8

28.7

15.4

14.1

Office

Commercial Mixed Use

Q4-2019

Maritime Provinces

Ontario

Quebec

Western Canada

Q4-2019

Asset Class Number of Properties Occupancy (%)(1) GLA (sq. ft.)

Retail 49 97.2 1,078,477

Office 10 94.4 492,507

Commercial Mixed-use 8 98.4 723,066

Industrial 25 99.8 2,151,448

Total 92 98.4 4,445,498(1) Based on in-place and committed base rent as of December 31, 2019

Q4-2018 Q4-2018

46.0

27.0

16.5

10.6

43.3

19.5

19.0

18.2

Operational Highlights(As at December 31, 2019)


March 2020

Top Ten Tenants

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# Tenant % of In-Place Base Rent GLA (sq. ft.) WALT

(years) Credit Rating (1)

1 6.2 104,929 9.6 Baa2/BBB+/na

2 6.0 222,491 7.7 na/BB+/BBB

3 5.5 127,334 5.1 Ba1/BB+/BBB-

4 3.5 81,611 4.7 Aaa/AAA/AAA

5 3.4 66,083 5.3 na/BBB/BBB

6 2.9 98,057 10.0 na

7 2.0 88,840 8.1 na

8 1.7 176,070 5.4 Baa3/BBB-/na

9 1.6 40,901 6.7 na/BB+/BBB

10 1.6 20,219 11.0 Aa2/A+/AH

TOP TEN SUBTOTAL 34.4 1,026,535 7.3OTHER TENANTS 65.6 3,345,810 4.2VACANT 73,153TOTAL 100.00 4,445,498 4.4

(1) Based on annualized in-place and committed base rent at December 31, 2019(2) Source: Moody’s, S&P, and DBRS. Credit rating assigned to tenant or its parent.

Highlights

Top ten tenants account for34.4%of base rent

Eightof the top tentenants are credit rated

Credit quality tenants account for 44.4% of in-place base rent


March 2020

High-Quality Tenant Profile

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GLA

BASE RENT

2020 2021 2022 2023 2024 2025-2036

► Excellent retention rate: Tenant renewal or replacement rate average above 90% in each of the past five years

► Overall weighted occupancy rate of 98.4% with a weighted average remaining lease term of 5.6 years

► Credit quality tenants have a weighted average remaining lease term of 7.3 years

► Staggered lease maturity profile► Not more than 12.0% of base rent matures in any given lease year

3.3%

11.2% 10.5% 10.5% 7.8%

56.7%

1.7%

10.7% 12.0% 10.3% 9.1%

56.2%


March 2020


March 2020

POSITIONED FOR GROWTH

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SECTION 4.


March 2020

Strategies for Driving Growth and Creating Value

Internal Growth► Nurture existing client

relationship, ensuring tenant retention and growth

► Implement operating improvements and preventative maintenance programs

► Pursue expansion and redevelopment opportunities within the portfolio

► Exploit lease-up opportunities

Strong Balance Sheet► Low cost of debt

► Staggered mortgage and lease maturity profile

► Targeted Debt to GBV ratio

► Access to multiple sources of capital

► Prudent capital management

External Growth► Acquire accretive income-

producing commercial properties in strong secondary markets

► Focus on Class B, high-quality commercial real estate

► Seek properties with selective development, expansion opportunities and geographical diversification

► Pursue off-market opportunities allowing access to unique pipeline

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March 2020

What Differentiates Us

OUR ABILITY TO IDENTIFY AND BUILD A STABLE, LOW RISK PORTFOLIO WHERE LARGER REITs ARE CURRENTLY DIVESTING

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► Urban markets and regional economic centres outside Central Vancouverand Toronto

► Often higher capitalization rates

► Focus on Central andEastern Canada

► Strong upside as market is transforming

► Our size permits us to be opportunistic

Strong Secondary MARKETS

Selection of High Quality Class B Assets

► Community retail service centres

► Industrial

► Mixed-use Commercial

► Office

Targeting specific SEGMENTS within four SECTORS


March 2020

Focused on Community-Based Service Centres

► Typically brand grocery or pharmacy anchored► Brand names► Long-term leases► Excellent covenants

► Banks, medical professionals, government services, restaurants

► Upside potential from rent increases, vacancy fill-up and pad development is available

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March 2020

Focused on Light Industrial Buildings

► Single or multi-tenant, light industrial buildings (typically 22 feet clearance or higher)

► Located on major transportation routes with strategic access to:► Airports► Large cities► Border crossings

► Currently focused on 50,000 sq. ft. to 200,000 sq. ft. buildings where increased occupancy and increased annual revenues are available

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March 2020

Focused on Mixed-Use Commercial / Office

► Buildings are often in industrial parks► Flex office with loading docks► Retail in industrial buildings (e.g. - décor, wholesale)► Light industrial with office space

► Currently, the right buildings in the right sectors are seeing increasing demand from a growing economy

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March 2020

Case Studies and Ongoing Opportunities

HALLS CREEK (2016-2017)► New pad development completed

► > 10% Return on invested capital (1)

► 100% leased

► Approximately $140 thousand NOI(1) on annualized basis

ST. MARGARET’S BAY (ONGOING)► 41,500 sq. ft. in development opportunity

KING GEORGE HIGHWAY (2017)► Pad developments complete

► 6,400 sq. ft. of new GLA

► Rogers, Subway and Cara signed

► >9% ROIC on Cara pad, >18% ROIC on Rogers and Subway pads

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OTHER OPPORTUNITIES (ONGOING)► 8150 Trans-Canada Highway, St. Laurent, QC

(pad development)

► 50 Empire Lane, Windsor, NS

(pad development)

► 1455 Mountain Ave., Winnipeg MB

(building expansion)

► 10 Bentall Street, Winnipeg, MB

(vacant land, industrial opportunity)

► 31 Auriga Drive, Ottawa, ON

(potential building expansion)



March 2020

Sound and Flexible Capital Structure

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Debt Composition ($ millions)

Operating facilities, term loans $35.5

First mortgages $330.1

Total $365.6

Debt to GBV(1) 57.52%

Total debt $365.6M

Total debt weighted average rate 3.74%

Total first mortgage debt weighted average term

5.4 years

Debt Maturity ProfileAs of December 31, 2019

Debt Maturing During Year

Payments of Principal

0

20

40

60

80

100

120

140

1 year 1-2 years 2-3 years 3-4 years 4-5 years later

$39.9

$16.1

$81.3

$23.6

$129.3

$75.5

(2) Includes line of credit of 30.5MM

(2)



March 2020

Why Invest in PROREIT

► Attractive yield and consistent monthly distributions

► Solid track record of growth and unitholder value creation

► Diversified portfolio and high-quality, low-risk tenants with long-term leases

► Experienced management team and solid relationships in the investment banking and lending businesses

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► Increased scale and growing profile to achieve additional synergies

► Acquisition focused

► Opportunistic and well-positioned to benefit from current real estate market transformation

► Clear strategy to grow earnings and net asset value

► Favourable Canadian real estate market in sound and resilient economy


March 2020


March 2020

APPENDICES

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SECTION 5.


March 2020

We’ve Done It Before

► The Former CANMARC REIT

► Diversified REIT with national portfolio

► 143 properties

► Acquired by Cominar in 2012 for $1.9 billion

► 43% compound annual rate of return since IPO, compared to 28% for the REIT index

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0%

25%

50%

75%

100%

May-2010 Jul-2010 Sep-2010 Nov-2010 Jan-2011 Mar-2011 May-2011 Jul-2011 Sep-2011 Nov-2011 Jan-2012

S&P/TSX Capped REIT Index

CANMARC REIT


March 2020

Compass Commercial Realty Acquisition

HIGHLY STRATEGIC ACQUISITION COMPLETED IN 2018

► Operates autonomously from Halifax headquarters

► Manages 38 third-party properties

► Manages 84 PROREIT properties

► Offices in Halifax, Moncton, Montreal and Oakville

► Significant room for expansion

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March 2020

2019 Property Additions

TransactionPurchase Price

($millions)Number of Properties

Added GLA(sq. ft.)

Occupancy Rate at Acquisition

Halifax Light Industrial Properties, Nova Scotia $28.1 5 357,824 93%

251 Laurier Avenue West, Ottawa, Ontario $21.2 1 58,203 100%

171 John Savage Avenue, Halifax, Nova Scotia $8.4 1 50,000 100%

500 Palladium Drive, Ottawa, Ontario $48.5 1 279,388 100%

Total Acquisitions $106.2 8 745,415

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March 2020

2018 Property Additions

TransactionPurchase Price

($millions)Number of Properties

Added GLA(sq. ft.)

Occupancy Rate at Acquisition

1750 Jean-Berchmans-Michaud St. Drummondville, QC (50%) $4.39 1 85,560 100%

Winnipeg, MB Industrial Portfolio $27.3 6 237,430 100%

598 Union St., Frederiction, NB $4.5 1 32,258 100%

Quebec Retail Portfolio $8.95 4 13,606 100%

Ottawa ON Office Portfolio $51.7 5 282,000 97.3%

Saint Hyacinthe, QC light industrial property $10.0 1 176,070 100%

Southwest Ontario Industrial properties $15.4 2 202,000 100%

Total Acquisitions $122.24 20 1,028,924

Total Sales ($0.895) (1) (11,700)

Net Acquisitions $121.34 19 1,017,224

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March 2020


March 2020

THANK YOU !

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