Aug 2019

First World Hybrid Real Estate Plc

First World Hybrid Real Estate Investment offering

• Dividend yield around 4.5% in sterling - long leases, strong tenants

• Modest capital growth over time - rental growth an important driver

• Better liquidity and pricing certainty than typical direct property investments but less volatility than publicly quoted and traded property

• With the benefit of a Regulated Fund

– Isle of Man registered Collective Investment Scheme – Manager is Regulated by the FSA in the Isle of Man and the Fund is

approved by the FSCA in SA– Listed on TISE and subject to listing regs– Being IOM domiciled is non UK Situs asset and no dividend withholding tax– Distribution and accumulating share class options

REITs Direct Real Estate

• UK listed REITs, yielding approximately 3.5%

• Priced on stock market therefore readily tradeable and liquid

• Generate diversified, property related returns

• Primarily to provide liquidity for redemptions

• UK commercial real estate, yielding just under 6%

• Robust income - FRI, long leases (WAULT >10 years)

• Low volatility - each property is independently valued biannually on a rolling basis

First World Hybrid Real Estate

First World Hybrid Real Estate Solid track record – expansion

Dec 2014

Dec 2015

Dec 2016

Dec2017

Dec 2018

June 2019

No. of properties 2 7 12 16 18 19

Gross asset value £15m £37m £75m £107m £132m £142m

First World Hybrid Real Estate Performance – Returns (GBP, 12 months ending)

June2019

Dec2018

Dec 2017

Dec 2016

Dec 2015

Total 5.4% 3.3% 9.1% 6.7% 7.0%

Income 5.0% 5.1% 5.5% 5.3% 4.3%

Price 0.4% -1.8% 3.6% 1.4% 2.7%

Income return as expected - predictable Price return – impacted by property valuations and REIT

volatility • Yield compression has slowed • REITs prices down in 2nd half 2018 and up in 2019 YTD

First World Hybrid Real Estate Performance – Comparative returns (GBP)

Annualised ReturnsAnnualised Returns

1 Year30 June 2019

3 Years30 June 2019

FWHRE 5.4% 7.7%

UK REITs -5.4% 4.3%

Composite Index(S&P 500, FTSE 100 & FTSE EuroFirst 300) 7.7% 12.1%

SA Listed property (ZAR) 0.8% -2.3%

Positive comparative outcome Strong outperformance of UK REITS

First World Hybrid Real EstatePerformance - without the volatility

Listed volatilityRetail prime office emphasis

Independently appraisedDistribution warehousing emphasis

£900 000

£1 000 000

£1 100 000

£1 200 000

£1 300 000

£1 400 000

£1 500 000

£1 600 000

£1 700 000

Jan

14

Mar

14

May

14

Jul 1

4

Sep

14

Nov

14

Jan

15

Mar

15

May

15

Jul 1

5

Sep

15

Nov

15

Jan

16

Mar

16

May

16

Jul 1

6

Sep

16

Nov

16

Jan

17

Mar

17

May

17

Jul 1

7

Sep

17

Nov

17

Jan

18

Mar

18

May

18

Jul 1

8

Sep

18

Nov

18

Jan

19

Mar

19

May

19

First World Hybrid Real Estate NAREIT UK REITs TRGBPSource: Bloomberg & Marriott

Sector - targets 75% warehousing / 25% regional offices

Geographic Institutional locations – sector driven

Ticket size £4 to £20m

Maintain WAULT > 10 yrsMin 8 years individually

Lease type FRI, upwards only

Covenant 4A1 min

Rental growth

Yield

Property Portfolio - Strategy / acquisition filter

First World Hybrid Real Estate Property portfolio – why this property type?

• Distribution warehousing – E Retailing and logistics– Demand > supply = above inflation

rental growth

• Retail – Value retailers preferred – Traditional retailers on back foot

• Offices– Regional offices good value – London offices fully priced and

rental under pressure

Property selection influenced by profound changes in consumer shopping behaviour and technology

Property portfolio – Geographically spread

• All leases FRI, upwards only

• Earliest renewals in just under 5 years

• All offices leases have fixed or RPI linked upward reviews

• Strong tenants with substantial balance sheets

• Max exposure to any single tenant 13% - Crown

First World Hybrid Real Estate Property portfolio – lease criteria

Lease structure and length enhances income predictability

Tenant selection and financial standing underpins income certainty

12

First World Hybrid Real Estate Property portfolio – photography and property detail

• Access the Marriott website www.marriott.co.za and click on FWHRE in the home page to access details, photos and drone coverage of each property

• Or a single video clip of drone coverage of 3 properties –example of each property type

13

First World Hybrid Real Estate Property portfolio – deal 19, Q2 property acquisition

• Modern distribution warehouse located adjacent to Dundee airport, Scotland

• FRI, RPI linked lease with D&B 5A1 national tenant

• Lease has further 17 years to expiry (no breaks)

• Approx 50% of the property sublet to Amazon for 10 years

• Acq price £6.5m (initial yield 5 ¼ %), replacement cost of £13.8m

14

First World Hybrid Real Estate Property portfolio – under due diligence, deal 20

• Modern A grade regional office

• Broadlands Office park, Norwich

• Let to Aviva Insurance

• FRI, Upwards only, lease with 10 ½ years to expiry

• Acq price £12.875m (initial yield 6.3%), replacement cost of £22.8m

First World Hybrid Real EstatePortfolio valuation – policy and trends

Good investment demand for long lease, well tenanted property

Valuations supported by strong occupational market.

• Each property is independently valued on the anniversary of its acquisition and in six monthly intervals thereafter.

• Rolling valuations, by design, to reduce volatility. • Barclays requirement – every 3 years on a rolling basis• Valuation trend

• In 2018 - 13 up, 2 flat, 1 down• In 2019 – 5 up, 8 flat, 3 down

First World Hybrid Real Estate Portfolio debt - well justified

• Variable Rate: 77bps LIBOR + 1.90% margin = 2.67%

• 5 year fixed debt (approx. 50%) 1.34% all in + 1.90% margin = 3.24%

• Positive leverage upfront (<3% ave debt rate versus 5.8% direct property yield)

• Max 50% LTV on property acquisition price

• Actual LTV is currently 44% of property portfolio and <40% of total assets

• Interest covered 4.7 times by rental (the ultimate test)

Using debt simply makes good senseHedge increases predictability of income yield

First World Hybrid Real EstateREITs – Fundamental part of the structure

• REITs provide liquidity for redemptions and property related returns pending investment in direct property

• 4 REITS – Large and liquid, £ based, UK dominant

– Distribution warehousing emphasis – London Metric/Tritax Big Box/Segro/Lxi

• Performance – Outperformed NAREIT index

– Following weak 2nd half in 2018, strong price appreciation in 2019 YTD

First World Hybrid Real EstateLiquidity & Redemptions

• Liquidity target level – Target 25% of NAV, held primarily in REIT portfolio– Increased in Q3 from 20% given increased UK uncertainty – Yield dilutive but considered prudent– Reviewed quarterly based on market conditions and redemptions

• Actual liquidity – Averaged 30% 2019 YTD – Following strong net flows into fund – Pending acquisition - deal #19 – Post deal #20, liquidity will reduce to target 25% level

First World Hybrid Real EstateLiquidity & Redemptions

• Redemptions– 2019 YTD: 6% of NAV – 2018 and 2017 calendar years: 9% and 10%

REITs held as liquidity held to meet reasonable redemptions

• Gating and suspension provisions – As with all open ended funds, there are standard provisions to deal with

extraordinary circumstances– Gating – maximum weekly redemption is 5% of shares in issue, excess c/f– Suspension circumstances - where pricing is not reflective of underlying

property valuations or where not practical to realise an investment

There to protect the interests of all investors

First World Hybrid Real Estate UK Property Market – key considerations

• Property yields attractive relative to bonds – Meaningful positive yield differential between long lease property yields and UK

bonds

– UK 10 years bonds currently yielding around 50 bps (no income growth)

• Occupational market generally sound – With exception of retail which is being impacted by profound changes in

consumer shopping behaviour (with distribution property being beneficiary)

• Debt at manageable levels – At borrowing rates <3%, meaningful upfront positive leverage and comfortable

IC ratios (pre GFC the cost of debt necessitated unsustainable property returns)

– Debt leverage is much lower (ave LTVs in mid 50%s whereas in 2007 in mid 70%s); significant de-risking due to more restrictive banking regs. - a structural shift

First World Hybrid Real Estate Brexit – key considerations • 3 years on and Brexit uncertainty continues - frustrating for business

and UK public at large

• Despite this, UK economy and property market has performed better than most commentators had speculated post Referendum. Evidenced in bidding & valuations.

• Significantly, international investors are behind >50% of investment activity (weaker sterling positive for these buyers).

• FWHRE’s properties - No specific Brexit risk – no London or international head offices, no export focussed manufacturing or automotive related. Generally UK consumer focussed businesses.

UK to remain 1st world economy (with entrenched property rights and good levels of governance and transparency) and an attractive destination to store wealth

First World Hybrid Real Estate plc Summary

• Leases and tenant strength underpin robust and attractive dividend yield in sterling

• Occupational market supportive of modest capital growth over time

• Better liquidity and pricing certainty than typical direct property investments but less volatility than publicly quoted and traded property

• Comfort of a Regulated Fund