varia us properties - specialized on real estate ... · 4/13/2018 · well-performing multifamily...

Strictly confidential1

PRESENTATIONFULL-YEAR 2017 RESULTS


IMPORTANT NOTICE

This presentation includes forward-looking information and

statements, including statements concerning the outlook for

our business. These statements are based on current

expectations, estimates and projections about the factors

that may affect our future performance, including the

economic conditions in the property markets relevant to us.

These expectations, estimates and projections are generally

identifiable by statements containing words such as

“expects,” “believes,” “estimates,” “targets,” “plans,”

“outlook” or similar expressions.

There are numerous risks and uncertainties, many of which

are beyond our control, that could cause our actual results

to differ materially from the forward-looking information and

statements made in this presentation and which could affect

our ability to achieve any or all of our stated targets. The

important factors that could cause such differences include,

among others:

– business risks associated with the volatile economic

environment and political conditions

– costs associated with natural disasters affecting our

properties

– changes in governmental regulations

– changes in currency exchange and interest rates, and

– such other factors as may be discussed from time to time

in prospectuses

Although we believe that its expectations reflected in any

such forward-looking statement are based upon reasonable

assumptions, it can give no assurance that those

expectations will be achieved. This presentation contains

non-GAAP measures of performance. We provide

definitions of these measures and reconciliations between

these measures and their IFRS counterparts as we believe

are appropriate.


AGENDAAPRIL 13, 2018

Key achievements

Financials

Portfolio and growth strategy

Outlook

Q&A


TODAY’S SPEAKERS

■ Vice Chairman,

Varia US Properties AG

■ CEO of Stoneweg SA,

the Asset Manager of


■ Delegate of the Board of

Directors, Varia US

Properties AG

■ Head of US Investments

of Stoneweg SA,

the Asset Manager of


JAUME SABATER MARTOS PATRICK RICHARDMANUEL LEUTHOLD

■ Chairman,



KEY ACHIEVEMENTS


2017 KEY ACHIEVEMENTS (1/2)

■ GROWTH

■ Size of the portfolio doubled

■ Full investment of the equity raised at IPO by end of June

■ Value-add strategy implemented

■ Strong real estate market

■ Average leverage of 60.52%

■ Average interest rate of 4.19%

■ DISTRIBUTION AND PERFORMANCE

■ USD 4.15 earnings per share (including a USD 4.8M profit from tax reform. Earnings per

share without tax reform impact would be USD 3.4)

■ NAV growth to USD 34.38 (2016: USD 33.65)

■ CHF 3.45 distributed in 2017

■ Share price increase by 9.53%


2017 KEY ACHIEVEMENTS (2/2)

■ CONSOLIDATION

■ Reinforced acquisition and asset management team in the US

■ Additional resources for the Board of Directors

■ Strong reputation in the real estate market


FINANCIALS FY 2017


2017 KEY FIGURES (1/2)

EFFECTIVE

GROSS

INCOME2016: USD 39.1 million

USD

million 65.8

FAIR VALUE

PORTFOLIO

ADJUSTMENT2016: USD 21.2 million

USD

million 22.4

TOTAL


USD

million 88.2

TOTAL

OPERATING

EXPENSES2016: USD 33.9 million

USD

million 39.2

REPAIR AND

CAPEX BELOW

THRESHOLD2016: USD 5.8 million

USD

million 4.9

YEAR I

CAPEX

INVESTED2016: No data

USD

million 6.9


2017 KEY FIGURES (2/2)

NET

OPERATING

PROFIT2016: USD 30.6 million

USD

million 48.9

PROFIT

FOR THE

PERIOD2016: USD 16.2 million

USD

million 34.9

EARNINGS

PER SHARE2016: USD 3.37

USD 4.15

NAV

PER SHARE2016: USD 33.65

USD 34.38

NAV

PER SHARE(EXCLUDING DEFERRED

TAXES)2016: USD 35.93

USD 35.74


PROFIT AND LOSS (CONSOLIDATED)

In USD million As of December 31, 2017

Period from Sept. 28, 2015

through Dec. 31, 2016

Rental income 59.9 36.5

Other income 5.8 2.6

Bargain on purchase of subsidiary - 4.2

Net gain from fair value adjustment on invest. property 22.4 21.2

Total income 88.2 64.6

Total operating expenses 39.2 33.9

Operating profit 48.9 30.6

Profit before income tax 35.7 22.0

Profit for the period 34.9 16.2

Profit attributable to:

Varia US Properties AG shareholders (in USD million) 28.1 8.9

Non-controlling interests (in USD million) 6.8 7.3

NAV & Earnings per share

Net asset value (NAV) per share (in USD) 34.38 33.65

Basic and diluted earnings per share (in USD) 4.15 3.37


FINANCIAL POSITION (CONSOLIDATED)

Assets in USD million As of December 31, 2017 As of December 31, 2016

Total current assets 94.7 98.0

Total non-current assets 573.5 351.8

Total assets 668.2 449.8

Liabilities and equity in USD million As of December 31, 2017 As of December 31, 2016

Total current liabilities 47.3 8.7

Total non-current liabilities 350.6 216.2

Total liabilities 397.9 224.8

Equity attributable to Varia US Properties AG

shareholders

247.6 208.4

Non-Controlling Interest (NCI) 22.8 16.6

Total equity 270.4 225.0

Total liabilities and equity 668.2 449.8


OPERATING RESULTS (not audited)

In USD million As of December 31, 2017 As of December 31, 2016

Realized income 65.8 39.1

Total Operating expenses (36.5) (19.2)

Net Operating Income 29.3 19.9

Finance cost (13.6) (8.4)

Operating results before taxes and

exceptional

15.7 9.0

Expensed capex (2.6) (2.6)

Exceptional expenses/gain 0.2 (9.9)

Realized operating profit 13.3 (3.6)

Non realized profit 22.4 25.4

Tax provision (0.8) (5.7)

Profit attributable to Non-Controlling Interests (6.8) (7.3)

Profit attributable to Varia 28.1 8.9


PORTFOLIO AND GROWTH STRATEGY


THREE INDIVIDUAL INVESTMENT STRATEGIES

■ Investment in US multifamily real estate properties situated in strong urban locations in supply-constrained markets

■ Mid- to long-term investment perspective through three individual investment strategies:

Acquisition, refurbishment, improvement and optimizing

operations of real estate properties to maximize rent potential

and increase long-term value

B and C products: 15-35 years old buildings well maintained

with potential to add value through refurbishments allowing

rent increases

Apartments specifically built for the American workforce

Value-adding strategy

Transition of rent and income restricted properties to non-

restricted status over a defined multi-year period

Transition strategy for rent restricted properties

(LIHTC)

Further optimization of revenues and operating expenses

sometimes coupled with opportunistic "value-add" to a

stabilized base

Strategy for stabilized properties

Value

Time

A

B

C

LIHTC

Market rent property*

Stabilized property*

Transition

Value-adding

* Cycle-optimized disposals possible


PORTFOLIO DEVELOPMENT

■ Portfolio value of USD 617.9 million

■ 50 assets

■ 8,245 units

■ 18 different States in the US

■ Florida down to 24% (2016: 41%)

■ Geographical diversification

■ Larger assets

■ Closer to metropolitan areas


PORTFOLIO 2017 KEY FIGURES (1/2)

AVERAGE

MONTHLY

RENT PER UNIT2016: USD 674

USD 716

GROSS

POTENTIAL


USD

million 83.9

AVERAGE MARKET

VALUE PER UNIT2016: USD 64,160

USD 74,950

OCCUPANCY

RATE2016: 95.5%

94.3%


PORTFOLIO 2017 KEY FIGURES (2/2)

NET

CASH FLOW2016: USD 8.2 million

USD

million 16.7

ANNUALIZED

CASH FLOW2016: USD 8.6 million

USD

million 19.7

CASH ON CASH

YIELD2016: 7.7%

7.82%

ANNUALIZED

CASH ON CASH

YIELD2016: 8.37%

9.22%


PORTFOLIO GROWTH IN 2017

Washington

Montana

South Dakota

North Dakota

ColoradoUtah

ArizonaCalifornia

Oregon

Nevada

Idaho

Wyoming

NewMexico

Texas Georgia

Florida

Kansas

Oklahoma

Alabama

Louisiana

Mississippi

Tennessee

Kentucky

Virginia

North Carolina

Illinois

Nebraska

Iowa

Wisconsin

Michigan

Missouri

Arkansas

Maine

Vermont

New York

Minnesota

Indiana

Ohio

Pennsylvania

WestVirginia

Maryland

South Carolina

States with Varia properties

Seattle to Portland

Sacramento, Reno

Las Vegas, Phoenix

Dallas, San Antonio

Indianapolis, Louisville

Richmond, Atlanta,

Raleigh-Durham

New acquisitions 2017

Varia properties

Jacksonville


ADDING VALUE TO THE PORTFOLIO

▪ In 2017, a total of 239 units have been rehabbed (compared to the plan of rehabbing 207 units)

▪ An average rent increase of USD 107 per month has been achieved, resulting in a rent uplift of

more than 10% (average rents are close to USD 850 per month in rehabbed units)

▪ The average rehab cost per unit is USD 4,921

▪ ROCE ranges from 16% to 35% at each property, which is ahead of schedule

▪ Average ROCE 26%


REHABBED UNITS


STRONG PERFORMANCE OF 2017 PORTFOLIO


OUTLOOK


ALREADY 4 ASSETS ACQUIRED IN 2018

NAME LOCATION PRICEUSD m

UNIT EQUITY EXPECTED AV. YIELD

River Oaks Tucson (AZ) 20.5 300 9.8 9.4%

Tierra Pointe Albuquerque (NM) 26.0 352 11.3 9.2%

Cinnamon Tree Albuquerque (NM) 21.5 398 9.8 9.3%

Meadows Memphis (TE) 13.5 200 6.2 9.0%

River Oaks

Tierra Pointe

Cinnamon Tree

Meadows


TARGETS 2018

INVESTMENT → Deploy the new capital raised by the end of June 2018 with new property

acquisitions in line with Varia’s strategy

→ Finalize the acquisition of the Non-Controlling Interests of the portfolio

STRATEGY → Focus on the existing portfolio, especially in terms of renovation, in order

to optimize portfolio’s performance to deliver expected returns

→ Implementation of planned works, rents increase and returns optimization

→ Continuous expansion of the presence of Varia’s asset manager in the US

FINANCIALS → Delivery of solid results in US Dollar by continuing to implement the

Company’s growth strategy

→ Further increase of the value of the portfolio with a strong distribution from

the properties

→ Target a dividend of CHF 2.50 per share for the business year 2018 to be

paid after the 2019 Annual General Meeting


TAX REFORM IMPACT

■ Varia will significantly benefit from the tax reform that was

adopted at the end of 2017, among others because of the

reduction of the tax rates for companies.

■ Total estimated tax burden:

■ 24.4% before tax reform

■ 15.4% after tax reform

■ In 2017, the impact was the following:

■ USD 6.5 million deferred tax provision reduction

■ USD 4.8 million extraordinary profit


■ Significant increase of the interest rates in the first two months of the year

(now flattening)

■ Interest rates applicable currently 4.3% - 4.5%

■ Targeted yield over duration of the loan (7-10 years) still between 9-10%

■ Interest only

INTEREST RATE INCREASE


SUMMARY

MARKET

PEOPLE

COMPANY

▪ Well-performing multifamily property portfolio in the U.S.

▪ Promising acquisition pipeline in growing urban submarkets

▪ Board of Directors with broad experience in real estate and financial services

▪ Reputable Swiss asset manager optimizing performance with tailored investment

strategies

▪ Strong rental income growth and low vacancy rates in multifamily housing

▪ Investment focus on B and C properties, in low to moderate income neighborhoods

located in greater metro areas with increasing populations and job growth

▪ Shift from home ownership to renting in the U.S. with demand for rented properties

outpacing supply

▪ Cash flow optimization through attractive financing and rehabilitation as well as

solid cash flow generation allowing for high distribution to shareholders


FINANCIAL CALENDAR

■ Annual General Meeting 2018

■ Half-Year Results 2018

24 May 2018

30 August 2018


Q&A

varia us properties - specialized on real estate ... · 4/13/2018 · well-performing multifamily...

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