TICON Freehold and Leasehold Real Estate Investment Trust · 8/1/2018 · Summary Overall Information Before Agenda 2 and 3 4 Right to Invest in Properties of TICON and/or TICON’s

1 August 2018

Proposed Acquisition of TICON Industrial Properties

TICON Freehold and Leasehold Real Estate Investment Trust

Extraordinary General Meeting of Trust Unitholders No.1/2018

Bangkok Marriott Marquis Queen’s Park Hotel

5th Floor, Sala Thai Ballroom

1

Board of directors of TICON Management Co.,Ltd. (REIT Manager)

Chairman of The Meeting

Chairman of The Board

and

Independent Director

Mr.Sun Vithespongse

Mr.Sopon

PunyaratabandhuIndependent Director

Mr.Sopon

RacharaksaDirector

Mr.Uten

LohachitpitaksDirector

Mr.Michio

MaedaDirector

Mr.Peerapat

SrisukontManaging Director

2

Trustee, IFA and Legal Advisor

Mr.Thawatchai

Lueangsurarungse

Trustee

Senior vice President

BBL Asset Management

Co.,Ltd.

Ms.Krongkarn

Noppawarn

IFA

Associate Director

Baker Tilly Corporate

Advisory Services

(Thailand) Ltd.

Mr.Charin

Satchayan

Legal Advisor

Partner

Charin & Associates

Limited

4

To acknowledge the minutes of the 2018 Annual General

Meeting of Trust Unitholders

3

Agenda 1

Voting Require: N/A

Summary Overall Information Before Agenda 2 and 3

4

Right to Invest in Properties of TICON and/or TICON’s Subsidiaries and

Investment plan of TREIT

▪ TICON agrees that TREIT will have the right to invest in the assets used in

the business operation of warehouse and/or factory which TICON and/or its

subsidiaries is entitled to or has the leasehold right after the Conversion

(Right to Invest) by investment in the form of purchase and/or lease and/or

others.

▪ TICON agrees that it shall procure the amount of Assets under Right to

Invest to have the total investment value of not less than Baht 3,500,000,000

(Three Thousand Five Hundred Million Baht)

▪ TREIT shall complete the investment transaction by 31 December 2018

Based on TREIT’s unitholders approved in EGM No.1/2017 Dated 19 October 2017.

TREIT shall invest in asset with value not less than THB 3,500 mm

6

To consider and approve the investment in the Additional

Investment Assets

5

Agenda 2

Range of Property

Appraised Value/(4)

Transaction Summary

6

Acquisition

Structure

Property

Purchase Price/(1)

Range of Fair Value of

the Transaction Assets

by IFA/(3)

Premium from

purchasing

Proposed

Funding

Acquisition of high quality standard of factories and warehouses in 11 prime

industrial/logistic locations in Thailand (“Units”) and purchase assets which convert from

leasehold to freehold (“Conversion assets”)

▪ New Assets 58 Units (17 Factories and 41 Warehouses)

▪ Conversion assets 23 Units (16 Factories and 7 Warehouses)

Not over THB 3,600.13 million (approximately USD 112.50 million)

▪ New Assets THB 3,345.63 million (approximately USD 104.55 million)

▪ Conversion assets THB 254.50 million (approximately USD 7.95 million)

Range of Fair Value of assets: THB 3,279.90 – 4,230.98 million

(approximately USD 102.50 – 132.22 million)

Approximately 9.76%/(2) over appraised valuation which appraised by independent appraisers

▪ Invest and Transfer assets within December 31, 2018Key Date

Proposed funding for the acquisition comprises of

▪ Debentures and/or Bridging loan and/or;

▪ Excess Cash of TREIT

1

2

3

5

6

7

Note: An exchange rate of 1 USD = 32 THB

1.Based on proposal from TICON Industrial connection PCL

2. Calculated based on Purchasing Price over low-end valuation price

3. Fair value of asset by Independent Financial Advisor reference from Enclosure 5

4Range of Appraised Value: THB 3,279.90 – 3,587.70 million

(approximately USD 102.50 – 112.12 million)

4. Appraised value by independent appraisers (Enclosure 3)

Target Portfolio Overview – “New Assets"

7

Operational benefits from greater size and scale of portfolio strategically located in Key Industrial Zones

58 New

Units/(4)

Properties

Ages

5.59 Years/(5)

Pro-Forma

Revenue (Per Year)/(6)

THB 242.7 mm

151,881SQ.M

Net Leasable

Area/(3)

~90%Occupancy

Rate/(1)

1.5 YearsWeighted Average

Lease Expiry

(“WALE”)/(2)

Note: 1.Based on Rent Roll as of 31 May 2018, OCR of Factory = 90.7% and OCR of Warehouse = 89.3% (blend 89.7%)

2. Based on Gross Rental Income (“GRI”) being the contracted rental income and estimated recoverable outgoing for the month of May’18

3. NLA of new assets = 151,881 SQ.M, 4. Factory = 17 units and Warehouse = 41 units 5. As of 31 July 2018 6. Reference from Enclosure 6

FH = 101,889 SQ.M

LH = 49,992 SQ.M

Overview of Proposed Acquisition Assets – Conversion Assets

8

Zone Eastern Economic Corridor

Type of Assets Factory Warehouse

Freehold Value (MB)/2 1,217 493

Leasehold Value (MB)/2 1,038 418

Investment Value

(MB)(FH-LH)179 76

No of Unit 16 7

Type of Right on assets Convert Leasehold to Freehold

Net Leasable Area

(Sq.m)43,700 19,650

No of Tenants 15 2

Zone Occupancy Rate% 85%/(1)

Location AMATA NAKORN CHONBURI

Note: 1.Performance as of 31 May 2018

2:Based on appraisal value (Enclosure 3)

Key Investment Highlight

• Amata Nakorn Industrial Estate is one of the largest area of industrial estate in

Thailand, and important manufacturing cluster, connected manufacturers in various

industries.

• Land price of AMN has dramatically increased and rental rate is very high. Thus,

Invest in freehold right will boost up the property value in long term and reduce

effect from unrealized loss from reduction of remaining lease period.

Key manufacturing hub for Thailand

✓ A key production hub for automobile, foundation for further

development of automobile industry as well as for aviation and

robotics & automation industry development.

✓ Foundation for development of plastics, rubbers& polymers for value-

added industries.

Occupied 83%

3,966,670 SQ.M

Net Asset Yield for Convert Assets

Total Revenue Per Year (MB) 129.0

OPEX (MB) (9.7)

NPI (MB) 119.3

Book Value (MB) 1,360.3

+ FH Investment (MB) 254.5

Total Asset Value (MB) 1,614.8

No Premium for Conversion assets

Kaga Electronics (Thailand)

W3

Plaloc Asia(Thailand)

B3.8

Todenko (Thailand)

M2.7/2

Ohizumi MFG (Thailand)

M2.4

Summary Overall TREIT Post – Proposed Acquisition

9

No of Unit

NLA

Portfolio Value

Geographical

Diversification/(3)

Proportion of

Freehold to

Leasehold assets

WALE/(5)

Existing Portfolio(As of May 31st ,2018)

+Proposed

Acquisition

Post-Proposed

Acquisition

489 Units/(6)

1,483,610 SQ.M/(6)

THB 30,403.90 million/(4)(6)

(USD 950.12 million)

• Northern BKK 26%

• Eastern BKK 12%

• EEC 62%

• Freehold 69%

• Leasehold 31%

~2 Years

Occupancy Rate 79%

+58 New

Units

+151,881 SQ.M

~90%(100%)/(2)

THB 3,345.63 million/(1)

(USD 104.55 million)


• Eastern BKK 46%

• EEC 37%

• Freehold 67%

• Leasehold 33%

~1.5 Years

547 Unit

1,635,491 SQ.M

80%(81%)

THB 34,004.03 million(USD 1,062.62 million)


• Eastern BKK 15%

• EEC 60%

• Freehold 73%

• Leasehold 27%

~2 Years

1.Based on TMAN BOD approval to invest in TICON assets.

2.TICON will provide performance guarantee for vacant unit for 12 months after acquisition.

6.Deduct unit M1.6/2(Plot P 12) in Pinthong 1 which sale to Thai Sankyo on 28/5/2018

3.Based on existing portfolio and proposed acquisition NLA and type of right on assets

4.Based on latest appraisal value on Dec 15,2017

5. WALE = Weighted % of GRI X remaining lease period under agreement.

+Conversion

Assets

23 Conversion

Units

Area to be Converted

-

THB 254.50 million/(1)

(USD 7.95 million)

-

63,350 SQ.M

Freehold 100%

-

Transaction Rationale and Highlights

10

1

2

3

4

New Assets located in Prime and Strategic Industrial/Logistic locations

in Thailand with International asset Quality

New Assets Enlarge and Diversify TREIT Portfolio

Consistent with the REIT Manager’s Investment Strategy

Enhance TREIT Performance and DPU Accretive Based on a

Management Pro formaThe acquisition is Enhance both of revenue and DPU to TREIT’s unitholders

Proposed acquisition is in line with TREIT’s key objectives

Reduces concentration risks through further diversification

All proposed acquisition assets are located in prime industrial location which shall boost overall TREIT’s

performance

New Assets located Prime and Strategic Industrial/Logistic locations in Thailand

with International asset Quality

11

1

Prime location

in Thailand

Thailand Industrial Property Market Demonstrates Signs of Stabilization

Summary Demand and Supply/1

Supply of SILP/3

+3.3% y-o-y

Demand of SILP/3

+1.0% y-o-y

Supply of RBF/4

-0.2% y-o-y

Demand of RBF/4

+1.9% y-o-y

Supply of MLP/5

+16.0% y-o-y

Demand of MLP/5

+15.3% y-o-y

Key Indicators/1

• Net Flows of foreign direct investment to the manufacturing sector in

1QDY2018 increased by 74% Y-o-Y compared to 1QFY2017

• The total supply of Ready built factories (RBFs) in 1QFY2018

remained at 2,357,000 SQ.M. the occupancy rate increase from 70.4%

in 4QFY2017 to 71% 1QFY2018.

• The total supply of Modern logistics properties (MLPs) in

1QFY2018 was 3,426,000 SQ.M, an increase of 16.0% Y-o-Y. the net

new take up in 1QFY2018 was 32,800 SQ.M

Note 1. CBRE Thailand Industrial, 1QFY2018

2. JLL

Thailand Property Clock 2018/2

Prime Residential

Property (Q1’18)

Prime Retail

Property (Q1’18)

Grade A Office

Property (Q1’18)

Industrial Property (Q1’18)/6

Rental Growth

1.0% y-o-y

Rental Rate

THB 160

Per Sq.m

Stage in Cycle

Growth

Slowing

• OCR Q1 2018 increase from

70.4% in Q4 2017 to 70.9%

• The net take-up was 11,500

SQ.M.

• The total supply in this quarter

approx. 2.36 million Sq.m

Ready Built Factories(RBF)

Modern Logistic Properties(MLP)

3. SILP = The Serviced Industrial Land Plots (SILPs)

4. RBF = Ready Built Factories

5. MLP = Modern Logistics Properties

6. Analyst Industrial Outlook by TMAN

• OCR Q1 2018 increase from

79.5% in Q4 2017 to 80.4%

• The net take-up was 5,000

SQ.M.

• The total supply in this quarter

approx. 3.43 million Sq.m

Industrial Properties 1QFY2018



12

1

Prime location

in Thailand

All proposed assets are located in EEC area , Northern BKK and Eastern BKK which are Thailand’s prime industrial area

TREIT have over 1 million sq. m of factory and warehouse space

in EEC and adjacent areas

EECd (EEC of Digital Park)

EECi (EEC of Innovation)

Double-track railway Motorway

EEC Area and Eastern BKK

High-quality infrastructure to support industries

✓ Double – track Railway from Bangkok down to Map Tha Put.

✓ Motorway No.7 linking Bangkok & Rayong.

✓ U-Tapao Airport with annual capacity to serve 3million passengers.

✓ 20 power plants and plan for high speed train.

A Key manufacturing hub for Thailand

✓ A key production hub for automobile, foundation for further

development of automobile industry as well as for aviation and robotics

& automation industry development.

✓ Foundation for development of plastics, rubbers& polymers for value-

added industries.

✓ 29 industrial estates – production base for over 3,800 factories.

Summary Key Location Highlights

TREIT’s Portfolio NLA in Eastern BKK and EEC

453,925

SQ.M

643,695

SQ.M

Current Portfolio

468,125

SQ.M

755,201

SQ.M

After acquisition

Factory Warehouse

OCR 83%OCR 84%OCR 91%

+125,706 SQ.M

• FAC 14,200 SQ.M

• WH 111,506 SQ.M1,097,620 SQ.M1,223,326 SQ.M

236 250 250 291 296 295 290 291

317

97%

68%62%

56% 60%63%

67% 68%69%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

200

250

300

350

400

450

500

BeforeFlood

2012 2013 2014 2015 2016 2017 May'18 AfterAcquisition

NLA (Thousand SQ.M)

13

1

Prime location

in Thailand

All proposed assets are located in EEC area , Northern BKK and Eastern BKK which are Thailand’s prime industrial area

Government Flood Protection System Summary Key Location Highlights

Strong and Renowned Tenants

Strategic located on highway network, convenient for transporting and

distributing. One of important electronics manufacturing cluster.

Tenants has come back to open factories to produce electronics products

in Northern Bangkok area and demand of warehouse of this area

commands an occupancy rate around 70%%.(2)

Northern Bangkok zone (Ayutthaya, Wangnoi, Prachinburi) is a strategic

gateway to Northern and North Eastern part of Thailand which cater to F&B

tenants requirements

Government completed elevated road projects and flooded protection wall

to protect industrial estate from disaster.(1)

Source: 1 Industrial Estate Authority of Thailand 2. Khight Frank: Logistics property market overview H2 2017

▪ MPM Technology is one of leading Hard-Disk-Drive

producers of Asia. MPM has rented factory with TREIT in

Navanakorn since 2015.

▪ Qual-Pro is a electronic manufacturing service (EMS)

provider which rented factory with TREIT since 2015.



Factory Performance in Northern BKK Area (2011 – 2018)/(3)

Occupancy Rate%

3. Reference from Asset management of TICON Industrial Connection PCL

- Constructed and operational - Under construction Under approval

process

Electronics and Automotive came back to Northern BKK Area in FY2018/4

Spare Part

producers have

rented factory area

from TREIT around

8,000 Sq.m

Electronics

producers have

rented factory area

from TREIT around

4,500 Sq.m

4.As of 31 July 2018

14

High Quality Standard of TREIT Assets

Prime location

in ThailandDiversification

Of Portfolio

1New Assets located Prime and Strategic Industrial/Logistic locations in Thailand with

International asset Quality

Average Size 1,500 – 3,000 sqm.

Average Height 5 – 7 meters

Floor Loading 1 – 3 Tons/sqm.

Location 11

Factory Warehouse

1.Well maintained common area

• Wide Road with lots of parking• Lot of Green area

2.Floor Quality

• High compressive strength concrete

• Burnished floor or hard trowel finishing technique

• Expansion joint

• Super flat and level floor

3.Roof – Design to improve air circulation

International Quality Standard

4.Green Buildings certified by LEED & EDGE

Total Solutions for Industrial Properties

√ Superior quality

Strategic locations

One-stop Services

√

√

Ready built and/or customized buildings

Flexibility for business

Prime location in industrial estate,

general industrial zones, exportprocessing zone or Duty-Free Zones

√

√

√

Average Size 1,000 – 3,000 sqm.

Average Height 8 – 12 meters

Floor Loading 3 – 5 Tons/sqm.

Location 18

Prime location

in Thailand

Source: TICON and TPARK

Prime location

in Thailand

LEED GOLD Certified EDGE Certified

69%

31%

73%

27%


15

2

Prime location


Of Portfolio

Increased Proportion of Freehold Assets

Pre-Proposed Acquisition Post-Proposed Acquisition

Freehold

1,027,598 SQ.M

Leasehold

456,012 SQ.M

Freehold

1,192,837 SQ.M

Leasehold

442,654 SQ.M

Key Rationale to convert leasehold to freehold

✓ Amatarnakorn considered as the prime industrial area ,

complete with infrastructures and utilities to support

production and/or use as logistic hub by far from

Bangkok only 57 KM.

✓ With qualification above, rental rate on this area growth

average 1.25% - 1.50% p.a and land cost for this area

dramatically increase during past 3-5 years.

✓ Therefore, Investment in freehold of these assets shall

boost up investment property value in long-term

✓ Cost to extend leasehold in next 25 years shall

expensive than invest in freehold today.

✓ Convert right on assets

from Leasehold to Freehold

area 63,350 SQ.M

✓ Acquire new assets (FH) total

area 101,889 SQ.M

Enhanced Geographical Diversification


Before After

Data As of 31 May 2018

74%

26%

75%

25%

Eastern BKK and EEC

1,097,620 SQ.M

Northern BKK

385,990 SQ.M

Northern BKK

412,165 SQ.M

Before After

Proportion of Factory and Warehouse

50%50% 52%48%

Warehouse

739,125 SQ.M

Factory

744,485 SQ.M

Warehouse

850,631 SQ.M

Factory

784,860 SQ.M

Before After


✓ Acquire new assets (LH) total

area 49,992 SQ.M

Eastern BKK and EEC

1,223,326 SQ.M

49%

21%

13%

12%

5%

US

51%

21%

12%

12%

4%

European

29%

21%24%

2%

11%

2%

11%

30%

22%22%

2%

11%

2%

11%


16

Prime location


Of Portfolio

Tenants Breakdown by Industry/1


Automotive

Enhanced Geographical Diversification/1


Before

Data As of 31 May 2018

ElectronicsLogistics

Packaging

Retail

FMCG

Others

After

Electronics

Automotive

Logistics

Packaging

Retail

FMCG

Others

Before AfterJapanese

Thai

Asian (Except)

Japanese

Japanese

European

Asian (Except)

Japanese

Thai

US

More diversification of Industry

✓ Increase in logistic industry 2% which

logistic is in increasing trend and

maintain automotive and electronics

industry in same proportionate before

invest in new asset

Nationality of Tenants

✓ Well-diversify nationality of tenants in

the same proportion before proposed

acquisition

Diversification

Of Portfolio

Diversification

Of Portfolio

2

1.Breakdown by GRI as of May’18L


17

Diversified tenant base underpinned by primary industries of Thailand

Logistic Services

18%10%

15%

46%

10%

TenantMix

Automotive

Others Electronics

E-Commerce

1.Breakdown by GRI for the month ended May’18

2.As of 31 May 2018

Warehouses and Distribution Center

Warehouses and

Factory

Warehouses and

Distribution Center

Factory Factory

Diversify tenant base including multinational companies

and leading domestic companies therefore reduces

concentration of trust after acquisition.

1

2

3

4

5

Tenants are in Thailand’s primary industry sectors which

are logistic services, Automotive, E-commerce, Stationary

business and Electronics

28 high quality tenants with no single tenant contributing

more than 12% of GRI of proposed acquisition assets.

Tenants have strong financial performance thus tenant

likely to extend lease contract to support their production

and/or business activities.

Most of tenants are renowned and have strong brand

thus It will support TREIT’s image to be the largest

industrial space provider to brand companies in Thailand.

2

Prime location


Of Portfolio

Note: Detail of tenant breakdown in each locations is in Pages A4- A14

5.33%

2.51%2.19% 2.13%

1.88% 1.77% 1.71% 1.59% 1.56% 1.47%

Siam Makro Leschaco BJC Kintetsu Schenker Lazada Denso DTSDraexlmaier

DHL Panalpina


18

Reduced concentration risk in the top 10 tenants

1. Breakdown by GRI for the month ended May’18

2

Prime location


Of Portfolio

Pre-Proposed Acquisition

Post-Proposed Acquisition

Top 10 Tenants by GRI(1)

20.55%Pro Forma Top

10 tenants by

GRI

22.15% Pro Forma Top

10 tenants by

GRI

4.83%

2.27%2.05% 1.99% 1.93%

1.70% 1.55% 1.47% 1.44% 1.33%

Siam Makro Leschaco Lazada BJC Kintetsu Schenker Denso DHL DTSDraexlmaier

Panalpina Reduce 1.6%

+3 Rank +1 Rank

Consistent with the REIT Manager’s Investment Strategy

19

Consistent

With strategy

“Maximize Benefit to All Unitholders”

Increase

NAV per Unit

Leading Industrial REIT of Region

Constant Growth in

TAV

Maintain High

OCRHigh Quality Assets

In Prime Location

Maintain Lowest

Cost of DebtMaintain Appropriate

Leverage %

Constant Growth in

DPU

Comprise prime and predominantly freehold logistics and industrial properties.

Enlarged TREIT portfolio value and maintain status “ the largest industrial REIT in Thailand”.

High quality Tenants.

Increase freehold assets in portfolio.

Reduces concentration risks through geographical diversification and tenant mix.

Potential to extend or rearrange size of factory/warehouse due to economical scale from

asset size in each location.

Ob

jec

tive

Ou

tco

me

Proposed acquisition is in line with TREIT’s Investment objective

3

Enhance TREIT Performance and DPU Accretive Based on

a Management Pro forma

20

Current Portfolio

(May’18)

+ Proposed

Acquisition

After Proposed

Acquisition% Change

No. of Assets 489 58 547 +12%

No. of Occupied Unit 396 55 451 +14%

NLA (sqm) 1,483,610 151,881 1,635,491 +10%

Occupied Area (sqm) 1,171,565 136,251 1,307,816 +12%

Occupancy 79.0% 89.7%79.9%

(80.9%)/(1)

+0.9%

(+1.9%)

Asset Value (THB'm) 30,404.0 3,600.1 34,004.1 +12%

Debt ratio 17.2%/(2) ~100%/(3) 25.5%/(2) +7.8%

1.OCR including guarantee performance for 1Y after transfer assets to TREIT

2.Debt Ratio = total IBD / Assume TAV equal on 1QFY2018 plus asset value from acquisition.

▪ Pro-forma DPU accretive for approx. THB 0.0315 per unit and accretive for approx. THB 0.0402 per unit (case including guarantee)

▪ Positive portfolio impact, provide stable increase in income stream and stable rental growth rate.

4Enhance

DPU

Pro-forma DPU (THB cents)/Enclosure 6

Case Current Performance0.6451 0.0315 0.6766 +4.9%

Pro-forma DPU (THB cents)/Enclosure 6

Case Current Performance + Guarantee 1Y0.6451 0.0402 0.6853 +6.2%

3. Assume use Debt THB 3,600 mm

Portfolio growth since IPO

21

YE 2014/5

1st Investment IPO 2014

▪ 45 units of WH/FA

▪ Value THB 4,228 mm/2 4

▪ NLA 214,523 Sq.m.



▪ NLA 155,182 Sq.m.

2nd Investment 2015

YE 2015/5 YE 2017/5

3rd Investment 2017

May’18 Within Dec’18



▪ NLA 1,114,955 Sq.m.

TICON 3.6 Billion Baht

▪ Value around THB 3.6 billion

▪ NLA 151,881 Sq.m

Sponsor Assets

Sponsor Assets acquisitionIn period

+THB 30 Billion

Since IPOConversion

PFPOs to TREIT

THB 4.2 bn/1

(USD 0.13 bn)/3

THB 7.3 bn/1

(USD 0.23 bn)/3

THB 30.4 bn/1

(USD 0.95 bn)/3

THB 30.4 bn/1

(USD 0.95 bn)/3

≥THB 34.0 bn/1

(USD 1.06 bn)/3


▪ Value THB 30,404 mm

▪ NLA 1,483,610 Sq.m.

Current Portfolio May’18

Note 1 : Expected after acquire TICON assets. 4. Acquisition value2: All prices is based on acquisition Price (without effect of revaluation in each year 5. In the End of each year

3. Assume all fiscal year use Exchange rate at USD 1 = THB 32

4th Investment 2018

Transaction timeline and Key Date

22

TMAN BOD No.5/2018

approve to invest in

TICON asset value not

over THB 3,600 mm

12 June 2018

TREIT EGM

No.1/2018

1 August 2018

Transfer assets to

TREIT and Payment

cash for acquisition

Vote required

:Not Less than 3 of 4 of trust units which

attending the meeting and having the

right to vote(TICON group cannot vote Agenda 2

and Agenda 3)

Based on TREIT’s unitholders approved in EGM No.1/2017 Dated 19 October 2017.

The acquisition must be completed and transfer within 31 December 2018

Within

31 December 2018

1 2 3

Strictly Private and ConfidentialPrepared by Baker Tilly Corporate Advisory Services (Thailand) Limited

IFA’s Opinionfor unitholders of TREIT

BY BAKER T ILLY CORPORATE ADVISORY SERVICES (THAILAND) L IMITED

August 1, 2018

23

Strictly Private and ConfidentialPrepared by Baker Tilly Corporate Advisory Services (Thailand) Limited 25

BackgroundTICON Management Co., Ltd. (“TMAN”) as the REIT Manager of TICON Freehold and Leasehold Real Estate Investment Trust (“TREIT”) plans to invest in the Additional Assets and the Conversion Assets (“the Transaction Assets”) total of 81 units as followings:

Type of Investment UnitsBuilding Area

(sq.m.)Net Assets Value

(THB million)

The Additional Assets

Freehold rights of warehouse 26 61,514

3,345.63Leasehold rights of warehouse 15 49,992

Freehold rights of factory 17 40,375

The Conversion Assets

Conversion of leasehold right to freehold rights of warehouse

7 19,650

254.50Conversion of leasehold right to

freehold rights of factory16 43,700

Total 81 215,231 3,600.13

Net price for the Transaction Assets is approximately THB 3,600.13 million.

24


Opinion of the IFA to the Transaction Assets PriceThe IFA has considered the appropriateness of the transaction price by using 2 methods which are 1) Valuation by Independent Appraisers and 2) The Financial Projection by the IFA as follows:

The Financial Projection by the IFA

Fair Value of the Assets(THB Million)

Total fair value of the Transaction Assets

3,746.04 – 4,230.98

Fair value of the Transaction Assets is in the range of THB 3,279.90 – 4,230.98 M

The Appraisal by the Independent Appraisers

Appraisal value (THB Million)15 Business

Advisory LimitedNexus Property

Consultant Co., Ltd.Minimum

appraisal valueMaximum

appraisal valueAdditional Investment Assets

Total of warehouse 2,006.10 2,124.00Total of factory 1,019.30 1,053.90

Total of factory and warehouse (1) 3,025.40 3,177.90 3,025.40 3,177.90 Assets to be Converted into Freehold

Freehold 1,840.70 1,710.10 Leasehold 1,430.90 1,455.60

Difference between freehold and leasehold value (2)

409.80 254.50 254.50 409.80

Summary of total appraisal value (1) + (2)

3,435.20 3,432.40 3,279.90 3,587.70

The Valuation by the Independent Appraisers: Two independent appraisers valuedthe Transaction Assets by the income approach.

The Financial Projection by the IFA: This approach analyzes the historical operating performance, actual rental and service agreements ,and the estimations of REIT and property manager.

After the investment in the Transaction Assets, IRR to unitholders is estimated to increase from 7.17% to 7.86%.

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Reasonableness of the Asset Acquisition

1. Enhance the ability to generate more income within a shortperiod of time; The Additional Investment Assets were occupied,accounting for 89.71% of all rental areas.

2. The Additional Investment Assets being in a good location;The 41 warehouse units are situated in strategic locations forlogistics services. Also, the 17 factory are in industrial estates.

3. The Assets to be Converted into Freehold can procurebenefits indefinitely; The Assets to be Converted can procurebenefits indefinitely after entering into the Transaction.

4. Improve quality of assets in the portfolio• The proportion of investment in freehold rights will increase

from 69.29% to 72.95%.• The Additional Investment Assets are still in a good condition

with an average age of 5.59 years, comparing with the current assets which is 9.20 year. (As of 31 July 2018)

5. No dilution effects; This transaction will be funded from loans, there will be no impact on TREIT’s existing trust unitholders.Advantages from Entering into the Transaction

6. Benefit from the Eastern Economic Corridor (“EEC”)Programe; Parts of the Additional Investment Assets are located in areas supported by the EEC programme

7. Economy of scale; The Additional Investment Assets are located in the same area as the assets currently owned by TREIT.

Disadvantages from Entering into the Transaction

1. Higher debt burden due to the additional borrowing/bond issuance; After the Transaction, TREIT’s interest expense is estimated to increase from THB 13.16M/month to THB 25.95M/month.

2. Higher debt to total asset ratio; After the Transaction, interest-bearing debt to total assets ratio edging up from 17.26% to 25.60%.(Refer to review financial statement as of 31 March 2018). Accordingto management account as of 31 May 2018 the ratio will increasefrom 17.20% to 25.52%

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Reasonableness of the Asset Acquisition

1. Risk from default of rentals and/or service fees and premature termination of rental contracts and service contracts by tenants

2. Risk from the contract parties’ breach of the contract to buyand to sell land and construction, the contract to buy and to sellconstruction, and the land lease/sub-lease contract

3. Risk of not getting the rental contract renewal upon expiry ofthe existing contracts

4. Risk of finding tenants for unoccupied warehouses and factories

Risk Factor

5. Risk of flooding in future industrial zone

6. Risk of TREIT for being unable to invest in the Additional Investment Assets and the Assets to be Converted into Freehold with the total investment value of THB 3,500 M in accordance with the resolution of the EGM of trust unitholders No. 1/2017 of TREIT and the 2018 AGM of trust unitholders of TREIT.

7. Risk related to the lease agreement for the option to early terminate

8. Risk relating to the option-to-swap condition in the rentalcontracts

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IFA’s Opinion

Fair value of the Transaction Assets is in the range of THB 3,279.90 – 4,230.98 M

IRR to unitholders is estimated to increase from 7.17% to 7.86%.

Net price for the Transaction Assets is approximately THB 3,600.13 million.

The trust unitholders should approve the transaction for TREIT’s Acquisition and Disposal of Assets and

Related Party Transactions

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TREIT Post Acquisition and Key highlight

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The Largest asset size

amount Industrial REIT in Thailand

THB 34,004 mm(USD 1,063 mm/1)

FinancialSoundness

TRIS Credit Rating

A(Stable Outlook)

Low Leverage Ratio

~ 25.52%/4Compare to Industry

Low Cost of Debt

~3.50%/3Compare to Industry

TREIT Key Highlight

Available Debt headroom for growth

1 2 3

4

NLA 1,635,491 SQ.M“The Best Industrial REIT Credit Rating in Thailand”

Key Portfolio Metrics

Avg. Occupancy

80%

High Renewal Rate

≥80%

WALE

~2 Years/2

Asset in EEC

974,980 SQ.M

Moderate WALE of Industrial Properties

5 9

Largest assets provider in EEC

7

LH/FH

27% / 73%

6

High Freehold Portion

(1) Exchange Rate @ THB 32 per 1 USD

(2) Weighted lease expiry by GRI of each lease agreement

(3) It may be change based on market interest rate

(4) Assume Total Asset value as of 31 May 2018 Plus Additional Investment THB 3,600.13 mm

(TAV 31/5/2018 = 32,291.05 IBD as of 31/5/2018 = 5,540 plus debt 3,600.13 (assume use debt 100%)

8

3130

Agenda 3To consider and approve the amendments of TREIT’s Trust Deed, including the

entry and/or the amendments to other agreements relating to the operation of

TREIT and seek for benefits from the immovable properties in order to be in line

with the investment in the Additional Investment Assets

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Agenda 3

➢ Consideration and Approval of the Amendments to the trust deed and other agreement by

✓ Amending and/or adding details of the additional assets for investment in Trust deed

✓ Adjusting information and other details related thereto in order to be in line with

investment in the additional assets for investment;

To consider and approve the amendments of TREIT’s Trust Deed, including the entry and/or the

amendments to other agreements relating to the operation of TREIT and seek for benefits from the

immovable properties in order to be in line with the investment in the Additional Investment Assets

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Other Matters (If any)

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Agenda 4

Documents

TICON Freehold and Leasehold Real Estate Investment Trust · 8/1/2018 · Summary Overall Information Before Agenda 2 and 3 4 Right to Invest in Properties of TICON and/or TICON’s