Space As a Service
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Space as a service Investor day and property tour June 2018 rdireit.com Itinerary Time Duration Location Description Hosted by 1 10:00 – 12:00 2 hours White Queen room • Welcome and registration • Mike Watters (CEO) and Office Space in Town Waterloo • RDI presentation Stephen Oakenfull (Deputy CEO) 2-6 Boundary Row, London SE1 8HP • PwC opening remarks on “space as a service” • Gareth Lewis (PwC) • RBH remarks on the UK hotel market • Helder Pereira (RBH) • Panel discussion: real estate as a service • Moderated by Carl Gough (Peel Hunt) 12:00 – 13:00 60 min Queen of Hearts room • Interactive lunch • RDI and Panellists Office Space in Town Waterloo 2-6 Boundary Row, London SE1 8HP 13:15 -13:45 30 min Transfer to Charing Cross Road. Underground from Waterloo to Tottenham Court Road (Northern Line) 2 13:45 – 14:10 25 min 127 Charing Cross Road • Tour the asset and surrounding area • Adrian Horsburgh London WC2H 0EW (Property Director) 14:10 – 14:30 20 min Transfer to Office Space in Town St Paul’s & Farringdon. Underground from Tottenham Court Road to St Paul’s (Central Line) 3 14:30 – 15:00 30 min Office Space in Town • Tour the asset and surrounding area • Giles Fuchs (OSIT CEO) and St Paul’s & Farringdon Roy Jones (General Manager) 20 Little Britain, London EC1A 7DH 15:00 – 15:15 15 min Transfer to Office Space in Town Liverpool Street. Walk to 46 New Broad Street EC2M 1JH 4 15:15 – 15:35 20 min Office Space in Town • Tour the asset and surrounding area • Giles Fuchs (OSIT CEO) and Liverpool Street Georgia Sandom (General Manager) 46 New Broad Street, London EC2M 1JH 15:35 – 16:00 25 min Transfer to Office Space in Town Monument. Underground from Liverpool Street to Monument (Circle Line) 5 16:00 – 16:30 30 min State room • Conclusion and final Q&A • RDI Office Space in Town Monument 20 St Dunstans Hill London EC3R 8HL 16:30 – 17:00 30 min Office Space in Town Monument • Tour the asset • Giles Fuchs (OSIT CEO) and 20 St Dunstans Hill, London EC3R 8HL Amelia Woolley (General Manager) 17:00 – 18:00 60 min The Deck • Drinks and canapés • RDI Office Space in Town Monument 20 St Dunstans Hill London EC3R 8HL Investor day and property tour June 2018 Farringdon Barbican Liverpool Street Whitechapel Moorgate New Broad Street, Tottenham Chancery Lane Little Britain, Court 4 Liverpool Street Holborn Road St Paul’s 3 St Paul’s Bank 127 Charing Cross Road 2 Aldgate Mansion House Fenchurch Street Covent Garden Blackfriars Cannon Street Tower Hill Leicester Square Temple Charing Cross Monument St Dunstans, 5 Monument Embankment Holiday Inn, Southwark Wapping London Bridge Southwark Waterloo Boundary Row, Borough 1 Waterloo Newington House Coburg House Investor day and property tour June 2018 Welcome RDI investor day and property tour The UK's leading income focused REIT 1 Relentless focus to deliver sustainable and growing income from a stronger balance sheet Superior income Sustainable income Growing income • Top quartile yield on NAV 6.3% • Fully covered dividend by earnings • 25.9% rent roll indexed (UK REIT average 4.2%) and operational cash flow • Open market rent reviews • Efficiently converting rental • Truly diversified portfolio and weighted to sectors income to shareholder returns tenant base with positive outlook with one of the lowest EPRA • High occupancy (97.3%), long • >30% of portfolio exposed to cost ratios WAULT (6.8 years to break) serviced income with strong • Long debt maturity (7.0 years), correlation to CPI fixed/capped finance costs (>95%) • Very active asset management Target of 3% – 5% underlying EPS growth p.a. Delivering on targets to offer investors certainty in an uncertain environment Investor day and property tour June 2018 Strength of business underpinned by progress against priorities 2 Strategic priorities designed to continue driving sustainable and growing income Financial discipline Income focused portfolio • Transparency on earnings and alignment to • Portfolio income characteristics enhanced through operational cash flow active capital recycling in the last 18 months: • Medium-term targets clearly aligned to compensation to improve accountability £360m £441m Medium-term target of 3% – 5% Disposal proceeds Acquisitions yielding achieving 10.1% premium >9% on equity underlying EPS growth p.a. • Portfolio significantly rebalanced for income growth over the last 3 years Sector exposure by market value % HY2018 FY2015 Efficient capital structure Commercial 33 19 London Serviced Offices 10 — • Stronger balance sheet with continued UK Offices 13 12 reduction in leverage and improved interest cover German Offices — 3 LTV (%) Interest cover (x) Distribution & Other 10 4 55 3.5 53.4% 3.5x Retail 45 59 UK Shopping Centres 19 33 50 3.0 UK Retail Parks and Other 11 — 48.0% 2.7x Germany 15 26 45 2.5 FY2016 HY2017 FY2017 HY2018 Hotels 22 22 Investor day and property tour June 2018 Investing in opportunity to continuously improve portfolio quality 3 Diversified business model provides ability to actively invest for growth Investment criteria and considerations Retaining focus on property fundamentals Income profile which will provide: – Longevity of income – Growth opportunities • Location • Asset characteristics need to align with occupier • Proximity to infrastructure demand • Favourable demographics • Structural change (e.g. logistics and flexible offices) • Limited additional supply, e.g. building constraints, • Areas of regeneration (e.g. Southbank and vacant land in vicinity, etc Tottenham Court) • Size, configuration and fit-for-purpose design • Clearly identified income-led asset management opportunities (e.g. potential development at • Supportive economics Charing Cross Road) • Capex requirements • Supported by in-house sector specialists and leading operational partners Actively recycling low growth income at a premium. Most recently, efficiently reinvested in "space as a service" with >9% expected yield on equity Investor day and property tour June 2018 From signing long leases to providing a high quality service 4 RDI well placed to take advantage of asset management increasingly moving into service provision Passive asset management Active asset management Specialist operational management £314.7m £184.2m Managed Hotels Retail Parks and Other Retail £125.0m Distribution £43.5m £309.9m £162.7m Automotive UK Shopping Centres Serviced Offi ces £96.7m Regional Offi ces £46.5m £111.5m Travelodge Greater London Offi ces Space optimisation – densifi cation and management time intensity RDI is experienced in dealing with operational assets and aligned strategic operational partners Investor day and property tour June 2018 Scalable platforms and long-term aligned strategic partners 5 Relatively simple and cost efficient integration when new opportunities present themselves Management platforms Recent transactions • The largest independent hotel manager in the UK • RDI owns 25.3% of RBH • Management fee based on percentage of EBITDA IHL hotel portfolio (£104.4m) Acquired November 2017 • OSIT retained 20% holding in the properties • Management fee based on percentage of EBITDA • RDI has first right of refusal on future developments London serviced office portfolio (£161.7m) Acquired January 2018 Strong cultural fit, focused on sustainable income growth Investor day and property tour June 2018 RDI has a strong "space as a service" platform 6 >30% of gross annualised rental income from serviced/managed assets UK Hotels – 22% by market value London serviced offices – 10% by market value RBH managed portfolio: • Exposure to London at >6% net initial yield Greater London Edinburgh Regions • 80% interest in 4 London serviced offices – 7 hotels – 2 hotels – 4 hotels • Average lot size: £40.7 million Managed by Office Space in Town ("OSIT"): • 5.8% net initial yield • £186.0m by market • 6.7% net initial yield value • £128.7m by market value St Dunstans Liverpool Street Travelodge leased portfolio: • 5 properties • 4.9% net initial yield • 19 year WAULT with landlord option to extend • £46.5m by market value Little Britain Boundary Row All net initial yields reflect EBITDA net of management fees and FF&E Investor day and property tour June 2018 RDI managed hotels: strong property fundamentals 7 13 hotels; 19% by market value All properties are strategically located within or near: Size and configuration • Larger population centres • Transport infrastructure sqft 50,358 rooms <20 • Demand generators, including Average per 140 Average permanent Average per hotel sport stadiums, event venues, etc property staff members • Limited fixed overheads (conference facilities, amenities, etc) • Expansion opportunities Locations by market value (%) Continuously refurbished Other • Disclosed income returns and net initial yields are net of 12% FF&E to support rolling refurbishment programme Gatwick Greater London Integrally linked to 8% Occupancy has • Southwark recently refurbished and 12 rooms added the North terminal 59% consistently 21% remained high Edinburgh since acquisition RDI portfolio growth driver over last 2 years Alternate use value, particularly in London Investor day and property tour June 2018 RDI managed hotels: resilient and growing income profi le 8 Implied NIY of 6.2% Trusted brands Limited service off ering Natural infl ation hedge • Strong, recognised brands ensure • Simple, effi cient operational model • Room rate can change daily to customer loyalty • Higher margins with lower volatility mitigate infl ation risk CPI outlook 2018 2019 2020 • Robust consumer demand • Lower capex requirements United Kingdom