#11111 DOLMEN CITY REIT Pakistan's First Listed Shariah Compliant Rental REIT 18th November 2019#2Table of Contents T0 01 Introduction - Sector Overview 02 Introduction - Company Overview 03 Operational and Financial Highlights 04 Opportunities and Challenges to REITS#3"To provide all investors with the same opportunity to invest in large scale commercial real estate that previously was to large financial institutions and wealthy individuals through direct investment in such real estate". open only House Resolution The US House of Representatives President Dwight D. Eisenhower September 14, 1960#41. Introduction - Sector Overview A highly regulated and disciplined corporate structure to pool funds for the purpose of real estate investment. GD3293485 INVESTORS G03293495 Purchase Income REIT UNITS Invest Income REAL ESTATE ASSETS Ownership of the Real Estate is represented through REIT Units. Investors can invest according to their financial ability. Units can be converted in to cash through sale to other investors via stock exchange.#51. Introduction - Sector Overview How REITs Work having animal invest shares or bri by in Investment For noun some Jecener. hat on (a person Investors Pakistan Stock Exchange Stock Exchange Listing REIT Scheme Managed by RMC Property Valuers Property Valuation REAL ESTATE FOR RENT FOR SALE 124 SOLD Dividends and Capital Appreciation % Development / Property Management Distribution TRUSTEES Trustee Purchase Real Estate vested in trustee Rent and Sale Proceeds#61. Introduction - Sector Overview REIT's in Pakistan ☐ REITS are regulated by the Securities & Exchange Commission of Pakistan 'SECP' under the REIT Regulations 2015 as amended in 2018. These regulations are comprehensive with principal focus on protection of the interest of general investors in a REIT Scheme. Six REIT licenses have been issued: Arif Habib Dolmen REIT Management Limited, AKD REIT Management Company Limited, Orange REIT Management Limited, ISE Towers REIT Management Limited, SB Global REIT Management Company Ltd. and TPL REIT Management Limited. Dolmen City REIT is the only Listed REIT launched in Pakistan; managed by Arif Habib Dolmen REIT Management Limited - RMC Rating AM2+ njee THE HARBOUR FRONT#71. Introduction - Sector Overview Types of REITs in Pakistan ■ Developmental REIT: Established with the objective of development, construction or refurbishment of real estate for industrial, commercial, residential or a combination of uses. ▪ Rental REIT: Established with the purpose of generating rental income from Real Estate. Hybrid REIT: A REIT Scheme, which has both development and rental components. Developmental Rental FOR LEASE Hybrid UK NEWS Barberry unveils first West Midlands build-to-rent project Coventry's £70m scheme is a sign that interest in the private-rented sector is picking up in the regions BY HANNAH BRENTON The firstbuid to rent scheme in the West Midlands is beingbrought to market in Coventry as interest in the e-rented sector (PRS) builds in the regions Developer Barberty Grouphas instructed CBRE to secka 70m forward funding pertner for a 404 unit PRS scheme at Bishop Gate (pictured) inthe city centra The scene could set aberchmasc for build to rent schemes outside of London, as singland prices affect the viability of the PRS in the capital. Coventry, known for its brutalist architecture and links to the notar industry is primed to become a PRS hotspot because of itsbooming population of young professienas In Hark the ritu in a CRRE report A funding deal would unlock Barberry's Bishop Gate site, which has undergone two previous planning incarnations that did not get off the ground. developer bought the former Royal Mal sorting office 2011 Bartery initially planned areal-t scheme with a superstore, which failed to attract asupermarket thetamin shelved in favour of the PRS development Barbery's managing drector Henry Bellfield said "The development is satisfying the shiftin preference towards ty contre living whichis attracted to the social and leisure amenities of town centres. Developers, you look at the alternatives At the moment, we feel residervial and DDC The residential Bishop Gate designed by architects Assael wil feature a 40-60 split between one and two-bed apartments, with retail on the ground floor The scheme has bees presented to Coventry City Council, why written support for a PRS-led- use scheme on the site. The search for a fundingpartner comes in the week MC Real Estate signed its first forward-funding PRS deal in north Acton with Hub Residential setting a precedent for institutional investment. Chris Lacey executive director at CERE whose team is working on more than E4bn of funding deals across the UK said Coventry srt the most obris city to bui understanding the fundamenal recent this in th#82. Introduction - Company Overview Country's Finest Mix-Use Development; revolutionized the retail landscape of Pakistan. Karachi's Favorite destination - the Dolmen Mall, Clifton integrates the best in food, fashion and leisure. Delighted Customers, Reputed Tenants, Growing Rents, Happy Unit- holders, and Vigilant Regulators - - Tower B Dolmen Mall Tower A Components of Dolmen City Project: Executive Tower The Harbour Front Harbour Front: Nineteen storeys state-of-the art office building - Dolmen Mall: Three storey international standard mall Executive Tower: Sea-facing multi storey office building (not included in Dolmen City REIT) Under construction Tower A and Tower B: Two towers of thirty five storeys each to accommodate hospitality and office space (not included in Dolmen City REIT)#92. Introduction - Company Overview Nature of the Scheme Perpetual, Rated, Listed, Closed-end Shariah Compliant Rental REIT Real Estate • Dolmen Mall Clifton 547,875 sq.ft. • The Harbour Front 256,544 sq.ft. Total Fund Size Trustee Rating Occupancy Net Asset Value Market Price 804,419 sq.ft. PKR 22,237 Million (at inception) PKR 46,233 Million as at June 30, 2019 Central Depository Company of Pakistan "AAA (rr)" by VIS Credit Rating Agency • Dolmen Mall Clifton • The Harbour Front 98.32% 97.19% Dividend Yield PKR 20.82 per unit (September 30, 2019) PKR 11.36 per unit (November 13, 2019) 10.40% (June 2016) 14.00% (Annualized 2020) 11.50% (June 2017) (on face value) 12.00% (June 2018) 13.20% (June 2019)#103. Operational and Financial Performance ➤ Currently Operating with the finest brands and Companies in Pakistan. Tenants include: Miscellaneous 23% Jewellery & Watches 2% €800 SAPPHIRE nishatlinen Carrefour engro Khaadi Debenhams alkaramstudio ideas Outfitters by Gul Ahmed mothercare Timberland PHILIP MORRIS (PAKISTAN) LIMITED 06 P&G J. byco Junaid Jamshed citibank Chevron 718 * 800 next ALDO CHARLES & KEITH adidas NIKE POLO RALPH LAUREN MANGO GIORGIO ARMANI TORY BURCH (MK) MICHAEL KORS SONY Home & Furniture 7% MALL-TENANCY PROFILE (AS AT JUNE 2019) Vacant 1% Accessories 5% Apparel 40% Food 14% Cosmetics Financial 0% Entertainment 6% 2% HARBOUR FRONT - TENANCY PROFILE (AS AT JUNE 2019) Vacant Philip Morris Pakistan 15% ICPL 6% Digicom 4% Citibank N.A. Pakistan 6% 3% Summit Bank 2% Sindh Engro Coal Mining 2% Engro Group Companies 31% Mitshubishi Corporation 3% Chevron Pakistan Lubricants 6% Byco Petroleum 11% Proecter & Gamble Pakistan (Pvt.) Ltd. 11%#113. Operational and Financial Highlights 30 June 2019 30 June 2018 (Rupees in '000) % INCOME Rental income 3,344,499 3,046,978 9.76 Marketing income 182,606 210,165 (13.11) 3,527,105 3,257,143 8.29 Administrative and operating expenses (513,267) (484,207) 6.00 Net operating income 3,013,838 2,772,936 8.69 Other income - profit on deposits 139,613 112,842 23.72 3,153,451 2,885,778 9.28 REIT Management fee (90,415) (83,194) 8.68 Sindh sales tax on REIT management fee (11,754) (10,815) 8.68 Trustee remuneration (15,069) (13,866) 8.68 Sindh sales tax on Trustee remuneration (1,959) (1,803) 8.65 (119,197) (109,678) 8.68 PROFIT BEFORE CHANGE IN FAIR VALUE OF INVESTMENT PROPERTY 3,034,254 2,776,100 9.30 Change in fair value of investment property / unrealised gain 3,835,334 2,279,168 68.28 PROFIT BEFORE TAXATION 6,869,588 5,055,268 35.89 Taxation PROFIT AFTER TAXATION 6,869,588 5,055,268 35.89#123. Operational and Financial Highlights Dividend Payout on the rise (YOY growth) Dividend Payout (PKR ' Million) 3,500 3,000 2,935 2,500 2,668 2,557 2,313 2,000 1,500 1,000 500 Cumulative Contribution to Government in terms of Federal and Provincial Taxes 4,000 2,000 921 Taxes Paid (PKR ' Million) 2,633 2,190 1,620 2016 2017 2018 2019 2016 2017 2018 2019#133. Opportunities and Challenges to REIT's REIT's can offer the following: ➤ Large scale development REIT's will bring the much needed respite to the commercial real estate sector and enable developers to both unlock value and create liquidity. Access to funds allows for quality development benefitting the economy, creating jobs and delivering a better habitat. ➤ Professional Management of Real Estate aspects Professionals are hired to manage manage Development, Facilities, Administration, Marketing and Maintenance. Collecting rent Screening tenants Property maintenance Setting rent $ $ Managing budgets#143. Opportunities and Challenges to REIT's Awareness of REIT's as new investor class REITS bring real estate, which offers higher Alpha over risk free investments, within the reach of retail/common investors. Documentation of Real Estate Sector REIT's are a critical instrument in governments hand to achieve reform agenda of documentation. With stringent reporting and regulatory oversight; REITs pave the way for documentation and transparency of the real estate sector. Potential return High Low Low Bonds Cash and Cash Equivalents Luxury Investments ● ⚫ Real Estate Commodities Stocks. High Expected risk#153. Opportunities and Challenges to REIT'S Challenges to REITS in Pakistan: Real Estate Sector under transition from informal sector to formal sector Absence of sound governance structure within the industry creates lack of good practices, unreliable construction quality, and legally protected purchase of units by the buyers. Negligible Capital Allocation for Real Estate Sector by Financial Institutions "Cities are built as they are financed". It is difficult for financial institutions to verify the character, capital, and capacity of potential clients. Risk assessment and portfolio valuation is also fragile, which is another factor for the lenders' extreme caution for real estate transaction. As a result, financial institutions are reluctant to enter this market, which in turn causes scarcity of finance. Absence of Tax Incentives by Government Policy reforms and balanced tax approach required to attract new investment in REITs.