Patrick Burke
Managing Director
Irish Infrastructure & Irish Property Seminar
4th September 2014
Eunice Dreelan
Director – Investment Development
Irish Infrastructure & Irish Property Seminar
4th September 2014
Irish LifeInvestment Managers
The Infrastructure JourneyMinimising Risk and Maximising Returns
September 2014
Simon Ellis
Head of Origination, AMP
The Irish Infrastructure Fund
Local and global expertise
Flagship Investor ManagerIndependent Infrastructure
Investment Manager
Experience > Established in 2001 to fund Ireland's
social welfare and public service
pensions
> NPRF Fund value of €19.9bn(2)
> Broad experience in traditional and
alternative investments, including
significant private equity holdings
> Investment mandate to change to
focus solely on commercial
investments in Ireland
> Functions managed by the National
Treasury Management Agency
> Regulated by the Central Bank of
Ireland
> Part of Great-West Lifeco
> Ireland’s largest fund manager with
€39.4bn in assets under
management(2)
> Managing assets since 1939
> 900+ domestic and international
institutional clients
> Manages assets for 24 of the 30
largest pension funds in Ireland
> Regulated by the Australian Securities and
Investments Commission
> €100bn funds under management
> One of the longest standing participants in global
infrastructure investing with 25 years experience and
over 60 infrastructure investment professionals
> A top ten global infrastructure manager(1) with
€5.3bn infrastructure FUM(2)
> Over 100 infrastructure equity and debt investments
made globally since 1988, across a range of sectors
and lifecycles
> Invested almost £1 billion in infrastructure assets
over the past 18 months
Note: (1) Towers Watson Global Alternatives Survey 2012.
(2) As of December 31st, 2013
A key strategic cornerstone investor, local fund manager and experienced international infrastructure manager
4
The Irish Infrastructure Fund1) As at 30 June 2014 in euro. Track Record represents the investment performance of AMP Capital’s infrastructure equity investments which are similar to the strategy of the Fund, as at 30 June 2014 and not the actual performance of the Fund.
See the Appendix for detailed footnotes and the full composition of the Track Record. In considering prior performance information, prospective investors should bear in mind that past performance is not necessarily indicative of future results, and there can be no assurance that the Fund will achieve comparable results or be able to avoid losses. Historical returns show aggregate data from multiple investment vehicles across different economic cycles and include unrealised valuations. Therefore, no Investor has received the stated returns. Performance listed is gross and does not account for fees paid to the manager.
ASSETS26
CASH YIELD SINCE INCEPTION
6.0%GROSS IRR AND 2.2X MONEY MULTIPLEON REALISEDASSETS
16.9%GROSS IRRSINCE INCEPTION
15.4%
BILLION INVESTED€3.4
Global Track Record
of deals within the AMP
Global Infrastructure Fund’s
investment strategy(1)
5AMP Capital Infrastructure Track Record
The Irish Infrastructure Fund
Benefits of Investing in Infrastructure
Stable inflation
- linked cash flows Cash flows often indexed to reflect increases in inflation or
long-term interest rates. Provides a good match for long-term inflation linked liabilities
Regulated /
Contracted Regulation and/or long-term contracts make cash flow generation highly visible and stable
Long Term Mature assets have long life spans and give predictable cash flows
Income + Growth Stable long-term yields, with the potential for capital growth
Potential for value enhancement through active management
Reduced risk Attractive risk-adjusted returns
Low correlation and volatility compared with traditional asset classes
Defensive characteristics
6
The Irish Infrastructure Fund
Returns Across Asset Classes 7
Attractive Yield & Capital Growth Relative to other Asset Classes
0.00%
2.00%
4.00%
6.00%
8.00%
10.00%
12.00%
10 Year GermanBond Yield
10 Year Irish GovtBond Yield
Cash - 12 MonthEuribor
Irish Infr IRR(Net) sinceinception
Irish Infr Yield(Net) sinceinception
Irish PropertyYield
World EquityDividend Yield
Source: as of the 29th of August - Bloomberg, FT, AMP/Irish Life
The Irish Infrastructure Fund
Infrastructure offers a wide spectrum of investment opportunities across multiple sectors and lifecycles with different return
and risk characteristics
Infrastructure universe: risk vs. returnR
etu
rntu
rn
Risk
Unregulated Assets
Partially Regulated
User Pays Assets
Regulated Assets
Housing
Hospitals
Education
Prisons
Courts
Gas Transmission
& Distribution
Electricity Transmission
& Distribution
Water & Wastewater
Airports
Toll Roads
Rail
Ports
Telecoms
Motorway Service
Stations
Storage
Metering
Ferry Operators
Power Generation -
Merchant
Economic Infrastructure Social Infrastructure
Greenfield Assets
New projects which are
approaching or under
construction
Source: B Capital partners, JP Morgan Asset Management, ING Bank
Availability Based
Assets
8
Irish LifeInvestment Managers
September 2014 The Irish Infrastructure Fund
The Irish Infrastructure Fund
The opportunity: delivering value relative to other European markets 10
Focus on assets combining a stable cash yield (5%+) and growth opportunities to produce a target IRR of 12%+
> First two assets acquired and performing well. €150m invested to date
> Immediate access to a projected 5 year average gross cash yield of 7.5%
> Excellent growth opportunities, leveraging the strategic platforms established in key sectors
Attractive portfolio of
seed assets
> First mover advantage, on the ground since 2011 and the only infrastructure fund entirely focused on Ireland
> Strong relationships established with existing owners, advisors and key Government departments
> Preferred party for management and vendors
Leading competitive
position
> Significant private sector investment in infrastructure pre global financial crisis
> State-owned assets with major capex requirements
> Live opportunities across a range of infrastructure sectors - pipeline with estimated equity requirement in
excess of €300m identified. 3 transactions targeted to close before the year end
Strong pipeline of
opportunities
> Willing / forced sellers as private sector owners look to delever balance sheets, exit non core assets and
recycle capital
> Bilateral opportunities
> Limited competition as mid-sized transactions fall underneath the radar of larger funds
Delivering relative
value
The Irish Infrastructure Fund
Fund performance: vindicating the relative value thesis 11
The Fund’s first two investments continue to deliver strong performance
The first two investments for the Fund are projected to generate a gross 5 year average cash yield of 7.5% based on capital
invested
First dividend paid in October 2013
To date, the Fund has delivered on its investment mandate
As at 30 June 2014 6 month Return 12 month Return IRR since acquisitionGross cash yield since
acquisition
Cyclone Wind Farms 3.7% 9.7% 11.6% 5.5%
Towercom 10.3% N/A (1) 13.2% 5.3%
Note: (1) Towercom was acquired 12 September 2013.
The Irish Infrastructure Fund
Inflation or GDP
correlated revenues
Key characteristics of targeted investments
Fund investment strategy 12
Monopolistic
characteristics or clear
competitive advantage
Cash flow growth
potential through
operational efficiencies
and capital projects
The Irish
Infrastructure
Fund
Monopolistic
characteristics or clear
competitive advantage
Sustainable and
predictable long-term
cash flows
High barriers to entry
that limit competition at
the asset level
Cash flow growth potential
through operational
efficiencies, capital projects
or revenue enhancing
activities
Provision of essential
services
The Fund seeks to invest in
assets that meet the
following criteria:
> Wholly or substantially
located or based in Ireland
> Predominantly operational
infrastructure assets
> Capability to invest in core
greenfield assets
> Acquired on the primary or
secondary market
> Provide potential to create
value through active asset
management
> Diversified across sectors
(energy/utilities, transport,
telecoms and PPPs) and risk
factors
Stable, cash-yielding Irish infrastructure assets with the potential to add value through active asset management
The Irish Infrastructure Fund
Investment universe 13
c. 230 assets
c. €10bn equity value
c. 120 assets
c. €6.0bn equity value
10 – 15 assets
€0.5 - 1bn
Irish infrastructure
universe(1)
Identified Fund target
assets
Target portfolio
Opportunities across a range of sectors
Transport
Airports
Ports
Roads
Rail
Energy /
Utilities
Gas distribution
Electricity generation
Wind
Water
Waste
TelecomsTowers infrastructure
Broadband network
PPPs
Convention centre
Education
Justice
Health
Note: (1) Includes operational and Government committed (e.g. new PPP projects announced under the Government Stimulus package) infrastructure assets across the energy/utilities,
transport, telecoms and PPP sectors. Does not include wind farm projects currently under construction or planning.
Ireland has a large universe of operational infrastructure assets
The Irish Infrastructure Fund
Deal prioritisation and likely funding requirements 14
There exists a sizeable pipeline of attractive opportunities which can be executed upon by the end of the year
1
Asset Timing – start of process Timing – funding
Target 1 September Nov / Dec 2014
Target 2 Now Oct / Nov 2014
Target 3 Now Nov / Dec 2014
Total priority 1 opportunities equity cheque €120 – 170m
2
3
Asset Timing – start of process Timing – funding
Target 4 Sep / Oct 2014 Nov / Dec 2014
Target 5 Q4 2014 Q1 2015
Target 6 2015 H2 2015/2016
Total priority 2 opportunities equity cheque €125 – 175m
Asset Timing – start of process Timing – funding
Target 7 Q4 2014 Q4 2014
Target 8 2015 2015
Total priority 3 opportunities equity cheque €40 – 50m
The Irish Infrastructure Fund
Seed asset: Towercom Limited 15
Overview • Towercom is the largest independent towers company in Ireland with a
portfolio of c.400 towers
• Originally spun out of eircom, the incumbent Irish telecom operator in
2007 for €155m.
• Acquired by IIF in September 2013
Key investment
highlights
• Portfolio includes many key strategic locations - planning permission for
competing towers extremely difficult to obtain
• Most revenues are derived from major MNO’s (88% of revenue comes
from top 6 customers), and most revenue is under long term customer
contracts
• A strong and experienced management team (c. 5.0% CAGR for
revenues between 2008 - 2012)
• EBITDA margin of c.85% and modest future capex => strong cash
conversion
• Conservative financing structure
Attractive pricing and
return metrics
• Acquired for a price representing of just under 10x EBITDA
• IRR since acquisition of 13.2% (as at 30 June 2014)
• Cash yield since acquisition of 5.3% (as at 30 June 2014)
Significant upside
potential
• Management forecasts assume Towercom will see more revenue
growth from network sharing than our acquisition case
• The Towercom management team could manage significantly more
towers with minimal additional cost
• Expect to use Towercom as an acquisition vehicle for further tower
opportunities in the Irish market
A combination of strong cash conversion and excellent growth potential (both organic and via acquisition)
The Irish Infrastructure Fund
Seed asset: Cyclone Wind Farms 16
Overview • Portfolio of operational wind farms with an enterprise value of c.€200m
completed in June 2012
• Majority interest in two wind farm portfolios in Ireland
– 75% of an 8 wind farm portfolio in the Republic of Ireland (53MW)
– 80% of a 2 wind farm portfolio in Northern Ireland (51MW)
Key investment
highlights
• Long term Power Purchase Agreements in place for all projects
• 3rd party O&M contracts in place for up to 15 years
• Excellent wind resources with P50 wind factors of up between 27-32%
• Strong cash yield – 10 year average yield of c.10% p.a. on invested equity
projected
• Conservative financing in place with gearing of c.50%
• Strong operating/availability track record reflecting strong management team
established by Viridian (co-shareholder)
• Portfolio diversified across sites (10) and regulatory regimes
Performance update • Operating well, with availability running around 97%
• Financial performance for the most recent financial year was in line with budget
• Cash yield since inception of 5.5%
Platform for growth • The Cyclone portfolio provides rare access to a controlling interest in an
existing portfolio of operational assets
• Strong on-going relationship with Viridian provides access to the development
pipeline of one of the largest developers in Ireland
Diverse portfolio with strong operational track record, delivering attractive cash yield potential
The Irish Infrastructure Fund
Investing now is the key to seizing the full opportunity 17
> Currently working on an attractive pipeline of transactions with a number of motivated sellers
> Live opportunities in the PPP, energy, roads and transport sectors
> In discussions with vendors on bilateral opportunities
Live deals in the next
6 months
> First two assets acquired at prices which compare favourably to those seen in similar transactions
across Europe
> Returns in the target range of 12 – 15% demonstrably available
> Projected 5 year average gross cash yields of 7.5%
Relative value thesis
demonstrated
> Ireland is returning to growth and is underpinned by stable and improving fundamentals
> Committing now is crucial to take advantage of the attractive market environment – limited competition and a
number of motivated sellers across a range of sectors
> Over time, as Ireland recovers further, the interest in Irish infrastructure assets will only increase
Attractive market
environment
> Given the strong pipeline of investment opportunities, we are confident that investor commitments can
be drawn-down over the next 6 months
Near term drawdown
of commitments
The Irish Infrastructure Fund
Important note
The information contained in this document, including any attachments (collectively, "Information") is issued by Irish Life Investment Managers Limited (regulated by the Central
Bank of Ireland) (“ILIM”) for providing general information about the investment capabilities referred to in the Information (“Capabilities”) and is qualified in its entirety by any
Prospectus, Supplement, Trust Deed or other relevant documentation. The Information is not intended for distribution or use in any jurisdiction where it would be contrary to
applicable laws, regulations or directives and does not constitute a recommendation, offer, solicitation or invitation to invest regarding the Capabilities.
Prospective investors should make their own inquiries and consult professional advisers as to applicable laws, regulations and directives (including any requisite governmental or
other consents or prescribed formalities) in any particular jurisdiction (including, where the Information is received) and the consequences arising from any failure to comply with
them.
While every care has been taken in preparing the Information; except as required by law, none of ILIM or their associates makes any representation or warranty as to accuracy
or completeness, including, without limitation, of any forecasts, or takes any responsibility for any loss or damage suffered as a result.
Photographic images used are for illustrative purposes only and may not represent actual images of assets or opportunities described in the Information.
The Information does not purport to be complete, does not necessarily contain all information which a prospective investor would consider material, and has been prepared
without taking account of any particular person’s objectives, financial situation or needs. Accordingly, the Information should not form the basis of any investment decision. A
person should, before deciding, consider the appropriateness of the Information, and seek professional advice, having regard to the person’s objectives, financial situation and
needs.
Past performance, forecasts and simulated performance may not be a reliable guide to future performance. The value of investments may fall as well as rise.
The Information is provided on a confidential basis and must be kept strictly confidential (with the exception of providing it to your professional advisors who are also contractually
and/or professionally bound to keep it confidential) and may not be reproduced or redistributed (in whole or in part) or otherwise made available to any other person in any format
without the express written consent of ILIM.
The Information should not be construed as an offer to sell or a solicitation of an offer to buy any security. Any sale or purchase of a security may only be made pursuant to an
offering memorandum.
18
Irish Property
Recovery built on strong foundations
Martin O’Reilly
Head of ILIM Property
Agenda
Property Market Prospects
Irish Life Pension Irish Property Fund
Drivers of Property Investment Return
Capital growth 1. Change in yield > Asset pricing
> Liquidity pressures
> Rental growth prospects
2. Rental value change > Demand for space
> Supply of space
3. Value add > Asset management
Income Return Rental income > Paid by tenants
Total Return Attribution (by sector)
Office Yield compression & strong Rental growth
Retail Yield compression with Rental values stabilising
All sectors Rental income high
Market Liquidity
Buyers
Private Equity Institutions REITS Private
Sectors
Office Retail Multi family Industrial
Transactions
€1.8bn – 2013 (96 transactions)
€1.7bn – H1 2014 (103 transactions)
Property portfolios Loan portfolios
Sellers
Banks deleveraging Back to back Resale
Asset Pricing
Property & Bonds Yields
Irish Property 7.3%
Irish long bond 1.9%
Spread 5.4%
Risk premium c.2%
Current Spread
Prime Property Yields
Peak Trough Current Trend
Office 3.75% 7.25% 5.0% Sub 5%
Retail 2.5% 6.0% 4.5% Stronger
Industrial 5.0% 10.0% 8.0% Stronger
4.00%
5.00%
6.00%
7.00%
8.00%
9.00%
10.00%
11.00%EQUIVALENT YIELD
Office yield since 2012
Rental growth - Office Vacancy rate falling
Shortage of Grade A offices
Strong letting activity
Pre-let activity
Prime Office rent €40psf
Lease terms strengthening
Rents at economic rebuild levels
Selective development underway
Site sales activity
Source: JLL
Vacancy rates
Dublin Overall 16.6% Grade A 4.9% Grade B/C 11.7%
Dublin 2 Overall 11.7% Grade A 3.5% Grade B/C 8.2%
Rental growth - Retail
Consumer sentiment improving
Retail environment challenging
Prime streets & Centres v The rest
Occupancy rates improving / New entrants
Rents stabilising in prime locations
Prime Retail Rent €400 psf Zone A
Vacancy Rates
Grafton Street 2.2%
Henry Street 4.7%
Recent Irish Life lettings
Rents set to recover from recession levels
Source JLL
Value Add
30 Herbert Street, Dublin 2
50,000 sq.ft
Being refurbished & to let
40,000 sq ft let BBH & LGT Bank
3 Georges Dock, IFSC
25,000 sq.ft
Being refurbished & to let
2 floors let
Improving the value by direct intervention in the asset
Income Return
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
14.0%
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Reversion
Annual income Return
Reversionary Yield 6%
High occupancy rate 96%
Trends & Prospects
Current Outlook
Liquidity Activity at record levels Weight of active buyers Volume of active sellers
To continue Changing focus New entrants
Yields Strong yield compression Lead by offices High yield gap with bonds
Prime office to stabilise Retail & industrial to fall To close with risk premium
Rental Growth Office strong with little supply Retail & industrial prime
stabilising
Strong growth to continue Recover from distressed levels
Income return High & roburst at c.7% Cornerstone trending at c.6%
Irish Life Pension Irish Property Fund
ILIM Strategic Approach
Market & Sector Forecasting
Investment style Growth - rental & capital
Value-added - refurb etc.
Core income - secure & high
Portfolio Risk Management
Income management High Occupancy
Tenant issues
Grow rents
Irish Life Pension Irish Property Fund
Key Fund Features
Structure Unit linked policyholder fund
Vintage Established 1971
Investor type ILIM institutional direct and managed fund clients
Liquidity Exiting investors phased over 3 years
Leverage None
Cash mandate Target 2.5%
Income Unit encashment
Sector Office, Retail, Industrial & Residential
Geography Ireland only (focus on Dublin)
Strategy Maximum total return through Income, Growth and Value add
Valuation Fair value – monthly external valuation
Pricing basis Acquisition
Property Portfolio Value €756m
Cash €48m
Number of Properties 55
Number of Leases 350+
Annual Rent Roll €52m
Vacancy Rate 5%
Average lease length 8 yrs
Current yield 7%
Key Fund Data
74%
22%
4%
Offices 21 properties
Retail 21 properties
Industrial 13properties
Property Sector Weighting July 2014
94%
6%
Dublin
Provincial
Provincial vs Dublin
Irish Life Pension Irish Property Fund
Office Portfolio City Centre 2 Grand Canal Square
30 Herbert Street
3 Georges Dock
87/89 Pembroke Road
Stephen Court
Hambledon House
26-28 City Quay
Earl Court/Segrave House
80 Harcourt Street
Blks C&D Georges Quay
1 Adelaide Road
Baggott Bridge House
Blks 2 Irish Life Centre
Out of town Belfield Office Park Clonskeagh
Block 7 Beech Hill Office Park
City Gate, Mahon, Cork
% of Office Rents by Business Sector
40%
28%
25%
7% Banking & Finance
Public Admin & SemiStateOther Business Services
TMT
Retail Portfolio
Shopping Centres
St Stephens Green
ILAC Centre
Pavilions Swords
High Street
Grafton Street (6)
Henry/Mary Street (3+)
Patrick Street (2)
Others (5)
Retail Parks
Coolock Retail Park (9)
Retail Sub-sector Weighting
37%
8%41%
14%
High Street Other City Centre
Shopping Centre Retail Park
Recent Acquisitions
87/89 Pembroke Road, Ballsbridge• 30,000 sq.ft• Passing Rent €1m• Bank of Ireland, ECDL, US Embassy• WAULT 21 years
1 Adelaide Road, Dublin 2• 60,000 sq.ft• Passing Rent €2.375m• AIB
• Unexpired lease term 10 years
2 Grand Canal Square, Dublin 2• 149,000 sq.ft - BREAM Excellent• Rent Passing €4.44m• William Fry & Capita• WAULT 14.7 yrs
Blocks A & B City Gate Park, Cork• New Office development• 216,000sq.ft• Let to EMC Information Systems, FireEye, RDJ solicitors, DFS,
Starbucks, Energie
30 Herbert Street, Dublin 2• 50,000 sq.ft• Being refurbished & to let• 40,000 sq ft in advanced negotiation
3 Georges Dock, IFSC• 25,000 sq.ft
• Being refurbished & to let
• 2 floors let
ExclusiveIrish Life under exclusivity on new acquisition
Henry Street Dublin 1
Prime retail parade 100% prime pitch Strong retailer line up
Rents primed for recovery Opportunities to add value
Reasons Why
Irish Life Pension Irish Property Fund
High quality property portfolio
Strong & experienced team
Clear strategy & process
Strong track record
Pension Case Study
Colm O’Neill
Chief Investment Officer
Case Study
60%40%
Long Dated Matching Bonds
Growth Assets
Considerations for Growth Assets Return Expectations Diversification Drawdown Liquidity
Defined Benefit Closed to new entrants since 2007 Significant active membership Growth Assets, targeting Bond return + 3%
Infrastructure: Attractive Risk and Return Characteristics
Return Analysis Unlisted Infrastructure
FTSE Wld EMU 5yr+
Annualised Return 7.8% 5.0% 7.0%Annualised Volatility 6.3% 13.9% 6.3%Max Drawdown -7.8% -48.2% -8.7%
Risk Adjusted Returns 1.2 0.4 1.1
Correlation 0.0 0.5
-60%
-50%
-40%
-30%
-20%
-10%
0%
10%
Mar-07 Dec-07 Sep-08 Jun-09 Mar-10 Dec-10 Sep-11 Jun-12 Mar-13 Dec-13
Unlisted Infrastructure FTSE Wld EMU 5yr+
Underwater Chart - Unlisted Infrastructure Vs Other Asset ClassesCumulative Returns
50%
75%
100%
125%
150%
175%
200%
Mar-07 Dec-07 Sep-08 Jun-09 Mar-10 Dec-10 Sep-11 Jun-12 Mar-13 Dec-13
Unlisted Infrastructure FTSE Wld EMU 5yr+
March 2007 – August 2014 / Source: AMP / ILIM
Irish Property: Capital Recovery with Attractive Yield
August 2004 – August 2014 / Source: ILIM
-70%
-60%
-50%
-40%
-30%
-20%
-10%
0%
10%
Aug-04 Sep-05 Oct-06 Nov-07 Dec-08 Jan-10 Feb-11 Mar-12 Apr-13 May-14
Irish Property FTSE Wld EMU 5yr+
Underwater Chart - Irish Property Vs Other Asset ClassesCumulative Returns
50%
75%
100%
125%
150%
175%
200%
225%
Aug-04 Sep-05 Oct-06 Nov-07 Dec-08 Jan-10 Feb-11 Mar-12 Apr-13 May-14
Irish Property FTSE Wld EMU 5yr+
LiquidityInfrastructure
Long term investment
Exit Options Matching buyers Asset sales Changes to gearing within fund
Venture Capital?
Access Direct investment Irish Life unit linked fund
Irish Property
Medium to long term investment
Exit Terms DC demographic exits: Immediate access Scheme exits: Phased over 3 years Schemes in wind up: Exit facilitated
Net acquirer of property through the Global Financial Crisis
Growth Asset Allocation
40%
43%
7%10%
Long Dated Matching BondsRisk Managed EquitiesAbsolute ReturnReal Assets
Irish PropertyEuropean PropertyInfrastructure
5.7%2.5%
1.8%
Irish Property Infrastructure
Long term return expectations
6% 8% +
Short term return expectation
8% + 8% +
Cash Distribution 5% - 6%
Diversification Improved Improved
Drawdown Potentially high Low
Liquidity Spread over 3 years Managed
Questions?
Thank You