Attached files
| file | filename |
|---|---|
| 8-K - 8-K - TIER REIT INC | form8-k04072017.htm |
COMPANY
PRESENTATION
APRIL 2017
Exhibit 99.1
3
Value Creation
• Proven track record in publicly-
traded real estate companies
• Successful history of investing &
creating value in target markets
• Ability to complete complex
transactions
• Demonstrated path toward long-
term value creation
Seven Target Growth Markets
• High-quality, Class A office
properties
• High-growth, demand-driven
markets
• Amenity-rich, high-density
submarkets – TIER1 submarkets
• Emphasis on LIVE.WORK.PLAY
environments
Targeted Approach
TIER ONE Property Services
• Unparalleled customer service &
operational excellence
• Operating & developing to
highest sustainability standards
• A leader in BOMA 360
designations
• Significant LEED & Energy Star
certifications
Focus + Strategy
5950 Sherry Lane
Experience + Innovation
Domain 8 (Rendering)
Service + Sustainability
One BriarLake Plaza
WHY
TIER?
Focused investment strategy
High-quality portfolio
Significant value creation opportunities
Experienced management team
Proven execution capabilities
Austin I Dallas I Houston I Charlotte I Nashville I Atlanta I Denver 4
5
Domain 7, Austin, TX
PART ONE
FOCUSED STRATEGY
Delivered 2015
6
Transformation
Experienced public company management team
executing on long-term focused strategy
Reduced portfolio from 36 to 10 markets
~$1.5 billion in non-target sales since December 2014
Reallocating capital into target growth markets
2010 Today
7
Seven Target Growth Markets
TIER REIT targets high-growth, demand-driven TIER1 submarkets that will
benefit most from population and office-using employment growth
Denver
Houston
Austin
Atlanta
Nashville
Dallas
Charlotte
CBD
The Domain
Southwest
The Galleria
Katy Freeway West
Westchase
Uptown
SouthPark
Preston Center
Plano Legacy
Uptown
Current market location
Midtown
Buckhead
CBD / LoDo
Platte River
Cherry Creek
CBD
West End
The Gulch
Target growth market
8
Strategic Plan
Positioning for growth &
long-term value creation for stockholders
Recycling Growing
Strengthening
9
2016 Results
• Sold $305mm during 2016
• Exited Chicago and St. Paul
• Transitioned credit facility to unsecured
• Repaid (without penalty) ~$295mm of debt
• Completed spend of deferred capital
• Achieved full dividend coverage during 2016
• 90.7% occupancy at 12.31.16
• Renewed 138K SF of Houston 2017
expirations
Results Objective
Strengthening
$300mm in
Non-target
Dispositions
Strengthen
Balance
Sheet
Maintain
Occupancy
Manage
Capital
Expenditures
Deliver Outsized
Stockholder
Return
• 23.6% total stockholder return for 2016
10
Capital Recycling
High-quality assets offer the potential for
incremental capital recycling warehouse
Recycling
500 East Pratt Woodcrest
Three Parkway
Buena Vista Eisenhower
Target Growth
Market Acquisitions
LIVE.WORK.PLAY
SOLD JANUARY 2017
Louisville Portfolio
Domain 7
Domain 2
SOLD MARCH 2017
SOLD MARCH 2017
11
PART TWO
CREATING VALUE
Bank of America Plaza, Charlotte, NC
Redevelopment to deliver 2017
12
Experienced Management Team
Significant real estate & public company experience spanning 30+ years
Heath Johnson
Managing Director -
Asset Management
Scott McLaughlin
Senior Vice President –
Investor Relations
Bill Reister
Chief Investment
Officer
Dallas Lucas
Chief Financial
Officer
Scott Fordham
Chief Executive Officer
President & Director
13
Value Creation Results
Domain 8 – Austin, TX
• 95% pre-leased
• Expected delivery 1Q’17
• Estimated 9%+ development yield
Two BriarLake Plaza –Houston,
TX
• Class A office tower delivered in
4Q’14
• Located in prestigious Westchase
• Commands highest rents in
submarket
Proven ability to develop premier
office space in TIER1 submarkets
Development
Domain 8 Under Construction
Successful track record
of acquisitions
The Domain – Austin, TX
• Original acquisition in 3Q’15
• Consolidated ownership of Domain
2 & Domain 7 in 1Q’17
• LIVE.WORK.PLAY community
5950 Sherry Lane – Dallas, TX
• Acquired in unique, off-market
swap transaction in 4Q’14
Acquisitions
Domain 2
The Terrace – Austin, TX
• Rebuilt occupancy from 65% to
90%+ within 24 months after
tenant relocation
Loop Central –Houston, TX
• Restored occupancy from 74% to
90%+ within 12 months after
tenant M&A
Burnett Plaza –Fort Worth, TX
• Re-leased 116K SF prior to
tenant’s known vacancy
Seasoned team with experience,
market knowledge, and
relationships
Asset Management
The Terrace
14
Mark-to-Market Rents
Future Value Creation: Leasing
Stabilize Occupancy at 93%
The Terrace
5950 Sherry Lane
In-place rents 15-35% below market for
tenants expiring through 2019 (~700K SF)
Opportunity to lease up to 165K SF of
vacant space
Potential
incremental
value creation:
$115mm to
$140mm1,2
1 Mark-to-market potential incremental value calculated using incremental estimated NOI from re-leasing SF expiring through 2019 at Bank of America Plaza, The Terrace, and Domain
4 at current market rates (less estimated $2/SF for Bank of America rate attributed to redevelopment) and a 6-7% NOI capitalization rate less $40/SF estimated leasing capital
2 Stabilized occupancy potential incremental value calculated using estimated NOI generated from increasing occupancy of Two BriarLake Plaza, 5950 Sherry Lane, and Burnett Plaza at
90% NOI margins of current market rates and a 6-7% NOI capitalization rate less $40/SF estimated leasing capital
Bank of America Plaza BriarLake Plaza
15
Future Value Creation: Redevelopment
Re-energizing the intersection of Trade & Tryon - the “Main & Main” of Charlotte’s CBD
Potential
incremental
value creation:
$7mm to
$12mm1
1 Redevelopment potential incremental value calculated using estimated NOI from new ~25K SF of retail space less prior rate and $2/SF estimated value for remainder of building and
a 6.0%-7.0% capitalization rate less estimated redevelopment costs
• $25mm redevelopment scheduled to
deliver in 2017
• Featuring new entrance, lobby, and
~25K SF of new retail space including
signature dining & entertainment
• Executed leases on over 50% of
new retail space
• Net occupancy up over 200 bps &
rental rates up over 10% since
redevelopment announced
Charlotte
Bank of America Plaza Rendering Rendering
16
Future Value Creation: Development
Domain 11 & 12 (pre-development)
• ~640K net rentable SF
• ~$335/SF development cost
• ~8.5%+ est. development yield
Domain 9 & 10 and Block G (future)
• ~660K net rentable SF of additional
future office space
Austin CBD (pre-development)
• ~345K net rentable SF
• ~$440/SF development cost
• ~8.5%+ est. development yield
Legacy District (pre-development)
• ~570K net rentable SF in two phases
• ~$340/SF development cost
• ~8.5%+ est. development yield
Potential
incremental
value creation:
$230mm to
$315mm1
1 Development potential incremental value calculated using stabilized NOI from above developments and a 6.0%-6.5% capitalization rate less
estimated development costs
Austin
Third + Shoal (Rendering)
Dallas
Legacy District (Rendering)
Austin
Domain 11 & 12 (Rendering)
17
Southwest CBD
Austin Update
The Domain
The Terrace Third + Shoal (Rendering) The Domain (Rendering)
Third + Shoal – Austin, TX
• Located in the heart of the “New
Downtown” district of the CBD
• Class A office project with best-in-
class features, including a 4K SF
roof terrace and eleven outdoor
balconies
• Fully entitled with very limited
competitive development pipeline
The Domain – Austin, TX
• Unparalleled value creation
potential through control of
highly attractive, fully-leased
micro-market
• Controlled position provides
pricing power and flexibility to
accommodate growth from both
future and existing tenants
• Opportunity for strong cash flow
growth through both
development and significant
mark-to-market potential
The Terrace – Austin, TX
• Commands highest rental rates in
prestigious Southwest Austin
submarket
• High barriers to new development
in this environmentally sensitive
area
• Opportunity for strong cash flow
growth through significant mark-
to-market potential
18
Houston Update
Galleria
Loop Central BriarLake Plaza
Westchase
Eldridge Place
Katy Freeway West
Eldridge Place – Houston, TX
• Excluding known move-outs, ~5%
of leases expire through 2018
• Attractive rents relative to recent
deliveries
• 38% of Houston NOI in 4Q’16
BriarLake Plaza – Houston, TX
• ~7% of leases expire through 2018
• Highest rents in Westchase
• 47% of Houston NOI in 4Q’16
Loop Central – Houston, TX
• ~6% of leases expire through
2018
• Moderate price point driving
current tenant demand
• 15% of Houston NOI in 4Q’16
Known move-outs
Lease Expirations (SF in 000s)
0
100
200
300
400
500
600
2
0
1
7
2
0
1
8
2
0
1
9
2
0
2
0
2
0
2
1
+
0
100
200
300
400
500
600
0
100
200
300
400
500
600
2
0
1
7
2
0
1
8
2
0
1
9
2
0
2
0
2
0
2
1
+
Other expirations
19
Commitment to Stockholders
• Upon completion of recycling phase, substantially all net operating
income will be derived from TIER’s seven high-growth target markets
Preserving optionality to enhance equity value through public or private execution
• Near-term goals for achieving share price parity with peer companies:
− Complete disposition of few remaining properties located outside target markets
− Allocate disposition proceeds prudently into strategic investments
− Execute on significant value creation opportunities
− Achieve full and sustainable dividend coverage
− Capitalize on future Houston office market recovery to drive occupancy gains
and monetize select holdings
• The TIER REIT management team and board of directors
are 100% committed to optimizing value of TIER’s common
stock through execution of its strategic plan or pursuing
other strategic alternatives, including public or private
transactions
20
PART THREE
BALANCE SHEET
BriarLake Plaza, Houston, TX
Phase II delivered 2014
21
Capital structure
as of 12.31.16 ($mm)1
1 Represents portfolio and capital structure as of 12.31.16 pro forma for the completed acquisition of the remaining interest in Domain 2 and Domain 7 on 1.4.17; the sales of
Wanamaker and Buena Vista completed on 1.17.17 and 1.18.17, respectively; the completed repayment of the loan secured by 500 East Pratt on 2.1.17; the completed sale of Three
Parkway and repayment of the mezzanine loan at One Briarlake on 3.1.17; the completed sale of Eisenhower on 3.13.17; the pending disposition of Fifth Third Center; and net of
estimated working capital adjustments
2 Estimated equity value is based on diluted shares outstanding multiplied by consensus NAV of $22.16 per share
3 EBITDA and NOI reflect annualized adjusted 4Q’16 EBITDA and NOI pro forma for the completed acquisition of the remaining interest in Domain 2 and Domain 7 on 1.4.17; the sales of
Wanamaker and Buena Vista completed on 1.17.17 and 1.18.17, respectively; the completed repayment of the loan secured by 500 East Pratt on 2.1.17; the completed sale of Three
Parkway and repayment of the mezzanine loan at One Briarlake on 3.1.17; the completed sale of Eisenhower on 3.13.17; and the pending disposition of Fifth Third Center
Capital Structure Snapshot
40%
60%
Total estimated
enterprise value:
$1,767
Credit statistics
12.31.16
Long-
Term
Targets
Net debt / annualized adj.EBITDA1,3 7.3x <6.5x
Net debt / total est. enterprise value1,2 40% <40%
Mortgage debt / total est. enterprise value1,2 11% <20%
Fixed charge coverage1,3 2.8x >3.0x
Unencumbered NOI / total NOI3 80% >65%
22
Burnett Plaza, Fort Worth, TX
PART FOUR
INVESTMENT RATIONALE
International TOBY 2014
INVESTMENT
RATIONALE
Focused investment strategy
High-quality portfolio
Significant value creation opportunities
Experienced management team
Proven execution capabilities
Austin I Dallas I Houston I Charlotte I Nashville I Atlanta I Denver 23
24
APPENDIX
MARKET FUNDAMENTALS
5950 Sherry Lane, Dallas, TX
Acquired 2014
25
Top-tier market with a highly educated workforce combined
with pro-business government policy
• 8.9% Class A vacancy, down from 10.5% in prior year
• Y/Y: 3.3% Class A rent growth / 1.2mm SF net absorption
• 4Q’16: 2.6% Class A rent compression / 0.3mm SF net
absorption
• 2.5mm SF under construction, ~78% preleased
• 3.2% avg. annual rent growth projected through 2020
Austin
1 Based on Moody’s Analytics, Bureau of Labor Statistics and CoStar Portfolio Strategy as of 4Q’16
The Domain
The Terrace
Third + Shoal
The Terrace Third+Shoal (Rendering) Domain 7
Sources: Moody's Analytics; BLS; CoStar Portfolio Strategy As of 16Q4
(10%)
(8%)
(6%)
(4%)
(2%)
0%
2%
4%
6%
8%
10%
12%
00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20 21
Austin Office-Using Employment
National Office-Using Employment Growth
Austin Working Age Population Growth
National Working Age Population Growth
Employment & Population Growth (Y/Y)
Office-Using Employment & Population Growth1
Portfolio Snapshot Market Commentary1
26
Dallas’ diversified economy, affordability, location and quality of
labor have put it on many corporate relocation lists
• 16.3% Class A vacancy
• Y/Y: 3.0% Class A rent growth / 2.7mm SF net absorption
• 4Q’16: Flat Class A rent growth / 0.6mm SF net absorption
• 9.6mm SF under construction, ~69% preleased
• 2.8% avg. annual rent growth projected through 2020
Dallas-Fort Worth
Burnett Plaza 5950 Sherry Lane Legacy (Rendering)
5950 Sherry
Lane
Burnett
Plaza
Legacy
District
Sources: Moody's Analytics; BLS; CoStar Portfolio Strategy As of 16Q4
(8%)
(6%)
(4%)
(2%)
0%
2%
4%
6%
8%
00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20 21
Dallas - Fort Worth Office-Using Employment
National Office-Using Employment Growth
Dallas - Fort Worth Working Age Population Growth
National Working Age Population Growth
Employment & Population Growth (Y/Y)
1 Based on Moody’s Analytics, Bureau of Labor Statistics and CoStar Portfolio Strategy as of 4Q’16
Office-Using Employment & Population Growth1
Portfolio Snapshot Market Commentary1
27
Sources: Moody's Analytics; BLS; CoStar Portfolio Strategy As of 16Q4
(8%)
(6%)
(4%)
(2%)
0%
2%
4%
6%
8%
00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20 21
Houston Office-Using Employment
National Office-Using Employment Growth
Houston Working Age Population Growth
National Working Age Population Growth
Employment & Population Growth (Y/Y)
Houston
Energy-related headwinds have shown signs of tapering, though office
demand will take time to return to normal
• 21.1% Class A vacancy, up from 14.8% in prior year
• Y/Y: 3.2% Class A rent compression / 0.9mm SF net absorption
• 4Q’16: 2.3% Class A rent compression / 0.0mm SF net absorption
• Sublease inventory of ~11.9mm SF as of 4Q’16
• 2.9mm SF under construction, ~51% preleased
BriarLake
Plaza
Loop
Central
Eldridge
Place
BriarLake Plaza Loop Central Eldridge Place
1 Based on Moody’s Analytics, Bureau of Labor Statistics and CoStar Portfolio Strategy as of 4Q’16; Houston Class A vacancy per JLL
Office-Using Employment & Population Growth1
Portfolio Snapshot Market Commentary1
28
Charlotte’s central location, affordable living costs and young,
educated workforce make it a banking and finance hub
• 7.3% Class A vacancy, steady from prior year
• Y/Y: 6.3% Class A rent growth / 0.6mm SF net absorption
• 4Q’16: 0.6% Class A rent compression / 0.1mm SF net
absorption
• 1.2mm SF under construction, ~44% preleased
• 3.0% avg. annual rent growth projected through 2020
Charlotte
Bank of
America Plaza
Bank of America Plaza
Sources: Moody's Analytics; BLS; CoStar Portfolio Strategy As of 16Q4
(10%)
(8%)
(6%)
(4%)
(2%)
0%
2%
4%
6%
8%
10%
00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20 21
Charlotte Office-Using Employment
National Office-Using Employment Growth
Charlotte Working Age Population Growth
National Working Age Population Growth
Employment & Population Growth (Y/Y)
1 Based on Moody’s Analytics, Bureau of Labor Statistics and CoStar Portfolio Strategy as of 4Q’16
Office-Using Employment & Population Growth1
Portfolio Snapshot Market Commentary1
29
Nashville
Office-Using Employment & Population Growth1
Nashville's economic diversity, mix of private and public
industry, and low costs of business fuel office demand
• 5.3% Class A vacancy, up from 4.3% in prior year
• Y/Y: 6.7% Class A rent growth / 1.4mm SF net absorption
• 4Q’16: 0.7% Class A rent compression / 0.9mm SF net absorption
• 1.8mm SF under construction, ~62% preleased
• 3.3% avg. annual rent growth projected through 2020
Plaza at
MetroCenter
Plaza at MetroCenter
Sources: Moody's Analytics; BLS; CoStar Portfolio Strategy As of 16Q4
(8%)
(6%)
(4%)
(2%)
0%
2%
4%
6%
8%
00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20 21
Nashville Office-Using Employment
National Office-Using Employment Growth
Nashville Working Age Population Growth
National Working Age Population Growth
Employment & Population Growth (Y/Y)
1 Based on Moody’s Analytics, Bureau of Labor Statistics and CoStar Portfolio Strategy as of 4Q’16
Portfolio Snapshot Market Commentary1
30
Forward-Looking Statements
This presentation contains forward-looking statements, including discussion and analysis of the financial condition of us and our
subsidiaries and other matters. These forward-looking statements are not historical facts but are the intent, belief or current
expectations of our management based on their knowledge and understanding of our business and industry. Words such as “may,” “will”,
“anticipates,” “expects,” “intends,” “plans,” “believes,” “seeks,” “estimates,” “would,” “could,” “should,” “opportunities,” “objectives,”
“strategies,” “goals,” and variations of these words and similar expressions are intended to identify forward-looking statements. We
intend that such forward-looking statements be subject to the safe harbor provisions created by Section 27A of the Securities Act of 1933
and Section 21E of the Securities Exchange Act of 1934. These statements are not guarantees of future performance and are subject to
risks, uncertainties and other factors, some of which are beyond our control, are difficult to predict and could cause actual results to
differ materially from those expressed or forecasted in the forward-looking statements. Forward-looking statements that were true at
the time made may ultimately prove to be incorrect or false. We caution you not to place undue reliance on forward-looking statements,
which reflect our management's view only as of the date of this presentation. We undertake no obligation to update or revise forward-
looking statements to reflect changed assumptions, the occurrence of unanticipated events or changes to future operating results.
Factors that could cause actual results to differ materially from any forward-looking statements made in the presentation include but are
not limited to: (i) market disruptions and economic conditions experienced by the economy or real estate industry as a whole and the local
economic conditions in the markets in which our properties are located; (ii) our ability to renew expiring leases and lease vacant spaces at
favorable rates or at all; (iii) the inability of tenants to continue paying their rent obligations due to bankruptcy, insolvency or a general
downturn in their business; (iv) the availability of cash flow from operating activities to fund distributions and capital expenditures; (v) our
ability to raise capital in the future by issuing additional equity or debt securities, selling our assets or otherwise to fund our future capital
needs; (vi) our ability to strategically acquire or dispose of assets on favorable terms or at all; (vii) our level of debt and the terms and
limitations imposed on us by our debt agreements; (viii) our ability to retain our executive officers and other key personnel; (ix)
unfavorable changes in laws or regulations impacting our business or our assets; and (x) factors that could affect our ability to qualify as a
real estate investment trust. The forward-looking statements should be read in light of these and other risk factors identified in the “Risk
Factors” section of our Annual Report on Form 10-K for the year ended December 31, 2016, as filed with the Securities and Exchange
Commission.
The modeling, projections, analyses, and other forward-looking information prepared by CoStar Portfolio Strategy, LLC (“CoStar”) and
presented herein are based on financial and other information from public and proprietary sources, as well as various assumptions
concerning future events and circumstances that are speculative, uncertain and subject to change without notice. Actual results and
events may differ materially from the projections presented.
All CoStar materials set forth herein (“CoStar Materials”) speak only as of the date referenced and may have materially changed since
such date. CoStar does not purport that the CoStar Materials herein are comprehensive, and, while they are believed to be accurate, the
CoStar Materials are not guaranteed to be free from error, omission or misstatement. CoStar has no obligation to update any of the
CoStar Materials included in this document. All CoStar Materials are provided “as is,” without any guarantees, representations or
warranties of any kind, including implied warranties of merchantability, non-infringement, title and fitness for a particular purpose. To the
maximum extent permitted by law, CoStar disclaims any and all liability in the event any CoStar Materials prove to be inaccurate,
incomplete or unreliable. CoStar does not sponsor, endorse, offer or promote an investment in the securities of TIER REIT, Inc. You should
not construe any of the CoStar Materials as investment, tax, accounting or legal advice.
5950 Sherry Lane, Suite 700
Dallas, Texas 75225
www.tierreit.com
972.483.2400
ir@tierreit.com