SAINT- GOBAIN NORTH AMERICAN HEADQUARTERS

PHILADELPHIA, PENNSYLVANIA USA

(Investment Review)

Date: 23/12/2015

I. INVESTMENT OPPORTUNITY
Arzan Wealth, Dubai as the sub-strategic advisor and 90North, USA as the property advisors are
offering the Investment opportunity in the acquisition of office building - The North American
Headquarters of Saint-Gobain, Paris at Philadelphia, Pennsylvania, USA.

The total cost of the property is US $130,200,000 of which the equity capital is $ 53,500,000
(41.09%).

The Investment Memorandum is dated October 2015 however the closing date for this opportunity has
not been confirmed.

II. BRIEF DESCRIPTION OF THE PROPERTY

The property was originally developed in the late 1970s as the headquarters for the National Liberty
Life Insurance Company and has functioned as a single tenant office.

The present owner (seller) of the property has redeveloped the property by constructing two buildings
with a rentable area of 321,226 square feet.

The property is 100% leased to a single tenant Saint- Gobain Corporation under a 15 years triple net
lease agreement commencing from September 2015 with 1.5% fixed annual increase in rent. In
addition, there is an extension to the tenure in the lease term for additional two 5-year options and one
3.6-year option.

The New headquarters for Saint Gobain North America and its subsidiary CertainTeed has invested
over $100 per sq. ft. equal to approximately US $ 32 Million of own capital to customize the property.
The objective of such a unique building was to create a dynamic space where it could attract and retain
top talent and also provide a living showroom of the products manufactured by the company.

III. TENANT PROFILE

Saint- Gobain has had its North American headquarters in Valley Forge, Pennsylvania and is presently
located at 18-20 Moores Road, Philadelphia.

Saint Gobain is the leader in the design, manufacturing and distribution of construction and housing
materials. It is ranked number 192 in the Fortune Global 500 and has an investment grade rating of
BBB.

Saint- Gobain is organized into four major sectors (% by 2014 sales): Building Distribution (46%),
Construction Products (26%), Innovative Materials (22%) and Packaging (6%). Saint- Gobain
Saint- Gobain has more than 265 locations across North America, with approximately 15,000
employees.

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IV. FINANCIAL IMPLICATIONS

SAINT- GOBAIN NORTH AMERICAN HEADQUARTERS PHILADELPHIA,

PENNSYLVANIA USA
PARTICULARS US DOLLAR
Total asset cost 130.2million
Debt (58.91%) 76.7million
Total Equity (41.09%) 53.5 million

APPLICATION OF RENTAL INCOME

Total
Investment % Equity
$130,200,000 100% $53,500,000
Rental Income $7,116,863 5.47% 13.30%
Management Fees 0.5% $651,000 0.50% 1.22%
Interest on Loan 2.9% $2,224,300 1.71% 4.16%
Investors Return 7.75% on Equity $4,146,250 3.18% 7.75%
Other Administrative Expense and Reserve $95,313 0.07%
NOTE: The first year of operation facts are based on our assumption and we will require a
detailed financial statement of the property to confirm the returns.

RETURN TO INVESTOR
Average Yield (Payable monthly) 7.75% per annum
Cash Yield (7.75% on Equity for 3 years) per year $4,146,250 $12,441,540
$ 3,076,940 (5.75% on
Capital Gain (Annual increase in value of 2% for 3 Years) Equity)
Return on Equity (including distribution and capital gain) 29.00%
Net IRR 9.50%

V. SWOT ANALYSIS
Strengths:
The property is 100% leased to Saint- Gobain under a 15-year triple net lease with
additional 13.6 years extension term.
There is a 1.5% fixed annual increase in rent
Saint- Gobain has had its North American headquarters at Pennsylvania for more
than 40 years.
Saint- Gobain has invested over $100 per sq ft (Approximately $32 million) of
their own capital to customize the property which reflects their commitment to the
property.
The company has more than 265 locations across North America with
approximately 15,000 employees.

Weakness
The Investors memorandum was issued in October 2015, the closing date of the
deal has not been confirmed.
The cost of debt is 2.90% and the Loan to Value is 62.5%. Since the deal is not
closed there is no surety of these terms.

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 The purchase price includes a premium paid above fair market value because of
uniqueness of the building of approximately 8.2%.
There is a structuring fee, arrangement & underwriting fee of 2% and 1%
respectively.
Saint- Gobain as a brand, is still establishing in the emerging economies.

Opportunities
High growth rate of real estate sector in USA.

Threats
There are risks and uncertainty about economic growth, global political stability and rise in
interest rates, with expected volatility in the market.

CONCLUSION:
The participation in Saint Gobain North American Headquarters, Philadelphia, Pennsylvania USA can
be categorized as a favorable short term investment as per the analysis made from the facts provided in
the Investors Memorandum.
Cash Yield: The investment yields a cash return of 7.75% payable monthly.
Extension term: There is an extension of the tenure in the lease term for additional two 5-
year options and one 3.6-year option (totally 13.6 years) in addition to current 15-year term.
Strong Tenant: Fortune Magazine ranks the tenant, Saint- Gobain, to whom the property is
being leased out to, number 192 in Global 500 category in 2015.
Exit Strategy: The strategy is to hold the property for 3 years.
Cost of Debt: The fixed rate of interest as charged by the bank is 2.90%, which is favorable, if
it is already locked given in the current environment where in Federal Reserve is raising the
interest rates and will continue to do so in the future. The Loan to Value is 62.5%.

We encourage you to do your own due diligence and not depend on the above conclusion

KEY OBSERVATIONS:
Investor Memorandum date: Facts are as of October 2015 the date the Investment
Memorandum was issued. Since there is no closing date yet, the facts may vary with special
point to note on the Loan Financing.
Terms of Loan & rising trend of interest rate by Federal Reserve: The cost of debt is
2.90% and the Loan to Value is 62.5%. The holding period of the property is 3 years, however
the term of the loan is unknown. There are potential for increase in interest rates in the United
States during 2016 that would negatively impact the costing and returns.

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 Value of the Property:
Total asset cost as per
Investors Memorandum $130,200,000

BELOW ARE OUR COMPUTATION OF THE BREAKDOWN

OF THE TOTAL ASSET COST
Property Development Cost $80,000,000
Saint Gobain Investment $32,000,000
Closing Cost $7,500,000
TOTAL $119,500,000
Premium $10,700,000
Premium % 8.2%
NOTE: The purchase price includes a premium paid above fair market value because
of uniqueness of the building of approximately 8.2%.

MORE INFORMATION REQUIRED ON THE FOLLOWING

Loan Terms and Conditions Sheet.
Detailed Cash Flow Statement for the 3 years including the breakdown of Closing
Cost.