Charter Hall Group · ASX:CHC
Charter Hall — Merger or Acquisition (February 2010)
72 slides from Charter Hall's merger presentation, Feb 12, 2010
Slide 1: Acquisition of Real Estate Management Platform & Equity Raising
For personal use only Charter Hall Group Acquisition of Real Estate Management Platform & Equity Raising 12 February 2010 NOT FOR DISTRIBUTION OR RELEASE IN THE UNITED STATES OR TO U.S. PERSONS
Slide 2: Important Notices
Important Notices This document has been prepared by Charter Hall Funds Management Limited ("CHFML") as responsible entity for Charter Hall Property Trust and Charter Hall Limited (together, "Charter Hall Group“ or “CHC”). The document is issued in relation to an "Entitlement Offer" of new stapled s
Slide 3: Executive Summary
Executive Summary For personal use only Charter Hall Group (CHC) is pleased to announce that it has agreed to acquire the majority of Macquarie Group’s (Macquarie) core real estate management platform (the Platform) comprising: – Management of two listed and three unlisted real estate funds (the F
Slide 4: Transformational Acquisition
Transformational Acquisition For personal use only CHC pre CHC post % change acquisition acquisition Assets under management $3.0bn $10.2bn 244% Portfolio Number of assets managed 65 333 412% metrics Number of funds managed 13 18 38% FY11 underlying earnings $30.0m $58.4m 95% Income FY11 forecast un
Slide 5: Agenda
Agenda For personal use only 1. Acquisition Overview 2. Acquisition Impact 3. Investors in CHC Managed Funds 4. Management and Transition 5. Financial Information 6. The Offer 7. Summary 8. Appendices Charter Hall Group Strategic Acquisition & Equity Raising 5 NOT FOR DISTRIBUTION OR RELEASE IN THE
Slide 6: Section one: Acquisition Overview
For personal use only Section one Acquisition Overview No.1 Martin Place, Sydney, NSW (Joint owned by MOF and MMPT) NOT FOR DISTRIBUTION OR RELEASE IN THE UNITED STATES OR TO U.S. PERSONS
Slide 7: Acquisition Overview
Acquisition Overview For personal use only CHC has agreed to acquire the majority of Macquarie’s core real estate management platform Real estate management business Co-investment holdings Managed funds Property services Macquarie Office Trust (MOF) Asset management 7.5% interest in MOF Macquarie
Slide 8: Overview of the Platform
Overview of the Platform For personal use only Provides CHC with a vertically integrated platform that is well staffed with up to 155 employees – Potential to earn fees across the full spectrum of property services – Platform complementary to CHC’s existing business – Over 80% of FY11 forecast man
Slide 9: Pricing of management business
Pricing of management business For personal use only $108 million consideration for the management business Represents an FY11 EBIT multiple of 7.7x and 1.5% of AUM Macquarie management business pricing Management fee income FY10F1 $m FY11F $m Base management fees 29.7 28.2 Performance fees - -
Slide 10: Overview of Funds
Overview of Funds For personal use only As at 31 Dec 2009 MOF2 MCW MDPF MMPT MPIF4 Fund type Listed Listed Unlisted Unlisted Unlisted Sector focus Office Retail Diversified Office Diversified AUM ($bn) 4.12 2.34 0.49 0.22 0.02 Market capitalisation ($bn) 1.45 0.90 n/a n/a n/a Net tangible assets ($b
Slide 11: Due Diligence Process
Due Diligence Process For personal use only CHC has conducted detailed due diligence on the Platform with the assistance of third party advisers CHC management and advisers have inspected and investigated the offshore operations and assets in detail Commercial Goldman Sachs JBWere engaged as f
Slide 12: Section two: Acquisition Impact
For personal use only Section two Acquisition Impact Wells Fargo Centre, Denver, Colorado (Owned by MOF) NOT FOR DISTRIBUTION OR RELEASE IN THE UNITED STATES OR TO U.S. PERSONS
Slide 13: Acquisition Impact
Acquisition Impact For personal use only Transformational transaction Support from two AUM increases to over major investors (Gandel $10bn Group and Macquarie)1 Enhanced diversity of Substantial increase in AUM (capital sources recurring income and product offering) Forecast FY11 underlying Signific
Slide 14: AUM increases to over $10 billion
AUM increases to over $10 billion For personal use only Acquisition increases AUM to over $10 billion and the number of funds managed by CHC from 13 to 18 – CHC expected to become one of the largest domestic real estate fund managers1 – Immediate scale through acquisition will complement organic g
Slide 15: Improved diversity of AUM
Improved diversity of AUM For personal use only Listed funds management represents an opportunity for CHC to diversify its sources of equity The Platform provides complementary exposure to core funds, relative to CHC’s current focus on core plus and opportunistic funds CHC Macquarie Listed MOF C
Slide 16: Improved diversity of AUM
Improved diversity of AUM For personal use only Capital source (pre Acquisition) Capital source (post Acquisition) Unlisted wholesale 24% Unlisted Unlisted wholesale retail Unlisted 83% Listed 17% retail 64% 12% Risk profile (pre Acquisition) Risk profile (post Acquisition) Opportunistic Core plus 2
Slide 17: Substantial increase in recurring income
Substantial increase in recurring income For personal use only FY11F CHC revenue streams FY11F CHC earnings mix (post Acquisition) 46.5 CHC pre acquisition 41.8 CHC post acquisition Development Corporate investment services income income Property 4% 30.6 3% management 2 fees 10% Property 17.1 income
Slide 18: CHC look-through assets
CHC look-through assets For personal use only Sector diversity (pre Acquisition) Sector diversity (post Acquisition) Industrial Industrial 12% Retail 23% Retail 31% 33% Office 55% Office 46% Geographic diversity (pre Acquisition) Geographic diversity (post Acquisition) US 19% Europe Australia / Aust
Slide 19: CHC look-through tenant profile
CHC look-through tenant profile For personal use only Lease expiry profile (years) Top 10 tenants (post Acquisition) MOF 4.6 Tenant % Portfolio leased Wesfarmers (Bunnings, Coles, Kmart, Target, Liquorland) 9% MCW 5.9 Australian Government (Federal & State) 6% Woolworths 5% MDPF 5.0 Telstra Corporat
Slide 20: Section three: Investors in CHC managed funds
For personal use only Section three Investors in CHC managed funds Argus Centre, Melbourne, VIC (Owned by MOF) NOT FOR DISTRIBUTION OR RELEASE IN THE UNITED STATES OR TO U.S. PERSONS
Slide 21: Benefits for Fund investors
Benefits for Fund investors For personal use only CHC is committed to delivering value to unitholders in the Funds over the long term Independent Director Committees established to review the transaction on behalf of Fund unitholders in consultation with independent advisers Intention for curr
Slide 22: Fund strategies maintained
Fund strategies maintained For personal use only CHC to continue management of the Funds in-line with previously stated strategies MOF focused on re-weighting portfolio back to a majority Australian portfolio MOF Intends to undertake strategic asset sales, initially focussing on divesting non-
Slide 23: Investors in CHC's current funds
Investors in CHC’s current funds For personal use only Existing Existing wholesale-dedicated personnel will remain fully focused on CHC's wholesale funds management business wholesale funds CHC management views existing wholesale funds as strategically important to the ongoing success of the bus
Slide 24: Section four: Management and Transition
For personal use only Section four Management and Transition Renmark Plaza, Renmark, SA (Owned by MCW) NOT FOR DISTRIBUTION OR RELEASE IN THE UNITED STATES OR TO U.S. PERSONS
Slide 25: Complementary management expertise
Complementary management expertise For personal use only Expanded management and property services capabilities with the combination of the Platform and CHC teams responsible for managing the portfolios Senior Macquarie staff who have committed to transfer to CHC have an average of 16 years’ ind
Slide 26: Staff arrangements
Staff arrangements For personal use only Senior leadership team for each Fund and property service divisions have committed to employment with CHC, including: – MOF CEO, Adrian Taylor – MCW CEO, Steven Sewell – Macquarie Direct CEO, Richard Stacker – Head of US asset management, Paul Sorensen Of
Slide 27: Settlement and transitional arrangements
Settlement and transitional arrangements For personal use only Economic settlement and transfer of management entities to occur on receipt of institutional offer proceeds – Funds will be re-named – Macquarie representatives on RE Boards to be replaced with CHC representatives ‘Change of control’
Slide 28: Ongoing arrangements with Macquarie
Ongoing arrangements with Macquarie For personal use only Following CHC’s capital raising, Macquarie will have a strategic investment in CHC – 10% interest acquired at $0.70 per security – Macquarie’s commitment endorses the CHC business model and encourages alignment of interests CHC has been g
Slide 29: Integration strategy
Integration strategy For personal use only Macquarie and CHC have developed an integration strategy to assist a smooth transition Economic settlement of the acquisition will proceed without any requirement for third party approvals All Macquarie employees required for operation of the Funds to
Slide 30: Section five: Financial Information
For personal use only Section five Financial Information Allianz Centre, Sydney (Owned by MOF) NOT FOR DISTRIBUTION OR RELEASE IN THE UNITED STATES OR TO U.S. PERSONS
Slide 31: Financial information
Financial information For personal use only Acquisition forecast to deliver estimated FY11 underlying EPS accretion of 18% Balance sheet gearing1 decreases to 8.9% Look through gearing2 increases to 38.5% Pro forma NTA decreases from $0.60 to $0.56 per security Pro forma Net Asset Value in
Slide 32: Sources and uses of funding
Sources and uses of funding For personal use only Sources Uses Entitlement offer $195m Funds management business2 $108m Institutional placement1 $25m MOF co-investment (7.5%)3 $111m Macquarie placement $85m MCW co-investment (7.5%)4 $69m Macquarie debt facility $10m MDPF co-investment (3.5%)5 $9m Tr
Slide 33: Transaction funding
Transaction funding For personal use only Entitlement Accelerated, fully underwritten, non-renounceable, 2 for 5 entitlement offer Offer Application price of $0.65 per security, representing a 10.3% discount to CHC’s 5 day VWAP Offer Institutional $25 million placement at $0.70 per security Pl
Slide 34: FY10 and FY11 Forecast Income Statement
FY10 and FY11 Forecast Income Statement1 FY10F (pre acquisition) FY11F (pre acquisition) Equity raising and FY11F (post acquisition) For personal use only $m $m acquisition adjustments $m $m Direct net property income (CPRF) 15.3 16.9 - 16.9 Co-investment income 12.4 13.7 15.94 29.6 Total CHPT incom
Slide 35: Pro forma Balance Sheet
Pro forma Balance Sheet1 31 Dec 2009 (pre acquisition)2 Equity raising and acquisition 31 Dec 2009 (pro forma post For personal use only $m adjustments3 acquisition) $m $m Assets Cash 23.1 5.3 28.4 Direct property (CPRF) 244.2 - 244.2 Indirect property investments 232.4 246.54 478.9 Other tangible a
Slide 36: Section six: The Offer
For personal use only Section six The Offer One California Plaza, California (Owned by MOF) NOT FOR DISTRIBUTION OR RELEASE IN THE UNITED STATES OR TO U.S. PERSONS
Slide 37: Entitlement Offer and Institutional Placement
Entitlement Offer and Institutional Placement For personal use only Total Offer of $220 million Fully underwritten by Goldman Sachs JBWere and Macquarie Capital Advisers Entitlement Offer Institutional Placement 2 for 5 accelerated, non renounceable $25 million institutional placement entitl
Slide 38: Offer Timetable
Offer Timetable For personal use only Event Date Trading Halt 11 February 2010 Institutional Offer opens 12 February 2010 Institutional Offer closes 3.30pm (AEDT), 12 February 2010 Institutional allocations advised and trading resumes 15 February 2010 Record Date for determining Entitlements for the
Slide 39: Section seven: Summary
For personal use only Section seven Summary Citigroup Centre, Sydney, NSW (Owned by MOF) NOT FOR DISTRIBUTION OR RELEASE IN THE UNITED STATES OR TO U.S. PERSONS
Slide 40: Summary
Summary For personal use only CHC has agreed to a strategic acquisition of a funds management platform and co-investment holdings – $108 million representing 7.7x FY11 EBIT multiple for the management business – $189 million representing 23% discount to NTA for the co-investment holdings – High qu
Slide 41: Section eight: Appendices
For personal use only Section eight Appendices No.1 Martin Place, Sydney, NSW (Joint owned by MOF and MMPT) NOT FOR DISTRIBUTION OR RELEASE IN THE UNITED STATES OR TO U.S. PERSONS
Slide 42: Overview of MOF
Appendix A Overview of MOF For personal use only MOF owns a high quality portfolio of office buildings Key Metrics typically located in major CBDs across the US, Current unit price1 $0.295 Australia, Europe and Japan Market capitalisation1 $1.4bn FY11 consensus EPS2 3.2cpu Over the last year MOF
Slide 43: Overview of MCW
Appendix A Overview of MCW For personal use only MCW invests predominantly in grocery-anchored Key Metrics shopping centres located throughout Australia, New Current unit price1 $0.61 Zealand, Europe and the US Market capitalisation1 $893m FY11 consensus EPS2 5.4cpu Over the last year MCW has un
Slide 44: Overview of MDPF
Appendix A Overview of MDPF For personal use only MDPF is an open ended, unlisted fund investing in Key Metrics (as at 31 Dec 09) a portfolio of direct property, unlisted wholesale NTA per unit $0.62 funds and listed property securities Balance sheet gearing 46% Portfolio overview1 (as at 31 Dec 0
Slide 45: Overview of MMPT
Appendix A Overview of MMPT For personal use only MMPT is an unlisted property trust established in Key Metrics (as at 31 Dec 09) 2002 to acquire a 50% interest in the office tower NTA per unit $0.92 and car park located at No. 1 Martin Place, Balance sheet gearing 45.5% Sydney in joint venture wi
Slide 46: Overview of MPIF
Appendix A Overview of MPIF For personal use only Established in June 2003, MPIF is an open-ended, Key Metrics (as at 31 Dec 09) property securities fund NTA per unit $0.13 Assets Under Management $14.6m MPIF’s underlying investments provide exposure to Balance sheet gearing 37.5% over 1,700 und
Slide 47: Overview of Asset Services business
Appendix A Overview of Asset Services business For personal use only Macquarie Asset Services Limited (“MASL”) provides a full range of asset and property management services to maximise real estate performance and investor returns Subcontracts MREMS to provide certain property and financial man
Slide 48: Overview of Property Management business
Appendix A Overview of Property Management business For personal use only Macquarie Real Estate Management Services (“MREMS”) provides property management, facilities management, financial management and leasing services, primarily to MCW MREMS is a subsidiary of MASL and has 68 staff across 12
Slide 49: Fee Structures
Appendix B Fee Structures For personal use only Base management fee: 0.45% p.a. of gross assets up to $1bn and 0.40% p.a. > $1bn Fee streams include: Performance fee: 5% of the total outperformance (relative to the Office Property Trust Development management (% MOF Accumulation Index) and an
Slide 50: Financial Information
Appendix C Financial Information For personal use only The Financial Information on slides 34 and 35 has been Securityholders should refer to Macquarie, MOF, MCW and prepared in accordance with the CHC accounting policies set out CHC’s financial reports and related announcements on the ASX in th
Slide 51: Financial Information
Appendix C Financial Information For personal use only Pro forma adjustments include: Co-investment income – Receipt of $305 million proceeds from the issue of 457 Co-investment income is based on CHC management's forecast million securities through the Equity Raising of CHC's share of earnings
Slide 52: Financial Information
Appendix C Financial Information For personal use only Expenses Foreign exchange Expenses comprise employment related costs, accommodation The Financial Information is based on the foreign exchange forward curves as at 2 Feb 2010. costs and other operating expenses. Costs have been forecast Th
Slide 53: Financial Information
Appendix C Financial Information For personal use only Purchase price allocation Accounting Standard AASB3 “Business Combinations” requires CHC to allocate the Acquisition consideration by recognising the assets (including identifiable intangible assets), liabilities and contingent liabilities of
Slide 54: Sensitivity analysis
Appendix C Sensitivity analysis For personal use only The financial performance and position of CHC will be impacted by changes in key variables as follows: Dec 09 pro forma Dec 09 pro forma FY11F underlying balance look through Dec 09 pro forma EPS (cents) sheet gearing gearing NTA (cents) Base c
Slide 55: Key Macquarie Staff
Appendix D Key Macquarie Staff For personal use only Chief Executive Officer and alternate director for MOF Years in Adrian sets the overall strategy and objectives for MOF in conjunction with the board and guides the portfolio Adrian industry: 18 Taylor management, capital transactions, marketi
Slide 56: Key risks
Appendix E Key risks For personal use only Outline – This section summarises some of the key risks that may affect the future performance of an investment in CHC. This is not an exhaustive list of the relevant risks. If any of the following risks materialise CHC’s business, financial condition and
Slide 57: Key risks
Appendix E Key risks For personal use only General risks affecting CHC (continued) – ASX market volatility: The ASX price of CHC securities will fluctuate due to various factors including general movements in interest rates, the Australian and international investment markets, international econom
Slide 58: Key risks
Appendix E Key risks For personal use only Regulatory issues and changes in law – Changes in law: CHC is subject to the usual business risk that there may be changes in laws or government legislation, regulation and policy that reduce income or increase costs. This may adversely affect the future
Slide 59: Key risks
Appendix E Key risks For personal use only Specific risks associated with the Acquisition – Completion risk: Completion of the transfer of the shares in the management entities being acquired by CHC are subject to a number of conditions beyond CHC’s direct control that may prevent or delay such tr
Slide 60: Key risks
Appendix E Key risks For personal use only Specific risks associated with the Acquisition (continued) – Change of control risk: Some of the contracts that entities within the Platform are a party to contain change of control clauses which may entitle the counterparty to terminate the contract upon
Slide 61: Key risks
Appendix E Key risks For personal use only Specific Risks for the Combined Group – Investments In Managed Funds: CHC manages a number of funds on behalf of third party investors. These funds typically invest in property- related assets and use debt to partially fund their investments. Many of the
Slide 62: Key risks
Appendix E Key risks For personal use only Specific Risks for the Combined Group (continued) – Illiquid property markets: Property assets are by their nature illiquid investments. This may make it difficult to sell assets of CHC’s in the short term in response to changes in economic or other condi
Slide 63: Key risks
Appendix E Key risks For personal use only Specific Risks for the Combined Group (continued) – Fixed nature of costs: Many costs associated with property assets are fixed in nature. The value of assets may be adversely affected if the income from the asset declines while these fixed costs remain u
Slide 64: Jurisdictions
Appendix F Jurisdictions For personal use only United Kingdom – This document is being distribution on a confidential basis only to persons who (a) have professional experience in matters relating to investments falling within article 19(5) of the Financial Services and Markets Act 2000 (Financial
Slide 65: Jurisdictions
Appendix F Jurisdictions For personal use only Singapore – This document and any other materials in connection with the Entitlement Offer relating to Singapore have not been registered as a prospectus with the Monetary Authority of Singapore. Accordingly, this document and any other document or ma
Slide 66: Jurisdictions
Appendix F Jurisdictions For personal use only European Economic Area – This document has not been approved by the competent authority in a member state of the European Economic Area (a Member State) or, where appropriate, approved in another Member State and notified to the competent authority of
Slide 67: Jurisdictions
Appendix F Jurisdictions For personal use only Switzerland – Neither the Securities nor the Entitlements may be publicly offered, sold or advertised, directly or indirectly, in or from Switzerland. Neither this document nor any other offering or marketing material relating to the Securities or the
Slide 68: Jurisdictions
Appendix F Jurisdictions For personal use only Ireland – This document and any other materials in connection with the Offer relating to Ireland do not constitute a prospectus within the meaning of Part 5 of the Investment Funds, Companies and Miscellaneous Provisions Act 2005 of Ireland. No offer
Slide 69: Jurisdictions
Appendix F Jurisdictions For personal use only Hong Kong – The contents of this document have not been reviewed or approved by any regulatory authority in Hong Kong. In particular, this document has not been, and will not be, registered as a 'prospectus‘ in Hong Kong under the Companies Ordinance
Slide 70: Glossary
Appendix G Glossary For personal use only Term Meaning Acquisition The acquisition of the majority of Macquarie’s core real estate management platform by CHC AIFRS Accounting International Financial Reporting Standards ASX Australian Securities Exchange AUM Assets under management Cap rate Capitalis
Slide 71: Glossary (continued)
Appendix G Glossary (continued) For personal use only Term Meaning FY10 Financial year ending 30 June 2010 FY11 Financial year ending 30 June 2011 Institutional Offer Placement and institutional component of the Entitlement Offer JLMs Joint lead managers, being Goldman Sachs JBWere and Macquarie Cap
Slide 72: Further information
For personal use only Further information David Southon Joint Managing Director +61 2 8908 4033 davids@charterhall.com.au David Harrison Joint Managing Director +61 2 8908 4025 davidh@charterhall.com.au Jelte Bakker Chief Financial Officer +61 2 8908 4035 jelteb@charterhall.com.au NOT FOR DISTRIBUTI
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