Charter Hall Retail Reit · ASX:CQR
Charter Hall Retail Reit — FY2010 Earnings Presentation
53 slides from Charter Hall Retail Reit's earnings presentation, Aug 20, 2010
Slide 1: Charter Hall Retail REIT 2010 Annual Results
Charter Hall Retail REIT For personal use only 2010 Annual Results 20 August 2010
Slide 2: Important Notice
Important Notice For personal use only Charter Hall Retail Management Limited ABN 46 069 709 468; AFSL 246996 (“CHRML”) is the responsible entity of Charter Hall Retail REIT ARSN 093 143 965 (“CQR”). Past performance is not a reliable indicator of future performance. Due care and attention has b
Slide 3: Contents
Contents For personal use only David Southon Chairman’s Update Chairman Steven Sewell 1 Performance Summary Chief Executive Officer Scott Dundas 2 Portfolio Investments Chief Investment Officer Steven Sewell 3 Portfolio Performance Chief Executive Officer Richard Di Lernia 4 Financial Performance Ch
Slide 4: Chairman's Update
Chairman’s Update For personal use only Successful integration of operations Significant alignment of interest with investors – CHC holds a 7.4% interest Short term focus of increasing the NTA per unit and reducing the spread between NTA and unit price – Continue to re-weight net equity to the
Slide 5: Performance Summary
Charter Hall Retail REIT For personal use only 01 Performance Summary
Slide 6: Result Summary
Result Summary For personal use only Financial 30 June 2010 Operating earnings $98.7m, 6.62 cpu Distribution $79.3m, 5.30 cpu Payout ratio 80% Net tangible assets $1,110m, 74 cpu Portfolio valuation $2,055m Average capitalisation rate 8.07% Balance sheet gearing 38.3% Interest cover ratio 2.35x Lake
Slide 7: Geographic Analysis
Geographic Analysis For personal use only 30 June 2010 Australia New Zealand Europe United States Total Operational results Portfolio value (A$m) 1,143 81 416 415 2,055 Average capitalisation rate 7.81% 8.00% 8.22% 8.62% 8.07% Same property NOI growth 4.7% 2.9% 0.4% (4.9%) 1.2% Occupancy 99.1% 100.0
Slide 8: FY10 Highlights
FY10 Highlights For personal use only 9 Delivering on strategy to re-weight to Australia Completed A$1.6 billion of US sales during FY10, two US assets contracted for sale at book value post balance date Reinvested offshore capital in the Australian market with four acquisitions, including two p
Slide 9: Investment Strategy
Investment Strategy For personal use only Recycle capital and acquire Continue to re-weight to the Australian market, a strategy that began in January 2009 with the first US portfolio sale ZEALAND NEW ― Realise equity following dissolution of 50/50 joint venture partnership STATES UNITED ― Realise r
Slide 10: Portfolio Investments
Charter Hall Retail REIT For personal use only 02 Portfolio Investments
Slide 11: Revaluation Results
Revaluation Results For personal use only Revaluations - six months to June 2010 Australia New Zealand Europe United States Total Number of properties 63 17 7 49 136 Percentage externally valued at June 20101 23% 4% - 12% 39% Dec 2009 book value adjusted for capex & acquisitions (A$m) 1,103.3 78.0 4
Slide 12: Australian Retail Yields
Australian Retail Yields For personal use only 10.0% Peak cap rates 9.0% 8.0% Cap rate 7.0% 6.0% 5.0% 4.0% Jun-03 Jun-04 Jun-05 Jun-06 Jun-07 Jun-08 Jun-09 Jun-10 Regional Sub-Regional Neighbourhood Household retail CQR reported Australian yields Source: Jones Lang LaSalle 12
Slide 13: Australian Acquisitions
Australian Acquisitions Strategy For personal use only Target assets that have strong capital and income growth potential and meet key investment hurdles: Sector: Neighbourhood, sub-regional & household retail Asset value: $20+ million Five year unlevered IRR: 10%+ Average annual NOI growth:
Slide 14: Australian Acquisitions – Household Retail
Australian Acquisitions – Household Retail Strategy For personal use only Asset class in recovery phase and lower level of institutional competition resulting in attractive pricing Solid weighted average rent reviews driving annual NOI growth Nationally recognised retailers with strong income
Slide 15: Case Study: Mile End Homemaker Centre and Home HQ Nunawading
Australian Acquisitions – Household Retail For personal use only Case Study: Mile End Homemaker Centre Initial yield 9.9% Forecast five year unlevered IRR of 10.9% Weighted average rent reviews of 3.3% 75% base rent secured by quality national retailers including: The Good Guys, Freedom Furn
Slide 16: Capital Recycling
Capital Recycling Strategy For personal use only Recycle equity from existing investments into higher capital and income growth prospects in Australia New Zealand: Dissolution of joint venture and repatriation of equity United States: Sell down of individual assets and interests in all joint ven
Slide 17: Portfolio Performance
Charter Hall Retail REIT For personal use only 03 Portfolio Performance
Slide 18: Property Portfolio
Property Portfolio For personal use only 30 June 2010 Australia New Zealand Europe United States Total June 091 Portfolio summary Number of properties 63 17 7 49 136 139 Number of tenancies 1,068 28 421 648 2,165 2,106 Valuation (A$m) 1,143.3 80.5 416.1 415.0 2,054.9 2,082.0 Performance metrics Same
Slide 19: Australia and New Zealand
Australia and New Zealand For personal use only Australia 63 properties: 7 sub-regional SC, 34 neighbourhood SC, 21 freestanding supermarkets and 1 household retail centre Same property NOI growth of 4.7% Occupancy 99.1%1, with average occupancy cost of 7.8% for speciality retailers, arrears 0
Slide 20: Australian Portfolio Overview
Australian Portfolio Overview Tenant Classification For personal use only Australian portfolio well positioned for growth Anchors Higher exposure to neighbourhood and sub-regional 60% shopping centres drives income growth in the portfolio Phase out of economic stimulus has reduced overall reta
Slide 21: Redevelopments - Australia
Redevelopments - Australia For personal use only Development capex cash outflow (A$m) Several projects have now been identified with construction expected to commence in FY11 41.0 Bathurst completed in second half of FY10, Yr 1 30.0 yield of 9.1%, 10yr IRR of 16.1% 11.5 1.7 FY10 FY11 FY12+ Redev
Slide 22: Europe Portfolio Overview
Europe Portfolio Overview For personal use only Macroeconomic situation fragile with sovereign debt concerns weighing on market sentiment Unemployment in Poland and Germany has fallen to 11.6% and 7.6% respectively (December 2009: 11.9% and 8.1%) Annual retail sales growth mixed with Germany a
Slide 23: Poland
Poland Tenant Classification For personal use only Five properties shadow anchored by Carrefour Same property NOI growth of 0.1%1 and National specialties 85% occupancy of 98.0%1 Weighted average rent review of 1.6% FY10 ROE of 18%, forecast to increase in FY11, Regional specialties due to d
Slide 24: Germany
Germany For personal use only Occupancy strong at 99.1% Tenant Classification German assets have strong tenant covenant with 80% of annual base rent from Rewe, number three in the European Master lease grocery market 49% New property managers driving income, with continued focus National on co
Slide 25: United States Overview
United States Overview For personal use only Economic recovery slower than initially expected Federal Funds target interest rate remains at 0 – 0.25% Unemployment stabilising, however remains high at 9.5% Overall retail sales improved in FY10, with most categories now experiencing positive g
Slide 26: United States
United States For personal use only The operating environment remained Portfolio Summary challenging and portfolio performance All values represent Wholly Desco Regency Total weak in FY10 CQR share Owned JV JV Number of properties 13 32 4 49 Same property NOI declined 4.9% CQR ownership 100% 60% 7
Slide 27: Financial Performance
Charter Hall Retail REIT For personal use only 04 Financial Performance
Slide 28: Earnings
Earnings June 2010 June 2010 June 2010 June 2010 June 2009 For personal use only Statutory Unrealised Non-recurring Operating Operating Income Items Items Earnings Earnings A$m A$m A$m A$m A$m Net property income 154.1 1.6 - 155.7 364.6 Net income from US JV2 16.5 - - 16.5 - Property valuation gains
Slide 29: Balance Sheet
Balance Sheet For personal use only Australia New Zealand Europe United States 30 June 2010 30 June 2009 A$m A$m A$m A$m A$m A$m Total assets (less cash) 1,186 81 426 252 1,945 2,044 Total debt (less cash) 335 - 335 76 746 810 Total liabilities (less cash) 392 - 363 80 835 9661 Net assets 794 81 63
Slide 30: Debt Maturity
Debt Maturity For personal use only Debt maturity by year Proactive debt refinancing initiatives underway across all regions A$m FY11 FY12 FY13 >FY13 Cash and undrawn capacity of $128 million AUS - 108 265 - Full compliance with all covenants globally EUR - 213 121 - US 25 4 4 185 New fundin
Slide 31: Derivatives Management
Derivatives Management For personal use only Interest rate hedging Strategy of maintaining predominantly floating rates in the Australian market Higher fixed debt levels in Europe and US given cheaper cost of funding Average fixed debt for FY11 of 70.4% FY10 weighted average interest rate 5.
Slide 32: Unit Consolidation
Unit Consolidation For personal use only Key features 1 for 5 unit consolidation, effective 1 September 2010 – Post-consolidation CQR unit price should increase from $0.55 to $2.752 per unit Number of units reduces from approximately 1.5 billion to 306 million Deferred settlement trading until
Slide 33: Strategy and Outlook
Charter Hall Retail REIT For personal use only 05 Strategy and Outlook
Slide 34: Strategy
Strategy For personal use only Active portfolio management to identify investment opportunities in the domestic market that provide higher and sustainable capital and income growth prospects ― Exit NZ – via JV dissolution and sell down ― Exit US – via sale of assets and JV interests ― Recycle capi
Slide 35: FY11 Outlook
FY11 Outlook For personal use only Earnings and distributions On execution of strategy and barring unforeseen events: FY11 operating earnings forecast in a range of 5.3 – 5.6 cents per unit (26.5 – 28.0 cents per unit post consolidation) FY11 distribution to reflect a payout ratio of between 80%
Slide 36: Questions
Charter Hall Retail REIT For personal use only Questions 36
Slide 37: Annexures
Annexures For personal use only Detailed Earnings 1 Slide 38 Balance Sheet 2 Slide 39 Debt & Gearing 3 Slides 40 – 41 Hedging Profile 4 Slides 42 – 45 Capital Expenditure Schedule 5 Slide 46 Portfolio Update 6 Slides 47 – 51 37
Slide 38: Annexure: Detailed Earnings
Annexure 1 Detailed Earnings For personal use only Jun 10 Jun 10 Jun 10 Jun 10 Jun 09 Statutory Income Unrealised Items Non-recurring Items Operating Earnings Operating Earnings A$m A$m A$m A$m A$m Net property income 23.2 1.0 - 24.2 219.2 Management fees (1.6) - - (1.6) (11.1) Finance costs (12.7)
Slide 39: Annexure: Detailed Regional Balance Sheet
Annexure 2 Detailed Regional Balance Sheet For personal use only US Wholly Regency 30 June Australia New Zealand Poland Germany Desco JV Owned JV 2010 Total assets (less cash) 1,186 81 287 139 167 207 45 2,112 Total debt (less cash) 335 - 216 119 76 123 38 907 Total liabilities (less cash) 392 - 239
Slide 40: Annexure: Debt Maturities
Annexure 3 Debt Maturities For personal use only Facility Drawn Drawn 30 June 2010 Region Rate Maturity Financial Covenants CQR share CQR share CQR share (Natural m’s) (Natural m’s) (A$m) Hillsboro US 10.4 10.4 12.1 Fixed Feb 11 - Franklin Square1 US 11.0 11.0 12.9 Fixed May 11 - Total FY11 25.0 Tro
Slide 41: Annexure: Covenants
Annexure 3 Covenants For personal use only Facility Drawn Unused 30 June 2010 Maturity Financial Covenants Covenant Actual CQR share Facility Facility Australia/NZ A$m A$m A$m Tangible net worth A$0.5bn A$1.1bn Multi-Currency Facility 225.0 107.9 117.1 Feb 12 Security pool gearing 65.0% 29.4% Securi
Slide 42: Annexure: Derivative Positions
Annexure 4 Derivative Positions For personal use only The table below provides an analysis of the REIT’s mark to market derivative positions as included in Note 9 to the financial statements All figures in A$m Australia New Zealand Europe United States Total Interest rate hedges (0.9) - (9.0) (6.7
Slide 43: Annexure: Cross Currency Swaps
Annexure 4 Cross Currency Swaps For personal use only US$ Equity cross currency swaps US$ Debt cross currency swaps US$ Cross currency swap details FY11 FY12 FY13 FY11 FY12 Face value (US$m) 13.0 15.0 44.0 50.0 23.0 Reverse FEC’s (US$m) (13.0) (15.0) (44.0) (50.0)1 - Net foreign exchange exposure -
Slide 44: Annexure: Interest Rate Risk Management
Annexure 4 Interest Rate Risk Management For personal use only Australia FY11 FY12 FY13 FY14 FY15 Avg. fixed debt 34.2% 31.1% 22.2% - - Weighted avg. fixed rate (includes margin) 8.11% 8.11% 8.06% - - United States FY11 FY12 FY13 FY14 FY15 Avg. fixed debt 79.4% 71.9% 78.3% 78.3% 78.1% Weighted avg.
Slide 45: Annexure: Foreign Exchange Income Hedging
Annexure 4 Foreign Exchange Income Hedging For personal use only FY11 FY12 FY13 FY14 FY15 Avg. proportion income hedged USD 88% 95% 100% 99% 47% Avg. FX forward rate (0.75) USD 0.70 0.76 0.76 0.76 0.76 Avg. proportion income hedged EUR 18% 17% 16% 11% 3% Avg. FX forward rate (0.56) EUR 0.58 0.57 0.5
Slide 46: Annexure: Capital Expenditure Schedule
Annexure 5 Capital Expenditure Schedule For personal use only Entity (A$m, CQR Maintenance Lease incentives Total Maintenance & Development Share) Incentives Australia FY10 2.5 0.8 3.3 11.5 FY09 1.7 0.7 2.4 23.8 FY08 2.8 1.3 4.1 65.2 New Zealand FY10 0.1 - 0.1 0.2 FY09 0.4 - 0.4 5.8 FY08 0.6 - 0.6 1
Slide 47: Annexure: Historical Operational Performance
Annexure 6 Historical Operational Performance For personal use only Australia/New Zealand United States Europe Jun 10 Dec 09 Jun 09 Jun 10 Dec 09 Jun 09 Jun 10 Dec 09 Jun 09 Number of properties 80 78 79 49 135 139 7 7 7 Number of tenancies 1,096 1,032 954 648 2,790 2,879 421 418 417 GLA (100% share
Slide 48: Annexure: Australia – Geographic Diversification
Annexure 6 Australia – Geographic Diversification For personal use only QLD 10 Neighbourhood SC (52,762m2) 2 Sub-regional SC (28,122 m2) 12 12 WA 2 Freestanders (6,281 m2) 3 NSW 8 Neighbourhood SC (43,025 m2) 11 Freestanders (31,915 m2) 11 Neighbourhood SC (63,607 m2) 2 Sub-regional SC (33,170 m2) 2
Slide 49: Annexure: Aus/NZ – Lease Expiry Profile
Annexure 6 Aus/NZ – Lease Expiry Profile For personal use only % Base Rent Expiring 40% 35% 32.5% 30% 25% 20% 15% 12.2% 11.1% 9.9% 10% 7.8% 7.4% 7.1% 5.6% 4.7% 5% 1.7% 0% FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20+ Anchor Specialty Base rent represents minimum rent for all properties, but exc
Slide 50: Annexure: United States – Lease Expiry Profile
Annexure 6 United States – Lease Expiry Profile For personal use only % Base Rent Expiring 40.5% 40% 35% 30% 25% 20% 15% 12.0% 10.7% 9.2% 10% 7.5% 6.5% 5.2% 5.0% 5% 2.4% 1.0% 0% FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20+ Anchor Specialty Base rent represents minimum rent for all properties,
Slide 51: Annexure: Europe – Lease Expiry Profile
Annexure 6 Europe – Lease Expiry Profile For personal use only % Base Rent Expiring 40% 35% 30% 25% 19.0% 20% 18.0% 18.2% 16.0% 15% 8.1% 8.8% 10% 7.3% 5% 2.6% 1.3% 0.7% 0% FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20+ Anchor Tenants Master Lease Specialty Poland – Anchor tenants do not include
Slide 52: Further information
For personal use only Further information Steven Sewell Chief Executive Officer +61 2 8295 1017 steven.sewell@charterhall.com.au Richard Di Lernia Chief Financial Officer +61 2 8295 1002 richard.dilernia@charterhall.com.au Kylie Ramsden Head of Listed Investor Relations +61 2 8295 1016 kylie.ramsden
Slide 53: charterhall.com.au/cqr
For personal use only charterhall.com.au/cqr
Charter Hall Retail REIT — FY2010 Earnings Presentation on 6ix