Cromwell Property Group · ASX:CMW
Cromwell Property — FY2013 Earnings Presentation
46 slides from Cromwell Property's earnings presentation, Aug 26, 2013
Slide 1: FY13 Results Presentation
For personal use only FY13 Results Presentation 26 August 2013 Cromwell Property Group – FY13 Results 1
Slide 2: Important Information & Disclaimer
Important Information & Disclaimer For personal use only This presentation including its appendices Cromwell Property Group does not guarantee any Securities Fund ARSN 129 580 267 (PSF) and (“Presentation”) is dated 26 August 2013 and has particular rate of return or the performance of Cromwell Aust
Slide 3: FY13 Highlights
For personal use only S ti 1 Section FY13 Highlights Cromwell Property Group – FY13 Results 3
Slide 4: Consistent Strategy
Consistent Strategy For personal use only Objective to provide defensive, defensive superior risk adjusted returns from commercial properties we own and manage in Australia Quality office assets in predominantly CBD / core fringe markets Assets which offer the potential for superior returns th
Slide 5: Consistent Outperformance
Consistent Outperformance For personal use only Cromwell has significantly outperformed the S&P/ASX 300 A-REIT Accumulation Index since stapling Outperformance of 30.5%, 9.5%, 16.1% and 32.7% per annum over 1, 3, 5 and 10 years Property performance in top quartile of managers rated by IPD sinc
Slide 6: Ascribing Value to Management
Ascribing Value to Management For personal use only The industry has seen sweeping changes in CEOs, Boards and senior management, both in large and small cap A-REITs This process creates inefficiencies as new executives revise strategy and realign investment portfolios and capital allocation C
Slide 7: The Right Structure to Deliver Long Term Results
The Right Structure to Deliver Long Term Results For personal use only Effective and successful business model Internal management structure enables alignment of interests, with no fee leakage Internal property management delivers better long term tenant relationships Specialised capital tra
Slide 8: Solid and Successful Year
Solid and Successful Year For personal use only Continuing to deliver on financial results Record operating profit of $102.4m, slightly ahead of guidance EPS and DPS yields remain among the highest in the sector Property portfolio provided consistent growth despite the difficult climate Av
Slide 9: Positioning for Further Growth
Positioning for Further Growth For personal use only Well positioned in a more challenging economic environment Government provides 46% of property income; top 5 tenants 59% Occupancy remains at 96% with minimal lease expiry over next 2 years Low growth environment and chase for yield boosti
Slide 10: FY13 Financial Results
For personal use only S ti 2 Section FY13 Financial Results Cromwell Property Group – FY13 Results 10
Slide 11: Record Operating Profit
FY13 RESULTS Record Operating Profit For personal use only Statutory profit of $46.2m Operating profit1 increased by 28% to a record $102.4m (7.6 cps) vs. guidance of 7.5 cps Derived 94.9% from property portfolio Increase in like for like property income of 2.8%2 over FY12 Average all up i
Slide 12: Statutory Profit Impacted by Acquisition Costs
FY13 RESULTS Statutory Profit Impacted by Acquisition Costs For personal use only Fair value decrease in properties of $55.7m Weighted Average Cap Rate Change 8.70% Costs of $26.4m from acquisitions 8.60% 0.10% (0.05%) Decrease in value1 of $32.8m, 1.8% of portfolio 8.51% 8.50% 0.19% (0.01%)
Slide 13: Financial Position Strengthened
FY13 RESULTS Financial Position Strengthened For personal use only Cash of $126m provides firepower to Jun-13 Jun-12 pursue additional property acquisitions ($’000) ($’000) Assets Growth in asset base of 39% ($672m) Cash and Cash Equivalents 125,933 59,153 from acquisition of CPF Portfolio Inves
Slide 14: Improving Debt Profile
CAPITAL MANAGEMENT G Improving p g Debt Profile For personal use only Syndicated debt facility ($352m) recently extended Weighted average debt maturity of 2.2 years from May 2014 to January 2016 and margin Actively pursuing opportunities for longer tenure reduced to reflect current market and
Slide 15: Lowering Interest Costs
CAPITAL MANAGEMENT G Loweringg Interest Costs For personal use only Targeting lower interest costs again in FY14 Weighted average hedge term of 2.6 years Weighted average margin reduced to 1.9% from 2.0% in FY13 High degree of certainty over interest expense in FY14 and FY15 Expect average
Slide 16: Equity Issued has added Significant Value
CAPITAL MANAGEMENT G Equity Issued has added Significant Value For personal use only $761.4m of equity issued since July 2009 Equity returns have been substantially higher, given current low cost of debt Average issue price of $0.82 vs. average NTA of $0.711 Recent acquisitions are expected
Slide 17: Increased Scale Resulting in Index Inclusion
CAPITAL MANAGEMENT G Increased Scale Resulting in Index Inclusion For personal use only Growth and index inclusion has been achieved Index inclusion has been a long term target but not at through accretive acquisitions the cost of security holder returns Have not grown just to get “bigger” S
Slide 18: Property Portfolio
For personal use only S ti 3 Section Property Portfolio Cromwell Property Group – FY13 Results 18
Slide 19: Property Portfolio Remains Robust
INVESTMENT PORTFOLIO O O O Property Portfolio Remains Robust For personal use only Geographic Sector Tenant Diversification1 Diversification1 Classification1 1% 1% 3% 4% 18% ACT 17% 19% Listed NSW Company/Subsidiary Commercial QLD 37% Government Authority Retail VIC Industrial TAS Private Company 28
Slide 20: Lease Expiry Profile
INVESTMENT PORTFOLIO O O O Lease Expiry Profile For personal use only WALE of 6.1yrs Lease Expiry Profile % Gross Income Occ panc of 96 Occupancy 96.1% 1% 45% Expiry profile cushioned against current soft conditions 40% Average of only 5.9% lease expiry FY14 – FY15 35% Diversified e s ed e
Slide 21: NSW Portfolio Purchased on Attractive Yield
INVESTMENT PORTFOLIO O O O NSW Portfolio Purchased on Attractive Yield For personal use only 7 assets purchased from NSW State Government for $405m Combination of three Sydney CBD assets and four regional NSW assets WALE of assets is 9.4 years Significant potential for valuation uplift given
Slide 22: Brisbane Acquisition Provides Multiple Options
INVESTMENT PORTFOLIO O O O Brisbane Acquisition Provides Multiple Options For personal use only Opportunistic acquisition Demonstrates ability to act quickly and benefit of strong cash position Two identical towers located on balance sheet between Golden Triangle (Financial Precinct) and Mul
Slide 23: Funds Management
For personal use only S ti 4 Section Funds Management Cromwell Property Group – FY13 Results 23
Slide 24: Funds Management – Significant Inflows
GROWTH Funds Management – Significant Inflows For personal use only Unlisted Property Trusts Property Securities (Phoenix Portfolios) Ipswich City Heart Trust closed early and Increase in FUM to over $400m oversubscribed in October 2012 having raised Demand growing from large dealer groups
Slide 25: Distribution Base will Underpin Future Demand
GROWTH Distribution Base will Underpin Future Demand For personal use only Direct retail investor base growing fast Unlisted Property Trust Property Securities Fund Over 5,000 current fund investors Over 13,000 retail Cromwell securityholders, many of whom are active investors in unlisted fund
Slide 26: Strategy & Outlook
For personal use only S ti 5 Section Strategy & Outlook Cromwell Property Group – FY13 Results 26
Slide 27: Property Portfolio – Continued Focus on Office
OUTLOOK Property Portfolio – Continued Focus on Office For personal use only We still prefer long-leased office property Current yields vs. 20 year average Significant demand now emerging for property with long CBD Sub leases Office Regional regional Industrial Focus for investors moving outsi
Slide 28: Consistent Execution of Strategy
OUTLOOK Consistent Execution of Strategy For personal use only Continued year on year growth in core property income Average ‘like for like’ property income growth of 2.8% for FY13 Average fixed reviews of 3.9% over 60% of portfolio in FY14 will buffer against weak markets Earnings growth po
Slide 29: Earnings and Capital Management
OUTLOOK Earnings and Capital Management For personal use only Operating earnings expected to be at least Targeting growth in NTA and operating 8.3 cps in FY14, 8.4% yield1 earnings per security Continued focus on maximising cash flow to Minimum rental increases expected to securityholders un
Slide 30: Contact Us
Contact Us For personal use only Paul Weightman Hamish Wehl CEO / Managing Director Investor Relations paul.weightman@cromwell.com.au hamish.wehl@cromwell.com.au Phone: +61 7 3225 7720 Phone: +61 7 3225 7783 Daryl Wilson Rob Percy Director - Finance and Funds Management Corporate Finance daryl.wilso
Slide 31: Appendix: Additional Information
For personal use only A Appendix di Additional Information Cromwell Property Group – FY13 Results 31
Slide 32: Cromwell Property Group Snapshot
Cromwell Property Group Snapshot For personal use only Cromwell has evolved organically over 15 years Cromwell Listed fund manager recapitalised by existing management in 1998 Property Group REIT structure created through stapling and merger of unlisted funds in 2006 Market cap: $1.7 bn1 Secur
Slide 33: FY13 Operating and Statutory Profit Reconciliation
FY13 Operating and Statutory Profit Reconciliation For personal use only FY13 FY13 FY12 FY12 ($’000) (CPS)1 ($’000) (CPS)1 Profit from operations 102,411 7.6 80,010 7.5 Gain/(loss) on sale of investment properties 132 - (331) - Loss on sale of other assets (146) - (44) - Non recurring merger transac
Slide 34: Segment Results
Segment Results For personal use only Property Funds Management Development Jun-13 2013 ($’000) ($’000) ($’000) ($’000) Segment revenue Sales to external customers 208,6351 9,797 - 218,432 Sales - intersegmental 953 16,089 - 17,042 Operating profits of equity accounted entities 111 54 - 165 Distribu
Slide 35: Property Portfolio – Key Assets
Property Portfolio – Key Assets For personal use only CMW Top 10 Property Assets Book Asset State Class Value Cap Rate Occupancy WALE Major Tenants Qantas Global Headquarters NSW Office $275.0m 7.00% 100.0% 19.5 yrs Qantas HQ North Tower QLD Office $200.0m 8.00% 99.4% 5.2 yrs AECOM, Bechtel, Technol
Slide 36: Property Portfolio – Top leases
Property Portfolio – Top 20 leases For personal use only Tenant Category Building Expiry Date Rental Income Dept of FaHCSIA Federal Government Tuggeranong Office Park Dec Dec-16 16 8 6% 8.6% Qantas Airways Limited Listed Company/Subsidiary Qantas Global HQ Dec-32 6.5% Origin Energy Services Limited
Slide 37: Property Portfolio – Net Property Income
Property Portfolio – Net Property Income For personal use only Like-for-like income growth FY13 FY12 Sales, Purchases and Other FY13 FY12 ($’000) ($’000) Variance ($’000) ($’000) Variance Tuggeranong Office Park, Greenway ACT 20,037 19,576 2.4% HQ North Fortitude Valley QLD2 16,482 8,137 102.6% 203
Slide 38: Property Portfolio - Lease Expiry Profile
Property Portfolio - Lease Expiry Profile For personal use only Lease Expiries representing >1% income (FY14-FY15) % of total Area Expiry portfolio rental Property Tenant (sqm) Status income Comment Current 100 Waymouth W th Street, St t Adelaide, Ad l id SA Vacant 9 098 Available 9,098 1 6% 1.6 S S
Slide 39: Qantas Global Headquarters, Refurbishment on Track
Qantas Global Headquarters, Refurbishment on Track For personal use only Lease extension to 2032 coupled with a $131m refurbishment and expansion programme Average return on cost of 8.8% expected in first financial year after completion Debt facility in place to fund 100% of works Completion
Slide 40: Hedging Profile
Hedging Profile For personal use only A Amount t Hedged H d d ($’000) B Base Rate R t M t it D Maturity Date t Y Years Remaining R i i % off T Total t l 20,000 3.17% 1-Nov-13 0.3 1.9% 28,000 3.17% 1-Nov-13 0.3 2.6% 52 000 52,000 3 17% 3.17% 1 Nov 13 1-Nov-13 03 0.3 4 9% 4.9% 62,400 2.99% 1-May-14 0.
Slide 41: Funds Management Summary
Funds Management Summary For personal use only Number of Fund Sector Investors Total Assets1 Properties Ongoing Fees3 Initial Fees3 Cromwell Riverpark Trust Direct property Retail $195m 1 0.60% 3.0% Cromwell Ipswich City Heart Trust Direct property Retail $96m 1 0.60% 3.0% Cromwell Box Hill Trust Di
Slide 42: Cromwell Riverpark Trust
Cromwell Riverpark Trust For personal use only This was the first of Cromwell’s next generation ‘back to basics’ single unlisted li t d property t trust t t and d served d as a bellwether b ll th forf the th type t off investments being sought in an uncertain economic environment. Key Statistics as
Slide 43: Cromwell Ipswich City Heart Trust
Cromwell Ipswich City Heart Trust For personal use only This unlisted trust’s asset is the $97.5million1 Ipswich City Heart building currently under construction in Ipswich, Ipswich Queensland. Queensland The building is due for completion in September 2013. The trust was the first Cromwell unlisted
Slide 44: Cromwell Box Hill Trust
Cromwell Box Hill Trust For personal use only This single property investment has a current distribution of 7.75% p.a.1 and d offers ff capital it l growth t ti l1 from th potential f th illi 2 ATO the $117 million building currently under construction in the east Melbourne suburb of Box Hill. Key S
Slide 45: Cromwell Phoenix Property Securities Fund
Cromwell Phoenix Property Securities Fund For personal use only This award winning fund is one of the top performing property securities funds in Australia Australia, with underlying investments chosen by Phoenix Portfolios using a ‘best ideas’ approach. Fund vs. Benchmark 140 120 Key Statistics1 as
Slide 46: For personal use only
For personal use only well versed well timed well considered Cromwell Property Group – FY13 Results 46
Cromwell Property Group — FY2013 Earnings Presentation on 6ix