Charter Hall Retail Reit · ASX:CQR
Charter Hall Retail Reit — FY2016 Earnings Presentation
45 slides from Charter Hall Retail Reit's earnings presentation, Aug 18, 2016
Slide 1: FY16 Full Year Results
For personal use only 18 August 2016 Charter Hall Retail REIT FY16 Full Year Results
Slide 2: Agenda
Agenda For personal use only 1 FY16 Full Year Results 2 Operational Performance 3 Portfolio Investments 4 Financial Performance 5 Strategy and Outlook Scott Dundas Christine Kelly Fund Manager Head of Retail Finance Charter Hall Retail REIT | Full Year Results | 30 June 2016 2
Slide 3: FY16 Full Year Results
FY16 Full Year Results For personal use only
Slide 4: Key Achievements
Key Achievements For personal use only Full Year Ended 30 June 2016 Operating earnings 17.9% increase NTA per unit up 5.6% of 30.40 cpu, growth of in portfolio value to $3.79 2.4% on pcp to $2.55 billion Total acquisitions Same property NOI Look through of $228 million growth of 2.2% gearing of 35.9
Slide 5: Consistent Delivery on Strategy
Consistent Delivery on Strategy Highlights For personal use only Strategy Achievements Active management • Stable occupancy at 98.0% • Same property NOI growth of 2.2% • Executed 10 major lease deals during the year • Specialty rent growth of 1.4% achieved from 136 renewals and 54 new leases reflect
Slide 6: Full Year Results Key Metrics
Full Year Results For personal use only 30 June 2016 Key metrics FY16 FY15 Movement Statutory profit $180.7m $162.5m +11.2% Operating earnings1 $120.3m $110.8m +8.6% Operating earnings1 per unit 30.40 cents 29.70 cents +2.4% Distributions per unit 28.10 cents 27.50 cents +2.2% Payout ratio2 92.4% 92
Slide 7: Operational Performance
Operational Performance For personal use only Active Management
Slide 8: Portfolio Summary
Portfolio Summary For personal use only Same Property Summary by Asset Type # GLA (‘000sqm) Occupancy1 NOI Growth Sub-regional shopping centres 20 287.6 98.0% 2.1% Neighbourhood shopping centres 37 215.5 97.3% 2.0% Freestanding supermarkets 17 56.2 100.0% 3.5% Total 74 559.3 98.0% 2.2% Portfolio and
Slide 9: Anchor Tenants
Anchor Tenants For personal use only • Wesfarmers and Woolworths businesses represent Top ten tenants by base rent 50.7% of base rent Woolworths 39.1% from Supermarkets and Liquor 25.9% 11.6% from Discount Department Stores Wesfarmers 24.8% • 31% of anchor tenants are paying turnover rent The Re
Slide 10: Specialty Tenants
Specialty Tenants For personal use only Summary by State and Location MAT Growth1 Occupancy Cost1 MAT/sqm New South Wales & ACT 3.9% 11.0% $8,853 Queensland 13.6% 7.2% $10,582 Victoria 6.2% 11.9% $7,731 South Australia (0.7%) 9.7% $7,105 Western Australia (3.4%) 8.0% $10,126 Metropolitan 6.5% 11.1%
Slide 11: Sustainability
Sustainability For personal use only CQR has focused on sustainability and community elements into our business operations • Implemented a range of energy initiatives, specifically LED lighting resulting in 1.7million kwh savings - equivalent to a reduction of 913 tonnes of carbon emissions • Develo
Slide 12: Portfolio Investments
Portfolio Investments For personal use only Enhancing the Portfolio Quality 12
Slide 13: Revaluations
Revaluations For personal use only • Property valuations increased by $91.3 million or 3.7% over the year • Weighted average cap rates continued to firm at June 2016, with full year compression of 44 basis points driving NTA growth for the REIT Twelve months to June 2016 Freestanding Neighbourhood S
Slide 14: Capital Transactions
Capital Transactions For personal use only Capital Recycling • Continues strategy of enhancing the REIT’s portfolio quality by recycling out of non-core properties into larger, higher growth potential properties • Average asset value has increased from $32.7 million at June 2015 to $39.7 million at
Slide 15: Case Study: Bateau Bay Square, NSW
Case Study For personal use only Bateau Bay Square, NSW Key metrics (100% interest) Purchase price $200.0m Current valuation $215.5m Gross lettable area (GLA) 28,697sqm Anchor rent (% of total centre ABR) 30% • Acquired a 47.5% interest in existing Retail Partnership No.2 Joint Venture in November 2
Slide 16: Case Study: Goulburn Square, NSW
Case Study For personal use only Goulburn Square, NSW Key metrics (100% interest) Current valuation $69.0m Year one development yield 7.3% Gross lettable area (GLA) 13,963sqm Anchor rent (% of total centre ABR) 25% • Acquired in August 2015 for $67.0 million • Successful negotiations for a new 15 ye
Slide 17: Redevelopments
Redevelopments For personal use only Current and Completed Projects Enhancing Portfolio Quality Project Project Stabilised Completion Description Status cost ($m) Yield1 Lansell 42.6 8.5% Sep 15 New Coles supermarket and expansion Construction complete and majors now Square,Vic. of Woolworths tradin
Slide 18: Financial Performance
Financial Performance For personal use only Prudent Capital Management
Slide 19: Operating Earnings and Distributions
Operating Earnings and Distributions For personal use only • FY16 operating earnings in line with market guidance and $m FY16 FY15 reflects growth of 2.4% on pcp Net property income • Sub-regional NOI increased largely due to 2.1% same property NOI growth, combined with the acquisitions of • Sub-reg
Slide 20: Balance Sheet
Balance Sheet For personal use only • Properties under management increased due to: Jun 16 Jun 15 Development, operational capex and lease Wholly owned properties 2,170 1,938 incentives totalling $71 million Debt (769) (658) Acquisitions net of disposals of $224 million Revaluation uplift of $
Slide 21: Debt Maturity Profile
Debt Maturity Profile For personal use only • Debt maturity profile reflects defensive nature of the Debt Maturity Profile REIT’s portfolio which has a weighted average debt maturity of 6.2 years 450 • No debt maturities until FY19, removing short term 400 refinance risk • Weighted average hedge exp
Slide 22: Strategy and Outlook
For personal use only Strategy and Outlook
Slide 23: REIT Strategy
REIT Strategy For personal use only The leading owner and manager of Australian supermarket anchored shopping centres, Goal providing a secure and growing income stream for our investors Active Enhance Prudent management portfolio quality capital management • Maintaining strong • Value enhancing • S
Slide 24: Retail Environment
Retail Environment For personal use only • Falling interest rates are expected to stimulate consumer Retail Sales Growth1 demand in conjunction with stable employment • Retailers combating lower inflation with sales growth strategies • Australian retail sales moderated over the past 12 months. Howev
Slide 25: Acquisitions and Divestment Strategy
Acquisitions and Divestment Strategy For personal use only • Strategic focus over the next 2-3 years to deliver sustainable income growth by: Increasing average asset size through: • Targeting acquisitions of larger neighbourhood and smaller sub-regional shopping centres • Redeveloping existing co
Slide 26: FY17 Outlook
FY17 Outlook For personal use only • We confirm that, barring unforeseen events and subject to the timing of acquisitions and divestments, the REIT’s FY17 guidance for operating earnings is expected to be in line with FY16 operating earnings • Distribution payout ratio range is expected to be betwee
Slide 27: Questions
For personal use only Questions
Slide 28: Annexures
Annexures For personal use only 1 Detailed Earnings 29 2 Funds from Operations (FFO) 30 3 NTA & Cash flow Reconciliation 31 4 Debt & Interest Rate Management 32 5 Capital Expenditure & Redevelopment Pipeline 33 6 Lease Expiry Profiles 35 7 Property Valuations 36 8 Typical Lease Structures 40 9 Histo
Slide 29: Detailed Earnings
Annexure 1 For personal use only Detailed Earnings Jun 2016 (All Values in $m) Jun 2016 Unrealised & Jun 2016 Jun 2015 Share of profits from investment in JV’s Statutory Profit Capital Items Operating Earnings Operating Earnings Net property income • Sub-regional 14.1 0.3 14.4 8.4 • Neighbourhood 6.
Slide 30: Funds from Operations (FFO)
Annexure 2 For personal use only Funds from Operations (FFO) FY16 ($m) FY16 (cpu) Statutory Profit 180.7 45.65 Revaluation increment on investment properties (92.1) (23.27) Revaluation decrement on investment properties attributable to acquisition costs 8.0 2.02 Loss on sale of investment properties
Slide 31: NTA per unit reconciliation
Annexure 3 For personal use only NTA per unit reconciliation +0.02 $3.79 +0.20 $3.59 (0.06) +0.04 NTA at Derivative MtM Acquisitions Property revaluation Operating earnings NTA at 30 Jun 2015 movement uplift (net of distribution) 30 Jun 2016 Operating earnings to operating cash flows reconciliation
Slide 32: Debt and Interest Rate Management
Annexure 4 For personal use only Debt and Interest Rate Management Debt maturities & covenants Post refinance initiatives Limit Drawn (All Values CQR Share) (A$m) (A$m) Rate Maturity Financial Covenants Covenant Actual LVR 55.0% 39.9% JV debt – CHRP1 117.5 110.7 Floating Jul-18 ICR 2.0x 3.1x LVR 60.
Slide 33: Capital Expenditure
Annexure 5 For personal use only Capital Expenditure Lease Total Maintenance ($m, CQR Share) Operational Incentives and Incentives Redevelopment FY16 6.2 5.0 11.2 60.1 FY15 6.1 3.8 9.9 51.3 FY14 7.8 2.3 10.1 59.4 Charter Hall Retail REIT | Full Year Results | 30 June 2016 33
Slide 34: Major Projects Redevelopment Pipeline
Annexure 5 For personal use only Major Projects Redevelopment Pipeline FY16 FY17 FY18 FY19 FY20 Erindale | $34.2m 41 Carnes Hill | $28.9m 37 Bateau Bay | $10.4m 37 Rosebud | $34.5m 37 Allenstown | $29.5m 29 Albany | $8.6m 24 Wanneroo | $20.6m 24 Sydney Street Markets (Stage 2) | $6.7m 21 Albany Cree
Slide 35: Lease Expiry Profile
Annexure 6 For personal use only Lease Expiry Profile 80% 70% 60.7% Anchor tenant expiry 60% WALE 10.6 years 50% 40% 30% 20% 11.5% 10% 4.9% 6.3% 8.2% 1.1% 0.9% 3.9% 2.5% 0% Portfolio WALE of 6.9 years FY17 FY18 FY19 FY20 FY21 FY22 FY23 FY24 FY25+ 30% 25% 20% 19.7% Specialty tenant expiry 16.2% 16.4%
Slide 36: Property Valuations as at June 2016
Annexure 7 For personal use only Property Valuations as at 30 June 2016 Book Value State Property Location Asset Type Interest % ($m) Cap Rate ACT Dickson Woolworths Dickson Freestander 100% 18.1 6.00% Erindale Shopping Centre Wanniassa Neighbourhood 100% 36.8 7.00% Manuka Terrace Manuka Neighbourho
Slide 37: Property Valuations as at June 2016
Annexure 7 For personal use only Property Valuations as at 30 June 2016 Book Value State Property Location Asset Type Interest % ($m) Cap Rate NSW Pemulwuy Marketplace Greystanes Neighbourhood 50% 14.3 6.25% Rosehill Woolworths Rosehill Freestander 100% 12.0 5.75% Rutherford Marketplace Rutherford N
Slide 38: Property Valuations as at June 2016
Annexure 7 For personal use only Property Valuations as at 30 June 2016 Book Value State Property Location Asset Type Interest % ($m) Cap Rate Sydney Street Markets1 Mackay Neighbourhood 100% 49.2 n/a Tablelands Square Atherton Neighbourhood 100% 33.5 6.75% Qld Total 473.7 SA Brickworks Marketplace
Slide 39: Property Valuations as at June 2016
Annexure 7 For personal use only Property Valuations as at 30 June 2016 Book Value State Property Location Asset Type Interest % ($m) Cap Rate WA Albany Plaza Albany Sub-regional 100% 58.1 7.00% Carnarvon Central Carnarvon Neighbourhood 100% 18.3 7.50% Esperance Boulevard Esperance Neighbourhood 100
Slide 40: Typical lease structures
Annexure 8 For personal use only Typical lease structures Attributes vary across different leases however key characteristics of supermarket and specialty leases are outlined below: Supermarket tenant leases Specialty tenant leases Lease term 15 - 20 years with options Typically average 5 years Base
Slide 41: CQR Australian portfolio – historical performance
Annexure 9 For personal use only CQR Australian portfolio – historical performance Proven and consistent performance over time Jun-11 Dec-11 Jun-12 Dec-12 Jun-13 Dec-13 Jun-14 Dec-14 Jun-15 Dec-15 Jun-16 Number of properties 71 72 74 75 74 77 77 78 73 76 74 Occupancy 98.8% 98.7% 98.6% 98.5% 98.2% 98
Slide 42: Glossary
Annexure 10 For personal use only Glossary • ABR: Annual base rent – base rent only, excludes outgoings and turnover rent • GLA: Gross lettable area • Gross rent: Base rent and outgoings • MAT: Moving annual turnover – calculated as a sum of rolling 12 month sales • Occupancy cost: Calculated as the
Slide 43: Further Information
Further Information For personal use only Scott Dundas Christine Kelly Fund Manager Head of Retail Finance Charter Hall Retail REIT Charter Hall Retail REIT T: +61 2 8651 9273 T: +61 2 8651 9401 scott.dundas@charterhall.com.au christine.kelly@charterhall.com.au Richard Stacker Head of Investor Relat
Slide 44: Important Notice
Important Notice Charter Hall Retail Management Limited ABN 46 069 709 468; AFSL 246996 (“CHRML”) has issued this presentation in its capacity as the responsible entity of Charter Hall Retail REIT For personal use only ARSN 093 143 965 (“CQR” or “the REIT”). This presentation has been prepared for g
Slide 45: Office locations
Sydney Head Office Level 20, No.1 Martin Place, Sydney, NSW, 2000 T: +61 2 8651 9000 For personal use only Melbourne Level 18, 570 Bourke Street, Melbourne VIC 3000 T: +61 3 9903 6100 Brisbane Level 22, Northbank Plaza, 69 Ann Street, Brisbane QLD 4000 T: +61 7 3228 2000 Perth Level 5, St Georges Sq
Charter Hall Retail REIT — FY2016 Earnings Presentation on 6ix