Gpt Group · ASX:GPT
Gpt — The GPT Group — H1 2008 Earnings Presentation
80 slides from Gpt's earnings presentation, Aug 27, 2008
Slide 1: Mid Year Results
Mid Year Results 27 August 2008
Slide 2: Agenda
Agenda Performance Strategy Capital Management Operational Overview – Investment Portfolio – Development – Funds Management – Joint Venture Outlook 2
Slide 3: Performance
Performance
Slide 4: Results Summary
Results Summary 1H08 1H07 A-IFRS net profit/loss ($67.7m) $737.1m Realised operating income $234.0m $296.7m Distribution per security 11.4 cents 14.3 cents Earnings per security 10.9 cents 14.5 cents 1H08 FY07 Total assets $13.9b $14.0b Headline gearing 37.3% 36.3% Look through gearing 46.7% 46.8% I
Slide 5: Results in line with Guidance
Results in line with Guidance Segment 30 June 08 Dec 08 Guidance* Actual ($m) ($m) Retail, Office and Industrial $259 $516 Hotel/Tourism $23 $48 US Seniors Housing $8 $15 Australian Funds Management $10 $21 European Funds Management ($12) ($15) Joint Venture Fund $60 $125 Development $0 $29 Corporat
Slide 6: Core Portfolio Performing very strongly
Core Portfolio Performing very strongly % of Cap rate** Occupancy** WALE** Comparable investments** income growth* Retail 41% 5.9% 99% - 6.2% Office 26% 6.1% 99% 5.6 yrs 7.4% Industrial 6% 7.5% 100% 7.3 yrs 5.3% TOTAL 73% 6.0% 99% - 6.4% *GPT assets only. **Including equity investments in GWOF/GWSCF
Slide 7: Key points
Key points Full year guidance $464 million confirmed Gearing remains within policy range Liquidity remains comfortable Core portfolio performing well Significant headroom over debt covenants Detail and prudent response to challenging market – Revised distribution policy – Underwritten DR
Slide 8: Reconciliation Realised Operating Income
Reconciliation Realised Operating Income 1H08 ($m) 1H07 ($m) Notes Realised Operating Income 234.0 296.7 Reduction in operating income of approximately 21%, consistent with 2008 guidance Changes in Fair Value of Assets (non cash) 1. Valuation increases (decreases) Core domestic portfolio 84.2 326.0
Slide 9: Property Revaluations
Property Revaluations(1) $m Change Comment Retail (29.0) (0.5%) • Cap rates softened ~20bp to 5.9% Office 127.6 4.1% • Cap rates softened by ~20bp to 6.1%, offset by strong income growth Industrial (14.4) (2.0%) • Cap rates softened by ~10bp to 7.5% Hotel/Tourism (82.6) (9.2%) • Difficult operating
Slide 10: Diversified Investments and Income
Diversified Investments and Income Total Investments* Total Income** * Based on realised operating income. **US Seniors Housing and Joint Venture equals contributed equity. Office and Retail include GPT’s equity interest in the GPT Wholesale Office and Shopping Centre Funds. 10
Slide 11: Strategy
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Slide 12: Global Operating Environment
Global Operating Environment Credit crunch created extremely challenging economic conditions globally Cost of capital increased dramatically (debt and equity) Increased volatility in global financial markets Reduced liquidity in global real estate markets Australia performing better than m
Slide 13: Key sector themes and GPT response
Key sector themes and GPT response Issue Themes / General Observations GPT Response Strategy / business • Simplicity preferred over complexity • Focus on core domestic operations model • Strong preference for domestic focus over (ownership, management, development offshore expansion (particularly fr
Slide 14: Resulting Business Model
Resulting Business Model Operationally focused • Simple, easy-to-understand business model • Focused on core business (ownership, management, development of high quality Australian real estate) Diversified by asset class, • By asset class (retail, office, industrial) earnings stream and capital • By
Slide 15: Strategic Focus
Strategic Focus GrT The GPT Group 4 Ownership Retail Portfolio GWS CF + Capital Partners Office Portfolio GWOF + Capital Partners Industrial Portfolio Capital Partners Retail Pipeline peline Industrial Pipeline GPT The GPT Group
Slide 16: Strategic Focus
Strategic Focus Ownership High quality Australian retail, office and industrial real estate providing high quality rental income streams Management High quality open-ended wholesale funds and institutional capital partners, providing GPT with a significant competitive advantage given lower cost/
Slide 17: Other Platforms/Investments
Other Platforms/Investments Hotel/Tourism – Sale process commenced (Jones Lang LaSalle) Homemaker portfolio – Marketing underway US Seniors Housing – Strong long-term prospects but inconsistent with revised strategic focus – GPT exploring options with Benchmark to reduce exposure/exit over tim
Slide 18: Non-Core Asset Sales
Non-Core Asset Sales(1) Jun-08 Asset/Portfolio book value Four Points $0.3bn Resort Portfolio $0.5bn Total Hotel/Tourism $0.8bn Homemaker Portfolio $0.4bn Floreat Forum $0.1bn Total Non-Core Retail $0.5bn H2O Portfolio $0.3bn Hamburg Trust Alliance Fund $0.1bn Total Warehoused Assets $0.4bn Total No
Slide 19: Earnings/Asset Mix
Earnings/Asset Mix(1) GPT’s high quality domestic operations already comprise the majority of operating income and asset base Contribution of core domestic operations will increase over time as a result of non-core asset sales and anticipated exit from US Seniors and the Joint Venture Realised O
Slide 20: Capital Management
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Slide 21: Overview
Overview Gearing within policy ranges – Headline gearing 37.3% (policy range 30-40%) – Look through gearing 46.7% (policy maximum 50%) Well placed to reduce gearing (primarily via non-core asset sales) – Target look through gearing over the medium-term of <40% – Return of JV capital will improve
Slide 22: Balance Sheet Overview
Balance Sheet Overview Jun 08 Dec 07 Total assets $13.9b $14.0b ↓ 0.7% Gearing Headline 37.3% 36.3% ↑ 1.0% Look through 46.7% 46.8% ↓ 0.1% Interest cover(1) Headline 2.7x 3.9x ↓ 1.2x Total borrowings $5.2 billion Weighted average term 3.5 years (4.5 years look through) Current effective intere
Slide 23: Debt Facilities/Covenants
Debt Facilities/Covenants GPT remains within all loan covenants Key loan covenants – 50% look through gearing (Jun 08 46.7%) – 40% balance sheet gearing (Jun 08 37.3%) – 2x interest cover (Jun 08 2.7x) No covenants related to market capitalisation 23
Slide 24: Liquidity Position
Liquidity Position 12 months to Jun 09 $ bn Approx. $1.1 billion of funding Estimated capital expenditure 0.2 required over next 12 months Maturing facilities 0.9 Funding required 1.1 Committed funding sources(1) 1.0 Total committed funding Underwritten DRP(2) 0.4 available of $1.4 billion Total
Slide 25: Indicative Impact of Asset Sales
Indicative Impact of Asset Sales Successful completion of even a portion of targeted asset sales would have significant impact on GPT’s look through gearing and asset value headroom under 50% look through LVR covenant Jun-08 Jun-08 $500m $750m $1bn (unadjusted) (adjusted)(1) asset sales asset sale
Slide 26: Distribution Policy
Distribution Policy Revised distribution policy announced July 2008 Will enhance financial flexibility and long-term growth prospects – Portion of earnings reinvested on ongoing basis – Development profits retained – 90-100% of other operating income distributed (depending upon capital managemen
Slide 27: Operational Review
Operational Review
Slide 28: Investment Portfolio
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Slide 29: Australian Retail Portfolio
Australian Retail Portfolio Performance strong GPT’s Portfolio** – Comparable income up 6.2%* Portfolio positioned for continued growth Key Operating Metrics – Jun 08** Comparable total centre sales growth 5.1% Comparable specialty sales growth 4.4% Specialty sales psm $8,706 Specialty occupancy
Slide 30: Australian Retail Portfolio
Australian Retail Portfolio Valuations* Portfolio value $5.4 billion – GPT $4.6 billion – Investment in GWSCF $809 million Valuations resulted in $29 million reduction over the half (0.5%) Portfolio weighted average cap rate 5.9% (5.7% Dec 07)** Cap rate softening largely mitigated by strong
Slide 31: Australian Office Portfolio
Australian Office Portfolio Performance strong Geographic Spread** – Comparable income up 7.4%* Positioned for continued growth** – Portfolio occupancy 99% – Portfolio underrented by 6.3% – Access to reviews over 19% of portfolio in 2nd half – Stepped rental increases average 4-5% – Average leas
Slide 32: Australian Office Portfolio
Australian Office Portfolio Asset Quality** Valuations* – Portfolio value $3.3 billion; GPT $2.2 billion and Investment in GWOF $1.1 billion – Valuations resulted in $128 million increase over the half (4.1%) – Portfolio weighted average cap rate 6.1% (5.9% Dec 07)** – Cap rate softening mitigated
Slide 33: Australian Industrial/Business Park Portfolio
Australian Industrial/Business Park Portfolio Geographic spread Performance strong – Comparable income up 5.3% Positioned for continued growth – Portfolio occupancy 100% – Stepped rental increases average 3.5% – Average lease term 7.3 years Long Weighted Average Lease Expiry* *By income. 33
Slide 34: Australian Industrial/Business Park Portfolio
Australian Industrial/Business Park Portfolio Valuations – Portfolio value $829 million – Valuations resulted in $14 million reduction over the half (1.8%) – Portfolio weighted average cap rate 7.5% (7.4% Dec 07) – Cap rate softening mitigated by rental growth Outlook – Demand softening but vaca
Slide 35: Hotel/Tourism Portfolio
Hotel/Tourism Portfolio Performance Four Points Sydney – Comparable income up 10.8% – Occupancy 83% – Average daily room rate $199 (up 8.2% vs Jun 07) Resort Portfolio – Comparable income down 54.5% – Occupancy 58% – Average daily room rate $218 (up 1.4% vs Jun 07) Portfolio tracking in line w
Slide 36: Hotel/Tourism Portfolio
Hotel/Tourism Portfolio Valuations – Valuations resulted in $85 million (9.6%) reduction over the half – Four Points up $24 million – increased room rate – Resorts down $109 million – weaker trading conditions, increased discount rates Outlook – Sydney hotel market expected to remain strong – ve
Slide 37: US Seniors Housing
US Seniors Housing Performance – Comparable income down 9.8% – Occupancy 89% – Average monthly rent US$5,100 (up 6.2% vs Dec 07) – Portfolio tracking in line with revised guidance Valuations – Review resulted in $24 million reduction (3%) – Reflects weaker trading conditions and softening in dis
Slide 38: Development
Development
Slide 39: Development Overview
Development Overview Ability to create new assets and enhance existing assets a critical component of GPT’s strategy and key long term value driver for the Group Capability strong across Retail, Office and Industrial/Business Park sectors But - shorter term challenges – Capital availability an
Slide 40: Development Overview
Development Overview Current commitments – One One One Eagle Street - $630 million (GPT interest 1/3 $210 million) – Charlestown Square expansion $450 million (GPT 100% interest) Medium and longer term projects subject to return profile and funding capability 40
Slide 41: Retail Developments
Charlestown Square Artist’s impression Retail Developments Rouse Hill Town Centre opened successfully March 2008 – Trading well over first five months – On track to meet sales and investment return targets Charlestown Square commenced Jan 2008 – Construction on programme – Forecast completion 20
Slide 42: Rouse Hill Town Centre
Rouse Hill Town Centre Winner Lloyd Rees Award for Urban Design 42
Slide 43: Rouse Hill Town Centre
Rouse Hill Town Centre Winner People’s Choice Award, Banksia Awards 43
Slide 44: Office Developments
workplace6 Artist’s impression Office Developments 818 Bourke Street – Completed and office fully leased – 7.8% yield on cost will be achieved workplace6 on track for completion in November – Sale completed to GWOF Dec 07 – Final payment due on completion – Office (16,930sqm) fully leased, Retai
Slide 45: Office Developments
Office Developments One One One Eagle Street Best development site in Brisbane – Only premium grade office development to be delivered this cycle – On programme for late 2011 completion Strong enquiry from range of prospective tenants Sell down of two-thirds to GWOF and existing capital partne
Slide 46: Industrial/Business Park Developments
Industrial/Business Park Quad 3 Sydney Olympic Park Developments Strategic focus – Large, high quality industrial and business park development sites in strategically important locations which have a key point of difference Sydney Olympic Park – All four Quad assets now complete and fully leased
Slide 47: Funds Management
Funds Management
Slide 48: Australian Funds Management
Australian Funds Management Australian Wholesale platform – Funds under Management $5.4 billion – GWOF $3.2 billion – GWSCF $2.2 billion GPT co-investment – GWOF $1,065 million – 38.2% – GWSCF $809 million – 39.8% Both Funds performing at or better than expectations 48
Slide 49: Australian Funds Management
Australian Funds Management Demand for equity weak due to pricing uncertainty – Despite this, platform continuing to attract capital – close to $100 million raised through DRP and other means Balance sheets of both funds strong – GWOF gearing 12% – GWSCF gearing 7% – Successfully raised or re-fi
Slide 50: European Funds Management GPT Halverton
European Funds Management GPT Halverton Integrated fund and asset management platform across Europe Six funds established in the industrial, office and retail sectors – A range of investors including large institutions and retail investors Assets under management €2.3 billion* Platform appro
Slide 51: Joint Venture
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Slide 52: Joint Venture Book Values
Joint Venture Book Values All asset values reviewed at June 48% of assets valued externally in 1H08 Book value 2.6% below book cost Minimal transaction evidence, minimal forced selling Portfolio Book Cost Book Value Movement (AUD m) (AUD m) German residential 2,391 2,295 (95) Euro multi let
Slide 53: Joint Venture Debt
Joint Venture Debt $4.7 billion in debt at June (LVR 71%) Minimal near term debt maturities No loan covenant breaches other than Galerie Butovice >90% fixed or hedged for weighted average 5.8 years Interest cover 1.6 times All JV debt is non recourse to GPT Debt Maturity (at June 2008) 4
Slide 54: Joint Venture Income
Joint Venture Income Income is stable Debt is secure GPT’s preferred income weighted to 2H08 On track to deliver full year 2008 income of $125 million Income 6 months to Full Year June 08 Target(2) JV Net Profit 64.2 GPT Income(1) Preferred 57.5 Ordinary 3.3 60.8 125.0 Assumed exchange rate
Slide 55: Outlook
Outlook
Slide 56: Outlook/Summary
Outlook/Summary Interim result in line with revised guidance and underlying cashflow Core domestic portfolio continues to perform strongly Minimal movement in value of core domestic portfolio Sound financial position to be improved further via non-core asset sales, targeting look through gea
Slide 57: Questions
Questions
Slide 58: Appendices
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Slide 59: Current Debt Facilities: GPT Bonds
Current Debt Facilities GPT Bonds Fixed Floating Outstanding Yrs to /indexed Swapped margin over Tranche ccy $A equiv m Mat date maturity rate to float benchmark* Floating MTN AUD 100.0 22-Aug-08 0.15 0.480 Fixed MTN AUD 325.0 30-Mar-09 0.75 6.00 (1.840) 0.400 Floating MTN AUD 375.0 30-Mar-09 0.75 F
Slide 60: Current Debt Facilities: Bank Facilities
Current Debt Facilities Bank Facilities Floating Outstanding Yrs to Limit A$ available A$ margin over Tranche ccy A$ m Mat date maturity equiv M equiv M benchmark Standby AUD 0.0 22-Nov-08 0.40 200.0 200.0 Multi-option Syndicated EUR 1,519.4 26-Oct-10 2.32 1,651.3 132.0 0.650 Bank Loan AUD 200.0 23-
Slide 61: Current Debt Facilities: Controlled Entities Bank Facilities
Current Debt Facilities Controlled Entities – Bank Facilities Floating Outstanding Yrs to Limit A$ Available margin over Entity ccy A$ equiv m Mat date maturity equiv M A$ equiv M benchmark Hamburg Bridge Facility USD 94.4 30-Dec-08 0.50 96.5 2.1 0.960 Somerton AUD 75.1 31-Mar-11 2.75 77.5 2.4 0.950
Slide 62: Balance Sheet Interest Rate Hedging
Balance Sheet Interest Rate Hedging HEDGING PROFILE OVER TIME * Jun Dec Jun Dec Jun Dec Jun Dec Jun Dec Jun 08 08 09 09 10 10 11 11 12 12 13 AUD bal M 1,940 1,747 1,332 1,142 1,164 846 667 575 575 525 525 Rate 5.45 5.55 5.69 5.89 6.04 6.45 6.94 7.14 7.42 7.90 8.24 % hedged 90% 80% 60% 51% 50% 36% 28
Slide 63: Development Pipeline: Retail, GPT owned
Development Pipeline Retail: GPT owned Est. Forecast Forecast Status Cost Yield Timing Charlestown Square, NSW $450m 7-7.5% 2008-2010 Under construction Melbourne Central $75m 7-8% 2009-2010 Masterplanning Sunshine Plaza, Qld $125m 7-8% 2010-2011 Masterplanning Newcastle CBD, NSW $500m Preliminary p
Slide 64: Development Pipeline: Office, GPT owned
Development Pipeline Office: GPT owned Forecast Forecast Status Est. Cost Yield Timing Eagle Street, Brisbane $630m 7-7.5% End 2011 2/3 sold to GWOF and Third Party Under construction 300 Lonsdale $110m 7%+ End 2011* DA approved Seeking pre-commitment TOTAL PIPELINE $740m * Subject to pre-commitment
Slide 65: Development Pipeline: Industrial, GPT owned
Development Pipeline Industrial: GPT owned Est. Forecas Forecast Status Cost t Yield Timing Pending new SOP Sydney Olympic Park, Samsung $170m 7.5% 2009-2013 masterplan Pending new SOP Sydney Olympic Park, other sites $220m 7.5% 2013-2016 masterplan Future stages in line with Austrak Business Park,
Slide 66: Development Pipeline: Funds
Development Pipeline Funds Est. Cost Forecast Status Timing Retail DA approved subject to Wollongong Central, NSW $350m 2009-2010 conditions precedent Chirnside Park, Vic $120m Preliminary planning Highpoint Shopping Centre, Vic (50%) $175m 2010-2011 Masterplanning Office Sold to GWOF workplace6, Sy
Slide 67: Fair Value: Retail
Fair Value Retail Dec 07 Fair Jun 08 Fair Value Cap Rate Value Cap Rate Property ($m) (%) ($m) (%) Casuarina Square, NT $415.0 6.00 $419.2 6.25 Charlestown Square, NSW $459.7 6.00 $493.1 6.00 Dandenong Plaza, VIC $225.0 7.25 $226.1 7.25 Erina Fair, NSW (50%) $409.8 5.50 $400.0 5.75 Floreat Forum, WA
Slide 68: Fair Value: Retail - Homemaker
Fair Value Retail - Homemaker Dec 07 Fair Jun 08 Fair Value Cap Rate Value Cap Rate Property ($m) (%) ($m) (%) Homemaker City, Aspley, QLD $70.0 7.50 $70.0 7.25 Homemaker City, Bankstown, NSW $50.0 8.00 $45.0 9.00 Homemaker City, Cannon Hill, QLD $22.0 7.25 $21.5 7.00 Stg 1&2: 7.00 Homemaker City, F
Slide 69: Fair Value: Office
Fair Value Office Dec 07 Fair Jun 08 Fair Value Cap Rate Value Cap Rate Property ($m) (%) ($m) (%) Australia Square, Sydney, NSW $300.0 5.50/5.75 $312.8 6.00 MLC Centre, Sydney, NSW $397.5 6.00 $433.7 6.00 One One One Eagle Street, Brisbane, QLD* $36.4 6.75 $35.8 n/a Melbourne Central, VIC $394.4 6.
Slide 70: Fair Value: Industrial
Fair Value Industrial Dec 07 Fair Jun 08 Fair Value Cap Rate Value Cap Rate Property ($m) (%) ($m) (%) 2-4 Harvey Road, Kings Park, NSW $47.0 7.25 $47.5 7.50 Citi-West Industrial Estate, Altona North, VIC $76.3 7.50 $71.0 7.75 Quad 1, Sydney Olympic Park, NSW $19.3 7.25 $20.8 7.25 Quad 2, Sydney Oly
Slide 71: Fair Value: Industrial
Fair Value Industrial Dec 07 Fair Jun 08 Fair Value Cap Rate Value Cap Rate Property ($m) (%) ($m) (%) Austrak Business Park, Somerton, VIC $144.7 7.25 $139.6 7.45 Austrak land, Somerton, VIC* $16.4 - $16.4 - 134-140 Fairbairn Road, Sunshine West, VIC $14.0 7.25 $14.1 7.25 116 Holt Street, Pinkenba,
Slide 72: Fair Value: Hotel/Tourism
Fair Value Hotel/Tourism Dec 07 Fair Value Cap Rate Jun 08 Fair Value Cap Rate * Property ($m) (%) ($m) (%) Four Points, NSW $232.4 8.5 $256.6 7.9 Voyages Hotels & Resort $662.9 7.7 $554.6 7.3 Total $895.3 $811.2 Weighted average cap rate 7.9% 7.5% * Includes interests in associates. 72
Slide 73: Retail: Sales Summary
Retail: Sales Summary Total Portfolio (excluding development) Moving Annual Turnover ccupancy Costs (%] GPT OWNED Casuarina Square 7,075 4.6% 9,622 5.6% 9.2% 13.6% Dandenong Plaza 3,949 0.9% 6,395 -0.6% 10.4% 16.1% Erina Fair 6,020 2.3% 7,113 3.9% 94% 18.4% Floreat Forum 7,923 5.3% 6,077 2.7% 73% 14
Slide 74: Office Portfolio
Office Portfolio Weighted average lease term 5.6 years (by area) 74
Slide 75: Industrial/Business Park Portfolio
Industrial/Business Park Portfolio Weighted average lease term 7.3 years (by income) 75
Slide 76: Hotels Performance
Hotels Performance Voyages Ayers Rock and Alice Springs Resort Jun 2008 Change %* Occupancy 59% -2.0% Average Daily Rate $201 5.2% Total Revenue (‘000) $52,780 -3.2% Voyages Lodges* Occupancy 56% -5.0% Average Daily Rate $246 -2.3% Total Revenue (‘000) $36,574 -11.4% Total Voyages Hotels and Resorts
Slide 77: Fund Summary
Fund Summary Fund Fund AUM GPT Fund Profile 30 June 08 Established co-investment (terms exclude extension options) Gearing Australian Wholesale Funds GWOF Q3 2006 AUD $3.2 billion AUD $1,065m Core Australian office assets. No defined 12% term. GWSCF Q1 2007 AUD $2.2 billion AUD $809.4m Core Australi
Slide 78: Joint Venture Fund Overview
Joint Venture Fund Overview 78
Slide 79: Joint Venture Fund Income
Joint Venture Fund Income 79 Rental / Investment Income 207.2 Capital Gains / (Losses) (2) 15 Net Operating Income 208.7 Asset Management Fees '3) 12.4 Interest Expense 124.7 Overheads / Other !4) 91 146.2 JV Net Profit Before Tax 62.5 Tax Expense / (Benefit) '5) (1.7) JV Net Profit 64.2 Note: 1 Ass
Slide 80: Joint Venture Fund Debt
Joint Venture Fund Debt Portfolio Book Value {A$m) 4,892.9 1,539.1 121.2 6,553.1 Bank Debt(A$m} 38065 11848 2661. LVR (gearing) 71.6% '2) 73.7% (3) 18.3% 71.1% a ee Bank Debt Fixed or Hedged 94.0% 71.4% 91.2% WigedAierageHedgeDuraon = T Weighted Average Bank Margin 92 bps 112bps 200bps 98 bps Intere