Charter Hall Group · ASX:CHC
Charter Hall — H1 FY2011 Earnings Presentation
54 slides from Charter Hall's earnings presentation, Feb 24, 2011
Slide 1: Charter Hall Group 2011 Half Year Results
Charter Hall Group For personal use only 2011 Half Year Results 24 February 2011
Slide 2: Contents
Contents For personal use only 1 Results summary David Harrison Joint Managing Director 2 Property investment 3 Property funds management David Southon 4 Development investment Joint Managing Director 5 Financials and capital management 6 Outlook and guidance Jelte Bakker Chief Financial Officer 7 A
Slide 3: Results summary
For personal use only Charter Hall Group 01 Results summary
Slide 4: Half year highlights
Half year highlights For personal use only Earnings in line with FY11 guidance Operating earnings of $30.8m, 118% up on prior corresponding period (pcp) Operating EPS of 10.54cps, 30% up on pcp1 DPS of 8.00cps, 25% up on pcp1 Property investment – EBITDA of $18.3m, 70% up over pcp Fund earni
Slide 5: Key metrics
Key metrics For personal use only 1HFY11 1HFY104 Change Operating earnings1 $30.8m $14.2m 118% Operating EPS 10.54cps 8.10cps 30% DPS 8.00cps 6.40cps 25% Statutory NPAT $46.8m ($57.8m) n/a At 31 December 2010 At 30 June 20104 Change Funds under management $10.4bn $10.2bn 2% Total Group assets $933m
Slide 6: Group business model
Group business model For personal use only Charter Hall is a diversified property group with a vertically integrated business model Charter Hall Group (ASX:CHC) Stapled Security Charter Hall Property Trust (CHPT) Charter Hall Limited (CHL) Property Investment Property Development Investment Funds
Slide 7: Group earnings breakdown
Group earnings breakdown For personal use only 1 Operating EBITDA of $30.9m , up from $14.5m on pcp $18.3m Property Investment EBITDA $18.3m (60%) 1HFY10 1HFY11 $10.8m2 $10.3m Funds Management $2.8m $2.3m EBITDA Development Investment $10.3m (33%) $1.0m EBITDA $2.3m (7%) Property Investment Funds
Slide 8: Property investment
For personal use only Charter Hall Group 02 Property investment
Slide 9: Property investment
Property investment For personal use only CHC invests $581m of equity in direct property ($19m) and managed funds ($562m) – Half year income of $18.3m reflecting average yield of 6.3% Investments (by value) Property income1 Sector diversity (by value) Direct Property Direct Property Retail Investo
Slide 10: Portfolio metrics
Portfolio metrics For personal use only Weighted average market capitalisation rate of 8.0% Weighted average rent reviews of 3.7% Weighted average lease expiry of 6.4 years Look-through lease expiry profile1 Top 10 tenants (31 December 2010) Tenant % Portfolio leased (by income) Wesfarmers 8.2
Slide 11: Property investment portfolio
Property investment portfolio For personal use only Direct property and co-investments (31 December 2010) Ownership CHPT 1HFY11 Market cap Discount Minimum investment1 CHPT rate rate rental income reviews (%) ($m) ($m) (%) (%) (%) Listed Funds Charter Hall Office REIT (CQO)1 8.8% 170.7 5.1 7.8% 9.0%
Slide 12: Property funds management
For personal use only Charter Hall Group 03 Property funds management
Slide 13: Property funds management
Property funds management For personal use only Funds under management increased from $10.2bn to $10.4bn 30 June 2010 31 December 2010 Wholesale Unlisted Wholesale Unlisted Funds Funds $3.2bn (30%) $2.5bn (25%) Retail Investor Retail Investor Funds Funds $1.5bn (15%) $1.5bn (14%) Listed Funds $5.8
Slide 14: Funds under management reconciliation
Funds under management reconciliation For personal use only Acquisitions and revaluations more than offset negative FX movements and disposals ($169m) +$605m ($518m) +$302m $10.4bn $10.2bn 2 30-June-2010 Revaluations Acquisitions Disposals FX Movement 31-December-2010 Notes: 1. FUM includes assets
Slide 15: Funds management income
Funds management income For personal use only 79% of management revenue annuity style Average of 72bps of FUM (42bps investment management and 30bps from other services) – Below average with potential to improve as market recovers 28% EBITDA margin with potential for future margin expansion $2
Slide 16: Investment management revenue
Investment management revenue For personal use only Strong increase in investment management revenue (up 208%) through diversification of equity sources 1HFY10 - $7.1m 1HFY11 - $21.9m Wholesale Unlisted Funds $5.6m (26%) Retail Investor Retail Investor Funds Funds $1.3m (18%) $3.9m (18%) Wholesale
Slide 17: Property management and leasing
Property management and leasing For personal use only Charter Hall provides leasing, property management and asset management services across the platform 1 2 Property management Leasing 284,108sqm Office HY Gross Income - $71m 89,876sqm 508,697sqm Retail HY Gross Income - $73m 13,712sqm 314,169sq
Slide 18: Development management services
Development management services For personal use only Contribution of $2.9m over half year period – Generated from projects completed in the first half ($43m) and currently active projects Active development book of $1.3bn across range of managed funds – Current book value of $0.5bn – Total deve
Slide 19: Trends and initiatives
Trends and initiatives For personal use only Trends Initiatives Investor preference for geographic and Re-weight portfolios to Australia sector specific funds Simplifying ownership, debt funding and derivative Listed Funds Global investors more relevant structures A-REITs closing NTA/price
Slide 20: Development investment
For personal use only Charter Hall Group 04 Development investment
Slide 21: Investments in CHOF4 and CHOF5
Investments in CHOF4 and CHOF5 For personal use only $31.1m of development co-investments (book value), diversified across seven projects Projected equity multiple of 1.6x from existing development investments – Targeting an equity multiple of >1.7x for future equity commitments – Equity IRR tar
Slide 22: Case study - Little Bay
Case study - Little Bay For personal use only 13.6 hectare residential development site – Achieved master plan approval for 66,500sqm of residential area – Comprises 28 housing lots and 10 superlots Commercial & Industrial Property (CIP) has been appointed as the preferred contractor for Stage 1
Slide 23: Investment in CIP
Investment in CIP For personal use only Industrial pre-lease developer in all states of Australia CIP Income statement ($m) 1HFY11 10 year history with 25 years average experience of CIP directors Total revenue 59.9 Important strategic off market source of investments for CHC funds Project exp
Slide 24: Financials and capital management
For personal use only Charter Hall Group 05 Financials and capital management
Slide 25: Income statement
Income statement For personal use only 1HFY11 1HFY11 1HFY10 (DRF consolidated) (DRF net contribution basis) (DRF net contribution basis) Direct net property income 7.9 0.1 1.2 Indirect property income 14.9 18.2 9.6 1 Property investment income 22.7 18.3 10.8 2 Investment management fees 21.9 21.9 7.
Slide 26: Operating earnings reconciliation
Operating earnings reconciliation For personal use only ($2.5m) +$4.8m +$2.5m +$11.1m $46.8m $30.8m 1 2 3 Operating earnings Postive fair value Net gains on sale Positive non-operating Other Statutory profit adjustments investment earnings Notes: 1. Fair value adjustments includes adjustments to der
Slide 27: Cashflow reconciliation
Cashflow reconciliation For personal use only Cashflow from operations weighted to 2HFY11 10.54cps +$2.9m ($4.9m) ($3.2m) ($2.6m) 8.00cps $30.8m $23.0m $23.5m 1 Operating earnings Reduction in trade Reduction in trade Earnings versus Other Operating cashflow Distribution receivables payables distr
Slide 28: Balance sheet
Balance sheet For personal use only 31-Dec-10 31-Dec-10 30-Jun-10 $m (DRF consolidated) (DRF on net contribution basis)1 (DRF on net contribution basis) Cash 14.7 13.3 26.8 Property investments 680.8 580.6 565.5 Development investments 58.0 58.0 52.4 Other tangible assets 60.4 57.7 57.8 Intangibles
Slide 29: Capital management profile
Capital management profile For personal use only $4.3bn of drawn debt across platform with weighted average maturity of 2.6 years – $1.9bn of debt refinanced over the half year period CHC to maintain balance sheet gearing range of 0-10% with look-through gearing driven by funds’ gearing policy G
Slide 30: Outlook and guidance
For personal use only Charter Hall Group 06 Outlook and guidance
Slide 31: Group strategy
Group strategy For personal use only Enhance return on equity through recycling co-investment capital – Over time reduce exposure to unlisted wholesale and retail investor funds – Sell 100% owned Mentone Showrooms Property Investment – Increase core investments in CQO and CQR to 10% – Invest recyc
Slide 32: Outlook and guidance
Outlook and guidance For personal use only Outlook Property markets globally are continuing to recover with cap rate compression across most markets Expect sustainable NOI growth through reduced vacancies, rental growth and reduction in funding costs in prime markets across sectors in Australia
Slide 33: Annexures
For personal use only Charter Hall Group 07 Annexures
Slide 34: Annexures
Annexures For personal use only A Property portfolio movement B - C Portfolio metrics D Funds management platform E – F Fund strategies G Earnings reconciliation H DRF reconciliation I Capital management J Debt expiry profile K - O Unlisted property portfolios 34
Slide 35: Annexure A – Property portfolio movement
Annexure A – Property portfolio movement For personal use only 31 December 10 Movement 30 June 2010 CHPT stake CHPT Other Acquisitions/ Change in CHPT stake CHPT (%) investment movements (sales) accounting (%) investment ($m) ($m)1 ($m) treatment ($m) ($m) Listed Funds CQO 9% 170.7 (1.8) 17.3 - 8% 1
Slide 36: Annexure B – Portfolio metrics
Annexure B – Portfolio metrics For personal use only Weighted average minimum rent reviews CQO 3.6% 1 CQR 4.3% CPOF 3.9% CPIF 3.1% DRF 3.7% CHUF 3.6% DPF 3.6% CHDPF 3.8% CHPT 3.7% Notes: 1. Based on Australian speciality leases only. 36
Slide 37: Annexure C - Portfolio metrics
Annexure C - Portfolio metrics For personal use only Quality of earnings improving with proactive management of well diversified portfolio Capitalisation rates WALE (by income in years)1 CQO 7.8% CQO 4.9 CQR 8.1% CQR 5.7 CPOF 7.7% CPOF 6.1 CPIF 8.3% CPIF 11.9 DRF 8.3% DRF 7.2 CHUF 8.1% CHUF 8.6 DP
Slide 38: Annexure D – Funds management platform
Annexure D – Funds management platform For personal use only Funds under management (FUM) of $10.4bn Listed Funds Wholesale Investor Funds Retail Investor Funds $5.8bn $3.2bn $1.5bn ($259m co-invested) ($194m co-invested) ($140m co-invested) Opportunistic Core Plus CQO2 CQR3 $0.8bn $2.4bn $3.75bn
Slide 39: Annexure E - Fund strategies
Annexure E - Fund strategies For personal use only Fund Defined strategies Progress Improve portfolio metrics Increased WALE by 8.1% to 5.1 years Exit from Europe subject to finalising of Atrium, Berlin Exit non-core offshore markets Sale of all Japanese assets CQO Co-investment transact
Slide 40: Annexure F - Fund strategies
Annexure F - Fund strategies For personal use only Fund Defined Strategies Progress Employ equity raised to acquire new assets and fund CPOF and CPIF acquired $304m in aggregate development pipeline Wholesale Investor Equity raising in CHOF6 and pursue partnership model to Funds enhance develo
Slide 41: Annexure G – Earnings reconciliation
Annexure G – Earnings reconciliation For personal use only $m 1HFY11 1HFY10 Statutory NPAT excludes non-controlling interest 46.8 (57.8) Fair value adjustments (11.1) 45.6 DRF consolidation impairment1 - 15.3 Gain/(loss) on sale or purchase (2.5) 10.5 Other (2.3) 0.6 Operating earnings 30.8 14.2 Not
Slide 42: Annexure H – DRF reconciliation
Annexure H – DRF reconciliation For personal use only CHC P&L – DRF related line items DRF on a net contribution basis DRF on a consolidated basis Direct property income - 7.8 Indirect property income 3.4 - Operating expenses - (0.5) Net interest expense - (2.4) Non-controlling interest - (1.4) Oper
Slide 43: Annexure I - Capital management
Annexure I - Capital management For personal use only 1 ($m) CHC CQO CQR CPOF CPIF DRF CHUF DPF CHDPF CHOF4 CHOF5 Asset values2 n/a 3,177 1,884 1,332 460 165 154 150 494 109 305 Net debt drawn2 nil 1,058 728 550 146 67 nil 73 202 66 115 Duration3 (years) n/a 2.7 3.5 2.9 2.3 2.9 n/a 1.1 2.8 n/a n/a G
Slide 44: Annexure J - Debt expiry profile
Annexure J - Debt expiry profile For personal use only Refinanced $1.9bn over half year period $1,200m $1,145m CQO $983m CQR Wholesale Unlisted Funds Retail Investor Funds $800m $630m $621m $512m $400m $256m $0m FY11 FY12 FY13 FY14 FY15 FY16+ 44
Slide 45: Annexure K – Unlisted portfolio detail
Annexure K – Unlisted portfolio detail For personal use only CORE PLUS OFFICE FUND (CPOF) BOOK VALUE INDEPENDENT MKT CAP MKT CAP MCR VALUER’S WALE MIN. RENT VALUATION RATE RATE CHANGE DISCOUNT REVIEW DATE 31 DEC 10 30 JUN 10 RATE/ IRR ($m) (%) (%) (%) (%) (YEARS) (%) 331 & 333 George St, Sydney, NSW
Slide 46: Annexure L – Unlisted portfolio detail
Annexure L – Unlisted portfolio detail For personal use only CORE PLUS INDUSTRIAL FUND (CPIF) BOOK INDEPENDENT MKT CAP MKT CAP MCR VALUER’S WALE MIN. RENT VALUE VALUATION RATE RATE CHANGE DISCOUNT REVIEW DATE 31 DEC 10 30 JUN 10 RATE/ IRR ($m) (%) (%) (%) (%) (YEARS) (%) 372 Eastern Valley Way, Chat
Slide 47: Annexure M – Unlisted portfolio detail
Annexure M – Unlisted portfolio detail For personal use only DIRECT RETAIL FUND (DRF) BOOK INDEPENDENT MKT CAP MKT CAP MCR VALUER’S WALE MIN. RENT VALUE VALUATION RATE RATE CHANGE DISCOUNT REVIEW DATE 31 DEC 10 30 JUN 10 RATE/ IRR ($m) (%) (%) (%) (%) (YEARS) (%) Menai Central, Sydney, NSW 36.9 30-J
Slide 48: Annexure N – Unlisted portfolio detail
Annexure N – Unlisted portfolio detail For personal use only DIVERSIFIED PROPERTY FUND (DPF) BOOK INDEPENDENT MKT CAP MKT CAP MCR VALUER’S WALE MIN. RENT VALUE VALUATION RATE RATE CHANGE DISCOUNT REVIEW DATE 31 DEC 10 30 JUN 10 RATE/ IRR (%) ($m) (%) (%) (%) (%) (YEARS) 400 Kent St, Sydney, NSW (75%
Slide 49: Annexure O – Unlisted portfolio detail
Annexure O – Unlisted portfolio detail For personal use only DIRECT PROPERTY FUND (CHDPF) BOOK INDEPENDENT MKT CAP MKT CAP MCR CHANGE VALUER’S WALE VALUE VALUATION RATE RATE DISCOUNT DATE 31 DEC 10 30 JUN 10 (%) RATE/ IRR ($m) (%) (%) (%) (YEARS) 2 Wentworth St, Parramatta, NSW 34.3 1-Dec-10 9.30% 8
Slide 50: Disclaimer
Disclaimer For personal use only This presentation has been prepared by Charter Hall Group (Charter Hall Limited (ABN 57 113 531 150) and Charter Hall Funds Management Limited (ABN 31 082 991 786) (AFSL 262861) as the responsible entity for Charter Hall Property Trust (ARSN 113 339 147). It is a pre
Slide 51: Disclaimer
Disclaimer For personal use only Charter Hall fund’s currently accepting investments The responsible entity of Charter Hall Direct Industrial Fund (“DIF”), Charter Hall Direct property Fund (“CHDPF”) and Charter Hall Direct Retail Fund (“DRF”) is Charter Hall Direct Property Management Limited (“CHD
Slide 52: Fund Key
Fund Key For personal use only Listed Funds CQO Charter Hall Office REIT CQR Charter Hall Retail REIT Wholesale Unlisted Funds CPOF Core Plus Office Fund CPIF Core Plus Industrial Fund Wholesale Opportunistic Funds CHOF4 Charter Hall Opportunity Fund 4 CHOF5 Charter Hall Opportunity Fund 5 Retail In
Slide 53: Further information
For personal use only Further information David Southon David Harrison Joint Managing Director Joint Managing Director +61 2 8908 4025 +61 2 8908 4033 david.southon@charterhall.com.au david.harrison@charterhall.com.au Jelte Bakker Kylie Ramsden Chief Financial Officer Head of Listed Investor Relatio
Slide 54: charterhall.com.au
For personal use only charterhall.com.au