Cromwell Property Group · ASX:CMW
Cromwell Property — Merrill Lynch A-REIT Conference 2012
33 slides from Cromwell Property's conference presentation, Oct 30, 2012
Slide 1: ASX lodgement letter for Merrill Lynch A-REIT Conference
30 October 2012 For personal use only Company Announcements Platform ASX Limited Level 4, Exchange Centre 20 Bridge Street SYDNEY NSW 2000 Dear Sir/Madam Merrill Lynch A-REIT Conference – Sydney 30-31 October 2012 Attached, by way of lodgement, is a copy of the presentation “Cromwell – Prospering in
Slide 2: Cromwell – Prospering in a low growth world
For personal use only Cromwell – Prospering in a low growth world October 2012 Cromwell Property Group 1
Slide 3: Important Information & Disclaimer
Important Information & Disclaimer For personal use only This presentation including its appendices (“Presentation”) is Cromwell Property Group’s other periodic and continuous based on sources believed by Cromwell Property Group to be dated 25 October 2012 and has been prepared by the disclosure ann
Slide 4: Cromwell Overview
For personal use only Section 1 Cromwell Overview Cromwell Property Group 3
Slide 5: Cromwell Group
Cromwell Group For personal use only Cromwell Property Group Market cap: $1.0 bn1 Security price: $0.8251 Gearing2: 53.0% Investment portfolio Portfolio value: $1.9 billion3 # Assets: 27 Weighted average cap rate: 8.4% WALE: 6.0 years Funds management platform AuM: $518 million4 Number of Funds: 35
Slide 6: Strategy and investment philosophy
Strategy and investment philosophy For personal use only To provide defensive, superior risk adjusted returns from a 100% Australian portfolio Invest in quality office assets in CBD, CBD fringe and established suburban office markets Asset value maximisation and securityholder returns are key focus
Slide 7: Historical performance
Historical performance For personal use only Cromwell has significantly outperformed the S&P/ASX 300 A-REIT Accumulation Index since stapling Outperformance of 2.2%, 4.2% and 10.5% per annum over 1, 3 and 5 years respectively Direct property performance in top quartile of managers rated by IPD since
Slide 8: Peer comparison
Peer comparison For personal use only Cromwell offers superior yields and growth compared to its peer group 120bps spread to FY13 EPS yield / 190bps spread to FY13 DPS yield EPS growth of 6% in FY12 FY13 EPS yield FY13 DPS yield 12% 12% Average 8.0% 9.2% 9.2% 10% 8.7% 10% Average 6.8% 8.7% 8.3% 8.5%
Slide 9: Future growth drivers
Future growth drivers For personal use only Cromwell is set to benefit significantly from a number of organic growth factors Growth in earnings from average fixed rental growth of 4.1% for FY13 Growth in earnings from increased activity in funds management business Property yield premium to bond / c
Slide 10: Property yields and bonds
Property yields and bonds For personal use only Yield is in demand – and property yield premiums to bond rates are at historic highs Australian 10 year bonds are currently at historic lows despite the relatively strong underlying economy Australian interest rates are also at all time lows Compressio
Slide 11: Investment Portfolio
For personal use only Section 2 Investment Portfolio Cromwell Property Group 10
Slide 12: Investment portfolio strategy
Investment portfolio strategy For personal use only Investment portfolio delivered over 95% of FY12 earnings Strategy Focus on office assets in CBD, CBD fringe and established suburban office markets Maintain defensive portfolio characteristics of strong covenant, long WALE and fixed growth Active r
Slide 13: Property portfolio
Property portfolio For personal use only Approximately 71% of gross portfolio income growing by an average minimum of 4.1% over FY13 Geographic Diversification1 Sector Diversification1 Tenant Classification1 1% 5% 5% 3% QLD Government Authority 25% NSW 17% 26% Retail ACT 41% Listed VIC Commercial Co
Slide 14: Property portfolio – top assets
Property portfolio – top 10 assets For personal use only Top 10 assets account for 73% of portfolio with occupancy of 99.3% and a WALE of 6.7 years CMW Top 10 Property Assets Asset City Class Book Value Cap Rate Occupancy WALE1 Major Tenants Review Qantas Global Headquarters Sydney Office $198.8 M 7
Slide 15: Secure income stream - minimal short term lease expiries
Secure income stream - minimal short term lease expiries For personal use only Average of only 6.3% p.a. lease expiry FY13 – FY15 Lease Expiry Profile % Gross Income 1.4% Marketing of 380 LaTrobe Street space generating positive Latrobe St VIC interest in a challenging market 1.0% 3.3% 1.0% Mary St
Slide 16: Case studies
Case studies For personal use only Cromwell has a proven track record of delivering value through active asset management Qantas HQ 321 Exhibition Street Bundall Corporate Centre Acquisition date August 2010 July 2010 December 2011 Acquisition value / yield $144m / 8.30% $90m / 8.00% $63m / 11.50% C
Slide 17: Funds Management
For personal use only Section 3 Funds Management Cromwell Property Group 16
Slide 18: Funds management strategy
Funds management strategy For personal use only Strategy to leverage property expertise and distribution network to enhance securityholder returns Currently $518m of assets under management across 3 funds Cromwell is growing its funds platform across three product groups Asset specific real estate s
Slide 19: Returns from syndicate platform
Returns from syndicate platform For personal use only Leveraging Cromwell’s retail syndication capabilities allows Cromwell to generate significant returns Attractive returns generated through underwriting syndicates 20-35% IRR Complementary to Cromwell’s property expertise and broader operations Mo
Slide 20: Funds Management earnings can grow significantly
Funds Management earnings can grow significantly For personal use only Significant cash on the sidelines 440,000 self managed super funds (Jun-11) holding $117bn in cash (Mar-12) Majority of new inflows to super and retail investment platforms is being retained in cash Bank funding from customer dep
Slide 21: Capital Management
For personal use only Section 4 Capital Management Cromwell Property Group 20
Slide 22: Capital management strategy
Capital management strategy For personal use only Maintain disciplined and proactive approach to capital management, both equity and debt capital Secured debt platform across a syndicated facility and 6 bilateral facilities Structure provides most cost effective form of funding and is well suited to
Slide 23: Debt facilities recently extended
Debt facilities recently extended For personal use only Diversified across a syndicated facility and six bilateral facilities Lenders comprise major Australian banks and one offshore bank No material maturities until FY14 $14m of short-term facilities repaid since balance date Weighted average debt
Slide 24: Interest rate hedging can be extended at lower rates
Interest rate hedging can be extended at lower rates For personal use only Weighted average swap term of 2.6 years FY13 91% hedged at 4.6% plus margins / FY14 71% at 4.9% plus margins As hedges expire, Cromwell’s interest cost will gradually reduce providing earnings upside If current interest rates
Slide 25: Summary
For personal use only Section 5 Summary Cromwell Property Group 24
Slide 26: Summary
Summary For personal use only Cromwell is well placed to continue to provide defensive, superior risk adjusted returns and above average growth Differentiated strategy providing potential for continued outperformance Outperformance versus peers over historical 1, 3 and 5 year periods Quality, defens
Slide 27: Appendix: Additional Information
For personal use only Appendix Additional Information Cromwell Property Group 26
Slide 28: Cromwell property portfolio
Cromwell property portfolio For personal use only QLD - 29% QLD Collins St, VIC Exhibition St, VIC 25% SA - 5% SA NSW -NSW 17% 23.2% 4.9% ACT 20% ACT- 19.9% VIC VIC - 28% 26.2% TAS Qantas HQ, NSW HQ North, QLD 0.8% Chatswood Towers, NSW Synergy, QLD Cromwell Property Group 27
Slide 29: Portfolio repositioning
Portfolio repositioning For personal use only Will continue to seek investment property opportunities consistent with strategy Seek assets which offer the potential for superior returns Transactions since June 2008 through active asset management Purchased Assets Date Price Cap Rate WALE Allocation
Slide 30: Case study: Cromwell Ipswich City Heart Trust
Case study: Cromwell Ipswich City Heart Trust For personal use only Cromwell Ipswich Trust closed over subscribed Artist’s impression Over 800 retail investors with an average investment size of ~$50,000 >50% of funds raised from direct retail (unadvised) for the first time ever Significant increase
Slide 31: Typical syndication timetable
Typical syndication timetable For personal use only Equity selldown typically targeted within 7 months of settlement Capital can be quickly recycled into other investment opportunities Month Timetable 1 2 3 4 5 6 7 8 Contract unconditional Drafting syndicate documentation Settlement of acquisition C
Slide 32: Growing funds management distribution base
Growing funds management distribution base For personal use only Cromwell securityholders Over 12,000 retail investors, many of whom invested in our products originally and continue to do so Retail investor database Over 20,000 prequalified potential investors Over 4,000 are current investors Initia
Slide 33: For personal use only
For personal use only well versed well timed well considered Cromwell Property Group 32
Cromwell Property Group — Merrill Lynch A-REIT Conference 2012 on 6ix