Charter Hall Retail Reit · ASX:CQR
Charter Hall Retail Reit — FY2017 Earnings Presentation
43 slides from Charter Hall Retail Reit's earnings presentation, Aug 15, 2017
Slide 1: FY17 Full Year Results
For personal use only 15 August 2017 Charter Hall Retail REIT FY17 Full Year Results
Slide 2: Agenda
Agenda For personal use only 1 FY17 Full Year Results 2 Financial Performance 3 Operational Performance 4 Retail Environment and Outlook Scott Dundas Christine Kelly Fund Manager Head of Retail Finance and Deputy Fund Manager Charter Hall Retail REIT | Full Year Results | 30 June 2017 2
Slide 3: FY17 Full Year Results
FY17 Full Year Results For personal use only
Slide 4: Key Achievements
Key Achievements For personal use only Full Year Ended 30 June 2017 Majors MAT Growth NTA per unit up 9.0% Total NPI Growth of 4.0%1 to $4.13 of 2.5% Total divestments of Total unitholder Total acquisitions lower growth centres of $157.2 million return of 17.1%2 of $282.6 million 1. For stores in tu
Slide 5: Full Year Results Key Metrics
Full Year Results For personal use only 30 June 2017 Key metrics FY17 FY16 Movement Statutory profit $251.3m $180.7m +39.1% Operating earnings1 $123.3m $120.3m +2.5% Operating earnings1 per unit 30.40 cents 30.40 cents - Distributions per unit 28.10 cents 28.10 cents - Payout ratio2 92.4% 92.4% - To
Slide 6: REIT Strategy
REIT Strategy For personal use only Tenant Relationships • Maintain strong tenant Payout Ratio Tenancy Mix relationships • Sustainable payout ratio • Optimise through proactive leasing • National tenant focus The leading owner and manager Shopping Gearing of Australian supermarket Experience anchore
Slide 7: Consistent Delivery on Strategy
Consistent Delivery on Strategy Highlights For personal use only Strategy Achievements Active management • Stable occupancy at 98.0% • Total NPI growth of 2.5% • Specialty rent growth of 0.2% achieved from 156 renewals and 79 new leases reflecting continued focus on specialty leasing • Majors MAT gr
Slide 8: Financial Performance
Financial Performance For personal use only Prudent Capital Management
Slide 9: Operating Earnings and Distributions
Operating Earnings and Distributions For personal use only • FY17 operating earnings in line with market guidance $m FY17 FY16 Movement • Sub-regional - NPI growth of 1.6% driven by 0.4% same Net property income property NPI growth and ownership of Goulburn and • Sub-regional 65.0 64.0 1.6% Katherin
Slide 10: Balance Sheet
Balance Sheet For personal use only • Properties under management increased $214 Jun 17 Jun 16 million due to: Wholly owned properties 2,367 2,170 Acquisitions net of divestments of $18 million JV properties 397 380 Development and capital expenditure totalling $83 million Debt (875) (769) Rev
Slide 11: Debt Maturity Profile
Debt Maturity Profile For personal use only • Strong diversity of debt sources including two new banks Debt Maturity Profile • Refinanced $100 million of FY19 maturities 450 • $220 million RP1 JV bank debt extended to FY22 400 • Increased liquidity by a further $225 million 350 • Weighted average de
Slide 12: Operational Performance
Operational Performance For personal use only Active Management & Enhancing the Portfolio Quality
Slide 13: Portfolio Summary
Portfolio Summary For personal use only GLA Same Property Total NPI Summary by Asset Type # Value ($m) (‘000sqm) Occupancy1 NPI Growth Growth Sub-regional shopping centres 20 1,401.2 285.8 98.1% 0.6% 4.8% Neighbourhood shopping centres 36 1,145.4 226.0 97.0% 1.4% 1.2% Freestanding supermarkets 15 21
Slide 14: Anchor Tenants
Anchor Tenants For personal use only • Wesfarmers and Woolworths businesses represent Top ten tenants by base rent 50% of base rent Woolworths 39% from Supermarkets and Liquor 25.4% 11% from Discount Department Stores Wesfarmers 24.5% • 38% of anchor tenants are paying turnover rent (31% at June
Slide 15: Specialty Tenants
Specialty Tenants For personal use only Summary MAT Occupancy by State and Location Growth1 Cost1 MAT/sqm Occupancy Cost and Specialty Sales New South Wales & ACT 1.1% 10.8% $9,265 10.20% $9,500 10.00% Queensland 0.4% 8.0% $9,926 $9,000 9.80% Victoria (1.7%) 12.3% $7,218 $8,500 9.60% South Australia
Slide 16: Revaluations
Revaluations For personal use only • 46% of the portfolio by value was externally revalued at 30 June 2017 • Property valuations increased by $118.0 million representing 4.5% growth over the whole portfolio • Weighted average cap rates continued to firm at June 2017, with full year compression of 40
Slide 17: Capital Transactions
Capital Transactions For personal use only Capital Recycling Improving Quality • Strategy of enhancing the REIT’s portfolio quality by recycling out of lower growth properties into higher growth properties • Requirement that all assets are the dominant convenience based shopping centre within their
Slide 18: Redevelopment Pipeline - $316 million
Redevelopment Pipeline - $316 million For personal use only Redevelopments Driving Earnings Accretion and Enhance Shopper Experience FY17 FY18 FY19 FY20 FY21 Carnes Hill | $123m Erindale | $34m Bateau Bay | $17m Wanneroo | $21m Lake Macquarie | $58m Secret Harbour I $63m Completed Underway/Approved
Slide 19: Sustainability
Sustainability For personal use only Our Sustainability Achievements 3.5 Star average 62 Green Star 72 Climate NABERS Performance Risk ratings Energy Rating ratings Inaugural GRESB Rating CQR National 3.5 NABERS Energy Retail weighted average rating • Energy pricing strategy delivering WA 3.5 NABERS
Slide 20: Retail Environment and Outlook
Retail Environment and Outlook For personal use only
Slide 21: Retail Environment
Retail Environment For personal use only 10 Years of Positive Supermarket Sales Growth • ABS retail trade grew by 3.3% over the rolling year to Annual Sales Growth February 2017 which is below long term averages 6.0% • Lower than average inflation in conjunction with a historically 5.0% high rate of
Slide 22: Retail Environment: Supermarkets Continue to Improve
Retail Environment For personal use only Supermarkets Continue to Improve • CQR’s supermarket portfolio continues to improve with all stores MAT growth of +2.4% and stores in turnover MAT growth of +3.8% • Growth in turnover from both Coles and Woolworths off already established high sales densities
Slide 23: Forecast Earnings Bridge
Forecast Earnings Bridge For personal use only FY17 to FY18 Earnings Bridge (look-through) 36.0 35.0 (0.5) 34.0 (2.2) 3.7 33.0 (0.2) 32.0 (1.9) 31.0 1.3 (0.4) 30.0 30.6 29.0 30.4 to 28.0 30.2 27.0 FY17 Operating Earnings NPI Growth NPI on NPI on Finance Costs Other Expenses NPI on FY18 Operating Ear
Slide 24: FY18 Outlook
FY18 Outlook For personal use only • Consistent with strategy, sale proceeds from divestments will be allocated to optimise returns via acquisitions, development, buy back or return of capital. Repositioning of the portfolio will be completed in FY18 • Barring unforeseen events and the timing of the
Slide 25: Questions
For personal use only Questions
Slide 26: Annexures
Annexures For personal use only 1 Detailed Earnings 27 2 Funds from Operations (FFO) 28 3 NTA & Cash flow Reconciliation 29 4 Debt & Interest Rate Management 30 5 Redevelopments 31 6 Lease Expiry Profiles 32 7 Community Achievements 33 8 Property Valuations 34 9 Typical Lease Structures 37 10 Histor
Slide 27: Detailed Earnings
Annexure 1 For personal use only Detailed Earnings Jun 2017 Jun 2017 Unrealised & Jun 2017 Jun 2016 (All Values in $m) Statutory Profit Capital Items Operating Earnings Operating Earnings Share of profits from investment in JV’s Net property income • Sub-regional 17.0 0.2 17.2 14.4 • Neighbourhood 5
Slide 28: Funds from Operations (FFO)
Annexure 2 For personal use only Funds from Operations (FFO) FY17 ($m) FY17 (cpu) Statutory Profit 251.3 61.92 Revaluation increment on investment properties (118.3) (29.14) Unrealised valuation gains on assets held for sale at year end (0.6) (0.14) Revaluation decrement on investment properties att
Slide 29: NTA per unit reconciliation
Annexure 3 For personal use only NTA per unit reconciliation +0.28 +0.01 $4.13 +0.02 +0.03 $3.79 NTA at Operating earnings Derivative MtM Property revaluation Other NTA at 30 Jun 2016 (net of distribution) movement uplift 30 Jun 2017 Operating earnings to operating cash flows reconciliation $2.1m $1
Slide 30: Debt and Interest Rate Management
Annexure 4 For personal use only Debt and Interest Rate Management Debt maturities & covenants Post refinance initiatives Limit Drawn (All Values CQR Share) (A$m) (A$m) Rate Maturity Financial Covenants Covenant Actual LVR 55.0% 32.4% JV debt – CHRP1 110.0 93.1 Floating May-22 ICR 2.0x 3.4x LVR 60.0
Slide 31: Current and Completed Projects
Annexure 5 For personal use only Current and Completed Projects Enhancing Portfolio Quality Project Project Stabilised Completion Description Status cost ($m) Yield1 Secret Harbour 63.3 7.2% May 17 New 4,050sqm Coles supermarket, new Aldi, along with Red Dot and over 30 new specialty Square, WA 1,55
Slide 32: Lease Expiry Profile
Annexure 6 For personal use only Lease Expiry Profile 80% 70% Anchor tenant expiry 60% 58.4% WALE 10.4 years 50% 40% 30% 20% 9.8% 7.8% 7.7% 10% 7.2% 2.7% 0.9% 2.7% 2.8% 0% Portfolio WALE of 6.8 years FY18 FY19 FY20 FY21 FY22 FY23 FY24 FY25 FY26+ 30% 25% 20% Specialty tenant expiry 17.0% 16.6% 15.8%
Slide 33: Customer and Community Achievements
Annexure 7 For personal use only Community - our Customer and Community Achievements 75% Tenant Customer survey participation rate with positive satisfaction on communication and engagement Upswing, a co-working space at our Gordon Centre provides on-site childcare alongside work environments to all
Slide 34: Property Valuations as at June 2017
Annexure 8 For personal use only Property Valuations as at 30 June 2017 Book Value State Property Location Asset Type Interest % ($m) Cap Rate ACT Dickson Woolworths Dickson Freestander 100% 18.9 5.75% Erindale Shopping Centre Wanniassa Neighbourhood 100% 37.2 6.75% Manuka Terrace Manuka Neighbourho
Slide 35: Property Valuations as at June 2017
Annexure 8 For personal use only Property Valuations as at 30 June 2017 Book Value State Property Location Asset Type Interest % ($m) Cap Rate NSW Tamworth Square Tamworth Sub-regional 100% 47.8 7.00% Thornleigh Marketplace Thornleigh Neighbourhood 50% 20.1 5.75% Tumut Coles Tumut Freestander 100% 1
Slide 36: Property Valuations as at June 2017
Annexure 8 For personal use only Property Valuations as at 30 June 2017 Book Value State Property Location Asset Type Interest % ($m) Cap Rate SA Brickworks Marketplace Torrensville Sub-regional 50% 33.0 6.50% Renmark Square Renmark Sub-regional 100% 24.7 7.50% Southgate Square Morphett Vale Sub-reg
Slide 37: Typical Lease Structures
Annexure 9 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 38: CQR Australian Portfolio – Historical Performance
Annexure 10 For personal use only CQR Australian Portfolio – Historical Performance Proven and consistent performance over time Jun-12 Dec-12 Jun-13 Dec-13 Jun-14 Dec-14 Jun-15 Dec-15 Jun-16 Dec-16 Jun-17 Number of properties 74 75 74 77 77 78 73 76 74 72 71 Occupancy 98.6% 98.5% 98.2% 98.2% 98.5% 9
Slide 39: Specialty Sales Reconciliation
Annexure 11 For personal use only Specialty Sales Reconciliation CQR has historically reported its specialty sales category to include any specialty tenant up to 700sqm. To move in line with SCA Guidelines, CQR will be moving to reporting specialty sales on all specialty tenants below 400sqm. Below
Slide 40: Glossary
Annexure 12 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 41: Further Information
Further Information For personal use only Scott Dundas Christine Kelly Fund Manager Head of Retail Finance & Deputy Fund Manager 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 Philip Cheetham
Slide 42: 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 43: 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
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