Charter Hall Group · ASX:CHC
Charter Hall — FY2008 Earnings Presentation
62 slides from Charter Hall's earnings presentation, Aug 25, 2008
Slide 1: Annual Results FY08 Charter Hall Group
For personal use only Annual Results FY08 Charter Hall Group 25 August 2008
Slide 2: 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 pr
Slide 3: Agenda
Agenda For personal use only • FY08 Highlights • Earnings Overview • Charter Hall Property Trust Review • Managed Funds (Core and Core Plus) • Charter Hall Limited Review • Financial Summary • Outlook Annual Results FY08 3
Slide 4: FY08 Highlights
FY08 Highlights For personal use only • Underlying EPS of 12.74 cps - growth of 34% • 39% increase in funds under management (FUM) to $3.9 billion • Managed funds have outperformed target IRR • Crystallised healthy development margins in managed funds – delivering circa $68 million of development pr
Slide 5: FY08 Highlights
FY08 Highlights For personal use only FY08 FY07 Change NPAT (AIFRS) $67.5m $43.2m 56% Basic EPS (AIFRS) 16.31cps 12.00cps 36% Underlying NPAT1 $52.7m $34.2m 54% Underlying EPS 12.74cps 9.51cps 34% DPS 12.60cps 10.44cps 21% At 30 June 08 At 30 June 07 Change FUM $3.9bn $2.8bn 39% Total Group Assets $
Slide 6: Earnings Overview
Earnings Overview For personal use only Coles Distribution Centre, Perth Airport WA Annual Results FY08 6
Slide 7: Group Revenue
Group Revenue For personal use only FY08 revenue growth of 72%1 $88.5m CHPT Revenue CHL Revenue 72% $41.6m $51.5m 68% $30.6m $26.4m $17.6m $46.9m $25.1m $13.1m FY06 FY07 FY08 NOTES: 1. Revenue in this analysis excludes interest income, is net of property expenses and includes the $7.2 million NPAT c
Slide 8: Group Revenue: Revenue composition
Group Revenue For personal use only Revenue composition $41.6m FY07 FY08 $26.4m $20.4m $12.0m $12.0m $12.3m $7.5m $6.7m $0.8m $0.3m 1 CHPT Revenue Services fees Performance fees Transaction fees Development NOTE: 1. Services fees include fund management, development management and property managemen
Slide 9: Group Revenue breakdown
Group Revenue For personal use only FY07 revenue breakdown FY08 revenue breakdown Transaction Development Development fees 1% 9% 2% Transaction fees Performance 8% fees 23% Performance fees CHPT Revenue 14% CHPT 51% Revenue 46% Services fees Services fees 23% 23% Annual Results FY08 9
Slide 10: Group EBITDA
Group EBITDA For personal use only FY08 EBITDA growth of 76% $66.8m CHL EBITDA CHPT EBITDA 76% $40.4m $38.0m $21.8m $25.9m $17.3m $26.5m $12.2m $4.5m FY06 FY07 FY08 • Strong EBITDA growth in Charter Hall Limited (CHL) and Charter Hall Property Trust (CHPT) Annual Results FY08 10
Slide 11: Group EBITDA: Corporate vs trust split
Group EBITDA For personal use only Corporate Vs. trust EBITDA split FY07 EBITDA $38.0 million1 FY08 EBITDA $66.8 million1 • Annuity style EBITDA contributes 78% Corporate EBITDA Corporate EBITDA (annuity) 15% (annuity) 17% Corporate EBITDA (other) 17% Trust EBITDA Trust EBITDA (annuity) 61% (annuity
Slide 12: Group EPS and DPS
Group EPS and DPS For personal use only Group Underlying EPS and DPS • FY08 Underlying EPS growth of 34% 12.74 12.60 EPS DPS 34% 10.44 9.51 47% 7.10 6.47 FY06 FY07 FY08 Annual Results FY08 12
Slide 13: Charter Hall Property Trust
Charter Hall Property Trust For personal use only ONE30 Stirling Street, Perth WA Annual Results FY08 13
Slide 14: CHPT investments
Charter Hall Property Trust For personal use only CHPT investments1 • 90% of the portfolio revalued independently • 0.28% expansion in weighted average cap rate offset by strong rental increases and development margin creation – 0.34% weighted average expansion in valuation discount rate/property IR
Slide 15: CHPT investment portfolio metrics
Charter Hall Property Trust For personal use only CHPT investment portfolio metrics Weighted average lease expiry Sector diversification (By income) (By income) Direct Properties 2.4 DPF 7.6 Industrial 19% Retail 35% CPIF 12.6 CPOF 8.0 CPRF 9.0 CHUF 9.5 Office Weighted Average 8.7 46% Annual Results
Slide 16: CHPT investment portfolio metrics: diversification
Charter Hall Property Trust For personal use only CHPT investment portfolio metrics Asset diversification Geographical diversification (By value) (By value) Direct Properties NZ CHUF DPF 3% 3% 10% 5% WA CPIF 17% Qld 12% 25% SA & ACT 3% CPRF 31% Vic CPOF 26% NSW 39% 26% Annual Results FY08 16
Slide 17: CHPT's top 20 tenants
For personal use only Wesfarmers 12.8% Telstra 6.4% Harvey Norman 5.2% St George 4.7% Coles CHPT’s top 20 tenants 4.6% American Express 3.3% Aust Government 2.4% Woolworths 2.1% Mercer 2.0% K&S Freight 1.8% Monash University 1.6% The Good Guys 1.5% Volvo 1.3% Central Queensland Charter Hall Property
Slide 18: Managed Funds (Core and Core Plus)
Managed Funds (Core and Core Plus) For personal use only 34 Hunter Street, Sydney NSW Annual Results FY08 18
Slide 19: Core Plus Retail Fund
Core Plus Retail Fund For personal use only Update on CPRF CPRF structure prior to first close • First close on 30 July 2008 Debt CHC $261m • $250 million equity drawn: 100% ($435m) – External wholesale investors $95 million1 CPRF – CHPT holds remaining $155 million – Equity raising to continue with
Slide 20: Core Plus Retail Fund
Core Plus Retail Fund For personal use only Launched July 2008 Geographical diversification Key Metrics At First Close FUM (Completed Basis) $495m Vic 39% Qld 31% Balance sheet assets1 $427m NSW 16% NZ 8% Number of assets 17 ACT 5% WA 1% CHPT stake 62% Total debt1 $182m Fund gearing2 43% Debt facili
Slide 21: Core Plus Office Fund
Core Plus Office Fund For personal use only Launched June 2006 Geographical diversification Key Metrics 31 July 2008 FUM (Completed Basis) $1,600m NSW 33% Qld 24% Balance sheet assets1 $1,428m Vic 23% WA 18% Number of assets 17 SA 2% CHPT stake 23% Total debt1 $658m Fund gearing2 46% Average debt fa
Slide 22: Core Plus Industrial Fund
Core Plus Industrial Fund For personal use only Launched April 2007 Geographical diversification Key Metrics 31 July 2008 FUM (Completed Basis) $339m WA 48% Balance sheet assets1 $398m Qld 29% Vic 15% Number of assets 11 NSW 9% CHPT stake 25% Total debt1 $143m Fund gearing2 36% Average debt faciliti
Slide 23: Diversified Property Fund
Diversified Property Fund For personal use only Launched October 2005 Geographical diversification Key Metrics 31 July 2008 FUM (Completed Basis) $249m WA 42% Balance sheet assets1 $239m NSW 32% Vic 22% Number of assets 12 Qld 4% CHPT stake2 18% Total debt1 $114m Fund gearing3 48% Average debt facil
Slide 24: Charter Hall Limited
Charter Hall Limited For personal use only Atrium, 60 Union Street, Pyrmont NSW Annual Results FY08 24
Slide 25: Funds Management Model
Funds Management Model For personal use only Charter Hall CIP1 CHOF42 CHOF53 CPOF CPIF CPRF DPF CHUF CHIF4 Direct Investment returns Direct property income 3 Co-investment income 3 3 3 3 3 Development investment income 3 3 3 Fees – enhance ROE Base fund management fees 3 3 3 3 3 3 3 3 Property manag
Slide 26: Return on Equity (ROE)
Return on Equity (ROE) For personal use only Fund management model enhances ROE1 Indicative FY08 ROE CPOF CPIF • Return on equity enhanced by fund Average FY08 CHC co-investment 106.3 45.5 management fees Co-investment income 5.2 3.2 Asset management fee 5.0 1.6 • Opportunity to improve on ROE Devel
Slide 27: Return On Equity (ROE)
Return On Equity (ROE) For personal use only Indicative ROE for DPF, CHOF4 and CHOF51 FY08 indicative ROE DPF FY08 Indicative ROE CHOF Average FY08 CHC co-investment 10.4 Average FY08 CHC co-investment 2.9 Co-investment income 0.8 Co-investment income 0.3 Asset management fee 1.4 Asset management fe
Slide 28: Funds Under Management (FUM)
Funds Under Management (FUM) For personal use only Funds under management of $3.89 billion1 Charter Hall FUM $3,895m Wholesale Investor Funds Retail Investor Funds Property $3,281m $596m $17m Opportunistic Core Plus $847m $2,434m CHOF4 CHOF5 CPOF CPIF CPRF DPF CHUF CHIFs Chullora $490m $357m $1,600m
Slide 29: Group FUM
Group FUM For personal use only 39% growth in total FUM $3.90bn CHPT Wholesale Retail 0.60 $2.81bn 0.25 1.97 3.28 $1.35bn $1.06bn 0.19 0.14 0.83 0.65 0.60 0.28 0.33 0.02 2005 2006 2007 2008 Funds under management 30 June 07 30 June 08 Change ($m) ($m) (%) CHPT 595 17 (97) Wholesale 1,971 3,281 66 Re
Slide 30: Wholesale FUM
Wholesale FUM For personal use only $3.28bn 66% growth in wholesale FUM 0.49 CHOF CPOF CPIF CPRF 0.34 $1.97bn 0.28 1.60 1.00 $0.83bn $0.65bn 0.23 0.85 0.65 0.61 0.69 2005 2006 2007 2008 30 June 07 30 June 08 Change Wholesale Funds ($m) ($m) (%) CHOF4 and CHOF5 692 847 22 CPOF 999 1,600 60 CPIF 280 3
Slide 31: Retail FUM
Retail FUM For personal use only 143% growth in retail FUM $0.60bn 0.22 CHIFs DPF CHUF $0.25bn 0.25 $0.19bn 0.12 $0.14bn 0.05 0.14 0.14 0.12 0.12 2005 2006 2007 2008 Retail Funds 30 June 07 30 June 08 Change ($m) ($m) (%) CHIF2-6 122 124 2 DPF 124 249 102 CHUF - 223 n/a Total 246 596 143% Annual Res
Slide 32: Capacity to grow FUM
Capacity to grow FUM For personal use only Expertise and acquisition capacity focused on enhanced and opportunistic opportunities Pipeline included in current FUM of $3.89bn Additional pipeline and acquisition capacity of $1.65bn $0.96bn $0.69bn $3.89bn $1.30bn Current FUM Development pipeline Acqui
Slide 33: Managed funds performance
Managed funds performance For personal use only Gross equity IRRs (since inception) – Outperformed target returns Hurdle Fund Target return return1 DPF 25.5% DPF 10% 10% CPOF 12% 11% CPIF 11% 10% CPOF 19.2% CHOF 4 and 5 20% 13% CPIF 16.1% CHOF 4 and 5 42.0% Hurdle Return NOTE: 1. CHC performance fee
Slide 34: Development
Development For personal use only Home HQ Nunawading, Vic Annual Results FY08 34
Slide 35: Development Exposure
Development Exposure For personal use only Charter Hall development exposure • Charter Hall has experienced and proven in-house development expertise • All Charter Hall developments undertaken in Core Plus and Opportunistic funds • Charter Hall derives development investment income from investments
Slide 36: Core plus funds development pipeline
Development Pipeline For personal use only Core plus funds development pipeline • Value creation counters cap rate expansion • Long-term portfolio target of 30% exposure to $2.0bn $1.5bn Enhanced and 70% exposure to Core $0.5bn Core Plus Opportunistic Total development pipeline Project Fund Sector C
Slide 37: Development Case Study: ONE30 Stirling Street
Development Case Study For personal use only Case 1 – ONE30 Stirling Street, Perth WA (CPOF Project) Development skills creating value Project strategy • Acquired 130-144 Stirling Street in August 2005 • Opportunity to capitalise on demand for in a rapidly growing Perth office market • Acquisition o
Slide 38: Opportunistic funds development pipeline
Development Pipeline For personal use only Opportunistic funds development pipeline • CHOF4 $165 million equity fully allocated • CHOF5 $165 million of $300 million equity $2.0bn commitments allocated $1.5bn • Average Gross IRR over 12 years of 30% $0.5bn • CHOF4/5 forecast equity IRR of 42% Core Pl
Slide 39: Development Case Study: Northbank Plaza
Development Case Study For personal use only Case Study 2 – Northbank Plaza, Brisbane Qld (CHOF4 project) Significance outperformance through active development management Project strategy • Acquired in December 2005 • Opportunity to capitalise on supply and demand dynamics in Brisbane office market
Slide 40: CIP
CIP For personal use only Development investment CIP income FY08 (100%) ($m) • CIP FY08 NPAT of $14.4 million Gross profit 30.7 • 50% interest in CIP contribution to CHC profit of $7.2 million Corporate overhead (9.8) • Completed 175,000m2 of projects during FY08 EBITDA 20.8 – tenants secured includ
Slide 41: Financial Summary
Financial Summary For personal use only Bunnings, South Nowra NSW Annual Results FY08 41
Slide 42: Income Statement
Income Statement For personal use only FY08 FY07 Change ($m) ($m) (%) Direct net property income 31.8 19.8 Investment income 9.5 6.5 Other trust income 0.2 - Total CHPT income 41.6 26.3 58% Development investment income 7.5 0.3 Funds management income 39.0 24.3 Other corporate income 0.4 0.4 Total C
Slide 43: Earnings Reconciliation
Earnings Reconciliation For personal use only FY08 FY07 ($m) ($m) NPAT (AIFRS) 67.5 43.2 Fair value adjustments (15.3) (11.5) Gains on sale of investments (0.8) - Foreign exchange movements (0.9) - Employee LTIP 2.7 0.9 Amortisation of lease incentives 0.4 0.3 Other (0.8) 1.3 Underlying NPAT 52.7 34
Slide 44: Cashflow Reconciliation
Cashflow Reconciliation For personal use only • Cash distribution coverage of circa 106% • Only substantial difference between Underlying NPAT and cashflow is accrual of certain fees • $10.2 million of FY08 accrued fees paid by August distribution date FY08 Cashflow Reconciliation ($m) Underlying Ea
Slide 45: Capital Management
Capital Management For personal use only Key Metrics 30 Jun 08 Post CPRF close Debt balance (net of $9m cash) $244.8m $41.0m Gearing1 31.2% 7.1% ‘Look through’ gearing2 43.5% 39.1% Debt maturity 2.0 yrs 3.0 yrs Portion of net debt hedged 75% 160% Weighted average interest hedge duration 6.0 yrs 2.7
Slide 46: Outlook
Outlook For personal use only Sydney Wharf, Pyrmont NSW Annual Results FY08 46
Slide 47: Strategy
Strategy For personal use only • CHC co-investment funds management model now well established – real estate fund manager with co-investments in managed funds – in-line with stated strategy – substantially enhances return on equity • Charter Hall well supported in current market – meaningful market
Slide 48: Capital Management
Capital Management For personal use only • Target CHC gearing range of 0% to 20%1 • Managed funds’ debt facilities all non recourse to CHC • CHC capital requirements going forward include: – undrawn equity commitments to managed funds of circa $55 million2 – co-investments for new fund initiatives –
Slide 49: EPS and DPS
EPS and DPS For personal use only • Charter Hall targets FY09 underlying EPS growth of approximately 5% • The Charter Hall Board’s current intention is to maintain FY09 DPS at approximately 12.6 cps, provided it is supported by underlying earnings Annual Results FY08 49
Slide 50: Questions
For personal use only Questions
Slide 51: Appendices
Appendices For personal use only 57 Anzac Parade, Chullora NSW Annual Results FY08 51
Slide 52: Appendix A – Revenue Contribution FY08
Appendix A – Revenue Contribution For personal use only FY08 Revenue contribution FY08 Revenue ($m) CHPT CPOF CPIF CHOFs CHUF DPF CHIFs CIP Other Total CHPT Rental income 31.8 31.8 Co-investment income 5.2 3.2 0.3 0.8 9.5 Other income 0.2 0.2 CHPT Revenue 31.8 5.2 3.2 0.3 0.8 0.2 41.6 CHL Base fees
Slide 53: Appendix A – Revenue Contribution FY07
Appendix A – Revenue Contribution For personal use only FY07 Revenue contribution FY07 Revenue ($m) CHPT CPOF CPIF CHOFs CHUF DPF CHIFs CIP Other Total CHPT Rental income 21.1 21.1 Co-investment income 3.0 1.7 0.1 0.4 5.1 Other income 0.2 0.2 CHPT Revenue 21.1 3.0 1.7 0.1 0.4 0.2 26.4 CHL Base fees
Slide 54: Appendix B – Balance Sheet
Appendix B – Balance Sheet For personal use only Post CPRF close1 30 June 08 30 Jun 07 ($m) ($m) ($m) Direct property 17.2 439.6 430.7 Investments in funds 480.2 243.5 142.1 Other investments 55.5 50.3 0.8 Cash, receivables and other assets 30.9 68.5 76.8 Total assets 583.8 801.9 650.4 Borrowings 50
Slide 55: Appendix C – Capital Management
Appendix C – Capital Management For personal use only • Charter Hall Group debt maturity profile 3 years (evergreen facility) • Group gearing 7.1% • Look-through gearing 39% • Information current at 31 July 2008 Duration Drawn CHC Tangible Gearing Gearing remainin Percentag Average Average balance c
Slide 56: Appendix D – CHPT Investments
Appendix D – CHPT Investments For personal use only CHPT investments Post CPRF 30 June 2008 CHPT CHPT CHPT stake investment CHPT stake investment (%) ($m) (%) ($m) Direct Properties 100% 17 100% 17 CPOF 23% 193 20% 161 CPIF 25% 58 25% 58 CPRF 62% 155 100% 423 DPF ordinary equity 18%1 15 24% 15 DPF b
Slide 57: Appendix E – CHC Securities
Appendix E – CHC Securities For personal use only Reconciliation of Securities • Charter Hall has a loan security plan (LSP or LTI) to provide a long-term incentive to staff – loan provided to employee trust by CHC – proceeds of loan utilised to acquire CHC securities – interest on this loan equal t
Slide 58: Appendix F – Property Portfolio (CPOF)
Appendix F – Property Portfolio For personal use only Core Plus Office Fund (CPOF) Ind. value Ind. Mkt cap rate Mkt cap rate MCR Change Valuer’s WALE Rent reviews ($m) valuation 30 Jun 08 31 Dec 07 (%) Discount (years) (%) date (%) (%) Rate/ IRR (%) Atrium, 60 Union Street, Pyrmont, NSW 160.1 30-Jun
Slide 59: Appendix F – Property Portfolio (CPIF)
Appendix F – Property Portfolio For personal use only Core Plus Industrial Fund (CPIF) Ind. value Ind. Mkt cap rate Mkt cap rate MCR Valuer’s WALE Rent ($m) valuation 30 Jun 08 31 Dec 07 Change Discount (years) reviews date (%) (%) (%) Rate/ IRR (%) (%) Chatswood Business Park, 372 Eastern 31.0 30-J
Slide 60: Appendix F – Property Portfolio (CPRF)
Appendix F – Property Portfolio For personal use only Core Plus Retail Fund (CPRF) Ind. value Ind. Mkt cap Mkt cap MCR Valuer’s WALE Rent ($m) valuation rate rate Change Discount (years) reviews date 30 Jun 08 31 Dec 07 (%) Rate/ IRR (%) (%) (%) (%) Bunnings, Bendigo Vic 9.1 30-Jun-08 7.00% 6.75% 0.
Slide 61: Appendix F – Property Portfolio (DPF)
Appendix F – Property Portfolio For personal use only Diversified Property Fund (DPF) Ind. Ind. Mkt cap rate Mkt cap rate MCR Valuer’s WALE Rent value valuation 30 Jun 08 31 Dec 07 Change Discount (years) reviews ($m) date (%) (%) (%) Rate/ IRR (%) (%) 46-50 Kings Park Road, West Perth WA 30.0 30-Ju
Slide 62: Further Information
Further Information For personal use only David Harrison Joint Managing Director +61 2 8908 4033 davidh@charterhall.com.au David Southon Joint Managing Director +61 2 8908 4025 davids@charterhall.com.au Peter Roberts Chief Financial Officer +61 2 8908 4047 peterr@charterhall.com.au Charter Hall Grou