Cromwell Property Group · ASX:CMW
Cromwell Property — FY2014 Earnings Presentation
48 slides from Cromwell Property's earnings presentation, Aug 28, 2014
Slide 1: FY14 Results Presentation
FY14 Results Presentation — ~ H : ar yy . PROPERTY GROUP
Slide 2: Important Information & Disclaimer
Important Information & Disclaimer For personal use only This presentation including its appendices legal or tax advice as they deem necessary or 243 (BHT), Cromwell Riverpark Trust ARSN 135 002 (“Presentation”) is dated 28 August 2014 and has consider appropriate for their particular jurisdiction.
Slide 3: Section 1: FY14 Highlights
For personal use only Section 1 FY14 Highlights CMW - FY14 Results 3
Slide 4: Key Messages
Key Messages For personal use only Our focus is to ensure we provide a predictable growing distribution to our security holders We are in a strong position to be able to continue to do this in the medium term We continue to do what we say we will do. We remain consistent to theme Buy low, se
Slide 5: Key Metrics
Key Metrics For personal use only FY14 Record Result as Forecast Operating Profit increased by 43% to a record $146.7m Operating O ti EPS increased i d by b 12% tto 8 8.5cps 5 Statutory Profit increased by 295% to $182.5m Payout ratio decreased from 95% to 90% Active Asset Management g
Slide 6: Strategy Remains Unchanged
Strategy Remains Unchanged For personal use only Objective is to provide defensive, superior risk adjusted returns from commercial properties we own and manage in Australia Maintain a property portfolio that provides a balance between defensive investments and assets that can be improved or repo
Slide 7: Consistent Strategy Delivers Consistent Outperformance
Consistent Strategy Delivers Consistent Outperformance For personal use only Cromwell has significantly outperformed the S&P/ASX 300 A-REIT Accumulation Index Outperformance of 7.2%, 10.2% and 21.8% per annum over 3, 5 and 10 years2 Cromwell Performance June 2014 Direct Property Returns (Annuali
Slide 8: Section: FY14 Financial Results
For personal use only Section 2 FY14 Financial Results CMW - FY14 Results 8
Slide 9: Operating Earnings Per Security Increased by 12%
Operating Earnings Per Security Increased by 12% FY14 RESULTS For personal use only Statutory profit increased 295% to $182.5m Operating earnings increase derived from a number of factors: Operating p gpprofit1 increased byy 43% to a record Accretion from FY13 acquisitions $146.7m Increase
Slide 10: Financial Position Strengthened
Financial Position Strengthened FY14 RESULTS For personal use only Pro forma cash of $190m Jun-14 Jun-14 Jun-13 provides flexibility to pursue (Pro-Forma)1 (Actual) (Actual) additional property ($’000) ($’000) ($’000) acquisitions or funds Assets management initiatives Cash and Cash Equivalents 19
Slide 11: Valuations Rising
Valuations Rising FY14 RESULTS For personal use only Fair value increase in investment property of $46.2m, net of capex and incentives Valuation changes highlight market appetite for low risk assets Increase in valuation for assets with long leases Decrease in valuation for some assets with
Slide 12: Weighted Average Debt Expiry Extended To 3.9 Years
Weighted Average Debt Expiry Extended To 3.9 Years CAPITAL For personal use only MANAGEMENT Diversified across 8 lenders with varying maturity dates No maturities until June 2015 Weighted average debt expiry of 3.9 years Debt Expiry p y Profile1 $600M $19M $44M $500M $50M Australian Major Bank
Slide 13: Lowering Interest Rates
Lowering Interest Rates CAPITAL For personal use only MANAGEMENT Targeting lower interest rates again in FY15 Weighted average hedge term of 4.7 years Weighted average margin of 1 1.6% 6% on current Extended with long-term long term cap in August 2014 facilities1 High degree of certainty o
Slide 14: Hedging Profile Extended
Hedging Profile Extended CAPITAL For personal use only MANAGEMENT Have hedged interest rates over $1bn of debt until May 2019 New interest rate cap initially over $32.7m increasing to $1bn by December 2017 Cromwell maintains benefit whilst variable interest rates remain below 3.39%1 Protecti
Slide 15: Section: Property Portfolio
For personal use only Section 3 Property Portfolio CMW - FY14 Results 15
Slide 16: Property Portfolio Remains Robust
Property Portfolio Remains Robust INVESTMENT For personal use only PORTFOLIO Geographic Sector Tenant Diversification1 Diversification1 Classification1 1.1% 2.4% 1.2% ACT 7.5% 19.2% NSW 19.4% 2 Government Authority QLD Office 26.3% VIC Retail Listed 50.8% C Company/Subsidary /S b id TAS Private Comp
Slide 17: Lease Expiry Profile
Lease Expiry Profile INVESTMENT For personal use only PORTFOLIO WALE of 5.9 years Lease Expiry Profile % Gross Income Vacancy 2.4% vs. CBD office average of 12.2%3 45.0% 40.9% Expiry profile cushioned against current soft conditions 40.0% Average fixed review of 3.1% over 49% of portfolio in
Slide 18: Property Portfolio - Lease Expiries FY15, FY16, FY17
Property Portfolio - Lease Expiries FY15, FY16, FY17 For personal use only Lease Expiries representing >1% income (FY15-FY17) Expiry % of Total Portfolio Property Tenant Area (sqm) Status Rental Income Comment FY15 Tenant vacating, space is being marketed & in discussion with 700 Collins Street, Mel
Slide 19: Portfolio – Acquisitions Added Significant Value
Portfolio – Acquisitions Added Significant Value For personal use only Recent acquisitions have generated significant value NSW Government Portfolio ($405m) Health & Forestry House Buildings, QLD ($65m) Acquisition Unlevered Property IRR’s Asset Date Post Acquisition Costs 207 Kent Street, Syd
Slide 20: Portfolio - Additional Value Add Opportunities
Portfolio - Additional Value Add Opportunities For personal use only Past Projects (2011-2014) Future Projects (2015-2018) Full refurbishment and Potential upside from replacement of plant. Tri Tri- reconfiguration of retail Generation plant installed space and additional carparking revenue Ne
Slide 21: Sustainability
Sustainability INVESTMENT For personal use only PORTFOLIO Energy improvements at 700 Collins Street in Energex House3 & HQ North achieved 5.5 Stars NABERS Melbourne delivered a NABERS energy efficiency energy increase to 4.5 stars from 3.5 stars NSW Government Portfolio achieved 6.1% reduction
Slide 22: Section: Capital Management
For personal use only Section 4 Capital p Management g CMW - FY14 Results 22
Slide 23: Active Management - Recycling Capital For Future Growth
Active Management - Recycling Capital For Future Growth For personal use only Sale of 6 assets in FY14 for $253m, plus sale of 321 Exhibition St for $206m post balance date Assets have delivered good returns, but expected future returns were below required hurdle rate Capital recycled to co-in
Slide 24: Capital Management – Transforming Debt Platform
Capital Management – Transforming Debt Platform For personal use only Successfully completed the refinancing of 7 debt facilities Managing gearing appropriately is a key capital into 1 new platform management initiative Common terms Gearing reduced before peak of property cycle via One sec
Slide 25: Section: Funds Management
For personal use only Section 5 Funds Management g CMW - FY14 Results 25
Slide 26: Funds Management – External AUM now $1.3bn
Funds Management – External AUM now $1.3bn1,2 For personal use only Unlisted Property Trusts Property Securities (Phoenix Portfolios) Cromwell Property Trust 12 launched in October 2013 Increase in AUM to over $559m and closed over-subscribed in April 2014 D Demand d growing i ffrom llarge
Slide 27: Cromwell's Closed Funds Continue To Perform
Cromwell’s Closed Funds Continue To Perform GROWTH For personal use only RIVERPARK TRUST IPSWICH TRUST Asset valuation uplift since inception Asset valuation uplift since inception from $173m to $205m from $92.5m to $99.5m 12.5% annualised return since 8.4% annualised return since inception
Slide 28: Funds Management – Open Funds Build Momentum
Funds Management – Open Funds Build Momentum GROWTH For personal use only DIRECT PROPERTY FUND 6 9 Since Performance Statistics1 Months Months Inception Launched August 2013. 2013 Diversified unlisted property Fund 8.9% 12.1% 13.4% Experiencing strong interest from larger wealth managers – (Afte
Slide 29: Funds Management – Oyster Group Acquisition
Funds Management – Oyster Group Acquisition GROWTH For personal use only Cromwell acquired 50% stake in New Zealand property and fund manager Oyster Group for $NZ7.5m1 Oyster has in excess of $NZ650m of property assets under management through a combination of private property syndicates and ins
Slide 30: Capital Management - Asset Allocation Guidelines
Capital Management - Asset Allocation Guidelines For personal use only Increased funds management activity generating greater demand for quality assets Cromwell has indicative asset allocation strategies g for each p property p y acquisition q Risk Appetite Speculative Developments Core Plus Cro
Slide 31: Section: Strategy & Outlook
For personal use only Section 6 Strategy gy & Outlook CMW - FY14 Results 31
Slide 32: Property Portfolio – Continued Focus on CBD Office
Property Portfolio – Continued Focus on CBD Office OUTLOOK For personal use only We still prefer commercial office property Prime vs. Secondary Office Yields Significant demand for property with long leases 10.00% Demand for core CBD expanding to include near 9.50% city and suburban locations
Slide 33: Consistent Execution of Strategy
Consistent Execution of Strategy OUTLOOK For personal use only Active Asset Management Peer FY15 EPS Yield1 Additional capital available through continued recycling of non-core 10% assets 38 bps p premium p 8% Peer average 7.6% Continued sale of assets which are not expected to meet hurdle rat
Slide 34: Contact Us
Contact Us For personal use only Paul Weightman Ross McGlade CEO / Managing Director Investor Relations paul.weightman@cromwell.com.au ross.mcglade@cromwell.com.au Phone: +61 7 3225 7720 Phone: +61 2 8278 3613 Daryl Wilson Hamish Wehl Director - Finance and Funds Management Fund Manger / Investor Re
Slide 35: Appendix: Additional Information
For personal use only Appendix Additional Information CMW - FY14 Results 35
Slide 36: Cromwell Property Group Snapshot
Cromwell Property Group Snapshot For personal use only Cromwell has evolved organically over 15 years Cromwell Listed fund manager recapitalised by existing managementt in i 1998 Property Group REIT structure created through stapling and merger of unlisted funds in 2006 Market cap: $1.7 bn1
Slide 37: FY14 Operating and Statutory Profit Reconciliation
FY14 Operating and Statutory Profit Reconciliation For personal use only FY14 FY14 FY13 FY13 ($’000) (CPS)1 ($’000) (CPS)1 Profit from operations 146,721 8.5 102,411 7.6 Gain on sale of investment properties 3,152 0.2 132 - Loss on disposal of other assets (559) - (146) - Fair value adjustments: Inv
Slide 38: Segment Result - Operating Earnings
Segment Result - Operating Earnings1 For personal use only Property / Funds Funds Property Management Management Property Investment est e t Internal te a External te a Development e e op e t Ju Jun-14 Segment revenue ($'000) ($'000) ($'000) ($'000) ($’000) Sales to external customers 263,951 1,592
Slide 39: Property Portfolio – Top Assets
Property Portfolio – Top 10 Assets For personal use only Book Asset State Class Value Cap Rate Occupancy WALE Major Tenants Qantas Global Headquarters NSW Office $335.0m 6.75% 100.0% 17.1 yrs Qantas HQ North Tower QLD Office $197.5m 7.75% 99.8% 4.2 yrs AECOM, Bechtel, Technology One 207 Kent Street
Slide 40: Property Portfolio – Top leases
Property Portfolio – Top 20 leases For personal use only Tenant Category Building Expiry Date Rental Income Qantas Airways Limited Listed Company/Subsidiary Qantas Global HQ Dec-32 10.6% Dept of Social Services Federal Government Tuggeranong Office Park Dec-16 9 0% 9.0% NSW State Government NSW Stat
Slide 41: Property Portfolio – Net Property Income
Property Portfolio – Net Property Income For personal use only Like for like income growth FY14 FY13 ($’000) ($’000) Variance Comments Tuggeranong Office Park, Greenway ACT 20,425 20,037 1.9% 203 Coward Street, Mascot NSW 15,621 15,020 4.0% 19 National Circuit, Barton ACT 2,987 2,905 2.8% 700 Collin
Slide 42: Property Portfolio – Net Property Income
Property Portfolio – Net Property Income For personal use only Sales, Purchases and Other FY14 FY13 ($’000) ($’000) Variance Comments C Properties CPF ope t es 13,073 3,0 3 11,261 , 6 16.1% 6 % Acquired q October 2012 Purchases NSW Office Portfolio 36,378 2,070 1,657.2% Acquired June 2013 Health & F
Slide 43: Property Portfolio – Movement In Book Value
Property Portfolio – Movement In Book Value For personal use only Portfolio significantly improved through acquisitions since 2010 In-sourced facilities management model delivers consistently low lifecycle capex Average 0.24% of valuation over past 5 years FY14 FY13 FY12 FY11 FY10 ($’000) ($’0
Slide 44: Facility Details
Facility Details1 For personal use only Amount Facility Maturity Date Years Remaining2 Covenants ($‘000) $123,500 Bank 1 5yr Facility May 19 May-19 4.7 $100,000 Bank 2 5yr Facility May-19 4.7 $123,500 Bank 3 5yr Facility May-19 4.7 $110,709 Bank 4 5yr Facility May-19 4.7 LVR - 60% $50,000 Bank 5 5yr
Slide 45: Interest Rate Hedging Details
Interest Rate Hedging Details For personal use only Amount Years Rate Type Maturity Date % of Total ($’000)) ($ g2 Remaining $86,450 4.15% Fixed Dec-17 3.6 8.1% $31,730 3.99% Fixed Nov-17 3.5 3.0% $100,000 5.95% Fixed Sep-17 3.3 9.4% $100,000 4.14% Fixed May-17 3.0 9.4% $133 000 $133,000 3 86% 3.86%
Slide 46: Funds Management Summary
Funds Management Summary For personal use only Number of Fund Sector Investors Total Assets1 Properties Ongoing Fees2 Initial Fees2 Cromwell Riverpark Trust Direct property Retail $208m 1 0 60% 0.60% 3 0% 3.0% Cromwell Ipswich City Heart Trust Direct property Retail $103m 1 0.60% 3.0% Cromwell Box H
Slide 47: Closed Fund Performance – CRT, ICH, BHT, C12
Closed Fund Performance – CRT, ICH, BHT, C12 For personal use only Riverpark Trust (CRT) Ipswich City Heart Trust (ICH) Box Hill Trust (BHT) Property Trust 12 (C12) NAV Price $1.18 NAV Price $1.00 NAV Price $1.00 NAV Price $1.00 Distribution Yield 9.50% p.a Distribution Yield 8.50% p.a Distribution
Slide 48: For personal use only
For personal use only well versed well timed wellll considered id d
Cromwell Property Group — FY2014 Earnings Presentation on 6ix