Cromwell Property Group · ASX:CMW

Cromwell Property — HY18 Earnings Presentation

54 slides from Cromwell Property's earnings presentation, Feb 28, 2018

  1. Slide 1: HY18 Results Presentation

    HY18 RESULTS PRESENTATION 28 February 2018 CMW – HY18 Results 1

  2. Slide 2: Important Information & Disclaimer

    Important Information & Disclaimer This presentation including its appendices appropriate for their particular jurisdiction. Cromwell Ipswich City Heart Trust ARSN 154 498 923 (Presentation) is dated 28 February 2018 and has (ICH), Cromwell Phoenix Core Listed Property Fund Cromwell Property Group d

  3. Slide 3: Overview & Key Highlights

    SECTION 1 Overview & Key Highlights

  4. Slide 4: Cromwell Property Group Overview

    Cromwell Property Group Overview  Cromwell is a real estate investor and manager operating on three continents with a global investor base  We are focused on creating value and providing sustainable returns for investors and security holders  We offer securityholders an attractive combination of

  5. Slide 5: Investment Strategy Leading To Sustainable Growth

    Investment Strategy Leading To Sustainable Growth  Results benefitting from investments undertaken since 2013 Gearing down  Substantial investment into funds management platform  €303 million investment in CEREIT  Establishment of CEREIT Management team on the NTA Up ground in Singapore  New Si

  6. Slide 6: HY18 Key Milestones

    HY18 Key Milestones 30 September  Soward Way, ACT (HY18 valuation of $260 million) reaches practical completion 4 October  Sold 9.83% stake in Investa Office Fund (ASX: IOF), profit of $25 million, IRR of 18% 2 November  Hedging profile (excluding the 3.39% cap) extended to 2.6 years, 73% hedged

  7. Slide 7: Financial and Capital Management Update

    SECTION 2 Financial and Capital Management Update

  8. Slide 8: Cromwell Property Group HY18 Headline Results

    Cromwell Property Group HY18 Headline Results HY18 COMMENTARY HY18 Performance Versus PCP  Statutory Profit, before write down of intangibles, HY18 HY17 Change was $155.5 million up from $153.2 million (up 1.5%) Statutory profit before write down of intangibles ($M) 155.5 153.2 1.5%  Statutory Pro

  9. Slide 9: Financial Update - HY18 Segment Results

    Financial Update - HY18 Segment Results1 HY18 COMMENTARY HY18 Segment Performance Versus PCP  Property Investment earnings were $58.2 million, a 6.9% decrease on the prior comparable period HY18 HY17 Change mainly due to asset sales and the vacancy at Property Investment ($M) 58.2 62.5 (6.9%) Tugge

  10. Slide 10: Financial Update – Balance Sheet Strengthens

    Financial Update – Balance Sheet Strengthens Balance Sheet Strengthens HY18 FY17 (Actual $M) (Actual $m)  Cash and Cash Equivalents has increased to $123.7 million Cash and cash equivalents 123.7 86.9 from $86.9 million in the prior comparable period Investment property 2,386.4 2,357.8  CEREIT (€3

  11. Slide 11: Capital Management – HY18 Activity Improves Position

    Capital Management – HY18 Activity Improves Position HY18 Capital Management Initiatives 1. The sale of the Investa Office Fund (ASX:IOF) stake saw the repayment of the $123 million margin loan 2. Surplus proceeds from the IOF sale were applied to revolvers 3. Proceeds from the sale of Health and Fo

  12. Slide 12: Capital Management – Diversified Debt Profile

    Capital Management – Diversified Debt Profile1  Facilities diversified across eight lenders + CB issue with varying maturity dates  Weighted average debt expiry of 1.8 years on a look-through basis with 74% not expiring until FY20 and beyond  Cromwell is currently negotiating the refinancing of n

  13. Slide 13: Capital Management – Interest Rate Hedging

    Capital Management – Interest Rate Hedging  Executed $690 million of interest rate derivatives with key relationship banks  Weighted Average Hedge Term of 2.6 years (excluding the 3.39% cap)  The blend of interest rate caps and swaps ensures a sustainable cost base allowing the business to benefi

  14. Slide 14: Property Investment Segment

    SECTION 2 Property Investment Segment

  15. Slide 15: Property Portfolio Snapshot

    Property Portfolio Snapshot Core Portfolio  Core portfolio comprises nine assets, majority of portfolio by value with a long CORE WALE, essentially full occupancy plus low capex and incentive requirements  Like for like NOI increased 7.7% (excluding Soward Way below) 55% Wale: 11.7 yrs Occupancy 9

  16. Slide 16: Property Portfolio Snapshot (as at December 2017)

    Property Portfolio Snapshot (as at 31 December 2017) Focus on secondary assets in CBD, CBD fringe and established suburban markets with potential to outperform Core Portfolio Core+ Portfolio Active Portfolio QANTAS GLOBAL HQ 475 VICTORIA AVENUE TUGGERANONG OFFICE PARK Mascot, NSW Chatswood, NSW Gree

  17. Slide 17: Property Portfolio – Valuations Continue To Rise

    Property Portfolio – Valuations Continue To Rise  Eleven assets were externally revalued in the period representing approximately half of portfolio by value  Fair value increase in investment property of $32.8 million net of property improvements, lease costs and incentives  Weighted Average Cap

  18. Slide 18: Property Portfolio – Tenant Profile Remains Robust

    Property Portfolio – Tenant Profile Remains Robust Geographic Diversification1 Sector Diversification1 Tenant Classification1 4.0% ACT 5.6% 9.6% 19.7% 25.9% Government Authority 2 NSW Office 39.6% 17.8% QLD Listed Company/Subsidary VIC Other Private Company 48.9% SA 34.5% 94.4% % of Gross  Tenant p

  19. Slide 19: Property Portfolio – Market Leading WALE of 7.2 years

    Property Portfolio – Market Leading WALE of 7.2 years  WALE of 7.2 years up from 6.35 years HY17 Lease Expiry Profile % Gross Income 3  Vacancy by gross income of 12.1% (vacancy excluding the active asset portfolio is 2.6%). 50% 49.2%  Average fixed review in next 2.5 years.  3.19% over 29% of p

  20. Slide 20: Property Portfolio – Future Lease Expiries

    Property Portfolio – Future Lease Expiries There are only three future expiries >1% through to the end of FY20 Lease Expiries representing >1% income (FY18-FY20) % of Total Expiry Property Tenant Comment Area (sqm) Portfolio Rental Date Income FY18 Lovett Tower Department of Prime Minister and Cabin

  21. Slide 21: Property Portfolio – Strong Leasing Success

    Property Portfolio – Strong Leasing Success New Leases Signed  Strong leasing activity in half with 67 transactions for 43,300+ sqm. 58 of these were new leases covering 15,600 sqm  Northpoint has had 25 new leases signed in the retail precinct and seven new office leases  Bechtel have signed a n

  22. Slide 22: Property Portfolio – Asset Recycling Continues

    Property Portfolio – Asset Recycling Continues Assets Realisations  Continue to recycle capital to realise value for assets at the end of their optimal investment term  Health House & Forestry House, interconnected towers in the heart of Brisbane CBD, sold for $69 million in November 2017  Assets

  23. Slide 23: Property Portfolio – Northpoint Value Enhancement

    Property Portfolio – Northpoint Value Enhancement Northpoint Tower, North Sydney  Withdrawal of stock for residential, metro and low vacancy rates in North Sydney all driving local tenant demand  25 new lease transactions completed. Woolworths, Westpac, Terry White Chemmart Pharmacy secured. On tr

  24. Slide 24: Property Portfolio – Tuggeranong Value Enhancement

    Property Portfolio – Tuggeranong Value Enhancement Soward Way, ACT  Bespoke 30,704 sqm new building constructed for Department of Social Services (DSS) adjacent to their original premises  Project commenced in August 2015 and was completed on budget ($170 million) in September 2017  Completion va

  25. Slide 25: Property Portfolio – Further Asset Enhancement Options

    Property Portfolio - Further Asset Enhancement Options Tuggeranong Office Park, ACT  Title has been subdivided into different lots.  Further progress made on adaptive re-use of existing buildings as aged care  Preferred operating partner identified  In depth market studies completed. In the loca

  26. Slide 26: Property Portfolio – Further Asset Enhancement Options

    Property Portfolio - Further Asset Enhancement Options Victoria Avenue, Chatswood 700 Collins Street, Melbourne  Potential to develop additional office space on the site  Plans to expand existing office development  Development application likely to be submitted April 2018  13,000 sqm in additio

  27. Slide 27: Funds Management Segment

    SECTION 4 Funds Management Segment

  28. Slide 28: Funds Management – Platform Expanded

    Funds Management – Platform Expanded  Total funds operating profit across all segments was up 5% to $16.3 Change in AUM ($bn)1 million (HY17 $15.6 million) as increase in fees from wholesale offset the lack of a performance fee in retail  Significant trading activity throughout Europe of €2.1 bill

  29. Slide 29: Funds Management – CEREIT IPO Transformative

    Funds Management – CEREIT IPO Transformative Cromwell European Real Estate Investment Trust (CEREIT) € 0.60  CEREIT successful debut on Singapore Exchange Securities € 0.59 € 0.58 Trading Limited (the SGX-ST) on 30th November 2017 € 0.57 € 0.56  €1.4 billion CEREIT will provide additional stable s

  30. Slide 30: Funds Management – CEREIT IPO Portfolio Overview

    Funds Management – CEREIT IPO Portfolio Overview Unique opportunity to invest in 74 properties across 5 countries with total Appraised Value of €1.4bn Occupancy Rate (by LA)3,4  87.7% WALE / WALT5  4.9 years / 5.8 years Denmark Aggregate Leverage  36.3% Properties 13 Projection Year 2018 DPU Yiel

  31. Slide 31: Funds Management – CEREIT IPO Portfolio Overview

    Funds Management – CEREIT IPO Portfolio Overview Positioned to benefit from improving fundamentals and business sentiment in Europe Italy and Netherlands Office Pan-European Light industrial / Logistics Milano Piazza Affari, Italy Central Plaza, Netherlands Parc Des Docks, France Bischofscheim, Germ

  32. Slide 32: Funds Management – Continuing to Invest For Future

    Funds Management – Continuing to Invest For Future  Mark McLaughlin appointed as Managing Director Europe in October Investment Portfolio by Sector 2017 with remit to grow business and building out capital partner base to be less dependent on transactional capital 13.2%  Total AUM increased 18% to

  33. Slide 33: Funds Management – Retail Funds Performing Well

    Funds Management – Retail Funds Performing Well  Operating profit of $2.1 million (HY17 $6.0 million).  Variance in operating profit driven by 1H17 having $4.7 million in fees from the Cromwell Riverpark Trust extension  AUM increased slightly but was steady at $1.8 billion (FY17 $1.8 billion) In

  34. Slide 34: Funds Management – Retails Funds Performing Well

    Funds Management – Retails Funds Performing Well Listed Securities Funds  Cromwell Phoenix Opportunities Fund generated 6-year annualised performance of 22.3% net after fees in December 2017  Fund hard-closed after reaching capacity  Cromwell Phoenix Property Securities Fund reopened in October 2

  35. Slide 35: Funds Management – Oyster Group Strongly Positioned

    Funds Management – Oyster Group Strongly Positioned  AUM at Oyster Group in New Zealand (50% interest) was Change in AUM (NZ$m) steady at NZ$1.2 billion (FY17 $1.2 billion). Pro-forma NZ1.4 billion)  New Zealand’s largest wholesale offer, the NZ$ 210 million, 43,500 sqm Millennium Centre was compl

  36. Slide 36: Outlook and Guidance

    SECTION 5 Outlook and Guidance

  37. Slide 37: Outlook - Australian Growth Moderate, Risks Remain

    Outlook - Australian Growth Moderate, Risks Remain  Australian economic growth remains moderate NAB Business Conditions Finance, Business & Property Services Employment Index Sqm  Business employment expectations improve while withdrawn 50 280,000 CBD Office Net Absorption stock, particularly in S

  38. Slide 38: Outlook - European Economic Recovery Continues

    Outlook - European Economic Recovery Continues  Eurozone economic growth has escalated through 2017 (Euro EU GPD Growth Rate Picks-up GDP growth of 2.6% annualised and up from 1.7% in 2016) and has driven real estate leasing and investment markets  Rising European bond yields are reflecting prospe

  39. Slide 39: Outlook – Asian Outbound Capital Continues to Grow

    Outlook – Asian Outbound Capital Continues to Grow  Asian outbound capital increased 98% year on year Cromwell has invested in Singapore in order to identify, to US$45.2 billion in the first six months of 2017 and then connect, new sources of Asian capital to both Australian and European real estat

  40. Slide 40: Outlook – Asian Outbound Capital Continues to Grow

    Outlook – Asian Outbound Capital Continues to Grow  Asian outbound capital increased 98% year on year Cromwell has invested in Singapore in order to identify, to US$45.2 billion in the first six months of 2017 and then connect, new sources of Asian capital to both (CBRE) Australian and European rea

  41. Slide 41: Outlook - FY18 Guidance Maintained

    Outlook - FY18 Guidance Maintained For further information please contact:  Prior years’ investment strategy positions Cromwell for sustained growth Paul Weightman  Growth opportunities in different business segments CEO / Managing Director paul.weightman@cromwell.com.au  Adaptive reuse assets in

  42. Slide 42: Additional Information

    APPENDICES Additional Information

  43. Slide 43: Appendices - Contents

    Appendices - Contents  Cromwell Property Group Statistics 43  Local European Footprint 44  HY18 Operating and Statutory Profit - Reconciliation 45  Segment Result - Operating Earnings Detail 46  Property Portfolio - Top 10 Assets 47  Property Portfolio - Top 20 Leases 48  Property Portfolio -

  44. Slide 44: Cromwell Property Group Statistics HY18

    Cromwell Property Group Statistics HY18 Global platform offering diverse product range across key property sectors Diverse Product Range Track Record of Successful Partnerships Extensive and Broad Skill Set Portfolio Platform AUM by Sector 2.7% $ 11.2bn 1 370+ 5.9% 12.3% Office Retail AUM people Ind

  45. Slide 45: Local European Footprint

    Local European Footprint 20 regional offices providing on the ground local market knowledge and expertise European Portfolio by Geography 10% 10% 11% 9% €4.0bn 24% 25% 11% Italy UK Benelux Nordics CEE Germany France Investment Portfolio by Sector BENELUX GERMANY ITALY UK Amsterdam Berlin Milan Edinb

  46. Slide 46: HY18 Operating and Statutory Profit Reconciliation

    HY18 Operating and Statutory Profit Reconciliation HY18 ($M) HY17 ($M) Profit from operations 76.8 78.7 Operating EPS (cents per security) 4.32 cps 4.50 cps Gain on sale of investment properties (4.2) - Gain on sale of listed securities 15.7 - Finance costs attributable to disposal group/other asset

  47. Slide 47: Segment Result – Operating Earnings Detail

    Segment Result – Operating Earnings Detail1 Property Funds Management Funds Management Funds Management Half Year ending 31 December 2017 Investment Asset Services Internal Retail Wholesale ($M) ($M) ($M) ($M) ($M) HY18 Segment revenue Sales – external customers 98.9 6.1 - 5.2 41.6 151.8 Sales - int

  48. Slide 48: Property Portfolio – Top 10 Assets

    Property Portfolio – Top 10 Assets Book Value Asset State Class Cap Rate Occupancy WALE Major Tenants ($M) Qantas HQ NSW Office 455.0 5.60% 100.0% 13.7 years Qantas Kent Street, Sydney NSW Office 279.0 5.75% 95.4% 3.7 years Symantec, Mann Judd, IOOF Service Co 700 Collins Street VIC Office 267.5 5.5

  49. Slide 49: Property Portfolio – Top 20 Leases

    Property Portfolio – Top 20 Leases Tenant Tenant Classification Expiry Date % of Portfolio Rental Income Qantas Airways Limited Listed Company/Subsidiary Dec-32 14.6% Commonwealth of Australia (Dept of Social Services) Government Authority Sep-32 7.9% Government Property NSW Government Authority Jun

  50. Slide 50: Property Portfolio – Net Property Income

    Property Portfolio – Net Property Income1 HY18 ($M) HY17 ($M) Variance ($M) Variance (%) Comments Soward Way 4.0 0.0 4.0 N/A . Lovett Tower 1.1 0.7 0.4 57.1% Level 9 leased from June 18. Bull Street, Newcastle 0.8 0.7 0.1 14.3% Market Rent Review 700 Collins Street 7.8 6.8 1.0 14.7% New Lease Statio

  51. Slide 51: Property Portfolio – Net Property Income

    Property Portfolio – Net Property Income1 HY18 ($M) HY17 ($M) Variance ($M) Variance (%) Comments Village Cinema Geelong 0.6 0.6 - - Regent Cinema Centre 0.7 0.7 - - Retail Total 1.3 1.3 - 0.1% TOTAL HELD PROPERTIES 74.5 77.4 (2.9) (3.8%) Forestry House, Brisbane 6.5 3.2 3.3 103.1% Asset sold Nov-17

  52. Slide 52: Property Portfolio – Movement In Book Value

    Property Portfolio – Movement In Book Value  Strategy of continuously improving portfolio through acquisitions since 2010  Recycling of capital means disposing of assets before asset has large capex requirements  In-sourced facilities management model also lowers lifecycle capex  Average Lifecyc

  53. Slide 53: Property Portfolio - Debt Platform Facility Details

    Property Portfolio - Debt Platform Facility Details Drawn Commitment Maturity Fin Yr Years Facility Covenants (AUD $M) (AUD $M) Date Expiry Remaining Bank 1 - 5 Year Facility - 123.5 Mar-2021 2021 3.2 yrs Bank 2 - 5 Year Facility 100.0 100.0 Mar-2021 2021 3.2 yrs Bank 3 - 5 Year Facility - 123.5 Jan

  54. Slide 54: CMW – HY18 Results

    CROMWELL PROPERTY GROUP

Cromwell Property Group — HY18 Earnings Presentation on 6ix