Centuria Capital Group · ASX:CNI
Centuria Capital — Centuria Quantum Property Outlook Webinar (September 2020)
37 slides from Centuria Capital's conference presentation, Sep 3, 2020
Slide 1: In Conversation with Jones Lang LaSalle (JLL)
CENTURIA Q U A N T U M In Conversation with Jones Lang LaSalle (JLL) John McBain, Joint CEO, Centuria Capital Dr David Rees, Regional Director Research, JLL Thursday, 3 September 2020 1
Slide 2: Your Webinar hosts
Your Webinar hosts QUANTUM Monica Hood Lizzie Paton Relationship Manager Relationship Manager 2
Slide 3: In Conversation with John McBain & Dr David Rees
In Conversation with John McBain & Dr David Rees QUANTUM John McBain Dr David Rees Centuria Capital Joint CEO JLL – Regional Director, Research • Strategic growth in a challenging market • FY21 commercial property outlook – a two-pronged approach • Evolving tenant demand drivers within • What makes
Slide 4: Strategic Growth: Dual Strategy
STRATEGIC GROW TH Dual Strategy 4
Slide 5: Strategic Growth Strategy
Strategic Growth Strategy Dual Strategy Growth by Corporate Acquisitions + Growth by Real Estate Acquisitions OVER $5.0bn OF TRANSFORMATIONAL INITIATIVES 5
Slide 6: Key Metrics: Sector resilience
KEY METRICS Sector resilience 6
Slide 7: Unlisted Healthcare real estate
Key Metrics Unlisted Healthcare real estate 1. Centuria and its related party healthcare AUM, assets and 3. Centuria Healthcare Property Fund (ARSN 638 821 360) unlisted fixed term funds as at 31 December 2019 (‘CHPF’, ‘Fund’) 7 2. Valuation complete on an as-if complete basis
Slide 8: Centuria Industrial REIT – CIP
Key Metrics Centuria Industrial REIT – CIP1 2. By income 8
Slide 9: Centuria Office REIT - COF
Key Metrics Centuria Office REIT - COF 1. Source: JLL Research. Prime net effective rents as at 30 June 2020. Includes Chatswood, St Leonards, Canberra, Brisbane Fringe, Melbourne Fringe, West Perth and Adelaide CBD markets 9
Slide 10: Synergies: Australia & New Zealand
SYNERGIES Australia & New Zealand 10
Slide 11: View Point: Strategy & Outlook
VIEW POINT Strategy & Outlook 11
Slide 12: Sector returns and volatility comparison
1. Source: CPFL, CPF2L & RBA. The risk and volatility for term deposits differs to a geared office property fund. 2. Centuria 348 Edward Street Fund starting yield and annualised forecast yield for the period 1 October 2019 to 30 June 2020. For the June 2020 quarter the actual distribution paid was
Slide 13: Australian real estate markets – which way from here?
Australian real estate markets – which way from here? Prepared for: Centuria Q U A N T U M David Rees Regional Director – Research JLL September 2020
Slide 14: Which way from here?
Which way from here? Economic impact – huge divergence in forecasts • Recovery profile: V, U or L ? … K or W ? • Interest rates, bond yields and employment: where to from here? • Another cycle or long-term structural shifts? Office markets – the key conundrums • Short term impacts vs long term trend
Slide 15: What shape will the recovery take?
What shape will the recovery take? Australia GDP, 2014 to 2024 Source: JLL Research, Oxford Economics, Deloitte Access Economics 15
Slide 16: Labour market to recover quicker than previous recessions
Labour market to recover quicker than previous recessions Australia labour force (trough to peak), economic downturns Source: JLL Research, Oxford Economics 16
Slide 17: Bond yields – where to from here?
Bond yields – where to from here? Australia Government 10 year nominal and real bond rate, 1986 to 2020 Source: JLL Research, RBA 17
Slide 18: Office markets: pre-COVID world was a long time ago
Office markets: pre-COVID world was a long time ago Australia office markets vacancy rate, 2019 Source: JLL Research 18
Slide 19: Office values – conservative ahead of this downturn
Office values – conservative ahead of this downturn A measure of risk - yield spread (prime CBD office yield minus real Australian bond rate) 7.0 Percent p.a. 6.0 5.0 4.0 3.0 COVID-19 2.0 GFC 1.0 Dot-com bust 1991/2 recession 0.0 Source: JLL Research, ABS 19
Slide 20: The recovery trajectory is remarkably consistent
The recovery trajectory is remarkably consistent National CBD office markets net absorption cycles 800,000 600,000 400,000 200,000 Sqm 0 -200,000 -400,000 -3 -2 -1 0 1 2 3 Years 1980s recession 1990s Recession Post 2000 Slowdown Source: JLL Research 20
Slide 21: How will this peak compare with previous cycles?
How will this peak compare with previous cycles? Vacancy rate peaks Downturn Sydney Melbourne Brisbane Perth Adelaide Canberra Mid-1970s 13.0% 18.3% 11.7% - - - Early 1980s 4.3% 7.8% 8.3% 15.1% - - Early 1990s 22.5% 25.8% 14.3% 31.8% 20.7% 6.9% Post 2000 11.9% 10.2% 7.0% 13.4% 13.0% 6.1% Financial C
Slide 22: Leasing incentives will move higher
Leasing incentives will move higher Sydney CBD vacancy rate and leasing incentives, 1990 to 2022 25% 50% 20% 40% 15% 30% Incentives Stock Vacant 10% 20% 5% 10% 0% 0% 1990 1994 1998 2002 2006 2010 2014 2018 2022 Vacancy Rate Incentive (RHS) Source: JLL Research 22
Slide 23: Resulting in downward pressure on effective rents
Resulting in downward pressure on effective rents Australian CBD office markets prime net effective rent movements 0% -10% -20% Peak-to-trough -30% -40% -50% -60% -88% -73% -71% Sydney Melbourne Brisbane Perth 1990s Recession Post 2000 Slowdown Source: JLL Research 23
Slide 24: Workspace ratios – running the numbers
Workspace ratios – running the numbers SIMULATION - SYDNEY Vacancy, rents, capital values sensitive to Growth (% p.a.) workspace forecasts 1990-19 History 2019-29 2019-29 JLL Base Possible Workspace ratio -0.4 -0.5 +0.2 Total stock 1.1 1.1 0.8 • Workspace ratios have been falling steadily – in Sydne
Slide 25: Changing office occupancy profiles
Changing office occupancy profiles Too early to make a confident call JLL Global WFH Survey 59% of respondents missed the office 65% of people less than 35 years old missed the office What did you enjoy about WFH? Less or no commute 64% Flexible hours 50% Enhanced work-life balance 29% What did you
Slide 26: Industrial: permanent re-rating?
Industrial: permanent re-rating? Average yields by sector 9.0% 8.5% 8.0% 7.5% 7.0% 6.5% 6.0% 5.5% 5.0% 4.5% 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Regional Sub-regional Neighbourhood 26
Slide 27: The starting point for the spread is very wide
The starting point for the spread is very wide Industrial sector discount rates & Australia Government 10 year bond rate, 1992 to 2020 16.00% 14.00% 12.00% 10.00% 8.00% 6.00% 4.00% 2.00% 0.00% 1992 1996 2000 2004 2008 2012 2016 2020 Industrial 10 year bond rate Source: JLL Research, RBA, MSCI 27
Slide 28: The key macro drivers – divergent trends
The key macro drivers – divergent trends Retail and manufacturing – new dawn or end of an era? Source: JLL Research, RBA, MSCI 28
Slide 29: National stock-to-sales ratio
National stock-to-sales ratio Just-in time vs. just-in-case 1.10 1.00 0.90 0.80 0.70 0.60 0.50 0.40 Source: JLL Research, ABS 29
Slide 30: Where are we now? Somewhere between Texas and Florida
Where are we now? Somewhere between Texas and Florida Logistics strategies critical in Australia Australia US State UK Australia – the raw numbers Area (mill sq km) 7.7 9.8 0.7 Texas 0.2 • 10x bigger than Texas, smaller population 0.2 Florida • Location of distribution and services critical Populati
Slide 31: Institutional Interest
Potential Potential Re-Rating Specialised Opportunities Growth BTR Aged care Retirement living Data centres Institutional Interest Childcare Self storage Private hospitals Student accommodation Industria l Office (Metro) Convenience retail Office (CBD) Hotels Discretionary retail © Jones Lang LaSall
Slide 32: Sectors to watch – future needle movers?
Sectors to watch – future needle movers? Public Digital Health Administration Economy Supply Chain Mining Management Manufacturing © 2020 Jones Lang LaSalle IP, Inc. All rights reserved.
Slide 33: David Rees
David Rees david.rees@ap.jll.com +61 (0) 2 9220 8514 © 2020 Jones Lang LaSalle IP, Inc. All rights reserved. 33
Slide 34: Your Questions Answered
CENTURIA Q U A N T U M Your Questions Answered 34
Slide 35: Thank You
CENTURIA Q U A N T U M Thank You 35
Slide 36: Important notice and disclaimer
Important notice and disclaimer This presentation is strictly for the use of Centuria Q U A N T U M members and must not be distributed in whole or in part. It was prepared by Centuria Property Funds Limited (ABN 11 086 553 639, AFSL 231149), Centuria Property Funds No. 2 Limited (ABN 38 133 363 185
Slide 37: Centuria
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