Charter Hall Group · ASX:CHC
Charter Hall — Investor Presentation (October 2017)
71 slides from Charter Hall's investor presentation, Oct 10, 2017
Slide 1: Charter Hall Group Market Update
10 October 2017 Charter Hall Group Market Update Sydney Western Sydney University, 1 Parramatta Square, Parramatta NSW
Slide 2: Agenda
Charter Hall | Market Update | 10 October 2017 Agenda 1. Group Transaction Market Update David Harrison 2. Equity Flows / Direct Business Update Richard Stacker 3. Office Market Update Adrian Taylor 4. Retail Market Update Greg Chubb 5. Industrial Market Update Sean McMahon 6. Capital Market Update
Slide 3: Group Transaction Market Update
Charter Hall | Market Update | 10 October 2017 Group Transaction Market Update David Harrison, Managing Director & Group CEO 990 La Trobe St, Melbourne VIC
Slide 4: Charter Hall Transactional Activity
Charter Hall | Market Update | 10 October 2017 Charter Hall Transactional Activity • Transaction revenue is a regular feature of earnings which we expect to continue • Gross transactions in Q1 FY18 reached $1,076m Q1 FY18 Office Industrial Retail TOTAL Acquisitions $190m $121m $454m $765m Divestment
Slide 5: Total Market Transactions
Charter Hall | Market Update | 10 October 2017 Total Market Transactions Charter Hall’s share of transactions has averaged ~13% of the total market transactions volume Total Market Transaction Volume ($bn) CHC % of Total Transactions, by Sector $35b 25% 35% $30b 30% 20% $25b 25% 15% $20b 20% $15b 15
Slide 6: Activity Expected to be Similar to 2016
Charter Hall | Market Update | 10 October 2017 Activity Expected to be Similar to 2016 Australian commercial property markets transaction volumes, 2004 to 2017* • Overall volumes are slightly lower than same time in 2016, however with current transaction activity expected to be near 2016 levels by y
Slide 7: Sale & Leaseback
Charter Hall | Market Update | 10 October 2017 Sale & Leaseback • CHC continues to be a major player within the sale and leaseback market with ~$3.0bn1 sale and leaseback transactions undertaken over the last 4+ years – CHC continues to see success sourcing off-market opportunities through loyal exi
Slide 8: Recent Sale & Leaseback Activity
Charter Hall | Market Update | 10 October 2017 Recent Sale & Leaseback Activity Recent sale & leaseback case studies highlight managements capabilities and the continued confidence from tenants in CHC’s ability to work collaboratively and execute upon mutually beneficial portfolio transactions • Cha
Slide 9: Recent Sale & Leaseback Activity – Repeat Business
Charter Hall | Market Update | 10 October 2017 Recent Sale & Leaseback Activity – Repeat Business 67% of all CHC leasing activity is underpinned by repeat tenant customers. Coca Cola is a major tenant repeat customer that recently committed to a major sale & leaseback in Brisbane. • CPIF exchanged t
Slide 10: Equity Flows / Direct Business Update
Charter Hall | Market Update | 10 October 2017 Equity Flows / Direct Business Update Richard Stacker, Group Executive – Global Investor Relations Wild Breads, 45 Kiln St, Darra QLD
Slide 11: Equity Flows
Charter Hall | Market Update | 10 October 2017 Equity Flows Consistent equity flows within the funds platform • Ability to access all 3 equity sources evident in record FY17 equity raised • Momentum in equity continuing in FY18 and expected to continue across all 3 equity sources • Local and offshor
Slide 12: Wholesale Equity Flows
Charter Hall | Market Update | 10 October 2017 Wholesale Equity Flows Charter Hall continues to see a demand from local and offshore investors • Equity flowing across 4 regions from 14 countries • >50% of FY17 equity flow from offshore investors • Australian real estate still attractive on a relativ
Slide 13: Wholesale Equity Flows – Investor Intentions
Charter Hall | Market Update | 10 October 2017 Wholesale Equity Flows Wholesale Investors intentions – will allocations continue in the short & long term • Across most alternative investments key investors concerns are valuation / pricing and deal flow • Notwithstanding these concerns: – Returns fro
Slide 14: Unlisted Direct Managed Funds
Charter Hall | Market Update | 10 October 2017 Unlisted Direct Managed Funds Office Retail Industrial Diversified $9.2bn $5.9bn $5.3bn CHOT CPOF1 BSWF1 LWHP RP22 LWIPs3 CLP CPIF $2.6bn $3.5bn $0.5bn $0.9bn $0.1bn $0.6bn $1.3bn $2.5bn Wholesale Equity 75 Mandates RP6 RP1 CPRF $0.6bn $0.3bn $0.3bn $0.
Slide 15: Grow the Direct Business with Resilience
Charter Hall | Market Update | 10 October 2017 Grow the Direct Business with Resilience Charter Hall Direct is an important component of Charter Hall’s funds business The focus is on growth that is sustainable and institutional quality funds/assets that will go through cycles • Gearing ranges in fun
Slide 16: Unlisted Retail Environment
Charter Hall | Market Update | 10 October 2017 Unlisted Retail Environment • The unlisted retail sector AUM has continued to decline as managers wind Unlisted retail sector AUM down / list on ASX their funds. The market is now dominated by a few key players • Charter Hall’s unlisted retail products
Slide 17: Direct FUM
Charter Hall | Market Update | 10 October 2017 Direct FUM Growth in FUM has been combined with a continued improvement in the portfolio quality Growth in Direct Funds Under Management • Growth in FUM through FY18-19 will be driven by existing and new funds: ‒ DOF 19% p.a compound growth rate from FY
Slide 18: Fund Performance
Charter Hall | Market Update | 10 October 2017 Fund Performance Above benchmark performance achieved across the majority of Direct funds 18
Slide 19: Adviser Friendly Product
Charter Hall | Market Update | 10 October 2017 Adviser Friendly Product Fund series now set up for the “Many to one” benefits of distributing through financial advisers Why Charter Hall Direct open funds are more suitable for advisers? • Advisers margins are under pressure - product needs to be easi
Slide 20: Direct (Unadvised) Investors – Digital
Charter Hall | Market Update | 10 October 2017 Direct (Unadvised) Investors – Digital increasingly important Marketing efforts focused on continuing to leverage Direct’s market leading brand position • Spend focused across digital, print, events, research and PR • Customer insights gained from digit
Slide 21: Office Market Update
Charter Hall | Market Update | 10 October 2017 Office Market Update Adrian Taylor, Group Executive – Office Artist impression of 11 Breakfast Creek Road, Newstead QLD
Slide 22: Office Funds Management Portfolio
Charter Hall | Market Update | 10 October 2017 Office Funds Management Portfolio Portfolio Portfolio No. of No. of WALE1 Occupancy1 WACR1 Value ($bn) Size (000 sqm)1 Assets Tenant Customers1 (years) (%) (%) 30 Sep 17 9.2 989 50 470 6.5 98.5% 5.87% Diversification by Geography1 Diversification by Fun
Slide 23: Charter Hall Managed Office Property Platform
Charter Hall | Market Update | 10 October 2017 Charter Hall Managed Office Property Platform Office Investment Management is a core competency with integrated capability in capital cities 88 real estate professionals QUEENSLAND (Team members) 10 properties Office & Asset Management: 2 9 properties Q
Slide 24: Office Managed Funds
Charter Hall | Market Update | 10 October 2017 Office Managed Funds Office $9.2bn Retail $5.9bn Industrial $5.3bn CHOT CPOF1 BSWF1 LWHP RP22 LWIPs3 CLP CPIF $2.6bn $3.5bn $0.5bn $0.9bn $0.1bn $0.6bn $1.3bn $2.5bn Wholesale Equity 75 Mandates RP6 RP1 CPRF $0.6bn $0.3bn $0.3bn $0.2bn DOF PFA Workzone
Slide 25: Favourable Office Market Outlook
Charter Hall | Market Update | 10 October 2017 Favourable Office Market Outlook Population has been the primary driver of tenant demand, with a very strong outlook • While peaks and troughs emerge from economic cycles, occupied office stock is fundamentally driven by Australia’s total population lev
Slide 26: Office Macro Drivers Favourable
Charter Hall | Market Update | 10 October 2017 Office Macro Drivers Favourable • Employment and population growth forecasts exceed other developed economies • Over the year to Jun-17, 175,400 full-time jobs were created across Australia • Australian job ads as at Jun-17 risen to their highest level
Slide 27: Office Fundamentals Favourable
Charter Hall | Market Update | 10 October 2017 Office Fundamentals Favourable Australian CBD Office Rent Forecast 2017-2026 • Secondary CDB occupancy has contracted for the past five consecutive Brisbane to lead all markets over the next 10 years years as tenant focus on buildings with quality inter
Slide 28: Recent Office Transactions
Charter Hall | Market Update | 10 October 2017 Recent Office Transactions • Office acquisitions typically demonstrate strong tenant covenants, long leases, strong fixed rent reviews and lower capex • 15 non-core office assets sold in FY16/17 to enhance portfolio quality Architect image Architect Arc
Slide 29: Charter Hall Integrated Development Capability
Charter Hall | Market Update | 10 October 2017 Charter Hall Integrated Development Capability • Strong track record creating and delivering world class office projects – 360,000sqm of NLA across 14 projects developed to date • Pipeline of ~$2.35 billion across 9 assets which will create ~265,000sqm
Slide 30: 1 Parramatta Square Video
Charter Hall | Market Update | 10 October 2017 1 Parramatta Square Video 30
Slide 31: Development Committed & Pipeline ~$2.35bn, ~265,000sqm
Charter Hall | Market Update | 10 October 2017 Development Committed & Pipeline ~ $2.35bn, ~265,000sqm Focus on creating build to core opportunities FY 2018 FY 2019 FY 2020+ 900 Ann Street, 105 Philip Street, Raine Square, GPO Exchange, 130 Lonsdale 11 Breakfast 140 Lonsdale Brisbane Square 370 Quee
Slide 32: Tenant Customer Themes
Charter Hall | Market Update | 10 October 2017 Tenant Customer Themes Current feedback themes are summarised below, and are all underpinned by innovation: 1. Employee Experience should be part of the asset strategy – Service and the Physical space. Are we fostering a connected community? No one forg
Slide 33: Sustainability, Wellbeing, Community & Innovation
Charter Hall | Market Update | 10 October 2017 Sustainability, Wellbeing, Community & Innovation INNOVATION Charter Hall has Australia’s largest Green Star footprint with 178 Green Star Performance ratings across operating assets, and 18 Green Star Design and As Built ratings in our developments Nat
Slide 34: Flexispace
Charter Hall | Market Update | 10 October 2017 Flexispace No. 1 Martin Place, Sydney and 570 Bourke Street, Melbourne 34
Slide 35: Office Funds Outperforming
Charter Hall | Market Update | 10 October 2017 Office Funds Outperforming • CPOF was granted inclusion into the IPD Core Office Index from July 2017 • CPOF was the highest performing multi-asset fund (all sectors) over 1,2 and 3 years and number two over 5 years • If CHOT were in the Index, it would
Slide 36: Retail Market Update
Charter Hall | Market Update | 10 October 2017 Retail Market Update Greg Chubb, Group Executive - Retail Lansell Square, Bendigo VIC
Slide 37: Retail Funds Management Portfolio
Charter Hall | Market Update | 10 October 2017 Retail Funds Management Portfolio Portfolio Portfolio No. of No. of WALE1 Occupancy1 WACR1 Value ($bn) Size (000 sqm)1 Assets Tenant Customers1 (years) (%) (%) 30 Sep 17 5.9 1,228 173 2,030 8.5 97.5% 6.08% Diversification by Geography1 Diversification b
Slide 38: Retail Managed Funds
Charter Hall | Market Update | 10 October 2017 Retail Managed Funds Office $9.2bn Retail $5.9bn Industrial $5.3bn CHOT CPOF1 BSWF1 LWHP RP22 LWIPs3 CLP CPIF $2.6bn $3.5bn $0.5bn $0.9bn $0.1bn $0.6bn $1.3bn $2.5bn Wholesale Equity 75 Mandates RP6 RP1 CPRF $0.6bn $0.3bn $0.3bn $0.2bn DOF PFA Workzone
Slide 39: Retail Fund Performance
Charter Hall | Market Update | 10 October 2017 Retail Fund Performance • The Retail portfolio continues to track strongly against the MSCI/IPD Index all Retail funds considerably outperforming the index over the three years to 30 June 2017 (or since inception) • We continue to divest smaller assets
Slide 40: Retail Strategy
Charter Hall | Market Update | 10 October 2017 Retail Strategy Convenience and community focussed VISION The pre-eminent owner and manager of Australian long WALE and non-discretionary retail assets Key Drivers Active asset management Enhance portfolio quality Attract and retain talent Selective acq
Slide 41: Charter Hall Integrated Retail Platform
Charter Hall | Market Update | 10 October 2017 Charter Hall Integrated Retail Platform Focussed on convenience and community • A fully integrated management structure, over 150 property professionals provide end-to-end retail tenant led solutions • Specific focus on convenience based non-discretiona
Slide 42: Our Sustainability Achievements
Charter Hall | Market Update | 10 October 2017 Our Sustainability Achievements 3.5 Star Average 62 Green Star 72 Climate Risk Inaugural NABERS Performance Ratings Ratings GRESB Rating Energy Rating CQR NATIONAL 3.5 NABERS ENERGY RETAIL WEIGHTED AVERAGE RATING ● Energy pricing strategy delivering ● L
Slide 43: Retail Markets
Charter Hall | Market Update | 10 October 2017 Retail Markets • Over the past 20 years Charter Hall’s preferred retail exposures of food-anchored and hardware & garden centres have shown superior growth in retail trade. Led by trade in supermarkets, non-discretionary retail spending has now overtake
Slide 44: Changing Consumption Patterns
Charter Hall | Market Update | 10 October 2017 Changing Consumption Patterns • Continued increase in consumption of food, retail and catering • Strong performance from supermarkets continues • Changes to specialty mix reflecting shift to food and services • Convenience and community focus demonstrat
Slide 45: Retail Case Study - Acquisition
Charter Hall | Market Update | 10 October 2017 Retail Case Study - Acquisition Arana Hills Plaza, QLD • Acquired by CQR in December 2016 for $67.1m Acquisition • Subregional centre with total GLA of 16,406sqm, anchored by Coles, Kmart and Aldi with 23 specialty shops, 4 kiosks and service station Va
Slide 46: Retail Case Study – Development
Charter Hall | Market Update | 10 October 2017 Retail Case Study – Development Lake Macquarie Fair, NSW • Integration of a small adjoining neighbourhood centre and Centre repositioning to Project Forecast increase GLA from 20,343sqm to 22,273sqm comprising: Project Cost $58.3m • Replacement of Coles
Slide 47: Retail Case Study – Small Projects
Charter Hall | Market Update | 10 October 2017 Retail Case Study – Small Projects Goulburn Plaza, NSW • Acquired by CQR in August 2015 for $67m Acquisition Current • Opportunity identified to reset the Coles lease and carry out an expansion of the supermarket by approximately 300 sqm Value $67.0m $8
Slide 48: Industrial Market Update
Charter Hall | Market Update | 10 October 2017 Industrial Market Update Sean McMahon, Chief Investment Officer & Group Executive – Industrial 485 Dohertys Rd, Truganina VIC
Slide 49: Industrial Funds Management Portfolio
Charter Hall | Market Update | 10 October 2017 Industrial Funds Management Portfolio Portfolio Portfolio No. of No. of WALE1 Occupancy1 WACR1 Value ($bn) Size (m sqm)1 Assets Tenant Customers1 (years) (%) (%) 30 Sep 17 5.3 2,840 111 158 9.2 97.4% 6.41% Diversification by Geography Diversification by
Slide 50: Industrial Managed Funds
Charter Hall | Market Update | 10 October 2017 Industrial Managed Funds Office $9.2bn Retail $5.9bn Industrial $5.3bn CHOT CPOF1 BSWF1 LWHP RP22 LWIPs3 CLP CPIF $2.6bn $3.5bn $0.5bn $0.9bn $0.1bn $0.6bn $1.3bn $2.5bn Wholesale Equity 75 Mandates RP6 RP1 CPRF $0.6bn $0.3bn $0.3bn $0.2bn DOF PFA Workz
Slide 51: Industrial Fund Performance
Charter Hall | Market Update | 10 October 2017 Industrial Fund Performance • Charter Hall industrial funds have performed strongly over the past 3 years and continue to do so supported by solid economic fundamentals and long WALE leases to quality tenant covenants in key metropolitan locations withi
Slide 52: Industrial Market Update
Charter Hall | Market Update | 10 October 2017 Industrial Market Update Corporate Revenue Growth in Key Sectors • Industrial tenant demand continues to gather momentum with leasing activity totalling 2.22 million square metres over the 12 months to FY- 17, up from 1.79 million square metres leased i
Slide 53: Industrial Market Update – Demand Analysis
Charter Hall | Market Update | 10 October 2017 Industrial Market Update – Demand Analysis Material uplift evident in the past 12 months • Leasing activity in FY-17 was led by take-up in Sydney and Melbourne which accounted for 72% of take-up recorded nationally. • In Q2-17, leasing activity in Perth
Slide 54: Industrial Market Update – Supply Analysis
Charter Hall | Market Update | 10 October 2017 Industrial Market Update – Supply Analysis Stock under construction presently low, with high commitment rate • Of the industrial space currently under construction, 97% is being developed is Melbourne, Brisbane and Sydney • Pre-commitment rates remain h
Slide 55: Industrial Sector Trends
Charter Hall | Market Update | 10 October 2017 Industrial Sector Trends Current levels of infrastructure investment and population growth support strong industrial sector expansion Structural Old facilities are becoming obsolete or converted to residential creating further need for prime industr
Slide 56: Charter Hall Approach
Charter Hall | Market Update | 10 October 2017 Charter Hall Approach Charter Hall’s Major Cross Sector Tenant Customer Relationships • Charter Hall is well positioned to capitalise on these evolving trends • Multi-sector relationship with key major tenants are enabling early phase discussions on fut
Slide 57: Tenant Customer Case Study
Charter Hall | Market Update | 10 October 2017 Tenant Customer Case Study Challenge 21,500sqm facility was being developed at CPIF’s 2 Hume Hwy 1 Chullora for Fastway Couriers on a 10-year pre-lease 2 Hume Hwy Chullora 21,500sqm Australia Post, CPIF’s tenant at the nearby 56 Anzac Ave Chullora 2 occ
Slide 58: Development Approach
Charter Hall | Market Update | 10 October 2017 Development Approach Sydney Development Strategy Targeting infill sites that: Have existing industrial zoning Can be immediately developed Are strategic in nature Have easy access to orbital road network The strategy aims to both capitalise
Slide 59: Capital Market Update
Charter Hall | Market Update | 10 October 2017 Capital Market Update Russell Proutt, Chief Financial Officer No.1 Martin Place, Sydney NSW
Slide 60: Capital Deployment
Charter Hall | Market Update | 10 October 2017 Capital Deployment • Deployment of the May 2017 equity raise continues to be ahead of schedule with $250m deployed into identified investments. • Notably since the announcement of the FY17 Results Charter Hall: - Deployed $30m into the LWHP to help fund
Slide 61: Capital Management Priorities
Charter Hall | Market Update | 10 October 2017 Capital Management Priorities Debt expiry profile ($m)1 2,756 • Diversification (ongoing) 2,245 • Expanded access – ability to source volume • Support the growth of FUM and platform 1,452 • Conservative financing profile 800 700 - Low gearing 382 276 -
Slide 62: Group Outlook
Charter Hall | Market Update | 10 October 2017 Group Outlook David Harrison, Managing Director & Group CEO 333 George Street, Sydney NSW
Slide 63: Our Strategy
Charter Hall | Market Update | 10 October 2017 Our Strategy We use our property expertise to access, deploy, manage and invest equity in our core real estate sectors – office, retail and industrial – to create value and generate superior returns for our customers. ACCESS DEPLOY MANAGE INVEST Accessi
Slide 64: Funds Under Management Growth
Charter Hall | Market Update | 10 October 2017 Funds Under Management Growth Funds under management movement ($bn) Funds under management by equity source ($bn) $0.8bn ($0.3bn) $0.0bn $0.1bn $20.4bn $19.8bn $20.4bn $2.8bn $17.5bn $2.8bn $19.8bn $2.5bn $4.3bn $13.6bn $4.1bn $2.5bn $11.4bn $1.9bn $9.9
Slide 65: Property Investment Portfolio
Charter Hall | Market Update | 10 October 2017 Property Investment Portfolio Portfolio No. of WALE1 Occupancy1 WARR1 WACR1 WADR1 Value ($m) Properties (years) (%) (%) (%) (%) 30 Sep 17 1,577 297 7.4 97.7 3.6 6.09 7.3 Diversification by Geography1 Diversification by Fund Diversification by Sector WA
Slide 66: Conclusion
Charter Hall | Market Update | 10 October 2017 Conclusion We believe the investment landscape will continue to accommodate growth • Relative attractiveness of commercial property • Continued equity flows from all equity sources • We continue to expect asset values to remain well supported • With $3
Slide 67: Appendix
Charter Hall | Market Update | 10 October 2017 Appendix 1 Shelley St, Sydney NSW
Slide 68: Fund Key and Glossary
Charter Hall | Market Update | 10 October 2017 Fund Key and Glossary Listed Entities Direct Funds CHC Charter Hall Group BW Trust BW Trust (Direct syndicate) CQR Charter Hall Retail REIT CDC Charter Hall Direct CDC Trust DIF2, DIF3, DIF4 Direct Industrial Fund series CLW Charter Hall Long WALE REIT
Slide 69: Contact Us
Charter Hall | Market Update | 10 October 2017 Contact Us David Harrison Russell Proutt Managing Director & Group CEO Chief Financial Officer Charter Hall Group Charter Hall Group T: +61 2 8651 9142 T: +61 2 8651 9493 david.harrison@charterhall.com.au russell.proutt@charterhall.com.au Sean McMahon R
Slide 70: Disclaimer
Charter Hall | Market Update | 10 October 2017 Disclaimer This presentation has been prepared by Charter Hall Funds Management Limited ACN 082 991 786 (together, with its related bodies corporate, the Charter Hall Group). This presentation has been prepared without reference to your particular inves
Slide 71: www.charterhall.com.au
Sydney Charter Head Hall | Office Level 20, No.1 Martin Place Sydney, NSW, 2000 T: +61 2 8651 9000 Melbourne Level 12, 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 Square 225 St
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