Centuria Office Reit · ASX:COF
Centuria Office Reit — Centuria Metropolitan REIT — FY2016 Earnings Presentation
37 slides from Centuria Office Reit's earnings presentation, Aug 9, 2016
Slide 1: Centuria Metropolitan REIT FY16 Results Briefing
Centuria Metropolitan REIT FY16 Results Briefing Primary Healthcare, 203 Pacific Highway, St Leonards CENTURIA METROPOLITAN REIT | CMA:ASX | FY16 RESULTS BRIEFING 9 AUGUST 2016 | PAGE 1
Slide 2: Agenda
Agenda ˃ Section 1: FY16 Results Overview ˃ Section 2: Portfolio Overview ˃ Section 3: Capital Management ˃ Section 4: Market Overview ˃ Section 5: Outlook and Strategy CENTURIA METROPOLITAN REIT | CMA:ASX | FY16 RESULTS BRIEFING 9 AUGUST 2016 | PAGE 2
Slide 3: Section 1: FY16 Results Overview
Section 1 FY16 Results Overview CENTURIA METROPOLITAN REIT | CMA:ASX | FY16 RESULTS BRIEFING 9 AUGUST 2016 | PAGE 3
Slide 4: FY16 Financial Overview
FY16 Financial Overview Financial snapshot Statutory profit/(loss) ($m) 44.8 Statutory profit/(loss) per security (cps) 37.5 Distributable earnings ($m) 22.0 Distributable earnings per security (cps) 18.4 Annualised distributable earnings yield1 (%) 8.6 Distribution ($m) 20.3 Distribution per securi
Slide 5: FY16 Financial Highlights
FY16 Financial Highlights Active management delivering predictable and growing earnings ˃ Statutory net profit of $44.8m 18.4 cps Distributable earnings ˃ Distributable earnings ~3% above guidance ˃ Distribution paid in line with forecasts 17.0 cps ˃ Disciplined capital structure maintained Distribu
Slide 6: FY16 Operating Highlights
FY16 Operating Highlights Strong fundamentals in metropolitan office markets generating value uplift ˃ Substantial leasing success ˃ 12,493 sqm across 35 transactions1 (new leases and renewals) 97.2% ˃ Majority of leasing activity captured in Canberra and Chatswood Portfolio occupancy assets ˃ Key F
Slide 7: FY16 NTA Movement
FY16 NTA Movement Strong metropolitan office market fundamentals and valuation uplift driving NTA growth Movements in NTA $ Per Security $2.30 0.300 $2.25 $0.27 0.250 $2.20 ($0.02) ($0.02) 0.200 $2.15 $2.18 $2.10 0.150 NTA $2.05 0.100 $2.00 ($0.02) $1.95 $1.97 0.050 21cps $1.90 $1.85 0.000 +11% $1.8
Slide 8: Section 2: Portfolio Overview
Section 2 Portfolio Overview CENTURIA METROPOLITAN REIT | CMA:ASX | FY16 RESULTS BRIEFING 9 AUGUST 2016 | PAGE 8
Slide 9: Portfolio Metrics
Portfolio Metrics Portfolio well positioned to ensure income and value continue to grow Portfolio snapshot FY16 FY15 12% Number of assets (#) 13 12 17% 44% Geographic Book value ($m) 398.7 323.1 diversification (by value) WACR (%) 7.86 8.43 27% FY16 NOI ($m) 28.1 10.31 NSW QLD ACT SA Occupancy2 (%)
Slide 10: Tenant Space Requirements
Tenant Space Requirements CMA’s actively managed portfolio is well suited to attract <500sqm SME tenants, being the dominant size cohort Leasing Deals by Size Cohort 100.0% ˃ Metropolitan office markets, like 2.9% 8% 6% 90.0% 17.1% 12% 13% our CBD’s, are dominated by SME’s 14% 80.0% 14% 9% 18% occup
Slide 11: Leasing Overview
Leasing Overview Focus on leasing ensures occupancy and income are maximised ˃ 35 lease transactions completed in FY16 across 12,493 sqm1 ˃ 21 new leases across 6,467 sqm ˃ 14 renewals across 6,026 sqm 11.1% Portfolio NLA leased ˃ Average deal size of ~357 sqm ˃ Executed 8 leases2 across 5,207 sqm t
Slide 12: Tenancy Profile
Tenancy Profile Tenant diversity and contracted rental growth delivering predictable and growing earnings ˃ Top 10 tenants account for 54% of gross rental income ˃ Approximately 76 per cent of gross rental revenue derived from ASX listed, multinational, national and government tenants ˃ 94% of renta
Slide 13: Capital Expenditure
Capital Expenditure ‘Fit for purpose’ portfolio well suited to attract and retain quality tenants ˃ Well maintained property portfolio delivers services and amenity demanded by existing and prospective tenants regardless of building age ˃ FY16 base building capex less than 1% of portfolio value, inc
Slide 14: 1 Richmond Road, Keswick
1 Richmond Road, Keswick Before Before After After CENTURIA METROPOLITAN REIT | CMA:ASX | FY16 RESULTS BRIEFING 9 AUGUST 2016 | PAGE 14
Slide 15: 54 & 60 Marcus Clarke Street, Canberra
54 & 60 Marcus Clarke Street, Canberra 54 Marcus Clarke St - Before 60 Marcus Clarke St - Before 54 Marcus Clarke St - After 60 Marcus Clarke St - After CENTURIA METROPOLITAN REIT | CMA:ASX | FY16 RESULTS BRIEFING 9 AUGUST 2016 | PAGE 15
Slide 16: FY16 Valuations
FY16 Valuations Valuation uplift driven by active asset management and strong fundamentals in metropolitan office markets $398.7m 9.3% Book value Increased Portfolio Valuation2 Key valuation metrics 30 Jun 30 Jun Change 2015 2016 Book value ($m) 323.1 398.7 75.6 Independent Portfolio Valuation ($m)
Slide 17: Section 3: Capital Management
Section 3 Capital Management CENTURIA METROPOLITAN REIT | CMA:ASX | FY16 RESULTS BRIEFING 9 AUGUST 2016 | PAGE 17
Slide 18: FY16 Debt Management
FY16 Debt Management Maintained disciplined and conservative capital management ˃ Four debt tranches with NAB ˃ Includes a $10m general purpose revolving facility established at the time of 33.2% acquiring a strategic interest in GMF Gearing ˃ ˃ Conservative gearing maintained within the target rang
Slide 19: Capital Transactions
Capital Transactions Acquire quality “fit for purpose” metropolitan office assets with predictable and growing income streams 203 Pacific Highway, St Leonards Property was acquired for $43.0 million1 in partnership with Centuria unlisted funds • Positive acquisition opportunity for CMA leveraging th
Slide 20: Proposed Merger with GPT Metro Office Fund (GMF)
Proposed Merger with GPT Metro Office Metro Fund (GMF) Disciplined assessment of value and supportive partner in Centuria Capital Rationale of proposed of GMF takeover: Bid Withdrawn • Strong strategic rationale given complementary metropolitan • Pricing too expensive – CMA assessment of value uncha
Slide 21: Section 4: Market Overview
Section 4 Market Overview CENTURIA METROPOLITAN REIT | CMA:ASX | FY16 RESULTS BRIEFING 9 AUGUST 2016 | PAGE 21
Slide 22: Market Overview
Market Overview Supply and demand fundamentals for metropolitan office markets remain strong ˃ Constrained supply side fundamentals Vacancy is tighter outside the CBDs ˃ Continued withdrawal of metropolitan office space for Australian office markets prime grade vacancy rate, 2Q16 residential convers
Slide 23: Market Overview
Market Overview Limited development activity Metro Fundamentals undervalued vs CBD? Office market development pipeline, 2016 to 2018 CBD Office vs Metro Office 5 Year Net Effective Rental Growth 2.0% Brisbane Near City 1.8% North Sydney 1.8% Sydney CBD 1.6% Brisbane CBD 1.4% Parramatta 1.2% Melbourn
Slide 24: Market Overview
Market Overview Capital market inflows to metropolitan office assets continuing to strengthen High levels of liquidity in non CBD office markets However, spreads remain very wide Office market transaction volumes, 2000 to 2016* Office sector A Grade yield vs 10 Year Government Bond Rate $21,000 45%
Slide 25: Market Overview
Market Overview Domestics still dominate metro acquisition CBD Office vs Metro Office Yield Comparison $7.0 billion 10.0% 1.6% Yield Spread Metro A Grade Yield CBD A Grade Yield Domestic Offshore 9.0% $6.0 billion 1.4% 8.0% 1.2% $5.0 billion 7.0% 1.0% 6.0% $4.0 billion 5.0% 0.8% $3.0 billion 4.0% 0.
Slide 26: Section 5: Outlook and Strategy
Section 5 Outlook and Strategy CENTURIA METROPOLITAN REIT | CMA:ASX | FY16 RESULTS BRIEFING 9 AUGUST 2016 | PAGE 26
Slide 27: Outlook: Metropolitan Office
Outlook Metropolitan Office Outlook ˃ Tenant demand in metropolitan office markets is expected to remain strong due to restrained supply in the near to medium term ˃ Continued stock withdrawals for residential conversion, particularly in the North Shore (NSW), Fortitude Valley (QLD) and St. Kilda Ro
Slide 28: Outlook: Capital Markets
Outlook Capital Markets Outlook ˃ World economic uncertainty is driving domestic and international investors towards defensive investments ˃ Capital inflows into the AREIT sector remain strong due to generally low gearing and conservative management delivering reliable earnings ˃ CMA is a conservati
Slide 29: Strategy
Strategy CMA’s strategy and ongoing focus remains unchanged Fund Strategy > Acquire quality ‘fit for purpose’ metropolitan real estate assets delivering a stable and secure income streams > Maintain a disciplined capital structure Portfolio strategy > Responding to demographic change by rezoning ass
Slide 30: Guidance
Guidance ˃ FY16 distributable earnings of 18.4cps ˃ ~3% above FY16 guidance ˃ FY16 distribution of 17.0 cps delivered in equal quarterly payments > FY17 guidance > FY17 distributable earnings guidance of 18.7 – 19.0 cps > FY17 distribution guidance of 17.5 cps ˃ To be paid in equal quarterly install
Slide 31: Closing
Closing ˃ CMA’s portfolio remains in a strong position ˃ Portfolio valuation has increased and there is potential for further capital gain ˃ Portfolio occupancy of 97.2% and WALE of 4.5 years (post 30 June) ˃ Robust tenancy profile with contracted rental growth > forecast CPI ˃ 94% of leases subject
Slide 32: Appendices
Appendices CENTURIA METROPOLITAN REIT | CMA:ASX | FY16 RESULTS BRIEFING 9 AUGUST 2016 | PAGE 32
Slide 33: Appendix A – Income Statement
FY16: Appendix A – Income Statement 30 June 2016 Revenue Gross property income ($m) 36.3 Straight lining of rental income ($m) 3.2 Interest income ($m) 0.1 Total revenue ($m) 39.6 Expenses Direct property expenses ($m) (8.2) Responsible entity fees ($m) (2.0) Finance costs ($m) (4.4) Management and
Slide 34: Appendix B – Distribution Statement
FY16: Appendix B – Distribution Statement $m 30 June 2016 Statutory net profit ($m) 44.8 Straight lining of rental income ($m) (3.3) Investment properties revaluation gain / (loss) ($m) (23.2) Loss on fair value of derivatives financial instrument ($m) 2.4 Net Loss on fair value of GMF investments l
Slide 35: Appendix C – Balance Sheet
FY16: Appendix C – Balance Sheet 30 June 2016 Cash ($m) 4.9 Investment properties ($m) 398.7 Other assets ($m) 11.9 Total assets ($m) 415.6 Interest bearing liabilities ($m) 141.1 Derivative financial instruments ($m) 3.1 Other liabilities ($m) 11.2 Total liabilities ($m) 155.4 Net assets ($m) 260.1
Slide 36: Appendix D – Investment Portfolio
FY16: Appendix D – Investment Portfolio Independent WALE2 Property State Book value $/Sqm Valuation ($m)1 Cap rate4 NLA (sqm) (years) Occupancy2 Office 9 Help Street, Chatswood NSW 55.1 5,862 55.0 7.25% 9,400 2.3 96.2% 203 Pacific Highway, St Leonards 3 NSW 45.5 7,754 45.5 7.50% 11,737 4.4 100.0% 3
Slide 37: Disclaimer
Disclaimer This presentation has been prepared by Centuria Property Funds Limited Limited (ABN 11 086 553 639, AFSL 231 149) (‘CPFL’) as responsible entity of the stapled entities Centuria Metropolitan REIT No.1 (ARSN 124 364 718) and Centuria Metropolitan REIT No.2 (ARSN 124 364 656), collectively
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