Charter Hall Retail Reit · ASX:CQR
Charter Hall Retail Reit — FY2015 Earnings Presentation
61 slides from Charter Hall Retail Reit's earnings presentation, Aug 17, 2015
Slide 1: Charter Hall Retail REIT 2015 Full Year Results
For personal use only 17 August 2015 Charter Hall Retail REIT 2015 Full Year Results
Slide 2: Agenda
Agenda For personal use only 1 Full Year Results 2 Operational Performance 3 Portfolio Investments 4 Financial Performance 5 Equity Raise 6 Strategy and Outlook Scott Dundas Philip Schretzmeyer Fund Manager Deputy Fund Manager Charter Hall Retail REIT | Full Year Results | 30 June 2015 2
Slide 3: Full Year Results
For personal use only Full Year Results
Slide 4: Key Achievements
Key Achievements For personal use only Full Year Ended 30 June 2015 8.7% increase Operating earnings NTA per unit up 5.6% in portfolio value of 29.70 cpu to $3.59 to $2.16 billion Moody’s Baa1 credit Look through Occupancy stable rating assigned to the gearing down at 98.4% REIT 3.6% to 33.6% Charte
Slide 5: Consistent Delivery on Strategy
Consistent Delivery on Strategy For personal use only Highlights Strategy Achievements Active management • Occupancy maintained at 98.4% • Same property NOI growth of 2.4% 1 • Specialty rent growth of 1.5% achieved from 122 renewals and 185 new leases • Executed 15 major lease deals during the year
Slide 6: Full Year Results
Full Year Results For personal use only 30 June 2015 Key metrics FY 15 FY 14 Movement Statutory profit $162.5m $85.2m +90.7% Operating earnings1 $110.8m $105.3m +5.2% Operating earnings1 per unit 29.70 cents 29.60 cents +0.3% Distributions per unit 27.50 cents 27.30 cents +0.7% Payout ratio2 92.6% 9
Slide 7: Operational Performance
Operational Performance For personal use only Active Management
Slide 8: Portfolio Summary
Portfolio Summary For personal use only Same Property Summary by Asset Type # GLA (‘000sqm) Occupancy1 NOI Growth Sub-regional shopping centres 17 243.6 98.5% 2.7% Neighbourhood shopping centres 39 224.7 97.9% 2.5% Freestanding supermarkets 17 56.1 100.0% 1.0% Total 73 524.4 98.4% 2.4% Portfolio and
Slide 9: Anchor Tenants
Anchor Tenants For personal use only • Wesfarmers and Woolworths businesses represent Top five tenants by annual base rent 52% of annual base rent − 40% from Supermarkets and Liquor − 12% from Discount Department Stores Woolworths 26.9% • 45% of anchor tenants are paying turnover rent1 • 21% are wit
Slide 10: Introduction of Aldi
Introduction of Aldi For personal use only • In line with Aldi’s plans to expand into the Western Australia and South Australia markets, CQR has recently completed its first Aldi supermarket lease • Aldi will form part of the redevelopment at Secret Harbour, WA • Aldi operates over 7,000 stores acro
Slide 11: Speciality Tenants
Speciality Tenants For personal use only Summary % of Occupancy MAT Specialty occupancy cost of 9.3% by Category ABR Cost1 Growth1 • Specialty MAT growth improved to 2.8% Food catering 8% 12.3% 0.9% • Average specialty gross rent $812/sqm Services 8% 11.8% 2.6% • Sales productivity of $8,741/sqm Gen
Slide 12: Portfolio Investments
Portfolio Investments For personal use only Enhancing the Portfolio Quality 12
Slide 13: Revaluations
Revaluations For personal use only • Property valuations increased by $86.7 million or 4.2% over the year • Weighted average cap rates continued to firm at June, with full year compression of 50 basis points driving NTA growth for the REIT • Value uplift driven by cap rates with adopted valuation re
Slide 14: Capital Transactions
Capital Transactions For personal use only Capital Recycling • Continues strategy of enhancing the REIT’s portfolio quality by recycling out of non-core properties into larger, higher growth potential properties • Average Australian asset value has increased from $28.6 million at June 2014 to $32.7
Slide 15: Case Study: Brickworks Marketplace, SA
Case Study For personal use only Brickworks Marketplace, SA Key metrics (100% interest) Purchase price on completion $75.8m Year one Yield 6.9% Gross lettable area (GLA) 16,896sqm Anchor rent (% of total centre ABR) 50% • Shopping centre opened 25 June and acquired in existing Retail Partnership No.
Slide 16: Redevelopments
Redevelopments For personal use only Current and Completed Projects Enhancing Portfolio Quality Project Project Stabilised Completion Description Status cost ($m) Yield1 Lansell Square, 42.6 8.5% Jun 15 New Coles supermarket and expansion Construction complete and majors now Vic. of Woolworths tradi
Slide 17: Financial Performance
Financial Performance For personal use only Prudent Capital Management
Slide 18: Operating Earnings and Distributions
Operating Earnings and Distributions For personal use only • FY15 Operating earnings is in line with market guidance A$m FY15 FY14 • Sub-regional NOI increased following the completion of Net property income redevelopments at Lansell, Singleton and South Hedland • Sub-regional 56.0 46.6 and the acqu
Slide 19: Funds from Operations (FFO)
Funds from Operations (FFO) For personal use only FY15 ($m) FY15 (cpu) Statutory Profit 162.5 43.55 Revaluation adjustments on investment properties (82.2) (22.03) Unrealised losses on derivatives 13.4 3.59 Loss on sale of investment properties 1.6 0.43 Transfer from reserves of cumulative FX losses
Slide 20: Balance Sheet
Balance Sheet For personal use only • Australian properties under management increased Jun 15 Jun 14 due to: Australian properties 1,938 1,776 − Development, maintenance capex and lease JV properties 225 213 incentives totalling $61 million − Acquisitions of $63 million Offshore properties - 126 − R
Slide 21: Case Study – Debt Restructure
Case Study – Debt Restructure For personal use only • In July 2015, the REIT completed several key initiatives to restructure its debt funding platform: – US$200 million (A$252 million) US Private Placement (USPP) issuance – Restructured syndicated bank debt facility with a total facility limit of $
Slide 22: Debt Maturity Profile
Debt Maturity Profile For personal use only • Debt maturity profile is now well spread, reducing Debt Maturity Profile post refinance strategy2 refinance risk for the REIT • Next focus is on the 18 month bank debt facility – FY16 management are actively looking at potential refinancing FY17 alternat
Slide 23: Equity Raise
Equity Raise For personal use only Charter Hall Retail REIT | Full Year Results | 30 June 2015 23
Slide 24: Equity Raise Transaction Overview
Equity Raise For personal use only Transaction Overview • CQR has contracted to acquire a portfolio of two high quality sub-regional shopping centres located in Goulburn, NSW and Katherine, NT (the Portfolio) − Combined acquisition price of $94.9 million1, reflecting a 7.2% initial yield − Both prop
Slide 25: Asset acquisitions – Goulburn Plaza, NSW
Asset acquisitions For personal use only Property overview – Goulburn Plaza, NSW Property details • Situated in the Southern Tablelands of NSW, Goulburn is Valuation $67.0 million strategically located between Sydney and Canberra Initial yield 7.0% • Goulburn Plaza was significantly redeveloped in 2
Slide 26: Asset acquisitions – Katherine Central, NT
Asset acquisitions For personal use only Property overview – Katherine Central, NT Property details • Situated south-east of Darwin on the Katherine river servicing Valuation $27.9 million a population of 24,000 Initial yield 8.3% − Supported by proximity to Tindal RAAF Base Occupancy 98.6% • Kather
Slide 27: Transaction impact
Transaction impact For personal use only Key financial metrics • Transaction is expected to be: − Neutral to FY16 operating earnings per unit, incorporating impact of FY15 non-core disposals − Accretive to FY17 operating earnings per unit, given higher growth potential of acquired assets • Look thro
Slide 28: Offer Details
Offer Details For personal use only $50m fully underwritten institutional placement Offer Price Summary Metric • Units will rank equally with existing CQR units Offer Price (per unit) $4.02 Discount to close on 14 August 2015 (3.8%) Discount to 5-day VWAP (4.3%) Institutional offer opens 17 August 2
Slide 29: Strategy and Outlook
For personal use only Strategy and Outlook
Slide 30: Retail Environment
Retail Environment For personal use only • Australian retail sales have been improving over the past 12 Retail Sales Growth1 months with NSW and Vic recording the highest level of sales growth • Lower AUD and consistent levels of employment have supported the retail sector in a period with lower tha
Slide 31: REIT Strategy
REIT Strategy For personal use only The pre-eminent owner and manager of Australian neighbourhood and sub-regional Goal supermarket anchored shopping centres that optimises returns for our investors Active Enhance Prudent management portfolio quality capital management • Maintaining strong • Value e
Slide 32: FY16 Outlook
FY16 Outlook For personal use only • We confirm that, barring unforeseen events, the REIT’s FY16 guidance for operating earnings is between 30.25 cents and 30.75 cents per unit • Distribution payout ratio range is expected to be between 90% and 95% of operating earnings Lansell Square, Vic
Slide 33: Questions
For personal use only Questions
Slide 34: Annexures
For personal use only Annexures
Slide 35: Annexures contents
Annexures For personal use only 1 Detailed Earnings 36 2 NTA & Cashflow Reconciliation 37 3 Debt & Interest Rate Management 38 4 Capital Expenditure & Redevelopment Pipeline 39 5 Lease Expiry Profiles 41 6 Property Valuations 42 7 Industry & Market Overview 46 8 Typical Lease Structures 48 9 Histori
Slide 36: Detailed Earnings
Annexure 1 For personal use only Detailed Earnings (All Values in A$m) Jun 2015 Jun 2015 Jun 2015 Jun 2014 Share of profits from investment in JV’s Statutory Profit Unrealised & Capital Items Operating Earnings Operating Earnings Net property income • Sub-regional 8.4 - 8.4 8.1 • Neighbourhood 6.6 0
Slide 37: NTA per unit reconciliation
Annexure 2 For personal use only NTA per unit reconciliation +0.02 $3.59 +0.20 $3.40 (0.03) NTA at A$ interest rate Property revaluation uplift Operating earnings NTA at 30 Jun 2014 swap MtM (net of distribution) 30 Jun 2015 Operating earnings to operating cash flows reconciliation ($2.7m) $5.1m $11
Slide 38: Debt and Interest Rate Management
Annexure 3 For personal use only Debt and Interest Rate Management Debt maturities & covenants Post refinance initiatives Limit Drawn (All Values CQR Share) (A$m) (A$m) Rate Maturity Financial Covenants Covenant Actual LVR 55.0% 34.2% JV debt – CHRP1 92.6 74.9 Floating Jul-18 ICR 2.0x 3.6x USPP 251.
Slide 39: Capital Expenditure
Annexure 4 For personal use only Capital Expenditure Lease Total Maintenance (A$m, CQR Share) Maintenance Incentives and Incentives Redevelopment Australia FY15 6.1 3.8 9.9 51.3 FY14 7.8 2.3 10.1 59.4 FY13 6.1 1.8 7.9 60.9 Charter Hall Retail REIT | Full Year Results | 30 June 2015 39
Slide 40: Major Projects Redevelopment Pipeline
Annexure 4 For personal use only Major Projects Redevelopment Pipeline FY14 FY15 FY16 FY17 FY18 Mackay (Stage 2) | $26.1m 44 Rosebud | $53.2m 38 Carnes Hill | $29.2m 36 Allenstown (Stage 2) | $27.4m 32 Wanneroo | $17.6m 30 Albany Plaza | $8.5m 28 Lake Macquarie | $44.5m 25 Mackay (Stage 1) | $5.4m 1
Slide 41: Lease Expiry Profile
Annexure 5 For personal use only Lease Expiry Profile 80% 70% 60.5% Anchor tenant expiry 60% WALE 10.7 years 50% 40% 30% 20% 10% 7.4% 6.7% 9.3% 4.8% 4.2% 1.2% 4.4% 1.5% 0% Portfolio WALE of 7.0 years FY16 FY17 FY18 FY19 FY20 FY21 FY22 FY23 FY24+ 30% 25% 19.8% 20% 18.2% Specialty tenant expiry 15.9%
Slide 42: Property Valuations as at June 2015
Annexure 6 For personal use only Property Valuations as at 30 June 2015 Book Value State Property Location Asset Type Interest % ($m) Cap Rate ACT Dickson Woolworths Dickson Freestander 100% 16.5 6.50% Erindale Shopping Centre Wanniassa Neighbourhood 100% 36.3 7.30% Manuka Terrace Manuka Neighbourho
Slide 43: Property Valuations as at June 2015
Annexure 6 For personal use only Property Valuations as at 30 June 2015 Book Value State Property Location Asset Type Interest % ($m) Cap Rate NSW Rutherford Marketplace Rutherford Neighbourhood 50% 16.5 6.75% Singleton Plaza1 and Square Singleton Sub-regional 100% 117.4 6.75% Sunnyside Mall Murwill
Slide 44: Property Valuations as at June 2015
Annexure 6 For personal use only Property Valuations as at 30 June 2015 Book Value State Property Location Asset Type Interest % ($m) Cap Rate SA Brickworks Marketplace1 Torrensville Sub-regional 50% 3.8 n/a Renmark Plaza Renmark Sub-regional 100% 27.2 7.75% Southgate Plaza Morphett Vale Sub-regiona
Slide 45: Property Valuations as at June 2015
Annexure 6 For personal use only Property Valuations as at 30 June 2015 Book Value State Property Location Asset Type Interest % ($m) Cap Rate WA Albany Plaza Albany Sub-regional 100% 55.4 7.50% Ballajura Central Ballajura Neighbourhood 100% 11.0 6.75% Carnarvon Central Carnarvon Neighbourhood 100%
Slide 46: Industry and market overview - Australian retail market
Annexure 7 For personal use only Industry and market overview - Australian retail market Average GLA Type (excl freestanding supermarkets) Total centres Total GLA (sqm) (sqm) City Centre 110 946,827 8,608 Super Regional 24 2,418,546 100,773 Major Regional 47 2,892,986 61,553 Regional 55 2,071,411 37
Slide 47: Australian retail market – current owners
Annexure 7 For personal use only Industry and market overview - Australian retail market – current owners Total Total GLA Proportion GLA Proportion Neighborhood Total (‘000 of total Sub-regional Total (‘000 of total centres centres sqm) (by GLA) GLA <25,000sqm centres sqm) (by GLA) Private Investors
Slide 48: Typical lease structures
Annexure 8 For personal use only Typical lease structures Attributes vary across different leases however key characteristics of supermarket and specialty leases are outlined below: Supermarket tenant leases Specialty tenant leases Lease term 15 - 20 years with options Typically average 5 years Base
Slide 49: CQR Australian portfolio – historical performance
Annexure 9 For personal use only CQR Australian portfolio – historical performance Proven and consistent performance over time Dec- Jun- Dec- Jun- Dec- Jun- Dec- Jun- Dec- Jun- Dec- Jun- 09 10 10 11 11 12 12 13 13 14 14 15 Number of properties 61 63 64 71 72 74 75 74 77 77 78 73 Occupancy 99.0% 99.1
Slide 50: Glossary
Annexure 10 For personal use only Glossary • ABR: Annual base rent – base rent only, excludes outgoings and turnover rent • GLA: Gross lettable area • Gross rent: Base rent and outgoings • MAT: Moving annual turnover – calculated as a sum of rolling 12 month sales • Occupancy cost: Calculated as the
Slide 51: Equity Raise - Risk factors
Annexure 11 For personal use only Equity Raise - Risk factors Investors should carefully consider the risks factors described below. Additional risk factors and uncertainties that are not known to the Responsible Entity, Charter Hall Retail Management Limited (CHRML) at the time of this Offer or whi
Slide 52: Equity Raise - Risk factors (continued)
Annexure 11 For personal use only Equity Raise - Risk factors (continued) Risks relating to CQR (continued) Capital expenditure CQR remains responsible for capital repairs for its share of the properties under the terms of the leases. CQR may incur capital expenditure for unforeseen structural probl
Slide 53: Equity Raise - Risk factors (continued)
Annexure 11 For personal use only Equity Raise - Risk factors (continued) Risks relating to CQR (continued) Change of responsible entity If the Responsible Entity is replaced as the responsible entity of CQR by an entity that is not a subsidiary of the Charter Hall Group, there is the potential for
Slide 54: Equity Raise - Risk factors (continued)
Annexure 11 For personal use only Equity Raise - Risk factors (continued) General market risks Economic and market conditions CQR may be adversely impacted by many factors including changes in general economic conditions such as interest rates, inflation, retail spending levels, consumer confidence
Slide 55: Equity Raise – International Offer Restrictions
Annexure 11 For personal use only Equity Raise – International Offer Restrictions This document does not constitute an offer of New Units in any jurisdiction in which it would be unlawful. New Units may not be offered or sold in any country outside Australia except to the extent permitted below. Hon
Slide 56: International Offer Restrictions (continued)
Annexure 11 For personal use only Equity Raise – International Offer Restrictions (continued) New Zealand This document has not been registered, filed with or approved by any New Zealand regulatory authority under the Financial Markets Conduct Act 2013 (New Zealand) (the "FMC Act"). The New Units ar
Slide 57: International Offer Restrictions (continued)
Annexure 11 For personal use only Equity Raise – International Offer Restrictions (continued) South Africa This document does not, nor is it intended to, constitute a prospectus prepared and registered under the South African Companies Act and may not be distributed to the public in South Africa. An
Slide 58: International Offer Restrictions (continued)
Annexure 11 For personal use only Equity Raise – International Offer Restrictions (continued) United States This document does not constitute an offer to sell, or a solicitation of an offer to buy, securities in the United States. Any securities described in this document have not been, and will not
Slide 59: Further Information
Further Information For personal use only Scott Dundas Philip Schretzmeyer Fund Manager Deputy Fund Manager Charter Hall Retail REIT Charter Hall Retail REIT T: +61 2 8651 9273 T: +61 2 8651 9246 scott.dundas@charterhall.com.au philip.schretzmeyer@charterhall.com.au Nick Kelly Head of Investor Relat
Slide 60: Important Notice
Important Notice This presentation has been prepared by Charter Hall Retail Management Limited (ABN 46 069 709 468) (AFS Licence No. 246996) as responsible entity of Charter Hall Retail REIT (CQR), in relation to a placement For personal use only (Placement) of new fully-paid ordinary units in CQR (
Slide 61: For personal use only
Sydney Head Office Level 20, No.1 Martin Place, Sydney, NSW, 2000 T: +61 2 8651 9000 For personal use only Melbourne Level 18, 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 11, St Georges S
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