Cromwell Property Group · ASX:CMW
Cromwell Property — FY2019 Earnings Presentation
53 slides from Cromwell Property's earnings presentation, Aug 29, 2019
Slide 1: FY19 Results Presentation
For personal use only FY19 RESULTS PRESENTATION 29 August 2019 CMW – FY19 Results 1
Slide 2: Important Information & Disclaimer
Important Information & Disclaimer This presentation including its appendices Investors should also seek such financial, legal or tax Cromwell Funds Management Limited ACN 114 782 For personal use only (Presentation) is dated 29 August 2019 and has been advice as they deem necessary or consider 777
Slide 3: Strategy Update & Overview
For personal use only SECTION 1 Strategy Update & Overview
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 For personal use only Securityholders benefit from stable long term cash flows, demonstrated asset enhancement capabilities and transactional profits, and low
Slide 5: Key FY19 Milestones
Key FY19 Milestones 24 August • TechnologyOne, and subsequently AECOM and Bechtel, all renew leases at HQ North For personal use only 26 September • Cromwell Ipswich City Heart Trust unitholders vote to extend Trust term to June 2023 30 October • CEREIT announces rights issue to acquire 23 assets fo
Slide 6: FY19 Results and Invest to Manage Strategy Update
FY19 Results and Invest to Manage Strategy Update For personal use only FY19 Highlights Total Securityholder Return (TSR)1 350.00 FY19 operating profit up 11.1% 300.00 NTA per unit of $0.97 250.00 AUM up to $11.9 billion 200.00 WALE of 6.9 years 150.00 100.00 Gearing of 35.0% (pro-forma capital rais
Slide 7: 'Invest to Manage' Summary
FY19 Results and Invest to Manage Strategy Update ‘Invest to Manage’ Summary For personal use only Investing capital to acquire assets, create new funds and sell down to capital partners EXISTING ‘Invest to Manage’ Opportunities Cromwell Stake Cromwell European REIT (CEREIT) 35.8% (pro-forma 32%)
Slide 8: Property Overview: 400 George Street, Brisbane
FY19 Results and Invest to Manage Strategy Update For personal use only Property Overview 400 George Street, Brisbane Site Area 2,902 sqm Asset suitable for new wholesale fund and NLA 43,978 sqm subsequent sell down to capital partners as Occupancy 99.8% part of Invest to Manage strategy WALE 4.9
Slide 9: Cromwell Polish Retail Fund
FY19 Results and Invest to Manage Strategy Update Cromwell Polish Retail Fund For personal use only Cromwell has exercised its pre-emptive right to acquire the third party investor interests in the Fund Acquired interests are planned to be rolled into a new Fund which Cromwell will underwrite an
Slide 10: Poland is Europe's Economic Success Story
Poland is Europe’s Economic Success Story 7th largest European economy … constantly outperforming peers …due to a productive labour market For personal use only 3,475 GDP in 2018 (€bn)1 Evolution of GDP indexed2 2018 Labour Productivity Index3 1,874 1,357 7th largest in the EU 549 391 218 194 140 99
Slide 11: Financial and Capital Management Update
For personal use only SECTION 2 Financial and Capital Management Update
Slide 12: Financial Update - FY19 Headline Results
Financial Update - FY19 Headline Results1 FY19 COMMENTARY FY19 Performance Versus PCP For personal use only Statutory Profit was $159.9 million compared to prior FY19 FY18 Change corresponding period of $204.1 million Statutory profit ($M) $159.9 $204.1 (21.7%) Underlying Operating Profit was up
Slide 13: Financial Update - FY19 Segment Results
Financial Update - FY19 Segment Results1 FY19 COMMENTARY FY19 Segment Profit Versus PCP For personal use only Direct Property Investment Segment profit was FY19 FY18 ($M) ($M) Change $136.1 million, up 12.9% from the prior period, driven by strong like-for-like NOI growth Direct property investmen
Slide 14: Financial Update – Balance Sheet Well Positioned
Financial Update – Balance Sheet Well Positioned FY19 FY18 (Actual $M) (Actual $m) For personal use only Balance sheet remains well positioned Cash and cash equivalents 101.6 204.6 Cash and Cash Equivalents of $101.6 million Investment property 2,520.9 2,451.1 Investment property held for sale - 0
Slide 15: Capital Management – Position Improves Further
Capital Management – Position Improves Further Strong Debt Profile For personal use only Group Gearing 60.00 Cromwell has been progressively reducing gearing and is Target Gearing Range CMW Gearing 55.00 now targeting a 30 – 40% gearing range through the cycle 50.00 Group gearing1 of 35.0% (42.3
Slide 16: Direct Property Investment
For personal use only SECTION 3 Direct Property Investment
Slide 17: Property Portfolio – Component Snapshot
Property Portfolio – Component Snapshot (as at 30 June 2019) For personal use only 69% 28% 3% Core Portfolio Core+ Portfolio Active Portfolio Wale: 9.4 years Wale: 3.1 years Wale: 0.6 years Occupancy: 99% Occupancy: 95% Occupancy: 52% NOI growth: 3.3% NOI growth: 5.3% NOI growth: 120.6% 2 QANTAS GLO
Slide 18: Property Portfolio – Valuations Continue To Rise
Property Portfolio – Valuations Continue To Rise Eleven assets were externally revalued in the period representing approximately half of the portfolio by value For personal use only Fair value increase in investment property of $74.9 million net of property improvements, lease costs and incentiv
Slide 19: Property Portfolio – Tenant Profile Remains Robust
Property Portfolio – Tenant Profile Remains Robust Geographic Diversification1 Sector Diversification1 Tenant Classification1 For personal use only 4.3% 4.3% 1.7% ACT 10.6% 15.7% 7.3% Office Government Authority 2 NSW 28.1% 33.9% Mixed use Listed Company/Subsidary 14.4% QLD Healthcare Private Compan
Slide 20: Property Portfolio – Long WALE of 6.9 years
Property Portfolio – Long WALE of 6.9 years WALE of 6.9 years For personal use only Lease Expiry Profile % Gross Income 3 Vacancy by NLA of 8.3%1 70% Vacancy excluding the active asset portfolio is 2.0% 60.7% Average fixed review in next three years 60% 3.70% over 70% of portfolio in FY20
Slide 21: Property Portfolio – Strong Leasing Success
Property Portfolio – Strong Leasing Success Leasing update For personal use only Core portfolio is 99% leased with the core+ portfolio at 95% on the back of 67 lease transactions for a total of 56,000 sqm Major transactions 24,800 sqm of lease renewals at HQ North including major renewals of lea
Slide 22: Property Portfolio – c.$1 Billion Development Pipeline
Property Portfolio – c.$1 Billion Development Pipeline Asset recycling strategy has been ongoing since 2010 with over $520 million of assets sold since start of FY18 For personal use only Funds have facilitated development of a c.$1 billion pipeline of new value add opportunities in owned proper
Slide 23: Indirect Property Investment
For personal use only SECTION 4 Indirect Property Investment
Slide 24: Indirect Investment – Segment Results Up Strongly
Indirect Investment – Segment Results Up Strongly For personal use only Operating profit for the segment was $45.4 million up 95% CEREIT Key Financial Highlights H2 2019 from $23.3 million in the prior period This was mostly due to CEREIT, which announced 2019 results to the Singapore Exchange S
Slide 25: Indirect Investment – CEREIT Growth >50% since IPO
Indirect Investment – CEREIT Growth >50% since IPO For personal use only 102 103 97 properties properties 93 properties Portfolio value at 90 properties Portfolio value at properties Portfolio value at €1,993 €2,081 Portfolio value at Portfolio value at €1,795 million million3 77 €1,718 million 75 €
Slide 26: Indirect Investment - CEREIT Portfolio as at June 2019
Indirect Investment - CEREIT Portfolio as at 30 June 2019 (Excluding the Acquisitions of Six Predominantly Office Properties in France and Poland) For personal use only Properties 97 Finland Occupancy Rate (by lettable area) 91.6% Properties 11 Lettable Area (sq m) 61,977 Valuation (€)1 1,834.5 mill
Slide 27: Indirect Investment – Seniors Living Opportunity
Indirect Investment – Seniors Living Opportunity Seniors Living opportunity For personal use only Cromwell has invested in a 50% ownership interest in LDK Healthcare with LDK Managing Director Paul Browne LDK has one operational village in North Sydney and one in Greenway, ACT due to begin accep
Slide 28: Funds and Asset Management
For personal use only SECTION 5 Funds and Asset Management
Slide 29: Funds Management – Foundations In Place
Funds Management – Foundations In Place Total Funds and Asset management segment profit was For personal use only Cromwell Funds Under Management $28.5 million (FY18 $35.0 million) Total segment AUM increased 3.2% to $9 billion driven by an increase in retail AUM to $2.3 billion (FY18 $2 billion
Slide 30: Funds Management – High Level of Activity Continues
Funds Management – High Level of Activity Continues Key activity in Europe European FUM by Region For personal use only High level of leasing activity across the platform with 437,000 € 1.2 € 1.0 sqm of leases signed in 550 transactions, more than ten per € 1.0 € 0.9 week, every week, for the year
Slide 31: Funds Management – DPF adds two assets
Funds Management – DPF adds two assets Retail Funds Management For personal use only Retail Funds Management segment profit was driven by a performance fee of $4.1 million realised on extension of Ipswich City Heart Trust 98.4% of votes cast by unitholders were in favour of the resolution to ext
Slide 32: Funds Management – Oyster Continues Growth
Funds Management – Oyster Continues Growth AUM at Oyster Group in New Zealand (50% interest) was up to For personal use only NZ$1.7 billion (FY18 NZ$1.5 billion) Key activity during the year Settlement of the 6.2-hectare Central Park Corporate Centre for NZ$209 million in July 2018 Purchase of
Slide 33: Outlook and Guidance
For personal use only SECTION 5 Outlook and Guidance
Slide 34: Outlook – Global Volatility Creates Opportunity
Outlook – Global Volatility Creates Opportunity Ripple effects of the US-China trade war are being felt globally 2019 Forecast GDP Growth Rates For personal use only 6.00% Spiking economic policy uncertainty will lead to an increase in 5.00% market volatility, and also opportunity, around the wo
Slide 35: Outlook – Australian Real Estate Snapshot
Outlook – Australian Real Estate Snapshot Total Vacancy Factor (%) Sydney and Melbourne CBDs have cyclical low CBD office For personal use only 20.0% vacancy rates (3.7% and 3.3% respectively) 18.4% 18.0% Both markets are now in a development phase, with 1.4 million 16.0% sqm of new stock in pip
Slide 36: Outlook – European Real Estate Snapshot
Outlook – European Real Estate Snapshot Europe’s real estate markets are in relatively good health despite a Investment by Sector For personal use only (12 months to June 2019) slowing economy and lower investment volumes across the region European real estate capital inflows are still robust (4
Slide 37: FY20 Guidance Affirmed at Top of Range
FY20 Guidance Affirmed at Top of Range For further information please contact: For personal use only Business well-positioned to meet possible risks, strong balance sheet with low gearing, long debt tenor, long WALE and favourable lease expiries Paul Weightman Focus continues to be on execution
Slide 38: Appendices – Additional Information
For personal use only APPENDICES Additional Information
Slide 39: Appendices - Contents
Appendices - Contents For personal use only Cromwell Property Group Statistics 40 Local European Footprint 41 Polish Economic and Real Estate Market Data 42, 43, 44 FY19 Operating and Statutory Profit - Reconciliation 45 Segment Result - Operating Earnings Detail 46 Property Portfolio -
Slide 40: Cromwell Property Group Statistics
Cromwell Property Group Statistics For personal use only Diverse Product Range Track Record of Successful Partnerships Extensive and Broad Skill Set Portfolio Platform AUM by Sector Office 11.9bn 3.0% 5.0% $ AUM 420+ 12.0% Retail people $11.9bn Industrial / Logistics 16.0% 60.0% Property 270 Securit
Slide 41: Local European Footprint
Local European Footprint 20 regional offices providing on the ground local market knowledge and expertise For personal use only European Portfolio by Geography 12% 15% Italy 6% 5% UK Benelux €3.8bn Nordics 26% 25% CEE Germany 11% France European Portfolio by Sector 6% BENELUX GERMANY ITALY UK 9% Off
Slide 42: Polish Macroeconomic Statistics
Polish Macroeconomic Statistics Household spending For personal use only Tight labour markets kept nominal wage growth at a strong 6.9% y/y in Q1, boding well for consumer spending this year. Unemployment is no longer falling as rapidly as at the start of 2018, while the level of vacancies is lowe
Slide 43: Polish Real Estate Market
Polish Real Estate Market For personal use only Solid market liquidity Some of the most affordable rents Offering attractive yields Prime office rents across Europe (€/sqm pa) Prime office yields across Europe High demand from SSC/BPO Retail growth potential in major cities Warsaw most attractive re
Slide 44: Polish Real Estate Market
Polish Real Estate Market For personal use only Growing disposable income Translates into high expected growth Key demand drivers Growing disposable income, Disposable income in LCU CAGR (’18-’28) 10.0% Retail sales CAGR (’18-’28) expected to be reflected in 9.0% consumer spending 8.0% 7.0% 7.0%
Slide 45: FY19 Operating and Statutory Profit Reconciliation
FY19 Operating and Statutory Profit Reconciliation FY19 ($M) FY18 ($M) For personal use only Profit from operations 174.2 156.8 Operating EPS (cents per security) 8.21 cps 8.36 cps Gain/(loss) on sale of investment properties 0.7 (5.0) Gain on sale of listed securities - 15.7 Loss on disposal of oth
Slide 46: Segment Result – Operating Earnings Detail
Segment Result – Operating Earnings Detail1 Direct Property Indirect Property Funds And Asset For personal use only Full Year ending 30 June 2019 Investment Investment Management ($M) ($M) ($M) FY19 Segment revenue Rental income and recoverable outgoings 208.0 - - 208.0 Operating profits of equity a
Slide 47: Property Portfolio – Top Assets
Property Portfolio – Top 10 Assets Current For personal use only Occupancy % Asset State Class Market Value Cap Rate WALE Major Tenants by NLA ($M) Qantas HQ NSW Office 502.0 5.13% 100.0% 12.3 years Qantas Airways Limited 700 Collins Street VIC Office 306.0 5.25% 99.8% 6.2 years Bureau of Meteorolog
Slide 48: Property Portfolio – Top Leases
Property Portfolio – Top 20 Leases For personal use only Tenant Tenant Classification Expiry Date % of Portfolio Rental Income Qantas Airways Limited Listed Company/Subsidiary Dec-32 15.6% Commonwealth of Australia (Dept of Social Services) Government Authority Sep-32 8.5% Government Property NSW Go
Slide 49: Property Portfolio – Net Property Income
Property Portfolio – Net Property Income1 FY19 ($M) FY18 ($M) Variance ($M) Variance (%) For personal use only Soward Way, Greenway 15.3 11.4 3.9 34.2% Village Cinema Geelong 1.5 1.3 0.2 15.4% Farrer Place, Queanbeyan 2.1 2.0 0.1 5.0% Crown Street, Wollongong 2.8 2.7 0.1 3.7% Qantas HQ 29.0 28.1 0.9
Slide 50: Property Portfolio – Net Property Income
Property Portfolio – Net Property Income1 FY19 ($M) FY18 ($M) Variance ($M) Variance (%) Tuggeranong Office Car Park (0.7) 0.0 (0.7) N/A For personal use only Lovett Tower 1.5 2.3 (0.8) (34.8%) Borrowdale House (0.1) (0.1) 0.0 0.0% 19 National Circuit 2.5 3.1 (0.6) (19.4%) Wakefield St, Adelaide 18.
Slide 51: Property Portfolio – Movement In Book Value
Property Portfolio – Movement In Book Value Strategy of continuously improving portfolio through acquisitions since 2010 For personal use only Recycling of capital means disposing of assets before asset has large capex requirements In-sourced facilities management model also lowers lifecycle c
Slide 52: Property Portfolio – Balance Sheet Debt Details
Property Portfolio – Balance Sheet Debt Details Drawn Commitment Maturity Fin Yr Years For personal use only Facility Covenants (AUD $M) (AUD $M) Date Expiry Remaining Jun-2023 Bank 1 - 5 Year Facility 100.0 100.0 2023 4.0 Bank 2 - 5 Year Facility 253.0 250.0 Jun-2023 2023 4.0 Bank 3 - 5 Year Facili
Slide 53: For personal use only
For personal use only CMW – FY19 Results 53
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