Cromwell Property Group · ASX:CMW
Cromwell Property — H1 2015 Earnings Presentation
55 slides from Cromwell Property's earnings presentation, Feb 18, 2015
Slide 1: 1H15 Results Presentation
For personal use only 1H15 Results Presentation FEBRUARY 2015
Slide 2: Important Information & Disclaimer
Important Information & Disclaimer For personal use only This presentation including its appendices consider appropriate for their particular jurisdiction. 336 (CRT), Cromwell Ipswich City Heart Trust ARSN (“Presentation”) is dated 18 February 2015 and has 154 498 923 (ICH), Cromwell Phoenix Propert
Slide 3: 1H15 Highlights
For personal use only Section 1 1H15 Highlights CMW - 1H15 Results 3
Slide 4: Key Messages
Key Messages For personal use only Our focus is to ensure we provide a predictable growing distribution to our security holders: We are in a strong position to be able to continue doing this We continue to do what we say we will do. We remain consistent to theme: Buy low, sell high Gear up
Slide 5: Strategy Remains Unchanged
Strategy Remains Unchanged For personal use only Objective is to provide defensive, superior risk adjusted returns from commercial properties we own and manage Maintain a property portfolio that provides a balance between defensive investments and assets that can be improved or repositioned with
Slide 6: Consistent Strategy Delivers Consistent Outperformance
Consistent Strategy Delivers Consistent Outperformance For personal use only Cromwell has significantly outperformed the S&P/ASX 300 A-REIT Accumulation Index and IPD Benchmark Outperformance of ASX300 A-REIT benchmark 3.2%, 5.2% and 23.9% per annum over 3, 5 and 10 years2 Outperformance of IP
Slide 7: Active Management – Sale of Bridge Street, Hurstville, NSW
Active Management – Sale of 43 Bridge Street, Hurstville, NSW For personal use only Unconditional contracts exchanged for the sale of 43 Bridge Street, Hurstville, NSW for $37 million Continuation of Cromwell’s strategy to sell assets when anticipated returns no longer meet internal return hurdl
Slide 8: Active Management – Health & Forestry House
Active Management – Health & Forestry House For personal use only Agreement for lease extension over 13,326sqm at Health House from July 2015 to December 2016 Asset will have generated a passing yield in excess of 20% per annum since acquisition in May 2013 through to December 2016 Significant
Slide 9: Active Management – Tuggeranong Office Park
Active Management – Tuggeranong Office Park For personal use only Agreed terms with Federal Government to construct a new building on the existing land: Estimated 2 year construction period Agreed terms for a new 15 year lease over c30,000sqm Significantly de-risking main leasing expiry in 2
Slide 10: Northpoint Asset Update
Northpoint Asset Update For personal use only Purchased in December 2013 together with Redefine Properties Opportunity to significantly reposition asset Submitted a development application including: Concept designs for a newly developed retail precinct Concept designs for a AAAT rated 4.0
Slide 11: Key Metrics
Key Metrics For personal use only 1H15 Result as Forecast Operating Profit of $72.9m Operating EPS of 4.2cps Statutory Profit of $87.2m Payout ratio increased from 88% to 92% Active Asset Management Unconditional contract exchanged for sale of 43 Bridge Street, Hurstville Lease exten
Slide 12: 1H15 Financial Results
For personal use only Section 2 1H15 Financial Results CMW - 1H15 Results 12
Slide 13: Operating Profit Remains Consistent
Operating Profit Remains Consistent 1H15 RESULTS For personal use only Statutory profit of $87.2m Operating earnings impacted by a number of factors: Operating profit1 consistent with prior period at Decrease in property earnings as a result of asset sales $72.9m Slight dilution from carry
Slide 14: Financial Position
Financial Position 1H15 RESULTS For personal use only Dec-14 Dec-14 Jun-14 Pro forma cash of $200m provides (Pro-Forma)1 (Actual) (Actual) flexibility to pursue additional property ($’000) ($’000) ($’000) acquisitions or funds management Assets initiatives Cash and Cash Equivalents 199,911 186,559
Slide 15: Valuations Continue To Rise
Valuations Continue To Rise 1H15 RESULTS For personal use only Fair value increase in investment property of $27.9m, net of capex and incentives Valuation changes highlight market appetite for low risk assets Increase in valuation for assets with long leases Decrease in valuation for some as
Slide 16: Property Portfolio
For personal use only Section 3 Property Portfolio CMW - 1H15 Results 16
Slide 17: Property Portfolio Remains Robust
Property Portfolio Remains Robust INVESTMENT For personal use only PORTFOLIO Geographic Sector Tenant Diversification1 Diversification1 Classification1 1.1% 2.5% 1.3% ACT 6.3% 19.6% NSW 22.8% 2 Government Authority QLD Office 25.8% VIC Retail 46.8% Listed Company/Subsidary TAS Private Company 44.7%
Slide 18: Lease Expiry Profile
Lease Expiry Profile INVESTMENT For personal use only PORTFOLIO WALE of 5.9 years Lease Expiry Profile % Gross Income Vacancy 4.8% vs. CBD office average of 12.5%3 50% 45.4% Expiry profile cushioned against current soft conditions 45% Average fixed review of 3.5% over 54% of 40% portfolio in
Slide 19: Property Portfolio - Lease Expiries FY16, FY17, FY18
Property Portfolio - Lease Expiries FY16, FY17, FY18 For personal use only Lease Expiries representing >1% income (FY16-FY18) % of Total Expiry Portfolio Property Tenant Area (sqm) Status Rental Income Comment FY16 Qld 147 Charlotte Street, Brisbane QLD Government 13,326 Jul-15 2.9% Health House lea
Slide 20: Sustainability
Sustainability INVESTMENT For personal use only PORTFOLIO 700 Collins Street, Melbourne VIC: Core portfolio sustainability targets for FY15: New end of trip facilities to provide 5 Star NABERS Energy rating increased amenity and cycle facilities Water efficient fittings included to 4 Sta
Slide 21: Capital Management
For personal use only Section 4 Capital Management CMW - 1H15 Results 21
Slide 22: Capital Management – Transforming Debt Platform
Capital Management – Transforming Debt Platform CAPITAL For personal use only MANAGEMENT Managing gearing appropriately is a key capital Convertible bond issued to fund the acquisition of Valad management initiative Europe from Blackstone Real Estate Partners VI and Valad Gearing reduced befor
Slide 23: Debt Profile
Debt Profile CAPITAL For personal use only MANAGEMENT Facilities are diversified across 8 lenders and the Convertible Bond issue with varying maturity dates Weighted average debt expiry of 3.8 years Preliminary discussions have commenced with the existing lender in relation to the June 2015 Tu
Slide 24: Interest Rate Hedging
Interest Rate Hedging CAPITAL For personal use only MANAGEMENT Targeting lower interest rates again in FY15 Weighted average hedge term of 4.5 years Weighted average margin of 1.3% on current Long-term cap expiry in May 2019 facilities1 5 year Convertible Bond at 2% Expect average intere
Slide 25: Hedging Profile Extended
Hedging Profile Extended CAPITAL For personal use only MANAGEMENT Interest rates for $1.2bn of debt are effectively hedged or fixed until May 2019 New interest rate cap entered into in August 2014 initially over $32.7m increasing to $1bn by December 2017 Cromwell maintains benefit whilst varia
Slide 26: Capital Management - Asset Allocation Guidelines
Capital Management - Asset Allocation Guidelines CAPITAL For personal use only MANAGEMENT Cromwell has indicative asset allocation strategies for each property acquisition Risk Appetite Speculative Developments Core Plus Cromwell Property Group Active Partnerships $10-$50m $50-$120m $100m + $250m
Slide 27: Funds Management
For personal use only Section 5 Funds Management CMW - 1H15 Results 27
Slide 28: Funds Management – AUM now $12.1bn
Funds Management – AUM now $12.1bn1,2 For personal use only Unlisted Property Trusts Oyster Property Group – New Zealand 7 funds with AUM of approximately $771m AUM of approximately $NZ693m 4 closed syndicates 2 diversified open funds Valad Europe 1 wholesale partnership Settlement
Slide 29: Cromwell Funds Management Update
Cromwell Funds Management Update For personal use only Investment product offering continues to expand and AUM continues to grow Currently have 2 open unlisted property funds available for investment – Direct Property Fund & Australian Property Fund Cromwell Phoenix Property Securities Fund ha
Slide 30: Funds Management – Phoenix Portfolios Update
Funds Management – Phoenix Portfolios Update GROWTH For personal use only Strong demand from retail investors and advisers for property securities fund, increasing FUM to over $205m Launch of new small cap equities fund in December 2014 with Phoenix Wholesale/eligible investors only Initial
Slide 31: Funds Management – Oyster Group Update
Funds Management – Oyster Group Update GROWTH For personal use only Assets Under Management grew 11.9% for the period from $618m at 30 June 2014 to $692m as at 31 December 2014 Secured new 3rd party management mandates for Whangaparaoa Shopping Centre (Auckland) and Wainuiomata Shopping Centre (
Slide 32: Valad Acquisition Overview
For personal use only Section 6 Valad Acquisition Overview CMW - 1H15 Results 32
Slide 33: Valad Europe Overview
Valad Europe Overview For personal use only The acquisition of Valad Europe provides an opportunity to acquire an established, well respected business with a strong cultural and strategic fit with Cromwell Platform Product and service lines Financial snapshot €5.3 (A$7.6) billion of AUM includin
Slide 34: Wide Range of Investment Mandates and Investors
Wide Range of Investment Mandates and Investors For personal use only Broad Asset Base Across Multiple Mandates Diverse Range of Quality Investors and Partners Others CEE 23% 6% Office 32% Private equity 15% Germany 20% Multi managers 43% SWFs Retail 23% 6% UK 18% Industrial 20% Nordics 14% Logistic
Slide 35: Valad Europe Financial Metrics
Valad Europe Financial Metrics For personal use only Strong Level of Recurring Fee Income1 Acquisition Valuation Metrics € millions A$ millions 1 2 Other Accounting 17% Funds management 110.0 158.1 7% Disposal Co-investment stakes 23.0 33.1 12% Performance fees 2 12.0 17.3 Total purchase price 145.0
Slide 36: Fully Integrated Suite of Services
Fully Integrated Suite of Services For personal use only Valad Europe offers a fully integrated suite of services to its investors and banking partners The Valad Europe team and business are closely aligned with investors through fund/mandate performance related fee structures Development Transa
Slide 37: Fund Types
Fund Types For personal use only Valad Europe offers a variety of different investment strategies depending on the opportunities and the preference of individual investors, banks or investor clubs Value-add REIM Mandates (Bank workouts) Enhanced returns in exchange for higher levels of operating
Slide 38: Strategy & Outlook
For personal use only Section 7 Strategy & Outlook CMW - 1H15 Results 38
Slide 39: Property Portfolio – Continued Focus on CBD Office
Property Portfolio – Continued Focus on CBD Office OUTLOOK For personal use only We still prefer commercial office property Prime vs. Secondary Office Yields Significant demand for property with long leases Demand for core CBD expanding to include near 10.00% city and suburban locations 9.50%
Slide 40: Consistent Execution of Strategy
Consistent Execution of Strategy OUTLOOK For personal use only Active Asset Management Peer FY15 EPS Yield1 Additional capital available through continued recycling of non-core 10% assets that are not expected to meet hurdle rates 142 bps premium Maintain a disciplined and focused approach to
Slide 41: Contact Us
Contact Us For personal use only Paul Weightman Ross McGlade CEO / Managing Director Investor Relations paul.weightman@cromwell.com.au ross.mcglade@cromwell.com.au Phone: +61 7 3225 7720 Phone: +61 2 8278 3613 Michael Wilde Jodie Clark Chief Financial Officer Chief Operations Officer michael.wilde@c
Slide 42: Appendix: Additional Information
For personal use only Appendix Additional Information CMW - 1H15 Results 42
Slide 43: Cromwell Property Group Snapshot
Cromwell Property Group Snapshot For personal use only Cromwell has evolved organically over 15 years Cromwell Listed fund manager recapitalised by existing Property management in 1998 Group REIT structure created through stapling and merger of unlisted funds in 2006 Market cap: $1.8 bn1 Secur
Slide 44: 1H15 Operating and Statutory Profit Reconciliation
1H15 Operating and Statutory Profit Reconciliation For personal use only 1H15 1H15 1H14 1H14 ($’000) (CPS)1 ($’000) (CPS)1 Profit from operations 72,861 4.2 73,210 4.3 Gain on sale of investment properties 1,070 0.1 3,146 0.2 Loss on disposal of other assets - - (23) - Fair value adjustments: Invest
Slide 45: Segment Result - Operating Earnings
Segment Result - Operating Earnings1 For personal use only Property / Funds Funds Property Management Management Property Investment Internal External Development Dec-14 Segment revenue ($'000) ($'000) ($'000) ($'000) ($’000) Sales to external customers 122,434 1,508 2,846 - 126,788 Sales - interseg
Slide 46: Property Portfolio – Top Assets
Property Portfolio – Top 10 Assets For personal use only Book Asset State Class Value Cap Rate Occupancy WALE Major Tenants Qantas Global Headquarters NSW Office $345.0m 6.63% 100.0% 16.6 yrs Qantas HQ North Tower QLD Office $197.5m 7.75% 99.8% 4.6 yrs AECOM, Bechtel, Technology One 207 Kent Street
Slide 47: Property Portfolio – Top leases
Property Portfolio – Top 20 leases For personal use only Tenant Category Building Expiry Date Rental Income Qantas Airways Limited Listed Company/Subsidiary Qantas Global HQ Dec-32 11.1% Dept of Social Services Federal Government Tuggeranong Office Park Dec-16 9.2% NSW State Government NSW State Gov
Slide 48: Property Portfolio – Net Property Income
Property Portfolio – Net Property Income For personal use only Like for like income growth 1H15 1H14 ($’000) ($’000) Variance Comments Henry Waymouth Centre, SA 2,294 313 633.4% Remainder of building leased in FY15 Kent Street, Sydney NSW 6,882 6,172 11.5% Higher occupancy in FY15 Oracle Building, L
Slide 49: Property Portfolio – Net Property Income
Property Portfolio – Net Property Income For personal use only Like for like income growth 1H15 1H14 ($’000) ($’000) Variance Comments Village Cinemas, Geelong VIC 613 595 2.9% 1 Regent Cinema Centre, Albury NSW 674 660 2.2% Retail Total Retail 1,287 1,255 2.5% Total held properties 97,165 95,395 1.
Slide 50: Property Portfolio – Movement In Book Value
Property Portfolio – Movement In Book Value For personal use only Portfolio significantly improved through acquisitions since 2010 In-sourced facilities management model delivers consistently low lifecycle capex Average 0.23% of valuation over past 6 years 1H15 FY14 FY13 FY12 FY11 FY10 ($’000)
Slide 51: Facility Details
Facility Details For personal use only Amount Facility Maturity Date Years Remaining1 Covenants ($‘000) $123,500 Bank 1 5yr Facility May-19 4.4 $100,000 Bank 2 5yr Facility May-19 4.4 $123,500 Bank 3 5yr Facility May-19 4.4 $110,709 Bank 4 5yr Facility May-19 4.4 LVR - 60% $50,000 Bank 5 5yr Facilit
Slide 52: Interest Rate Hedging Details
Interest Rate Hedging Details For personal use only Amount Years Rate Type Maturity Date % of Total ($’000) Remaining1,2 $86,450 4.15% Fixed Dec-17 4.4 6.8% $31,730 3.99% Fixed Nov-17 4.4 2.5% $100,000 5.95% Fixed Sep-17 4.4 7.8% $100,000 4.14% Fixed May-17 4.4 7.8% $133,000 3.86% Fixed Aug-16 4.4 1
Slide 53: Funds Management – Open Funds Continue To Perform
Funds Management – Open Funds Continue To Perform GROWTH For personal use only DIRECT PROPERTY FUND 6 1 Since Performance Statistics1 Months Year Inception2 Diversified unlisted property Fund 4.5% 13.9% 13.3% Experiencing strong interest from larger wealth managers – (After fees & costs) platfor
Slide 54: Closed Fund Performance – CRT, ICH, BHT, C12
Closed Fund Performance – CRT, ICH, BHT, C12 For personal use only Riverpark Trust (CRT) Ipswich City Heart Trust (ICH) Box Hill Trust (BHT) Property Trust 12 (C12) NAV Price $1.28 NAV Price $1.00 NAV Price $1.00 NAV Price $1.00 Distribution Yield 7.42% p.a Distribution Yield 8.50% p.a Distribution
Slide 55: For personal use only
For personal use only well versed well timed well considered
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