Charter Hall Group · ASX:CHC
Charter Hall — Investor Day (November 2013)
136 slides from Charter Hall's investor day presentation, Nov 21, 2013
Slide 1: Charter Hall Group Investor Day 2013
21 November 2013 Charter Hall Group Investor Day 2013
Slide 2: Agenda
Charter Hall Group Agenda Overview of Charter Hall vision, values and strategy 1 David Southon & David Harrison, Joint Managing Directors Our view of real estate markets around the nation 2 Chris Freeman, Research Manager Wholesale funds – Growth, positioning and performance 3 Andrew Glass, Head ofW
Slide 3: Overview of Charter Hall Vision, Values and Strategy
Overview of Charter Hall Vision, Values and Strategy David Southon & David Harrison, Joint Managing Directors
Slide 4: What do we stand for?
Charter Hall Group What do we stand for? A 3 minute video Charter Hall Group Investor Day 2013 3
Slide 5: Our Vision
Charter Hall Group Our Vision Vision, purpose, values, strategy and goals OUR VISION The smart property choice OUR PURPOSE To grow investor wealth through smart property outcomes OUR VALUES INTEGRITY ACCOUNTABILITY PASSION EXPERTISE COLLABORATION OUR STRATEGY To use our specialist property expertise
Slide 6: Investing in our Brand
Charter Hall Group Investing in our Brand Retail Signage Office Digital Screens Industrial Pylon Sign Charter Hall Group Investor Day 2013 5
Slide 7: Upgraded Investor Centre
Charter Hall Group Upgraded Investor Centre www.charterhall.com.au Charter Hall’s new Investor Centre • Our Investor Centre provides investors with access to information on Charter Hall Group, our listed and unlisted managed funds and provides a facility for prospective investors to find the right i
Slide 8: New Way of Working
Charter Hall Group New Way of Working Adding value to Charter Hall and our clients • Physical space designed to support a workforce that is empowered to work anywhere, anytime with a focus on the business results • Being an employer of choice, attracting and retaining people who align with Charter H
Slide 9: Corporate Responsibility and Sustainability
Charter Hall Group Corporate Responsibility and Sustainability Sustainability continues to be a core part of how we manage risks and enhance value across our business Sustainable • To grow investor wealth by delivering smart property outcomes business • To actively work to reduce our consumption of
Slide 10: Evolution of the Business Model
Charter Hall Group Evolution of the Business Model Repositioning of the business 2010-2013 FY10 21 Nov 2013 Comment Progress since FY10 Property Funds Management • Focus on smart solutions for investors, tenants and Domestic FUM $7.9bn $10.1bn Total FUM communities in Australian retail, office and i
Slide 11: Charter Hall Competitive Advantages
Charter Hall Group Charter Hall Competitive Advantages • Focused – domestic focus, specific asset sectors with specialist professionals • Multiple sources of equity – through the cycle diversity of equity flows • Track record – long term relationships with investors built on consistent performance •
Slide 12: Recap on FY14 Activity to date
Charter Hall Group Recap on FY14 Activity to date • Completed a $150m equity raising target for CPIF • Successfully closed DIF2 capital raising oversubscribed at $135m • CLP has increased total equity committed to $356m and total investment capacity to $525m through an additional $98m of equity comm
Slide 13: $331m of Gross Equity in Funds Secured FY14 to date
Charter Hall Group $331m of Gross Equity in Funds Secured FY14 to date $77m $16m Direct Industrial Charter Hall Retail REIT $6m Fund No.2 Core Plus Office Fund DRP Completed equity raise IRP $31m $103m $98m Core Logistics Core Plus Charter Hall Office Trust Partnership Industrial Fund Acquisition of
Slide 14: What next?
Charter Hall Group What next? Positioned for growth 2014+ Strategy FY14 objectives • Continue to achieve the investment objectives of our investors ACCESS • Enhance return on equity • Source equity to invest into core real estate sectors targeting growth in the Australian FUM platform of 6-10% pa DE
Slide 15: Solid Earnings Growth Expected in FY14
Charter Hall Group Solid Earnings Growth Expected in FY14 Charter Hall is well positioned to continue to capitalise on our ability to access, deploy, manage and co-invest across core property sectors of office, retail and industrial We confirm guidance provided to the market in August 2013 and barri
Slide 16: Our View of Real Estate Markets Around the Nation
Our View of Real Estate Markets Around the Nation Chris Freeman, Research Manager
Slide 17: Research at Charter Hall
Research Research at Charter Hall Charter Pack and promotion • Detailed research reports for use internally and major investment partners • Viewed as fund management IP, so rarely publicly distribute or actively promote detailed forecasts and analysis Charter Hall Group Investor Day 2013
Slide 18: Capital Fundamentals
Capital Fundamentals
Slide 19: Capital Fundamentals
Research Capital Fundamentals Fixed interest rates and property yield spread • Secure property appears very attractive in the current interest rate environment • Upward movements in bond yields likely to see a reallocation away from fixed interest. AMP’s October Global Investor Survey showed 23% of
Slide 20: Capital Fundamentals
Research Capital Fundamentals Significant reallocating to property is planned Figure 3. Net increase or decrease in allocations expected in next quarter Bonds Property Net percentage of survey respondents to increase or decrease allocations to each asset category. Source: AMP Global Investment Surve
Slide 21: Capital Fundamentals
Research Capital Fundamentals A-REIT share price/NTA history by type • This reallocation is occurring at a time when ‘rent-collecting’ A-REIT’s have broadly grown to be at (or above) NTA • Thereby effectively transitioning from being net sellers to buyers of assets Source: Bloomberg, Charter Hall Re
Slide 22: Capital Fundamentals
Research Capital Fundamentals Australian superannuation growth • With the strong recovery of the equities market the total assets of Australian Superannuation Funds exceeded Australian GDP for the first time since 2007 • In FY13 superannuation assets rose by $217bn, while nominal GDP grew by $37bn.
Slide 23: Office Market
Office Market
Slide 24: Office Markets
Research Office Markets Employment and vacancy • But while capital drivers are strong, full time employment growth has slowed notably from mid-2011 • This corresponds to rising vacancy in office markets over the past two years Employment Growth by Type & Population Ratio Major CBD Vacancy Rates Risi
Slide 25: Office Markets
Research Office Markets Major CBD absorption vs. ASX 200 • However, the performance of the equities market provides a strong leading indicator that tenant demand is likely to recover, with the caveat that this has largely been driven by growth in multiples Source: JLL/IRESS/Charter Hall Research Cha
Slide 26: Office Markets
Research Office Markets Corporate profits and professional job advertisements • This is reinforced by improved corporate profitability and a recent rise in professional job advertisements • Real corporate profits have started to recover and major banks saw revenues rise 5.8% in FY13. In line with th
Slide 27: Office Markets
Research Office Markets Department of Employment forecasts • 5 year employment growth expectations from the Department of Employment still favour Perth and Brisbane • However these markets are likely to see the greatest supply impact over the medium term Source: DOE / Charter Hall Research Charter H
Slide 28: Office Markets
Research Office Markets Committed and uncommitted supply • Upcoming supply is significant in all markets moving forward • Having seen significant levels of stock come online in 2013, Melbourne now has the lowest relative level of supply under construction Source: JLL / Charter Hall Research Charter
Slide 29: Office Markets
Research Office Markets Strategy in action • Acquired Bankwest Place, Perth for $458m in Joint Venture with CPOF and institutional partners – 12 year lease to Commonwealth Bank of Australia – Well below market rents – Looks through current cycle • Acquired 9 Castlereagh Street in Sydney for $172.5m
Slide 30: Retail Market
Charter Hall ry _ rt “ PACE FOR LEASE _ Dame Locati
Slide 31: Retail Market
Research Retail Market Non discretionary sectors continue to outperform • Retail turnover remains below trend, with non-discretionary expenditure significantly outperforming • Department stores causing a significant drag on overall growth numbers Rolling Annual Retail Turnover by Type 20yr CPI Index
Slide 32: Retail Market
Research Retail Market Centre composition and exposure to food retailing by GLA 15.3% 29.6% 59.7% Source: Urbis, Charter Hall Research Charter Hall Group Investor Day 2013 31 31
Slide 33: Retail Market
32 Research Retail Market Retail leasing spreads and occupancy costs • Looking at leasing spreads of listed A-REITs shows that sub-regional and neighbourhood centre owners are still seeing positive leasing spreads, while tougher retail conditions are being reflected in centers focused on discretiona
Slide 34: Retail Property Sector
Research Retail Property Sector Retail turnover growth by category • Consumer confidence and retail turnover are closely correlated, but a discrepancy has been evident in the past two years. The rise in confidence evident since late 2011 has thus far not translated into retail sales, but there is li
Slide 35: Retail Market
Research Retail Market Relative yields in retail sector • Yield recompression appears highly likely, with neighbourhood and sub-regional centres trading above long run averages Neighbourhood Avg: 8.03% Peak: 6.64% Now: 8.51% Sub-Regional Avg: 7.45% Peak: 6.32% Now: 7.66% Regional: Avg: 6.31% Peak: 5
Slide 36: Retail Market
Research Retail Market Relative yields in retail sector • Neighbourhood and sub-regional assets trading significantly higher than the peak yield witnessed in 2007 • Looking at the average spread relative to regional centres shows a yield disparity not evident since 2001. When this is put into contex
Slide 37: Retail Market
Research Retail Market Strategy in action • Acquired Bateau Bay Square in NSW for $164m with global partner – Supermarket orientated, sub-regional centre • CQR raised $119m to buy three neighbourhood centres – Tamworth, Dubbo and Lake Macquarie – 9.6% average yield across portfolio, non-discretionar
Slide 38: Industrial Market
Industrial Market
Slide 39: Industrial Market
38 Research Industrial Market Broad supply and demand • Industrial property’s demand and supply profile suggests it is arguably the best placed asset class • Demand for space in 2012 was the highest since 2005, with real development approvals 18% below the 10 year average and 43% below the 2007/8 pe
Slide 40: Industrial Market
Research Industrial Market Gross corporate profits – manufacturing vs. logistics • Manufacturing’s decline is shown in gross corporate profit levels, a clear drag on industrial tenant demand • Logistics, fuelled by internet retailing and the high $AUD has seen profits rise by 55% in five years Sourc
Slide 41: Industrial Market
40 Research Industrial Market Supply and demand 2013 • Thus far over 60% of major leases tracked have been for new premises via either pre-lease or design and construction agreements. Traditional leases of existing stock represents 35% of activity, with the majority of demand for prime grade assets
Slide 42: Industrial Market
41 Research Industrial Market Supply under construction by city and precinct Toll Ipec Super Retail Group Bunnings Distribution Blue Star Linfox Source: Charter Hall analysis of JLL Data Charter Hall Group Investor Day 2013 41
Slide 43: Industrial Market
Research Industrial Market Vacancy by grade yield spreads • There is a greater quantum of secondary stock available for lease, with tenants clearly favouring prime assets • While yield spreads to secondary assets are very attractive, the risk profile is substantially heightened due to higher vacancy
Slide 44: Industrial Market
43 Research Industrial Market Composition of returns • The industrial sector has marginally outperformed over the longer term, with a lower level of volatility than broader property • However, this performance may be understated as IPD’s basket is significantly overweight in Sydney, the softest perf
Slide 45: Industrial Market
Research Industrial Market Strategy in action • Retail funds closed $211 million DIF1 Portfolio – DIF1 lease expiry profile 12.1 years • Closed $120m equity raising for DIF2 oversubscribed – DIF2 targeting 10+ year WALE – Current assets possess a 13.0 year lease expiry profile • Launched Core Logist
Slide 46: Wholesale Pooled – Growth positioning and performance
Wholesale Pooled – Growth positioning and performance Andrew Glass, Head of Wholesale Pooled Funds
Slide 47: Wholesale Pooled Funds FUM contribution
Wholesale Pooled Funds Wholesale Pooled Funds FUM contribution Charter Hall manages a $10.3bn total property portfolio NO. OF PROPERTIES NO. OF TENANTS LETTABLE AREA (SQM) TOTAL ASSETS ($M) FY13 GROSS INCOME ($M) 200 2,968 2.8m 10,323 909 FUM Equity Sources CHC Balance Sheet Co-Investment ($10.3 bil
Slide 48: Wholesale Pooled Funds
Wholesale Pooled Funds Wholesale Pooled Funds Key characteristics • Investment mandate for Core Plus Office Fund (CPOF) and Core Plus Industrial Fund (CPIF) focussed principally on core type returns with ability to undertake projects to enhance value • Value created through enhancement works is full
Slide 49: CPOF and CPIF FUM
Wholesale Pooled Funds CPOF and CPIF FUM Growth in CPOF and CPIF FUM ($m) Cumulative CPOF and CPIF Equity Commitments 2500m 1800m 1600m $2,360 $1,589 2000m $2,100 1400m $1,407 $1,826 $1,900 1200m $1,764 1500m $1,204 $1,560 1000m $1,085 $1,030 $975 $975 800m 1000m $919 600m 500m 400m $500 $386 200m 0
Slide 50: CPOF and CPIF FUM
Wholesale Pooled Funds CPOF and CPIF FUM Number of assets under management (CPOF and CPIF) Charter Hall Co-Investment Stake (CPOF and CPIF) (% of committed equity) 25% 40 23% 24% 23% 35 36 20% 30 19% 19% 31 30 30 30 18% 29 25 15% 15% 20 12% 18 10% 15 10 5% 5 1 0 0% FY06 FY07 FY08 FY09 FY10 FY11 FY12
Slide 51: CPOF and CPIF occupancy
Wholesale Pooled Funds CPOF and CPIF occupancy CPOF and CPIF Occupancy Performance 100% 100% 100% 100% 98% 98% 98% 96% 97% 97% 96% 94% 92% 90% 88% 86% 84% 82% 80% FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 • The Wholesale Pooled Fund team in conjunction with Charter Hall’s specialist Asset Management a
Slide 52: CPOF
Wholesale Pooled Funds CPOF $ 1.8 bn office portfolio Portfolio characteristics Key metrics Gross property assets $1.82 billion Total debt $825 million Gearing (look through) 45% Number of assets 15 Occupancy1 97% Weighted average lease expiry1 5.1 years CBD assets1 92% Prime grade assets 89% Weight
Slide 53: CPOF
Wholesale Pooled Funds CPOF Outperformance • CPOF has outperformed the IPD/Mercer Wholesale Property Funds Index (total office funds) over 1, 3 and 5 year periods to 30 June 2013 CPOF Performance to June 2013 9.9% 9.1% 8.8% 8.7% 7.8% 7.9% 2.7% 1.3% 1.2% 1.4% 0.9% 1.3% 12 Months(%) 24 Months (%pa) 36
Slide 54: CPOF
Wholesale Pooled Funds CPOF Acquisition and leasing activity Major Activity over 18 months 11 Exhibition Street, Melbourne 9 Castlereagh St, Sydney Re-leased 11,748sqm of space to BUPA $172m 10 year term 21,000sqm Bank West Place, Perth (33%) Secured 18 months ahead of expiry $153m ($458m for 100%)
Slide 55: CPOF
Wholesale Pooled Funds CPOF Enhancement strategy Key events during FY13 • Planning consent obtained for a new building at 333 George St, Sydney and a significant expansion and upgrade of 570 Bourke St, Melbourne • Combined both projects are forecast to generate 5% NTA accretion and improve overall q
Slide 56: Enhancing Value from Core Assets
Wholesale Pooled Funds Enhancing Value from Core Assets 570 Bourke Street, Melbourne • CPOF acquired 50% for $75m in June 2008 at a 7.0% cap rate • The balance of the asset was purchased from the joint owner for $76.5m in September 2010 at 8.0% cap rate • The asset has now been re-valued to $178 mil
Slide 57: Enhancing Value from Core Assets
Wholesale Pooled Funds Enhancing Value from Core Assets 570 Bourke Street, Melbourne • Highly accretive returns using available floor space potential at effectively no land cost • Returns enhanced by value uplift of the existing asset due to “repositioning” effect of new podium and lobby renewal • D
Slide 58: CPOF
Wholesale Pooled Funds CPOF Review event completed and well supported • CPOF is an open-ended investment vehicle with a long-term investment mandate • A Review Event occurred in 2013 where some unit holders redeemed (or sold) their stake due to changes in their investment strategy • Demand from exis
Slide 59: CPIF
Wholesale Pooled Funds CPIF $665m industrial portfolio Portfolio characteristics Key metrics Portfolio Value $665 million Total net debt $130 million Gearing (look-through) 20% Number of assets 24 Occupancy 99% Weighted average lease expiry 8.5 years Core assets 95% Weighted average cap rate 8.38% W
Slide 60: CPIF
Wholesale Pooled Funds CPIF Outperformance • Outperformed the industrial component of the IPD/Mercer Wholesale Property Funds Index (total funds) over all time periods to 30 June 2013 CPIF Relative Performance to 30 June 13 9.7% 8.6% 8.5% 8.5% 8.2% 7.8% 2.8% 2.0% 1.1% 0.7% 0.8% 0.3% 12 Months(%) 24
Slide 61: CPIF
Wholesale Pooled Funds CPIF Acquisition and leasing activity Key events during and post FY13 80 - 120 Canberra Street, 15 Huntingwood Drive, Hemmant, Qld Huntingwood, NSW $13.25m $16.2m 45,000sqm 12,740sqm 2 Bannister Road, Canning Vale WA $70.5m 83,250sqm 15 Long Street, 11 Huntingwood Drive, Smith
Slide 62: CPIF Investment and Acquisition Strategy
Wholesale Pooled Funds CPIF Investment and Acquisition Strategy Sourcing Assets • Attractive acquisition opportunities for both short and long WALE industrial assets • CPIF aims to offer long portfolio WALE (8.5 years) with targeted long term equity IRR in excess of 11%pa • Focussed on ‘true to labe
Slide 63: CPIF Investment and Acquisition Strategy
Wholesale Pooled Funds CPIF Investment and Acquisition Strategy Land Bank “build-to-hold” Approach • Acquisition of land bank in Brisbane (Berrinba and Willawong) and Sydney (Smithfield) to create product • Development agreement with CIP to source and secure pre-lease commitments. CIP will bear deve
Slide 64: CPIF Investment and Acquisition Strategy
Wholesale Pooled Funds CPIF Investment and Acquisition Strategy Commercial Industrial Properties (CIP) pipeline • Charter Hall’s ownership (50% of CIP) provides visibility into its development pipeline • Typically $400 - $500m of prospective industrial assets under consideration at any point in time
Slide 65: Enhancing Value from Core Assets
Wholesale Pooled Funds Enhancing Value from Core Assets 18-120 Canberra Street, Brisbane, Qld • Acquired 4.8ha of freehold land in tightly held Port of Brisbane precinct • Purchase price of $13.25m in July 2012 with an acquisition yield of 6.4% with 6 months to lease expiry • Negotiated new lease (1
Slide 66: Wholesale Partnerships
Wholesale Partnerships Adrian Taylor, Head of Wholesale Partnerships
Slide 67: Wholesale Partnerships - Background
Wholesale Partnerships Wholesale Partnerships - Background Wholesale Partnerships Comprise: • Partnerships which typically include two or more capital partners including Charter Hall • Wholesale Mandates which typically have no Charter Hall Co-Investment, however, may include an interest held alongs
Slide 68: Wholesale Partnerships - Scope
Wholesale Partnerships Wholesale Partnerships - Scope • Some Partnership investors also invest within our pooled funds • Partnership formation allows access to specific sector exposures (office/retail/logistics) with: – ability to reflect investors individual risk appetites – ability to tailor to va
Slide 69: Attracting investors and capturing demand
Wholesale Partnerships Attracting investors and capturing demand What investors want: • Access to opportunities • To leverage Charter Hall’s skills/resources and relationships • To be involved in establishing structure around their specific needs • To obtain high quality exposures to Australian inve
Slide 70: Partnerships Investment Timeline
Wholesale Partnerships Partnerships Investment Timeline Fund creation and major acquisitions over 18 months Value Charter Hall Office Trust (CHOT) 17 assets/ $2,031m Bank West Place $458m Keperra Square Bunnings (BP Fund) 1 asset/ $63m 10 assets/ $239m Core Logistics Bateau Bay Square(RP2) Partnersh
Slide 71: Partnership Summary
Wholesale Partnerships Partnership Summary Since August 2012 (excludes CHOT), the Partnership platform has invested in $1.5 billion of Office, Retail and Industrial assets. On average, these assets are less than 5 years old, have a 9 year WALE, high occupancy and have an average passing yield of 7.6
Slide 72: Organic growth and alignment
Wholesale Partnerships Organic growth and alignment CHC Co- CHC Co- Indep. Valuation Fund Sector invest invest (%) ($A'm) ($A'm) Charter Hall Office Trust Office 174.9 14.5% 2,241 Riverside Centre, SA Office Nil Nil 76 Bateau Bay Square Retail 17.6 20.0% 164 BP Fund (Bunnings) Retail 14.5 13.0% 239
Slide 73: FY13 Growth Analysis – Diversification in line with CHC strategy
Wholesale Partnerships FY13 Growth Analysis – Diversification in line with CHC strategy Charter Hall views everyday-needs retailing and logistics based industrial assets as well positioned to deliver stable income through the next cycle By Sector By State Office Industrial 35% QLD, 29% NSW, 30% 35%
Slide 74: FY13 Growth Analysis – Strength of Tenants
Wholesale Partnerships FY13 Growth Analysis – Strength of Tenants By Gross Income 91% of portfolio income derived from Government or Investment Grade or equivalent tenants Top 10 Tenants Tenant Grade 25% Wesfarmers (incl subsidaries) Other/ Specialities, 16% Metcash 9% 13% Bankwest 12% Bank of Queen
Slide 75: FY13 Growth Analysis - Lease expiry profile
Wholesale Partnerships FY13 Growth Analysis - Lease expiry profile By Gross Income Strong WALE of 9.0 years 70% 60% 50% 40% 30% 20% 10% 0% Vacant FY2014 FY2015 FY2016 FY2017 FY2018 FY2019 FY2020 FY2021 FY2022 FY2023+ Charter Hall Group Investor Day 2013 74
Slide 76: Wholesale Mandates – Case Study
Wholesale Partnerships Wholesale Mandates – Case Study Bankwest Place and Raine Square, Perth In June 2013, a domestic super fund and a global institutional investor, in partnership with Core Plus Office Fund (CPOF), acquired the $458m Bankwest Place Complex in Perth Investment considerations: • New
Slide 77: Retail (Direct) Investor Funds
Retail (Direct) Investor Funds Capitalising on our position and leveraging off growth in SMSFs Richard Stacker, Head of Charter Hall Direct Property
Slide 78: Success and competitive advantage of the Direct model
Success and competitive advantage of the Direct model
Slide 79: Direct FUM Contribution
Direct FUM Contribution Charter Hall manages a $10.3bn total property portfolio NO. OF PROPERTIES NO. OF TENANTS LETTABLE AREA (SQM) TOTAL ASSETS ($M) FY13 GROSS INCOME ($M) 200 2,968 2.8m 10,3231 909 FUM Equity Sources CHC Balance Sheet Co-Investment ($10.3 billion as at June 2013) ($603 million as
Slide 80: Direct Growth in FUM
Direct Property Direct Growth in FUM Growth in CH Direct FUM Direct Property business has seen growth $m of 47% in FUM in three years $2,000 47% Increase in FUM to June 2013 $1,800 • Mixture of organic growth and acquisition of $1,600 $1,670m other management rights $1,400 $1,540m $1,516m $1,478m –
Slide 81: #1 Ranked in Sector and Growing Market Share
Direct Property #1 Ranked in Sector and Growing Market Share CHC % of Unlisted Retail Sector Direct have significantly increased market share 16% and ranking over the past four years 14% 14% 12% • Market share increased from 2% to 14% of the 10% 10% unlisted retail sector 8% 9% 6% • Ranking improved
Slide 82: Direct's Competitive Advantage
Direct Property Direct’s Competitive Advantage Direct retain various competitive advantages in the retail investor funds market, including: • Institutional Manager regarded highly compared to non institutional peers • Demise, exit and sale of many previous competitors • Long established network of f
Slide 83: Direct's Growth in Revenue
Direct Property Direct’s Growth in Revenue Growth in Charter Hall Direct Revenue $m (with and without co-investment income) Revenue (excluding CHC co-investments) $18.9m $20 has grown 96% over the past two years $18 whilst returning 65% to Charter Hall $15.3m $16 $14.7m $14 • Increased market share
Slide 84: Direct Business Model
Direct Property Direct Business Model Direct model is focused on growth in FUM from: • Single/multiple property syndications (>$50m) • Unlisted retail funds diversified by asset and geography (~$200m) • Sector specific (industrial, office, retail) • Acquisition of unlisted management rights e.g. PFA
Slide 85: Direct Product Asset Targets
Direct Property Direct Product Asset Targets Fund and syndicate style assets targeted Criteria Office Retail Industrial $ size $50m+ $10-$30m $10-50m Property Type B+ above Neighbourhood centres, Prime grade Hardware Location CBD and fringes Flexible Near established precincts Tenant Brand names, Br
Slide 86: Direct Product Structure
Direct Property Direct Product Structure Syndicate vs fund • Different characteristics to consider (sector, asset quality, size and risk) in developing product as well as understanding appetite and design/distribute product that meets investor needs • Refined product suite (legacy, current and futur
Slide 87: Direct Fee Structure – Syndication and Fund
Direct Property Direct Fee Structure – Syndication and Fund Type of fee WorkZone syndication Direct Industrial Fund No.1 Fund size (asset value) $124.5m $210.4m Base management fee 0.50% - 0.60% pa of GAV 0.60% pa of GAV Transaction fee 1.80% - 2.30% of purchase price 2.00% of purchase price (origin
Slide 88: Direct fund and syndicate performance
Direct Property Direct fund and syndicate performance Equity IRR (%) Fund Performance (12 months to 30 September 2013) Direct’s ongoing funds and historical 12% syndicates have performed strongly over 10% 10.50% the past 12 months and also over the long 8% 8.60% 6% 8% term 4% 2% 0% • Products contin
Slide 89: Growth in SMSF's and Direct's Approach to Accessing this Sector
Growth in SMSF’s and Direct’s Approach to Accessing this Sector
Slide 90: Continuing growth in SMSFs
Direct Property Continuing growth in SMSFs Total Superannuation Growth in Past 5 Years SMSFs sector continues to represent the largest growing segment of the $1.62 trillion super industry • Size of the superannuation industry rose by 15.5% in 12 months to June 2013 to $1.62 trillion • In the past fi
Slide 91: Profiling of SMSFs
Direct Property Profiling of SMSFs Core Data research Key reasons for moving to a SMSF structure Core Data study captured the multiple perspectives 5.8 Greater control over investments 4.3 on service provisions to SMSFs (trustees, financial 5.9 planners and accountants) Invest in direct assets (e.g.
Slide 92: Planned shifts in SMSF Asset Allocation
Direct Property Planned shifts in SMSF Asset Allocation Core Data Research SMSFs were asked about upcoming shifts in asset allocation expected in the next year • Cash and term deposits identified for reductions driven by low interest rates • SMSF trustees indicate growing interest in Australian equi
Slide 93: Charter Hall Award Winner
Direct Property Charter Hall Award Winner Charter Hall 2013 winner of the Self Managed Super Fund Awards - Commercial Property, SMSF Member Category • Charter Hall was the most highly rated provider in Commercial Property from 19 property fund managers/advisers (including listed and unlisted manager
Slide 94: Leveraging SMSF Space
Direct Property Leveraging SMSF Space Strategy to target SMSF investors • Education • Provision of educational tools and information packs • Dedicated section on Charter Hall website, signup for regular e-comms • Partnerships • With financial planning dealerships/accountants/private banks with SMSF
Slide 95: Our Distribution Channels
Direct Property Our Distribution Channels Equity Raise by Product Since January 2010 Direct accesses equity from multiple channels, 700.0m with new equity averaging $156m pa since New Equity flows of Average of $156m January 2010 600.0m pa Over 3.5 Years 593.5m 500.0m • Direct consumers 400.0m • SMS
Slide 96: Direct Short to medium term growth plans
Direct Short to medium term growth plans
Slide 97: 2013/14 FUM outlook
Direct Property 2013/14 FUM outlook $m Growth in CH Direct FUM $2,000 $400m roll off of legacy FUM in 2013/14. $1,800 Replacement by higher margin $1,600 $1,700m funds/syndicates including: $1,668m $1,400 $1,540m $1,516m $1,478m • WorkZone office syndication $124.5m $1,200 $1,000 $1,140m • DIF2 acqu
Slide 98: Conclusion
Direct Property Conclusion • Direct are the #1 fund manager in the unlisted retail funds sector • Direct’s business model is capital light and has translated to increased revenue and margins for CHC • Direct will continue to develop its product suite and distribution channels to target the growing S
Slide 99: Update on operations
Update on operations Craig Newman, Head of Office and Industrial Asset Management
Slide 100: Portfolio summary
Group Portfolio summary Charter Hall Group property platform by sector Portfolio Size No. of No. of Gross income WALE Occupancy Average cap rate ($bn) properties tenants ($m) (years) (%) (%) Office 6.1 56 645 595 5.1 96.8 7.9 Industrial 1.1 39 51 98 10.9 99.9 8.1 Retail 3.0 105 2,272 216 6.7 98.0 8.
Slide 101: Our reach
Group Our reach Asset and property management hubs in all major locations in Australia As at 30 June 2013 Charter Hall Group Investor Day 2013 100
Slide 102: Integrated management capabilities
GROUP Integrated management capabilities Sector specialists Capital Transactions Experienced teams 9 Castlereagh Street, Sydney NSW Development Asset Management Management Project leasing teams Property Management Singleton Square, NSW Sophisticated RM program Regarded by tenants with major tenants
Slide 103: Asset Management
Group Asset Management Objective: maximise income and value • 30 professionals in Sydney, Melbourne, Brisbane and Perth offices Team • Highly experienced team with diverse backgrounds • Strategic Asset Plans • Income, expenditure and capital budgets Deliverables • Leasing analysis and recommendation
Slide 104: Property Management
Group Property Management Objective: Delivering smart, pro-active solutions • Fully integrated in house services with experience and capabilities across all 3 sectors Team • Regional locations supported by State capital and Head Office teams • Property Business Planning • Financial management and re
Slide 105: Office and Industrial Portfolio
Office and Industrial Portfolio
Slide 106: Portfolio Weightings and Exposure
Office Portfolio Weightings and Exposure $ Value - by State $ Value - by Group 2% 25% 14% 45% 43% 16% 32% 23% Partnerships Pooled Direct NSW VIC QLD WA SA/ ACT/ TAS $ Value - by Precinct $ Value - by Grade 2% 19% 15% 21% 81% 62% CBD Suburban Premium A B C Charter Hall Group Investor Day 2013 105
Slide 107: Active Leasing
Office Active Leasing 605 148,244 96% 1,038,558 136 Sqm Average Tenants Sqm NLA Leases executed Leases completed occupancy Notes: - Figures as at 30 September 2013 Charter Hall Group Investor Day 2013 106
Slide 108: Managing Lease Expiries
Office Managing Lease Expiries By Gross Income Charter Hall Group Investor Day 2013 107
Slide 109: Proactive Leasing Approach
Office Proactive Leasing Approach Asset Challenge Activity No 1 Martin Place, Macquarie Group lease • Agents appointed – CBRE + DTZ Sydney expiry 30,000 sqm Dec • Target tenant list and actively responding to current requirements 14 • New leases agreed with DLA Piper (6,000 sqm) and Charter Hall (2,
Slide 110: "Buy, Build, Hold" pipeline
Office “Buy, Build, Hold” pipeline Asset NLA sqm Value $m Status 171 Collins Street, Melbourne 31,000 $230 • Complete • Leasing remaining vacancy Workzone West, Perth 15,573 $125 • Complete • 100% Leased Workzone East, Perth 12,338 $90 • Underway • 50% Leased 175 Eagle Street, Brisbane 22,851 $150 •
Slide 111: Enhancing amenities
Office Enhancing amenities Enhancement Complete Underway Foyer/Lobby upgrades 12 4 Lift upgrades 5 6 End of Trip facilities 5 3 171 Collins Street, Melbourne Sustainability Continued efficiency gains: • Energy- 9% improvement • Water – 3% improvement • Waste – increased co-mingled 504 Pacific Hwy, S
Slide 112: Portfolio summary
Industrial Portfolio summary Fund Assets Value $m WALE Occupancy Core Plus Industrial Fund 24 $665m 8.5 years 99% Core Logistics Partnership 6 $352m 9.3 years 91% Direct Industrial Fund 7 $210m 12.1 years 100% Direct Industrial Fund No 2 2 $105m 13.0 years 100% TOTAL 42 $1,332m 9.7 years 97% Coles D
Slide 113: "Buy, Build, Hold" pipeline
Industrial “Buy, Build, Hold” pipeline Asset GLA sqm Value $m Status Toll NQX Facility, Rockhampton 7,000 $12.5 • Under construction QLD • 100% Pre-committed Blackwoods Logistics Facility, 13,800 $25 • Under construction Mackay QLD • 100% Pre-committed Northline Logistics Facility Long 16,500 $24 •
Slide 114: Active leasing
Industrial Active leasing 51 145,562 99% 1,083,000 17 Sqm Average Tenants Sqm GLA Leases executed Leases completed occupancy • 101,873sqm leased or renewed in FY13 • Leased or terms agreed on a further 43,689sqm to 30 September 2013 Major transactions include: • Australia Post - 10,507sqm • Northlin
Slide 115: Managing lease expiries
Industrial Managing lease expiries By Gross Income 80.00% 70.00% 60.00% 50.00% 40.00% 30.00% 20.00% 10.00% 0.00% FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21 FY22 FY23+ Charter Hall Group Investor Day 2013 114
Slide 116: Retail portfolio
Retail portfolio John Courtney, Head of Portfolio Operations (AUS and NZ)
Slide 117: Key Portfolio Statistics
Retail Key Portfolio Statistics As at 30 September 2013 • 791 Retail assets across Australia in 1 listed and 4 wholesale funds and partnerships – 17 Sub Regional Shopping Centres – 43 Neighbourhood Shopping Centres – 19 Freestanding Supermarkets • Portfolio value over $2.3bn • 1,550 specialty tenant
Slide 118: Experienced operational teams
Retail Experienced operational teams A team of over 140 people within the Dedicated retail experts within the Retail Team working in collaboration Capital Transactions Team. with Charter Hall Services Divisions to deliver on operational excellence. Capital Transactions Asset Development Management M
Slide 119: Disciplined Investment Strategy
Retail Disciplined Investment Strategy Typical Typical GLA Anchor Tenants • Neighbourhood and Woolworths sub-regional Neighbourhood < 10,000 sqm Coles supermarket anchored Woolworths • $20 - $100m asset Coles value for CQR Sub-regional 10,000 to 40,000 sqm Kmart Big W • Value up to $200m for Target
Slide 120: Transaction Activity
Retail Transaction Activity Acquisitions by CQR Secret Harbour, WA ($33m) Tamworth, NSW ($35m) Lake Macquarie, NSW (50% sale from DRF to CQR, 100% interest $70m) Dubbo, NSW ($31m) South Gate, SA ($60m) Charter Hall Group Investor Day 2013 119
Slide 121: Transaction Activity
Retail Transaction Activity Acquisitions by wholesale funds and partnerships Bateau Bay Square, NSW ($164m) Keperra Square, QLD ($63m) Charter Hall Group Investor Day 2013 120
Slide 122: Results delivered "through the Asset Life-Cycle"
Retail Results delivered “through the Asset Life-Cycle” • Fully vertically integrated platform – Functional teams work seamlessly to maximise value of the property throughout its life-cycle Strategic Strategic Asset – Expert in niche sector of supermarket anchored Asset Planning retail centres Manag
Slide 123: Property Management Resources
Retail Property Management Resources Our portfolio is managed across 12 hubs located throughout Australia Charter Hall Group Investor Day 2013 122
Slide 124: Brand Strategy
Retail Brand Strategy Core Brand Idea The community square for today Targeting Customers Customer Experience Relevance A place to meet Local, people focused A forum, the plaza, the Trend of service providing a belonging common. oriented and and connection experience based Creating places that shoppi
Slide 125: Brand Strategy
Retail Brand Strategy Charter Hall Group Investor Day 2013 124
Slide 126: Specialty Tenant Leasing Activity
Retail Specialty Tenant Leasing Activity Australia - specialty tenant lease expiry at 30 September 2013 476 specialty leases Specialty tenant Current specialty Leasing deals completed since WALE steady at retention rate of completed on 1 July 2012 49,200 m2 GLA 3.1 years 85% and Overall 25% of the -
Slide 127: Anchor Tenant Leasing Activity
Retail Anchor Tenant Leasing Activity Australian anchor tenant lease expiry at 30 September 2013 10 Anchor tenant Anchor Tenant Major tenant Majors Leasing 37,000 m2 deals completed WALE 11.7 years GLA occupancy rate Deals completed since 1 July 2012 on 9.5 % of the 100% Portfolio 70% 65.4% 60% 50%
Slide 128: Asset Enhancement and Redevelopment
Retail Asset Enhancement and Redevelopment • Value of major developments completed from 1 July 2012 to 30 Sept 2013 - $98.9 m • Current major projects underway ( approved ) - $59.2 m • Forecast pipeline of projects to commence within the next 3 years – over $250 m Projects Completed Allenstown, QLD
Slide 129: Development Activity
Retail RETAIL Development Activity Singleton Square – NSW Singleton Square – NSW Allenstown Square - QLD Lansell Square - VIC South Hedland Square - WA Charter Hall Group Investor Day 2013 128
Slide 130: Trends
Retail Trends • A focus on service offerings and experience in centre and a connection with the local communities as the “meeting place” • Strong competition between Woolworths and Wesfarmers business in all of their retail formats i.e. Liquor, Supermarkets, DDS, Hardware – Innovation on product ran
Slide 131: Questions?
Questions?
Slide 132: Closing remarks
Closing remarks David Harrison, Joint Managing Director
Slide 133: Expertise across risk/return spectrum
Expertise across risk/return spectrum A manager of wholesale, listed and retail investor capital Risk vs. Target Return Profile Target Return Development 20% + $0.3bn Office Retail 15 – 17% Industrial Wholesale Partnerships Diversified Wholesale Pooled 11 – 14% $1.8bn $0.6bn Listed (CQR) Retail Inve
Slide 134: Charter Hall Investor Day 2013
Charter Hall Investor Day 2013 Thank you for your participation
Slide 135: Disclaimer
Disclaimer This presentation has been prepared by Charter Hall Group (being Charter Hall Limited (ABN 57 113 531 150) and Charter Hall Funds Management Limited (ABN 31 082 991 786) (AFSL 262861) as the responsible entity for Charter Hall Property Trust (ARSN 113 339 147)) (the “Group”). It is a pres
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