Slide 1: 2015 Annual Results
2015 Annual Results 19 August 2015
Slide 2: Agenda
Agenda • Merger update and strategic focus Angus McNaughton • Financial results Richard Jamieson Angus McNaughton Richard Jamieson Chief Executive Officer CFO and EGM Investments • Portfolio performance Stuart Macrae • Development update Jonathan Timms • FY16 focus and guidance Stuart Macrae Jonatha
Slide 3: Merger update and strategic focus
Merger update and strategic focus Angus McNaughton Cranbourne Park, VIC
Slide 4: Merger benefits on track with a strong platform for growth
Merger benefits on track with a strong platform for growth • Strategic focus remains unchanged • Operational cost synergies on track • Over 60% of operational cost savings1 already locked in • Merger financing savings achieved1 with over $100m lower cost • Weighted average cost of debt reduced to 4.
Slide 5: Strategic focus remains unchanged
Strategic focus remains unchanged Retail real estate • We will own, manage and develop Australian retail assets across the spectrum • Portfolio composition will evolve as developments occur and asset recycling continues Operational excellence • High performance intensive asset management approach •
Slide 6: Operational cost synergies on track
Operational cost synergies on track • Targeted operational cost savings progressing well Gross operational P&L cost savings ($m, run-rate basis) • Over 60% ($31m) of estimated savings on a run-rate basis 18 491 secured to date - principally in salaries and corporate 50 36 mths+: 100%/$49m overheads
Slide 7: Merger financing savings achieved with over $100m lower cost
Merger financing savings achieved with over $100m lower cost Interest cost savings ($m)3 • Scheme Booklet assumed all debt would be 35 refinanced, with estimated interest cost savings of $28m 30 4 28 28 • Interest savings of $28m have been locked in1 25 24 • Refinancing costs have reduced by over $1
Slide 8: Integration is on program
Integration is on program Three key integration focus areas to deliver optimal organisational ‘We are one of design, synergy realisation and long-term financial results Australia’s leading REITs Culture invested across the • Key operational team structures integrated full retail asset spectrum’ • Co
Slide 9: Solid FY15 performance
Solid FY15 performance Financials Development • Underlying earnings of $683.1m, up 6.2%1 • Successfully completed Emporium Melbourne, Warnbro Centre and Cranbourne Park Stage 1 • NTA of $2.45, up 5.2%1 • $922m of projects under construction (direct share $461m) • Conservative gearing of 28.0%2 acros
Slide 10: Financial results
Financial results Richard Jamieson Emporium Melbourne, VIC
Slide 11: Strong financial performance
Strong financial performance FY15 FY14 • Statutory net profit of $675m1 Aggregate Aggregate • DPS of 16.9 cents represents a group2 group2 Change payout ratio of 98% of Underlying earnings $683m $643m 6.2% underlying EPS Underlying EPS 17.3c 16.7c 3.6% • NTA is up 5.2% to $2.45 DPS 16.9c3 16.2c 4.3%
Slide 12: Underlying earnings growth of 6.2%
Underlying earnings growth of 6.2% • Strong underlying earnings growth driven by underlying performance, internalisation of Novion management and capital transactions FY15 FY14 Aggregate Aggregate group group Change ($m) ($m) (%) Net property income (NPI) 928.2 863.3 7.5 Property management, develop
Slide 13: Balance sheet strength
Balance sheet strength Aggregate • Increase in value of direct Aggregated balance sheet group1 property of 5.0% driven by As at: 30-Jun-15 30-Jun-14 Change revaluation gains of $738m for ($m) ($m) (%) FY15, with a weighted average Cash 107.4 156.0 (31.2) capitalisation rate of 6.30% Direct property
Slide 14: Solid debt metrics
Solid debt metrics Aggregate • Weighted average group interest rate reduced As at: 30-Jun-15 30-Jun-14 Change by 110 bps Weighted average interest rate (%) 4.2 5.3 (1.1) • Gearing at low end Weighted average debt duration (years) 3.21 3.4 (0.2) of 25% to 35% target range Gearing2 (%) 28.0 29.3 (1.3)
Slide 15: Merger refinancing well positioned
Merger refinancing well positioned • ‘A-’ Standard & Poor’s long-term credit rating confirmed post merger USPP Convertible notes • A$564m of NVN USPP funding pre merger • $300m of NVN convertible notes pre merger • A$558m renegotiated in July 2015 with existing maturities • Over 99% of conversion no
Slide 16: Debt refinancing – next key steps
Debt refinancing – next key steps • Drawn debt $4.2b as at 30 June 2015 Debt maturity profile1 ($m) FY16 440 • Current facilities $6.6b1 FY17 960 178 1,800 • Available liquidity of $2.4b1 sufficient to meet FY18 840 funding requirements FY19 800 38 FY20 700 400 • Future DCM transactions to be source
Slide 17: Distribution policy aligned with underlying earnings
Distribution policy aligned with underlying earnings Revised underlying earnings measure • Effective 1 July 2015 • Underlying earnings will exclude the amortisation of non-project lease incentives and include rent lost from undertaking developments • Equivalent to PCA FFO plus rent lost from underta
Slide 18: Portfolio performance
Portfolio performance Stuart Macrae The Glen, VIC
Slide 19: A large portfolio with broad potential
A large portfolio with broad potential Scale and relevance • 99 centres under management (88 Direct Portfolio) • Over 9,700 tenants (8,800+ Direct Portfolio) • Largest landlord to Wesfarmers and Woolworths with 231 stores Opportunities • Improving portfolio occupancy • Grow national retailer relatio
Slide 20: Improving portfolio metrics
Improving portfolio metrics 30-Jun-15 30-Jun-14 Portfolio well positioned Aggregate Aggregate for growth Key portfolio statistics group FDC NVN group FDC NVN Number of shopping centres 88 61 27 92 63 29 • Solid growth in comp NPI, up 2.5% Gross lettable area (m)(sqm) 2.8 1.4 1.4 2.8 1.4 1.4 • Specia
Slide 21: Retail environment steadily improving
Retail environment steadily improving Rising disposable income to drive household consumption Consumer sentiment and employment muted over the short-term 14% Household consumption 130 5% Gross disposable income Consumer sentiment index 12% 120 Forecast income 3% 10% 110 Chnage YoY Change YoY 8% 100
Slide 22: Specialty sales improving partly offset by weak majors
Specialty sales improving partly offset by weak majors Portfolio retail sales by store type For the year ended 30-Jun-15 Proportion of portfolio Stabilised MAT growth1 Specialty stores recovery is MAT Store type sales by sales by rent 30-Jun-15 30-Jun-14 leading portfolio sales growth ($m) (%) (%) (
Slide 23: Specialty sales driven by general, services and mobile phones
Specialty sales driven by general, services and mobile phones Stabilised specialty store sales by category For the year ended 30-Jun-15 % of Jun-15 Jun-14 All specialty categories are MAT specialty MAT MAT recording positive growth Category sales sales change change ($m) (%) (%) (%) Apparel 2,126 33
Slide 24: Portfolio records improvement in comparable NPI
Portfolio records improvement in comparable NPI Well-weighted lease expiry profile1 • Comparable NPI growth has increased to 2.5% supported by fixed annual reviews of 4% to 5% of 5.6 years for specialties and control of costs • 1,871 lease deals completed, representing 11% of portfolio gross rent NP
Slide 25: Development update
Development update Jonathan Timms Warnbro Centre, WA
Slide 26: Redevelopment pipeline enhanced and team integrated
Redevelopment pipeline enhanced and team integrated Development pipeline expanded to $3.1b1 with five key projects under construction • Current projects are in line with or ahead of expectations • Further 18 projects in early planning stage outside the identified pipeline • Pipeline provides flexibi
Slide 27: Development pipeline expanded to $3.1b
Development pipeline expanded to $3.1b $m 2 Chadstone Retail and Office 622 2 Cranbourne Park 110 2 Current Warriewood Square 87 2 Colonnades (Stage 1) 51 2 Halls Head Central 52 Mandurah Forum 2 350 Estimated FY16 Partner assets 1 153 commencements Minor projects 4 18 The Glen 2 380 Estimated FY17
Slide 28: Chadstone project progressing well with expanded scope
Chadstone project progressing well with expanded scope Key metrics Original scope Current forecast Cost (retail and office) $580m $622m Yield >6% >6% Expected IRR >10% >10% • Luxury and premium international tenant demand has driven additional remix opportunity as part of project and total forecast
Slide 29: Chadstone retail and office project
Chadstone retail and office project Site work on retail project New bus interchange open Artist’s impression Office tower 29
Slide 30: Cranbourne Park near completion, well ahead of budget
Cranbourne Park near completion, well ahead of budget Key metrics Board approved Current forecast Total cost $112.3m $110.3m Yield >7% >8% Expected IRR >12% >14% • Stage 1 opened successfully in March 2015, including new Coles and Target, refurbished Kmart, mini-majors and specialties • Centre tradi
Slide 31: Other current projects – all tracking ahead of expectations
Other current projects – all tracking ahead of expectations Warriewood Square, NSW $87m Halls Head Central, WA $52m Colonnades, SA $51m • New mini-major tenants and specialties, • Redevelopment to include new Kmart, Aldi, • New fresh food mall anchored by expanded expanded Woolworths and a significa
Slide 32: Key projects in planning well advanced
Key projects in planning well advanced Mandurah Forum, WA $350m • Major redevelopment including complete centre refurbishment, a new department store, Target, mini-majors, specialty retailers, a new modern food court and alfresco dining area • Council approval received in April 2015 • Major tenant d
Slide 33: Key projects in planning well advanced
Key projects in planning well advanced Roselands, NSW $480m • Major repositioning of Roselands as a modern Major Regional centre in south western Sydney • Redevelopment includes upgraded department store, new discount department store, new supermarket, international retailers, mini-majors and specia
Slide 34: FY16 focus and guidance
FY16 focus and guidance Angus McNaughton Myer Bourke Street, VIC
Slide 35: FY16 key focus areas
FY16 key focus areas • Deliver forecast cost synergies, identify new cost and revenue opportunities to drive growth • Significantly progress integration • Establish new Vicinity Centres culture and integrate people, processes and systems • Co-location of corporate teams • Integrate IT platforms • Pr
Slide 36: Our digital future is progressing
Our digital future is progressing State of play Connect • Digital strategy development underway, building on FDC and NVN learnings to date • Exploring potential partners for network connectivity across portfolio Digitise Future opportunity • A fully integrated digital and property platform • Seamles
Slide 37: FY16 guidance
FY16 guidance • FY16 underlying earnings guidance of 18.8 to 19.1 cents per security (underlying EPS)1 • inclusive of five asset sales (~$220m)2 which reduced underlying EPS guidance by ~0.3 cents per security • Payout ratio is expected to be 90% to 95% of underlying earnings 1. Subject to no unfore
Slide 38: Merger benefits being realised
Merger benefits being realised • Increased portfolio scale and expertise • Total AUM of $22b and #1 in Sub Regional and Outlet Centres, and #2 Super Regional, Major Regional, City Centre and Regional AUM combined • Industry leading team drawn from both Novion and Federation • Material value creation
Slide 39: Appendices
Appendices Appendices Strategic focus 1 Responsible investment 2 Financials 3 Strategic partnerships 4 Capital transactions 5 Development pipeline 6 Assets under management 7 Direct portfolio 8 Asset summaries 9 Contact details 10 Chadstone Shopping Centre, VIC
Slide 40: Appendix – Strategic focus
Appendix 1 – Strategic focus • Fully integrated platform focused on the ownership and management of Australian retail real estate Retail • Own, manage and develop assets across the full retail asset spectrum – Super Regional to Neighbourhood centres real estate • Invest in retail assets with stable
Slide 41: Appendix – Responsible investment
Appendix 2 – Responsible investment FY15 outcomes Energy intensity1,2,4 • Materiality assessment completed3 2.2% reduction • Sustainability outcomes formally integrated into procurement process3 • Sustainability integrated into our development projects3 Water intensity1,2,4 • Chadstone development5
Slide 42: Appendix – Financials: Underlying earnings to net profit
Appendix 3 – Financials: Underlying earnings to net profit For the 12 months to: 30-Jun-15 30-Jun-14 ($m) Total underlying earnings (aggregate group) 683.1 643.6 Subtract Federation underlying earnings prior to the merger (239.0) (243.0) Non-distributable items: Straight-lining revenue 6.4 (1.6) Pro
Slide 43: Appendix – Financials: Underlying earnings to AFFO
Appendix 3 – Financials: Underlying earnings to AFFO FY15 FY15 FY15 $m NVN FDC Aggregate group Underlying earnings1 423 260 683 Add: Amortisation of non-project incentives 7 2 9 Less: Rent lost from undertaking developments (13) - (13) Funds from operations (FFO) 417 262 679 Less: Tenant incentives
Slide 44: Appendix – Financials: On track for targeted cost savings
Appendix 3 – Financials: On track for targeted cost savings Cost saving Current Estimated savings as per % achieved 12 month • Over 60% of (on a run-rate or annualised basis) status Scheme Booklet to date target estimated ($m) ($m) (%) (%) operational cost Operational savings locked in1 Gross2 31 49
Slide 45: Appendix – Strategic partnerships
Appendix 4 – Strategic partnerships Strategic partnerships complement the direct portfolio strategy and provide capital partnership opportunities Revenue contribution Current partnerships • $8.4b of AUM 7% of revenue is from partnerships • 17 strategic partners 7% • ~4% AM fees from co-owned assets
Slide 46: Appendix – Capital transactions
Appendix 5 – Capital transactions Acquisition Disposals Settlement Sale price Cap rate Acquisitions Settlement price Cap rate ($m) (%) ($m) (%) FDC portfolio FDC portfolio FDC 1HFY15 – total (338) 7.57 1HFY15 – total 484 7.13 Woodlands Village Jan-15 (11) 9.75 NVN portfolio Mildura Central Feb-15 (1
Slide 47: Appendix – Development pipeline
Appendix 6 – Development pipeline Development FDC FDC cost FDC cost Identified development pipeline cost cost 30-Jun-151 to complete ($m) ($m) ($m) ($m) Chadstone Retail and Office 622 311 76 235 Cranbourne Park 110 55 45 10 Warriewood Square 87 44 8 36 Colonnades (stage 1) 51 25 2 23 Halls Head Cen
Slide 48: Appendix – Assets under management
Appendix 7 – Assets under management Australia’s third largest REIT with presence in each Australian state and territory Queensland Scale and relevance across Western Australia the full spectrum of Australian retail Major Regional 1 City Centre Regional 3 4 Regional 3 sub-sectors and geographies Sub
Slide 49: Appendix – Assets under management (continued)
Appendix 7 – Assets under management (continued) Direct portfolio Managed As at 30 June 2015 Wholly-owned Co-owned Total (Third party/co-owned) Total AUM No. of centres 60 28 88 11 (28) 99 GLA (000’s, sqm) 1,384 1,385 2,769 246 3,015 Number of leases 4,489 4,383 8,872 774 9,748 Annual retail sales (
Slide 50: Appendix – Direct portfolio: Key statistics by centre type
Appendix 8 – Direct portfolio: Key statistics by centre type Key portfolio statistics Outlet/ As at 30 June 2015 Bulky Goods Neighbourhood Sub Regional City Centre Regional1 Total portfolio Number of shopping centres 5 21 37 4 21 88 Gross lettable area (m)(sqm) 0.1 0.2 0.8 0.2 1.4 2.8 Comparable NPI
Slide 51: Appendix – Direct portfolio: Key portfolio retailers
Appendix 8 – Direct portfolio: Key portfolio retailers Top 10 retailers Top 10 retail groups Number of % of total Number % of total Credit Rank Retailer Retailer type Rank Retailer Brands stores income of stores income rating1 1 Supermarket 58 4.8 1 140 10.6 A- Coles, Kmart, Liquorland, Target Big W
Slide 52: Appendix – Direct portfolio: Diversification
Appendix 8 – Direct portfolio: Diversification Diversified portfolio1 Lease expiry profile2 14% 12% 10% Super Regional Major Regional 8% City Centre Regional 6% 4% 2% 0% Chadstone Chatswood QueensPlaza Bayside Emporium Northland Myer Centre Elizabeth Galleria Broadmeadows Brisbane Balanced geographi
Slide 53: Appendix – Direct portfolio: Portfolio information
Appendix 8 – Direct portfolio: Portfolio information MAT sales analysis by state1 Weighted average capitalisation rate (%) Jun-15 Jun-14 5% Super Regional 5.00 5.25 4% Major Regional 5.84 5.96 3% Regional 6.70 7.00 2% City Centre 5.56 5.72 1% Sub Regional 7.17 7.67 0% WA WA VIC TAS SA/NT QLD NSW Tot
Slide 54: Appendix – Asset summaries
Appendix 9 – Asset summaries Specialty Value as at Capitalisation Discount Occupancy Annual retail Centre Specialty occupancy Centre type Interest 30 June 2015 rate rate GLA rate sales sales sales costs (%) ($m)1 (%) (%) (sqm) (%)² ($m) ($psm)² ($psm)² (%)2,3 New South Wales Chatswood Chase Sydney M
Slide 55: Appendix – Asset summaries (continued)
Appendix 9 – Asset summaries (continued) Specialty Value as at Capitalisation Discount Occupancy Annual retail Centre Specialty occupancy Centre type Interest 30 June 2015 rate rate GLA rate sales sales sales costs (%) ($m)1 (%) (%) (sqm) (%)² ($m) ($psm)² ($psm)² (%)2,3 Queensland QueensPlaza City
Slide 56: Appendix – Asset summaries (continued)
Appendix 9 – Asset summaries (continued) Specialty Value as at Capitalisation Discount Occupancy Annual retail Centre Specialty occupancy Centre type Interest 30 June 2015 rate rate GLA rate sales sales sales costs (%) ($m)1 (%) (%) (sqm) (%)² ($m) ($psm)² ($psm)² (%)2,3 Victoria Chadstone Shopping
Slide 57: Appendix – Asset summaries (continued)
Appendix 9 – Asset summaries (continued) Specialty Value as at Capitalisation Discount Occupancy Annual retail Centre Specialty occupancy Centre type Interest 30 June 2015 rate rate GLA rate sales sales sales costs (%) ($m)1 (%) (%) (sqm) (%)² ($m) ($psm)² ($psm)² (%)2,3 Victoria (continued) DFO Sou
Slide 58: Appendix – Contact details
Appendix 10 – Contact details Contact: Investors Media Penny Berger Brandon Phillips +61 2 8229 7760 +61 3 9236 6321 penny.berger@vicinity.com.au brandon.phillips@vicinity.com.au About Federation Centres (ASX: FDC) Federation Centres is one of Australia’s leading retail property groups. Following th
Slide 59: Disclaimer
Disclaimer This document is a presentation of general background information about the activities of Federation Centres (ASX:FDC) current at the date of lodgement of the presentation (19 August 2015). It is information in a summary form and does not purport to be complete. It is to be read in conjun