Cromwell Property Group · ASX:CMW
Cromwell Property — H1 2014 Earnings Presentation
47 slides from Cromwell Property's earnings presentation, Feb 20, 2014
Slide 1: 1H14 Results Presentation
For personal use only 1H14 Results Presentation 20 February 2014
Slide 2: Important Information & Disclaimer
Important Information & Disclaimer For personal use only This presentation including its appendices legal or tax advice as they deem necessary or 243 (BHT), Cromwell Riverpark Trust ARSN 135 002 (“Presentation”) is dated 20 February 2014 and has consider appropriate for their particular jurisdiction
Slide 3: Section 1: 1H14 Highlights
For personal use only Section 1 1H14 Highlights CMW 1H14 Results 3
Slide 4: Key Themes
Key Themes For personal use only 1H14 Record Result as Forecast Operating Profit increased by 59% to a record $73.2m $73 2m Operating EPS increased by 13% to 4.26cps Statutory Profit increased by 194% to $86.7m Payout ratio decreased from 96% to 88% FY14 guidance maintained at 8.4c EPS a
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 in Australia Maintain a property portfolio that provides a balance between defensive investments and assets that can be improved or repo
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 since stapling Outperformance of 7.1%, 13.2% and 31.8% per annum over 3, 5 and 10 years Property performance in top quartile of manager
Slide 7: Active Management - Recycling Capital For Future Growth
Active Management - Recycling Capital For Future Growth For personal use only Sale of 6 assets in 1H14 for $253m Assets have delivered good returns, but expected future returns were below required hurdle rate Capital recycled to co-investment in Northpoint Tower with balance retained for futur
Slide 8: Active Management - Partnering on an Attractive Opportunity
Active Management - Partnering on an Attractive Opportunity For personal use only Northpoint Tower is an iconic North Sydney 42-storey building purchased 50/50 with Redefine in December 2013 for $278.7m Initial asset in new fund with potential for additional assets and investors over time Inte
Slide 9: Active Management - Additional Value Add Opportunities
Active Management - Additional Value Add Opportunities For personal use only Past Projects (2011-2014) Future Projects (2014-2018) Full refurbishment and Potential upside from replacement of plant. Tri Tri- reconfiguration of retail Generation plant installed space and additional carparking reve
Slide 10: Active Management - Qantas Global Headquarters Completed
Active Management - Qantas Global Headquarters Completed For personal use only $131m refurbishment and expansion programme completed on 29 January, 2014 Project delivered on time, on budget Current value of $320m, representing approximately 15% of portfolio NABERS Energy rating expected to i
Slide 11: Qantas Global Headquarters
Qantas Global Headquarters For personal use only 2014 2014 2014 Entrance Open plan work Transformed Forecourt of 2011 environment, 2011 internal stairway 2011 Bourke Road maximising in Building A natural atu a light g t CMW 1H14 Results 11
Slide 12: Funds Management – External AUM now $1.2bn
Funds Management – External AUM now $1.2bn1 For personal use only Unlisted Property Trusts Property Securities (Phoenix Portfolios) Cromwell Property Trust 12 launched in October Increase in FUM to over $450m 2013 with significant inflows from direct retail D Demand d growing i ffrom llarg
Slide 13: Capital Management - Asset Allocation Guidelines
Capital Management - Asset Allocation Guidelines For personal use only Increased funds management activity generating greater demand for quality assets Cromwell has indicative asset allocation strategies g for each p property p y acquisition q Risk Appetite Speculative Developments Core Plus Cro
Slide 14: Capital Management – Equity Raised has Added Value
Capital Management – Equity Raised has Added Value For personal use only $761.4m of equity issued since July 2009 Equity returns have been substantially higher, given current low cost of debt Average issue price of $0.82 vs. average NTA of $0.711 Recent acquisitions are expected to continue
Slide 15: Capital Management – Transforming Debt Platform Over Time
Capital Management – Transforming Debt Platform Over Time For personal use only Well advanced in discussions to refinance or extend the Managing gearing appropriately is a key capital majority j y of facilities management g initiative Targeting longer term and slight improvement in Gearing r
Slide 16: Section: 1H14 Financial Results
For personal use only Section 2 1H14 Financial Results CMW 1H14 Results 16
Slide 17: Operating Earnings Per Security Increased by 13%
Operating Earnings Per Security Increased by 13% 1H14 RESULTS For personal use only Statutory profit increased 194% to $86.7m Operating earnings increase derived by a number of factors: Half year operating profit1 increased by 59% Accretion from FY13 acquisitions to a record $73 $73.2m 2m
Slide 18: Financial Position Strengthened
Financial Position Strengthened 1H14 RESULTS For personal use only Cash of $115m provides flexibility to Dec-13 Jun-13 pursue additional property acquisitions ($’000) ($’000) or funds management initiatives Assets A t Cash and Cash Equivalents 114,599 125,933 NTA increased from $0.70 to $0.71 pe
Slide 19: Valuations Beginning To Rise
Valuations Beginning To Rise 1H14 RESULTS For personal use only Fair value increase in investment property of $16.6m (0.7%), 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
Slide 20: Debt Profile In Transition
Debt Profile In Transition CAPITAL For personal use only MANAGEMENT Diversified across 8 facilities with varying maturity dates Current average cost of debt is 6.0% based on existing hedged rates N maturities No t iti until til January J 2015 Cost of new debt approximately 5.0% Weighted av
Slide 21: Lowering Interest Rates
Lowering Interest Rates1 CAPITAL For personal use only MANAGEMENT Targeting lower interest rates again in FY14 Weighted average hedge term of 1.9 years Weighted average margin of 1 1.9% 9% on current High degree of certainty over interest expense facilities in FY14 and FY15 Expect average
Slide 22: Section: Property Portfolio
For personal use only Section 3 Property Portfolio CMW 1H14 Results 22
Slide 23: Property Portfolio Remains Robust
Property Portfolio Remains Robust INVESTMENT For personal use only PORTFOLIO Geographic Sector Tenant Diversification1 Diversification1 Classification1 0.6% 1.2% 1.1% ACT 13.9% 18.2% 17.9% NSW Government Authority 2 QLD Office Listed Company/Subsidiary Retail 48.3% 24.7% VIC Private Company TAS 33.8
Slide 24: Lease Expiry Profile
Lease Expiry Profile INVESTMENT For personal use only PORTFOLIO WALE of 6.2 years Lease Expiry Profile % Gross Income Vacancy 4.0% vs. CBD office average of 11.8%3 50.0% 46.3% Expiry profile cushioned against current soft conditions 45.0% Average fixed review of 4.1% over 53% of 40.0% portfo
Slide 25: Proactive Engagement on FY17 Expiries
Proactive Engagement on FY17 Expiries INVESTMENT For personal use only PORTFOLIO Average half year occupancy of 97.9% since stapling in Proactive leasing team already engaging on FY17 December 2006 expiries Tuggeranong – actively engaged with tenant and Consistently maintained occupancy abov
Slide 26: Sustainability
Sustainability INVESTMENT For personal use only PORTFOLIO Attractive NABERS ratings across portfolio reduced in HQ North Achieved 6 Star Green Star - Office As Built v2 1H14 resulting lti from f Northpoint N th i t acquisition i iti One of only 13 properties nationally to achieve such a Qant
Slide 27: Section: Funds Management
For personal use only Section 4 Funds Management g CMW 1H14 Results 27
Slide 28: Cromwell's Direct Property Funds Continue To Perform
Cromwell’s Direct Property Funds Continue To Perform GROWTH For personal use only Closed Funds RIVERPARK TRUST IPSWICH TRUST BOX HILL TRUST Asset valuation Asset revalued to Asset currently uplift since $97.5m from under construction inception from $92.95m Capital raise $173m to $199m Buil
Slide 29: Funds Management - Cromwell Property Trust Case Study
Funds Management - Cromwell Property Trust 12 Case Study GROWTH For personal use only $76 million capital raise, expected to close April 2014 3 assets, $129m in value, 14.5 year WALE, 100% occupancy Initial distribution yield of 7.75%1 p.a Owns 3 assets; 2 in Victoria and 1 in South Australi
Slide 30: Section: Strategy & Outlook
For personal use only Section 5 Strategy gy & Outlook CMW 1H14 Results 30
Slide 31: Property Portfolio – Continued Focus on Office
Property Portfolio – Continued Focus on Office OUTLOOK For personal use only We still prefer commercial office property Prime vs. Secondary Office Yields Significant demand for property with long leases 9.0% Demand for core CBD expanding to include Secondary Office Yields near city and suburba
Slide 32: Consistent Execution of Strategy
Consistent Execution of Strategy OUTLOOK For personal use only Guidance Maintained – Strategy Unchanged FY14 earnings and distributions guidance of at least 8.4 cps and 7.5 cps respectively maintained. Represents an EPS and DPS yield of 8 6%1 and 7 8.6% 7%1 respectively 7.7% Focus is on preser
Slide 33: 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 Daryl Wilson Hamish Wehl Director - Finance and Funds Management Investor Relations daryl.
Slide 34: Appendix: Additional Information
For personal use only Appendix Additional Information CMW 1H14 Results 34
Slide 35: 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: $1.7 bn1 Secur
Slide 36: 1H14 Operating and Statutory Profit Reconciliation
1H14 Operating and Statutory Profit Reconciliation For personal use only 1H14 1H14 1H13 1H13 ($’000) (CPS)1 ($’000) (CPS)1 Profit from operations 73,210 4.3 45,924 3.8 Gain on sale of investment properties 3,146 0.2 - N/A Loss on disposal of other assets (23) (0 0) (0.0) - N/A Fair value adjustments
Slide 37: Segment Result - Operating Earnings
Segment Result - Operating Earnings2 For personal use only Property Investment Funds Management Property Development Dec-13 Segment revenue ($'000) ($'000) ($'000) ($’000) Property p y income - external customers 136,614 , - - 136,614 , Property income - intersegmental 517 - - 517 Funds management i
Slide 38: 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 $320.0m 7.00% 100.0% 17.6 yrs Qantas HQ North Tower QLD Office $200.0m 8.00% 99.7% 4.7 yrs AECOM, Bechtel, Technology One 321 Exhibition S
Slide 39: Property Portfolio – Top leases
Property Portfolio – Top 20 leases For personal use only Tenant Category Building Expiry Date Rental Income Qantas Airways Limited Listed Company/Subsidiary Qantas Global HQ Dec-32 10.2% Dept of Social Services Federal Government Tuggeranong Office Park Dec-16 8.6% Origin Energy Services Limited Lis
Slide 40: Property Portfolio – Net Property Income
Property Portfolio – Net Property Income For personal use only Like for like income growth 1H14 1H13 ($’000) ($’000) Variance Comments Tuggeranong Office Park, Greenway ACT 10,023 9,991 0.3% Bi-annual Bi annual CPI increases, next review due Dec 2015 203 Coward Street, Mascot NSW 7,657 7,362 4.0% Ex
Slide 41: Property Portfolio – Net Property Income
Property Portfolio – Net Property Income For personal use only Sales, Purchases and Other 1H14 1H13 ($’000) ($’000) Variance Comments Acquired October 2012 CPF Properties 7,846 3,700 112.1% Purchases Acquired June 2013 NSW Office Portfolio 18,799 0 N/A Acquired May 2013 Health & Forestry House 6 491
Slide 42: Property Portfolio - Lease Expiries FY14, FY15, FY16
Property Portfolio - Lease Expiries FY14, FY15, FY16 For personal use only Lease Expiries representing >1% income (FY14-FY16) % off total t t l Area Expiry portfolio rental Property Tenant (sqm) Status income Comment Current 100 Waymouth Street Street, Adelaide Adelaide, SA Vacant 8,986 Available 1.
Slide 43: Property Portfolio – Movement In Book Value
Property Portfolio – Movement In Book Value For personal use only Portfolio significantly improved through acquisitions since 2009 In-sourced facilities management model delivers consistently low lifecycle capex 1H14 FY13 FY12 FY11 FY10 ($’000) ($’000) ($’000) ($’000) ($’000) Opening Balance 2,3
Slide 44: Interest Rate Hedging
Interest Rate Hedging For personal use only Amount Hedged Maturity Date ($’000) Base Rate1 Years Remaining % of Total May-14 62,400 2.99% 0.3 5.6% May-14 100,000 2.98% 0.4 9.0% Oct-14 83,700 4.94% 0.8 7.5% May-15 133,000 5.19% 1.4 11.9% F b 16 Feb-16 31 730 31,730 5 90% 5.90% 21 2.1 2.8% Jul-16 100,
Slide 45: Funds Management Summary
Funds Management Summary For personal use only Number of Fund Sector Investors Total Assets1 Properties Ongoing Fees2 Initial Fees2 Cromwell Riverpark Trust Direct property Retail $203m 1 0.60% 3.0% Cromwell Ipswich City Heart Trust Direct property Retail $101m 1 0.60% 3.0% Cromwell Box Hill Trust D
Slide 46: Closed Fund Performance – CRT, ICH, BHT
Closed Fund Performance – CRT, ICH, BHT For personal use only Riverpark Trust (CRT) Ipswich City Heart Trust (ICH) Box Hill Trust (BHT) NAV Price $1.12 NAV Price $1.00 NAV Price $1.00 Distribution Yield 9.25% p.a Distribution Yield 8.25% p.a Distribution Yield 7.75% p.a WALE 10.9 years WALE 13.5 yea
Slide 47: For personal use only
For personal use only well versed well timed wellll considered id d
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