Cromwell Property Group · ASX:CMW
Cromwell Property — H1 2016 Earnings Presentation
45 slides from Cromwell Property's earnings presentation, Feb 19, 2016
Slide 1: 1H16 Results Presentation
For personal use only 1H16 Results Presentation 19 February 2016
Slide 2: Important Information & Disclaimer
Important Information & Disclaimer For personal use only This presentation including its appendices appropriate for their particular jurisdiction. ARSN 135 002 336 (CRT), Cromwell Ipswich City (“Presentation”) is dated 19 February 2016 and has Heart Trust ARSN 154 498 923 (ICH), Cromwell Cromwell Pr
Slide 3: Section 1: 1H16 Highlights
For personal use only Section 1 1H16 Highlights CMW - 1H16 Results 3
Slide 4: 1H16 Highlights – Strong Result Boosted by Transactional Income
1H16 Highlights – Strong Result Boosted by Transactional Income Operating profit1 up 22% to $88.8 million (5.1 cps) For personal use only Statutory profit1 up 124% to $195.5 million (11.2 cps) Active asset management focus continues Reduction in near term expiry profile including success wit
Slide 5: 1H16 Highlights – Funds Contribute 21% of Operating Profit
1H16 Highlights – Funds Contribute 21% of Operating Profit For personal use only Operating profit up 22% at $88.8 million ($72.9 million in 1H15) Operating profit boosted by: Operating profit per security of 5.1 cps (4.2 cps 1H15) Inclusion of European business for full period Statutory profi
Slide 6: 1H16 Highlights – Gearing Down, Cash and NTA up
1H16 Highlights – Gearing Down, Cash and NTA up For personal use only Dec-15 June-15 ($’000) ($’000) Cash and Cash Equivalents have Assets increased 135% to $256 million from Cash and Cash Equivalents 255,695 108,693 $109 million FY15 Investment Properties 2,083,219 2,137,648 NTA, which does not
Slide 7: Property Portfolio
For personal use only Section 2 Property Portfolio CMW - 1H16 Results 7
Slide 8: Property Portfolio Remains Robust
Property Portfolio Remains Robust Geographic Sector Tenant For personal use only Diversification1 Diversification1 Classification1 2.0% 7.3% ACT 22.5% 21.1% NSW Government Authority 2 25.6% Office Retail 47.2% QLD Listed Company/Subsidary VIC 31.7% Private Company 44.6% 98.0% Very strong tenant pr
Slide 9: Property Portfolio – Actively Managing Lease Expiry Risk
Property Portfolio – Actively Managing Lease Expiry Risk WALE of 5.7 years with vacancy of 5.7% For personal use only Lease Expiry Profile % Gross Income Expiry profile cushioned against current soft conditions 25% Average fixed review of 3.7% over 19% of portfolio in 2H16 Improvement in short
Slide 10: Property Portfolio – Lease Expiries FY16, FY17, FY18
Property Portfolio – Lease Expiries FY16, FY17, FY18 Lease Expiries representing >1% income (FY16-FY18) For personal use only % of Total Area Expiry Portfolio Property Tenant (sqm) Status Rental Income Comment FY16 13 Keltie Street , Woden, ACT Department of Veteran Affairs 20,274 Jun-16 4.2% Heads
Slide 11: Case Study: 9,000+ sqm leased or renewed at Victoria Avenue
Case Study: 9,000+ sqm leased or renewed at Victoria Avenue For personal use only Demand is at highest levels seen since Cromwell purchased the Victoria Avenue, Chatswood asset in 2006 Strong demand for good quality, well managed office space in North Sydney in general Chatswood is uniquely pl
Slide 12: Property Portfolio – Valuations Continue To Rise
Property Portfolio – Valuations Continue To Rise For personal use only Fair value increase in investment property of $105 million net of capex and incentives Weighted Average Cap rate improved by 0.37% to 7.52% since FY15 (8.20% FY14) Spread between primary and secondary cap rates is now compr
Slide 13: Property Portfolio – Active Management Remains a Focus
Property Portfolio – Active Management Remains a Focus For personal use only Core portfolio assets have strong tenant covenants, long WALEs, fixed rental escalations Active portfolio assets have short WALEs and are either sold or transformed Once transformation has occurred, asset is realised
Slide 14: Property Portfolio – Transformation And Recycling Track Record
Property Portfolio – Transformation And Recycling Track Record For personal use only Core Portfolio 14 assets worth $1.6 billion, 75% of current portfolio by value WALE of 7.8 years Weighted property ungeared IRR since acquisition of 10.8% Average valuation uplift over costs of 17.4% Active
Slide 15: Case Study: Waymouth Street, Adelaide
Case Study: 100 Waymouth Street, Adelaide For personal use only Next-life asset transition, active leasing strategy, disposal at significant premium Property Data Asset Management Challenge Results Property Type Office • Purchased in 2003 • Fully refurbished asset leased to blue chip tenants (Origin
Slide 16: Case Study: Tuggeranong Office Park, ACT
Case Study: Tuggeranong Office Park, ACT For personal use only New building on site, retained tenant, occupancy extended Property Data Asset Management Challenge Results Property Type Office • Whole of asset lease expiry in December 2016 • Retained tenant on the property Athllon Drive, • Need to ret
Slide 17: Case Study: Northpoint Tower, North Sydney
Case Study: Northpoint Tower, North Sydney For personal use only Wholesale capital partnership to transform North Sydney CBD Property Data Asset Management Challenge Results Property Type Office • Purchased in December 2013 post a failed • DA passed and a 2 year construction raising by a competitor
Slide 18: Funds Management
For personal use only Section 3 Funds Management CMW - 1H16 Results 18
Slide 19: Strong Funds Management Operating Profit
Strong Funds Management Operating Profit For personal use only Operating Profit of $19.6 million ($0.5 million 1H15) Change in AUM ($bn)1 Wholesale Funds operating profit of $10.7 million ($0.3m 1H15) Retail Funds operating profit of $8.8 million ($0.2 million 1H15) Result incorporates first
Slide 20: Funds Management – Wholesale (Australia and Europe)
Funds Management – Wholesale (Australia and Europe) Australasia Haagse Poort, The Hague, the Netherlands For personal use only Bevan Towning recently appointed Head of Australasian Wholesale Unlisted Funds Management Brief to target Australian and Asian wholesale capital for investment into our
Slide 21: Funds Management – Retail (Australia and New Zealand)
Funds Management – Retail (Australia and New Zealand) For personal use only Australia Cromwell Funds Management selectively purchased three properties on behalf of fund unitholders during 1H16 2015 Australian Property Institute’s Winner of the Commonwealth Bank of Australia Funds Management Awar
Slide 22: Case Study: Cromwell Box Hill Trust
Case Study: Cromwell Box Hill Trust For personal use only ATO Building, Cromwell Box Hill Trust ATO Box Hill Cromwell received an unsolicited approach for the recently completed ATO Box Hill building The proposed sale was put to a unitholder vote. Unitholders voted to sell The building, owned
Slide 23: Capital Management
For personal use only Section 4 Capital Management CMW - 1H16 Results 23
Slide 24: Capital Management – Recent Initiatives Strengthen Position
Capital Management – Recent Initiatives Strengthen Position For personal use only Conservative approach mandated by Board CMW Group Gearing Cash and Cash Equivalents of $256 million Cromwell is fully hedged until May 2019 Portfolio gearing1 of 29% (31% look-through) Group gearing2 of 38% (
Slide 25: Capital Management – Asset Allocation Strategy
Capital Management – Asset Allocation Strategy For personal use only CMW – 1H16 Results 25
Slide 26: Capital Management – Diversified Debt Profile
Capital Management – Diversified Debt Profile1 For personal use only Facilities are diversified across eight lenders and a Convertible Bond issue with varying maturity dates Weighted average debt expiry of 3.1 years with 70% not expiring until FY19 Debt Expiry Profile1 $700.0m Key Terms of Conve
Slide 27: Capital Management – Interest Rate Hedging
Capital Management – Interest Rate Hedging For personal use only Targeting lower interest rates again in FY16 Weighted average hedge term of 3.6 years Weighted average margin of 1.49% on current facilities1 Long term accreting interest rate cap expiry in May 2019 Average interest rates on
Slide 28: Capital Management – Interest Rate Hedging
Capital Management – Interest Rate Hedging For personal use only Interest rates for $1.2bn of debt are effectively hedged or fixed until May 2019 Accreting interest rate cap entered into in August 2014 will cover $1bn by December 2017 The cap allows Cromwell to benefit from low variable intere
Slide 29: Outlook
For personal use only Section 5 Outlook CMW - 1H16 Results 29
Slide 30: Outlook - Lower A$ To Drive A Slow, Structural Transition In Economy
Outlook - Lower A$ To Drive A Slow, Structural Transition In Economy For personal use only Growth suppressed in near term due to end of mining Australian Statistics (Q4’15) boom. Adjustment a direct negative impact on GDP Metric Value Trend Falling A$ from US$0.96 to US$0.70 is providing a boost
Slide 31: Outlook – Demand High, Leasing Conditions Uneven
Outlook – Demand High, Leasing Conditions Uneven For personal use only Market Overview Cromwell Rental Property Clock Commercial property sales of $25 billion in 2015 (40% from offshore) Office Rental Markets: Key cities Yields are still c.3% higher than other global gateway cities Demand will
Slide 32: Outlook – High Volumes, Increased Appetite for European Property
Outlook – High Volumes, Increased Appetite for European Property For personal use only European transactions volumes up 23% to €135bn in half after a ~24% year on year increase last year Cross-border capital accounted for >50% of transactions, with a growing share (c.32%) from global players I
Slide 33: Outlook
Outlook For personal use only Property Cromwell Property Group Significant demand for property with long leases to continue 1H16 Snapshot1 Disconnect between capital values and rental growth to remain Leasing conditions improving in Sydney with a reduction in incentives being seen, remaining c
Slide 34: Contact Us
Contact Us For personal use only Paul Weightman Ross McGlade CEO / Managing Director Investor Relations paul.weightman@cromwell.com.au ross.mcglade@cromwell.com.au Phone: +61 7 3225 7720 Phone: +61 2 8278 3613 Michael Wilde Jodie Clark Chief Financial Officer Chief Operations Officer michael.wilde@c
Slide 35: Appendix: Additional Information
For personal use only Appendix Additional Information CMW - 1H16 Results 35
Slide 36: 1H16 Operating and Statutory Profit Reconciliation
1H16 Operating and Statutory Profit Reconciliation 1H16 ($’000) 1H15 ($’000) For personal use only Profit from operations 88,814 72,861 Operating EPS (cents per security) 5.1 cps 4.2 cps Gain on sale of investment properties 19,386 1,070 Loss on disposal of other assets (201) - Business combination
Slide 37: Segment Result – Operating Earnings
Segment Result – Operating Earnings1 For personal use only Funds Funds Funds Property Management Management Management Property Investment Internal Retail Wholesale Development Dec-15 Segment revenue ($'000) ($'000) ($'000) ($'000) ($'000) ($’000) Sales to external customers 115,675 3,950 11,469 40,
Slide 38: Property Portfolio – Top Assets
Property Portfolio – Top 10 Assets For personal use only Asset State Class Book Value Cap Rate Occupancy WALE Major Tenants Qantas HQ NSW Office 400,000,000 6.00% 100% 15.6 yrs Qantas 700 Collins Street VIC Office 218,000,000 6.25% 77% 3.1 yrs Bureau of Meteorology, Metro Trains HQ North Tower QLD O
Slide 39: Property Portfolio – Top leases
Property Portfolio – Top 20 leases For personal use only Tenant Category Building Expiry Date Rental Income Qantas Airways Limited Listed Company/Subsidiary Qantas HQ Dec-32 12.8% Commonwealth of Aust. Dept of FaHCSIA Government Authority Tuggeranong Office Park Aug-17 10.5% Government Property NSW
Slide 40: Property Portfolio – Net Property Income
Property Portfolio – Net Property Income Like for like income growth 1H16 1H15 For personal use only ($’000) ($’000) Variance Comments Vodafone Call Centre, Kingston TAS 3,641 1,072 239.6% $2.5 million surrender fee paid Dec-15 Medibank expired Sept 14 vacating 15,000 sqm. 3 floors leased 700 Collin
Slide 41: Property Portfolio – Net Property Income
Property Portfolio – Net Property Income For personal use only Like for like income growth 1H16 1H15 ($’000) ($’000) Variance Comments Village Cinemas, Geelong VIC 620 613 1.1% Regent Cinema Centre, Albury NSW 662 674 (1.8%) Retail1 Total Retail 1,282 1,287 (0.4%) Total held properties 92,493 91,431
Slide 42: Property Portfolio – Movement In Book Value
Property Portfolio – Movement In Book Value For personal use only Portfolio significantly improved through acquisitions since 2010 In-sourced facilities management model delivers consistently low lifecycle capex 1H16 FY15 FY14 FY13 FY12 FY11 FY10 ($’000) ($’000) ($’000) ($’000) ($’000) ($’000) (
Slide 43: Facility Details
Facility Details For personal use only Amount Facility Maturity Date Years Remaining1 Covenants ($‘000) 123,500 Bank 1 5yr Facility May-19 3.37 yrs 100,000 Bank 2 5yr Facility May-19 3.37 yrs 123,500 Bank 3 5yr Facility May-19 3.37 yrs 50,000 Bank 4 5yr Facility May-19 3.37 yrs LVR - 60% 25,000 Bank
Slide 44: 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 5.95% Fixed Sep-17 3.35 yrs 7.2% 31,730 5.90% Fixed Feb-16 3.35 yrs 2.6% 100,000 3.99% Fixed Nov-17 3.35 yrs 8.3% 100,000 4.15% Fixed Dec-17 3.35 yrs 8.3% 100,000 4.38% Fix
Slide 45: For personal use only
For personal use only well versed well timed well considered
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