cromwell property group - asx · 2011-03-08 · cromwell property group (asx:cmw) small-mid caps...

CROMWELL PROPERTY GROUP (ASX:CMW) Small-Mid Caps New York Conference 1

Cromwell Property GroupAn opportunity to invest in the Australian Commercial Property Market

CROMWELL PROPERTY GROUP (ASX:CMW) Small-Mid Caps New York Conference

Important Information and Disclaimer

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Cromwell Property Group Overview

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Cromwell Property Group (ASX code: CMW) is an internally managed Australian Real Estate Investment Trust (A-REIT) and a property fund managerAssets under management of approximately AUD $1.8 billion

AUD $1.4 billion in Group assetsAUD $0.4 billion in unlisted property funds managed by the Group for external investors

1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

Acquired asset for $13.6m• 1 property• syndicate

Acquired assets for $34.0m• 3 properties• 2 syndicates

Acquiredassets for $45.4m• 2 properties• 2 syndicates

Acquiredassets for $92.4m• 3 properties• 3 syndicates

Assets acquired $48.8m• 2 properties

Assets acquired $300m• 13 properties

Assets acquired $41m• 1 property

Assets acquired $375m

• Portfolio of assets

1999: First property acquired and first property syndicate established

2005: Exceeded $1 billion in AuM

Assetssold$260m

• 5 properties


• 1 property


• 1 property


• 1 property

Dec 2006Funds stapled to form Cromwell Property Group

OVERVIEW


Management

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Noel Woodward (1/30)1

Head of Property ServicesNoel is responsible for the property and facilities management of Cromwell’s property portfolioNoel has 30 years experience in the property profession working for a number of leading listed Australian companies in senior rolesCertified Shopping Centre Manager of Australia (CSMA)

Paul McDonnell (5/25)1

National Asset ManagerPaul is responsible for maximising income from all properties across the Cromwell portfoliosExtensive experience in asset management, property management, and leasing in commercial, industrial, retail, hotel and residential property Bachelor of Economics, Associate Diploma of Business (Real Estate Valuation) and a Postgraduate Diploma in Applied Economics

Jodie Clark (6/20)1

Director - Cromwell Property ServicesThe Group’s Principal Licensed Real Estate Agent throughout Australia and transactions manager in the transactions team20 years experience in the property industry

David Gippel (9/20)1

Director - Cromwell CapitalResponsible for credit analysis, debt facility structuring and management, compliance and interest rate strategy for the GroupResponsible for procuring and managing Cromwell’s banking and finance relationships Prior to Cromwell, 11 years experience in Corporate Banking specialising in Real Estate Investment and Development

1) Years with Cromwell/years experience

Paul Weightman (12/27)1

Managing Director/CEOCromwell Group Executive Chairman from 1998-2008 and has acted as a director of companies in the property, energy and retail sectorsSolicitor for more than 20 years with extensive experience in property development and investment, financial structuring, public listings, mergers and acquisitions, revenue matters and joint ventures

Daryl Wilson (11/20)1

Finance DirectorLeads the development of Cromwell’s funds management capabilities and has primary responsibility for the finance and funds management functionsHe holds a Bachelor of Commerce and a Diploma of Financial PlanningMember of the Institute of Chartered Accountants

OVERVIEW


Key Financial Results Dec-10

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1) Calculated as (total borrowings less cash)/(total assets less cash)2) Based on closing security price of $0.755 on 22 February 2011

1H11 Actual 1H10 Actual Change

Statutory accounting profit/(loss) ($'000) 28,916 4,234 + 583%

Operating earnings ($'000) 32,867 33,354 – 1%

Operating EPS ($) $0.037 $0.047 – 22%

Distributions ($'000) 31,861 28,306 + 13%

Distributions per security ($) $0.035 $0.040 – 13%

Payout Ratio (%) 97% 85% + 14%

Dec-10 Actual Jun-10 Actual Change

Net Tangible Assets ($'000) 640,312 570,120 + 12%

Securities on Issue ('000) 910,986 807,835 + 13%

NTA per security ($) $0.70 $0.71 – 1%

Gearing (%)1 53% 48% + 5%

Look-through gearing (%)1 53% 50% + 3%

Full year FY11 financial guidanceOperating earnings of minimum 7.0 cents per securityDistributions of 7.0 cents per security represents 9.2% yield2

HY11 RESULTS


Recently Enhanced Debt Profile

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Achieved credit approved terms for the refinance of:$415 million syndicated facility (rollover of existing facility)$133 million facility secured by 3 assets (replacing 3 existing facilities)

New facilities subject to documentation and satisfaction of preconditions, expected to be completed by April 2011Following this refinancing, minimal debt maturity until July 2013 and a weighted average debt maturity of 3.3 yearsFacilities provided by 4 major Australian Banks and one International BankCurrent Reserve Bank Cash Rate 4.75%; further rate rises expected to be gradual

1) Reflects expected debt maturity profile based on agreed credit approval terms.

CAPITAL MANAGEMENT


Long Term Focus

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Aim is to deliver outperformance through the cycleCromwell has significantly outperformed in direct property and property securities over short, medium and long termDirect property outperformance independently verified by IPDCromwell Phoenix Property Securities Fund outperformance over all periods since inception

GROWTH


The Australian Commercial Property Cycle

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Valuations for quality property have bottomed

Peak to trough fall of 23.1% reported by IPD

Opportunities to buy well below replacement cost

Capitalisation rates for office property above long term averages

Significant rental growth expected once supply is absorbed

Office vacancy peaking in most major Australian markets

Source: BIS Shrapnel

OVERVIEW


Key Portfolio Statistics1

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Dec 10 Actual1 Jun 10 Actual2

Total Value $1.4 bn $1.1 bn

Number of Properties 23 22

Occupancy 97.4% 95.8%

WALT 6.0 years 4.9 years

WACR 8.31% 8.61%

NLA 525,307 m2 453,791 m2

1) Includes 100% TGA Complex, but not potential impact of Qantas HQ expansion2) Includes 2/3 of TGA Complex counted as an investment in associate

Portfolio Summary

Brisbane

QLD 15%

VIC 32%

ACT 23%NSW 20%

SA 7%

WA 1%

TAS 2%

Adelaide

Melbourne

Canberra

Hobart

SydneyAlbury

Perth

Map shoes geographic diversification by gross income as at 30 Dec 2010

PORTFOLIO


Top 5 assets account for 52% of portfolio with occupancy of 99.3% and a WALT of 7.1 years

Key AssetsPORTFOLIO


79% of gross income leased to government or ASX 200 listed companies75% of portfolio subject to fixed or minimum reviews, with average minimum increase of 3.9% in FY12Target 4% annual growth in like-for-like net property incomeNo material arrears or uncollected rents at any time in the Group’s history

Next Review Type % of Total Passing Income Cumulative %

Fixed1 74.5% 74.5% CPI2 21.4% 95.9% Market 0.8% 96.7% Nil 1.3% 98.0% Holdover 0.1% 98.1% Expiry 1.9% 100.0%

1) 15.9% of the fixed reviews are at the higher rate of CPI or a fixed rate2) 3.8% of reviews are capped CPI increases

Secure Income StreamPORTFOLIO


One of the longest WALT’s in A-REIT sector, at 6.0 years

Average of only 5.4% vacancy/lease expiry in each of next 5 financial years

Terms agreed for sale of Scrivener and Cannington industrial property since half-year

Heads of Agreement signed for 50% of Synergy Building’s vacancy since half-year

Majority of FY12 expiry occurs in June 2012

Minimal risk from lease expiriesPORTFOLIO


Continuing Portfolio Improvement

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Acquisition of quality office buildings in key markets (Sydney, Melbourne, Canberra) since 2008

Improvement to tenant quality and WALT

Divestment of smaller non-core assets which are no longer efficient to manage

PORTFOLIO


Case Study

321 Exhibition Street, Melbourne, VIC

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Melbourne is the best performing office market over the past 3 years

Acquired from a Cromwell managed fund in July 2010

At time of acquisition Cromwell had negotiated a Heads of Agreement for a 10 year lease over 78% of building from Origin Energy

Cromwell committed to a $25 million refurbishment to reposition the asset to a 5 Star Green Star and 4.5 Star NABERS energy rating

Balance of the property has been leased since acquisition for a 10 year term, providing annual income growth at the higher of 4% or CPI

PORTFOLIO


Purchased in February 2005

Existing tenant vacated the premises in October 2010

The property was quickly re-leased to Woolworths/Lowes joint venture

Building refurbished and expanded to meet tenants requirements

Leased commenced in January 2011 on a 10 year term, with only 21/2 months total vacancy

Potential expansion of further 14,000 –20,000m2

Significant scope for improvement in market rentals in medium term

Case Study

Hoppers Crossing Distribution Centre, VICPORTFOLIO


Cromwell purchased the property from a motivated vendor in August 2010Since purchase, have negotiated a Heads of Agreement with Qantas to enhance the asset and extend lease from 10 to 22 years1

Cromwell expect to invest further amounts over next 2-3 years to deliver the enlarged, refurbished facility to fulfil Qantas’ accommodation requirements in return for increased rentalsExpanded facility will allow Qantas to utilise space more efficiently and consolidate staff from a number of locationsPro-forma WALT for portfolio expected to increase to 7.7 years on execution of new leaseDetails of construction timing and cost being finalised; indicative debt funding terms negotiated 1) Agreement is subject to certain conditions including finalisation of scope of work

and costs for refurbishment and expansion.

Case Study

Qantas Headquarters, Sydney, NSWPORTFOLIO


Non Resident Taxation of Australian Listed Property

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As a stapled security, Cromwell Property Group is made up of Cromwell Corporation Limited (the Company) and Cromwell Diversified Property Trust (the Trust), each with different taxation treatments

The Trust pays ‘distributions’100% of income paid to securityholders for past 3 years has been distributionsResidents in Information Sharing Agreement (“ISA”) countries only incur 7.5% tax on part of distributionNon ISA residents taxed at 30%High proportion of tax deferred income (not subject to Australian tax)Non Australian Capital Gains Tax (CGT) for holdings less than 100%

The Company pays ‘dividends’

Not expected to make up a significant portion of payments to securityholders

Franked dividends not subject to Australian tax

Unfranked dividends taxed at 30% (reduced to 10-15% by double –tax treaty where applicable)

No CGT for holdings less than 100%

TAXATION


Non Resident Taxation of Direct Property

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Tax advice vital to maximise after tax returns

Equity in an Australian property trust

Income is flow through

Most income taxed at concessionary 7.5% final tax rate if resident in ISA country

Tax deferred portion of distribution is not subject to Australian tax

No CGT for holdings less than 10%

No single individual investor can hold > 10% (on a look through basis)

Debt or hybrid property notes

Debt securities can pay a return linked to specific assets or a portfolio of assets

Interest income taxed at 10% final tax

Share in capital growth of assets

For investors who cannot access 7.5% rate or prefer to earn interest

Foreign pension funds not subject to Australian tax on interest

TAXATION


Summary

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Solid earnings baseRecurring property earnings currently 95% of totalWALT of 6 years, quality tenant baseMinimal lease expiries in next 5 yearsTargeting 4% growth in annual net property income

Focus on cash flowDPS yield of 9.2%1

Simple balance sheet and minimal development exposure allows for high payout ratio

Targeting growth in NTA and EPS over medium termHave continued to expand AUM over last 3 yearsWill benefit from improving valuationsWill continue disciplined approach to transactional activityAbility to leverage existing skills over a much larger asset base

1) Based on closing security price of $0.755 on 22 February 2011

GROWTH


APPENDICESProperty Portfolio Details

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CROMWELL PROPERTY GROUP (ASX:CMW) Small-Mid Caps New York Conference21

Property Portfolio

1) Current carrying value including refurbishment and acquisitions costs2) Includes Origin leases effective 1 August 20113) Excludes impact of proposed lease extension from 10 years to 22 years

CROMWELL PROPERTY GROUP (ASX:CMW) Small-Mid Caps New York Conference22

Top 20 Tenants


Property Portfolio - Focus on Sustainability

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Cromwell has adopted Global Reporting Initiative (GRI) G3 guideline as the framework for reporting on the Group’s environmental, economic and social performance.Governance

Since 2007, Cromwell has applied the National Australian Built Environment Rating System (NABERS) to measure the operational impacts of its properties on the environment. The Group is compliant with the Building Energy Efficiency Disclosure Act 2010Strive for industry best practice Corporate Governance at both acorporate and funds management level

Environmental Sustainability – Quiet AchieversOffice portfolio averaged a 3.9 Star NABERS rating, well above the industry averageIn-house facilities managers continue to reduce each building’s use of resourcesFY11 energy rating expected to improve on FY10


Tuggeranong Office Park, Greenway ACT

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Address Athllon Drive, Tuggeranong ACTSector CommercialLand Area 80,780 sqmLettable Area 30,757 sqmAcquisition Date June 2008External Valuation $167.5m (Jun 2010)Book Value $166.0m (Dec 2010)Occupancy 100%Cap Rate 8.75%WALT 5.95 yearsMajor Tenants Govt Department of Families, Housing,

Community Service & Indigenous Affairs.

The property comprises five individual buildings of up to three stories linked by enclosed walkways. The basement area includes both service areas and 291 car parks with a further 469 open car parks on-site. It is fully leased to the Commonwealth Government until 2016.


700 Collins Street, Melbourne VIC

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The property comprises 12 levels of office accommodation, 3 levels of car parking and various retail areas. 700 Collins Street is located in the Docklands Precinct at the western end of the Melbourne CBD. Tenants enjoy uninterrupted views and direct access to the city.

Address 700 Collins Street, Melbourne VIC 3008Sector CommercialLand area 4,836 sqmLettable area 33,901 sqmAcquisition date December 2004External valuation $168.0m (Dec 2010)Book value $168.0m (Dec 2010)Occupancy 100%Cap rate 7.75%WALT 4.55 yearsMajor tenants Bureau of Meteorology and Medibank Private


Qantas Global Headquarters, Sydney NSW

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Superbly positioned within immediate proximity of Sydney is Kingsford Smith International and Domestic Airports. A modern campus style business park comprising three multi-level office buildings and an office warehouse building, all with extensive basement parking.

Address 203 Coward Street, Mascot NSW

Sector Commercial

Land Area 27,160 sqm

Lettable Area 46,546 sqm

Acquisition Date August 2010

External Valuation $143.0m (May 2010)

Book Value $152.0m (Dec 2010)

Occupancy 100%

Cap Rate 8.00%

WALT 10.01 years

Major Tenant Qantas Airlines Limited


475 Victoria Avenue, Chatswood NSW

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The complex comprises two 13-level office buildings complete with ground floor retail and 3 levels of basement car parking. There is also a freestanding annexe building and well maintained gardens separating the 2 office towers. Office space in the complex comprises a net lettable area of 24,139 sqm while the retail space covers an area of approximately 835 sqm.

Address 475-501 Victoria Ave, Chatswood NSWSector CommercialLand area 6,030 sqmLettable area 24,974 sqmAcquisition date March 2006External valuation $127.5m (Jun 2010)Book value $127.5m (Dec 2010)Occupancy 98.32%Cap rate 8.00%WALT 4.89 yearsMajor tenants Reed Elsevier Australia, Evans & Peck and

Leighton Contractors


321 Exhibition Street, Melbourne VIC

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The property is being refurbished and will provide significant exposure to the improving Melbourne CBD commercial market. The property is 100% pre-committed under a 10 year lease commencing in August 2011.

Address 321 Exhibition Street, Melbourne VICSector CommercialLand area 2,914 sqmLettable area 30,915 sqmAcquisition Date July 2010

External valuation $155.0m (Mar 2010) on completion of refurbishment

Book value $115.9m (Dec 2010)Occupancy 100% (on completion of refurbishment)Cap rate 7.75%WALT 10.75 yearsMajor tenants Origin Energy


AWB Building, Melbourne VIC

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The La Trobe Street property is a modern A grade office complex with approximately 22,000 sqm of office accommodation. The 18 level building has 2 separate foyers fronting La Trobe Street providing a separate entry point for the major tenant AWB, who solely occupy the upper portion of the building.

Address 380-390 LaTrobe St, Melbourne VIC 3000Sector CommercialLand area 2,899 sqmLettable area 21,983 sqmAcquisition date December 2005External valuation $94.5m (June 2010)Book value $97.0m (Dec 2010)Occupancy 100%Cap rate 8.00%WALT 3.76 yearsMajor tenants AWB Services Limited and Australian Taxation

Office


200 Mary Street, Brisbane QLD

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Cromwell House at 200 Mary Street is strategically located in Brisbane’s CBD, just 125 metres from the GPO and in an area known as Brisbane’s Golden Triangle. The 19 level office tower serves as the head office of Cromwell Property Group. Parts of the building enjoy views over the Brisbane River to Moreton Bay as well as Brisbane’s hinterland.

Address 200 Mary Street, Brisbane QLD 4000Sector CommercialLand area 1,834 sqmLettable area 13,841 sqmAcquisition date June 2001External valuation $81.5m (Dec 2010)Book value $81.5m (Dec 2010)Occupancy 99.60%Cap rate 8.50%WALT 3.37 yearsMajor tenants Queensland Government, Commonwealth

Government, Cromwell Property Group


TGA Complex, Symonston ACT

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The Therapeutic Goods Administration (TGA) complex at Symonston consists of 2 separate buildings on a 17.35 hectare site approximately 8 kilometres from the Canberra CBD. The main building is a world class office and laboratory facility which is leased to the TGA until 2017. There is scope for significant expansion of the existing facilities.

Address 136 Narrabundah Lane, Symonston ACT

Sector CommercialLand area 173,500 sqmLettable area 18,524 sqmAcquisition date June 2002External valuation $75.0m (Mar 2010)Book value $75.0m (Dec 2010)Occupancy 100%Cap rate 8.50%WALT 6.29 yearsMajor tenants Therapeutic Goods Administration


Synergy, Kelvin Grove QLD

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Synergy, completed in November 2008, is located within Kelvin Grove Urban Village, Brisbane’s newest master-planned inner-city precinct merging business, technology, education and the arts. It is a state of the art A-grade building which has been awarded a 5 Star Green Star As designed Rating under the Green Building Council of Australia’s (GBCA) Green Star rating system. A 5 Star rating recognises and rewards “Australian Excellence” in building design.

Address 76-88 Musk Ave, Kelvin Grove QLDSector OfficeLand area 3,878 sqmLettable area 14,144 sqmAcquisition date June 2007External valuation $68.0m (Dec 2010 )Book value $68.0m (Dec 2010)Occupancy 74.3%Cap rate 8.75%WALT 5.9 yearsMajor tenants Queensland University of Technology


Contacts

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Paul WeightmanChief Executive OfficerPh: +61 (0) 7 3225 [email protected]

Cromwell Property GroupLevel 19, 200 Mary StreetBrisbane QLD

Phone: +61 7 3225 7777Facsimile: +61 7 3225 7788

www.cromwell.com.au

Cromwell Investor Services1800 334 533

David GippelStructured Finance & TreasuryPh: +61 (0) 7 3225 [email protected]

Jodie ClarkTransactions ManagerPh: +61 (0) 7 3225 [email protected]

cromwell property group - asx · 2011-03-08 · cromwell property group (asx:cmw) small-mid caps...

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