CFS Retail Property Trust (CFX)
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CFS Retail Property Trust (CFX) Half-year results to 31 December 2011 21 February 2012 Angus McNaughton Managing Director, CFSGAM Property 1 Agenda • Overview • Highlights • Financial results • Capital management • Portfolio overview • Development update • Australian retail property market • Strategy • Summary and outlook • Questions 3 Overview CFS Retail Property Trust (CFX) Disciplined growth 4 2 Michael Gorman Fund Manager, CFS Retail Property Trust (CFX) Highlights 6.5¢ 2.9% 99.7% distribution per unit Growth in comparable1 portfolio occupancy retail specialty MAT2 2.7% 28.1% c.3% Average rental increase on Gearing Retail sales growth retail specialty store outlook retained re-leasing3 1. Comparable centres refer to those centres that are not undergoing or have not undergone substantial redevelopment in either period of comparison. 2. Moving Annual Turnover. 3. Renewals and replacements. 6 3 Financial results Highlights for the six months ended 31 December 2011 Key metrics Change Net profit $201.7 million -41.8% Distributable income1 $184.6 million 9.5% Net property income2 $278.5 million 11.1% Like-for-like net property income3 4.1% Distribution per unit of 6.5 cents 3.2% Total assets $8.7 billion 2.4% Net tangible asset backing (NTA) $2.06 per unit 0.5% Gearing4 at 31 December 2011 28.1% 1. Distributable income is a key financial measure used by management to assess the performance of the Trust. Distributable income equals profit excluding: net gains on revaluations of investment properties, associate and derivatives; the effect of straight-lining fixed rental increases; the movement in fair value of unrealised performance fees; non-cash convertible notes interest expense; adjustments for convertible notes buy-back expense; and adjustments for project and other items. 2. Including DFO centres and excluding flowback. 3. Including those assets owned for both six-month periods and excluding the impact of developments. 4. Gearing equals borrowings to total assets. For this calculation, total assets exclude the fair value of derivatives and borrowings is the amount drawn down as per Note 5 of the Interim report, adjusted for the fair value of cross currency swaps. 7 Financial results Composition of distribution per unit Six months ended CFS Retail Property Trust 31 December 2011 $m cpu Net profit 201.7 Adjustments deduct net gain from properties and associates revaluations (112.7) add back net loss from derivatives revaluations 68.3 deduct straight-lining rental revenue (0.9) add back movement in the fair value of unrealised performance fees 5.6 add back non-cash convertible notes interest expense 3.5 add back convertible notes buy-back expense 4.9 add back amortisation of project items 10.9 add back adjustments for other items 3.3 Distributable income/Distribution 184.6 6.5 8 4 Capital management Activities and outcomes Capital management activities during the period Outcomes • Refinanced $225 million of bank debt facilities, due to 9 Maintained the Trust’s credit rating expire December 2011 and February 2012 - S&P credit rating of ‘A/A-1’ • Raised $300 million in new 5.75% July 2016 convertible notes 9 Improved the Trust’s weighted average cost of debt • Used to fund the buy-back of $300 million convertible notes maturing in August 2014 9 Further staggered the debt maturity profile • Put in place $300 million of new bank debt facilities 9 Debt remains senior and unsecured • Initiated a buy-back of the outstanding August 2014 convertible notes 9 Maintained gearing within the Trust’s target gearing range of 25% - 35% • Resulted in the buy-back of $4.2 million of (28.1% at 31 December 2011) convertible notes • Terminated and replaced a number of interest rate swaps 9 Capital management Debt profile Diversified debt funding sources1 At 31 Dec 20111 At 30 Jun 20112 Weighted average interest rate3 6.5% 7.0% Weighted average duration of debt 3.3 years 3.5 years 34% 36% Proportion of debt hedged4 91% 92% Undrawn debt facilities $601 million $360 million 8% 3% 19% 1 Debt maturity profile Bank debt Convertible notes 1,200 US Private Placement Short term notes 1,000 Medium term notes 800 575 600 300 38 178 $ million 400 50 150 100 200 291 440 225 260 300 38 0 100 FY 2012 FY 2013 FY 2014 FY 2015 FY 2016 FY 2017 FY 2018 FY 2019 US private placement Bank debt Convertible notes^ Medium term notes 1. Adjusted for $100 million of medium term notes, issued in February 2012. 2. Adjusted for the issue of $300 million of July 2016 convertible notes and buy-back of $300 million of August 2014 convertible notes, which settled post 30 June 2011. 3. Including line fees and margins. 4. Including convertible notes and fixed-rate medium term notes. ^ The $291 million of August 2014 convertible notes have an investor put option in August 2012. The $300 million of July 2016 convertible notes have an investor put option in July 2014. 10 5 Capital management FY12 objectives and focus FY12 objectives and focus Capital recycling • Continue to investigate potential sales, including: • 100% interests in smaller non-core assets, or • 50% interests in fully developed regionals or CBD assets • Investigate options for potential reallocation of capital • fund other capital management initiatives such as a unit buy-back • reinvest into accretive developments • fund opportunistic acquisitions, or • repay existing debt facilities Maintain diversity of debt Take advantage of low interest rates to reduce debt costs 11 Portfolio overview Shoppers across the CFX portfolio 12 6 Portfolio overview Key portfolio metrics • Occupancy remains stable at 99.7% Shopping centre portfolio metrics Including DFO centres 31-Dec-11 30-Jun-11 Change 31-Dec-11 Number of retail assets 25 25 29 Investment properties ($m) 8,045 7,878 8,582 Number of retail tenants 3,640 3,645 4,139 Occupancy1 (%) 99.7 99.7 99.7 Number of vacancies 28 31 29 1. By gross lettable area. 13 Portfolio overview Sales performance by category • Shopping centres provide diverse sources of income Comparable1 Actual Approximate category contribution to income vs sales for a regional MAT MAT shopping centre 31 Dec Annual 31 Dec Annual 2011 growth 2011 growth Category $m % $m % 25% Department stores2 619.0 (6.1) 653.4 (7.8) 60% Discount department stores 736.0 (1.9) 782.3 (1.9) Supermarkets 1,482.7 2.1 1,563.2 3.0 75% Mini majors 708.1 0.2 758.0 1.7 40% Retail specialty 2,563.5 2.9 2,710.6 2.4 % of sales Other retail3 462.8 3.3 481.9 3.6 % of income Majors Shopping centre portfolio2 6,572.1 1.1 6,949.4 1.0 Retail specialty DFO centres 537.0 0.2 537.0 0.2 Total portfolio2 7,109.1 1.0 7,486.4 1.0 1 Comparable centres refer to those centres that are not undergoing or have not undergone substantial redevelopment in either period of comparison. 2 Comparable department stores and total growth variances exclude David Jones Chadstone, which was impacted by the substantial upgrade works undertaken between January and October 2011. 3 Other retail includes cinemas, travel agents, auto accessories, Lotto and other entertainment and non-retail stores. 14 7 Portfolio overview Retail specialty stores by category December 2011 comparable1 Moving Annual Turnover Actual shopping centre portfolio (12 months to December 2011 compared to 12 months to December 2010) Specialty Specialty 31 Dec 31 Dec Annual occupancy sales per 2011 2010 growth costs sqm Retail specialty category $m $m % Dec 20113 17.2% $9,269 Food retail 179.7 165.2 8.8 Jun 2011 17.1% $8,991 Food catering 373.9 352.7 6.0 Dec 2010 17.2% $8,788 Apparel 914.8 899.5 1.7 Jun 2010 16.8% $8,558 Jewellery 209.3 210.0 (0.3) Leisure 169.4 183.0 (7.4) General retail2 226.3 224.6 0.7 Homewares 201.7 193.4 4.3 Mobile phones 103.7 85.0 22.0 Retail services 184.7 177.2 4.2 Total retail specialty 2,563.5 2,490.6 2.9 Actual specialty MAT/sqm ($) 9,086 8,788 3.4 1. Comparable centres refer to those centres that are not undergoing or have not undergone substantial redevelopment in either period of comparison. 2. General retail comprises giftware, pharmacy and cosmetics, pets, discount variety, florists and toys. 3. Excluding Bayside Shopping Centre as the centre was development impacted during the period. 15 Portfolio overview Retail observations and leasing environment • Consumers benefitting from low unemployment and solid wages growth • Retail sales environment remains challenging with some discretionary spending being diverted to non-retail areas like travel • Leasing was strong in the lead-up to Christmas • Food and services retailers continue to perform strongly while apparel sales have tempered • CFX occupancy at 99.7%, while defaults and Queues outside Ralph Lauren, VIP day at Chadstone Shopping Centre arrears remain low • Achieved a 2.7% increase on retail specialty store re-leasing1 with standard fixed 5% annual increases • Retailers continue to benefit from being located in well-managed shopping centres • Retailers who have invested in their brand are benefitting most in current environment New Coach store at DFO Homebush 1. Renewals and replacements. 16 8 Portfolio overview DFO update Strategy Status Outcomes 126 leasing deals completed since acquisition Improve tenant mix 9 Strong international and domestic leasing demand Circa 37% uplift in passing income and 23% above acquisition budget income Increase income from assets Downtime for re-letting and new fit-outs has resulted in 9 flat MAT growth to 31 December 2011, but increased future rental income Over $2 million of unbudgeted income identified since Identify new income sources 9 acquisition Launched a new marketing campaign in July 2011 Improve marketing initiatives Multi-platform integrated youth-oriented campaign 9 Across television, radio, print, outdoor and social media Newly introduced tenants to the DFO centres Occupancy costs – Jun-10 – Dec-11 – Coach – Osh Kosh – United Colors of Benetton – Lacoste Homebush 7.4% 8.0% Outlet – G-Star Raw – Lee – Forever New Essendon 8.7% 10.3% – Fossil – Skechers – Oakley – Karen Millen Moorabbin 10.2% 11.4% – Seafolly – Typo – Oporto – Sunglass Hut – Ksubi South Wharf n/a1 14.4% 1 Trading for less than 12 months at this time, so data not available.