CFS Retail Property Trust (CFX)
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CFS Retail Property Trust (CFX) Quarterly update to 30 September 2010 3 November 2010 Agenda 2 – Overview – Highlights – Acquisition of retail outlet centres – Capital management – Sales performance – Development update – Sustainability and responsible property investment – Australian retail property market outlook – Summary 1 Overview State of the market 3 – Continued strength in leading Australian economic indicators – Economic growth 1 of 3.3% in the year to 30 June 2010 Economy – Unemployment rate stable at 5.1% in September 2010 – Strong Australian dollar performance – Australian share market performance improvement since Federal election outcome Capital markets – Market expectation of increases in the official cash rate – Increased corporate debt issuance at competitive pricing – Increased transaction activity for quality assets A-REIT sector – Majority of A-REITs still trading at discounts to NTA2 – Continued globalisation of investor base is impacting A-REIT pricing – Strength of the Australian dollar supporting retailer margins Retail – Australian retail sales growth remains positive – Increase in leasing demand 1. Gross domestic product. 2. Net tangible asset backing. Highlights 4 – Announced the Trust’s agreement to acquire four retail outlet centres, funded via a $540 million institutional placement – Post quarter end, CFX issued new debt at the best pricing since the onset of the Global Financial Crisis – Sustainability and Responsible Property Investment – CDP Carbon Disclosure Leaders Index DFO Moorabbin, Cheltenham, Vic – Won the inaugural APREA best practices award – Grand Plaza first to receive NABERS rating – Achieved total actual1 retail specialty store sales growth of 11.3% – Further progress on the Trust’s development pipeline DFO Essendon and Homemaker Hub, Essendon, Vic 1. Total actual Moving Annual Turnover (MAT) sales include centres that have undergone substantial redevelopment in the past 24 months. 2 Acquisition of retail outlet centres 5 – In September 2010 CFX agreed terms to acquire four Direct Factory Outlet ((DFO)‘DFO’) centres for $498 million1 – DFO Homebush, NSW – DFO Essendon and Homemaker Hub, Vic – DFO Moorabbin, Vic – DFO South Wharf and Homemaker Hub, Vic (50% interest)2 – Funded via a $540 million institutional placement – Unit Purchase Plan offered under the same terms as DFO South Wharf and Homemaker Hub, Melbourne, Vic the institutional placement closing 18 November 2010 – Se ttlemen t on the acqu is ition o f DFO H omeb ush , DFO Essendon and Homemaker Hub and DFO Moorabbin occurred on 29 October 20103 1. Excluding stamp duty and other transaction costs. DFO Homebush, Homebush, NSW 2. The agreed acquisition of DFO South Wharf and Homemaker Hub remains conditional on the joint venture partner, The Plenary Group, securing acquisition financing. Another condition is the execution of non-compete agreements by key Austexx personnel. In the event that the acquisition of DFO South Wharf and Homemaker Hub does not proceed, CFX intends to use the capital raised for this asset (and associated acquisition costs) to initially retire debt and may choose to redeploy this capital in the future. 3. Excluding DFO South Wharf and Homemaker Hub which is expected to settle by the end of November 2010. Acquisition of retail outlet centres 6 – Acquisition of carefully selected assets from the DFO portfolio at attractive pricing relative to recent comparable retail outlet centre transactions – 8.26% weighted average cap rate – Strengthens relationships with retailers given the growing importance of retail outlet centres as a distribution channel – Complementary “retail offer” to regional malls – Key success factors of retail outlet centres include – Proximity to major arterial roads – Emphasis on quality brands at discount prices – Caters to the broad population – Limited supply DFO Essendon and Homemaker Hub, Essendon, Vic 3 Acquisition of retail outlet centres Growth opportunities 7 – Leverage the expertise of Colonial First State Global Asset Management to undertake initiatives across the acqqguired DFO centres to drive growth and enhance value 1. Remix tenants where appropriate – Add complementary product offerings across the portfolio such as jewellery and cosmetics – Expand luxury offering at DFO South Wharf 2. Increase tenant interaction – Work directly with tenants to increase foot traffic and drive sales – Provide retailers with access to a full offering from regional shopping centres to retail outlet centres 3. Targeted marketing – Strategggpgic localised marketing campaigns – Particular focus on increasing the awareness of DFO South Wharf 4. Enhance lease structures – Average occupancy cost across the acquired DFO centres1 of 8.6% relative to comparable retail outlet centres at ~11% 1. Excluding DFO South Wharf and Homemaker Hub (as the centre has been trading for less than 12 months). Capital management 8 – 100% equity funded the acquisition of the four retail outlet centres – In October 2010, announced a new issuance of $450 million of medium term notes – $160 million floating rate MTNs for 3.5 years – $290 million fixed rate MTNs for 5.5 years – Best pricing and largest A-REIT MTN issuance since the onset of the Global Financial Crisis – Strong demand for CFX debt from domestic corporate bond holders – Entire CFX portfolio to be revalued for the six months to 31 December 2010 4 Capital management 9 – Strong balance sheet maintained – Target gearing range of 25% to 35% Post acquisition1 30 Jun 10 Gearing2 (% borrowing to total assets) 28.1% 29.5% NTA per unit $2.00 $2.02 Undrawn debt facilities $544 million3 $431 million FY11 debt expiries Amount and expiry Status Medium term notes $294 million (Nov-10) To be paid out from new $450 million MTN issue $350 million (Feb-11) To be partially replaced by new $450 million MTN issue Bank debt facilities $100 million (Jun-11) and refinancing of balance on program 1. Post the acquisition of the four retail outlet centres. 2. Gearing equals total drawn debt to total assets. For this calculation total assets exclude the fair value of derivatives. 3. Following the $450 million MTN issuance and the expiry of the $294 million in MTNs in early November 2010. Sales performance Category - rolling 12-month period 10 Growth in Moving Annual Turnover (MAT) - rolling 12-month period Comparable1 Actual MAT MAT 30-Sep MAT 30-Sep MAT 2010 growth 2010 growth Category $m % $m % Department stores 309.8 0.6 701.5 1.4 Discount department stores 605.1 (3.8) 801.7 0.2 Supermarkets 1,162.6 3.8 1,476.1 5.7 Mini majors 383.2 (1.6) 738.7 10.8 Retail specialty 1,399.9 (1.4) 2,596.9 11.3 Non-retail specialty2 339.5 6.7 472.7 11.7 Total 4,200.1 0.4 6,787.6 7.5 Specialty stores sales (per square metre) $7,642 $8,644 1. Shopping Centre Council of Australia (SCCA) definition of comparable centres refers to those centres that are not undergoing or have not undergone substantial redevelopment in the past 24 months. 2. Non-retail specialty are sales reporting tenancies under 400 sqm including travel agents, auto accessories, Lotto and other entertainment and non-retail stores. 5 Sales performance Retail specialty stores by category - rolling 12-month period 11 Growth in Moving Annual Turnover (MAT) - rolling 12-month period Comparable1 Actual MAT MAT 30-Sep MAT 30-Sep MAT 2010 growth 2010 growth Retail specialty category $m % $m % Food retail 115.2 0.0 175.5 5.0 Food catering 228.7 0.3 363.0 11.3 Apparel 394.0 (2.1) 928.7 17.9 Jewellery 119.7 (0.2) 213.7 24.1 Leisure 128. 8 (13. 7) 200. 2 (6. 3) General retail2 161.6 1.5 243.6 9.9 Homewares 69.5 (4.1) 200.9 3.3 Mobile phones 62.8 7.3 85.3 6.7 Retail services 119.6 3.8 186.0 8.7 Total retail specialty 1,399.9 (1.4) 2,596.9 11.3 1.Comparable centres are those centres that are not undergoing or have not undergone substantial redevelopment in the past 24 months. 2.General retail comprises giftware, pharmacy and cosmetics, pets, discount variety, florists and toys . Sales performance Category – September quarter sales 12 Annual growth in September quarter sales Comparable1 Actual 30-Sep 30-Sep 2010 Annual 2010 Annual quarter growth quarter growth Category $m % $m % Department stores 69.9 5.4 150.7 4.3 Discount department stores 150.4 (1.8) 197.5 2.8 Supermarkets 303.4 5.5 385.2 6.5 Mini majors 90.8 (4.1) 181.2 10.5 Retail specialty 341.9 1.1 632.5 14.0 Non-retail specialty2 85.2 5.8 118.4 8.4 Total 1,041.6 2.1 1,665.5 9.1 1. Shopping Centre Council of Australia (SCCA) definition of comparable centres refers to those centres that are not undergoing or have not undergone substantial redevelopment in the past 24 months. 2. Non-retail specialty are sales reporting tenancies under 400 sqm including travel agents, auto accessories, Lotto and other entertainment and non-retail stores. 6 Sales performance Retail specialty stores by category – September quarter sales 13 Annual growth in September quarter sales Comparable1 Actual 30-Sep 30-Sep 2010 Annual 2010 Annual quarter growth quarter growth Retail specialty category $m % $m % Food retail 28.9 2.8 44.5 6.3 Food catering 58.8 3.5 93.5 12.5 Apparel 95.2 (0.6) 225.1 22.3 Jewellery 26.3 1.4 48.6 26.4 Leisure 28. 6 (10. 1) 45. 0 (0. 4) General retail2 39.9 3.4 59.1 10.0 Homewares 16.6 (3.2) 47.4 5.9 Mobile phones 17.1 19.8 22.0 13.0 Retail services 30.5 2.7 47.3 7.4 Total retail specialty 341.9 1.1 632.5 14.0 1.Comparable centres are those centres that are not undergoing or have not undergone substantial redevelopment in the past 24 months.