Challenger Limited · ASX:CGF
Challenger — Challenger Diversified Property Group — Non-Deal Roadshow (August 2009)
44 slides from Challenger's roadshow presentation, August 2009
Slide 1: Challenger Diversified Property Group
Challenger Diversified Property Group ASX: CDI CDI offers investors exposure to a diversified portfolio of quality properties, generating stable income returns and potential for capital growth Investor briefing Trevor Hardie – Fund Manager August 2009 Tim Evans – Assistant Fund manager 1
Slide 2: Important notice
Important notice Information contained in this publication is current as at 6 August 2009 unless otherwise specified and is provided by Challenger Listed Investments Limited (ABN 94 055 293 644) (AFSL 236887) (“Challenger”), as Responsible Entity of the Challenger Diversified Property Trust 1 (ARSN
Slide 3: Agenda
Agenda Introduction and Overview Highlights for the year ended 30 June 2009 Entitlement Offer update Key financials and FY10 guidance Portfolio performance Appendix 3
Slide 4: Introduction and overview
Introduction and overview
Slide 5: Introduction to CDI
Introduction to CDI ¾ Challenger Diversified Property Group (CDI) – ASX listed October 2006 ¾ Investment objectives – Providing investors with exposure to core property returns and capacity to undertake value-add opportunities such as asset repositioning and development – Current focus on domestic c
Slide 6: Challenger Diversified Property Group
Challenger Diversified Property Group ASX: CDI Back-to-basics LPT with passive rental income High yielding quality earnings underpinned by sound property fundamentals FY10 guidance: EPU of 5.2 cents; DPU of 4.2 cents Conservative capital position; covenant gearing at 26.8%1 Continuing dome
Slide 7: CDI accumulation index performance
CDI accumulation index performance versus ASX200 property from 1 July 2008 to 11 August 2009 7
Slide 8: Highlights for year ended June 2009
Highlights for year ended 30 June 2009
Slide 9: FY09 highlights
FY09 highlights ¾ Operating performance – in line with guidance – Rental income: $75.3 million1 (up 7.5%); Net property income up 5.0% – Profit from operating activities:2 $42.2 million (FY08: $42.9 million) – 2H09 distribution: 3.0 cents per unit (cpu); FY09 distribution: 6.7 cpu ¾ Investment prope
Slide 10: FY09 highlights (cont)
FY09 highlights (cont) ¾ Capital management initiatives executed – Reduction in development capital expenditure – Distribution policy adjusted to 80-85% of operating profit before development property write downs – Distribution Re-investment Plan (DRP) activated – Pursuing asset sales – Smithfield (
Slide 11: FY09 operating performance
FY09 operating performance ¾ Net property income: $67.9 million (up 5% on FY08) ¾ Profit from operating activities1: $42.2 million (down $0.7m or 1.8% on FY08) − Financing costs up $4.9 million ¾ Full year distribution of 6.7 cpu − Distribution payout ratio2: 86.3% FY09 FY08 $’000 $’000 Net property
Slide 12: Entitlement Offer update
Entitlement Offer update
Slide 13: The Entitlement Offer
The Entitlement Offer ¾ CDI is undertaking a fully underwritten $130 million Institutional and Retail Entitlement Offer − Institutional entitlement offer approximately $110 million and retail entitlement offer approximately $20 million − 4 for 7 non-renounceable Entitlement Offer at $0.40 per New Un
Slide 14: Rationale for the Entitlement Offer
Rationale for the Entitlement Offer ¾ The Entitlement Offer, the June 2009 DRP and Smithfield1 and Heidelberg2 asset sales significantly strengthen the balance sheet − Covenant Gearing3 reduced to 26.8% from 43.9% at 30 June 2009 vs. covenant of 50% − Balance Sheet Gearing4 reduced to 25.1% from 39.
Slide 15: Entitlement Offer status and timing
Entitlement Offer status and timing1 ¾ Institutional Entitlement Offer (IEO) completed − Raised approximately $111 million − 95% (approx) take up − Allotment and normal trading of new units issued under IEO on Monday 24 August 2009 ¾ Retail Entitlement Offer − Can apply for up to additional 50% of 4
Slide 16: Key financials and FY10 guidance
Key financials and FY10 guidance
Slide 17: EPU / DPU guidance
EPU / DPU guidance ¾ Pro forma FY10 EPU1,2 guidance of 5.2 cents ¾ Pro forma FY10 DPU3 guidance of 4.2 cents − Down from normalised 5.5 cpu to 4.2 cpu on a like-for-like basis ¾ Distribution policy4 remains unchanged 8 DPU movement from FY09 actual to FY10 guidance 7 - 0.7 + 1.3 6 - 0.5 + 0.3 - 2.7
Slide 18: Debt summary post Entitlement Offer
Debt summary post Entitlement Offer ¾ Total borrowings of $210 million ¾ Average cost of debt – 4.7% (includes average margin of 51 bps on drawn debt) ¾ Weighted average line fee on undrawn debt is 30 bps Post Entitlement Offer 30 Jun 09 Borrowings1 $m 210 334 Gearing (debt to total assets) % 25.1 3
Slide 19: Debt maturity profile
Debt maturity profile Debt maturity profile at 30 June 2009 180 160 Pro forma post 140 30 June 2009 Entitlement Offer 48 120 30 Total facility ($m) $500 $372 100 15 $m 80 Total drawn ($m) $334 $210 60 110 98 95 1 40 Total undrawn ($m) $166 $162 20 31 36 36 - - - Weighted average term of 1.3 1.6 Oct-
Slide 20: Liquidity
Liquidity ¾ Sufficient liquidity to meet all debt maturity and forecast capital expenditure requirements until October 2010 ¾ Approximately $55 million of debt refinance or non-core asset sales expected to meet October 2010 debt maturity 30 June 2009 pro forma FY10 Liquidity to June 2011 300 $14 250
Slide 21: Balance sheet – pro forma
Balance sheet – pro forma Post balance date adjustments 30 June 2009 Pro forma post Entitlement Pro forma post 30 June Distribution, balance date Offer Entitlement ($m) 20091 DRP & fees2 Asset sales3 adjustments adjustments Offer Assets Cash and receivables 2.8 2.8 2.8 Investment and development pro
Slide 22: Balance sheet impact and debt covenant analysis
Balance sheet impact and debt covenant analysis ¾ Approximately $388 million (46% fall in asset values) buffer to Covenant Gearing level of 50% ¾ Forecast FY10 ICR of 4.5x post Entitlement Offer vs. covenant of 2.0x Covenant Gearing Balance Sheet Gearing (total liabilities / (total assets less defer
Slide 23: Gearing sensitivity analysis
Gearing sensitivity analysis ¾ Ability to withstand further asset value impairment − Approximately $388 million (46% fall in asset values) buffer to Covenant Gearing level of 50% Covenant Gearing (total liabilities / total assets less deferred tax asset) 60% Balance Sheet Gearing (total debt / total
Slide 24: NTA sensitivity analysis
NTA sensitivity analysis $1.00 $0.80 NTA per unit ($) $0.60 $0.88 $0.86 $0.69 $0.40 $0.63 $0.58 $0.20 30-Jun-09 Post balance date adjustments¹ Post Entitlement Offer 50bps cap rate expansion 100bps cap rate expansion Weighted average capitalisation rate 8.1% 8.1% 8.6% 9.1% Note: 1. Post June 2009 DR
Slide 25: Portfolio performance
Portfolio performance
Slide 26: Portfolio management update
Portfolio management update ¾ Smithfield − Conditional contract1 exchanged for sale of new warehouse facility for $6 million2 − Equal to written down book value at 30 June 2009 − Settlement expected in December 2009 ¾ Heidelberg − Non-binding heads of agreement entered into for sale at $8 million3 −
Slide 27: Portfolio overview – June 2009
Portfolio overview – 30 June 2009 ¾ Portfolio characterised by sound fundamentals − Occupancy – 98.92% (30 June 2008: 99.97%) − WALE – 5.7 years (30 June 2008: 6.2 years) ¾ Domestic focus – 91% Australian Australian portfolio French portfolio Total portfolio Total investment property portfolio value
Slide 28: Diversification enhances portfolio quality
Diversification enhances portfolio quality As at 30 June 2009 Sector diversification (by value) Geographic diversification (by value) 2% 9% 10% Office 3% NSW 29% Retail 4% ACT 18% VIC 7% Industrial - Distr'n QLD Centre SA 54% Industrial - High Tech WA 20% TAS 18% France 26% Tenant diversification by
Slide 29: Tenant industry diversification
Tenant industry diversification1 ¾ 30% of CDI portfolio leased to government tenants ¾ Financial services sector exposure low at 2.6% ¾ Strong diversity Top 20 tenants Industry representation % Of Total 30.4% Contracted Rank Tenant Name Tenant Industry Asset(s) Portfolio Contracted Gross Income 1 AB
Slide 30: Portfolio revaluations as at June 2009
Portfolio revaluations as at 30 June 2009 ¾ 50% (by value) independently revalued at 30 June 2009 (31 Dec 2008: 94% revalued) ¾ Valuations have fallen $16.7 million representing 4.2% across properties revalued1 ¾ Market capitalisation rates softened 23 bps from 7.84% to 8.07% ¾ French portfolio valu
Slide 31: Leasing transactions underpin fundamentals
Leasing transactions underpin fundamentals ¾ Proactive focus on leasing - occupancy at 98.92% ¾ FY09 − deals completed include renewal and new leases at: Makerston House, Jam Factory, Century City Walk, Cosgrove Industrial Park, 6 Foray St Fairfield, Goodman Fielder, Taylors College4 and Verizon4 (L
Slide 32: Strategies in place for upcoming lease expiries
Strategies in place for upcoming lease expiries ¾ Portfolio 98.92% occupied Lease expiry profile (by income)2 53.1% ¾ WALE 5.7 years ¾ Lease expiries proactively managed − emphasis on retaining tenants 15.5% 8.4% 8.0% 7.4% 6.5% 1.1% Vacant Jun-10 Jun-11 Jun-12 Jun-13 Jun-14 FY 2015 Beyond % portfoli
Slide 33: Rent review profile provides built-in growth
Rent review profile provides built-in growth ¾ Significant weighting to fixed and indexed rental reviews over next three years ¾ 90% of portfolio subject to rental reviews in FY10 Rent review profile (by income) Review type FY10 rental Rent reviews proportion (%) 11% 14% 22% Fixed 55% Average 3.4% 1
Slide 34: CDI portfolio diversification by geography & sector
CDI portfolio diversification by geography & sector Geographic Sector Diversification 300 29% 250 26% 200 20% Industrial - High Tech Value ($m) Industrial-DC 150 Retail Office 100 9% 7% 50 4% 3% 2% 0 NSW ACT VIC QLD SA WA TAS France Sector Geographic Diversification 500 450 54% 400 France 350 TAS 30
Slide 35: Summary
Summary Financial results and portfolio performance ¾ Financial performance in line with guidance ¾ Portfolio fundamentals remain sound Entitlement Offer to raise approximately $130 million ¾ 4 for 7 fully underwritten, non-renounceable Entitlement Offer – Issue price of $0.40 per New Unit Strengthe
Slide 36: Appendix
Appendix
Slide 37: Management
Management ¾ Management agreements published on website ¾ Management expense ratio (MER): 48.60bps ¾ Management fees: Fee type Calculation Base management fee 0.5% of gross assets of CDPG per annum, however this fee is reduced to 0.3% per annum for the period from allotment to June 2008 for IPO asse
Slide 38: Distribution policy
Distribution policy CDI’s distribution policy is to distribute accounting profit earned from operating activities adjusted for non-cash expenses, straight-line rent, leasing costs, debt establishment fees and capital expenditure incurred to maintain the investment properties, subject to the ongoing
Slide 39: Net property income (AIFRS)
Net property income (AIFRS) Australian portfolio FY09 FY08 Variance Variance ($'000) ($'000) ($'000) % Office ABS Building, Belconnen, ACT 6,950 6,641 309 4.7 The Forum, Cisco, St Leonards, NSW 4,657 5,282 (625) (11.8) DIAC ("DIMA") Building, Belconnen, ACT 4,807 4,656 151 3.2 Discovery House, Woden
Slide 40: Net property income (AIFRS) (continued)
Net property income (AIFRS) (continued) Australian portfolio (continued) FY09 FY08 Variance Variance ($'000) ($'000) ($'000) % Industrial – High-Tech Goodman Fielder, North Ryde, NSW 2,276 2,251 25 1.1 Rexel, North Ryde, NSW 1,359 834 525 62.9 Kraft, Port Melbourne, Vic. 1,517 1,417 100 7.1 Pacific
Slide 41: Entitlement Offer pricing
Entitlement Offer pricing ¾ Issue price of $0.40 per New Unit − 13.0% discount to last close − 11.5% discount to 5 day VWAP − 42.0% discount to pro forma NTA per unit 13.0% discount to 11.5% discount to 42.0% discount to pro last close 5 day VWAP forma NTA per unit $0.50 $0.50 $0.80 $0.46 $0.69 (13.
Slide 42: Peer comparison
Peer comparison FY10 EPU yield1 FY10 DPU yield1 20% 18.4% 20% 15% 13.0% 15% 13.2% 11.6% 9.2% 10.1% 11.0% 10.5% 8.1% 8.8% 8.8% 8.2% 8.3% 10% 7.3% 10% 7.0% 7.8% 7.8% 8.0% 6.7% 6.4% 6.6% 6.9% 5% 5% 0% 0% Australand Bunnings Stockland Charter Dexus Macq. GPT Australand CDI Mirvac Bunnings Clth Office St
Slide 43: Indicative timetable
Indicative timetable Event Date Announcement of Entitlement Offer; institutional Entitlement Offer opens 10.00am AEST, Thursday 6 August 2009 Unitholder declaration forms due to Orient Capital 4.00pm AEST, Thursday 6 August 2009 Institutional Entitlement Offer closes 10.30am AEST, Friday 7 August 20
Slide 44: Slide 44
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