Challenger Limited · ASX:CGF
Challenger — Challenger Diversified Property Group — H1 2010 Earnings Presentation
29 slides from Challenger's earnings presentation, Feb 9, 2010
Slide 1: Challenger Diversified Property Group Results presentation 1H10
Challenger Diversified Property Group (ASX: CDI) Results presentation for half-year ended 31 December 2009 (1H10) Trevor Hardie – Fund Manager Tim Evans - Assistant Fund Manager 9 February 2010 1
Slide 2: Important notice
Important notice Information contained in this publication is current as at 9 February 2010 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 (ARS
Slide 3: Key points
Key points ¾ Operating profit on plan; balance sheet strengthened ¾ Net property income: $33.5 million (up 1%); Operating profit: $25.6 million (up 23%) ¾ 1H10 distribution of 2.05 cents per unit (cpu) confirmed ¾ Net tangible assets (NTA) of 65 cpu impacted by revaluations ¾ Entitlement Offer stren
Slide 4: Financial performance
Financial performance 4
Slide 5: Operating performance
Operating performance ¾ Net property income: $33.5 million (up 0.9% on 1H09) ¾ Profit from operating activities1: $25.6 million (up 22.8% on 1H09) − Financing costs down $3.9m on lower debt ¾ NPAT: $(13.7) million compared to $(58.6) million in 1H09 − Includes impact of property revaluations ¾ Half-
Slide 6: NTA at 65 cpu (post DRP)
NTA at 65 cpu (post DRP) ¾ Net tangible assets per unit (NTA) down primarily due to property revaluations ¾ DRP in operation for 1H10 distribution − Participation circa 60% − Circa 22.7 million units to be allotted on 26 February 2010 − Minimal change in NTA − Challenger Life Group will hold approx
Slide 7: Debt metrics
Debt metrics ¾ One multi currency facility of $371m with domestic banks Westpac & CBA ¾ CDI operating within covenants − Total liabilities / Total tangible assets ratio of 25.6% (post DRP) against covenant of 50.0% − Interest cover ratio (ICR) 4.5 times against covenant of 2 times ¾ Average cost of
Slide 8: Facility expiry profile
Facility expiry profile ¾ Current short term profile reflects fund’s strategy of maintaining low cost debt ¾ $184 million drawn at 31 December 2009 – undrawn $187 million ¾ Current development commitments over next 12 months - $8 million ¾ Discussions with both banks commenced • 31 December 2009 exp
Slide 9: Portfolio performance
Portfolio performance 9
Slide 10: Portfolio overview – 31 December 2009
Portfolio overview – 31 December 2009 ¾ Portfolio characterised by sound fundamentals − Occupancy – 96.5% (30 June 2009: 98.92%) − WALE – 5.3years (30 June 2009: 5.7 years) ¾ Domestic focus – 91% Australian Australian portfolio French portfolio Total portfolio Total property portfolio value1 $m 685.
Slide 11: Diversification enhances portfolio quality
Diversification enhances portfolio quality As at 31 December 2009 Sector diversification (by value) Geographic diversification (by value) 3% 9% 8% Office 3% 27% NSW Retail ACT 18% 4% VIC Industrial - Distr'n 7% QLD Centre SA 56% Industrial - High Tech WA TAS 18% 21% France 27% Tenant diversification
Slide 12: Tenant industry diversification
Tenant industry diversification1 ¾ 32% of CDI portfolio leased to government tenants ¾ Financial services sector exposure low at 2.8% ¾ Strong diversity Top 20 tenants Industry representation % Of Total Contracted Portfolio Ranking Tenant Name Tenant Industry Asset(s) Contracted Gross Income 31.7% 1
Slide 13: Portfolio revaluations at 31 December 2009
Portfolio revaluations at 31 December 2009 ¾ 73% (by value) independently revalued at 31 Dec 09 ¾ Valuations have fallen $42.4 million (5.1% across total portfolio) ¾ Market capitalisation rates softened 35 bps from 8.07% to 8.42% ¾ French portfolio value down 1.4%3. Market capitalisation rates aver
Slide 14: Strategies in place for lease expiries
Strategies in place for lease expiries Lease expiry profile (by income)2 ¾ Portfolio 96.5% occupied 53.3% ¾ WALE 5.3 years ¾ Lease expiries proactively managed 13.1% 10.5% 5.7% 7.4% 6.5% 3.5% Vacant Jun-10 Jun-11 Jun-12 Jun-13 Jun-14 FY 2015 Beyond % portfolio Expiry Property Major tenant income dat
Slide 15: Improving environmental sustainability
Improving environmental sustainability ¾ Focus on improving energy and water efficiency − Reducing carbon footprint; medium-term objective of 4.5+ star rating − Cost savings − Tenant attraction − Improved asset values ¾ Approach − Understand building performance − Complete annual NABERS assessment −
Slide 16: Significant organic development available
Significant organic development available Calendar year Organic development opportunities T rust Sector Estimated cost* $M Area 2010 2011 2012 2013 2014 Total project Incremental sqm Committed: Domain car park refurbishment Active Car park 11 8 11 8 Discretionary: Cosgrove Industrial Park Stage 2 Pa
Slide 17: Outlook
Outlook ¾ With balance sheet now strengthened, CDI positioned for growth ¾ Growth opportunities to be explored: − Acquisitions − Development pipeline − Recycling to enhance returns from existing portfolio ¾ Continuing focus on property asset management and proactive leasing ¾ FY10 EPU and DPU guidan
Slide 18: Questions
Questions 18
Slide 19: Contacts
Contacts Trevor Hardie Fund Manager Tel: + 61 (0)2 9994 7546 Email: [email protected] Tim Evans Assistant Fund Manager Tel: + 61 (0)2 9994 7131 Email: [email protected] Luke Keighery Investor Relations Tel: + 61 (0)2 9994 7633 Email: [email protected] Website www.challenger.
Slide 20: Appendices
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Slide 21: 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 22: Hedge profiles
Hedge profiles Interest rate hedges Income hedges Notional Hedge rate* Maturity date Half year ending AUD/EUR $A denominated hedges 30 June 2010 0.568 $70m 3.35% Feb 2011 31 December 2010 0.571 $25m 4.57% Oct 2011 30 June 2011 0.560 1 $40m 5.37% Feb 2014 31 December 2011 0.527 $40m1 5.07% Jul 2016 $
Slide 23: Lease expiry profile (by gross passing income)
Lease expiry profile (by gross passing income) CDI Detailed Lease Expiry - As At 31 Dec 09 8.00% 0.51% 7.00% 6.00% 1.58% Forum Properties (The Forum Cisco) 5.00% 0.48% Telstra (Makerston) Kings Car Parking (Makerston) 4.00% 3.39% Kraft % 2.19% Verizon (The Forum Verizon) Australian Pharm. (API Richa
Slide 24: 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 78% of portfolio subject to rental reviews in FY11 Rent review profile (by income) Review type FY11 rental Rent reviews proportion 16% 14% 22% (%) 9% 9% 3% Fixed 51% Avera
Slide 25: CDI portfolio diversification by geography & sector
CDI portfolio diversification by geography & sector Geographic Sector Diversification 300 250 27% 27% 200 21% Industrial - High Tech Value ($m) Industrial-DC 150 Retail 9% Office 100 7% 50 4% 3% 2% 0 NSW ACT VIC QLD SA WA TAS France Sector Geographic Diversification 450 56% 400 350 France 300 TAS WA
Slide 26: Net property income
Net property income Australian portfolio 1H10 1H09 Var ($'000) ($'000) ($'000) % Office ABS Building, Belconnen, ACT 3,407 3,423 (16) (0) The Forum, Cisco, St Leonards, NSW 2,424 2,383 41 2 DIAC ("DIMA") Building, Belconnen, ACT 2,444 2,376 68 3 Discovery House, Woden, ACT 2,216 2,153 63 3 Makerston
Slide 27: Net property income - continued
Net property income - continued French portfolio 1H10 1H09 Var (€'000) (€'000) (€'000) % 105, Route d'Orleans, Sully sur Loire 544 493 51 10 Avenue Savigny, Aulnay sous Bois 330 308 22 7 Rue Charles Nicolle, Villeneuve les Beziers 421 404 17 4 140, Avenue Marcel Paul, Gennevilliers 353 321 32 10 ZAC
Slide 28: Management
Management ¾ Management agreements published on website ¾ Management expense ratio (MER): 49.07bps 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
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