Century Funds Management
Prospects for
Australian
Commercial
Property – 2011
and beyond
23 February 2011
Representatives
> Jason Huljich – CEO
> Sean Webster – Investment Manager (OFG)
> John Taylor – Head of Distribution
About Us
> CFM is one of the largest unlisted Fund Managers in Australia - $930 million of property – 28 Funds, 49 Properties – Established 1999.
> Strong track record of exceptional returns for our Investors – 15 Funds have been completed with an average total return of 18.45% per annum.
> Century is one of the few Fund Managers that is still able to purchase property and raise the necessary equity. Latest Fund is heavily oversubscribed - 200 Creek Street.
> 80% of the Century portfolio is managed by our experienced in-house property professionals. Skill sets – valuers, experienced leasing agents, development, asset and portfolio management. Century believes that its fundamental property asset experience, coupled with its funds management pedigree, place it in a unique position to maximise value for Investors.
> Century has strong relationships with 4 major banks and has refinanced 21 facilities totalling $318 million over the last 24 months.
OUR PORTFOLIO
CFM Acquisition Strategy
> Macro Economic Overview – start with a map of Australia and identify key themes for the national economy
> Property Market Overview – overlay an understanding of property market fundamentals
> Identify locations and acquisition targets (property specific analysis)
CFM Acquisition Strategy – Part 1
> Macro Economic Overview
– Sean Webster (Investment Manager – OFG)
The Big Picture – Global growth
Global growth – our trading partners
Commodities – by volume
Commodities – by Price
Commodities – the outlook
Commodities – impact on the economy
Commodities – impact on the economy
Commodities – impact on the economy
The outlook for the economy
The outlook for the economy
What is the global outlook from here?
> Low interest rates globally are starting to be reflected in economic growth which is accelerating
> Many developed countries are growing at >5% pa and likely to hold this rate of growth
> Interest rates to start rising globally
> Metal, energy and agricultural prices are likely to remain buoyant but could also be an inflation risk
> Debt issues will continue to be a concern for economies and markets
Australian Economy - Outlook
> Economic growth improving into 2011 (~4%) and ahead of the rest of the Industrial Countries
> Inflation likely to push to the top of the RBA band for next 12 to 18 months
> The RBA is likely to hold rates for the short term but they will trend higher over the medium term dependant on data
> Rising commodity prices will be good for growth but the currency is likely to remain close to parity and interest rates will trend higher
> Risks – Currency gets too strong, RBA moves interest rates too high, China’s growth slows sharply which impacts commodities
CFM Acquisition Strategy – Part 1
Conclusions> What does this mean for property investors?
> Brisbane and Perth are identified as growth areas based on resources
> Buoyancy in the wider economy will lead to white collar employment –positive for office market leasing
> Australia positioned to leverage growth in developing nations –regarded as an attractive and stable location for foreign investors
CFM Acquisition Strategy – Part 2
> Property Market Fundamentals
– Jason Huljich - CEO
Property Market Review
Three key drivers –
› Capital Values
› Vacancy Rates
› Supply Levels
Long Term % Annual Market Returns
(Source: IPD 2010)
Yields
% Annual Returns: Year to 30 Sept 2010
Historical Vacancy - Office Markets
Vacancy Rates - Office Markets
Employment v Hours Worked
Brisbane Demand and BMI
Vacancy Rates - Office Markets
Historical Supply Levels
Supply Restriction
The Property Cycle
CFM Acquisition Strategy – Part 2
Conclusions> What does this mean for property investors?
> Property fundamentals positive
– Valuations stabilising/improving
– Vacancy rates declining
– Limited new supply
> This is the bottom of the cycle/start of the upswing
> We are a net buyer at this point in the cycle
CFM Acquisition Strategy – Part 3
> Property Specific Analysis and Product Structure
– John Taylor – Head of Distribution
Acquisition Case Study – CPT14
> Step 1 Macro Themes – Locations identified related to resources theme - Brisbane and Perth.
We prefer Brisbane for it’s scale (circa 50% of Sydney CBD), and story in QLD infrastructure spending, population growth and resources
> Step 2 Property Market Fundamentals - Short term vacancy an issue in Brisbane – strong initial lease profile required, but represents a counter-cyclical opportunity as other buyers are focused on next 2 years.
> Step 3 – Property Specific Analysis – 200 Creek Street, Brisbane
Acquisition Case Study – Step 3
> 200 Creek Street, Brisbane
Property Fundamentals
- Strong lease profile – 5 yr WALE to Govt
and Multi-National Tenants
- Good Carparking Ratio
- Recently Refurbished
- Fringe Location – popular with mining
services businesses
- Strong Initial yield based on acquisition
price (motivated vendor)
Product Structure
> Investors are seeking investments with the following characteristics;
– Transparency
– Simple trust structures
– No financial engineering
– Clear financing terms
– Reduced gearing levels, and
– Returns derived from cashflows
> In short – “Back to the Future”
Product Structure
> Advisor/Investor Survey had the following key conclusions -
– Combination of income (7-8%) and capital gain (4-6%)
– Gearing levels lower – 50% is the new 65%
– 75% of investors will continue to invest
Century Property Trust 14
> Single Asset, Fixed Term Unlisted Trust
> Initial Gearing at 50%
> Initial Yield at 8.75% growing to average yield of circa 9% over 5 yr term
> 100% Tax deferred for first 2 years
> Offer Closes 28 Feb 2011 – already over-subscribed
Listed v Unlisted
Listed v Unlisted
QUESTIONS?