Centuria Geelong Office Fund Cornerstone Offer - This document is strictly for the use of Financial Advisers and Wholesale Clients only and must ...
←
→
Page content transcription
If your browser does not render page correctly, please read the page content below
Centuria Geelong Office Fund Cornerstone Offer This document is strictly for the use of Financial Advisers and Wholesale Clients only and must not be distributed to any Retail Client.
CENTURIA UNLISTED PROPERTY | CENTURIA GEELONG OFFICE FUND | CORNERSTONE OFFER
Centuria Capital is an ASX-listed specialist investment manager
Centuria Capital Group (ASX:CNI)
$4.46bn FUM
Listed Industrial REIT (ASX: CIP)
Unlisted Investment Centuria Life
Centuria Diversified
Property Funds $1.07b FUM Property Funds Property Fund Bonds $0.38b FUM
$2.02b Office REIT (ASX: CMA) $1.61b 16 fixed term $0.83b Guardian Friendly Society
$0.95b FUM closed-end funds $0.45b FUM
FUM FUM FUM
As at 11 January 2018. Includes the Williams Landing (VIC) development as if complete. PAGE 2
CENTURIA UNLISTED PROPERTY | CENTURIA GEELONG OFFICE FUND | CORNERSTONE OFFER
Centuria Property Funds enjoys a successful track record of performance
20 years
business established in 1998
$3.63 billion1
of property funds under management
37 unlisted funds
successfully wound up
$1.6 billion
of asset sales
14.26% p.a. 2
average total return to investors
As at 30 September 2017 unless otherwise stated.
1. As at 11 January 2018. Includes the Williams Landing (VIC) development as if complete.
2. Refer to the disclaimer page for important information about the average total return calculation. PAGE 3
CENTURIA UNLISTED PROPERTY | CENTURIA GEELONG OFFICE FUND | CORNERSTONE OFFER
Centuria Geelong Office Fund – investment summary
The Centuria Geelong Office Fund (Fund) is a new unlisted
single asset investment trust.
The Fund will invest in a high quality office building located
in the major regional centre of Geelong, Victoria.
The asset benefits from a long 20-year lease to the Traffic
Accident Commission (TAC), a Victorian government-owned
entity. Over 10 years remain on the current lease term.
The Fund is forecast to provide investors with attractive and
secure monthly distributions.
PAGE 4
CENTURIA UNLISTED PROPERTY | CENTURIA GEELONG OFFICE FUND | CORNERSTONE OFFER
Asset Highlights – 60 Brougham Street, Geelong
Modern A-grade building with a long-term government lease and minimal capital expenditure requirements.
• $115.25m purchase price (freehold) on a 6.83% cap rate
• Completed in 2009
• 16,098 sqm of NLA1 and a large island site of 5,475 sqm
• 100% let to a AAA-rated state government entity2
• 10.3 year WALE3
• 3.5% fixed annual rental increases
• 5.5 star NABERS energy rating (1 of only 13 assets in VIC)
• 339 car spaces
• Central CBD location with sweeping bay views
1. Net lettable area.
2. Transport Accident Commission (TAC) leases 100% of office NLA, representing 94% of net property income.
3. Weighted average lease expiry (by income) as at 1 April 2018. PAGE 5
CENTURIA UNLISTED PROPERTY | CENTURIA GEELONG OFFICE FUND | CORNERSTONE OFFER
Fund Highlights
Attractive, secure and tax-effective monthly forecast distributions, coupled with conservative gearing.
• Unlisted single asset investment trust
• 5-year initial investment term
• 7.41% p.a. average distribution yield
• Initial LVR of 44.7%1
• Independent research by Lonsec and Core Property
• Total equity raise of $74.3m
• Fund timetable:
o PDS and research reports released – 5 February 2018
o Cornerstone offer closes – 2 March 2018
o Application monies due – 21 March 2018
o Fund establishment date – 3 April 2018
1. Initial loan to value ratio (LVR) is based on the independent asset valuation of $116.0m. PAGE 6
CENTURIA UNLISTED PROPERTY | CENTURIA GEELONG OFFICE FUND | CORNERSTONE OFFER
Forecast Financial Returns (post fees, pre tax)
Distribution Yield Forecast Total Return Forecast
Financial Distribution Indicative Tax Change in Terminal Levered Terminal NTA
Year Yield Deferral Rates Terminal Cap Rate Cap Rate IRR Per Unit
2018 7.00%1 100% - 50 bps 6.33% 11.02% $1.20
2019 7.20% 100%
-25 bps 6.58% 10.07% $1.14
2020 7.35% 98%
2021 7.50% 70% No change 6.83% 9.17% $1.09
2022 7.50% 60%
+ 25bps 7.08% 8.11% $1.03
2023 7.70%2 45%
Weighted Average 7.41% - + 50bps 7.33% 7.05% $0.97
Financial return forecasts disclaimer. The distribution yield forecast and total return forecast are for the 5-year period ending 31 March 2023. The financial return forecasts are subject to assumptions, risks and circumstances outside of the control of Centuria. The financial
return forecasts are subject to change prior to the completion of both the exclusive acquisition due diligence period and the preparation of the final PDS. The distribution yield forecast and total return forecast have been prepared on a basis that will be consistent with the final
PDS and also with regard to key assumptions surrounding re-leasing (slide 17), market rents (slide 17), capital expenditure (slide 17) and debt financing (slide 19) that are detailed in this document. The 5-year financial return forecasts are provided for the use of Financial
Advisers and Wholesale Clients only. The PDS will include forecast financial returns for a period of up to 2-years only. Financial Advisers and Wholesale Clients should form their own view on the reliability and risks of the 5-year financial return forecasts in this document. Please
ensure you read the PDS in full, particularly the assumptions and risks underlying the financial return forecasts, before making a decision in respect of this investment. This document must not be provided to Retail Clients and should not be relied upon in making an investment
decision.
1. Annualised distribution yield for the period 1 April 2018 to 30 June 2018.
2. Annualised distribution yield for the period 1 July 2022 to 31 March 2023. PAGE 7
CENTURIA UNLISTED PROPERTY | CENTURIA GEELONG OFFICE FUND | CORNERSTONE OFFER
Geelong is a thriving regional centre close to the Melbourne CBD
• Victoria’s second largest city
• Current population of 238,603
• 75km south west of Melbourne CBD
• 60 min by train to Melbourne CBD
• Trains run every 10 mins in peak hour
• 20 min drive to Avalon airport
• 60 min drive to Melbourne Airport
• Transurban’s West Gate Tunnel Project is
expected to cut travel time by 20 minutes
between Geelong and Melbourne
PAGE 8
CENTURIA UNLISTED PROPERTY | CENTURIA GEELONG OFFICE FUND | CORNERSTONE OFFER
Geelong – key highlights
Population growth: Diverse and robust $14.3 billion gross $1.5 billion record
325,000 by 2036 economy: regional product: building activity:
36.5% increase 17,000 businesses 4.3% annual growth 15% increase
100,000+ workforce
2nd largest VIC port: Education hub: Sea change and Gateway to the Bellarine
11,700 students affordability is driving Peninsula and Great
+11 million tonnes
enrolled at Deakin growth. Median 3 bed Ocean Road:
University Geelong house prices: 4.3 million visitors p.a.
$452,000 Geelong
$844,000 Melbourne
Source: Enterprise Geelong. PAGE 9
CENTURIA UNLISTED PROPERTY | CENTURIA GEELONG OFFICE FUND | CORNERSTONE OFFER
Five major government agencies now call Geelong home
GMHBA Stadium
Geelong Hospital Geelong Football Club (AFL)
Geelong Private Hospital
WorkSafe
NDIA (550 staff) & (700+ staff)
Westfield Geelong Dept. of Human
Services (400 staff) Australian Bureau of
Statistics (300 staff)
TAC
(~1,100 staff)
Geelong Train Station
Deakin University
“Combined, the five agencies
will boost Geelong’s
employment by 5,685 direct
and indirect jobs. That, in turn,
will inject nearly $2bn annually
into the local economy”.
Enterprise Geelong
PAGE 10CENTURIA UNLISTED PROPERTY | CENTURIA GEELONG OFFICE FUND | CORNERSTONE OFFER Geelong has been repositioned as Australia’s leading regional government social insurance hub Address 60 Brougham Street 1 Malop Street 13-19 Malop Street Completion date 2009 Estimated April 2018 Estimated early 2019 Building NLA / NABERS 16,098 sqm / 5.5 stars 15,301 sqm / 5.5 stars 15,436 sqm / 5.0 stars Car parks 339 104 167 Average floor plates 2,700 - 2,900 sqm 1,391 sqm approx. 2,500 sqm Lease NLA 14,860 sqm (TAC) 13,272 sqm (WorkSafe) approx. 8,200 sqm (NDIA) Initial term / Remaining term 20 years / 10.3 years 15 years 20 years Net rent per sqm $443/sqm (current) $447/sqm (lease start) $490/sqm (lease start) Fixed rent increases 3.5% p.a. 3.75% p.a. 3.5% p.a. PAGE 11
CENTURIA UNLISTED PROPERTY | CENTURIA GEELONG OFFICE FUND | CORNERSTONE OFFER
Federal and State Government decentralisation policies to support Geelong’s continued development
• In June 2017, the House of Representatives established a • The $500m Regional Jobs and Infrastructure Fund is the
Select Committee on Regional Development and Victorian Government’s overarching regional development
Decentralisation package
• A key focus of the inquiry is the potential decentralisation of • In November 2017, the government announced an agreement
non-policy related public sector jobs to regional areas with US-based software company LiveTiles (ASX: LVT) to
establish their Asia Pacific headquarters and Global Innovation
• 187 written submissions were received, including Geelong’s Centre in Geelong during 2018. The project is expected to
Comcare relocation pitch (see following slide for details) create up to 500 new jobs for the region
• Select Committee’s final report is due May 2018 • In May 2017, the government announced the planned
relocation of 600 public sector employees to Ballarat at a cost
of $47.8m
PAGE 12CENTURIA UNLISTED PROPERTY | CENTURIA GEELONG OFFICE FUND | CORNERSTONE OFFER
Comcare – City of Greater Geelong’s decentralisation submission
• Comcare is the statutory authority that administers the New Development Proposal – The Dennys Lascelles Tower
Commonwealth’s workers’ compensation scheme
• 20 Brougham Street, Geelong
• In September 2017, the City of Greater Geelong led a
delegation, including TAC and WorkSafe representatives, • 13,450 sqm NLA with a 5 star NABERS rating
which formally lobbied the Federal Government to
relocate 650 Comcare employees from Canberra to • Developer, Techne Group, is currently seeking government and
Geelong corporate lease pre-commitments, which is likely to include Comcare
“Given we’ve seen the very successful
transition of the TAC and more recently
WorkSafe, we believe the addition of Comcare
will only further enhance Geelong’s reputation
as a centre of excellence in social insurance”.
Kevin Spiller, CEO
City of Greater Geelong
PAGE 13CENTURIA UNLISTED PROPERTY | CENTURIA GEELONG OFFICE FUND | CORNERSTONE OFFER
Asset Stacking Plan
Large flexible floor plates, end of trip facilities and a high car parking ratio (1:48sqm).
PAGE 14CENTURIA UNLISTED PROPERTY | CENTURIA GEELONG OFFICE FUND | CORNERSTONE OFFER
Tenant Mix (by income) Expiry Profile (by income)
93.7%
100%
3.1%
% of Net Property Income Expiring
1.5% 80%
1.3%
93.9% 0.2% 60%
40%
20%
3.1% 1.5%
TAC Impact Investment Group 0.2% 0.2%
1.3%
Rush Hour Café Fernwood Gym 0%
2021
2018
2019
2020
2022
2023
2024
2025
2026
2027
2028
2029
CBA ATM
PAGE 15CENTURIA UNLISTED PROPERTY | CENTURIA GEELONG OFFICE FUND | CORNERSTONE OFFER
Traffic Accident Commission (TAC)
TAC Lease Renewal – supporting factors
Reasons to remain in Geelong:
• Government policies continue to support decentralisation
• The TAC is a Victorian Government-owned organisation,
• Geelong is a leading social insurance hub (TAC, WorkSafe & NDIA)
established under the Transport Accident Act 1986, to
reduce the social and financial cost of transport accident • Large percentage of the TAC workforce live in Geelong
injuries and prevent deaths and injuries on Victorian roads • Moving staff involves expensive relocation packages
• TAC and its workforce are entrenched in the Geelong community
• The TAC’s key functions include paying for treatment • Cheaper Geelong A-grade rents vs Melbourne A-grade rents
and support services for people injured in transport
accidents, promoting road safety and improving the state’s Reasons to remain at 60 Brougham Street:
trauma system
• Fit for purpose building – TAC was involved in design
• Large island site allows for flexible open plan floorplans
• The TAC is funded through payments by Victorian motorists
when they register their vehicles each year with VicRoads • Limited number of large development sites in central Geelong CBD
• High economic rents required to support new developments
• Tenant would incur extensive office fit-out costs at a new building
PAGE 16CENTURIA UNLISTED PROPERTY | CENTURIA GEELONG OFFICE FUND | CORNERSTONE OFFER
Forecast Assumptions – model inputs
Office – passing net rent $443/psm (passing rents = market)
Retail – passing net rent $441– $1,357/psm (passing rents = market)
Market rent growth Office: 3.25% p.a.1 Retail: 3.25% p.a.1
Lease renewal probability 75% (all tenants)
Downtime 9 months (all tenants)
Incentive (new lease or renewal) Office: 20% Retail: 10%
Refurbishment at expiry Office: $75psm / $150psm
(renewals / new leases) Retail: $25psm / $50psm
Office: 7 years Retail: 5 years
New lease terms
3.50% p.a. rent increases (all tenants)
CPI 2.25% (5-year average)
Capital expenditure $1,584,4572 over 5 years
1. Average of Centuria’s 2017 – 2023 calendar year forecasts.
2. Capital expenditure budget per the KPMG SGA technical building report (circa $600,000) plus the landlord’s re-carpeting and re-painting requirement under the TAC lease as at March 2019 (circa $1,100,000). PAGE 17CENTURIA UNLISTED PROPERTY | CENTURIA GEELONG OFFICE FUND | CORNERSTONE OFFER
Comparable Sales Evidence
Institutional capital continues to seek long government lease acquisitions in metro and regional locations.
Transaction metrics
60 Brougham St 99 Georgina Terrace 44 Sydney Ave 105 Phillip St 913 Whitehorse Rd
(at acquisition date)
Location Geelong, VIC Gosford, NSW Barton, ACT Parramatta, NSW Box Hill, VIC
Sale date Apr-18 Nov-17 Nov-17 May-17 Aug-15
Built / Building grade 2009 / A PC1 /A 2003 / A PC1 /A 2015 / A
NLA (sqm) 16,098 7,380 9,948 25,240 19,680
Car parks 337 (1:48) 91 (1:81) 218 (1:46) 50 (1:505) 300 (1:66)
WALE (years) / Occupancy 10.3 / 100% 10.0 / 100% 7.7 / 100% 11.9 / 100% 13.9 / 100%
NABERS (stars) 5.5 Targeting 4.5 4.5 Targeting 5.0 5.0
Sale price $115.25m $47.0m $64.7m $229.0m $156.0m
Core cap rate / Initial yield 6.83% / 6.91% 6.44% / 6.44% 6.27% / 6.17% 5.53% / 5.32% 5.76% / 6.00%
Capital value per sqm $7,1592 $6,368 $6,504 $9,073 $7,927
Net rent per sqm $443 $413 $430 (gross) $475 $375
Vendor Impact Investment Group Doma Group Quintessential Dexus Cromwell
Buyer Centuria Altis Property Partners Charter Hall Charter Hall FG Asset Management
Transport Accident Dept. of Foreign Affairs &
Key tenants ATO NSW Dept. of Education ATO
Commission Trading
Source: various real estate agency reports.
1. Practical completion.
2. Capital per sqm is inflated by a high car parking ratio and the retail tenancies. A normalised car parking ratio of 1:100sqm results in an adjusted capital value per sqm of approximately $6,800. PAGE 18CENTURIA UNLISTED PROPERTY | CENTURIA GEELONG OFFICE FUND | CORNERSTONE OFFER
Debt Summary (signed term sheet) LVR & ICR Covenant Sensitivity Analysis
Change in Terminal 5-Year Rolling LVR3
Initial drawn debt / Total facility $51.86m / $53.31m
Cap Rate Cap Rate Peak LVR Min LVR
Facility term 3 years
-50bps 6.33% 44.7% 35.4%
Total interest rate (margin + swap rate) 3.19% p.a.1
-25bps 6.58% 44.7% 36.8%
Hedging 100%
No change 6.83% 44.7% 38.2%
Establishment fee (bank charge) $159,926
+25bps 7.08% 44.7% 39.7%
Initial LVR (on independent valuation) 44.7%
+50bps 7.33% 44.7% 40.5%
LVR / ICR covenant 57.5% / 2.0x
Financial Year ICR4
Underwriting Facility 2018 4.79x
2019 4.86x
Facility $7.63m2
2020 4.96x
Facility term Repaid at settlement 2021 4.69x
Interest rate 10.0% p.a. 2022 3.86x
1. Interest rate is fixed for 3 years from transaction settlement. Financing assumption for years 4 and 5 of the fund term is a fully hedged two year debt facility based on the current forward swap rate as at 1 April 2021 of 2.82% and a margin of 1.5%, totalling 4.32% p.a.
2. Centuria Capital will provide short-term financing for the $5.8m acquisition deposit, $0.6m cash security to lock in a forward swap rate and $1.23m to enter the swap agreement. Interest rate pricing reflects the unsecured and non-recourse terms of the loan.
3. Change in cap rate is applied incrementally over initial 5-year fund term. LVR and ICR calculations reflect the initial 3-year debt facility and the assumed 2-year refinancing facility over year 4 and 5 of the fund term . LVR calculations are at the end of each financial year.
4. The Interest Cover Ratio (ICR) is calculated as Fund EBITDA divided by interest expense. PAGE 19CENTURIA UNLISTED PROPERTY | CENTURIA GEELONG OFFICE FUND | CORNERSTONE OFFER
Fund Structure
Custodian Investors
Centuria Property Funds No.2 Ltd1 $74.3m equity raise
Investment structure Closed-end single asset unit trust
100% equity Initial fund term 5 years
interest
Issue / starting price per unit $1.002
Responsible Entity Centuria Geelong Office Fund
Centuria Property Funds Ltd 5-year unlisted property trust Starting NTA per unit $0.893
Distribution payments Monthly
Property Management Agreements Property Exit Voting Process
Property, Facilities & 60 Brougham Street, Geelong
Development Management • Ability to extend Fund term by an additional two years is subject to
Initial LVR an Ordinary Resolution (50% of votes in favour)
of 44.7%
• Fund term extensions beyond seven years are subject to a
Unanimous Resolution (100% of votes in favour) i.e. guaranteed
Debt
liquidity event for investors at 7 years
Initial drawn debt $51.9m
• No redemption facility is available, however where possible
Centuria may endeavour to match sellers with a potential buyer if
1. Services to be provided by Centuria Property Funds No.2 Ltd, or one of its associated entities.
2. The starting price per unit reflects stamp duty and upfront transaction costs being amortised and written off over 5 years.
an investor wishes to exit the Fund
3. The starting NTA per unit reflects stamp duty and upfront transaction costs being written off at acquisition. PAGE 20CENTURIA UNLISTED PROPERTY | CENTURIA GEELONG OFFICE FUND | CORNERSTONE OFFER
Fund Services and Fee Schedule
Acquisition 2.0% (of gross asset purchase price)
Base management 0.8% p.a. (of GAV1)
Disposal 1.0% (of gross asset sale price)2
Performance 20% over 9% IRR
Custodian min of 0.015% p.a. (of GAV1) or $15,000 p.a.3
Property, facilities &
Charged at market rates
development management
Leasing 6.5% (renewal); 20.0% (new lease)4
1. Gross asset value of Fund.
2. Payments to third party sales agents are funded from the disposal fee.
3. Services to be provided by Centuria Property Funds No.2 Ltd, or one of its associated entities.
4. Fees are charged as a percentage of the lease’s year 1 rent and are debt funded. Payments to third party leasing agents are funded from the leasing fee. Services to be provided by Centuria Property Services Pty Ltd on commercial arm’s length terms. PAGE 21CENTURIA UNLISTED PROPERTY | CENTURIA GEELONG OFFICE FUND | CORNERSTONE OFFER
Centuria is undertaking a total equity raise of $74.3 million
Cornerstone Offer General Offer
The Cornerstone Offer allows advisers to reserve an equity stake in the If an adviser does not have aggregate client demand of $1,000,000,
Fund without being subject to the ‘first-come, first-served’ condition and clients can still invest via the General Offer. Centuria expects high
the upfront payment requirement of the General Offer. demand from our direct SMSF investors. The General Offer is operated on
a ‘first-come, first served’ basis and will close once it is fully subscribed.
The minimum investment under the Cornerstone Offer is $1,000,000,
being an aggregate of all client commitments. The minimum single client To obtain a copy of the PDS, please submit an Expression of Interest Form
investment within the aggregate commitment is $50,0001. (EOI) via our website: www.centuria.com.au
Offer type Retail PDS Offer type Retail PDS
General Offer opens 5 February 2018
Independent research reports released February 2018
General Offer closes Once fully subscribed
Cornerstone commitments due2 2 March 2018
Minimum investment $50,0001
Monies due 21 March 2018
Monies due At time of application
Transaction settlement / fund establishment 29 March / 3 April 2018 Transaction settlement / fund establishment 29 March / 3 April 2018
1. Centuria reserves the right to accept less than $50,000 at its own discretion.
2. This is an adviser’s non-binding commitment on behalf of their clients’ and is subject to clients’ formal application upon receipt of, and via the application form accompanying, the PDS. PAGE 22CENTURIA UNLISTED PROPERTY | CENTURIA GEELONG OFFICE FUND | CORNERSTONE OFFER
Investment Rationale
Long-term AAA-rated government lease which underpins secure monthly distributions averaging 7.41% p.a.
Modern A-grade building with a high 5.5 star NABERS rating and minimal forecast cap ex requirements
Geelong has been repositioned as a leading government social insurance hub
Federal and state government decentralisation policies continue to support the growth of regional centres, including Geelong
High probability of TAC lease renewal due to geographic, economic, operational and government policy factors
Institutional capital continues to seek investments with long-term government leases in the current low economic growth environment
Centuria is a high quality investment manager with a successful 20-year track record
PAGE 23CENTURIA UNLISTED PROPERTY | CENTURIA GEELONG OFFICE FUND | CORNERSTONE OFFER
Disclaimer
This document is strictly for the use of Financial Advisers and Wholesale Clients only and must not be distributed to any Retail Client.
This document has been issued by Centuria Property Funds Limited ABN 11 086 553 639 AFSL 231149 (Centuria) and contains general information about Centuria and its related bodies corporate that is current as at
December 2017. This document is not a recommendation or personal advice in relation to, or any offer of securities in, Centuria or any product or service offered by Centuria and does not take into account the
investment objectives, financial situation or needs of any particular person. Therefore, before acting on the information in this document you should consider the appropriateness of an investment in the Fund having
regard to your objectives, financial situation and needs.
It is intended that Centuria will apply to the Australian Securities and Investments Commission (ASIC) to register the Centuria Geelong Office Fund (Fund) as a management investment scheme. Centuria will be the
responsible entity of the Fund and the issuer of units in the Fund. It is intended that a Product Disclosure Statement (PDS) will be issued in February 2018 and will be available from Centuria’s website
www.centuria.com.au. You should obtain and read a copy of the PDS relating to the Fund before making a decision to invest. Centuria and its associates will receive fees in relation to an investment in the Fund as
disclosed in the PDS. Investment in the Fund is subject to risk including possible delays in payment or loss of income and principal invested. Centuria does not guarantee the performance of the Fund.
This document has been prepared from information believed to be accurate, however, no representation or warranty is made as to the accuracy or adequacy of any information contained in this document.
Past performance disclaimer:
Centuria has completed 37 funds with a combined value of approximately $1.6b and an average total return to investors of 14.26% per annum. Past performance is not indicative of future performance. The annualised
total return of 14.26% is current as at 30 September 2017 and is the average of total returns across all funds managed to completion (all real estate assets sold and debt repaid) by Centuria Property Funds Ltd as
responsible entity/trustee since 1998 and includes capital gains as well as distributions paid during the life of completed funds shown on a per annum basis. The annualised total return of completed funds does not
represent the performance of any of Centuria’s funds currently under management. Each fund managed by Centuria will have different characteristics, properties and risks and should be assessed by an investor
independently of the performance of Centuria’s completed funds. Average per annum total returns calculated at the completion of a fund do not take into account returns in any particular year and current or future
funds may experience fluctuations in asset values and distributions during the life of a fund.
CA-CPFL-13/12/17-00699
PAGE 24You can also read
