Joint venture between Gandel Group and
Colonial First State Property
CPA acquisition of CFT office and
industrial portfolio
GAN acquisition of CFT retail portfolio
Philosophy
♦
Colonial First State Property (CFSP) and the Gandel Group committed to
—
—
—
—
performance of both funds and people
alignment of interests
innovation
high corporate governance and transparency
♦
Proposed structure delivers focussed funds management and property
and development management teams
♦
Establishment of focussed sector specific trusts is believed to provide best
structure
♦
Unitholders entitled to share in future earnings of the property and
development management entity within a managed risk environment
♦
CFSP and Gandel Group are committed to the long-term
1
The proposal
Trusts
♦
CPA / GAN to acquire CFT to form CFS Gandel Retail Trust and larger CPA
♦
GAN acquiring $646.8 million in retail assets
♦
CPA acquiring $1.18 billion in office, industrial and HTI office assets
♦
Capped performance fee introduced in CPA
♦
Base fee reduces in GAN once assets > $3.5 billion
♦
Unitholders participate in share of future earnings of property and
development management entity (Gandel Retail Management or GRM)
2
The proposal (continued)
Fund Manager
♦
Commonwealth Managed Investments Limited responsible entity for both
trusts
♦
Colonial First State Property Limited and Colonial First State Property
Retail Pty Limited (CFSPR) fund managers for CPA and GAN respectively
♦
CFSPR is 60% owned by CFSP and 40% owned by the Gandel Group
Property and Development Manager (GRM)
♦
GRM established—60% owned by the Gandel Group 40% owned by CFSP
♦
CFSP’s 40% share of future earnings of GRM distributed to listed and
wholesale investors
♦
GRM will manage approximately $5 billion in retail assets
3
The proposal (continued)
CMIL
(Responsible Entity)
Colonial First State
Property Limited
(Fund Manager)
Gandel Retail Management
(Property & Development
Manager, $5 bn under
management)
Commonwealth
Property Office Fund
$2.1 bn
Colonial First State
Property Retail Ltd
(Fund Manager)
CFS Gandel Retail Trust
$2.8bn
CPA office
assets
CFT office
assets
CFT industrial
and HTI
office1 assets
$924.4m
$726.0 m
$451.0m
Gandel Group &
CFSP wholesale
funds retail
assets
$2.2bn
Note:
1 HTI = high tech industrial
4
GAN retail
assets
CFT
retail assets
$2126.7m
$646.8m
GAN unitholder benefits
EPU
+ 3.5% 1
DPU
+ 3.5% 1
S&P / ASX 200
Index weighting
from 3.7% to
4.8%
Improved
diversification
Ratings
upgrade
potential
NTA
-2.5%
Note:
1 Average forecast for 18 months to December 2003
♦
Acquisition of major retail portfolio—total assets $646.8 million
♦
Combines GRM’s property management and development skills with
CFSP’s funds management skills
♦
Gains an income stream (initially 28%) related to the earnings from the
enlarged GRM business
♦
Acquisition of quality sub-regional assets
♦
2.5% NTA dilution weighted against management fee income
♦
Opportunity for re-rate
5
CPA unitholder benefits
EPU
+ 5.4% 1
DPU
+ 1.8% 1
NTA per
unit
+ 3.7%
S&P / ASX 200
Index weighting
(1.7% to 3.7%)
Geographic
Diversification
(Sydney retained)
Potential
MSCI
inclusion
Note:
1 Average forecast for 18 months to December 2003
♦
♦
Opportunity to acquire a $726 million quality office portfolio
Acquisition of industrial portfolio ($451 million) considered non core
—
♦
♦
♦
♦
expect to enhance deal pipeline by divestment
Performance fee structure reinforces alignment of interests
Reduces average capitalisation rate on office portfolio
Retained earnings increase to 0.7 cpu at end of forecast period
Opportunity for re-rate
6
CFT unitholder benefits
Premium to
NTA
Increased
quality
(cap rate
8.6% to 8.0%)
Increased
DPU growth
(0% to
2.4%)
Potential
price re-rate
Distribution
yield
(8.2% to
7.7%)
Earnings
yield
(7.8% to
8.0%)
♦
Exposure to two sector specific vehicles
♦
Re-rate potential in GAN and CPA
♦
Strong management proposition and alignment of interest initiatives
♦
Addresses issues facing CFT
♦
Expected to provide long-term value by proven specialise management
7
Conclusion
♦
Significant transaction involving two of Australia’s leading
property groups
♦
Transaction provides benefits to all groups of unitholders
♦
Transaction structured in unique manner to align interests
—
—
—
♦
Gandel Group has 60% ownership of Gandel Retail Management
unitholders (wholesale and listed) receive 40% of GRM distributions
CPA performance fee
Boards and independent expert are fully supportive
of transaction
8
Gandel Retail Trust
SECTION 1
Gandel Retail Trust
Overview
♦
Acquisition of $646.8 million of CFT retail assets by scrip offer of 0.65 GAN
units per CFT unit and assumption of $213 million in debt
♦
GAN to receive an income stream related to the earnings stream from
Gandel Retail Management
♦
Responsible entity to delegate its authority to CFSP / Gandel JV
♦
CFSP related parties to initially acquire a 9.2% stake in GAN from the
Gandel Group
♦
GAN to be renamed the CFS Gandel Retail Trust
♦
Right of first refusal over Chadstone and Northland (to listed and
wholesale funds)
10
Gandel Retail Trust
Strategy / Direction
♦
Investment strategy of GAN broadened to include sub-regional centres
—
—
improves geographic diversification
increases exposure to outperforming sub regional sub-sector
♦
CFSP funds management expertise
♦
Increased acquisition and development pipeline
—
♦
diluted impact of individual development project risk
Critical mass (including wholesale) provides greater opportunities to
improve performance from existing assets and make accretive acquisitions
11
GAN EPU / DPU accretion
Earnings and distributions
cpu
Earnings per unit
4.85
4.75
4.65
4.55
4.45
4.35
4.25
Forecast 4.75
4.66
4.56
4.58
4.52
Jun 02
Source:
Gandel Group
Note:
1 June 2002 EPU is estimated
♦
DPU increase
— +3.5% (average for 18
months to December 2003)
— +5.0% y-o-y to June 2003
4.82
4.65
Dec 02 Jun 03
Pre Post
Dec 03
Distributions per unit
cpu
EPU increase
— +3.5% (average for 18
months to December 2003)
— +5.0% y-o-y to June 2003
4.40
Dec 01
4.85
4.75
4.65
4.55
4.45
4.35
4.25
♦
4.75
Forecast
4.66
4.56
4.58
4.52
4.82
4.65
4.40
Dec 01
Jun 02
Dec 02
Pre
Jun 03
Dec 03
Post
Source:
Gandel Group
Note:
1 June 2002 DPU is estimated
12
GAN asset acquisition
♦
GAN will effectively buy an interest in eight sub-regional shopping centres and one mixed use asset
Property name
GAN assets
Chadstone (50%)
Myer Centre
Northland (50%)
Bayside
Broadmeadows
Lake Haven
Val’n ($m)
Queen Street Central
Altona
Eastlands
$84.8
$73.9
$71.0
Super-regional
CBD Regional
Regional
Regional
Sub-regional
Sub-regional/
Business Park
CBD Regional
Sub-regional
Sub-regional
Elizabeth City Centre (50%)
Port Phillip Plaza
Roxburgh Park
$60.8
$42.8
$19.8
Regional
Sub-regional
Neighbourhood
GAN total
CFT retail assets
Grand Plaza
Brimbank Central
Clifford Gardens
Castle Plaza
Golden Grove Village
Runaway Bay (50%)
Corio Village
Rockingham City (12.5%)
Bowes Street
$585.0
$454.0
$215.0
$204.3
$145.6
$141.1
Type
$2,098.1
Cap rate
(%)
No. of
specialties
MAT psm1
Specialty occ.
costs (%)1
6.75
7.63
7.50
8.25
8.75
8.38
376
155
201
177
120
120
5,821
5,033
4,693
4,037
4,079
5,821
16.5
18.1
16.6
15.3
15.7
11.2
n/a
9.00
9.25
n/a
80
76
n/a
4,222
4,347
n/a
13.8
12.7
9.00
8.75
9.00
128
28
14
3,306
4,245
5,940
12.8
10.9
13.5
7.74
1,475
4,742
15.8
$157.0
$95.0
$91.5
$74.0
$73.0
Sub-regional
Sub-regional
Sub-regional
Sub-regional
Sub-regional
8.00
8.50
9.00
8.70
8.50
117
103
87
66
91
4,621
3,943
6,358
4,948
5,176
12.7
14.0
10.9
11.9
11.4
$71.0
$52.0
$23.3
$10.0
Sub-regional
Sub-regional
Sub-regional
Mixed use
8.25
9.75
7.75
n/a
122
88
130
n/a
5,746
5,671
4,147
n/a
12.7
10.4
13.6
n/a
CFT retail total
$646.8
8.52
804
4,937
12.4
Merged portfolio total
2,744.9
7.92
2,279
4,807
14.9
Note:
1
CFT retail data is as at Dec 2001
13
GAN portfolio diversification
♦
Increased exposure to sub-regional assets (PCA sub-regional total return
11.4% vs 9.7% for regionals for 10 years to December 2001)
♦
Increased exposure to food and convenience spend
♦
Victoria weighting reduced from 61% to 52%
Asset type
70%
48
50%
22
40%
23
20%
10%
1
10%
1
Sub
regional
Pre Post
7
31
3 8
5
0%
0%
Regional
26
30%
20%
Source:
Note:
52
50%
28
Super
regional
61
60%
40
37
40%
30%
Geographic diversification
NSW
Neighbourhood
VIC
QLD
Pre
Gandel Group
Excludes Bowes Street
14
SA
Post
0
1
WA
3
3
TAS
GAN portfolio quality
♦
Average cap rate increases marginally from 7.7% to 7.9%, highlighting
portfolio quality maintained
Weighted average cap rate
9.0%
8.8%
8.5%
8.0%
7.5%
7.7%
7.9%
8.1%
8.2%
7.4%
7.0%
ART
Source:
Note:
GAN pre
GAN
post
WFT
WFA
UBS Warburg
Excludes Bowes Street
15
CEP
GAN corporate governance
Board of Directors of GRM
Board of fund manager
♦
John Gandel, AO (Chairman)1
♦
Peter Polson (Chairman)
♦
Clive Appleton1
♦
Clive Appleton1
♦
Wal Edgell1
♦
Wal Edgell1
♦
Tony Gandel1
♦
John Gandel, AO1
♦
Peter Kahan
♦
Tony Gandel1
♦
Geoff McWilliam1
♦
Bob Kelly
♦
Mick Moylan
♦
Geoff McWilliam1
♦
David Thurin1
♦
Claire Roberts
♦
Bevan Towning
♦
Paul Stark
♦
David Thurin1
Note:
1 Indicates directors common to both boards
16
GAN fund management team
♦
CMIL (wholly owned by Commonwealth Bank of Australia) to become
responsible entity of GAN
♦
CMIL delegates authority to a JV between CFSP (60%) and Gandel Group
(40%) “Colonial First State Retail Property Pty Limited”
Fund Manager
Bevan Towning
Fund Analyst
Anthony Poirrier
Retail Portfolio
Manager
Mick Moylan
Retail Analyst
Harold Potuzak
Listed services
Treasury Exec.
Joanna Wakefield
Finance Manager
Andrew Crowther
17
Investor Rel. Mgr
Susie Graham
GAN strategic holding
♦
Strong alignment of interest via strategic holding
♦
The Bank1 and Gandel Group will retain a minimum holding of 536.6
million GAN units (30.8% down from 36.0%) for a minimum of 3.5 years
♦
Gandel Group will sell 160 million units to parties related to the Bank
at $1.22
♦
Gandel Group has the right to sell up to a further 173 million units at a
market based price to CFSP between 1 and 3.5 years after implementation
♦
Gandel Group will retain a minimum of 125 million units for 5 years whilst
retaining an interest in the business
Note:
1 Includes related entities excluding CFSP property securities funds
18
GAN balance sheet impact
Pro forma balance sheet (Jun 02)
($m)
Pre deal
Post deal
Property assets
Other assets 1
Total assets
2,126.7
27.3
2,154.0
2,805.8
36.4
2,842.2
Borrowings
Other liabilities
Total liabilities
424.4
95.7
520.1
649.7
117.1
766.8
Net assets
1,633.9
2,075.4
Issued units
Gearing (%)
NTA per unit ($)
1,342.6
19.7%
1.22
1,746.9
22.9%
1.19
Note:
1 Includes intangible asset resulting from the acquisition
19
♦
Slightly higher gearing
♦
Reduction in NTA to $1.19
set against
—
—
income stream from GRM
acquisition cost efficiencies
♦
Potential for rating agency
enhancement
♦
Reduce cost of debt
—
increased ability to fund
acquisition
Gandel Retail Management
♦
GRM to manage GAN and CFT retail assets and certain wholesale assets
♦
GRM to be one of the largest managers of retail assets in Australia
(AUM: approximately $5 billion)
♦
GAN will receive its share of income related to earnings from GRM
Gandel Group
60%
Various wholesale
funds via CFSPG
GAN via CFSPG
28% (financial)
12% (financial)
Gandel Retail Management
♦
The distribution entitlements are recalculated six monthly based on
revenue contributed to GRM
GRM fees
Property management fees
Leasing fees
Development services fees
Project leasing fees
Pre project fees
4.0% of gross income
6.0% of first year’s income
5.0% of project cost
14.0% of first year’s income
10.0% of cost
20
GRM property & development management team
♦
All key personnel retained—average retail experience 15 years
Managing Directors
Tony Gandel / David Thurin
General Manager
Development
Leasing
Martin James
General Manager
National Leasing
Stuart McCrae
Leasing staff
(42)
General Manager
Development
Neville Beer
Regional
Managers
General Manager
Finance
David Marcun
Legal/
Human Resources
Development and
Project Managers
(25)
Shopping
centre staff
(229)
Accounting/
Property
Administration
(89)
(21)
Note: Staff numbers are approximate
21
Growth strategy for GRM
Breakdown of managed assets
18.6%
25.6%
CFPS wholesale assets
Existing GAN Assets
12.8%
CFT retail assets
43.0%
Other¹
♦
GRM stakeholders (including GAN) will share in the growth of the
property and development management business
—
♦
distribution to GAN from GRM of $5.2 million over first 18 months
In excess of A$1 billion in identified capital expenditure within the
managed portfolio
Note: Other includes the Gandel Group’s interest in Chadstone and Northland
22
GAN income upside
♦
CFT specialty occupancy costs lower than JHD / GAN sub-regional averages
15%
14%
GAN sub-regional average 13.2%
13%
JHD sub-regional average 12.9%
12%
1
CFT average 12.4%
11%
10%
10.4
11.4
10.9
11.9
12.7
12.7
Runaway
Bay
Grand
Plaza
13.6
14.0
9%
Corio
Village
Clifford
Gardens
Golden
Grove
Castle
Plaza
♦
Property management efficiencies
♦
Income opportunities
Source: Gandel Group / CFSP
— tenancy remix
—
—
advertising
casual mall leasing
Note: 1. 2000 / 2001 (including marketing levy)
23
Rockingham Brimbank
Conclusion
♦
Enhanced combined management proposition
♦
Income stream from Gandel Retail Management
♦
Strong EPU and DPU accretion and improved growth profile
24
Commonwealth Property Office Fund
SECTION 2
Commonwealth Property Office Fund
Overview
♦
Efficient acquisition of $1.18 billion in assets from CFT
♦
Funded by scrip offer of 1.19 CPA units for each CFT unit and
assumption of $290 million debt
♦
Unique opportunity—enhanced pipeline through future sale / swap
of the non-core assets and reinvestment into office assets
♦
Restructure of management fee—base fee reduced to 0.45% p.a.,
introduction of a capped performance fee
26
CPA property strategy
Strategy
♦
In line with existing strategy—investment bands maintained
♦
Post weighting 61% core, 15% enhanced, 24% strategic
♦
Weighting to key markets maintained
Core
♦ Major CBD / suburban
market
♦ Target IRR 9.75–11.0%
♦ Low risk tenancy profile
Enhanced
♦
Target IRR >11%
♦
Some vacancy or
leasing risk
♦
Able to be repositioned
in terms of quality,
market etc
♦ Blue chip tenant base
♦ Prime quality
♦ Limited capital expenditure
♦ 60 Castlereagh Street,
Sydney
♦ 56 Pitt Street, Sydney
♦ Lee Street, Sydney
♦ 45 Pirie Street, Adelaide
♦
Generally B to A- quality
♦
Capital expenditure
required for repositioning
♦ Brandon Office Park,
Glen Waverley
♦ Governor Stirling Complex,
Perth
♦ 300 Queen Street, Brisbane
27
Strategic
♦ Strategic location for the
Bank
♦ Target IRR 10.50–12.50%
♦ Generally long weighted
average lease expiry
♦ 100% occupied by CBA
♦ 150 George Street,
Parramatta
CPA financial impact—momentum maintained
Earnings and distributions
♦
Earnings per unit (cents)
5.2
5.0
4.8
4.6
4.4
4.2
4.0
3.8
3.6
Forecast
4.78
4.45
3.84
3.94
Dec
99
Jun
00
4.05
Dec
01
4.52
4.58
4.88
4.88
—
4.50
—
4.71
♦
4.19
Jun
01
Dec Jun
01
02
Pre Post
Dec
02
Jun
03
—
Earnings retained to enable sale
of non core assets and
re-investment while still
providing ongoing DPU growth
♦
Retained earnings as at Dec 03
forecast to be 0.7 cpu ($9 million)
Forecast
4.36
3.81
3.97
Dec
99
Jun
00
4.67
4.63
4.49
4.54
4.55
4.59
Dec Jun
01
02
Pre Post
Dec
02
Jun
03
Dec
03
4.41
4.05
Dec
01
Jun
01
Source:
CFSP
Note:
1 June 2002 DPU is estimated
28
+1.8% (average for 18 months to
December 2003)
+3.9% y-o-y to June 2003
♦
Distributions per unit (cents)
4.62
+5.4% (average for 18 months
to December 2003)
+7.7% y-o-y to June 2003
DPU increase
—
Dec
03
Source:
CFSP
Note:
1 EPU calculation June 2002 based on estimated NOI
and number of units on issue at end of period only
5.2
5.0
4.8
4.6
4.4
4.2
4.0
3.8
3.6
EPU momentum maintained
CPA asset acquisition
CPA will acquire ten office properties
Property name
Val’n ($m)
NLA (m2)1
Rate psm
($)1
Cap
rate
(%)
Occupancy
(%)
Avg. lease
term (yrs)
Passing
Market
rent psm2 rent psm2
Over /
(under)
renting
CPA portfolio
385 Bourke St
175 Pitt St
AAP Centre (50%)
120 Pitt St
Finlay Crisps
201 Kent St (25%)
36-46 George St
475 Victoria Ave (33%)
100 King William St
53 Ord St
42-46 Colin St
14-16 Parliament Pl
205.0
145.0
140.0
119.2
61.6
54.3
43.8
42.0
32.0
29.7
28.2
10.8
59,876
26,019
46,802
24,260
28,576
41,350
14,519
25,112
19,518
6,822
8,817
3,050
3,424
5,573
5,983
4,913
2,156
5,253
3,017
5,068
1,640
4,354
3,198
3,607
8.3
8.3
7.0
7.3
10.0
8.0
9.5
7.8
10.5
8.0
8.0
8.0
95.0
100.0
100.0
100.0
100.0
99.0
100.0
100.0
95.0
100.0
100.0
100.0
4.1
6.2
3.5
7.6
3.6
4.5
5.2
2.1
5.3
12.0
10.0
12.0
Subtotal
911.6
304,721
4,266
8.21
98.1
5.2
CFT portfolio
60 Castlereagh St
56 Pitt St
150 George St
197 St Georges Tce
300 Queen St
14-18 Lee St
45 Pirie St
Brandon Office Park
1 Mill St
5 Mill St
190.0
135.5
81.0
71.0
70.0
56.5
54.7
40.5
11.5
10.8
26,988
20,705
21,964
26,307
19,308
14,418
19,809
17,092
6,273
7,096
7,040
6,578
3,688
2,707
3,765
3,919
2,797
2,369
1,833
1,550
7.0
7.5
8.5
7.9
8.0
8.8
9.1
9.8
9.5
9.5
93.3
94.4
100.0
100.0
95.0
100.0
98.0
100.0
100.0
94.8
5.5
2.8
3.3
4.7
3.3
7.9
4.4
2.1
0.8
2.7
Subtotal
721.5
179,960
4,009
7.98
96.5
4.2
2.0%
$1,633.1
484,681
4,171
8.10
97.7
4.8
1.4%
Total
383
463
608
451
250
486
319
436
252
275
262
265
389
462
537
472
276
511
322
437
253
253
253
253
(1.6%)
0.1%
13.2%
(4.4%)
(9.3%)
(4.9%)
(0.9%)
(0.2%)
(0.3%)
8.6%
3.5%
4.6%
0.1%
511
563
355
337
312
407
307
254
274
230
Note:
1. Property NLAs and rates psm are on 100% basis
2. Passing and market rents represent gross rents, except for 53 Ord St, 42-46 Colin St and 14-16
Parliament Place which are on a net basis
29
534
567
357
248
326
402
313
257
227
228
(4.2%)
(0.8%)
(0.5%)
36.1%
(4.5%)
1.2%
(1.9%)
(1.3%)
20.5%
0.9%
CPA portfolio impact
Portfolio benefits
♦
Reduced reliance on any single tenant
♦
Greater geographic diversity (Sydney CBD 63%, Melbourne reduced 15%)
♦
Reduces asset specific risk (no asset greater than 10%)
♦
Average lease duration remains in line with sector average
♦
Reduced weighted average cap rate by 8.21% to 8.10% reflecting
quality enhancement
Property
State
Improves avg
age
Reduces avg
cap rate
Improves
occupancy
60 Castlereagh St
NSW
✔
✔
56 Pitt St
NSW
✔
✔
197 St Georges Tce
WA
✔
✔
300 Queen St
QLD
14-18 Lee St
NSW
✔
45 Pirie St
SA
✔
✔
150 George St
NSW
✔
✔
Brandon Office Park
VIC
✔
✔
Improves avg
lease term
✔
✔
✔
✔
30
CPA portfolio impact
Lease expiry profile (by income)
Average lease duration (years)
1
6
60%
55.9 51.2
5.0
4
40%
3
30%
18.3
14.8 14.6
14.0
9.4 8.9
6.1 6.8
2
1
0
0%
FY 2003 FY 2004 FY 2005 FY 2006
Pre
Post
Pre
FY
2007+
Rent review type
36 36
31
29
30%
80%
41
40
38
Post
Peer average
Exposure to top 10 tenants 1
50%
40%
4.8
5
50%
20%
10%
5.2
1
32
35 33
34
70.6%
54.1%
60%
28
40%
20%
10%
20%
0%
0%
FY03
Pre
FY03
Post
FY04
FY04
Pre
Post
Mkt Fixed
Note:
1. Core portfolio only
FY05
Pre
FY05
Post
Pre
31
Post
CPA management team
Fund Manager
Carmel Hourigan
Portfolio
Management
Fund Analyst
Charles Wong
Portfolio
Managers—
Office
Charles Moore
and Nicola Jones
Portfolio
Manager—
Industrial
Peter Neville
Asset Managers
Michael Scott
Richard Dehn
Asset Managers
Robert Culf
David Hancock
Finance Manager
Jenny Benjafield
32
Treasury
Jo Wakefield
Investor Relations
Manager
Susie Graham
CPA fee structure
♦
♦
Existing fee waivers retained (A$2.5 million)
♦
Consistent outperformance required to earn maximum performance fee1% outperformance each half to get to 0.55%
Base fee reduced to 0.45% p.a of total assets and capped performance fee
introduced to reinforce incentive to outperform peer group
Performance fee
Benchmark:
S&P / ASX 200 Commercial Property Accumulation
(ex CPA)
Basis:
5% of first 1% outperformance per six months and 15%
thereafter (up to cap level)
Calculated:
Six monthly, using 20 day VWAP to end of period
Cap:
Total performance fee no higher than 0.15% per 6 mths
Cumulative:
Prior period underperformance must be earned back
Overperformance above the cap in prior periods is also
carried forward
Consideration:
In units, at higher of NTA and market (further
performance hurdle)
33
CPA non core assets
♦
CPA will acquire CFT’s industrial / HTI (non core) assets
♦
CPA proposes to divest the non core assets over time ($451 million book
value) and reinvest the proceeds in office assets consistent with the
current strategy
—
expect strong demand in a sector which is difficult to obtain critical mass
♦
Forecasts assume non core assets retained for 18 months
♦
As a prudent capital management initiative, CPA will retain earnings while
the non core assets are held
—
♦
$9 million (0.7 cpu) of retained earnings at end of forecast period
Distributions do not reduce on sale and reinvestment assuming
reinvestment yield of 7.35% and sale at book value
—
—
below weighted average cap rate post proposal (8.1%)
below average net yield of last 3 acquisitions by CPA (8%)
34
CPA balance sheet impact
Pro forma balance sheet (Jun 02)
($m)
Pre deal
Post deal
924.3
18.0
942.3
2,101.4
30.8
2,132.2
Borrowings
Other liabilities
239.4
34.4
273.8
538.0
75.6
613.6
Net assets
668.5
1,518.6
621.7
25.4%
1.08
1,361.5
25.2%
1.12
Property assets
Other assets
1
Issued units (m)
Gearing (%)
NTA ($)
♦
NTA increases from $1.08
to $1.12
♦
Reduced gearing
♦
Greater opportunity to
fund acquisitions
($105 million debt capacity)
♦
Reduced cost of debt
—
♦
Increased liquidity
—
Note:
1 Includes assets held in associates
—
35
benefit from unrated to
rated vehicle
S&P / ASX 200 Property
Index weighting 1.7% to
3.7%
possible MSCI inclusion
Conclusion
♦
Opportunity to purchase a $726 million office portfolio and a
$451 million industrial portfolio with limited transaction costs
♦
Reduced base fee and capped performance fee further aligns
interests
♦
Strong accretion to EPU and DPU (+1.8%)
♦
NTA increase from $1.08 to $1.12 (+3.7%)
♦
Proven management team to focus on asset optimisation
36
Colonial First State Property Trust Group
SECTION 3
CFT overview
♦
CFS & CBA property businesses were integrated in early 2001
—
CFSP has spent a considerable amount of time reviewing fund strategy including
CFT’s strategy in the context of the group’s philosophies and market dynamics
♦
Sector specific funds with focussed, high quality management are believed
to provide the optimal structure
♦
CFSP / Gandel Group JV creates an opportunity to specialise in retail and
office
—
♦
specialised management teams
Restructuring CFT will provide enhanced medium to long-term growth
38
Current profile of CFT
♦
Below average EPU / DPU growth, with income support required
Low DPU growth forecasts
6%
5%
Ongoing EPU / DPU gap (pre proposal)
1
9.5
4.8%
4.3%
4%
2.6%
8.5
2.3%
2%
1.3%
0%
SGP
GPT
ADP
DDF
—
—
8.77
8.81
9.05
9.05
9.05
8.97
8.55
Dec-01
Jun-02
Dec-02
DPU
Source: CFT
Note:
1
June 2002 EPU and DPU are estimates
Contributing factors:
—
8.75
EPU
CFT
Source: UBS Warburg
Note:
1
2001 to 2006 compound annual growth
♦
9.05
8.0
Jun-01
1%
MGR
9.05
9.0
2.9%
3%
9.05
incentives and structured reviews
industrial exposure without critical mass
under-development of retail portfolio
39
8.72
Jun-03
Dec-03
Current profile of CFT (continued)
♦
Lower growth has contributed to high cost of capital despite the quality
of the portfolio
High cost of capital vs peers
Despite reasonable average cap rate
10%
9.0%
9%
7.6%
8%
7%
6.7%
7.0%
7.9%
8.0%
7.0%
8.71% 8.90%
7.84%
7.5%
6%
7.0%
5%
MGR
Source:
8.40% 8.47%
8.5%
8.3%
8.61%
SGP
GPT
ADP
DDF
GPT
CFT
Source:
UBS Warburg
40
MGR
UBS Warburg
ADP
CFT
DDF
SGP
Addressing the issues
♦
Assets moving into two capital markets rated vehicles
♦
Retail opportunities better exploited by known retail property experts
♦
Industrial assets can now be sold in a vehicle without impacting upon
distributions
♦
Ability to align CFT investors with CFSP philosophy
—
—
—
—
performance (performance fee in CPA)
alignment (GRM interest + strategic fit)
innovation (GRM interest)
corporate governance (listed vehicles not competing for assets)
41
Value of offer - short term
♦
♦
Fixed offer ratio of 0.65 GAN units and 1.19 CPA units
♦
EPU increase of 1.2% (average for 18 months)
Offer represents premium to current market with significant re-rate
potential
DPU impact
10.0
9.5
9.0
8.5
8.0
7.5
7.0
10.0
9.5
9.0
8.5
8.0
7.5
7.0
8.55 8.72
8.72
Dec 02
8.89
8.97
Jun 03
Pre
8.94
cpu
cpu
EPU impact
Dec 03
GAN units
CPA units
Total
0.65
1.19
Post
8.60
Jun 03
Pre
Price1
1.21
1.18
9.05
9.05
8.53
Dec 02
Market
Ratio
9.05
30 day VWAP
Offer value
0.79
1.40
Price1
1.24
1.20
2.19
Offer value
0.80
1.43
Dec 03
Post
Average broker valuation
Valuation2
1.28
1.25
2.23
Notes:
1 Prices are as at close of trading on 29 July 2002. CPA is cum distribution for 6 months ending 30 June 2002.
Table assumes 50% of CPA distribution is carried
2 Based on Deutsche Bank AG, JBWere and UBS Warburg equities research
42
8.69
Offer value
0.83
1.49
2.32
Value of offer - long term
♦
Restructuring CFT into two sector focused funds
— removes current uncertainty
— considered to be best long term structure
♦
Both CPA and GAN considered to be strong performing, well
managed trusts
♦
Significant upside in GAN
—
—
—
—
♦
Significant upside in CPA
—
—
—
♦
capitalise on low occupancy costs
long term development opportunities
critical mass in assets under management
more efficient access to debt and equity
divestment of industrial
ability to compete and grow via property acquisitions and developments
lower MER
Transaction aimed at delivering long term outperformance
43
Implementation
SECTION 4
The offer
♦
For each CFT stapled security, CFT unitholders receive
—
—
0.65 GAN units; plus
1.19 CPA units
♦
CFT unitholders remain entitled to the June 02 distribution
♦
GAN and CPA units issued as consideration will rank from 1 July 2002
♦
CFT unitholders can elect to receive cash via a bookbuild
♦
Proposal will be implemented by unitholders’ vote in each trust to be held
on 3 September
♦
Independent expert concludes that transaction is fair and reasonable for
all unitholders
45
Meetings required
Resolution
Approval
GAN
1. Approval of Proposal
2. Issue of Units
3. Amendment of
Constitution
CPA
1. Approval of Proposal and
issue of CPA units
2. Amend Constitution—
new fees
3. Ratification of previous
issues
4. Amend Constitution—
placements
CFT
1. Amend Constitution
2. Approve Proposal
Restrictions
50%
75%
75%
Gandel Group, CBA & related entities
Gandel Group
None
50%
CBA and related entities
75%
CBA and related entities
50%
Investors who participated in the issue
75%
None
75%
50%
None
CBA and related entities
Proposal must be approved by unitholders in all trusts
46
Timetable1
2002
Announcement
GAN meeting
Tuesday 30 July
Tuesday 3 September
CPA meeting
Tuesday 3 September
CFT meeting
Tuesday 3 September
Note:
1
Dates are indicative only.
47
Contact information
CFT
CPA
GAN
Colonial First State Property
Level 10, 46 Market Street
Sydney NSW 2000
Colonial First State Property
Level 10, 46 Market Street
Sydney NSW 2000
Gandel Group of Companies
1341 Dandenong Road
Chadstone VIC 3148
Tel: +61-2-9378 4423
Fax: +61-2-9378 4523
Tel: +61-2-9378 4423
Fax: +61-2-9378 4523
Tel: +61-3-9205 1222
Fax: +61-3-9205 1333
Fund manager: Bevan Towning
Tel: +61-2-9378 2885
[email protected]
Fund manager: Carmel Hourigan
Tel: +61-2-9378 4562
[email protected]
Managing Director Gandel Retail Trust:
Clive Appleton
Tel: +61-3-9205 1244
[email protected]
48