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CHARTER HALL GROUP — Capital/Financing Update 2017
Apr 27, 2017
64645_rns_2017-04-27_7f67f1f4-3b0b-48e1-af3e-c42976769e58.pdf
Capital/Financing Update
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NOT FOR DISTRIBUTION IN THE UNITED STATES OR TO U.S PERSONS
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Charter Hall Group Equity raising presentation
28 April 2017
Artist impression of 333 George Street, Sydney, NSW
Charter Hall | Charter Hall Group Equity Raising Presentation I 28 April 2017
Important information
Disclaimer
Past and future performance
This presentation contains information as to past performance of the Group. Such information is given for illustrative purposes only, and is not – and should not be relied upon as – an indication of future performance of the Group. The information in this presentation has been obtained from or based on sources believed by the Group to be reliable. This presentation contains certain “forward looking statements”. Forward looking words such as “expect”, “should”, “could”, “may”, “will”, “believe”, “forecast”, “estimate” and other similar expressions are intended to identify forward-looking statements. While due care and attention has been used in the preparation of forward looking statements, such statements are not guarantees of future performance.
Such statements are subject to various known and unknown risks, uncertainties and other factors that are in some cases beyond the Group’s control. These risks, uncertainties and factors may cause actual results, performance or achievements to differ materially from those expressed or implied by the forward-looking statements and from past results, performance or achievements. The Group cannot give any assurance or guarantee that the assumptions upon which management based its forward-looking statements will prove to be correct or exhaustive beyond the date of its making, or that the Group’s business and operations will not be affected by other factors not currently foreseeable by management or beyond its control. Such forward-looking statements only speak as at the date of this announcement and the Group assumes no obligation to update such information.
No liability
The information contained in this presentation has been prepared by the Group in good faith. No representation or warranty, express or implied, is made as to the accuracy, adequacy, reliability or completeness of any statements, estimates, opinions or other information contained in this presentation, any of which may change without notice. This includes, without limitation, any historical financial information and any estimates and projections and other financial information derived from them (including any forward-looking statement). Nothing contained in this presentation is, or may be relied upon, as a promise or representation, whether as to the past or the future.
To the maximum extent permitted by law, the Group and the underwriter (including their respective unitholders, shareholders, related bodies corporate, directors, officers, partners, employees, affiliates, agents and advisers) disclaim and exclude all liability for any loss or damage suffered or incurred by any person as a result of their reliance on the information contained in this presentation or any errors in or omissions from this presentation. Neither the underwriter, nor any of its advisers, affiliates, related bodies corporate, directors, officers, partners, employees or agents have caused, permitted to cause or caused the issue, submission, dispatch or provision of this presentation and none of them makes or purports to make any statement in this presentation and there is no statement in this presentation which is based on any statement by any of them. To the maximum extent permitted by law, no party nor any other person accepts any other liability, including without limitation, any liability arising from fault, negligence or lack of care, for any loss or damage arising from the use of this presentation or its contents or otherwise in connection with it.
The underwriter and its advisers, affiliates, related bodies corporate, directors, officers, partners, employees and agents make no recommendations as to whether you or your related parties should participate in the Institutional Placement nor do they make any representations or warranties to you concerning the Institutional Placement, and you represent, warrant and agree that you have not relied on any statements made by the underwriter, or any of its advisers, affiliates, related bodies corporate, directors, officers, partners, employees or agents in relation to the Placement and you further expressly disclaim that you are in a fiduciary relationship with any of them.
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Charter Hall | Charter Hall Group Equity Raising Presentation I 28 April 2017
Important information
Disclaimer
Prior to making a decision in relation to the Group’s securities, products or services, investors, potential investors and customers must undertake their own due diligence as to the merits and risks associated with that decision, which includes obtaining independent financial, legal and tax advice on their personal circumstances.
This presentation is not, and does not constitute, an offer to sell or the solicitation, invitation or recommendation to purchase any securities and neither this announcement nor anything contained herein shall form the basis of any contract or commitment. In particular, this presentation does not constitute an offer to sell, or a solicitation of an offer to buy, securities in the United States or to any “U.S. person” (within the meaning of Regulation S under the U.S. Securities Act of 1933, as amended (the “Securities Act”)) (“U.S. Person”). This presentation may not be distributed or released in the United States or to, or for the account or benefit of, any U.S. Person. The securities in the Offer discussed herein have not been and will not be registered under the Securities Act, and may not be offered or sold in the United States or to, or for the account or benefit of any, U.S. Person except (1) in compliance with the registration requirements of the Securities Act and any other applicable securities laws of any state or other jurisdiction of the United States or pursuant to an exemption from, or in a transaction not subject to, such registration requirements and (2) in transactions that will allow Charter Hall Group to qualify, and to continue to qualify, for the exception provided by Section 3(c)(7) of the U.S. Investment Company Act of 1940, as amended (the “Investment Company Act”).
Each individual or institution that reviews this presentation that is in the United States or that is, or is acting for the account or benefit of, a U.S. Person, will be deemed to represent that such entity (and any person on whose behalf such entity is acting) is both a “qualified institutional buyer” within the meaning of Rule 144A under the Securities Act and a “qualified purchaser” as defined in Section 2(a)(51) of the Investment Company Act. Each such person will also be deemed to acknowledge and agree that it will not copy, forward, deliver or distribute this presentation, electronically or otherwise, to any other person. If you are unable to provide the foregoing representations, warranties and agreements, please do not read this presentation. Please return it immediately to the Group and destroy or delete any copies.
Financial Disclosure
You should also be aware that certain financial data included in the Presentation are “non-GAAP financial measures” under Regulation G of the U.S. Securities Exchange Act of 1934, as amended. These non-GAAP financial measures include “operating earnings”.
The disclosure of such non-GAAP financial measures in the manner included in the Presentation may not be permissible in a registration statement under the U.S. Securities Act. These nonGAAP financial measures do not have a standardized meaning prescribed by Australian Accounting Standards or International Financial Reporting Standards and therefore may not be comparable to similarly titled measures presented by other entities, and should not be construed as an alternative to other financial measures determined in accordance with Australian Accounting Standards or International Financial Reporting Standards. Although Suncorp Bank believes these non-GAAP financial measures provide useful information to users in assessing the financial performance and condition of its business, you are cautioned not to place undue reliance on any non-GAAP financial measures included in the Presentation.
By reading this presentation and to the extent permitted by law, the reader releases each entity in the Group and its affiliates, and any of their respective directors, officers, employees, representatives or advisers from any liability (including, without limitation, in respect of direct, indirect or consequential loss or damage or loss or damage arising by negligence) arising in relation to any reader relying on anything contained in or omitted from this presentation.
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Charter Hall | Charter Hall Group Equity Raising Presentation I 28 April 2017
Highlights
FY17 earnings upgrade and an equity raising to drive the continued growth of Charter Hall
FY17 earnings upgrade
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Charter Hall provides upgraded operating earnings guidance, inclusive of the impact of a $275 million fully underwritten Institutional Placement being conducted today and a performance fee that will deliver an additional $10 million of pre-tax revenue, expected to be paid prior to 30 June 2017. Absent unexpected events, Charter Hall’s revised FY17 guidance is:
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40.1 cents of operating earnings per security on a pre-tax basis (representing 32% growth on FY16 – previously forecast to be 24%)
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35.9 cents of operating earnings per security on a post-tax basis (representing 18% growth on FY16 – previously forecast to be 12%)
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30.0 cents distribution per security (representing 12% growth on FY16)
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The distribution payout ratio is forecast to be marginally below the bottom end of the distribution policy range, being 85% – 95% of operating earnings per security
Equity raising
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Charter Hall is undertaking a $275 million fully underwritten Institutional Placement and a non-underwritten Security Purchase Plan to be capped at $15 million
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$5.48 per security fixed issue price, representing a 3.4% discount to close price on 27 April 2017
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New securities will rank equally with existing securities and will be entitled to the full distribution for the six months to 30 June 2017
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All of the raising proceeds will be used to fund the majority of the $333 million of identified Property Investment opportunities to be made alongside of capital partners, which will drive the continued growth of Charter Hall
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Charter Hall | Charter Hall Group Equity Raising Presentation I 28 April 2017
Highlights continued
Portfolio of Property Investments to generate FUM growth and enhanced operating earnings quality
Property Investment acquisition portfolio overview
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Charter Hall has assembled $333 million of contracted, identified or committed investments alongside capital partners across 11 funds
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$268 million or 80% of the identified investments are within 7 existing and 1 new wholesale pooled funds and partnerships
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The remaining $65 million or 20% of the investments represent seed capital required to launch or accelerate the growth of 3 Direct retail investor products
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48% of the total investments and 56% of the long term[1] investments are into the office sector, up-weighting Charter Hall’s Property Investment portfolio to a 37% Office exposure
Investment rationale
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The investments alongside our capital partners are expected to initially generate $1.8 billion of FUM growth and a Property Investment yield of 6.2%[2]
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Maintains alignment with capital partners as part of current and future equity raisings across the platform
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Property Investment portfolio enhanced ensuring continued predictable and high quality Property Investment income for securityholders
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WALE extended to 7.5 years, WARR maintained at 3.5%
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Portfolio diversification benefits delivered through the continued growth of Charter Hall’s Property Investment portfolio
Notes
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Comprised of the $268 million of investments within wholesale pooled funds and partnerships
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Based on the forecast annualised FY18 Property Investment yield
Not for distribution in the United States or to U.S Persons
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Charter Hall | Charter Hall Group Equity Raising Presentation I 28 April 2017
Property Investment acquisition portfolio overview
Equity raising to fund identified investments alongside capital partners to drive growth
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Equity raising proceeds to fund the majority of $333 million of contracted, committed or identified investments alongside capital partners
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Resulting in a weighted average pro-forma ownership interest of 18% across the investments at a Property Investment yield of 6.2%[1]
| Sector | Investment | Rationale | Size ($m) | Initial holding | Indicative timing |
|---|---|---|---|---|---|
| Industrial | Charter Hall Prime Industrial Fund (CPIF) | Participate in capital raising | 20 | 6% | Q3 FY17 |
| Industrial | Direct Industrial Fund No. 4 (DIF4) | Investment support to enable acquisitions | 30 | 23% | Q4 FY17 |
| Office | Brisbane Square Wholesale Fund (BSWF)2 | Investment alongside CPOF and an institutional investor | 95 | 17% | Q4 FY17 |
| Office | Charter Hall Prime Office Fund (CPOF) | Participate in capital raising | 30 | 11% | Q4 FY17 |
| Office | PFA Diversified Property Trust (PFA)3 | Investment support to enable acquisitions | 10 | 6% | Q4 FY17 |
| Diversified | Direct Consumer Staples Fund (DCSF)4 | Investment support to underwrite new fund establishment | 25 | 100% | Q4 FY17 |
| Total identified investment opportunities with an indicative investment timing of Q4 FY17 | 210 | ||||
| Retail (Hardware) | Long WALE Hardware Partnership (LWHP) | Participate in capital raising to fund a conditionally contracted acquisition |
30 | 14% | Q1 FY18 |
| Retail (Shopping) | Charter Hall Prime Retail Fund (CPRF) | Pro-rata participation to fund an acquisition in exclusive due diligence |
415 | 38% | Q1 FY18 |
| Retail (Liquor) | Long WALE Investment Partnership (LWIP2) | Pro-rata participation to fund further acquisitions in due diligence |
10 | 10% | Q1 FY18 |
| Total identified investment opportunities with an indicative investment timing of Q1 FY18 | 81 | ||||
| Office | Counter Cyclical Trust (CCT) | Commitment to a new partnership alongside a global institutional investor |
25 | 5% | During FY18 |
| Retail (Shopping) | Retail Partnership No. 6 Trust (RP6) | Pro-rata top-up of original commitment to enable acquisitions |
17 | 20% | During FY18 |
| Total identified investment opportunities with an indicative investment timing during FY18 | 42 | ||||
| Total identified investment opportunities | 333 | 18% |
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Based on the forecast annualised FY18 Property Investment yield 2. Subject to vendor Board approval 3. Subject to PDS issuance
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Subject to CHIML Board approval 5. $18m deployed in Q1 FY18 with remainder progressively drawn until development completion estimated in FY19 Not for distribution in the United States or to U.S Persons
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Charter Hall | Charter Hall Group Equity Raising Presentation I 28 April 2017
Property Investment portfolio impact
Property Investment portfolio metrics remain robust with an up-weight to the office sector
| Portfolio | Average | WALE | Occupancy | WARR | WACR | WADR | |
|---|---|---|---|---|---|---|---|
| value ($m) | holding (%) | (years) | (%) | (%) | (%) | (%) | |
| 31 March 17 | 1,312 | 15.3% | 7.3 | 97.8% | 3.5% | 6.11% | 7.5% |
| Pro-forma | 1,625 | 17.2% | 7.5 | 98.0% | 3.5% | 6.14% | 7.5% |
Diversification by Sector 31 March 2017
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Diversification by Sector
Pro-forma
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Retail
Industrial
27% (Shopping)
32%
$1,312m
Retail
(Hardware)
3%
Office Retail (Liquor)
33% 5%
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Industrial
25% Retail (Shopping)
29%
$1,625m [1]
Retail (Hardware)
4%
Office
37%
Retail (Liquor)
5%
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Retail (Shopping) Retail (Hardware) Retail (Liquor) Office Industrial
Retail (Shopping) Retail (Hardware) Retail (Liquor) Office Industrial
Notes
- Based on the $313m of identified investments. The $20m CPIF investment is included as at 31 March 17
Not for distribution in the United States or to U.S Persons
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Charter Hall | Charter Hall Group Equity Raising Presentation I 28 April 2017
Sources and uses
Equity raising proceeds to be used alongside existing balance sheet capacity to fund the identified Property Investments
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Proceeds from the $275 million of equity raised will fund the majority of $291 million of Property Investments that are expected to complete prior to Q1 FY18
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$65 million of the proposed investments are into Direct retail investor products that are typically recycled over time, replenishing investment capacity
| Sources of funds1 $m Institutional Placement 275 Existing balance sheet capacity 63 Total sources 337 |
Uses of funds Status $m % of equity raising deployed1 |
|---|---|
| Investments with an indicative timing of Q4 FY17 Invested / contracted 210 76% Investments with an indicative timing of Q1 FY18 Contracted 81 24% |
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| Sub-total 291 100% |
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| Identified commitments expected to be invested during FY18 and transaction costs Committed 46 - |
|
| Total uses 337 100% |
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Relates to the fully underwritten component of the equity raising only.
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Any proceeds raised under the non-underwritten Security Purchase Plan, which is capped at $15 million will reduce the requirement to use Charter Hall’s existing balance sheet capacity in funding the identified investments
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Charter Hall | Charter Hall Group Equity Raising Presentation I 28 April 2017
Upgrade to FY17 earnings guidance
Operating earnings per security on a post-tax basis upgraded by 6%
Our guidance is as follows:
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Based on no material change in current market conditions, our FY17 guidance for operating earnings per security growth on FY16[1] is:
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40.1 cents of operating earnings per security on a pre-tax basis (representing 32% growth on FY16 – previously forecast to be 24%)
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35.9 cents of operating earnings per security on a post-tax basis (representing 18% growth on FY16 – previously forecast to be 12%)
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30.0 cents distribution per security (representing 12% growth on FY16)
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The distribution payout ratio is forecast to be marginally below the bottom end of the distribution policy range, being 85% – 95% of operating earnings per security
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Notes
Artist Impression of 130 Lonsdale (Wesley Place), Melbourne, Victoria
Not for distribution in the United States or to U.S Persons
- FY16 OEPS on a pre and post-tax basis was 30.4 cents per security
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Charter Hall | Charter Hall Group Equity Raising Presentation I 28 April 2017
Equity raising
$275 million fully underwritten Institutional Placement and capped non-underwritten Security Purchase Plan
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Charter Hall is conducting a $275 million fully underwritten Institutional Placement
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$5.48 per security fixed issue price, representing a 3.4% discount to the close price on 27 April 2017
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New securities will rank equally with existing securities and will be entitled to the full distribution for the six months to 30 June 2017
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Charter Hall will also offer all securityholders the opportunity to participate in a non-underwritten Security Purchase Plan
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Size of the Security Purchase Plan capped at $15 million
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To be undertaken at the same $5.48 per security fixed price
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Details will be separately provided to securityholders
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1 Shelley Street, Sydney, New South Wales
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Charter Hall | Charter Hall Group Equity Raising Presentation I 28 April 2017
Offer details
$275 million fully underwritten Institutional Placement and capped non-underwritten Security Purchase Plan
$275 million fully underwritten Institutional Placement and a $15 million capped non-underwritten Security Purchase Plan
- Securities will rank equally with existing Charter Hall securities and will be entitled to the full distribution for the six months ending 30 June 2017
| Offer pricing summary | Metric | |
|---|---|---|
| Offer price per security | $5.48 | |
| Discount to close on 27 April 2017 | 3.4% | |
| Discount to 5-day VWAP | 3.9% |
Indicative timetable
| Event | Date |
|---|---|
| Record Date for the Security Purchase Plan | 7:00pm (Sydney time) Thursday, 27 April 2017 |
| Trading halt and announcement of Institutional Placement | Before market on Friday, 28 April 2017 |
| Trading halt lifted | Before market on Monday, 1 May 2017 |
| Security Purchase Plan opens | Tuesday, 2 May 2017 |
| Settlement of securities under the Institutional Placement | Wednesday, 3 May 2017 |
| Allotment and trading of Institutional Placement securities | Thursday, 4 May 2017 |
| Security Purchase Plan closes | 5:00pm (Sydney time) Wednesday, 17 May 2017 |
| Announcement of result of Security Purchase Plan | Wednesday, 24 May 2017 |
| Allotment of Security Purchase Plan securities | Thursday, 25 May 2017 |
| Trading commences in Security Purchase Plan securities | Friday, 26 May 2017 |
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Charter Hall | Charter Hall Group Equity Raising Presentation I 28 April 2017
Important information
International offer restrictions
This document does not constitute an offer of new stapled securities ("New Securities") of the Group in any jurisdiction in which it would be unlawful. In particular, this document may not be distributed to any person, and the New Securities may not be offered or sold, in any country outside Australia except to the extent permitted below.
Hong Kong
WARNING: This document has not been, and will not be, authorized by the Securities and Futures Commission in Hong Kong pursuant to the Securities and Futures Ordinance (Cap. 571) of the Laws of Hong Kong (the "SFO"). No action has been taken in Hong Kong to authorize this document or to permit the distribution of this document or any documents issued in connection with it. Accordingly, the New Securities have not been and will not be offered or sold in Hong Kong other than to “professional investors" (as defined in the SFO).
No advertisement, invitation or document relating to the New Securities has been or will be issued, or has been or will be in the possession of any person for the purpose of issue, in Hong Kong or elsewhere that is directed at, or the contents of which are likely to be accessed or read by, the public of Hong Kong (except if permitted to do so under the securities laws of Hong Kong) other than with respect to the New Securities which are or are intended to be disposed of only to persons outside Hong Kong or only to professional investors as defined in the SFO and any rules made under that ordinance.
The contents of this document have not been reviewed by any Hong Kong regulatory authority. You are advised to exercise caution in relation to the offer. If you are in doubt about any contents of this document, you should obtain independent professional advice.
Singapore
This document has not been registered as a prospectus with the Monetary Authority of Singapore ("MAS") and, accordingly, statutory liability under the Securities and Futures Act, Chapter 289 (the "SFA") in relation to the content of prospectuses does not apply, and you should consider carefully whether the investment is suitable for you. The Group is not a collective investment scheme authorised under Section 286 of the SFA or recognised by the MAS under Section 287 of the SFA and the New Securities are not allowed to be offered to the retail public.
This document and any other document or material in connection with the offer or sale, or invitation for subscription or purchase of the New Securities may not be circulated or distributed, nor may the New Securities be offered or sold, or be made the subject of an invitation for subscription or purchase, whether directly or indirectly, to persons in Singapore except to "institutional investors" (as defined in the SFA), or otherwise pursuant to, and in accordance with the conditions of, any other applicable provisions of the SFA.
This document has been given to you on the basis that you are an "institutional investor" (as defined under the SFA). In the event that you are not an "institutional investor", please return this document immediately. You may not forward or circulate this document to any other person in Singapore.
Any offer is not made to you with a view to the New Securities being subsequently offered for sale to any other party. You are advised to acquaint yourself with the SFA provisions relating to resale restrictions in Singapore and comply accordingly.
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Charter Hall | Charter Hall Group Equity Raising Presentation I 28 April 2017
Important information
International offer restrictions
New Zealand
This document has not been registered, filed with or approved by any New Zealand regulatory authority under the Financial Markets Conduct Act 2013 (the "FMC Act"). The New Securities are not being offered or sold in New Zealand (or allotted with a view to being offered for sale in New Zealand) other than to a person who:
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is an investment business within the meaning of clause 37 of Schedule 1 of the FMC Act;
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meets the investment activity criteria specified in clause 38 of Schedule 1 of the FMC Act;
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is large within the meaning of clause 39 of Schedule 1 of the FMC Act;
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is a government agency within the meaning of clause 40 of Schedule 1 of the FMC Act; or
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is an eligible investor within the meaning of clause 41 of Schedule 1 of the FMC Act.
Switzerland
The New Securities may not be distributed in Switzerland and will not be listed on the SIX Swiss Exchange ("SIX") or on any other stock exchange or regulated trading facility in Switzerland. This document has been prepared without regard to the disclosure standards for issuance prospectuses under art. 652a or art. 1156 of the Swiss Code of Obligations or the disclosure standards for listing prospectuses under art. 27 ff. of the SIX Listing Rules or the listing rules of any other stock exchange or regulated trading facility in Switzerland. Neither this document nor any other offering or marketing material relating to the New Securities may be publicly distributed or otherwise made publicly available in Switzerland.
Neither this document nor any other offering or marketing material relating to the New Securities have been or will be filed with or approved by any Swiss regulatory authority. In particular, this document will not be filed with, and the offer of New Securities will not be supervised by, the Swiss Financial Market Supervisory Authority (FINMA), and the offer of New Securities has not been and will not be authorized under the Swiss Federal Act on Collective Investment Schemes ("CISA"). The investor protection afforded to acquirers of interests in collective investment schemes under the CISA does not extend to acquirers of New Securities.
This document is personal to the recipient only and not for general circulation in Switzerland.
United States
This presentation is not, and does not constitute, an offer to sell or the solicitation, invitation or recommendation to purchase any securities and neither this announcement nor anything contained herein shall form the basis of any contract or commitment. In particular, this presentation does not constitute an offer to sell, or a solicitation of an offer to buy, securities in the United States or to any “U.S. person” (within the meaning of Regulation S under the U.S. Securities Act of 1933, as amended (the “Securities Act”)) (“U.S. Person”). This presentation may not be distributed or released in the United States or to, or for the account or benefit of, any U.S. Person. The securities in the Offer discussed herein have not been and will not be registered under the Securities Act, and may not be offered or sold in the United States or to, or for the account or benefit of any, U.S. Person except (1) in compliance with the registration requirements of the Securities Act and any other applicable securities laws of any state or other jurisdiction of the United States or pursuant to an exemption from, or in a transaction not subject to, such registration requirements and (2) in transactions that will allow Charter Hall Group to qualify, and to continue to qualify, for the exception provided by Section 3(c)(7) of the U.S. Investment Company Act of 1940, as amended (the “Investment Company Act”).
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