Centuria Property Funds No. 2 Limited CENTURIA INDUSTRIAL REIT Australian Securities Exchange –...

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Centuria Property Funds No. 2 Limited

CENTURIA INDUSTRIAL REIT

2018 Goldman Sachs Small and Mid-Cap Conference Presentation

Sydney 18 April 2018,

Centuria Property Funds No. 2 Limited (CPF2L) as Responsible Entity of Centuria Industrial REIT

(ASX:CIP) provides a presentation that will be used at the Goldman Sachs ninth annual Small and

Mid-Cap Conference being held today in Sydney.

– Ends –

For more information or to arrange an interview, please contact: Ross Lees

Trust Manager – CIP

Centuria Property Funds No. 2 Limited

Phone: 02 8923 8923

Email: [email protected]

Tim Mitchell

Group Head of Investor Relations

Centuria Capital Group

Phone: 02 8923 8923

Email: [email protected]

About Centuria Property Funds No. 2 Limited

Centuria Property Funds No. 2 Limited (CPF2L), a wholly-owned subsidiary of Centuria Capital Group (CNI), is the

Responsible Entity for the ASX listed Centuria Industrial REIT (CIP).

CIP is Australia’s largest ASX-listed income focused industrial investment vehicle and is included in the S&P ASX300 index.

CIP owns a portfolio of 39 high quality industrial assets with a value exceeding $1 billion, the properties are located in key

metropolitan locations throughout Australia.

CPF2L, combined with Centuria Property Funds Limited (CPFL), the Responsible Entity for the ASX listed Centuria

Metropolitan REIT (CMA), has $3.7 billion of funds under management in 17 unlisted property funds, one open-ended

diversified property fund and two listed REITs.

CNI is an ASX-listed specialist investment manager with $4.6 billion in funds under management.

www.centuria.com.au

mailto:[email protected]

http://www.centuria.com.au/

CENTURIA INDUSTRIAL REIT (ASX:CIP) I GOLDMAN SACHS SMALL AND MID-CAP CONFERENCE I 18 APRIL 2018

1 ASHBURN ROAD, BUNDAMBA, QLD

Centuria Industrial REITGoldman Sachs Small and Mid-Cap Conference

1H18 Results

CENTURIA INDUSTRIAL REIT I GOLDMAN SACHS SMALL AND MID-CAP CONFERENCE I 18 APRIL 2018

1Overview

2Portfolio Overview

3Summary

1 ASHBURN ROAD, BUNDAMBA, QLD

Section 1


Overview


Centuria CapitalASX-listed specialist investment manager

1. Includes 31 Kendall Street, Williams Landing, VIC, as if complete2. Includes post 31 December 2017 acquisitions3. Above chart at 31 December 2017

Property fund management

Listed Property $2.0b 1 Unlisted Property $1.7b 2

$0.9bAssets Under Management

Investment Bonds

17 fixed term funds

$3.7bAssets Under Management 1,2

Assets Under Management

Industrial REIT (CIP)

$1.1bAssets Under Management 1

Office REIT (CMA)

$0.9bCenturia Diversified

Property Funds

$4.6bAssets Under Management 1,2

Centuria Capital Group


CIP, Australia’s largest ASX listed income focused industrial REIT

Key Metrics at 31 December 2017

40.6%Gearing 3

95.9%Portfolio

occupancy 4

4.9yrsPortfolio WALE 4

39High quality assets

$1.0bPortfolio value

19.4cpuFY18 distribution

guidance

$608mMarket

capitalisation 1

7.9%FY18 forecast

distribution yield 1

1. Based on CIP closing price of $2.45 on 31 March 2018

2. Source: Moelis & Company

3. Gearing is defined as total borrowings minus cash / total assets minus cash and goodwill

4. By income

12 month total unit holder return outperforming S&P/ASX300

A-REIT Index at -0.1% 2

6.7%

2


CIP has a simple strategy – to deliver income and capital growth to investors from a portfolio of high quality Australian industrial assets; by

– focusing on ‘fit for purpose’ assets that are relevant to our quality customer base

– anticipating and meeting the needs of our customers to ensure high retention and occupancy

– Re-positioning assets to maximise value to unit holders

24-32 Stanley Drive Somerton, VIC

Strategy


1. Source: ASX disclosures at 31 December 2017

– Only ASX listed REIT with 100% exposure to Australian industrial real estate

– Large scale, geographically diversified industrial portfolio

– Included in S&P/ASX 300 Index

– Portfolio has grown significantly over the past five years

Australia’s largest ASX listed income focused industrial REIT

$2.0 bn

0

25

50

75

100%

1.0

0.5

1.5

Value of owned Industrial Portfolio (ex Business Parks) 1

0.0

CIPPeer 8

Represents Australian Industrial Property (ex Business Parks) as a % of assets

Peer 7 Peer 6 Peer 5 Peer 4 Peer 3 Peer 2 Peer 1

$0.3 bn

$0.6 bn

$0.8 bn

$1.0 bn$1.1 bn

$1.3 bn $1.4 bn$1.5 bn

$1.8 bn

NA

$1,200 m

1,000

400

200

800

600

CIP Portfolio Value

0

Jun 14 Jun 15 Jun 16 Jun 17 Dec 17

CAGR 34%


Note: Investment sales greater than and equal to $5 million included; yields reflect reversionary yields

Source: RCA / Colliers Edge

Note: Yields reflect average prime industrial assets, as at December 2017

Source: Colliers International

Competition for assets drives transaction volumes

$9 AUD Billions

6

7

8

4

5

0

2

1

3

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

10%

9.0

8.5

9.5

8.0

7.5

6.0

7.0

6.5

Ave

rag

e C

ap R

ate

Tran

sact

ion

Volu

me

Transaction Volumes and Average Cap Rate

NSW VIC QLD WA SA ACT Other Average Prime Yield Average Secondary Yield 6 7 84 50 21 3

Yield (%)

Average Industrial Yield by City (2017)

Houston

Melbourne

Shanghai

Los Angeles

Sydney

Tokyo

Chicago

Frankfurt

Munich

Vancouver

London

Hong Kong

Singapore

Total average 5.1%


6.0

5.0

2.0

1.0

3.0

4.0

Australian GDP and CPI

0.0

CPIGDP

Dec-

2006

Mar

-200

7Ju

n-20

07Se

p-20

07De

c-20

07M

ar-2

008

Jun-

2008

Sep-

2008

Dec-

2008

Mar

-200

9Ju

n-20

09Se

p-20

09De

c-20

09M

ar-2

010

Jun-

2010

Sep-

2010

Dec-

2010

Mar

-201

1Ju

n-20

11Se

p-20

11De

c-20

11M

ar-2

012

Jun-

2012

Sep-

2012

Dec-

2012

Mar

-201

3Ju

n-20

13Se

p-20

13De

c-20

13M

ar-2

014

Jun-

2014

Sep-

2014

Dec-

2014

Mar

-201

5Ju

n-20

15Se

p-20

15De

c-20

15M

ar-2

016

Jun-

2016

Sep-

2016

Dec-

2016

Mar

-201

7Ju

n-20

17Se

p-20

17De

c-20

17

Underlying conditions remain positive for industrial occupiers

65

60

55

40

45

35

50

Australian Manufacturing Purchasing Managers Index (3 months average)

May 09 May 10 May 11 May 12 May 13 May 14 May 15 May 16 May 17

Projected Average Population Growth (2018-2022)

3.0 %

0.3%0.0%

-0.4%

0.5% 0.6% 0.6% 0.6% 0.8% 0.8% 0.9% 1.0% 1.0% 1.0% 1.2% 1.3% 1.3% 1.3% 1.6% 2.7%

Maj

or A

dvan

ced

Ger

man

y

Japa

n

Fran

ce

Peop

le’s

Rep

ublic

of C

hina

Uni

ted

Stat

es

Uni

ted

King

dom

Hon

g Ko

ng S

AR

Sing

apor

e

Mex

ico

Asia

& P

acifi

c

Emer

ging

& d

evel

opin

g

Can

ada

Wor

ld

Indo

nesi

a

Emer

ging

mar

ket

Indi

a Aust

ralia

Nig

eria

2.0

0.0

1.0

-1.0

Source: ABS

Source: RBA, Property Insights

2013/14 2014/15 2015/16 2016/17eC

om

mer

ce S

hare

(%)

Sal

es (A

UD

Mill

ions

)

Online Retail and eCommerce

Average monthly online Retail Sales Share of eCommerce Sales

$1,000

$600

$400

$800

0

$200

38.5

39.5

37.5

35.5

35.0

36.0

37.0

38.0

39.0

36.5

Source: Source: ABS / Colliers Research Note: ‘eCommerce’ defined as ‘pure-online sales’

Source: IMF


1) Source: Knight Frank Research

Availability reducing across all key marketsMarket supply 1

Available Space – Sydney

1,000

800

600

400

200

0

Apr

11

Aug

11

Dec

11

Apr

12

Aug

12

Dec

12

Apr

13

Aug

13

Dec

13

Apr

14

Aug

14

Dec

14

Apr

15

Aug

15

Dec

15

Apr

16

Aug

16

Dec

16

Apr

17

Aug

17

Dec

17

Prime Secondary

1,200

1,200

800

1,000

600

400

200

0

Available Space – Melbourne

Prime Secondary

Apr

11

Aug

11

Dec

11

Apr

12

Aug

12

Dec

12

Apr

13

Aug

13

Dec

13

Apr

14

Aug

14

Dec

14

Apr

15

Aug

15

Dec

15

Apr

16

Aug

16

Dec

16

Apr

17

Aug

17

Dec

17

800

600

400

200

0

Available Space – Brisbane

Prime Secondary

Apr

11

Aug

11

Dec

11

Apr

12

Aug

12

Dec

12

Apr

13

Aug

13

Dec

13

Apr

14

Aug

14

Dec

14

Apr

15

Aug

15

Dec

15

Apr

16

Aug

16

Dec

16

Apr

17

Aug

17

Dec

17


Section 3

Portfolio overview


High quality assets accomodating quality tenantsPortfolio composition

1. Includes acquisition of Lot 14 Sudlow Road, Bibra Lake, WA and 207-219 Browns Road, Noble Park, VIC, exchanged on 29 June 2017

Portfolio Snapshot 1H18 FY17 1 1H17

Number of assets 39 38 37

Book value $m 1,005.2 961.2 911.9

WACR % 7.02 7.33 7.42

GLA sqm 766,539 757,944 693,620

Average asset size sqm 19,655 19,945 18,746

Occupancy by income % 95.9 92.1 96.1

WALE by income Years 4.9 4.4 4.4

AWH Woolworths

Green's General FoodsVisy Board

The Reject ShopAPI

OroraVIP Petfoods

K & S FreightersBradnam's Windows and Doors

12345678910

Tenant % of total incomeRank

8.1%8.1%

6.4%5.3%

4.3%4.2%

3.9%3.5%

3.4%3.4%

18%QLD

SA

WA

NT

NSW

ACT

VIC

39%

27%

2%

1%

13%

Geographic Diversification (by value)


1. FY19 will further reduce to 10.2% following settlement of 39-45 Wedgewood Road, Hallam, VIC

– Record leasing in 1H FY18, 20.1% of portfolio leased over a six month period

– 100% tenant retention in 1H FY18 driven by leasing transactions with major occupiers

– Executed one of Australia’s largest leases, 83,781sqm to AWH

– High occupancy of 95.9%, portfolio WALE of 4.9 years

– Significant reduction in portfolio vacancy and near term forward lease expiry

Operational highlights

Active management generates record leasing volume

Weighted Average Lease Expiry (by income)

70 (%)

60

50

40

30

20

10

0

1H18 FY17

FY18

3.5%

5.0%

FY20

14.2%

24.8%

47.3%

FY19 1

11.2%

11.8%

FY21

3.2%

4.9%

Vacant

7.9%

4.1%

FY22+

62.1%

WALE4.9 years

Occupancy95.9%

47.3%


Transactional highlights

Acquisitions Divestment

207-219 Browns RoadNoble Park, VIC

– $37.0 million acquisition, 7.0% initial yield 2

– 8.8 year WALE 3

– Adjoins existing CIP four hectare asset at 500 Princes Highway, Noble Park

Lot 14 Sudlow RoadBibra Lake, WA


– 7.8 year WALE 3

– Re-leased 100% of the property ahead of settlement

– Adjoins existing CIP asset at 310 Spearwood Avenue, Bibra Lake

92 Robinson AvenueBelmont, WA


– 100% leased to Toll Transport until 2021

– High quality, fit-for-purpose asset in infill location situated between Perth CBD and Perth airport

39-45 Wedgewood DriveHallam, VIC

– $10.0 million divestment, 7.5% premium to book value

– Settlement to occur in June 2018, ahead of FY19 lease expiry

Over $130m1 transacted to improve portfolio quality

1. Includes CIP’s 7.7% interest in Propertylink Group and 43-45 Mica Street, Carole Park, QLD

2. Acquisition prices and initial yields before transaction costs

3. WALE by area


Section 5

Summary


– CIP is Australia’s largest ASX focused income industrial REIT with 100% exposure to industrial assets

– Managed by Centuria Capital (ASX:CNI), a specialist fund manager with $121m 1 co-investment

– CIP’s portfolio is nationally diversified with highest weightings towards NSW and VIC markets

– The portfolio has undergone significant active management

> Near term lease expiries have been significantly reduced over the last 12 months, increasing WALE to 4.9 years

> Continued execution of complementary acquisition and disposal initiatives

Summary

– Australia’s industrial market continues to experience strong demand from domestic and international investors

– Tenant demand improving

> Adaptation towards emerging technological trends

> Uplift from traditional manufacturing sectors

– Forecast FY18 distributable earnings of 19.5-20.0 cents per unit

– Forecast FY18 distribution of 19.4 cents per unit

1. Based on CIP closing price of $2.45 as at 31 March 2018, and CNI disclosure of 21 Nov 2017


CIP, Australia’s largest ASX listed income focused industrial REIT

Key Metrics at 31 December 2017

40.6%Gearing 3

95.9%Portfolio

occupancy 4

4.9yrsPortfolio WALE 4

39High quality assets

$1.0bPortfolio value

19.4cpuFY18 distribution

guidance

$608mMarket

capitalisation 1

7.9%FY18 forecast

distribution yield 1

1. Based on CIP closing price of $2.45 on 31 March 2018

2. Source: Moelis & Company

3. Gearing is defined as total borrowings minus cash / total assets minus cash and goodwill

4. By income

12 month total unit holder return outperforming S&P/ASX300

A-REIT Index at -0.1% 2

6.7%

2


PAGE 18CA-CIP-17/04/18–00777

This presentation has been prepared by Centuria Property Funds No. 2 Limited (ABN 38 133 363 185, AFSL 340 304) (‘CPF2L’) as responsible entity of the Centuria Industrial REIT (ARSN 099 680 252 (‘CIP’ or the ‘Trust’).

All information and statistics in this presentation are current as at 18 April 2018 unless otherwise specified. It contains selected summary information and does not purport to be all-inclusive or to contain all of the information that may be relevant, or which a prospective investor may require in evaluations for a possible investment in CIP. It should be read in conjunction with CIP’s periodic and continuous disclosure announcements which are available at www.centuria.com.au. The recipient acknowledges that circumstances may change and that this presentation may become outdated as a result. This presentation and the information in it are subject to change without notice and CPF2L is not obliged to update this presentation.

This presentation is provided for general information purposes only. It is not a product disclosure statement, pathfinder document or any other disclosure document for the purposes of the Corporations Act and has not been, and is not required to be, lodged with the Australian Securities & Investments Commission. It should not be relied upon by the recipient in considering the merits of CIP or the acquisition of securities in CIP . Nothing in this presentation constitutes investment, legal, tax, accounting or other advice and it is not to be relied upon in substitution for the recipient’s own exercise of independent judgment with regard to the operations, financial condition and prospects of CIP.

The information contained in this presentation does not constitute financial product advice. Before making an investment decision, the recipient should consider its own financial situation, objectives and needs, and conduct its own independent investigation and assessment of the contents of this presentation, including obtaining investment, legal, tax, accounting and such other advice as it considers necessary or appropriate. This presentation has been prepared without taking account of any person’s individual investment objectives, financial situation or particular needs. It is not an invitation or offer to buy or sell, or a solicitation to invest in or refrain from investing in, securities in CIP or any other investment product.

The information in this presentation has been obtained from and based on sources believed by CPF2L to be reliable.

To the maximum extent permitted by law, CPF2L and its related bodies corporate make no representation or warranty, express or implied, as to the accuracy, completeness, timeliness or reliability of the contents of this presentation. To the maximum extent permitted by law, CPF2L does not accept any liability (including, without limitation, any liability arising from fault or negligence) for any loss whatsoever arising from the use of this presentation or its contents or otherwise arising in connection with it.

This presentation contains information as to the past performance of CIP. Such information is given for illustrative purposes only, and is not – and should not be relied upon – as an indication of the future performance of CIP.

This presentation may contain forward-looking statements, guidance, forecasts, estimates , prospects, projections or statements in relation to future matters (‘Forward Statements’). Forward Statements can generally be identified by the use of forward looking words such as “anticipate”, “estimates”, “will”, “should”, “could”, “may”, “expects”, “plans”, “forecast”, “target” or similar expressions. Forward Statements including indications, guidance or outlook on future revenues, distributions or financial position and performance or return or growth in underlying investments are provided as a general guide only and should not be relied upon as an indication or guarantee of future performance. No independent third party has reviewed the reasonableness of any such statements or assumptions. No member of CPF2L represents or warrants that such Forward Statements will be achieved or will prove to be correct or gives any warranty, express or implied, as to the accuracy, completeness, likelihood of achievement or reasonableness of any Forward Statement contained in this presentation. Except as required by law or regulation, CPF2L assumes no obligation to release updates or revisions to Forward Statements to reflect any changes. The reader should note that this presentation may also contain pro forma financial information.

Distributable earnings is a financial measure which is not prescribed by Australian Accounting Standards (‘AAS’) and represents the profit under AAS adjusted for specific non-cash and significant items. The Directors consider that distributable earnings reflect the core earnings of the Trust.

All dollar values are in Australian dollars ($ or A$) unless stated otherwise.

Disclaimer


Thank you

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