2013 Final Results Investor Presentation - Champion Final Presentation.pdf · 2013 Final Results Investor…

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  • 1

    2013 Final Results Investor Presentation

    version 2.1

  • 2Gross RevenueGross Revenue

    Gross Revenue increased 5.8% to $2,179 mil

    Office demand in Central (Citibank Plaza) was weak in 2013, though

    higher levels of activity in 2014

    Demand for Langham Place Office remains solid

    Average Rental Rates at Langham Place Mall increased 25.6%

    At the REIT Level1

    Langham Place OfficeB

    Revenue -0.3% to $1,202 mil

    Passing Rent down marginally

    Occupancy stable

    Acquired 4 Floors in Jul 13, now

    complete control of property

    Citibank PlazaA

    Revenue +9.5% to $289 mil $1,200

    $1,400

    Gross Revenue (by Property) LP Retail LP Office Citibank Plaza

    Langham Place MallC

    Revenue +9.5% to $289 mil

    Higher Passing Rent

    Almost fully occupied

    Revenue +16.8% to $688 mil

    Higher Passing and Turnover Rent

    Mall remained fully occupied

    55%

    13%

    32%

    676 638

    594 536

    570 584 597 609 600 602

    135134

    135133 126

    128 129 135 138151

    220 231230

    249254

    278 285304 320

    368

    $0

    $200

    $400

    $600

    $800

    $1,000

    $1,200

    1H 09 2H 09 1H 10 2H 10 1H 11 2H 11 1H 12 2H 12 1H 13 2H 13

    in H

    K$

    (m

    illi

    on

    s)

    LP Retail LP Office Citibank Plaza

  • 3Net Property IncomeNet Property Income

    Operating Expenses +9.7% to $431 mil

    Building Mgt Expenses increased by $25.7mil,

    higher wage costs across all properties in line with the market

    Repairs and Maintenance increased by $8.3 mil,

    from renovation of newly acquired Citibank Plaza floors

    Leasing Commissions increased by $7.9mil,

    larger amount of space rolling over at Langham Place

    Net Property Income +4.9% to $1748 mil

    At the REIT Level1

    Langham Place OfficeB

    NPI -1.1% to $990m

    Expenses +$6.5m(3.2%) to $212m

    Building Mgt Expenses up $11.1m

    Repairs and Maintenance up $7.1m

    Promotion Expenses down $5.5m

    Citibank PlazaA

    NPI +7.6% to $232 m

    19.8%

    80.2%

    Langham Place MallC

    NPI +7.6% to $232 m

    Expenses +$8.7m(17.9%) to $57 m

    Building Mgt Expenses up $3.6m

    Rental Commissions up $3.3m

    NPI +16.9% to $526 mil

    Expenses +$23.0m(16.5%) to $162m

    Building Mgt Expenses up $10.9m

    Rental Commissions up $6.8 m

    877833

    780729

    765 797830 836 858

    889

    155 171179

    188186

    192 181213 200

    231

    $0

    $200

    $400

    $600

    $800

    $1,000

    $1,200

    $1,400

    1H 09 2H 09 1H 10 2H 10 1H 11 2H 11 1H 12 2H 12 1H 13 2H 13

    in H

    K$

    (m

    illi

    on

    s)

    Gross Revenue (with expenses)Operating Expenses Net Property Income

  • 4

    $200

    Cash Interest Expenses increased $108 mil, from

    $143 mil to $251 mil

    low coupon convertible bond was rolled over into a

    10 year Medium Term Note

    new $1.9bn bank loan to fund acquisition of 4

    Citibank Plaza floors

    In 2014, Interest Expenses expected to rise with the

    refinancing of $7bn Citibank Plaza loan

    Interest1

    Cash Tax decreased $61 mil, from $175 mil to

    $114 mil

    CB interest costs from past 5 years became tax

    deductable for Langham Place when the CB was

    retired

    Effective tax rate expected to return to normal

    by 2H 2014.

    Taxes 2

    Interest and TaxesInterest and Taxes

    20%

    15

    3 14

    3

    13

    8

    14

    1

    12

    5

    75

    79

    65

    11

    7

    13

    4

    $0

    $40

    $80

    $120

    $160

    1H 09 2H 09 1H 10 2H 10 1H 11 2H 11 1H 12 2H 12 1H 13 2H 13

    in H

    K$

    (mill

    ion

    s)

    Cash Interest Expenses

    0.2

    %

    7.2

    %

    12

    .0%

    11

    .7%

    14

    .2%

    16

    .7%

    9.5

    %

    0%

    4%

    8%

    12%

    16%

    2007 2008 2009 2010 2011 2012 2013

    Effective Tax Rate

  • 5DistributionsDistributions

    +$17.5 m (1.4%) to $1,271 mil

    NPI increased $82m

    Tax decreased $61m

    Cash Finance Costs increased $108m

    Managers Fees in units down from 60% to 50%

    -$20m impact

    Distributable Income1 Distributions 2

    Distribution Amount +1.3% to $1,201 mil

    Payout ratio is 94.5% (2012: 94.6%)

    Distribution Per Unit +0.6% to HK$0.2102

    Based on unit price of $3.37, equivalent to

    a yield of 6.24%

    approximate free cashflow the actual amount paid out

    +$143m

    -$128m

    $2,000

    Distribution Amount Distributable Income$0.30

    Distribution per Unit

    1,0

    84

    1,1

    70

    1,2

    54

    1,2

    71

    -57 -66 -68 -70

    1,0

    67

    1,1

    11

    1,1

    86

    1,2

    01

    -$400

    $0

    $400

    $800

    $1,200

    $1,600

    2010 2011 2012 2013

    in H

    K$

    (m

    illi

    on

    s)

    Distribution Amount Distributable IncomeRetention

    Distribution Amount

    0.2

    16

    2

    0.2

    24

    1

    0.2

    08

    9

    0.2

    10

    2

    $0.00

    $0.05

    $0.10

    $0.15

    $0.20

    $0.25

    2010 2011 2012 2013

    Distribution per Unit

  • 6

    Capitalization Rates left unchanged in 2013: Citibank Plaza at 3.3%, Langham Place at 4.0%

    Capitalization Rates 1

    Property Valuation Property Valuation

  • 7

    Langham

    Office,

    $7,381m

    Langham

    Retail,

    $16,228m

    Property Valuation Property Valuation

    26%12%

    $26,656 per sq. ft. GFA

    Implied Rent is $164.32 per sq. ft.

    (Dec 2012: $145.75)$10,501 per sq. ft. GFA

    Implied Rent is $35.00 per sq. ft.

    (Dec 2012: $34.07)

    Property Value as of Dec 2013

    increased $3.2 billion to $61.5 billion

    Citibank Plaza

    increased 4.0%, from the addition of 4

    acquired floors.

    Langham Place Office Tower

    increased 2.7% from slightly higher

    rent rate assumptions

    Assessed Valuation 1

    Langham Place Mall

    Langham Place Office

    Citibank Plaza,

    $37,900m

    $23,312 per sq. ft. GFA

    Implied Rent is $82.67 per sq. ft.

    (Dec 2012 $83.35)

    Total PortfolioValue

    $61.5bn*

    62%NAV per unit increased 1.8% to $7.94

    per unit from 2012

    At unit price @$3.37 the discount to

    NAV is 58%

    Net Asset Value per Unit 2

    Langham Place Mall

    increased 11.3% from higher rent rate

    assumptions

    Citibank Plaza

    * Valuation by

    Savills Valuation and Professional Services

  • 8

    2013 Total Borrowings increased from

    HK$12.2bn to HK$14.7bn:

    +$585 mil because of the redemption

    premium of CBs that matured

    +$1,900 mil from the acquisition of 4

    floors at Citibank Plaza

    Langham Place Mall is presently

    unpledged

    Total Borrowings1

    Debt InformationDebt Information

    14,899 14,879 14,87914,059

    12,219

    14,704

    11.6x

    7.0x

    0x

    4x

    8x

    12x

    16x

    0

    5,000

    10,000

    15,000

    20,000

    2008 2009 2010 2011 2012 2013

    HK

    $ (

    mill

    ion

    s)

    Debt Levels Total Borrowings (L) Interest Coverage (R)

    Interest cover remains comfortable at

    7x

    Debt to Equity ratio remains low at

    32.4%

    Debt to Assets (Gearing) ratio is also

    low at 23.4%, well within REIT Code

    maximum of 45%

    Debt Ratios 2

    Interest cover is calculated using NPI as the numerator. Where

    annualization is required, 2x the relevant 1H 13 figure is used.

    62.5%

    54.4%

    44.9%

    36.3%

    27.6%32.4%

    36.0%32.2%

    28.4%25.0%

    20.4%23.4%

    0%

    20%

    40%

    60%

    80%

    100%

    2008 2009 2010 2011 2012 2013

    Leverage Ratios Debt / Equity Debt / Assets

    2008 2009 2010 2011 2012 2013

  • 9

    $6,000

    $8,000

    Debt MaturityBank Loans MTN

    Average interest rate at 1.99% (@Hibor = 0.38%)

    Over 2013, average maturity increased from 1.07

    to 3.11 years

    HK$7 billion syndicated bank loan due in May

    Total Blended Borrowings 1

    Debt Information Debt Information

    Refinancing in 2014 2

    All Citibank Plaza loans due in 2014/15 to be

    refinanced into new 3 and 5 year bank loans.

    Positive response from banks: Interest spread for

    new banks loans at around Hibor + 120-140bp

    Overall average floating interest spread will edge up

    marginally

    $6,000

    $8,000

    Post Refinancing Bank Loans MTN Pending

    70

    00

    50

    0

    22

    00

    19

    00

    31

    04

    $0

    $2,000

    $4,000

    $6,000

    20

    14

    20

    15

    20

    16

    20

    17

    20

    18

    20

    19

    20

    20

    20

    21

    20

    22

    20

    23

    HK

    $ m

    illi

    on

    s

    $11.6 bn with interest rate of Hibor + 1.14%.

    $300mil undrawn revolving facility

    $3.1bn with fixed

    coupon of 3.75%

    79%

    Secured / Floating

    21%

    Unsecured / Fixed

    22

    00

    19

    00

    31

    04

    $0

    $2,000

    $4,000

    $6,000

    20

    14

    20

    15

    20

    16

    20

    17

    20

    18

    20

    19

    20

    20

    20

    21

    20

    22

    20

    23

    HK

    $ m

    illi

    on

    s

  • 10

    CITIBANK PLAZACITIBANK PLAZA

  • 11

    1.2

    1.4

    1.6

    NE

    T F

    LOO

    R A

    RE

    A (

    mil

    lio

    n s

    q f

    t)

    HONG KONG CENTRAL GRADE A OFFICE SUPPLY (1986 - 2016)

    Central Grade A Office Supply Central Grade A Office Supply

    Historical average supply about 500,000 sq. ft. p.a.

    Virtually 0 Grade A supply in Central; no new land supply

    In longer term, 2 possible sites: 300,000(net) sq. ft. where

    GPO is and 180,000(net) sq. ft. opposite Government HQ

    Virtually No Supply1

    40,000 sq. ft. from the Forum in 2014 - already

    pre-leased to Standard Chartered

    95,000 sq. ft. from Shanghai Commercial Bank

    redevelopment in 2015 owner occupied

    Buildings in the Pipe Line 2

    0.0

    0.2

    0.4

    0.6

    0.8

    1.0

    1986

    1987

    1988

    1989

    1990

    1991

    1992

    1993

    1994

    1995

    1996

    1997

    1998

    1999

    2000

    2001

    2002

    2003

    2004

    2005

    2006

    2007

    2008

    2009

    2010

    2011

    2012

    2013

    2014

    2015

    2016

    NE

    T F

    LOO

    R A

    RE

    A (

    mil

    lio

    n s

    q f

    t)

    ICC in W Kowloon

    Sh

    ang

    hai C

    om

    m B

    ank B

    ldg

    Th

    e Fo

    rum

    20 year Average

    430,000 sq. ft.

  • 12

    Overall outlook for G3 is positive this year

    Winding down of US liquidity boosting measures

    may dampen positive sentiment

    Citibank Plaza remains priced competitively with

    face rents at $80-85 per sq. ft.

    Passing rent has been maintained at between $84-

    $86 since June 2010.

    Rents Rates1

    Citibank Plaza Citibank Plaza

    Occupancy in terms of absolute floor area was

    maintained in 2013 under challenging environment.

    Occupancy based on pre-acquisition* total floor area is

    89.2%, vs 89.1% a year ago.

    Occupancy based on post-acquisition* total floor area is

    85.3%.

    Occupancy 2

    * acquisition of 4 vacant floors in July

    120%

    Occupancy at Citibank Plaza Total Using Pre-acquisition Floor Area

    $120

    Passing Office Rents at Citibank Plaza

    97

    .9%

    94

    .9%

    87

    .2%

    83

    .5%

    81

    .5%

    88

    .6%

    90

    .4%

    88

    .7%

    89

    .1%

    88

    .4%

    85

    .3%

    89.2%

    0%

    20%

    40%

    60%

    80%

    100%

    De

    c 08

    Jun

    09

    De

    c 09

    Jun

    10

    De

    c 10

    Jun

    11

    De

    c 11

    Jun

    12

    De

    c 12

    Jun

    13

    De

    c 13

    Total Using Pre-acquisition Floor Area

    87

    .46

    90

    .49

    90

    .07

    84

    .81

    84

    .67

    84

    .33

    85

    .15

    86

    .10

    85

    .12

    85

    .26

    84

    .60

    $0

    $20

    $40

    $60

    $80

    $100

    De

    c-08

    Jun

    -09

    De

    c-09

    Jun

    -10

    De

    c-10

    Jun

    -11

    De

    c-11

    Jun

    -12

    De

    c-12

    Jun

    -13

    De

    c-13

    Effe

    ctiv

    e R

    en

    t p

    er

    sq.

    ft.

    (Le

    tta

    ble

    )

  • 13

    40%

    50%

    Citibank Plaza Expiries (Dec 2013)Vacant Leases Expiring Rent ReviewRetail

    3%

    Vacant15%

    Citibank Plaza Citibank Plaza

    Of the 37.8% of floor area expiring in 2014,

    renewals have been secured for 17.5%

    - including ICBC for 6 years

    New tenants for 2014 have been secured for

    3.9% of floor area but have yet to move in

    Citibank rent review completed

    BoAML will be vacating in 4Q

    Lease Maturities 2 Tenant Mix 1

    Banking decreased* by 3% after departure of HSBC

    last year

    Space occupied by Legal and Others increased* to

    offset the reduction in Banking

    New tenants moving in soon include: Compass Offices,

    Kontiki Capital, Donglin, EMFI, Hammer Capital

    14.7%

    37.8%

    10.5%

    27.4%

    6.7%

    6.7%

    1.8%

    0%

    10%

    20%

    30%

    40%

    Vacant 2014 2015 2016 2017

    Pe

    rce

    nta

    ge

    of

    Flo

    or

    Are

    a

    Banking46%

    Inst.Funds

    8%

    Hedge Funds4%

    Securities3%

    Legal5%

    Others15%

    3%

    Tenant Profile

    Dec 2013

    * change in % ignore the dilution effect of 4 vacant floors added

    ICBC

    (12%)

    BoAML

    (14%)

  • 14

    LANGHAM PLACE LANGHAM PLACE

  • 15

    5.0

    6.0

    7.0

    8.0

    NE

    T F

    LOO

    R A

    RE

    A (

    mill

    ion

    sq

    ft)

    HONG KONG SAR GRADE A OFFICE SUPPLY (1986 - 2016)

    Central + ICC Rest of HKSAR

    HKSARHKSAR--wide Grade A Office Supply wide Grade A Office Supply

    2014 SupplyA

    850k sq. ft. - 3 projects in Kowloon E

    350k sq. ft. - 2 projects in Island S

    180k sq. ft. - project in Kowloon W

    2016 SupplyC

    350k sq. ft. - 2 projects in Shatin

    240k sq. ft. - project in Kowloon E

    240k sq. ft. - project in Island E

    600k sq. ft. - Somerset House in Island E

    180k sq. ft. - Sunning Plaza in CWB

    Undergoing DemolitionD

    2015 SupplyB

    2.5m sq. ft. - 5 projects in Kowloon E

    250k sq. ft - Octagon in Tsuen Wan

    120k sq. ft. - Observatory Rd in TST

    0.0

    1.0

    2.0

    3.0

    4.0

    5.0

    1986

    1987

    1988

    1989

    1990

    1991

    1992

    1993

    1994

    1995

    1996

    1997

    1998

    1999

    2000

    2001

    2002

    2003

    2004

    2005

    2006

    2007

    2008

    2009

    2010

    2011

    2012

    2013

    2014

    2015

    2016

    NE

    T F

    LOO

    R A

    RE

    A (

    mill

    ion

    sq

    ft)

    Last 20 years Annual Supply

    2,200,000 sq. ft.

    180k sq. ft. - Sunning Plaza in CWB

    240k sq. ft. - Asia House in CWB

  • 16

    Face rents improved to $38-45 per sq. ft.

    Passing rent improved by $4.50 to $32.86 per sq. ft.

    Rent Rates 1

    LanghamLangham Place Office TowerPlace Office Tower

    High occupancy levels were maintained even with

    over 50% of the building expiring in 2013

    Resilience of the non-financial sectors still

    underpinning demand

    Occupancy2

    98

    .3%

    97

    .9%

    98

    .5%

    98

    .3%

    99

    .4%

    99

    .6%

    96

    .8%

    98

    .0%

    99

    .2%

    98

    .8%

    99

    .0%

    100%

    120%

    Occupancy at Langham Office

    30

    .42

    32

    .86

    $30

    $35

    $40

    Effe

    ctiv

    e R

    en

    t p

    er

    sq.

    ft.

    (GFA

    )

    Passing Office Rents at Langham Place

    98

    .3%

    97

    .9%

    98

    .5%

    98

    .3%

    99

    .4%

    99

    .6%

    96

    .8%

    98

    .0%

    99

    .2%

    98

    .8%

    99

    .0%

    0%

    20%

    40%

    60%

    80%

    De

    c 08

    Jun

    09

    De

    c 09

    Jun

    10

    De

    c 10

    Jun

    11

    De

    c 11

    Jun

    12

    De

    c 12

    Jun

    13

    De

    c 13

    26

    .79

    26

    .77

    26

    .82

    26

    .98

    26

    .40

    26

    .93

    27

    .43

    28

    .09

    28

    .36

    30

    .42

    32

    .86

    $0

    $5

    $10

    $15

    $20

    $25

    De

    c-08

    Jun

    -09

    De

    c-09

    Jun

    -10

    De

    c-10

    Jun

    -11

    De

    c-11

    Jun

    -12

    De

    c-12

    Jun

    -13

    De

    c-13

    Effe

    ctiv

    e R

    en

    t p

    er

    sq.

    ft.

    (GFA

    )

  • 17

    Others4%

    Vacant1%

    Merchandizing &Trading decreased by 2% to 41%

    Lifestyle increased by 3% to 27%

    Newest Tenants include Compass Office and Perfect

    Shape, as well as a 2 floor expansion by Neo Derm

    Tenant Mix 1

    LanghamLangham Place Office TowerPlace Office Tower

    Lease Maturities2

    Of the 33% of floor area expiring in 2014, renewals have

    been secured for 8%. New tenants for 2014 have been

    secured for 11% of floor area

    There should continue to be positive rental reversion as

    market rents are significantly above expiring rents

    60%

    80%Langham Place Office Expiries (Dec 2013)

    Vacant Leases Expiring Rent Review

    Merchandizing& Trading

    41%

    Professional & Sales Services

    16%

    Insurance10%

    Lifestyle27% Tenant

    ProfileDec 2013

    1.0%

    32.9%

    13.6%

    44.7%

    0.4%

    2.5%

    0%

    20%

    40%

    60%

    Vacant 2014 2015 2016 2017

    Pe

    rce

    nta

    ge o

    f Fl

    oo

    r A

    rea

  • 18the Langham Place Mall 2013 Scrap Book

  • 19LanghamLangham Place MallPlace Mall

    Increasing number of middle-class short-haul

    shoppers from Southern China looking for cosmetics

    and mid-priced fashion and accessories.

    11.8% growth in Tenant Sales - less affected by

    slowdown in the HK luxury sector.

    Tenant Sales2

    Health an