2014 Investor Presentation Final version 3 - Final.pdf · 2014 Investor Presentation Final version…

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  • 1

    2014 Investor Presentation Final version 3.2

    read disclaimers on the final page

  • 2Key HighlightsKey Highlights

    Langham Place

    - strong sales growth at mall

    Citibank Plaza

    - bottoming out in 2015

    Expense Ratio Slightly Up

    - higher rental commissions

    DPU Lower

    - normalizing tax rate

    - higher interest expense

    Stable Valuation

    Resilient Financial Profile

    2014 Change

    Rental Income $2080m + 4.6%

    Net Property

    Income$1800m + 3.0%

    Expense Ratio 13.5% + 1.4pp

    Distribution

    per Unit$0.2037 - 3.0%

    Property

    Valuation$62,438m + 1.5%

    Gearing 23.1% - 0.3pp

  • 3Total Rental IncomeTotal Rental Income

    Rental Income increased 4.6% yoy to $2,080 mil, but was down 1.6% HoH

    By contribution: Citibank Plaza 51%

    Langham Place Mall 35%

    Langham Place Office 14%

    At the Trust Level1

    Langham Place OfficeB

    Langham Place MallC

    Revenue -3.7% to $1,064 mil

    Lower Passing Rent

    Decrease in occupancy in 4Q

    after BoAML moved out

    Citibank PlazaA

    Revenue +11.2% to $281 mil

    Higher Passing Rents

    A bit of down time in 2H after

    Ageas Insurance vacated

    Revenue +16.4% to $735 mil

    Higher Base Rents

    Seasonality concentrates growth

    in 2H of each year

    Minimal impact on income from

    Oct/Nov Occupy demonstrations

    No longer discussing Gross Revenue to avoid the distortion of bldg mgt fee income growth

    553 564 552 553 559 505

    113 119 120 133 140142

    259278 291

    340 350 385

    $0

    $200

    $400

    $600

    $800

    $1,000

    $1,200

    $1,400

    1H 12 2H 12 1H 13 2H 13 1H 14 2H 14

    in H

    K$

    (m

    illi

    on

    s)

    Rental Income (by Property) LP Retail LP Office Citibank Plaza

  • 4Net Property IncomeNet Property Income

    Net Property Income +3.0% to $1,800 mil

    Net Operating Expenses +16.0% to $280 mil

    Net Expenses Ratio +1.4pp to 13.5%

    Net Building Mgt Expenses increased by $13.6 mil,

    driven by higher maintenance costs at LP Mall

    Leasing Commissions increased by $17.6 mil, because of

    large amount of space rolled over at office properties

    At the Trust Level1 At the Property Level2

    Net Property

    Income

    Net Operating

    Expenses

    Citibank Plaza -6% to $932m +15% to $132m

    Langham Office +9% to $253m +34% to $28m

    Langham Mall +17% to $615m +14% to $120m

    830 836 858889 921 880

    95 126105

    136 128 151

    $0

    $200

    $400

    $600

    $800

    $1,000

    $1,200

    $1,400

    1H 12 2H 12 1H 13 2H 13 1H 14 2H 14

    in H

    K$

    (m

    illi

    on

    s)

    Rental Income (with expenses)Operating Expenses Net Property Income

    10.2%

    13.1%

    10.9%

    13.3%

    12.2%

    14.7%

    0%

    2%

    4%

    6%

    8%

    10%

    12%

    14%

    16%

    18%

    1H12 2H12 1H13 2H13 1H14 2H14

    Expense Ratio (as a % of Rental Income)

  • 5

    Cash Interest Expenses increased $37 mil, from $251

    mil to $288 mil

    $7.5bn refinancing in May 2014 at higher rates

    No refinancing and therefore no further increase in

    interest spreads for 2015.

    Interest1

    Taxes paid increased $48 mil to $161 mil

    Effective tax rate was low at 12.8% because of

    leftover deductions from retired CB used in 1H

    The effective tax rate in 1H was 9.1% but returned

    to normal in 2H

    Taxes 2

    Non Property ExpensesNon Property Expenses

    79

    65

    117

    134139

    150

    $0

    $30

    $60

    $90

    $120

    $150

    $180

    1H 12 2H 12 1H 13 2H 13 1H 14 2H 14

    in H

    K$

    (mill

    ions

    )

    Cash Interest Expenses

    16.7%

    9.5%

    12.8%

    0%

    4%

    8%

    12%

    16%

    20%

    2012 2013 2014

    Effective Tax Rate

  • 6DistributionsDistributions

    Distributable Income decreased 2.9% to $1,234 mil.

    There was a $37 mil drop broken down as follows:

    Although NPI increased $53m

    Interest Income decreased by $5m

    Cash Finance Costs increased $37m

    Taxes increased by $48m

    Distributable Income1

    Distribution Per Unit for 2014 decreased

    3.0% to HK$0.2037

    Based on unit price of $3.80, the yield is

    5.36%

    -$90m

    The dip in 2012 DPU was due to the conversion of CBs

    Distribution Per Unit2

    1,2

    54

    1,2

    71

    1,2

    34

    -68 -70 -64

    1,1

    86

    1,2

    01

    1,1

    71

    -$400

    $0

    $400

    $800

    $1,200

    $1,600

    $2,000

    2012 2013 2014

    in H

    K$

    (m

    illi

    on

    s)

    Distribution Amount Distributable IncomeRetention

    Distribution Amount

    0.2089 0.2099 0.2037

    $0.00

    $0.05

    $0.10

    $0.15

    $0.20

    $0.25

    $0.30

    2012 2013 2014

    Distribution per Unit

  • 7

    Citibank Plaza,

    $36,332m

    Langham

    Office,

    $7,869m

    Langham

    Retail,

    $18,237m

    Valuation by Property Valuation by Property

    58%

    29%

    13%

    Value fell 4.1% to $22,000 per sq. ft.

    Implied rent decreased

    from $82.67 to $78.72 per sq. ft

    Cap Rate 3.3%

    Citibank Plaza

    Langham Place Mall

    Langham Place Office

    Comparisons are made with respect to Dec 2013 Valuation by Savills Valuation and Professional Services per sq. ft. valuations are based on Gross Floor Area

    Value rose 6.6% to $11,200 per sq. ft

    Implied rent increased

    from $35.00 to $37.32 per sq. ft

    Cap Rate 4.0%

    Value rose 12.4% to $30,000 per sq. ft.

    Implied rent increased

    from $164.32 to $185.00 per sq. ft

    Cap Rate 4.0%

    Appraised Value of Properties at $62.44bn

    Property Valuation1

  • 8

    Properties appreciated by $929mil in 2014

    Capitalization Rates unchanged over 2014, all

    adjustments to value are based on changes in rental

    assumptions

    Property Value Over Time1 Net Asset Value2

    Net Assets stand at HK$46.28bn

    NAV per unit increased 1.5% to HK$8.06 per

    unit from Dec 2013

    Based on unit price of $3.80, the discount to

    NAV is 53%

    Net Asset ValueNet Asset Value

    $7.80 $7.94 $8.06

    $0.00

    $2.00

    $4.00

    $6.00

    $8.00

    $10.00

    12/12 12/13 12/14

    Net Asset Value per Unit

    36.5 37.9 36.3

    21.823.6 26.1

    $0

    $10

    $20

    $30

    $40

    $50

    $60

    $70

    $80

    12/12 12/13 12/14

    in H

    K$

    (b

    illi

    on

    s)

    Value of Property Portfolio

    Citibank Plaza Langham Place

  • 9

    22

    00 3

    70

    0

    19

    00

    38

    00

    31

    04

    $0

    $1,000

    $2,000

    $3,000

    $4,000

    $5,000

    $6,000

    2015 2016 2017 2018 2019 2020 2021 2022 2023

    HK

    $ m

    illi

    on

    s

    Debt MaturityBank Loans MTN

    HK$11.6bn in secured bank loans and

    HK$3.1bn in unsecured notes

    Blended interest: 2.03% (1M Hibor = 0.24%)

    Average maturity: 4.1 years (as of Dec 2014)

    Interest Expense2

    floating interest rate of Hibor + 1.33%. fixed coupon of 3.75%

    79% 21%

    Debt As Of Dec 2014 Debt As Of Dec 2014

    Basic Information1

    At 1M Hibor = 0.24%, 2015 interest expenses

    should be $298m

    (compared to $289m for 2014 )

  • 10

    Total borrowings have remained steady at $14.7bn

    Gross Assets at $63.6bn

    Langham Place Mall is presently unpledged

    Total Borrowings1

    Interest cover remains comfortable at 6.2x

    Debt to Assets (Gearing) ratio is low at 23.1%, well

    within REIT Code maximum of 45%

    Debt to Equity ratio at a robust level of 31.8%

    Ratios 2

    Debt HistoryDebt History

    Interest cover is calculated using NPI as the numerator.

    12,219

    14,704 14,704

    0x

    4x

    8x

    12x

    16x

    0

    5,000

    10,000

    15,000

    20,000

    2012 2013 2014

    HK

    $ (m

    illi

    on

    s)

    Debt Levels

    Total Borrowings (L) Interest Coverage (R)

    31.8%

    23.1%

    0%

    20%

    40%

    60%

    80%

    100%

    2012 2013 2014

    Leverage RatiosDebt / Equity Debt / Assets

  • 11

    OFFICE MARKET UPDATEOFFICE MARKET UPDATE

  • 12

    $0

    $20

    $40

    $60

    $80

    $100

    $120

    $140

    $H

    K p

    er

    sq.

    ft.

    Index rebased from original data series to the approximate equivalent rental levels

    Collier's Rental Indices(Dec 2011 - Dec 2014)

    Wanchai

    Central

    Tsim Sha Tsui

    HK HK Grade A Office Rents Grade A Office Rents

    vacancy 5%

    vacancy 3%

    vacancy 2%

  • 13

    0.0

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    1987

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    NE

    T F

    LOO

    R A

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    A (

    mill

    ion

    sq

    ft)

    HONG KONG CENTRAL GRADE A OFFICE SUPPLY (1986 -