ING Property Trust Annual results presentation May 2009 Peter - - PowerPoint PPT Presentation

ING Property Trust

Annual results presentation – May 2009 Peter Mence – General Manager Stuart Harrison – Chief Financial Officer

Agenda

» Highlights and performance » Financial overview » Strategy » Valuations » Market risks » Back to the future

Highlights

• The most diversified property vehicle listed on the New Zealand stock

exchange with a portfolio of 95 buildings valued at $1.1 billion. The Trust provides space solutions for over 290 tenants

• In a difficult leasing environment the property portfolio occupancy at year-

end was 98%

• A weighted average lease term of 4.2 years, providing strong rental security
• Net property income increased by $3.2m during the year and assessments

by the independent valuers show the portfolio is 7.9% under-rented providing some potential for rental growth in the year ahead

• The Trust’s average property size of $10m allows it to take advantage of the

continued demand for investment property assets under $20m with the sale

• f 17 properties for $116.2m
• Yield on market rental for the portfolio is 9.1%, which is 7.9% under-rented
• The sale of the stake in ING Medical Properties Trust for $16.5m, with the

proceeds used to repay debt

Financial performance

$23.4m $14.2m $(9.2)m Deferred taxation $(3.8m) $0.0m $(3.8m) (Loss)/gain on disposal of investment $(9.8m) $0.2m $(9.6m) (Loss)/gain on disposal of properties (IFRS) $(132.9m) $43.0m $(89.9m) Revaluations $(154.5m) $90.1m $(64.4m) Operating surplus/(deficit) (pre tax)

• 25.1%

$28.0m $35.0m Interest expense

• 29.3%

13.5 (12.2) Post tax earnings per units (cents) 3.8% $84.6m $87.8m Net rental income $71.7m $75.6m FY08 $(134.8m) 2.5% Change $(63.1m) $77.5m FY09 Operating surplus (post tax) Operating surplus (pre disposals, revals & tax)

Financial position

• 17.6%

$700.5m $577.1m Unitholders’ funds

• 5.3%

37.7% 39.7% Debt-to-total-assets ratio 3.0% 514.3m 529.7m Securities on issue

• 20.0%

136.2c 108.9c Net asset backing per unit (cents)

• 9.9%

$1,167.3m $1,051.6m Total property value 6.2% $457.3m $429.8m Bank debt FY08 Change FY09

Interest rate management

• Main facility was reduced post year end by $100m to $500m following the close-
• ut of $100m of interest rate swaps.
• Weighted duration of facilities of 1.45 years.
• Debt hedged 88.2% at 31 March 2009, reduced to 64.3% by 30 April 2009.
• Interest rate paid (incl margins and fees) in FY09 was 7.01% (compared with

7.20% in FY08).

• Duration of hedge portfolio was 5.1 years, reducing to 4.7 years by 30 April

2009.

Hedge expiry by calendar year

50.4% 10.8% 10.2% 7.2% 5.4% 16.1% 0.0%

0% 10% 20% 30% 40% 50% 60% 2009 2010 2011 2012 2013 2014 2015

Average swap rate

7.3% 7.4% 7.4% 7.4% 7.4% 7.3% 7.1%

0% 2% 4% 6% 8% 10% FY10 FY11 FY12 FY13 FY14 FY15 FY16

Covenants

2.14 x

• Equal or exceed 2.00 times

$79.7m

• Operating surplus

$37.3m

• Net interest expense

Interest cover ratio - based on 12 months - 40.5% Not to exceed 45% $1016.4m $411.3m

• Fair market value of properties
• Total money borrowed from ANZ

Loan to valuation ratio - based on - Bank loan facility - ANZ 39.7% Not to exceed 50% $ 1,081.8m

• Gross value of Trust fund

Borrowing limitation $429.8m Total money borrowed FY09 Trust Deed

Distributable income

$0.0m $3.8m Plus investment disposal $0.2m $4.5m Plus/minus derivative fair value adjustment $1.3m $1.3m Plus management rights amortisation

• 5.4%

9.95c 9.41c Gross distributable income per unit (cents) $(43.0m) $89.9m Plus revaluations losses/(gains) Adjust for: $52.9m $46.6m Gross distributable income

• $8.0m
• $7.3m

Current tax $90.9m $(64.4m) Profit before tax $44.9m $39.3m Net distributable income 5.2% 8.44c 8.00c Net distributable income per unit (cents) $3.5m FY08 Change $11.5m FY09 Plus property sales IFRS adjustment*

* The difference between gains on disposal of properties calculated under NZIFRS and old NZGAAP.

Distribution

The full year gross distribution target sustained at 8.0 cents per unit.

2.375 0.345 2.030 September 2.375 0.0 2.375 FY08 June 1.148 0.363 0.440 Imputation Credits 9.850 2.550 2.550 Gross Distribution 8.702 2.187 2.110 Cash Distribution March Total December Distribution (cpu) 2.242 0.300 1.942 September 2.592 0.417 2.175 FY09 June 1.408 0.394 0.297 Imputation Credits 9.408 2.335 2.239 Gross Distribution 8.000 1.941 1.942 Cash Distribution March Total December Distribution (cpu)

Gearing

ING Property - Gearing Movment

from 30 September 2008 to 31 March 2009 30 32 34 36 38 40 42 44 Opening Property sales IMP sale Reval Capex Closing Gearing %

Investment properties - profile

Total Retail Commercial Industrial 4.65 3.77 3.60 5.03 2008 4.24 4.51 3.74 4.64 2009 Weighted average lease term 99.1% 99.3% 99.5% 98.1% 2008 97.8% 97.8% 93.4% 99.0% 2009 Occupancy 1.27% 6.63% 1.27% 5.20% Minimum 11.34% 9.94% 11.34% 11.27% Maximum 8.51% 7.92% 8.66% 8.91% Average Contract capitalisation rate 9.18% 8.58% 9.82%. 9.12% Average Market capitalisation rate

Unit price

60 70 80 90 100 110 120 Sep-08 Oct-08 Nov-08 Dec-08 Jan-09 Feb-09 Mar-09 Gross Prices Indexed to 100 ING Property Trust NZ Property Gross Index NZX 50 Index

Strategy

• Risk mitigation – both income and value
• Capital management – debt reduction
• Portfolio structuring for the future

The Trust’s strategy, while unchanged in the long term, has been revised in the more immediate term. The current strategy is focused on three key areas:

Risk mitigation

Diversification by location and sector

71% 3% 16% 10% Auckland Hamilton Wellington Regional

Assets by sector Assets by region

35% 34% 31% Office Industrial Retail

Risk mitigation

Strong occupancy and weighted average lease term

90% 92% 94% 96% 98% 100% Office Industrial Retail Total

Occupancy by sector WALT by sector

1 2 3 4 5 6 Office Industrial Retail Total

Diversification by tenant

0.0% 0.5% 1.0% 1.5% 2.0% 2.5% 3.0% 3.5% 4.0%

H o me and Leisure Gro up N o el Leeming Gro up F o nterra C o Operative Gro up Limited T o nkin & T aylo r Limited Ezibuy Limited T ruck Leasing Limited (Esanda) H P P ackaging N ew Wave Lo gistics (A ustralia) P ty Limited A mco r P ackaging IB M N ew Z ealand Limited P eter B aker T ranspo rt Limited T e P uni Ko kiri Easy Lo gistics Limited KM A R T A N Z B ank (N Z ) Limited D eutsche P o st Wo rld N et B unnings Limited T he Wareho use Limited B risco es Gro up Limited D epartment o f Internal A ffairs

Risk mitigation

Diversification by lease maturity

2.41% 10.22% 3.67% 5.31% 4.19% 5.84% 11.74% 18.13% 10.98% 11.70% 15.80% 0.00% 2.00% 4.00% 6.00% 8.00% 10.00% 12.00% 14.00% 16.00% 18.00% 20.00% 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

Capital management – debt reduction

• 17 property sales for $116.2m
• Liquidity under $20m
• Activity from high net worth individuals, syndicators and owner
• ccupiers
• Little quality stock on the market in the right price range
• Enquiry levels have improved
• $100m target for FY2010
• $46m of conditional sales contracts

Capital management

• Assets held at realistic values – backed up by sales
• Liquidity in market for assets under $20m
• Unitholder dilution issues
• Debt issues can be managed by sales without requirement to raise

capital

• Loan to value target is 35%
• Intention to sell $100m of property in current financial year

Valuations

• Decline of 8.3% at year end, including 1.3% interim decline
• Liquid part of the market – less than $20m
• Current market activity suggests values to be stable at this level
• Little quality stock on the market has helped sales activity
• Yield on market rentals over 9.1%
• Valuations completed by DTZ New Zealand, Jones Lang LaSalle

and Colliers International

Rent reviews – rental growth

6.10% 7.60% 10.20% 8.40%

0% 2% 4% 6% 8% 10% 12% 2006 2007 2008 2009

Growth of rentals actually reviewed during the year.

… leaving supply as the major vacancy driver

Previous Cycles – Supply vs Demand

Auckland CBD Office Supply vs Absorption

• 40,000
• 20,000

20,000 40,000 60,000 80,000 100,000 120,000 D e c

• 8

5 D e c

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sqm

Supply Absorption Source: CBRE Research & Consulting

CBRE market forecasts

CBRE Composite Property Component Investment Returns

• 40
• 30
• 20
• 10

10 20 30 40 1 9 8 7 1 9 8 8 1 9 8 9 1 9 9 1 9 9 1 1 9 9 2 1 9 9 3 1 9 9 4 1 9 9 5 1 9 9 6 1 9 9 7 1 9 9 8 1 9 9 9 2 2 1 2 2 2 3 2 4 2 5 2 6 2 7 2 8 2 9 2 1 2 1 1 2 1 2 Annual Return (%)

• 40
• 30
• 20
• 10

10 20 30 40 Annual Return (%)

Capital return based on yield change Capital return based on rent change Income return Total return

Conclusion

• The market remains uncertain.
• Occupancy issues remain key
• The ING Property Trust portfolio is in good shape and relatively well

positioned

• Average size $10m – big advantage in this market in sales and leasing
• Strong diversification – gives good risk profile
• Current unit price factors in substantial negatives

Disclaimer

This presentation has been prepared by ING Property Trust Management Limited. The details in this presentation provide general information only. It is not intended as investment or financial advice and must not be relied upon as such. You should obtain independent professional advice prior to making any decision relating to your investment or financial needs. This presentation is not an offer or invitation for subscription or purchase of securities or other financial

• products. Past performance is no indication of future performance. All

values are expressed in New Zealand currency unless otherwise stated. 20 May 2009