IOF Results Presentation Financial Year 2013 Highlights - PowerPoint PPT Presentation

IOF Results Presentation Financial Year 2013

Highlights Outperforming our objectives Financial > 56% increase in Net Profit to $158.7 million > 11% increase in Operating Earnings per unit to 22.4 cents per unit – ahead of guidance > 3% increase in NTA to $3.23 per unit following revaluation uplifts Australian Portfolio > Another active period of leasing, with over 43,000sqm leased > Maintained high occupancy of 96% > External revaluation uplifts of $59 million – 5% uplift on prior book valuations > Recent acquisitions are outperforming expectations and only ~1.5% of FY14 rent is at risk Capital Management > Weighted average debt maturity increased to 3.2 years > Leveraged S&P BBB+ credit rating to raise $250 million in debt capital markets at an average margin of 193bps and average debt maturity of 8.6 years > Refinanced $150 million of bank debt IOF FY13 Results Presentation 21/08/2013 2

Portfolio repositioning on track Significant progress since Investa took over management Geographic diversity (by value) 1 > ~$440 million of acquisitions during FY13: Target Australia Europe United States weightings - 66 St Georges Terrace, Perth 100% Tactical 5 – 15% - 567 Collins Street, Melbourne (50% with 80% Value add Investa Commercial Property Fund) 15 – 25% 60% - 99 Walker Street, North Sydney 40% Core 70 – 80% > Australian portfolio currently well balanced 20% between core, value-add and tactical assets 0% FY11 Current Target > Committed to repositioning the portfolio to become 100% Australian: Improving portfolio quality 1 B-Grade A-Grade Premium - European exit continues – Bastion Tower being 100% marketed for sale 80% 60% Increasing % of premium 40% assets 20% Decreasing % of B Grade 0% FY11 FY13 1. Includes 567 Collins Street, Melbourne as at completion and post 30 June 2013 acquisition of 99 Walker Street, North Sydney IOF FY13 Results Presentation 21/08/2013 3

Successful track record of quality acquisitions Strategic execution driving earnings accretion and NTA growth 242 Exhibition Street, Melbourne 66 St Georges Terrace, Perth > A-grade asset leased to Telstra until > All FY13 expiries (54% of building) 2020 renewed > Valuation increased by 7.5% > New rents achieved average $673psm, 22% above average acquisition rent of > IRR since acquisition 13.4% $550psm (8.4% including all acquisition costs) > WALE increased from 1.8 to 3.8 years > Valuation increased by 8.2% > IRR since acquisition 19.6% (12.4% including all acquisition costs) 126 Phillip Street, Sydney 567 Collins Street, Melbourne (under construction) > Premium grade building with no leasing > Premium grade asset achieving risk until 2019 strong leasing outcomes > 5 star NABERS and Green Star rating > Record rents achieved - $1,425psqm on 575sqm suite, more than 10% > Increasing evidence of cap rate ahead of acquisition assumptions compression for prime assets > Significant leasing activity over the past 6 months – 5 deals and over 5,000sqm agreed IOF FY13 Results Presentation 21/08/2013 4

Balance sheet de-risked Debt Maturity Profile ($m) 3 Key Indicators 30 June 2013 30 June 2012 700 Undrawn Bank Debt Drawn Bank Debt Drawn debt $677m $511m 600 USPP ($A) 500 Bastion Tower Gearing (look-through) 26.3% 21.9% MTN 400 363 Annualised weighted average 5.2% 5.5% debt cost 1 Refinanced/issued in FY13 300 Hedged 2 55% 72% 200 Interest cover ratio (look- 214 100 5.4x 4.9x through) 150 129 125 59 0 S & P credit rating BBB+ N/A FY14 FY15 FY16 FY17 FY18 FY26 > Busy year of debt management – refinancing or issuing a total of ~$400 million: - Debt maturities are now evenly spread across financial years, minimising refinance risk - All in cost of new debt 4% – 4.5% p.a. > Gearing 29.4% post 99 Walker St acquisition - further acquisition capacity of $100 – $200 million > Weighted average debt maturity increased from 2.4 to 3.2 years 1. Weighted average debt cost represents borrowing costs/average debt balance during the period 2. Includes interest rate caps 3. Post drawing of USPP and new $150m bank facility IOF FY13 Results Presentation 21/08/2013 5

Australian portfolio update Acquisition activity driving income growth > Contributions from acquisitions: Key Metrics 30 June 2013 30 June 2012 - 66 St Georges Terrace, Perth Net Property Income (NPI) $162.1m $130.3m - 126 Phillip Street, Sydney 4.5% 1.4% Like-for-like NPI growth - 242 Exhibition Street, Melbourne 32,079 1 80,368sqm Leased > Like-for-like NOI growth boosted by 10 – 20 Tenant retention (by income) 54% 2 76% Bond St and FY12 lease renewal to QBE at 628 Occupancy (by income) 96% 98% Bourke St Weighted average lease expiry > As flagged at 1H13, retention was expected to 4.8yrs 5.1yrs be low for the full year due to the impact of 16 – Face rent growth 14.9% 6.7% 18 Mort St, which is now leased Average passing face rent $542psqm $527psqm > Face rent growth 14.9% driven by Centrelink at 140 Creek St and Telstra at Mort St Number of investments 21 18 1. As at 30 June 2013; additional ~11,000sqm leased post 30 June 2013 and included in 43,000sqm quoted on page 2 2. Excluding Mort Street the retention rate was 69% IOF FY13 Results Presentation 21/08/2013 6

Australian major lease expiries Substantial leasing activity de-risking outlook Property Location Tenant Area (sqm) Expiry > Addressed vacancy, upcoming renewals and future risks: Vacant 151 Clarence St Sydney - 4,844 Vacant - 13,250sqm at Mort St leased to Telstra 628 Bourke St Melbourne - 4,725 Vacant - 9,756sqm at 151 Clarence St leased FY13 and 1,159sqm with terms agreed Mar ’13 16-18 Mort St Canberra DEEWR 14,506 - 7,286sqm at 140 Creek St leased to FY14 Commonwealth Government July ’13 151 Clarence St Sydney Westpac 7,428 > Only major expiry in FY14 is 140 Creek St 140 Creek St Feb ’14 Brisbane – foyer and floors are to be Brisbane ATO 10,947 refurbished before re-leasing 140 Creek St Feb ’14 Brisbane Centrelink 2,473 FY15 > Active leasing discussions on future Nov ’14 expiries ongoing across the portfolio 10-20 Bond St Sydney Origin Energy 4,661 Jan ‘15 99 Walker St North Sydney AAMI 4,602 > WALE including leases with terms agreed increases to 5.4 years Feb ’15 140 Creek St Brisbane Centrelink 4,813 May ’15 628 Bourke St Melbourne V Line 2,673 > FY14 forecast rent at risk limited to ~1.5% FY16 Oct ’15 126 Phillip St Sydney Deutsche 12,523 June ‘16 140 Creek St Brisbane DTMR / DPW 8,819 IOF FY13 Results Presentation 21/08/2013 7

IOF’s portfolio well positioned Minimal leasing risk across the portfolio > No major lease expiry in Sydney or Melbourne in the near term > Achieving average rents at 66 St Georges Terrace Perth of $673psm, 22% above average acquisition rent of $550psm > 140 Creek St Brisbane to be refurbished – scheduled to complete late 2014 Sydney and Melbourne lease expiry profile (by income) 1 Perth and Brisbane lease expiry profile (by income) 70% 70% 60% 60% 140 Creek St (to be refurbished) 50% 50% 66 St Georges Terrace 40% 40% 30% 30% 20% 20% Minimal expiry risk 10% 10% 0% 0% FY14 FY15 FY16 FY17 FY18 Beyond FY14 FY15 FY16 FY17 FY18 Beyond Perth Brisbane Sydney Melbourne 1. Includes North Sydney IOF FY13 Results Presentation 21/08/2013 8

European portfolio update Operating conditions remain challenging > Bastion Tower is on the market after signing a 30 June 2012 Key Metrics 30 June 2013 new lease to the major tenant, increasing the WALE to 8 years Net Property Income (NPI) € 16.1m € 18.3m > We continue to pursue exit options for the Dutch Like-for-like NPI growth (1.5%) (5.8%) Office Fund: - Further deterioration in NAV over the past six Occupancy (by income) 84% 86% months - down 5% as cap rates increased; although the devaluation was more than offset Leased 150,512sqm 170,334sqm by the devaluation of the Australian dollar Tenant retention 81% 1 62% - We maintain our 15% discount to stated NAV Weighted average lease expiry 5.4yrs 4.5yrs 1. Tenants retained as a proportion of total leasing completed IOF FY13 Results Presentation 21/08/2013 9

Leveraging the Investa platform Management expertise improving asset performance > NABERS ratings improved over the year: Electricity Intensity Trend Gas Intensity Trend 140 - Energy from 4.0 to 4.2 (kWh/m 2 ) (MJ/m 2 ) 100 120 - Water from 3.4 to 3.7 80 100 80 > Key asset achievements include: 60 60 40 - NABERS Energy increased from 5.0 to 5.5 40 stars at 140 Creek St, Brisbane 20 20 0 - Total reduction in electricity use of 35% since 0 FY11 FY13 FY11 FY13 2011 at 347 Kent St, Sydney - On track to deliver 4.5 star NABERS Energy Greenhouse Gas rating at 16-18 Mort St, Canberra – up from Emissions Intensity Trend Water Intensity Trend 3.5 stars 120 900 (kg CO 2 -e/m 2 ) (L/m 2 ) 800 100 700 80 600 500 60 400 300 40 200 20 100 0 0 FY11 FY13 FY11 FY13 IOF FY13 Results Presentation 21/08/2013 10