FSREC Fund Series H1 FY20 Results & Update
1. Market update 241 O’Riordan Street, Mascot
Commercial property yields Macro factors underpinning commercial real estate remain supportive Commercial property yields by sector, compared to 10 year Spread of average commercial property yield to 10 year government bond government bond 8.5% 7.5% 4.5% 6.5% 5.5% 3.5% 4.5% 2.5% 3.5% 2.5% 1.5% 1.5% 0.5% 0.5% -0.5% Dec-07 Dec-08 Dec-09 Dec-10 Dec-11 Dec-12 Dec-13 Dec-14 Dec-15 Dec-16 Dec-17 Dec-18 Dec-19 Dec-07 Dec-08 Dec-09 Dec-10 Dec-11 Dec-12 Dec-13 Dec-14 Dec-15 Dec-16 Dec-17 Dec-18 Dec-19 (0.5%) Prime Office Prime Industrial National Retail 10 year Bond Source: Bloomberg, JLL Research, FSREC (31 December 2019) Disclaimer: historical performance is not a reliable indicator of future performance. 3
Sydney office market Significant rental differential between Sydney CBD and South Sydney supportive for continued growth Prime office yields: Sydney CBD vs South Sydney Net effective rent ($/sqm): Sydney CBD vs South Sydney $850 8% $750 7% $650 6% $550 $450 5% $350 4% $250 $150 3% Sydney CBD South Sydney Sydney CBD South Sydney Source: JLL (31 December 2019) Notes: South Sydney data used as an illustration for the Mascot office market Disclaimer: historical performance is not a reliable indicator of future performance. 4
Retail sector Yields for neighbourhood retail remain attractive Neighbourhood vacancy reducing illustrating strong non-discretionary retail performance Vacancy by shopping centre type Retail yields by sub-sector 8.00% 8.00% 7.00% 7.50% 6.00% 7.00% 5.00% Neighbourhood 6.50% 4.00% 6.00% Mid-sized 3.00% centres 5.50% 2.00% Large centres 5.00% 1.00% 4.50% 0.00% Dec-09 Dec-10 Dec-11 Dec-12 Dec-13 Dec-14 Dec-15 Dec-16 Dec-17 Dec-18 Dec-19 Q2 2009 Q2 2010 Q2 2011 Q2 2012 Q2 2013 Q2 2014 Q2 2015 Q2 2016 Q2 2017 Q2 2018 Q2 2019 Neighbourhood Subregional CBD Source: JLL, FSREC (31 December 2019) Disclaimer: historical performance is not a reliable indicator of future performance. 5
Retail sales growth Non-discretionary retail categories continuing to provide steady sales growth Annualised sales growth by category Non-discretionary retail SERVICES/OTHER FOOD CATERING FRESH FOOD 1 year growth: 3.4% 1 year growth: 2.8% 1 year growth: 4.2% Discretionary retail DEPARTMENT STORES HOUSEHOLD GOODS CLOTHING 1 year growth: 0.7% 1 year growth: - 0.1% 1 year growth: 2.9% Source: ABS – Annualised returns to 30 November 2019 Disclaimer: historical performance is not a reliable indicator of future performance.
2. H1 FY20 Fund Performance 7
Fund valuations PORTFOLIO VALUATIONS FUND I FUND II FUND III FUND IV 1 June 2019 valuation $256,050,000 $179,000,000 $238,500,000 $119,619,980 December 2019 valuation $260,250,000 $182,150,000 $239,750,000 $119,500,000 Portfolio valuation change 1.6% 1.8% 0.5% -0.1% December 2019 cap rate 2 6.1% 6.1% 6.3% 5.9% Source: FSREC Notes: All figures based on preliminary unaudited estimates for 31 December 2019. Audited financials will be released in mid March 2020. (1) Historical cost of Keilor Central, being the asset purchase price of $113,000,000 plus transaction costs, less depreciation. (2) Average capitalisation rate of the portfolio Disclaimer: historical performance is not a reliable indicator of future performance. 8
Key Fund metrics Portfolio Metrics FUND I FUND II FUND III FUND IV 5 5 2 1 No. of assets Geographic Diversification 15% NSW VIC 47% 13% 42% QLD SA 72% 100% Sector Diversification 100% 11% 13% Retail 37% Office 100 100 63% 100% 87% 100% % % Fund Metrics Net Tangible Assets (NTA) $1.63 $1.63 $1.53 $1.51 Gearing ratio 36% 38% 32% 38% Distribution yield on capital 4.6% 5.3% 4.8% 4.0% (H1 FY20) Distribution yield on NTA 4.5% 5. 3 % 5.0% 4.2% (H1 FY20) Source: FSREC Notes: All figures based on preliminary unaudited estimates for 31 December 2019. Audited financials will be released in mid March 2020. Disclaimer: historical performance is not a reliable indicator of future performance. 9
3. Portfolio Performance 10
FSREC Fund Series — H1 FY20 Highlights Geographic Diversification 75% 98% 3% 13% Total portfolio occupancy tenant retention on lease NSW expiry VIC QLD 20% 34 6.4% SA 64% leasing deals completed average leasing spread $789m 33% 5.3% 2.5% $9,301 /sqm Retail portfolio only portfolio annual total portfolio turnover 1 retail portfolio weighting to majors turnover growth annual specialty sales specialty productivity turnover 1 majors growth 4.4% $859 /sqm 58% 97% 10.2% portfolio turnover weighting to non- portfolio turnover growth majors in turnover rent specialty occupancy cost average specialty gross rent growth discretionary Source: FSREC Notes: All figures calculated for the six months ending 31 December 2019, weighted by income. Retail portfolio statistics calculated on FSREC portfolio of 12 shopping centres. All turnover figures based on unaudited sales turnover for the 12 months to 31 December 2019. 1 Like for like tenants only Disclaimer: historical performance is not a reliable indicator of future performance. 11
Fund I — key metrics 98% 5 130 occupancy shopping centre tenants assets 8 6.9% 4.7 yrs weighted average leasing deals majors turnover growth lease expiry completed (HY20) Tenant lease expiries by year (% portfolio) Noosa Village Top tenants 40% Coles 19% 35% 30% Study Group 15% 25% Fitness First 6% 20% 15% Woolworths 4% 10% 5% Aldi 4% 0% 2019 2020 2021 2022 2023 2024+ Source: FSREC Note: All stats calculated as at 31 December 2019 by unaudited income 12
Lake Innes Village 13
Fund II — key metrics 5 103 97% shopping centre tenants occupancy assets 5.5 yrs 11 5.3% leasing deals weighted average majors turnover completed (HY20) lease expiry growth Tenant lease expiries by year (% portfolio) 70% 60% Hilton Plaza 50% Top tenants 40% Woolworths 20% 30% Coles 10% 20% Fitness First 6% TK Maxx 5% 10% FoodWorks 4% 0% 2019 2020 2021 2022 2023 2024+ Source: FSREC Note: All stats calculated as at 31 December 2019 by unaudited income 14
Birkdale Fair 15
Fund III — key metrics 2 66 99% assets tenants occupancy 3.7 yrs 7 4.8% leasing deals weighted average majors turnover completed (HY20) lease expiry growth Tenant lease expiries by year (% portfolio) 50% 45% Toormina Gardens 40% 35% Top tenants 30% 25% NSW Government 24% 20% Abbvie 10% 15% Woolworths 7% 10% Landis+Gyr 6% 5% Coles 6% 0% 2019 2020 2021 2022 2023 2024+ Source: FSREC Note: All stats calculated as at 31 December 2019 by unaudited income 16
Fund IV — key metrics 1 70 99% shopping centre tenants occupancy asset 4.3 yrs 8 2.5% [Photo to come] ▪ leasing deals weighted average majors turnover completed (HY20) lease expiry growth Tenant lease expiries by year (% portfolio) 45% 40% Keilor Central 35% 30% 25% Top tenants 20% 15% Coles 15% 10% Kmart 15% 5% Aldi 6% 0% 2019 2020 2021 2022 2023 2024+ Source: FSREC Note: All stats calculated as at 31 December 2019 by unaudited income 17
Keilor Central 18
For further information Investor relations Telephone 1300 454 801 Email info@fsrec.com.au 19
5. Appendix 20
Retail sector: Australian demographics to drive retail sales growth Largest age cohort in Australia reaching peak spending within the next 10 years Annual population growth over next 10 years, for each aging year Number of people, by age cohort Peak Peak consumption consumption 2,000,000 120,000 Growth in number of people at each age (per year) 1,800,000 100,000 1,600,000 1,400,000 80,000 Number of People 1,200,000 60,000 1,000,000 800,000 40,000 600,000 400,000 20,000 200,000 0 0 0 – 4 5 – 9 95+ 10 – 14 15 – 19 20 – 24 25 – 29 30 – 34 35 – 39 40 – 44 45 – 49 50 – 54 55 – 59 60 – 64 65 – 69 70 – 74 75 – 79 80 – 84 85 – 89 90 – 94 1 5 10 15 20 25 30 35 40 45 50 55 60 65 70 75 80 85 90 95 100 Age (years) Age cohort (years) Source: ABS, FSREC (as at December 2019) Source: ABS, JLL Research (2019) 21
Retail sector: Retail supply per capita Lower forecast retail supply per capita supportive of sales productivity over long-term 3.00 2.50 1995 – 1999 Sqm of new retail space per additional person 2.00 2000 – 2004 2005 – 2009 1.50 2010 – 2014 1.00 2015 – 2019 2020 – 2023 0.50 0.00 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 2017 2019 2021 2023 Source: JLL Research (February 2020), Deloitte Access Economics 22
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