Series H1 FY20 Results & Update 1. Market update 241 ORiordan - - PowerPoint PPT Presentation

H1 FY20 Results & Update

FSREC Fund Series

Market update

1.

241 O’Riordan Street, Mascot

Commercial property yields

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Source: Bloomberg, JLL Research, FSREC (31 December 2019) Disclaimer: historical performance is not a reliable indicator of future performance.

Spread of average commercial property yield to 10 year government bond Commercial property yields by sector, compared to 10 year government bond

Macro factors underpinning commercial real estate remain supportive

(0.5%) 0.5% 1.5% 2.5% 3.5% 4.5% 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

• 0.5%

0.5% 1.5% 2.5% 3.5% 4.5% 5.5% 6.5% 7.5% 8.5% 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 Prime Office Prime Industrial National Retail 10 year Bond

Significant rental differential between Sydney CBD and South Sydney supportive for continued growth

Net effective rent ($/sqm): Sydney CBD vs South Sydney

Sydney office market

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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.

$150 $250 $350 $450 $550 $650 $750 $850 Sydney CBD South Sydney 3% 4% 5% 6% 7% 8% Sydney CBD South Sydney

Prime office yields: Sydney CBD vs South Sydney

Vacancy by shopping centre type

Retail sector

0.00% 1.00% 2.00% 3.00% 4.00% 5.00% 6.00% 7.00% 8.00% Q2 2009 Q2 2010 Q2 2011 Q2 2012 Q2 2013 Q2 2014 Q2 2015 Q2 2016 Q2 2017 Q2 2018 Q2 2019

Neighbourhood Mid-sized centres Large centres

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Source: JLL, FSREC (31 December 2019) Disclaimer: historical performance is not a reliable indicator of future performance.

Yields for neighbourhood retail remain attractive Neighbourhood vacancy reducing illustrating strong non-discretionary retail performance

Retail yields by sub-sector

4.50% 5.00% 5.50% 6.00% 6.50% 7.00% 7.50% 8.00% Dec-09 Dec-10 Dec-11 Dec-12 Dec-13 Dec-14 Dec-15 Dec-16 Dec-17 Dec-18 Dec-19 Neighbourhood Subregional CBD

Non-discretionary retail categories continuing to provide steady sales growth

Retail sales growth

Annualised sales growth by category

Source: ABS – Annualised returns to 30 November 2019 Disclaimer: historical performance is not a reliable indicator of future performance.

Non-discretionary retail FOOD CATERING 1 year growth: 2.8% SERVICES/OTHER 1 year growth: 3.4% Discretionary retail DEPARTMENT STORES 1 year growth: 0.7% CLOTHING 1 year growth: 2.9% HOUSEHOLD GOODS 1 year growth: -0.1% FRESH FOOD 1 year growth: 4.2%

H1 FY20 Fund Performance

2.

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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%

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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.

Key Fund metrics

Portfolio Metrics FUND I FUND II FUND III FUND IV

• No. of assets

5 5 2 1

Geographic Diversification Sector Diversification

Fund Metrics

Net Tangible Assets (NTA)

$1.63 $1.63 $1.53 $1.51

Gearing ratio

36% 38% 32% 38%

Distribution yield on capital (H1 FY20)

4.6% 5.3% 4.8% 4.0%

Distribution yield on NTA (H1 FY20)

4.5% 5.3% 5.0% 4.2%

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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.

87% 13%

Retail Office

100 %

100% 37% 63%

100 %

100% 100%

QLD NSW VIC SA

100% 11% 47% 72% 13% 15% 42%

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Portfolio Performance

3.

FSREC Fund Series—H1 FY20 Highlights

11 portfolio turnover growth portfolio annual turnover1

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.

Retail portfolio only

$789m 4.4%

retail portfolio weighting to majors

33% 97% 5.3% 2.5%

majors turnover growth

58%

majors in turnover rent weighting to non- discretionary annual specialty sales growth

10.2%

specialty occupancy cost

$9,301/sqm

specialty productivity

$859/sqm

average specialty gross rent

Total portfolio

leasing deals completed

34 75%

tenant retention on lease expiry

98%

• ccupancy

6.4%

average leasing spread

64% 20% 13% 3% NSW VIC QLD SA

Geographic Diversification

total portfolio turnover1 portfolio turnover growth

Fund I — key metrics

Tenant lease expiries by year (% portfolio) Top tenants

Source: FSREC Note: All stats calculated as at 31 December 2019 by unaudited income

0% 5% 10% 15% 20% 25% 30% 35% 40% 2019 2020 2021 2022 2023 2024+

12

shopping centre assets

5

tenants

130

• ccupancy

98%

weighted average lease expiry

4.7 yrs

leasing deals completed (HY20)

8

majors turnover growth

6.9%

Coles 19% Study Group 15% Fitness First 6% Woolworths 4% Aldi 4%

Noosa Village

Lake Innes Village

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Fund II — key metrics

Tenant lease expiries by year (% portfolio) Top tenants

Source: FSREC Note: All stats calculated as at 31 December 2019 by unaudited income

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0% 10% 20% 30% 40% 50% 60% 70% 2019 2020 2021 2022 2023 2024+

Woolworths 20% Coles 10% Fitness First 6% TK Maxx 5% FoodWorks 4% shopping centre assets

5

tenants

103

• ccupancy

97%

weighted average lease expiry

5.5 yrs

leasing deals completed (HY20)

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majors turnover growth

5.3%

Hilton Plaza

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Birkdale Fair

Fund III — key metrics

Tenant lease expiries by year (% portfolio) Top tenants

Source: FSREC Note: All stats calculated as at 31 December 2019 by unaudited income

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0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 50% 2019 2020 2021 2022 2023 2024+

NSW Government 24% Abbvie 10% Woolworths 7% Landis+Gyr 6% Coles 6% assets

2

tenants

66

• ccupancy

99%

weighted average lease expiry

3.7 yrs

leasing deals completed (HY20)

7

majors turnover growth

4.8%

Toormina Gardens

Fund IV — key metrics

Tenant lease expiries by year (% portfolio) Top tenants

▪ [Photo to come]

Source: FSREC Note: All stats calculated as at 31 December 2019 by unaudited income

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0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 2019 2020 2021 2022 2023 2024+

Coles 15% Kmart 15% Aldi 6% shopping centre asset

1

tenants

70

• ccupancy

99%

weighted average lease expiry

4.3 yrs

leasing deals completed (HY20)

8

majors turnover growth

2.5%

Keilor Central

Keilor Central

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Investor relations

For further information

Telephone 1300 454 801 Email info@fsrec.com.au

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Appendix

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200,000 400,000 600,000 800,000 1,000,000 1,200,000 1,400,000 1,600,000 1,800,000 2,000,000 0–4 5–9 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 95+ Number of People Age cohort (years)

Largest age cohort in Australia reaching peak spending within the next 10 years

Retail sector: Australian demographics to drive retail sales growth

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Source: ABS, FSREC (as at December 2019) Source: ABS, JLL Research (2019)

Peak consumption 20,000 40,000 60,000 80,000 100,000 120,000 1 5 10 15 20 25 30 35 40 45 50 55 60 65 70 75 80 85 90 95 100

Age (years) Growth in number of people at each age (per year)

Peak consumption

Number of people, by age cohort Annual population growth over next 10 years, for each aging year

Retail sector: Retail supply per capita

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Source: JLL Research (February 2020), Deloitte Access Economics

Sqm of new retail space per additional person 1995–1999 2000–2004 2005–2009 2010–2014 2015–2019 2020–2023

1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 2017 2019 2021 2023 0.00 0.50 1.00 1.50 2.00 2.50 3.00

Lower forecast retail supply per capita supportive of sales productivity over long-term

Low exposure to discretionary specialty retail at 3.3% of total retail portfolio

Diversification by retail categories

FSREC retail portfolio—diversification by sales category

Diversification by retail group

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28% 5% 29% 8% 30% Supermarkets DDS National Franchise Independent

Source: FSREC Notes: All figures calculated by income as at 31 December 2019 and weighted by income. Retail portfolio statistics calculated on portfolio of 12 shopping centres. Disclaimer: historical performance is not a reliable indicator of future performance.

28.0% 18.2% 10.8% 10.6% 8.6% 8.5% 7.5% 4.5% 2.2% 1.1% Jewellery, Homewares Apparel Supermarkets

Non-discretionary retail 85%

Retail services General retail Food catering Food retail Other Mini-majors DDS Discretionary specialty Supermarkets Kmart JB Hifi, TK Maxx, The Reject Shop Beauty, Medical, Banks, Travel Pharmacy, Discount Variety, Florist Takeaway Food, Cafes Butcher, Baker, Grocer, Liquor Communications, Newsagent, ATMs Coles, Woolworths, Aldi

15% 3.3%

Specialty sales growth by portfolio weighting

FSREC retail portfolio—specialty performance

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Source: FSREC Notes: All figures calculated as at 31 December 2019 (by income) for retail portfolio of 12 shopping centres. All turnover figures based on unaudited sales turnover for the 12 months to 31 December 2019.

1General retail includes pharmacy, giftware, cosmetics, discount variety & florists

Specialty Sales Growth

0% 5% 10% 15% 20%

• 10%
• 8%
• 6%
• 4%
• 2%

0% 2% 4% 6% 8%

Retail Services Food Catering Communications Food Retail General Retail Homewares Jewellery Apparel Portfolio weighting (% income)

Retail sector – recent comparable sales

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Corburg North Village VIC | $47m, 4.6% | Apr 2019 Strathalbyn, SA| $19m, 5.7% | Nov 2019 Marketplace Warner QLD| $78m, 5.8% | Dec 2019 Willowdale NSW| $35m, 5.6% | July 2019

Source: FSREC Disclaimer: historical performance is not a reliable indicator of future performance.

Retail sector – recent comparable sales

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Rockdale Plaza NSW | $142m, 6.0% | Apr 2019 Campbellfield Plaza VIC| $74m, 5.8% | Dec 2018 St Mary’s Village NSW| $68m, 5.8% | Dec 2019 Norton Plaza NSW| $153m, 5.5% | Sep 2019

Source: FSREC Disclaimer: historical performance is not a reliable indicator of future performance.

Oxford Village, Sydney (Fund I)

FSREC Portfolio NSW

ASSET TYPE Convenience retail and office VALUATION $99.0 million TOTAL MAT n/a LOCATION CBD GLA 12,042 sqm

• AV. SPEC GROSS RENT

$1,162/sqm TENANTS (Retail) Aldi, JB Hifi, Chemist Warehouse, 30 specs (Office) Fitness First, Study Group OCCUPANCY 99% SPEC OCC COST 9.1% WALE 2.00 years SPEC PRODUCTIVITY $7,005/sqm STRATEGY Lease-up final vacancy and progress additional value add opportunities

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Marketfair Campbelltown, Sydney (Fund II)

ASSET TYPE Neighbourhood retail VALUATION $53.5 million TOTAL MAT $53.0 million LOCATION Metro GLA 9,119 sqm

• AV. SPEC GROSS RENT

$1,163/sqm TENANTS Woolworths, 27 specs OCCUPANCY 99% SPEC OCC COST 6.8% WALE 3.70 years SPEC PRODUCTIVITY $11,980/sqm STRATEGY Maintain high occupancy through active management, continue to progress longer-term development masterplan and land rezoning

Newtown Central, Sydney (Fund II)

ASSET TYPE Convenience retail VALUATION $31.3 million TOTAL MAT $13.8 million LOCATION CBD GLA 3,355sqm

• AV. SPEC GROSS RENT

$712/sqm TENANTS Foodworks, Fitness First, 13 specs OCCUPANCY 97% SPEC OCC COST 7.2% WALE 0.80 years SPEC PRODUCTIVITY $14,620/sqm STRATEGY Following supermarket and gym refurbishment, lease-up final vacancy

Source: FSREC. All figures as at 31 December 2019

Windsor Riverview, Sydney (Fund I)

FSREC Portfolio NSW (continued)

ASSET TYPE Neighbourhood retail VALUATION $55.8 million TOTAL MAT $68.3 million LOCATION Metro GLA 7,911 sqm

• AV. SPEC GROSS RENT

$746/sqm TENANTS Coles, 33 specs OCCUPANCY 99% SPEC OCC COST 13.1% WALE 6.96 years SPEC PRODUCTIVITY $5,711/sqm STRATEGY Maintain high occupancy through active management, reduce exposure to apparel to improve productivity

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Toormina Gardens, Coffs Harbour (Fund III)

ASSET TYPE Convenience-based subregional VALUATION $87.5 million TOTAL MAT $145.7 million LOCATION Regional GLA 20,890 sqm

• AV. SPEC GROSS RENT

$706/sqm TENANTS Woolworths, Coles, Kmart, 51 specs OCCUPANCY 98% SPEC OCC COST 7.9% WALE 2.90 years SPEC PRODUCTIVITY $10,832/sqm STRATEGY Execute specialty leasing strategy, progress development application for car park improvements and padsite

Lake Innes, Port Macquarie (Fund I)

ASSET TYPE Neighbourhood retail VALUATION $33.0 million TOTAL MAT $64.3 million LOCATION Regional GLA 4,671sqm

• AV. SPEC GROSS RENT

$787/sqm TENANTS Coles, 12 specs OCCUPANCY 99% SPEC OCC COST 10.5% WALE 7.12 years SPEC PRODUCTIVITY $8,322/sqm STRATEGY Introduce additional food catering following completion of placemaking works. Cater tenant mix to leverage off adjacent University growth

Source: FSREC. All figures as at 31 December 2019

FSREC Portfolio NSW (continued)

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241 O'Riordan Street, Mascot, Sydney (Fund III)

ASSET TYPE Office VALUATION $152.3 million

• AV. NET RENT

$430/sqm LOCATION Suburban GLA 19,042 sqm TENANTS Property NSW, AbbVie, Coates, Newslink, Landis & Gyr OCCUPANCY 99% WALE 3.5 years STRATEGY Capitalise on strong office market to drive leasing spreads through early renewals and proactive leasing

Source: FSREC. All figures as at 30 June 2019

Keilor Central, Melbourne (Fund IV)

FSREC Portfolio VIC and SA

ASSET TYPE Convenience-based subregional VALUATION $119.5 million TOTAL MAT $142.9 million LOCATION Metro GLA 19,401 sqm

• AV. SPEC GROSS RENT

$1,002/sqm TENANTS Coles, Aldi, Kmart, 65 specs OCCUPANCY 99% SPEC OCC COST 13.3% WALE 3.16 years SPEC PRODUCTIVITY $9,117/sqm STRATEGY Execute specialty leasing strategy, progress development masterplan

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Lynbrook Village, Melbourne (Fund I)

ASSET TYPE Neighbourhood retail VALUATION $39.0 million TOTAL MAT $43.1 million LOCATION Metro GLA 7,620 sqm

• AV. SPEC GROSS RENT

$635/sqm TENANTS Coles, 31 specs OCCUPANCY 97% SPEC OCC COST 12.9% WALE 4.15 years SPEC PRODUCTIVITY $6,154/sqm STRATEGY Lease-up vacancies through active management

Hilton Plaza, Adelaide (Fund II)

ASSET TYPE Neighbourhood retail VALUATION $20.4 million TOTAL MAT $42.0 million LOCATION Metro GLA 4,452sqm

• AV. SPEC GROSS RENT

$837/sqm TENANTS Woolworths, 13 specs OCCUPANCY 95% SPEC OCC COST 11.3% WALE 0.67 years SPEC PRODUCTIVITY $7,044/sqm STRATEGY Drive supermarket performance following refurbishment, lease office vacancy

Source: FSREC. All figures as at 31 December 2019

Noosa Village, Noosa (Fund I)

FSREC Portfolio QLD

ASSET TYPE Neighbourhood retail VALUATION $33.5 million TOTAL MAT $68.7 million LOCATION Metro GLA 4,692 sqm

• AV. SPEC GROSS RENT

$930/sqm TENANTS Woolworths, 21 specs OCCUPANCY 97% SPEC OCC COST 6.7% WALE 1.12 years SPEC PRODUCTIVITY $16,156/sqm STRATEGY Progress Woolworths expansion following development approval and execute specialty leasing strategy

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Birkdale Fair, Brisbane (Fund II)

ASSET TYPE Neighbourhood retail VALUATION $30.5 million TOTAL MAT $68.2 million LOCATION Metro GLA 5,413 sqm

• AV. SPEC GROSS RENT

$796/sqm TENANTS Woolworths, 17 specs OCCUPANCY 99% SPEC OCC COST 9.0% WALE 8.37 years SPEC PRODUCTIVITY $8,909/sqm STRATEGY Progress development application for padsite

Northpoint Shopping Centre, Toowoomba (Fund II)

ASSET TYPE Neighbourhood retail VALUATION $46.5 million TOTAL MAT $58.9 million LOCATION Regional GLA 6,854 sqm

• AV. SPEC GROSS RENT

$705/sqm TENANTS Coles, 26 specs OCCUPANCY 96% SPEC OCC COST 8.7% WALE 1.89 years SPEC PRODUCTIVITY $8,451/sqm STRATEGY Lease-up vacancies through active management

Source: FSREC. All figures as at 31 December 2019

This presentation has been prepared by Fort Street Real Estate Capital Pty Limited (ACN 164 101 731) (FSREC) a corporate authorised representative (CAR

• No. 440307) of Walsh & Company Asset Management Pty Limited (ACN 159 902 708, AFSL 450 257) (Walsh AM) as investment manager for Fort Street

Real Estate Capital Fund I (ARSN 163 688 346) (Fund I) , Fort Street Real Estate Capital Fund II (ARSN 169 190 498) (Fund II), Fort Street Real Estate Capital Fund III (ARSN 605 335 957) (Fund III) and Fort Street Real Estate Capital Fund IV (ARSN 623 196 298) (Fund IV) (Funds or FSREC Funds). Walsh AM is a wholly owned subsidiary of Evans Dixon Limited (ACN 609 913 457) (ED1) and ED1 has a majority economic interest in FSREC. This presentation may contain general advice. Any general advice provided has been prepared without taking into account your objectives, financial situation or needs. Before acting on the advice, you should consider the appropriateness of the advice with regard to your objectives, financial situation and needs. Past performance of the FSREC Funds is not a reliable indicator of the future performance of the FSREC Funds. This presentation may contain statements, opinions, projections, forecasts and other material (forward-looking statements), based on various

• assumptions. Those assumptions may or may not provide to be correct. The Investment Manager and its advisers (including all of their respective

directors, consultants and/or employees, related bodies corporate and the directors, shareholders, managers, employees or agents of them) (Parties) do not make any representation as to the accuracy or likelihood of fulfilment of the forward-looking statements or any of the assumptions upon which they are based. Actual results, performance or achievements may vary materially from any projections and forward-looking statements and the assumptions

• n which those statements are based. Readers are cautioned not to place undue reliance on forward-looking statements and the Parties assume no
• bligation to update that information.

The Parties give no warranty, representation or guarantee as to the accuracy or completeness or reliability of the information contained in this

• presentation. The Parties do not accept, except to the extent permitted by law, responsibility for any loss, claim, damages, costs or expenses arising out
• f, or in connection with, the information contained in this presentation. Any recipient of this presentation should independently satisfy themselves as to

the accuracy of all information contained in this presentation.

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Disclaimer