Electrolux, Beverley, South Australia Virgin Australia Head Office, Bowen Hills, Queensland Bunnings, South Mackay, Queensland 15 February 2018 Charter Hall Long WALE REIT FY18 Half Year Results
Agenda 1. FY18 half year highlights 3 2. Financial performance 5 3. Operational updates & portfolio overview 10 4. FY18 earnings guidance 18 5. Additional information 20 Avi Anger Fund Manager Charter Hall Long WALE REIT Kerri Leech Head of Long WALE REIT Finance Ben Ellis Deputy Fund Manager Charter Hall Long WALE REIT 2
FY18 half year highlights Virgin Australia Head Office, Bowen Hills, QLD
Key highlights 1H FY18 highlights 1 Financial performance Portfolio performance Capital management Operating EPS of 13.0 cents 1.8% above PDS 1H FY18 EPS forecast 11.3 year WALE 100% occupancy 28.6% gearing 2 within target range of 25% 35% DPS of 13.7 cents 3 6.9% above PDS 1H FY18 DPS forecast $96.8 million of net property acquisitions 4.8 years & 5.2 years weighted average debt & hedging maturities respectively $4.02 NTA per security 2.2% increase since June 2017 $21.0 million gross property valuation uplift $101.6m of new equity successfully raised via DRP and entitlement offer 1. Metrics include Virgin Australia Head Office which was acquired 4 January 2018. 2. Reflects pro-forma 31 December 2017 balance sheet gearing adjusted for the settlement of Virgin Australia Head Office. Refer to Additional Information Note 2 (slide 22). 3. DPS is greater than EPS for the period as a result of the December 2017 entitlement offer. 4
Financial performance Coles Distribution Centre, Perth, WA
1H FY18 results snapshot Key metrics Statutory profit Operating earnings Operating earnings per security Distributions per security 1H FY18 $45.9m $27.3m 13.0 cents 13.7 cents 31 Dec 2017 30 Jun 2017 Movement NTA per security $4.02 $3.93 2.2% Number of properties 81 1 80 +1 property WALE 11.3 years 1 11.8 years -0.5 years Property portfolio $1.52bn 1 $1.40bn 8.4% Balance sheet gearing 28.6% 2 29.9% (1.3%) Look through gearing 35.7% 2 37.7% (2.0%) Look through hedging 63% 66% (3%) 1. Includes Virgin Australia Head Office which was acquired 4 January 2018 and Woolworths Distribution Centre, Dandenong on a lease commencement basis 2. Reflects pro-forma 31 December 2017 gearing adjusted for the settlement of Virgin Australia Head Office. Refer to Additional Information Note 2 (slide 22). 6
Financial performance A$m 1H FY18 PDS % change Net property income 42.9 39.8 7.8% Interest income 0.1 0.1 (0.1%) Increased revenue driven by NPI from property acquisitions since IPO SUEZ portfolio Bunnings South Mackay Additional ALH leased pubs Total income 43.0 40.0 7.7% Operating expenses (4.4) (3.8) 14.7% Finance costs (11.3) (9.7) 16.8% Operating earnings 27.3 26.4 3.4% Operating expenses higher than PDS forecast as a result of portfolio growth and new acquisitions Finance costs are similarly higher due to debt funded property acquisitions EPS / DPS (cents) Operating earnings per security 13.0 12.8 1.8% Distribution per security 13.7 1 12.8 6.9% Operating EPS for the 1H FY18 period of 13.0 cents Outperformed PDS target EPS of 12.8 cents by 1.8% 1. DPS is greater than EPS for the period as a result of the December 2017 entitlement offer. 7
Balance sheet A$m Dec 2017 Jun 2017 Cash 94.8 2.9 Investment properties 798.4 760.4 Equity accounted investments 420.1 402.3 Other assets 23.8 27.1 Total assets 1,337.1 1,192.6 Provision for distribution 15.1 13.3 Debt 384.5 359.0 Unamortised borrowing costs (2.3) (2.3) 12.1% asset growth over the half year period Proceeds from December 2017 entitlement offer held as cash prior to Virgin Australia Head Office acquisition settlement 1 Acquisition of Bunnings South Mackay and the ALH leased Bridge Inn Hotel 2 $21.0m gross property revaluations Other liabilities 5.8 5.3 Total liabilities 403.1 375.2 Net tangible assets 934.0 817.4 Securities on issue (m) 232.3 207.8 2.2% growth in NTA per security over half year period NTA per security ($) $4.02 $3.93 1. Settlement occurred post balance date on 4 January 2018 2. Acquisition of the Bridge Inn Hotel, VIC, was in conjunction with the disposal of the Prestons Hotel, VIC, overall resulting in a net portfolio valuation increase 8
Debt & hedging summary A$m Debt summary Limit Drawn Maturity Look through debt maturity profile (A$m) 500 Balance sheet debt Syndicated debt facility 470.0 384.5 Feb 2022 Joint venture debt (CLW interest) 400 300 85.5 LWIP debt facility 67.5 63.0 Sep 2020 LWIP USPP 90.0 90.0 May 2027 Weighted average cost of debt 1 4.1% Weighted average debt maturity term 4.8 years Balance sheet gearing 28.6% 2 Look through gearing 35.7% 2 Hedging summary 3 Total look through swaps 339.8 Look through debt hedged 63% Weighted average hedge maturity term 5.2 years 200 100-4.5 63.0 384.5 90.0 FY18 FY19 FY20 FY21 FY22 FY27 CLW drawn debt LWIP drawn debt Undrawn debt Increased existing bank debt facility by $20 million Balance sheet gearing remains within target 25 35% range post Virgin Australia Head Office settlement Undrawn debt and cash of $95.0 4 million at 31 December 2017 1. For the 1H FY18 period, excludes amortisation of debt costs 2. Reflects pro-forma 31 December 2017 gearing adjusted for the settlement of Virgin Australia Head Office. Refer to Additional Information Note 2 (slide 22). 3. Includes LWIP USPP 4. Adjusted for Virgin Australia Head Office acquisition and includes available cash in LWIP and other joint ventures 9
Operational updates & portfolio overview Norwood Hotel, Norwood, SA
Virgin Australia Head Office acquisition Improves portfolio diversification, eastern seaboard exposure and increases office exposure In December 2017, CLW agreed to acquire the head office of Virgin Australia in Brisbane, Queensland 100% occupied with an 8.4 year WALE 12,427 sqm of A-grade office space 6.8% acquisition capitalisation rate The acquisition was settled 4 January 2018 Long WALE asset leased to a high quality ASX-listed tenant Located in the Brisbane Fringe Urban Renewal Precinct Improves portfolio diversification 3.5% annual fixed reviews In conjunction with the transaction, the REIT successfully completed an accelerated non-renounceable entitlement offer, which raised $94.1 million of new equity to fund the acquisition and associated transaction costs 11
Portfolio update CLW continues to develop its close tenant relationships to explore future potential leasing opportunities Management is pleased to provide the following updates on CLW s portfolio for the period: Electrolux Beverley, SA Australian Tax Office Adelaide, SA Hoppers Crossing Distribution Centre, Hoppers Crossing, VIC - Early five year extension over entire 25,562 sqm facility - Increases lease term remaining from 6.9 years to 11.9 years - Improves portfolio lease expiry profile - Australian Tax Office ( ATO ) has exercised the mid-term market rent review - The review process is now underway and CLW is working with the ATO in accordance with the lease terms - CLW continues to receive leasing enquiries for this property - Tenant continues to pay rent for remainder of lease - 3 year WALE 12
Portfolio snapshot Portfolio snapshot Portfolio by sector Dec 2017 1 Jun 2017 Number of properties 81 80 Property valuation (A$m) 1,515.5 1,397.2 Weighted Average Capitalisation Rate ( WACR ) 6.2% 6.2% Occupancy 100% 100% Weighted Average Lease Expiry ( WALE ) 11.3 years 11.8 years Proportion of income subject to fixed rental increases 64% 62% Weighted Average Rental Review 2 ( WARR ) 2.8% 2.9% Retail 24% Industrial 45% Office 31% Portfolio summary 1 Sector Assets Valuation ($m) Cap rate (%) WARR 2 (%) WALE (yrs) Occupancy (%) Office 3 $462.8 6.0% 3.4% 10.4 100% Industrial 20 $678.6 6.5% 2.8% 9.7 100% Retail 58 $374.1 5.9% 1.9% 16.0 100% Total / weighted average 81 $1,515.5 6.2% 2.8% 11.3 100% 1. Includes Virgin Australia Head Office which was acquired 4 January 2018 2. Includes CPI reviews completed during the period 13
Tenant diversification CLW is pleased to include Virgin Australia amongst its tenants, through the acquisition of the Virgin Australia Head Office Further diversifies the REIT s tenant base with 16 high quality customers across various industries and business sectors Major tenants 1 Woolworths / ALH 26.3% Australia Post 3.3% Australian Tax Office 16.6% Grace Worldwide 3.2% Coles 11.7% Electrolux 2.9% Metcash 11.6% Toll 2.6% Virgin Australia 7.1% Coates Hire 2.2% Westpac 5.5% Bunnings Group 1.7% SUEZ 5.0% 1. Includes Virgin Australia Head Office which was acquired 4 January 2018. Weighted by gross passing income as at 31 December 2017 (REIT ownership interest). 14
Industry diversification Portfolio underpinned by long leases to tenants across diverse business industries The vast majority of tenant industries are non-discretionary Tenant industries 1 Food & liquor 34% Government Hospitality 17% 16% Transportation Mail & logistics Banking & finance Recycling & waste management 7% 6% 5% 5% Document storage Electrical / whitegoods Heavy equipment hire Hardware retail 3% 3% 2% 2% 1. Includes Virgin Australia Head Office which was acquired 4 January 2018. Weighted by gross passing income as at 31 December 2017 (REIT ownership interest). 15
Lease expiry profile Long dated portfolio WALE of 11.3 years 1 First major expiry remains approximately 3 years away in FY21 Electrolux lease extension increases the portfolio WALE Current WALE of 11.3 years 25.3% 23.6% 14.9% 11.4% 0.4% 4.0% 0.8% 1.6% 3.0% 2.9% 5.0% 2.7% 0.3% 3.0% 1.0% Vacant FY18 FY19 FY20 FY21 FY22 FY23 FY24 FY25 FY26 FY27 FY28 FY29 FY30 FY31 FY32 FY33 FY34 FY35 FY36 FY37 FY38 FY39+ 1. Includes Virgin Australia Head Office which was acquired 4 January 2018. Weighted by gross passing income as at 31 December 2017 (REIT ownership interest). 16
Geographic diversification Highly diversified by geography and real estate sector 1 81 assets comprising office, industrial and retail properties located in six Australian states Property acquisitions improve diversification and re-weights the portfolio to the Eastern Seaboard markets Legend Office (3 properties) Industrial (20 properties) Retail (58 properties) Brisbane 1 Office 3 Industrial 12 Retail 1 Perth 4 7 Industrial Retail 3 1 WA 23% SA 22% QLD 21% NSW 11% 3 4 1 1 Sydney 1 Office 4 Industrial Adelaide 1 Office 1 5 Industrial Retail 1 VIC 22% TAS 1% 1 2 1 Melbourne 7 Industrial 16 Retail 1. Percentages per state refers to weighting by property valuations as at 31 December 2017, including valuations for Woolworths Distribution Centre on a lease commencement basis (REIT ownership interest) and Virgin Australia Head Office which was acquired 4 January 2018. 17
FY18 earnings guidance Metcash Distribution Centre, Canning Vale, WA
FY18 earnings guidance CLW s FY18 Operating EPS guidance is 26.4 cents per security The REIT confirms that barring any unforeseen events and no material change in current market conditions, CLW s guidance for FY18 Operating EPS remains unchanged at 26.4 cents per security, representing: 3.9% growth over FY17 annualised Operating EPS 3.1% ahead of PDS target FY18 annualised Operating EPS of 25.6 cents The target distribution payout ratio remains at 100% of Operating Earnings Coles Distribution Centre, Perth, WA Virgin Australia Head Office, Bowen Hills, QLD Villa Noosa Hotel, Noosaville, QLD 19
Additional information 1. NTA reconciliation 21 2. Pro-forma balance sheet 22 3. Portfolio revaluations 23 4. Portfolio investment portfolio 24 5. Glossary 27 6. Contact information 28 Toll, Altona North, VIC
NTA reconciliation NTA per security reconciliation ($A) $0.13 ($0.14) $0.10 ($0.01) $4.02 $3.93 1 NTA as at 30 Jun 2017 Operating earnings Provision for distribution Property revaluations Derivative MTM / other NTA as at 31 Dec 2017 1. Includes distributions relating to equity issued cum-distribution under the December 2017 entitlement offer 21
Pro-forma balance sheet Cash proceeds from the December 2017 entitlement offer were received prior to 31 December 2017 balance date and were utilised to fund the Virgin Australia Head Office acquisition which settled on 4 January 2018 Tabled below is CLW s 31 December 2017 pro-forma balance sheet adjusted for Virgin Australia Head Office settlement A$m Dec 2017 Virgin Australia Head Office settlement 1 Pro-forma Dec 2017 Cash 94.8 (91.9) 2.9 Investment properties 798.4 90.8 889.2 Equity accounted investments 420.1-420.1 Other assets 23.8-23.8 Total assets 1,337.1 (1.1) 1,336.0 Provision for distribution 15.1-15.1 Debt 384.5-384.5 Unamortised borrowing costs (2.3) - (2.3) Other liabilities 5.8-5.8 Total liabilities 403.1-403.1 Net tangible assets 934.0 (1.1) 933.0 Securities on issue (m) 232.3-232.3 NTA per security ($) $4.02 - $4.02 Balance sheet gearing 23.3% 5.3% 28.6% Look through gearing 31.5% 4.2% 35.7% 1. Includes acquisition costs 22
Portfolio revaluations Property revaluations during 1H FY18 resulted in a total gross uplift of $21.0 million, reflecting a 1.5% increase on prior book values (excludes properties acquired and divested) Excluding properties acquired and divested, the portfolio WACR firmed 7bps to 6.13% as a result of revaluations Including properties transacted, the portfolio WACR firmed 3bps to 6.17% as at 31 December 2017 1H FY18 valuation summary Office Industrial Retail 1 Total Number of properties 2 20 57 79 Prior book value 2 (A$m) 372.0 669.6 351.9 1,393.5 December 2017 valuation (A$m) 372.0 678.6 364.0 1,414.5 Movement in valuation (A$m) - 9.0 12.1 21.0 Movement (%) - 1.3 3.4 1.5 Portfolio WACR as 30 June 2017 (%) 5.8 6.5 6.0 6.2 Portfolio WACR as at 31 December 2017 (%) 5.8 6.5 5.9 6.1 Movement (bps) - (0.07) (0.12) (0.07) Adjusted for property acquisitions during the period Number of properties acquired 3 1-1 2 Property valuation (A$m) 90.8-10.1 100.9 Property capitalisation rate (%) 6.75-5.63 6.64 December 2017 portfolio valuation post acquisitions (A$m) 462.8 678.6 374.1 1,515.5 December 2017 portfolio WACR post acquisitions (A$m) 6.0 6.5 5.9 6.2 1. Excludes Preston Hotel, VIC, which was sold in December 2017 for $4.1 million (reflecting CLW s 45% interest in LWIP) 2. Includes costs capitalised during the period including capital expenditure. 3. Includes Virgin Australia Head Office which was acquired 4 January 2018. 23
Property investment portfolio Office portfolio 1 Asset State REIT interest Valuation 2 (A$m) Cap rate 3 (%) WALE 4 (years) Occupancy 4 (%) NLA 5 (sqm) WARR 6 (%) Westpac Building, Kogarah NSW 50.1% 102.0 5.5% 16.5 100% 31,724 CPI Australian Taxation Office, Adelaide SA 100% 270.0 5.9% 9.3 100% 36,802 3.8% Virgin Australia Head Office, Bowen Hills QLD 100% 90.8 6.8% 8.4 100% 12,427 3.5% Total / weighted average 462.8 6.0% 10.4 100% 68,526 3.4% Australian Taxation Office, Adelaide, SA Westpac Building, Kogarah, NSW Virgin Australia Head Office, Bowen Hills, QLD 1. Includes Virgin Australia Head Office which was acquired 4 January 2018. 2. Most recent external valuation or Directors valuation (REIT ownership interest). 3. Weighted by Valuation (REIT ownership interest). 4. As at 31 December 2017 by gross passing income (REIT ownership interest). 5. NLA shown on a 100% basis. 6. WARR, weighted by gross passing income as at 31 December 2017 (REIT ownership interest). 24
Property investment portfolio Industrial portfolio Asset State REIT interest Valuation 1 (A$m) Cap rate 2 (%) WALE 3 (years) Occupancy 3 (%) GLA 4 (sqm) Australia Post, Kingsgrove NSW 100% 23.4 5.3% 8.5 100% 6,729 3.5% SUEZ, Artarmon NSW 100% 17.6 5.0% 29.0 100% 4,309 3.0% SUEZ, Davis Road, Wetherill Park NSW 100% 10.7 6.0% 9.0 100% 3,975 3.0% SUEZ, Newton Road, Wetherill Park NSW 100% 9.2 6.3% 4.0 100% 2,987 3.0% Coles Distribution Centre Truganina VIC 50.0% 52.0 5.4% 14.5 100% 69,074 3.5% Woolworths Distribution Centre, Hoppers Crossing VIC 100% 46.7 7.8% 3.0 100% 52,364 3.0% Toll, Altona North VIC 100% 33.1 6.0% 7.9 100% 6,310 3.5% SUEZ, Dandenong South VIC 100% 7.5 6.0% 9.0 100% 2,767 3.0% SUEZ, Campbellfield VIC 100% 2.0 7.5% 1.0 100% 1,537 3.0% SUEZ, Bairnsdale VIC 100% 0.4 8.0% 1.0 100% 387 3.0% Grace Worldwide, Willawong QLD 100% 38.7 7.0% 5.6 100% 22,108 3.5% Coates Hire, Kingston QLD 100% 32.0 5.8% 15.2 100% 1,835 4.0% SUEZ, Lower Nudgee QLD 100% 4.2 5.3% 19.0 100% 1,760 3.0% Electrolux, Beverley SA 100% 35.5 7.0% 11.9 100% 25,562 3.5% Metcash Distribution Centre, Canning Vale WA 100% 169.0 7.3% 6.1 100% 98,295 CPI Coles Distribution Centre, Perth WA 49.9% 121.0 6.5% 10.4 100% 81,647 2.8% SUEZ, Welshpool WA 100% 12.9 6.0% 14.0 100% 3,460 3.0% SUEZ, Landsdale WA 100% 3.9 6.3% 14.0 100% 2,598 3.0% SUEZ, South Boulder WA 100% 0.6 8.3% 14.0 100% 630 3.0% Total / weighted average (completed assets) 620.3 6.6% 9.1 100% 388,334 2.9% Woolworths Distribution Centre, Dandenong VIC 26.0% 58.2 5.3% 20.0 100% 70,431 2.8% Total / weighted average 678.6 6.5% 9.7 100% 458,765 2.8% WARR 5 (%) 1. Most recent external valuation or Directors valuation (REIT ownership interest). Woolworths Distribution Centre, Dandenong valuation on a lease commencement basis. 2. Weighted by Valuation (REIT ownership interest). 3. As at 31 December 2017 by gross passing income (REIT ownership interest) 4. GLA shown on a 100% basis 5. WARR, weighted by gross passing income as at 31 December 2017 (REIT ownership interest). 25
Property investment portfolio Retail portfolio LWIP portfolio 1 Other retail Total Number of assets 57 1 58 Property valuation 2 (A$m) 345.1 29.0 374.1 WACR 3 (%) 5.9 6.0 5.9 WALE 4 16.6 years 8.9 years 16.0 years Occupancy 4 100% 100% 100% Retail portfolio WARR 4 CPI 5 3.0% 1.9% Geographic diversity 3 Income diversity 4 SA 6% WA 10% NSW 3% TAS 3% QLD 42% Bunnings 8% Dan Murphy's rent 16% Villa Noosa Hotel, Noosaville, QLD VIC 36% Hotel rent 76% Bunnings, South Mackay, QLD 1. Reflects CLW s 45% interest 2. Most recent external valuation or Directors valuation (REIT ownership interest) 3. Weighted by Valuation (REIT ownership interest) 4. As at 31 December 2017, weighted by gross passing income (REIT ownership interest) 5. In addition to Dan Murphy s turnover rent 26
Glossary ASX Balance sheet gearing Cap rate CLW or the REIT DPU EPS Look-through gearing LWIP MTM NTA REIT PDS WACR WALE WARR Australian Stock Exchange Calculated as the ratio of net drawn debt (excluding unamortised debt establishment costs) to total tangible assets, less cash Capitalisation rate Charter Hall Long WALE REIT Distributions per security Operating earnings per security Calculated as the ratio of net drawn debt (excluding unamortised debt establishment costs) to total tangible assets, less cash, based on the non-ifrs pro forma proportionately consolidated statement of financial position, which adjusts for the REIT s share of the debt, assets and cash held in equity accounted investments Long WALE Investment Partnership Mark-to-market Net tangible assets Real estate investment trust Charter Hall Long WALE REIT Product Disclosure Statement dated 27 September 2016; and Charter Hall Long WALE REIT Supplementary Product Disclosure Statement dated 27 October 2016 Weighted average capitalisation rate Weighted average lease expiry Weighted average rent review 27
Contact information Avi Anger Fund Manager Charter Hall Long WALE REIT T: +61 2 8651 9111 E: avi.anger@charterhall.com.au Kerri Leech Head of Long WALE REIT Finance Charter Hall Long WALE REIT T: +61 2 8651 9347 E: kerri.leech@charterhall.com.au Ben Ellis Deputy Fund Manager Charter Hall Long WALE REIT T: +61 2 8651 9350 E: ben.ellis@charterhall.com.au Philip Cheetham Head of Listed Investor Relations Charter Hall Group T: +61 2 8651 9214 E: philip.cheetham@charterhall.com.au IMPORTANT NOTICE & DISCLAIMER This presentation ("Presentation") has been prepared by and is the sole responsibility of Charter Hall WALE Limited (ABN 20 610 772 202, Australian Financial Services Licence Number 486721) ( Responsible Entity ) as the proposed responsible entity for each of Charter Hall Direct Industrial Fund (ARSN 144 613 641), LWR Finance Trust and Franklin Street Property Trust (which will collectively comprise the Long WALE REIT ). It is a presentation of general background information and the Long WALE REIT s activities as at 31 December 2017 unless otherwise stated. It is a summary and does not purport to be complete. It is not intended to be relied upon as advice to investors or potential investors and does not take into account the investment objectives, financial situation or needs of any particular investor. A reader should, before making any decisions in relation to their investment or potential investment in the Long WALE REIT, seek their own professional advice. This presentation is not an offer or invitation for subscription or purchase of securities or other financial products. Indications of, and guidance on, future earnings and financial position and performance are forward-looking statements. Due care and attention has been used in the preparation of forward looking statements. Such forward-looking statements are not guarantees of future performance and involve known and unknown risks, uncertainties, and other factors, many of which are beyond the control of the Long WALE REIT, that may cause actual results to differ materially from those expressed or implied in such statements. There can be no assurance that actual outcomes will not differ materially from those expressed or implied in such statements. There can be no assurance that actual outcomes will not differ materially from these statements. All information herein is current as at 31 December 2017 unless otherwise stated, and all references to dollars ($) or A$ are Australian Dollars unless otherwise stated. 28
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