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A-REIT

Survey 2012


2

CONTENTS

Contents 1. Getting the inside information............................... 3 2. top 3 ranked A-reits................................................... 4 3. Survey background..................................................12 Participants............................................................................................14 Ranking Criteria.....................................................................................15 Survey Period ........................................................................................15 4. Sector review............................................................ 16 Overview................................................................................................18 Returns...................................................................................................19 Volatility.................................................................................................21 5. survey findings........................................................ 22 Results – Financial Ranking Metrics.................................................. 24 Results – Investment Ranking Metrics.............................................. 24 Sector Composition............................................................................. 25 Property Valuations............................................................................. 26 Merger and Acquisition Activity........................................................ 27 Sector Gearing...................................................................................... 28 Sources of Debt Funding..................................................................... 29 Cost of Borrowings.............................................................................. 29 Location of Property Assets................................................................ 30 Weighted Average Lease Expiry..........................................................31 6. overall rankings..................................................... 32 7. detailed survey results........................................... 34 8. EXPLANATION OF CRITERIA AND RANKINGS................44 Financial Criteria..................................................................................44 Investment Criteria..............................................................................44 Method of Ranking.............................................................................. 45 9. corporate finance at BDO....................................... 46 Key Contacts......................................................................................... 47 Achievements.......................................................................................48 About BDO........................................................................................... 49 10. Disclaimer................................................................... 50 11. glossary......................................................................51


GETTING THE INSIDE INFORMATION

3

1. Getting the inside information The BDO Corporate Finance Team is pleased to present the 18th edition of the BDO A-REIT Survey. The 2012 Survey covers the 12 month period ending 30 June 2012, a year in which the A-REIT sector recorded an 11% total return and outperformed the broader market following a long period of underperformance. The risk profile of the Sector has reduced significantly since the GFC which saw the Sector lose 70% of its value. A-REIT managers have repaired the balance sheets and reduced the gearing of a number of entities, exited many risky investments, reduced their exposure to offshore assets and restored distribution payout ratios to more appropriate levels. In an uncertain investment environment, those A-REITs that have de-risked themselves are an attractive investment proposition, given the quality of the assets that they own, and the visibility they offer around future earnings and distributions. The major A-REITs are well positioned to withstand any future economic downturn, and should perform strongly if and when a sustained property recovery eventuates. However, at the smaller end of the spectrum, a number of A-REITs have yet to adequately resolve issues around gearing and underperforming assets. These A-REITs will continue to be subject to investor uncertainty and remain marked down by the market.

KEY FINDINGS • 29 of 36 entities surveyed recorded a positive total return for the year • The Property Index outperformed the All Ordinaries by 18% in FY12 • Volatility of the Property Index was lower than the All Ordinaries at 30 June 2012 • Average increase in property values of 0.5% • Entities are still on average trading at a discount to NTA (22%) but this discount has decreased since 2011 (23%) and 2010 (32%)

The year ahead therefore represents another interesting (and hopefully positive) year for the Sector. On behalf of our national Corporate Finance team, we congratulate the winner of the 2012 Survey, Ingenia Communities Group. We hope you enjoy reading the 2012 Survey and we wish you all the best for 2013. Best regards

Sebastian Stevens Partner, Corporate Finance

A-REIT SURVEY 2012


4

TOP 3 RANKED A-REITs

2. top 3 ranked A-reits


TOP 3 RANKED A-REITs

5

Top 3

Ranked entities highlight the diversity of the sector

ingenia

Ingenia Communities Group ranked number one on the back of a strong increase in NTA

growthpoint Growthpoint Properties Australia ranked number two following a period of solid operating performance

westfield

The high quality global portfolio of Westfield Group saw it ranked number three

A-REIT SURVEY 2012


6

TOP 3 RANKED A-REITs

Ingenia Communities Group Ingenia Communities Group (INA – formerly ING Real Estate Community Living Group) owns, manages and develops a diversified portfolio of seniors housing communities. The stapled group has total look-through assets under management of $429m with operations located predominately in Australia and the United States. INA’s securities performed strongly in the 12 months to 30 June 2012, with a total one year return of 74%. Included in this total return was a distribution of 0.5 cents per security – the first time INA has declared a distribution since 2008. Overall look-through gearing for INA has reduced from 69% in FY11 to 52% in FY12. This was largely driven by the sale of INA’s highly geared US non-New York assets in November 2011, coupled with the positive impact of a substantial valuation uplift from INA’s New York portfolio. The valuation uplift of $30m in INA’s New York portfolio was principally driven by increased investor demand for quality, yield-driven seniors housing assets as well as the strong increase in occupancy rates over the year.

Key highlights of INA’s performance in FY12 include: • INA’s net profit increased to $34m from $13m in FY11 • A 31% increase in its net asset value • A one year return of 74%, the second highest one year return in the Survey, and a 67% return over the last three years, the second highest three year return in the Survey.

A-REIT SURVEY 2012


TOP 3 RANKED A-REITs

Having rebuilt the Group from the precarious position of several years ago, security holders can be assured that the Board and management will continue to exercise extreme diligence in the allocation of capital. We will continue our rigorous assessment of internal and external growth opportunities while maintaining a balance with a possible buyback to security holders. Simon Owen CEO

74%

One year return

100%

Tax deferred distribution

11

Years WALE

31%

increase in NTA per security

7


8

TOP 3 RANKED A-REITs

Growthpoint Properties Australia Growthpoint Properties Australia (GOZ) owns a diversified portfolio of 41 modern, well leased office and industrial properties with a book value of $1.4b. During FY12 GOZ acquired, or contracted to acquire, six properties, for a total price of $346m (before transaction costs), at an average initial yield of 8.9%.

Key highlights of growthpoint’s performance in FY12 include: • A very high portfolio occupancy of 99% and a WALE of 7.2 years • A total return of 21.6% for FY12 and 19.7% for the three years to 30 June 2012 • The GOZ security price has traded at a premium to its NTA since January 2012.

By continuing its steady growth and providing a stable and growing distribution yield, Growthpoint Properties Australia has further established itself as a consistent, income producing investment, despite turbulent financial markets. Timothy Collyer Managing Director

A-REIT SURVEY 2012


TOP 3 RANKED A-REITs

9

22% One year return

17.6

Cents full year distribution

100% Tax deferred distribution

7.2

years wale

A-REIT SURVEY 2012


10 TOP 3 RANKED A-REITs

Westfield Group Westfield Group (WDC) is Australia’s largest REIT, with total assets as at 30 June 2012 of $34b. WDC has interests in 109 shopping centres across Australia (42), the United States (47), the United Kingdom (5), Brazil (4) and New Zealand (11), containing approximately 24,000 individual retail outlets. FY12 was a period of strong operating performance for WDC with income growth and comparable specialty sales growth in each of its operating regions, reflecting the high quality of WDC’s portfolio globally. Global occupancy levels increased to 97.5%.

A-REIT SURVEY 2012

We are confident in the future of the Group’s business model and opportunities for growth. We continue to pursue our strategic plan focussed on investing and developing world class iconic retail destinations in major cities globally. Peter Lowy and Steven Lowy AM co-CEOs


TOP 3 RANKED A-REITs

11

16%

One year return

48.95 Cents full year distribution

24% premium to nta

32% gearing

Key highlights of westfield group’s performance in FY12 include: • Being one of three entities that traded at a premium to NTA through FY12 (24%) • Maintaining a strong balance sheet with gearing at 32% and available liquidity of $7b • Reporting a small increase of 1% in its NTA through the year.

A-REIT SURVEY 2012


12 SURVEY BACKGROUND

3. Survey background


SURVEY BACKGROUND 13

36

Participants included in the 2012 Survey

$138B

Combined assets of participants

56%

Of the entities surveyed are classified as diversified

A-REIT SURVEY 2012


14 SURVEY BACKGROUND

Participants The 2012 Survey incorporates entities within the A-REIT sector and listed on the Australian Securities Exchange as at 30 June 2012. Thirty-six entities with combined total assets of $138b have been included in the 2012 Survey. Entities that have been classified as property developers, or have market capitalisations of less than $20m, have been excluded from the 2012 Survey. Each year the eligibility of participants for inclusion in the BDO A-REIT Survey is reassessed. ENTITY NAME

SIZE1 SUB-SECTOR

Abacus Property Group

2,107 Diversified

ALE Property Group Aspen Group

848 Diversified 587 Diversified

Astro Japan Property Group

1,322 Diversified

Australand Property Group

3,997 Diversified

Australian Education Trust

358 Office

Brookfield Prime Property Fund

843 Office

Bunnings Warehouse Property Trust Carindale Property Trust

1,335 Retail 673 Retail

Centro Retail Australia

5,097 Retail

CFS Retail Property Trust

8,434 Retail

Challenger Diversified Property Group

880 Diversified

Charter Hall Group

878 Diversified

Charter Hall Retail REIT

1,945 Retail

Commonwealth Property Office Fund

3,714 Office

Cromwell Property Group

1,838 Diversified

Dexus Property Group

7,364 Diversified

Galileo Japan Trust Generation Healthcare REIT

792 Diversified 208 Diversified

Goodman Group

8,220 Industrial

GPT Group

9,001 Diversified

Growthpoint Properties Australia

1,607 Diversified

IEF Real Estate Entertainment Group

239 Diversified

Ingenia Communities Group

458 Diversified

Investa Office Fund

2,503 Office

Mirvac Group

8,411 Diversified

Mirvac Industrial Trust

227 Industrial

Multiplex European Property Fund

337 Retail

Real Estate Capital Partners USA Property Trust

129 Retail

RNY Property Trust Stockland Property Group Thakral Holdings Group Trafalgar Corporate Group Trinity Limited

474 Office 14,534 Diversified 1,064 Diversified 97 Office 124 Diversified

Westfield Group

33,670 Retail

Westfield Retail Trust

13,340 Retail

1. Total reported assets as at 30 June 2012 (millions)


SURVEY BACKGROUND 15

Ranking Criteria

Survey Period

Explanation of the criteria used in the 2012 Survey together with the methods of weighting and ranking is included at Section 8.

The 2012 Survey only takes into account information disclosed in each entity’s annual report for the year ended 30 June 2012. For those entities with 31 December year ends, half year reports to 30 June 2011 and 2012 have been used together with the annual report to 31 December 2011 to create comparable results for the year ended 30 June 2012.

A summary of the criteria and their weightings for the 2012 Survey is provided below. Ranking Criteria

Weighting %

Operating Cash Yield (on net assets)

15

Distribution Yield

10

Tax Deferred Distribution Percentage

10

Movement in NTA

15

Premium/Discount to NTA

15

Total Financial Criteria

65

Total Return (One Year)

20

Total Return (Three Year)

10

Volume of Trading on ASX

5

Total Investment Criteria

35

TOTAL OVERALL

100 A-REIT SURVEY 2012


16 SECTOR REVIEW

4. Sector review


SECTOR REVIEW

17

11%

Total return of Property Index for FY12

67%

Property Index remains 67% off its 2007 highs

81%

of Entities recorded positive one year returns

A-REIT SURVEY 2012


18 SECTOR REVIEW

Overview The A-REIT sector performed strongly in the 12 months to 30 June 2012. Following the GFC, the risk profile of the Sector has now been significantly reduced. Capital management initiatives have helped repair many of the previously over-extended balance sheets, while many A-REITs have now exited their more risky operations and reduced their exposure to offshore investments. Distribution payout ratios have been restored to more appropriate levels. Those A-REITs that have de-risked themselves now represent an attractive defensive investment proposition, given their focus on high quality property assets and their improving distributions. As noted on page 31 of the Survey, the weighted average lease expiry for the A-REITs surveyed is 6.2 years, which provides a high level of certainty around future cash flows and distributions.

Several entities are now trading at a premium to their NTA, including Goodman Group, which traded at an average premium over its NTA of 31% throughout FY12, and Westfield Group at 24%. During the 12 months to 30 June 2012, a number of A-REITs undertook security buy-backs, often at large discounts to NTA. This has had the impact of increasing earnings and distributions per security, and has generally been looked on favourably by the market. Following on from the significant acquisition activity detailed in the 2011 Survey, 2012 saw a number of corporate acquisitions announced and completed. Again, offshore acquirers were at the forefront, taking advantage of the opportunity to acquire high quality assets at less than NTA. In particular, we farewell the winner of our 2011 Survey, Charter Hall Office REIT, which was acquired by a consortium led by Reco Ambrosia Pte Ltd (an affiliate of the Government of Singapore Investment Corporation Pte Ltd) and delisted from the ASX on 1 May 2012. The lack of property development activity undertaken during and since the GFC has resulted in limited new property supply entering the market place. With interest rates falling, and potentially trending lower still, and A-REITs forecasting increasing distributions, the near term future of the Sector looks positive.


SECTOR REVIEW 19

returns The performance of the A-REIT sector (based on the Property Index) relative to the All Ordinaries for the period between February 2007 (the date when the Property Index reached its all time high) and 30 June 2012, is set out below. Capital Returns of Property Index and All Ordinaries Index – February 2007 to June 2012 ALL ORDINARIES S&P/ASX 200 PROPERTY INDEX 100%

2007 Source: Bloomberg

2008

2009

2010

2011

2012


20 SECTOR REVIEW

The one, three and five year total annual (capital and dividend) returns to 30 June 2012 for each of the A-REITs that are members of the Property Index are set out in the table below. TOTAL ANNUAL RETURNS FOR PROPERTY INDEX MEMBERS TO 30 JUNE 2012

1 year return

3 year return

5 year return

SGP

-2.8%

5.3%

-10.5%

GPT Group

GPT

10.3%

17.0%

-24.7%

Mirvac Group

MGR

9.4%

12.5%

-19.4%

Dexus Property Group

DXS

12.2%

14.1%

-6.8%

Australand Property Group

ALZ

-6.2%

12.3%

-12.4%

Charter Hall Group

CHC

14.6%

11.6%

-20.0%

Abacus Property Group

ABP

-4.4%

10.7%

-19.7%

Westfield Group

WDC

16.3%

8.8%

-3.5%

Westpac Retail Trust

WRT

12.8%

n.a.

n.a.

CFS Retail Property Trust

CFX

14.8%

13.0%

4.6%

Centro Retail Australia

CRF

n.a.

n.a.

n.a.

Charter Hall Retail REIT

CQR

11.8%

15.8%

-10.1%

Bunnings Warehouse Property Trust

BWP

10.3%

12.6%

3.4%

Commonwealth Property Office Fund

CPA

14.9%

13.6%

-3.3%

Investor Office Fund

IOF

12.5%

21.5%

-8.6%

Goodman Group

GMG

A-REIT Name

ASX Code

Stockland Trust Group

S&P/ASX 200 (GICS) Property Accumulation Index

10.0%

36.8%

-29.2%

11.0%

12.3%

-12.3%

Source: UBS

• The total return (capital and dividends) for the Property Index for the 12 months to 30 June 2012 was 11.0%. The equivalent return for the S&P/ASX 200 All Ordinaries Index was negative 6.7%. • Despite the strong performance during FY12, the Sector has not recovered relative to other equity indices since the GFC. Whilst the Property Index has somewhat recovered from its lows of March 2009 (when it was approximately 80% below its February 2007 high), at 30 June 2012 it remained 67% off its high. • The Property Index has averaged a total annual return of negative 12.3% over the last five years (being the period 1 July 2007 to 30 June 2012). Only two of the A-REITs that comprise the Property Index (CFS Retail Property Trust and Bunnings Warehouse Property Trust) have recorded a positive return over this period. • Westfield, Australia’s largest REIT (which comprises 29% of the Property Index) recorded a strong 16.3% return for the year ending 30 June 2012, outperforming the Property Index. • Seven entities recorded negative returns for the period (2011 Survey: 10).

A-REIT SURVEY 2012


SECTOR REVIEW 21

Volatility The volatility of the Property Index compared to the All Ordinaries (for the period between February 2007 and 30 June 2012) is set out below. Volatility has been calculated on an annualised rolling one month ‘Close-Close’ basis. • Between February 2007 and November 2008, the Sector’s volatility increased measurably as the real risks of the Sector became apparent and it was exposed to the full impact of the GFC. • Volatility reached its peak in October 2008 when the Property Index moved more than 5% in a day on 13 occasions out of 23 trading days, exhibiting significantly more volatility than the All Ordinaries. • Volatility has subsequently declined as recapitalisations and other capital management initiatives have reduced the Sector’s perceived risk, although there was an uptick in volatility during the middle of 2011. • The volatility of the Sector is now generally consistent with the volatility of the All Ordinaries. Volatility of All Ordinaries and Property Index

ASX PROPERTY 200 INDEX

ASX ALL ORDINARIES

120%

80%

40%

2007

2009

2012

A-REIT SURVEY 2012


22 SURVEY FINDINGS

5. survey findings


SURVEY FINDINGS 23

22%

Median discount to NTA

0.5%

Average increase in property values

40%

Average gearing of survey entities

seven

Entities did not pay a distribution during FY12

A-REIT SURVEY 2012


24 SURVEY FINDINGS

Results – Financial Ranking Metrics Ranking Criteria Cash Yield on Weighted Average Net Assets

High – FY12

Low – FY12

Median – FY12

Median – FY11

25.8%

-11.1%

6.5%

6.7%

Distribution Yield

106.3%

0%

6.9%

6.2%

Tax Deferred Distributions

100.0%

0%

34.0%

26.6%

Movement in NTA

36.7%

-68.6%

-1.8%

0.5%

Premium/(Discount) to NTA

30.9%

-94.9%

-22.3%

-23.3%

The 2012 Survey has again presented some very interesting results in the financial criteria: • The median operating cash yield has remained relatively steady compared to FY11. Managers continue to undertake active portfolio management to improve rental yields. • Seven entities did not pay a distribution during FY11 (compared with 12 from the previous year), resulting in an increase in the median distribution return. • Following an increase in the NTA in FY11, the median NTA has fallen slightly in FY12. A major contributor to this fall in NTA was the impact of lower interest rates which in many instances generated a non-cash mark-to-market loss on the interest rate swaps (derivatives) held by entities. This also had the effect of increasing the balance sheet liability for derivatives, resulting in a lower NTA. • The Sector continues to trade at a substantial discount to NTA (median discount of 22%). As security prices have increased, this discount has reduced slightly compared to the FY11 discount (23%).

Results – Investment Ranking Metrics Ranking Criteria

High – FY12

Low – FY12

Median – FY12

Median – FY11

Total Return (One Year)

189.5%

-44.1%

12.3%

12.5%

Total Return (Three Year)

69.2%

-41.4%

14.7%

-10.2%

Volume of Trading on ASX

292.8%

1.8%

35.8%

43.3%

The median total return (capital and dividends) for FY12 of the entities surveyed was 12.3%, extending the recovery in Sector returns following a 12.5% median return for surveyed entities in FY11. This reflects the increasing confidence in the Sector after initiatives undertaken to reduce the Sector’s perceived risk. A-REITs are an attractive investment proposition, given the quality of the assets that they own, and the visibility they offer around future earnings and distributions. • 29 entities out of 36 achieved positive returns in FY12 (81%), with 75% of entities achieving positive returns in FY11. • Mirvac Industrial Trust (MIX) achieved the highest return for the year (190%), with its unit price rising from 3.8 cents at 30 June 2011 to 11.0 cents at 30 June 2012 in recognition of management’s stabilisation of MIX’s capital base. • Ingenia Communities Group (74% one year return) also performed strongly in FY12. • The median three year return has increased from negative 10.2% to 14.5%, while 34 entities recorded positive three year returns, a large increase from only ten entities in FY11. • In 2012, liquidity was at a more historically consistent level. Trading volumes evident in previous periods, associated with a high number of sellers in the market and an increased number of capital raisings, no longer had an impact on liquidity.

A-REIT SURVEY 2012


SURVEY FINDINGS 25

Sector Composition The combined market capitalisation of all 36 Sector participants totalled $79b at 30 June 2012. The 16 entities that comprise the leading A-REIT Property Index (the S&P/ASX200 Property Index) make up 94% ($75b) of this total. The Sector continues to be dominated by Westfield Group which represented nearly 29% of the Property Index as at 30 June 2012. However, we note that this is a substantial reduction from 30 June 2009 when Westfield Group represented almost 46% of the Property Index. The reduction in Westfield Group’s weighting is due to the divestment by Westfield Group of various assets into the Westfield Retail Trust, as well as the strong recovery in the security prices of other Property Index members. The next largest entities were Westfield Retail Trust, which comprised 12% of the Property Index, and Stockland Trust Group, which comprised 9%. The 20 non-Property Index members contribute $4b (6%) to the combined market capitalisation of the Sector at 30 June 2012. Set out below is the proportion of the Sector’s total market capitalisation that each sub-sector (retail, industrial, commercial and diversified) comprises. Given that the retail sub-sector has Westfield Group and Westfield Retail Trust as members, this sub-sector contributes $41b (51%) to the Sector’s market capitalisation. Composition of Property Index by Entity other

westfield group

mirvac group dexus property group CFS retail property trust GPT GROUP

westfield retail trust stockland trust group

goodman group

Composition of Sector by Sub-sector industrial diversified

Retail

Office

A-REIT SURVEY 2012


26 SURVEY FINDINGS

Property Valuations In our 2011 Survey we noted that following two years of downward pressure on property valuations, there was increasing evidence to suggest that valuations and capitalisation rates had stabilised. The findings from our 2012 Survey indicate that this period of stabilisation has continued with values increasing on average by 0.5% during the 12 months to 30 June 2012. The figure below illustrates the distribution of valuation movements of the entities surveyed. Of the 36 entities surveyed, 22 entities recorded valuation increases with ten experiencing valuation decreases (four had no movements in their property valuations). Retail and diversified properties performed the strongest throughout FY12. Aspen Group recorded a 12% increase in the value of its investment portfolio during the financial year (a revaluation increase of $42m) resulting from strong rental revisions and new leasing initiatives. Carindale Property Trust’s main asset, a 50% interest in the Westfield Carindale shopping centre in Brisbane, was independently valued as at 30 June 2012 at $669m, reflecting a revaluation surplus of approximately $65m (11%). The property was redeveloped during FY12 with the valuation undertaken on the basis that the redevelopment had been completed by year end – the redevelopment was expected to reach practical completion on 9 August 2012. Number of Entities by Valuation Increments with Prior Year Comparison

2011

2012

1.5% 2 < -10%

1

4

1

-10% > -5%

A-REIT SURVEY 2012

9

12

-5% > = 0%

17

19

0% > 5%

3

8 > 5%

AVERAGE PROPERTY RE-VALUATION RETAIL (2011: -6%)

0%

AVERAGE RE-VALUA


%

E PROPERTY ATION OFFICE (2011: 2.3%)

SURVEY FINDINGS 27

Merger and Acquisition Activity We noted in the FY11 Survey the large discounts to NTA experienced by the smaller capitalised REITs contributed to an increase in acquisition activity and consolidation at that end of the Sector. During FY12, the number of merger and acquisition transactions within the Sector declined, however the overall average transaction size increased as the transaction activity focussed primarily on mid-cap REITs. Despite the sustained impact of the high Australian dollar, acquisitions were again led by foreign investment, in particular from North America. Overseas buyers have been attracted to Australian REITs for two reasons. Firstly, some buyers have capitalised on depressed Security prices in order to acquire foreign real estate in recovering markets at below asset valuation. Secondly, Australian real estate remains attractive to overseas investors due to the stable economy, and the underlying quality of assets with high occupancies and strong tenant registers. Major Sector acquisitions announced and/or completed during FY12 are detailed below. In addition to those acquisitions listed, we note the merger of Centro Properties Group and Centro Retail Trust into a new entity, Centro Retail Australia. This merger resulted in a resolution to the debt re-financing issues that had been facing the Centro entities. Target

Acquirer

Location of Date Date Acquirer Announced Completed

EDT Retail Trust

EPN Group

US

May 2011

September 2011

Charter Hall Office REIT

Reco Ambrosia Pte Ltd & other investors

Singapore

August 2011

April 2012

Tishman Speyer Office Fund

US Office Holdings

US

February 2012

March 2012

-27%

Canada

April 2012

September 2012

-16%

Thakral Holdings Brookfield Asset Group Management

-0.5%

AVERAGE PROPERTY RE-VALUATION DIVERSIFIED (2011: 0.3%)

Discount to NTA -17% -4%

-0.5%

AVERAGE PROPERTY RE-VALUATION INDUSTRIAL (2011: 3.9%)

A-REIT SURVEY 2012


28 SURVEY FINDINGS

Sector Gearing Average gearing across all 2012 Survey participants has decreased substantially during FY12 with the average gearing falling to 40% from the FY11 level of 47%. The primary reason for such a large decrease is the removal of a number of highly geared entities from the FY12 Survey (including Tishman Speyer Office Fund, EDT Retail Trust and the Centro entities) that had skewed the average level of gearing in recent years. There remains a clear distinction between the gearing levels of the larger and smaller REITs. Through a combination of capital raisings, asset sales and other capital management initiatives, a number of the more established entities in the Sector took the opportunity to repair their balance sheets during 2009 and 2010 and reduce gearing levels. REITs with market capitalisations of over $1b now have average gearing levels of 25%. (Gearing is defined as net debt (interest bearing liabilities less cash) divided by total assets). However, smaller entities in the Sector found accessing liquidity (both equity and debt) more difficult, and a number of these entities continue to have very leveraged balance sheet positions. A-REITs with market capitalisations of less than $1b now have average gearing levels of 47%.

Sector Gearing History (Average of Participants) 50%

40%

30%

20%

10%

0% 1998

2005

2012

Average Gearing by Sub-Sector with Prior Year Comparison 2011

2012

The smaller entities have not been able to raise sufficient equity capital, or had lower quality assets that were not easily able to be offloaded (or were sold at a large discount to valuation), to offset the effect of declining asset values on gearing. This level of gearing is simply not sustainable in the medium to long term, given current investor and bank sentiment.

53.6% 35.4% RETAIL A-REIT SURVEY 2012

47.8%

42.5%

OFFICE

43.1%

40.5%

DIVERSIFIED

50.8% 44.7% INDUSTRIAL


SURVEY FINDINGS 29

Sources of Debt Funding

Cost of Borrowings

A variety of debt funding sources are important to A-REITs in order to diversify their sources of debt, and to lower their reliance on mainstream banks. However, many sources of funding are only accessible to the larger REITs.

The cost of an entity’s borrowings reflects a number of factors, including the lender’s assessment of the borrower’s risk and of the quality and location of assets securing the borrowings, and the borrower’s gearing and interest coverage. Overall, during FY12 the Sector’s average weighted average interest rate (being a weighted average of the cost of all finance facilities of an entity) reduced to 6.1%, reflecting the lower funding cost environment.

As set out in the figure below, the majority of debt is bank funded. For many of the smaller REITs, this represents the only source of funding available. Rated medium term notes continue to be an increasingly popular debt source, but are limited to a minority of A-REITs that have been able to secure suitable institutional ratings. Westfield Group and Stockland Trust Group are two of the larger holders of medium term notes. CMBS (mortgage backed securities that are then pooled) funding is limited to only four REITs (primarily with US asset exposure), and has been reducing in size over recent years.

2011

50.5%

BANK DEBT

28.5% 34.8% MEDIUM TERM NOTES

4.6%

1.4%

CMBS

The retail and diversified sub-sectors recorded the highest weighted average interest rates of 6.2%. The industrial sub-sector had the lowest result of 4.5%.

Weighted Average Interest Rate by Sub-Sector with Prior Year Comparison

Major Funding Source with Prior Year Comparison

57.7%

Entities with operations in the United States and Japan continue to access borrowing facilities at a far cheaper cost than Australian based A-REITs.

2011

2012

9.2%

13.3%

OTHER

6.6%

6.2%

RETAIL

6.3%

6.1%

OFFICE

6.1%

6.2%

DIVERSIFIED

5.7%

2012

4.5%

INDUSTRIAL A-REIT SURVEY 2012


30 SURVEY FINDINGS

Location of Property Assets Following a strong period of global expansion up to 2007, the GFC has resulted in a retreat from abroad by the sector, as many REITs suffered large declines in the values of their overseas investments.

Location and Value of Property Assets

Europe 5%

New Zealand 1%

US 11% Australia 81%

However, two large-cap REITs, Westfield Group and Goodman Group, have retained a global model and continue to have significant exposures in America, Europe and Asia. Detailed opposite is a breakdown of property assets by location over the five years to 30 June 2012.

Asia 3%

Australia

AUSTRALIA

US

EUROPE

ASIA

NZ

100%

The proportion of property assets located in Australia has increased significantly in recent years to 81% at 30 June 2012. This compares with only 64% of assets being located in Australia at 30 June 2007. There was again a decline in the proportion of international assets during FY12, reflecting both the scaling back of international operations (and in particular US assets) and the takeovers of a number of entities with US assets (Tishman Speyer Office Fund, EDT Retail Trust and Charter Hall Office REIT). Notwithstanding this decline, approximately 11% of property assets remain located in the US. Ten entities continue to own property assets in the US, totalling almost $9b. A-REIT SURVEY 2012

0%

FY12

FY11

FY10

FY09

FY08

FY07


SURVEY FINDINGS 31

Weighted Average Lease Expiry The weighted average term to expiry for leases is a measure of the security and stability of future tenure and income; however a shorter term to expiry in some situations may be viewed as a positive, as it allows for earlier rental re-negotiations to take advantage of any market movements. The average WALE of those entities surveyed increased in FY12 to 6.2, up from 5.6 in FY11. The retail sub-sector had the highest average lease expiry of 6.9 years, as a result of trusts such as Charter Hall Retail Fund (11 years), Bunnings Warehouse Property Trust (eight years) and Multiplex European Property Fund (eight years) having WALEs significantly above the Sector average. The sub-sector with the shortest WALE is industrial at 4.9 years.

WALE BY SUB-SECTOR WITH PRIOR YEAR COMPARISON 2011

6.3

6.9 RETAIL

6.2

5.6 OFFICE

6.8

6.2

DIVERSIFIED

4.4

2012

4.9

INDUSTRIAL

A-REIT SURVEY 2012


32 OVERALL RANKINGS

6. overall rankings

ingenia

Ingenia Communities Group ranked number one on the back of a strong increase in NTA

growthpoint Growthpoint Properties Australia ranked number two following a period of solid operating performance

westfield

The high quality global portfolio of Westfield Group saw it ranked number THREE


OVERALL RANKINGS 33

OVERALL RANKINGS rank Entity 1

Ingenia Communities Group

2

Growthpoint Properties Australia

3

Westfield Group

4

Australian Education Trust

5

Charter Hall Group

6

GPT Group

7

Multiplex European Property Fund

8

Trafalgar Corporate Group

9

ALE Property Group

10

Cromwell Property Group

11

Goodman Group

12

Mirvac Industrial Trust

13

Generation Healthcare REIT

14

Astro Japan Property Group

15

Charter Hall Retail REIT

16

Investa Office Fund

17

CFS Retail Property Trust

18

Carindale Property Trust

19

Abacus Property Group

20

Dexus Property Group

21

Westfield Retail Trust

22

Commonwealth Property Office Fund

23

Thakral Holdings Group

24

Aspen Group

25

Australand Property Group

26

Centro Retail Australia

27

Bunnings Warehouse Property Trust

28

Trinity Limited

29

Challenger Diversified Property Group

30

Mirvac Group

31

RNY Property Trust

32

Stockland Property Group

33

Brookfield Prime Property Fund

34

Galileo Japan Trust

35

IEF Real Estate Entertainment Group

36

Real Estate Capital Partners USA Property Trust A-REIT SURVEY 2012


34 DETAILED SURVEY RESULTS

7. detailed survey results

189%

Highest one year return achieved by mirvac industrial trust

69%

Highest three year return achieved by Australian Education Trust

three

Entities traded at a premium to NTA

16

Entities recorded positive nta movements


DETAILED SURVEY RESULTS 35

OPERATING CASH YIELD rank Entity

-10%

0%

1

Multiplex European Property Fund

25.8%

2

Galileo Japan Trust

15.8%

3

Westfield Group

13.6%

4

Astro Japan Property Group

13.2%

5

Australand Property Group

12.5%

6

Cromwell Property Group

10.7%

7

Charter Hall Group

10.3%

8

Growthpoint Properties Australia

8.9%

9

RNY Property Trust

8.8%

10

Charter Hall Retail REIT

8.5%

11

Australian Education Trust

8.5%

12

Thakral Holdings Group

8.0%

13

Abacus Property Group

7.7%

14

ALE Property Group

7.6%

15

Bunnings Warehouse Property Trust

7.3%

16

Westfield Retail Trust

7.1%

17

Challenger Diversified Property Group

6.6%

18

Dexus Property Group

6.5%

19

Commonwealth Property Office Fund

6.5%

20

GPT Group

6.1%

21

Generation Healthcare REIT

5.8%

22

CFS Retail Property Trust

5.7%

23

Mirvac Group

5.6%

24

Aspen Group

5.5%

25

Goodman Group

5.2%

26

Mirvac Industrial Trust

4.8%

27

Stockland Property Group

4.7%

28

Carindale Property Trust

4.5%

29

Investa Office Fund

4.2%

30

Ingenia Communities Group

3.9%

31

Trafalgar Corporate Group

3.7%

32

IEF Real Estate Entertainment Group

2.1%

33

Centro Retail Australia

1.0%

34

Trinity Limited

0.4%

35

Real Estate Capital Partners USA Property Trust

-5.3%

36

Brookfield Prime Property Fund

-11.1%

10%

20%

30%

A-REIT SURVEY 2012


36 DETAILED SURVEY RESULTS

DISTRIBUTION RETURN ON INVESTMENT 0%

rank Entity 1

Multiplex European Property Fund

106.3%

2

Trafalgar Corporate Group

73.1%

3

Australian Education Trust

10.7%

4

Cromwell Property Group

10.2%

5

Growthpoint Properties Australia

8.9%

6

Charter Hall Group

8.8%

7

Generation Healthcare REIT

8.6%

8

Australand Property Group

8.5%

9

Abacus Property Group

8.4%

10

Bunnings Warehouse Property Trust

8.3%

11

Charter Hall Retail REIT

8.1%

12

Challenger Diversified Property Group

8.1%

13

ALE Property Group

8.0%

14

Stockland Property Group

7.6%

15

Centro Retail Australia

7.5%

16

CFS Retail Property Trust

7.3%

17

Aspen Group

7.2%

18

Investa Office Fund

6.9%

19

Mirvac Group

6.9%

20

Carindale Property Trust

6.7%

21

Commonwealth Property Office Fund

6.4%

22

Astro Japan Property Group

6.3%

23

Dexus Property Group

6.2%

24

GPT Group

5.8%

25

Westfield Group

5.8%

26

Goodman Group

5.5%

27

Westfield Retail Trust

3.7%

28

Ingenia Communities Group

3.0%

29

Brookfield Prime Property Fund

2.1%

30

Galileo Japan Trust

0.0%

31

Trinity Limited

0.0%

32

Thakral Holdings Group

0.0%

33

RNY Property Trust

0.0%

34

Real Estate Capital Partners USA Property Trust

0.0%

35

Mirvac Industrial Trust

0.0%

36

IEF Real Estate Entertainment Group

0.0%

A-REIT SURVEY 2012

20%

40%

60%

80%

100%

120%


DETAILED SURVEY RESULTS 37

TAX ADVANTAGED DISTRIBUTION 0%

rank Entity 1

ALE Property Group

100%

2

Trafalgar Corporate Group

100%

3

Ingenia Communities Group

100%

4

Growthpoint Properties Australia

100%

5

GPT Group

100%

6

Generation Healthcare REIT

100%

7

Astro Japan Property Group

100%

8

Aspen Group

100%

9

Charter Hall Group

85.3%

10

Brookfield Prime Property Fund

75.0%

11

Cromwell Property Group

73.1%

12

Abacus Property Group

71.6%

13

Carindale Property Trust

58.0%

14

Charter Hall Retail REIT

48.8%

15

Westfield Group

43.7%

16

CFS Retail Property Trust

40.9%

17

Australian Education Trust

40.6%

18

Australand Property Group

35.2%

19

Investa Office Fund

32.8%

20

Westfield Retail Trust

27.5%

21

Dexus Property Group

26.2%

22

Commonwealth Property Office Fund

14.9%

23

Bunnings Warehouse Property Trust

24

Challenger Diversified Property Group

8.7%

25

Multiplex European Property Fund

8.0%

26

Goodman Group

6.9%

27

Centro Retail Australia

0.0%

28

Trinity Limited

0.0%

29

Thakral Holdings Group

0.0%

30

Stockland Property Group

0.0%

31

RNY Property Trust

0.0%

32

Real Estate Capital Partners USA Property Trust

0.0%

33

Mirvac Industrial Trust

0.0%

34

Mirvac Group

0.0%

35

IEF Real Estate Entertainment Group

0.0%

36

Galileo Japan Trust

0.0%

20%

40%

60%

80%

100%

10.6%

A-REIT SURVEY 2012


38 DETAILED SURVEY RESULTS

MOVEMENT IN NTA PER SECURITY rank Entity

-80%

-60%

-40%

-20%

0%

1

RNY Property Trust

36.7%

2

Trinity Limited

34.3%

3

Ingenia Communities Group

30.8%

4

Carindale Property Trust

15.1%

5

Investa Office Fund

7.5%

6

Westfield Retail Trust

5.0%

7

Commonwealth Property Office Fund

4.5%

8

Goodman Group

3.7%

9

Australian Education Trust

2.7%

10

Mirvac Group

2.5%

11

Thakral Holdings Group

2.1%

12

GPT Group

1.7%

13

Challenger Diversified Property Group

1.5%

14

CFS Retail Property Trust

0.9%

15

Westfield Group

0.8%

16

Stockland Property Group

0.8%

17

Centro Retail Australia

0.0%

18

Dexus Property Group

-1.0%

19

Australand Property Group

-2.5%

20

Bunnings Warehouse Property Trust

-2.6%

21

Charter Hall Group

-3.6%

22

Growthpoint Properties Australia

-4.0%

23

Charter Hall Retail REIT

-4.5%

24

Generation Healthcare REIT

-4.8%

25

Mirvac Industrial Trust

-5.0%

26

Astro Japan Property Group

-6.4%

27

Abacus Property Group

-6.8%

28

Cromwell Property Group

-8.2%

29

Brookfield Prime Property Fund

-11.9%

30

ALE Property Group

-12.1%

31

Galileo Japan Trust

32

IEF Real Estate Entertainment Group

-35.3%

33

Aspen Group

-38.8%

34

Trafalgar Corporate Group

-41.1%

35

Real Estate Capital Partners USA Property Trust

-51.8%

36

Multiplex European Property Fund

-68.6%

A-REIT SURVEY 2012

-17.7%

20%

40%


DETAILED SURVEY RESULTS 39

PREMIUM / (DISCOUNT) TO NTA rank Entity

-100%

-80%

-60%

-40%

-20%

0%

20%

1

Goodman Group

30.9%

2

Westfield Group

24.4%

3

Growthpoint Properties Australia

0.1%

4

Cromwell Property Group

-1.9%

5

ALE Property Group

-4.6%

6

Charter Hall Group

-5.0%

7

Bunnings Warehouse Property Trust

-5.9%

8

Charter Hall Retail REIT

-7.3%

9

CFS Retail Property Trust

-13.1%

10

Dexus Property Group

-13.6%

11

GPT Group

-13.8%

12

Stockland Property Group

-14.5%

13

Commonwealth Property Office Fund

-15.5%

14

Investa Office Fund

-17.0%

15

Aspen Group

-18.5%

16

Abacus Property Group

-18.9%

17

Centro Retail Australia

-21.3%

18

Australian Education Trust

-22.2%

19

Westfield Retail Trust

-22.4%

20

Challenger Diversified Property Group

-23.5%

21

Generation Healthcare REIT

-24.1%

22

Brookfield Prime Property Fund

-25.6%

23

Mirvac Group

-26.0%

24

Australand Property Group

-27.5%

25

Trafalgar Corporate Group

-27.8%

26

Carindale Property Trust

-30.6%

27

Trinity Limited

-34.4%

28

Multiplex European Property Fund

-35.6%

29

Thakral Holdings Group

-38.5%

30

Ingenia Communities Group

-45.3%

31

Astro Japan Property Group

-47.4%

32

Mirvac Industrial Trust

-58.0%

33

Real Estate Capital Partners USA Property Trust

-59.7%

34

RNY Property Trust

-66.9%

35

IEF Real Estate Entertainment Group

-69.4%

36

Galileo Japan Trust

-94.9%

40%

A-REIT SURVEY 2012


40 DETAILED SURVEY RESULTS

1 Year RETURN rank Entity

-50%

0%

1

Mirvac Industrial Trust

189.5%

2

Ingenia Communities Group

74.0%

3

Trinity Limited

41.7%

4

Australian Education Trust

41.6%

5

Thakral Holdings Group

40.7%

6

Multiplex European Property Fund

38.5%

7

Brookfield Prime Property Fund

28.6%

8

Growthpoint Properties Australia

21.6%

9

ALE Property Group

20.3%

10

Centro Retail Australia

19.1%

11

Westfield Group

16.3%

12

Commonwealth Property Office Fund

14.9%

13

CFS Retail Property Trust

14.8%

14

Charter Hall Group

14.6%

15

Carindale Property Trust

13.0%

16

Westfield Retail Trust

12.8%

17

Investa Office Fund

12.5%

18

RNY Property Trust

12.5%

19

Dexus Property Group

12.2%

20

Charter Hall Retail REIT

11.8%

21

Generation Healthcare REIT

10.6%

22

Bunnings Warehouse Property Trust

10.3%

23

GPT Group

10.3%

24

Goodman Group

10.0%

25

Cromwell Property Group

9.9%

26

Mirvac Group

9.4%

27

Astro Japan Property Group

8.8%

28

Challenger Diversified Property Group

8.4%

29

Trafalgar Corporate Group

7.0%

30

Aspen Group

-2.0%

31

Stockland Property Group

-2.8%

32

Abacus Property Group

-4.4%

33

Australand Property Group

-6.2%

34

Galileo Japan Trust

-17.2%

35

IEF Real Estate Entertainment Group

-35.3%

36

Real Estate Capital Partners USA Property Trust

-44.1%

A-REIT SURVEY 2012

50%

100%

150%

200%


DETAILED SURVEY RESULTS 41

3 Year RETURN rank Entity

-40%

-20%

0%

1

Australian Education Trust

69.2%

2

Ingenia Communities Group

67.0%

3

Trafalgar Corporate Group

57.5%

4

Thakral Holdings Group

53.1%

5

Multiplex European Property Fund

51.5%

6

Goodman Group

36.8%

7

Brookfield Prime Property Fund

25.2%

8

Cromwell Property Group

21.5%

9

Investa Office Fund

21.5%

10

Growthpoint Properties Australia

19.7%

11

RNY Property Trust

19.6%

12

Aspen Group

18.6%

13

GPT Group

17.0%

14

Challenger Diversified Property Group

16.9%

15

Charter Hall Retail REIT

15.8%

16

Carindale Property Trust

14.9%

17

Generation Healthcare REIT

14.8%

18

Centro Retail Australia

14.7%

19

Westfield Retail Trust

14.7%

20

ALE Property Group

14.5%

21

Dexus Property Group

14.1%

22

Commonwealth Property Office Fund

13.6%

23

CFS Retail Property Trust

13.0%

24

Bunnings Warehouse Property Trust

12.6%

25

Mirvac Group

12.5%

26

Trinity Limited

12.3%

27

Australand Property Group

12.3%

28

Mirvac Industrial Trust

11.7%

29

Charter Hall Group

11.6%

30

Abacus Property Group

10.7%

31

Westfield Group

8.8%

32

Stockland Property Group

5.3%

33

Astro Japan Property Group

4.5%

34

Galileo Japan Trust

-32.1%

35

IEF Real Estate Entertainment Group

-32.8%

36

Real Estate Capital Partners USA Property Trust

-41.4%

20%

40%

60%

80%

A-REIT SURVEY 2012


42 DETAILED SURVEY RESULTS

LIQUIDITY 0%

rank Entity 1

Centro Retail Australia

292.78%

292.8%

2

Stockland Property Group

127.65%

127.6%

3

Investa Office Fund

123.55%

123.5%

4

Commonwealth Property Office Fund

118.14%

118.1%

5

Dexus Property Group

114.20%

114.2%

6

Westfield Retail Trust

105.48%

105.4%

7

GPT Group

105.24%

105.2%

8

Mirvac Group

102.21%

102.2%

9

Westfield Group

101.78%

101.7%

10

CFS Retail Property Trust

89.45%

89.4%

11

Goodman Group

87.72%

87.7%

12

Charter Hall Group

70.52%

70.5%

13

Real Estate Capital Partners USA Property Trust

58.31%

58.3%

14

Ingenia Communities Group

54.15%

54.1%

15

Abacus Property Group

47.20%

47.2%

16

Bunnings Warehouse Property Trust

46.27%

46.2%

17

Aspen Group

42.26%

42.2%

18

Mirvac Industrial Trust

41.07%

41.0%

19

Trinity Limited

30.5%

20

Multiplex European Property Fund

29.6%

21

Astro Japan Property Group

28.9%

22

Australand Property Group

27.4%

23

Galileo Japan Trust

22.5%

24

ALE Property Group

19.3%

25

Thakral Holdings Group

15.7%

26

Generation Healthcare REIT

15.2%

27

Cromwell Property Group

14.0%

28

Australian Education Trust

14.0%

29

Charter Hall Retail REIT

11.1%

30

RNY Property Trust

10.7%

31

Trafalgar Corporate Group

7.3%

32

Carindale Property Trust

6.4%

33

Growthpoint Properties Australia

4.9%

34

Challenger Diversified Property Group

4.8%

35

Brookfield Prime Property Fund

3.2%

36

IEF Real Estate Entertainment Group

1.8%

A-REIT SURVEY 2012

50%

100%

150%

200%

250%

300%


DETAILED SURVEY RESULTS 43

A-REIT SURVEY 2012


44 EXPLANATION OF CRITERIA AND RANKINGS

8. EXPLANATION OF CRITERIA AND RANKINGS A brief explanation of each criteria used to rank REITs in the 2012 Survey is provided below. Financial Criteria Operating Cash Yield on Average Net Assets Calculated by dividing operating cashflow (including interest expense); by the average of opening and closing net assets for the period. The financial year end of the entity has been used in all cases, except for 31 December entities where 30 June 2012 figures have been sourced from half year reports. Where accounts have been prepared for a period of less than one year, the operating cash measure has been annualised. Distribution Return on Investment Calculated by dividing the distribution per Security paid for the entityâ&#x20AC;&#x2122;s financial year by the average ASX price of the Security through the year. The average ASX price is calculated on a daily closing price basis, with prices sourced from Bloomberg. Where accounts have been prepared for a period of less than one year, the distribution has been annualised. Tax Deferred Distribution Component The percentage of the total annual distribution from each entity which is tax deferred. Where this information was not disclosed in the annual report, BDO attempted to obtain the detail required from other sources.

Movement in NTA Per Security Calculated by assessing the percentage increase (or decrease) in NTA per Security over the entitiesâ&#x20AC;&#x2122; financial year by using the opening and closing figures for NTA per Security. Where an entity was listed during the year, BDO has assessed the opening NTA as being equal to the issue price. In all cases the financial year end of the entity has been used, except for 31 December year ends where we have used NTA from the 30 June 2011 and 2012 half year reports. Premium/Discount to NTA Calculated by subtracting the average of NTA per Security (being opening NTA plus closing NTA divided by two) from the average ASX price per Security, and dividing this by the average NTA per Security. We have ranked entities trading at a premium to NTA as having the highest ranking in this criteria.

Investment Criteria Total Return This measure, over both the one year and three years to 30 June 2012, records both the income return (i.e. distributions) and capital appreciation (i.e. movement in ASX price). Information sourced from UBS and Bloomberg has been used to compile this criteria. Volume of Trading on ASX (Liquidity) This liquidity measure is expressed as a percentage, and is calculated by dividing the total volume of Securities traded in each entity for the year ended 30 June 2012 by the weighted average total number of Securities on issue. This provides an indication of relative liquidity, irrespective of entity size.

A-REIT SURVEY 2012


EXPLANATION OF CRITERIA AND RANKINGS 45

Method of Ranking A total score of 100 (maximum) has been used, comprising 65 points for financial criteria and 35 points for investment criteria. In determining the final rankings, the scores on each component were aggregated (not the rankings) such that relative performances within each criterion are maintained in determining the overall rankings. Financial Criteria The tests used in the financial criteria and assigned weightings are as follows. Financial Criteria

Score 2012

Operating Cash Yield (on net assets)

15

Distribution Yield

10

Tax Deferred Distribution Percentage

10

Movement in NTA

15

Premium/Discount to NTA

15

PERFECT SCORE

65

In each of the above tests the scores were scaled so that the top performer in each test received the maximum available score for that criterion. Ranks were then assigned based on the scaled scores.

Investment Criteria The tests used in the investment criteria and assigned weightings are as follows. Investment Criteria

Score 2012

Total Return (One Year)

20

Total Return (Three Year)

10

Volume of Trading on ASX PERFECT SCORE

5 35

In each of the above tests, the scores were scaled so that the top performer in each test received the maximum available score for that criterion. Ranks were then assigned based on the scaled scores. The above tests have been ranked using a variable points system for each test, based on the number and importance of aspects taken into account. In each of the tests, the scores were scaled so that the top performer in each test received the maximum available score for that criterion. Ranks were then assigned based on the scaled scores. Median Results For an entity which could not be scored equitably in a particular criteria, due to its recent listing, the unique nature of an entity’s activities, or lack of available information for the relevant criteria, that entity was allocated a median result for the purpose of ranking. This ranking was then weighted and scored as usual. For all such instances ‘N/A’ appears in the result column for the individual criteria tables.

A-REIT SURVEY 2012


46 CORPORATE FINANCE AT BDO

9. corporate finance at BDO


CORPORATE FINANCE AT BDO 47

Key Contacts The BDO Corporate Finance team consists of over 70 professionals, servicing the corporate and investment sectors. Our dedicated team can assist you in making strategic business decisions through specialist transaction advice, commercially sound valuations, due diligence, effective merger and acquisition strategies, and financial modelling advice.

Our international presence gives our Corporate Finance team representation in the worldâ&#x20AC;&#x2122;s main commercial and financial centres. This extensive reach enables our clients to take advantage of global opportunities, as well as draw on BDOâ&#x20AC;&#x2122;s experience and resources worldwide. This is of significant benefit in identifying and facilitating opportunities across the globe.

Bruce Gordon

National Leader, Corporate Finance Tel: +61 2 9240 9857 bruce.gordon@bdo.com.au Fiona Hansen

Sebastian Stevens

Partner, Adelaide Tel: +61 8 7324 6091 gregory.wiese@bdo.com.au

Partner, Melbourne Tel: +61 3 9603 1830 fiona.hansen@bdo.com.au

Partner, Sydney Tel: +61 2 9240 9725 sebastian.stevens@bdo.com.au

Reece Edwards

Gregory Wiese

Jenny Rayner

Dan Taylor

Partner, Brisbane Tel: +61 7 3237 5731 reece.edwards@bdo.com.au

Partner, Melbourne Tel: +61 3 9603 1700 jenny.rayner@bdo.com.au

Partner, Sydney Tel: +61 2 9240 9935 dan.taylor@bdo.com.au

David Krause

Sherif Andrawes

Mark Thomas

Partner, Brisbane Tel: +61 7 3237 5658 david.krause@bdo.com.au

Partner, Perth Tel: +61 8 6382 4763 sherif.andrawes@bdo.com.au

Partner, Sydney Tel: +61 2 9240 9931 mark.thomas@bdo.com.au

Zoran Radosevic

Simon Cook

Partner, Brisbane Tel: +61 7 3237 5789 zoran.radosevic@bdo.com.au

Partner, Perth Tel: +61 8 6382 4758 simon.cook@bdo.com.au

Steven Sorbello

Adam Myers

Partner, Brisbane Tel: +61 7 3237 5825 steven.sorbello@bdo.com.au

Partner, Perth Tel: +61 8 6382 4751 adam.myers@bdo.com.au

Chris Mctye

David McCourt

Partner, Hobart Tel: +61 3 6234 2499 chris.mctye@bdo.com.au

Partner, Sydney Tel: +61 2 9240 9738 david.mccourt@bdo.com.au

A-REIT SURVEY 2012


48 ACHIEVEMENTS

Achievements • Australia’s number one provider of Independent Expert’s Reports (2005 – 2011)* • Australia’s leading accounting adviser for IPOs (2007 – 2011) * *Based on number of transactions.

Australian Initial Public Offering 2005 to 2011 BDO BDO ERNST & YOUNG ERNST & YOUNG GRANT THORNTON GRANT THORNTON PWC PWC PKF PKF KPMG KPMG HLB MANN JUDD HLB MANN JUDD STANTON PARTNERS STANTON PARTNERS DELOITTE DELOITTE RSM BIRD CAMERON RSM BIRD CAMERON

94 94 80 80 74 74 70 70 65 65 56 56 48 48 48 48 43 43 32 32 0

0

20 20

40 40

60 60

80 80

100 100

150 150

200 200

250 250

Australian Independent Expert’s Report 2005 to 2011

BDO BDO STANTON PARTNERS STANTON PARTNERS LONERGAN EDWARDS LONERGAN EDWARDS DELOITTE DELOITTE KPMG KPMG GRANT SAMUEL GRANT SAMUEL GRANT THORNTON GRANT THORNTON DMR CORPORATE DMR CORPORATE ERNST & YOUNG ERNST & YOUNG PKF PKF

223 223 140 140 106 106 106 106 100 100 85 85 83 83 83 83 69 69 62 62 0

0

50 50

100 100

Source: CONNECT 4, wholly owned business of Thomson Reuters (Professional) Australia Limited (16/1/12) – based on number of transactions A-REIT SURVEY 2012


ABOUT BDO 49

ABOUT BDO As the fifth largest full service accounting and advisory network nationally and internationally, our deep expertise spans multiple specialist services. We work with many leading brands and companies ranging in size from large corporate organisations, private businesses, families, entrepreneurs and individuals across a wide range of industry sectors. We excel at creating strong relationships with clients who are seeking a combination of technical excellence with a specialised range of services and a desire for outstanding client relationships. Our ability to create and maintain outstanding relationships is based on our understanding that each of our clients is distinctively different, and it is their unique needs that drive our distinctively different approach. Our clients tell us it is the way we listen to them, work with them and how we see them that makes our approach distinctively different.

We enjoy outstanding relationships with our clients. We focus on what is important to them; adopting a partnership style approach, being responsive and reliable, keeping our promises and maintaining open and frank communication. We are committed to delivering value for our clients, so we do what it takes to get to know their business and the sector they operate in. This is why we have dedicated teams who have specialist industry knowledge and a deep understanding and appreciation of risks, issues and opportunities in a wide range of sectors, including Property & Construction, and Funds Management. BDO delivers a wide range of services to the property & construction, and funds management sectors including financial audits, trust audits, compliance audits, control audits and outgoing audits. We also advise on real estate investment trusts, fund structuring and corporate governance for funds.

Fifth 1,118 48,767 135

The BDO network is the worldâ&#x20AC;&#x2122;s fifth largest accountancy network

Offices everywhere you need them

Partners and staff worldwide

Present in over 135 countries A-REIT SURVEY 2012


50 DISCLAIMER

10. Disclaimer This 2012 Survey has been prepared by BDO Corporate Finance (East Coast) Pty Ltd AFS Licence 247420 (‘BDO’). Although BDO has taken due care to ensure the accuracy of this 2012 Survey, no warranties are given in relation to the statements and information contained herein.

Sources of Information • • • • •

A-REIT Annual Reports and Half-year Reports Other reports and presentations lodged with Australian Securities Exchange UBS’ S&P/ASX Property 200 Index data and S&P/ASX Property 300 Index data Bloomberg Other public data.

BDO disclaims all liability arising from any person acting on information and statements made herein. The contents of this 2012 Survey should not be treated as advice to acquire, hold or dispose of securities and readers are advised to obtain professional advice before making any investment decision based on information contained in this 2012 Survey. From time to time BDO partners and staff may hold relevant interests in securities issued by the Entities reported upon. BDO has not received any commission, brokerage or other undisclosed benefit as a result of any statements made. Liability limited by a scheme approved under Professional Standards Legislation. At all times, BDO is committed to protecting the privacy of our clients, contacts, and that of their staff. Any personal information held by BDO for financial or accounting purposes will only be used by BDO to support your relationship with us and to ensure you receive the most appropriate range of information and services. (BDO’s Privacy Statement is available upon request).

A-REIT SURVEY 2012


GLOSSARY 51

11. glossary All Ordinaries Index containing the largest 500 ASX companies by market capitalisation ASX Australian Securities Exchange A-REIT Australian real estate investment trust BDO BDO Corporate Finance (East Coast) Pty Ltd AFS Licence 247420 Distribution Either a distribution from a trust or dividend from a company DPS Distribution per Security CMBS Commercial Mortgage-Backed Security FY12 Financial year-ending 30 June 2012 FY11 Financial year-ending 30 June 2011 GFC Global financial crisis NTA Net tangible assets Property Index S&P/ASX Property 200 Index p.a. Per annum REIT Real estate investment trust Security Either an ordinary share in a company or unit in a trust Security Price The price of an ordinary share in a company or unit in a trust the 2012 Survey BDO A-REIT Survey covering the year-ending 30 June 2012 the 2011 Survey BDO A-REIT Survey covering the year-ending 30 June 2011 the Sector A-REIT (Australian listed property) sector Total return Change in Security Price (capital) plus Distributions US United States WALE Weighted Average Lease Expiry

A-REIT SURVEY 2012


1300 138 991 bdo.com.au Adelaide Brisbane Cairns Darwin Hobart Melbourne Perth Sydney Distinctively different – it’s how we see you Audit • Tax • Advisory

This publication has been carefully prepared, but it has been written in general terms and should be seen as broad guidance only. The publication cannot be relied upon to cover specific situations and you should not act, or refrain from acting, upon the information contained therein without obtaining specific professional advice. Please contact the BDO member firms in Australia to discuss these matters in the context of your particular circumstances. BDO Australia Ltd and each BDO member firm in Australia, their partners and/or directors, employees and agents do not accept or assume any liability or duty of care for any loss arising from any action taken or not taken by anyone in reliance on the information in this publication or for any decision based on it. BDO refers to one or more of the independent member firms of BDO International Ltd, a UK company limited by guarantee. Each BDO member firm in Australia is a separate legal entity and has no liability for another entity’s acts and omissions. Liability limited by a scheme approved under Professional Standards Legislation (other than for the acts or omissions of financial services licensees) in each State or Territory other than Tasmania. BDO is the brand name for the BDO network and for each of the BDO member firms. © 2012 BDO Australia Ltd. All rights reserved.


A-REIT Survey 2012