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Commonwealth Property Fund (CPF) focuses on performance and results

14 September 2000

The Commonwealth Property managed Commonwealth Property Fund (CPF) continues to provide impressive investment returns with performance for the financial year to June 2000 exceeding 13%. Other developments in CPF include the appointment of Rod Cowdroy as Fund Manager and the launch of the proposed development at 11 Exhibition Street.

The outstanding fund performance to 30 June 2000 continues three previous years of significant out-performance of the market since the introduction of the Fund's new strategy by Commonwealth Property in July 1997. The three year average annual performance to June 2000 of the Fund is tracking at between 2 and 3 percentage points per annum above that of the Mercer's Australian Unlisted Property Index. In this case, the CPF contributes to 21% of the Index value along with other unlisted property trusts, including the Lend Lease APPF, AMP and the Commonwealth Property managed Private Property Syndicate.

Source: William M Mercer

Head of Funds Management at Commonwealth Property, Bob Kelly said, "The return for the current year again shows a significant premium to the market. The office portfolio of the Fund, in particular, has achieved an excellent return, primarily due to intensive asset management." Major initiatives included the re-negotiation of the Grosvenor Place ground lease in Sydney (adding more than $26 million to the value of the Fund's 70% share of the asset) and refurbishment of the food court. The extension of leases in 101 Collins Street, Melbourne comprising 25% of the net lettable area contributed to the 8.7% increase in capital value of that asset.

Other Fund initiatives have also boosted CPF's performance, including the implementation of a debt strategy to increase return on equity to investors. Standard & Poors has given the Fund an A-stable credit rating and the CPF currently has a $250 million debt programme. CPF was the first unlisted property fund to enter into the corporate debt market with a very successful $150 million Medium Term Note (MTN) issue in July 1999.

Commonwealth Property's strategy for the CPF is delivering, through its closed-end performance focussed structure, significant out-performance of the market to its Unitholders.

Commonwealth Property is an active property fund manager, and CPF is leading the way with a performance based management fee. The CPF management team realised excellent returns in the Sydney market with its sale of a 50% share of Westpac Plaza to the Mirvac Group. Last year the team also sold a commercial asset in Canberra to a syndicated group.

The Fund has also been active on the buy side, with acquisitions of 11 Exhibition Street, Melbourne now part of the 101 Collins Street complex, enhancing the value of the Fund's flagship asset. Planning for an office development on the site is nearing completion. The concept is to develop a 15 level building to allow existing tenants in 101 to expand their operations with consistent design elements and shared services and management systems. This will be the first new office building in Melbourne for 8 years. The building, designed by Bates Smart, will have large open floors with views to the river and beyond, extensive tenant parking and Exhibition Street level café's and restaurants. Ms Eleanor Purcell will manage the development aspects of the project for Commonwealth Property. Mr Cowdroy said "the design has been driven by the specific requirements of major tenants in a changing commercial world. 11 Exhibition Street presents a unique opportunity for tenant expansion in 101 and other tenants seeking quality space in the highly sought eastern core precinct of the Melbourne CBD".

Rod Cowdroy has recently been appointed Fund Manager for CPF to pursue further active initiatives and maintain leading performance. Rod has been with Commonwealth Property for 3 years where he has managed the commercial assets within CPF and more recently the Commercial Asset Management Division. Bob Kelly will continue his active role across all Commonwealth Property funds. Mr Kelly said "Our management restructure enables a broader focus on all Commonwealth Property funds to enhance performance for all investors who have selected our business model which is fundamentally built on true alignment of interests for all stakeholders".

The strong performance focus of the CPF is delivering consistently high returns to its Unitholders and Commonwealth Property's innovative approach to performance orientated structures across all their funds is attracting continued investor support from both existing and new clients.