Colonial First State Property Trust Group (CFT) announces June 2002 full year results

8 August 2002

CFS Managed Property Limited, the responsible entity of the Colonial First State Property Trust Group (CFT), confirms that the distribution to CFT unitholders for the quarter ending 30 June 2002 is 4.525 cents per unit, bringing the full year distribution to 18.1 cents per unit, unchanged from the 2001 financial year. The distribution will be paid to unitholders on 19 August 2002.

Trust earnings for the period totalled $108.9 million, an increase of 3.9% over the year to 30 June 2001. This result was driven by intensive portfolio management of the Trust’s assets, a positive outcome against a backdrop of local and global economic uncertainty. Net property income increased by 1.5% to $149.2 million, with the retail portfolio contributing a strong positive result to this increase.

Over this period, earnings per unit increased to 17.58 cents per unit, up 0.6% from 17.47 cents per unit for the previous corresponding period. The difference between earnings per unit and distributions per unit was funded by a transfer from capital reserves of $3.43 million (equivalent to 0.52 cents per unit).

Market performance
The defensive characteristics of the listed property trust market proved attractive to investors over the course of the 2002 financial year. In this strong market, CFT recorded a total return of 15.0%, in line with the listed property trust sector and outperforming the diversified peer group and the broader share market, on both a six and 12 months basis.

Capital Management
At 30 June 2002 the Trust’s total borrowings were $516.1 million, reflecting a gearing ratio of 27.8%. This increase in gearing, when compared to the previous period, is a result of the debt funding of the $75.0 million acquisition of the remaining 50% interest in Grand Plaza Shopping Centre, funding of capital expenditure commitments across the portfolio and the suspension of the Trust's distribution reinvestment plan in October 2001.

Despite this increase, gearing remains in line with the listed property trust sector average of 27.4% and is within the Manager’s preferred gearing range of 20 – 30%.

At 30 June 2002 the weighted average interest rate (exclusive of bank margins) on total borrowings was 5.63%. Of this, 53.9% was hedged at an average interest rate (exclusive of bank margins) of 6.07%. New hedging arrangements negotiated throughout the course of the year allowed the Trust to take advantage of lower interest rates and extended the Trust’s hedging maturity profile, with the weighted average duration of all swaps currently at 4.4 years.

Portfolio Management

The occupancy rate across the aggregated CFT portfolio at 30 June 2002 was 95.0%. This occupancy level was maintained through the leasing of over 96,717sqm of space, equating to 11.6% of net lettable area. Of these leasing deals, 51.3% represented new leases, with the remainder being lease renewals by existing tenants.

Current vacancies in the portfolio lie predominantly in the industrial and high tech industrial (HTI) office portfolios (7.6% combined), which typically have shorter lease expiries and therefore more intensive asset management requirements. Difficult market conditions have resulted in a softening in demand for industrial space. However, the strong link between economic growth and the industrial market should underpin tenant demand going forward.

Retail Centres
Retail centres performed strongly in 2002, with Moving Annual Turnover (MAT) up 7.8% over the previous corresponding period. All centres contributed positively to this growth, particularly Golden Grove Village, which benefited significantly from the redevelopment undertaken in 2001.

Discount department stores, mini-majors and supermarkets were the strongest performing store types, reinforcing the Manager’s strategic focus on food and non-discretionary spend tenants to extract performance.

Acquisitions and Sales
In April 2002, the Trust acquired the remaining 50% interest in Grand Plaza Shopping Centre for $75 million. The acquisition was funded by a draw down of debt from the Trust’s existing debt facility. This was a strategic acquisition for the Trust, with master planning for the centre identifying opportunities to add significant value through future development in the medium to longer term.

In August 2001, settlement of the $13.75 million sale of the remaining portion of 339 Military Road, Cremorne was completed. This property was a small, inefficient holding for the Trust and the sale, at a small premium to book value, was a positive outcome for CFT unitholders.

Capital Expenditure
Over the course of the year a total of $21.5 million was spent on maintaining and improving existing assets within the portfolio. This included the finalisation of the redevelopment at Golden Grove Village (completed in October 2001) and the refurbishment of the ground floor and foyer at 300 Queen Street, Brisbane.

All assets within the CFT portfolio were revalued over the course of the year, with the Trust recording a net increase of $36.4 million to asset revaluation reserves. Assets which had notable positive revaluation effects (taking into account capital expenditure) included Grand Plaza (up $8.1 million (100% interest)), Runaway Bay (up $8.1 million), Castle Plaza (up $7.1 million), Brimbank Central (up $6.2 million), 56 Pitt Street, Sydney (up $5.7 million), Alexandria Industrial Estate (up $2.9 million) and Epping Road and Lane Cove Road (up $3.0 million).

The positive impact of these revaluations contributed to CFT’s net asset backing (NTA) per unit increasing from $2.02 to $2.08.