REST0001 Property Performance Analysis, 2017
John Vu, Qiaoyu Kong, Henry Liu
PROPERTY PERFORMANCE ANALYSIS
PIR Centuria Scarborough House Fund Review
Things PIR Report not covered: Things PIR Report considered:
100% Tax deferral is only applied for Australian residents Market Risks( economic or market conditions fall
and only applies to the first two years and uncertain for the down, poor sale price, policy changes)
rest investment term. Debt facility and metrics is reasonable and
Lack of information substantiating the current physical understandable.
condition of the property Capex, a total of $3.5M between the periods May
Initial interest covered ratio calculation is not provided. 2017 and Jan 2019, is likely to improve the value
Ongoing management fee is based on an estimated of the building, but the estimate capex
number from the PDS and do not represent the actual expenditure is uncertain.
management fee. Cap rate is the main performance drivers in
All-in-fee analysis provided by PIR based on assumed sensitivity analysis and the floating interest rate
numbers, which dilutes the accuracy of other figures which for refinance (Trench B) is considerable.
base on it. Macro environment including infrastructure
developments, projected population growth and
the presence of an established ‘health precinct’ in
Woden.
PROPERTY PERFORMANCE ANALYSIS
Centuria Scarborough House Fund Pros and Risks Analysis
• Good Track Record - Fund Manager • Mild Property and Market Risk
History Performance (Location, Tenants, Physical Performance,
~30% IRR on sale of 175 Demand and Supply)
Castlereagh St • Financial Risks
~20% IRR on sale of 80 Waterloo Liquidity - a closed-end fund which
Rd, Macquarie Park means investors may not withdraw
from the Fund with a WALE of 8.2
• Strong Market years.
Canberra A-Grade Office (If market start to fall - Redemptions may
vacancy compression not be covered by inflows)
The total return of Office in Refinance - The Fund estimated it is
Canberra Region is steadily rising necessary to draw debt in year 4 in
from the end of 2014 order to maintain distributions due to
incentive.
• Government Support – Health Hub (The availability of debt, and the cost of
Strong Tenant debt)
The ACT Government will be • Other Risks
relocating its workforce of about Leasehold Title – Future selling price
750 staff from multiple sites Indistinct Fees and Expense –
around Canberra and will be Operating Expense
joining other Commonwealth Lease Expire and Single Major
Government Departments Tenant Risk – Future selling price
already in Woden.
Source: Centuria group, The Canberra Times, Collier
PROPERTY PERFORMANCE ANALYSIS
Centuria Scarborough House Fund – Investment Strategy
• The data referenced in the PIR is from the Product Disclosure Statement of Centuria
Scarborough Fund at the date of publication and may vary over time. The forecast and
opinions formed are assumptions and should not be taken as personal financial product
advice.
• Investor need to assess their own personal circumstances (including financial and taxation).
• The illiquid nature of the fund requires investors to be comfortable with the prospective returns
verse the illiquidity.
• Fund portfolio: government tenant, stable yield, strong market, proven fund manager,
guaranteed building quality, further risks can be minimized by active management and
professional operation.
• CPF has approximately $2.8 billion of property under management spread across 18 unlisted
property funds and three A-REITs, thus refinance will not be a major issue.
• Income return is guaranteed in the investment term, capital growth is questionable. Due to
supply shortages and governments focus on Woden as a major health precinct, we believe the
capital growth estimate by PIR is achievable.
• In conclusion, we are in the opinion that Centuria Scarborough House Fund is a viable
investment option with the potential for strong risk adjusted returns.
