Mirvac Industrial Trust – Results Presentation FY08cdn3.blocksassets.com/.../master/qWP6epvzIUZ3PKJ/...Mirvac Industrial Trust Results FY08 Page 8 > No financial covenants on majority

Mirvac Industrial TrustResults FY08 1Page

Mirvac Industrial Trust – Results Presentation FY08 26 August 2008


> Financial Summary FY08> Capital Management> Portfolio Metrics> Post 30 June Update> Chicago Market Update> FY09 EPU/DPU Guidance> Strategic Review> Annexure

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Agenda


Financial Summary FY08


FY08 FY07 VarianceNet Property Income (US$’000) 44,083 51,458Net profit after tax1 (A$m) 27.9 38.2Core earnings (CPU) 7.16 9.37Non-core realisations2 (CPU) 0.46 0.95Total earnings3 (CPU) 7.62 10.32Distribution (CPU) 7.975 9.75

1. Adjusted for non cash AIFRS items2. Includes realisations from non-core asset sales and partial income hedge extinguishments3. Allows for AIFRS adjustments to remove non-cash items

Financial Summary FY08Highlights – Income Statement

> FY08 core earnings 23.6 per cent less than FY07 due to deteriorating operating environment

Slower leasing environment

Delayed commencement of leases

Rent relief and write-off of bad debts

Higher non-recoverable costs (snow ploughing and utility)

> 2H08 distribution of 3.10 cents per unit to be paid on 29 August 2008


FY08 FY07 VarianceNTA including deferred tax liability (A$) (CPU) 0.701 0.92FX Rate A$/US$ 0.9626 0.8487Closing market price (A$) 0.24 1.035Gearing (%) 56.1 51.6Debt service coverage ratio times 2.03 2.32

1. Operational update released 30 July 2008 stated 72 cents. The difference relates to audit related adjustments.2. Including revaluations and secured debt

Financial Summary FY08 (continued)Highlights – Balance Sheet

> 30 June 2008 NTA of $0.70 comprised of:

Item A$

Property2 0.71MTM income hedges 0.04Other assets/liabilities 0.00Minority interest (0.03)NTA (excl. Deferred Tax Liability) $0.72Deferred Tax Liability (0.02)NTA (incl. Deferred Tax Liability) $0.70


Financial Summary FY08 (continued)NTA Movement

> NTA 12 month movement due to the following:

0.92

0.70

30 Jun 2007 Exchangerate

Revaluat ions M TMincomehedges

M inorit yinterest

Deferred taxliab ilit y

30 Jun 2008

(0.12)

(0 .17)

0.01 0.01

0.03


Capital Management


> No financial covenants on majority of facilities

– Only 3.9 per cent of debt has financial covenants1

> No imminent material refinancing risk – first material expiry August 2010

– Weighted average rate of 5.48 per cent

• reflects current market pricing

– Weighted average remaining term of 2.9 years

– 93.6 per cent fixed rate component

– Management are undertaking to secure a replacement revolver facility with a new financier

> Gearing increased to 56.1 per cent

– Increase due to revaluations write-down of US$58.1 million

– Will be reduced by FY09 asset sales program and subsequent debt paydown

– Target gearing of < 50 per cent

Capital ManagementDebt – Overview

1. Includes the JPMorgan Revolver which was repaid 9 July 2008. Management are undertaking to secure a replacement revolver facility with a new financier.


ComponentBalance(US$m)

Debt%

Cost%

Maturity

Fixed

CMBS 1 117,450 30.4 5.43 7 August 2010

CMBS 2 67,419 17.4 5.54 7 February 2011NorthWestern 176,955 45.8 5.76 1 July 2011Total fixed 361,824 93.6 5.61

Floating

CMBS 1 9,310 2.4 3.56 7 August 2010

CMBS 2 561 0.1 3.11 7 February 2011

Hammond 9,900 2.6 3.13 1 June 2022

JPMorgan Revolver1 5,000 1.3 4.36 14 July 2008

Total floating 24,771 6.4 3.54

Total debt 386,595 100.0 5.48 2.9 yrs

Capital Management (continued)Debt – Breakdown

1. Facility was repaid 9 July 2008. Management are undertaking to secure a replacement revolver facility with a new financier.


Capital Management (continued)Debt - Covenant summary

Level

MIXOwnership

(%)

FacilityDrawn

(US$m)

UnusedFacility(US$m)

FinancialCovenants

Property (CMBS #1) 95 126,760 – NoneProperty (CMBS #2) 95 67,980 – None

Property (Hammond) 95 9,900 – Note 1)

Property (NorthWestern) 95 176,955 – None

LLC (JPMorgan Revolver) 95 5,000 6,000 Note 2)

Total facilities 386,595 6,000

NoteDSCR

(times) FY081) >1.45 2.092) Facility was repaid 9 July 2008.

Management are undertaking to secure a replacement revolver facility with a new financier.

Financial covenants:

> Financial covenants restricted to one small loan facility


> Hedges for 100 per cent of income for the first two years with 20 per cent annual cascade following three years

> Maintain same hedge profile on rolling six month basis

> Current weighted average AUD/USD hedge rate is $0.7525

Settlement date Hedged%

FX rate($)

31 December 2008 100 0.7399

30 June 2009 100 0.7430

31 December 2009 100 0.7436

30 June 2010 100 0.7463

31 December 2010 80 0.7418

30 June 2011 80 0.7526

31 December 2011 60 0.7481

29 June 2012 60 0.7932

31 December 2012 40 0.7596

28 June 2013 40 0.8233

Weighted average hedge rate 0.7525

Capital Management (continued)Foreign exchange profile


Portfolio Metrics


FY08 FY07 Variance

FY09 expiry1 (%) 24.8 17.2

FY10 expiry1 (%) 8.4 9.6

Vacancy1 (%) 13.0 9.0

New leases and renewals executed (m sq ft) 2.6 2.5

Portfolio Weighted average lease expiry3 (yrs) 3.9 4.1

Tenant retention4 (%) 80.6 90.4

Portfolio MetricsOverview

1. Weighted by area2. Includes month to month license agreements3. Weighted by income4. Since IPO

> Vacancies and FY09 expiries are key focus

> Vacancy rate increased to 13.0 per cent

− Impacted mainly by 6 tenants totalling 949,000 square feet vacating or downsizing

> FY09 expiries are 24.8 per cent1,2

Currently 7 per cent of the total portfolio is known to be vacating in FY09

> Tenant retention decreased from 90.4 per cent to 80.6 per cent

> Portfolio WALE of 3.9 years


Portfolio Metrics (continued)Leasing results

> Executed lease transactions over 2.6 million square feet during FY08 (18.2 per cent of portfolio)

− 14 new leases and 35 renewals were executed during FY08

> Like for like rental income growth was negative 1.37 per cent

> Average lease term was 4.5 years for new leases and 3.9 years for renewals

> Portfolio average passing rent is US$3.87 per square foot


> FY09 expiries increased from 17.2 per cent1 to 24.8 per cent2. Driven by:

execution of short term leases due to tenants uncertainty in the US operating conditions

contractual nature of the Chicago industrial market

> Ongoing asset management focus:

Reduce vacancy and expiry risks

10 tenants represent 70 per cent of FY09 expiries

Maintain contracted rental growth profile

Portfolio Metrics (continued)Lease expiry profile

1. As at 29 August 20072. Includes month to month license agreements3. Month to month license agreements

6.1%

23.8%

8.4%8.8%

Vacant 2010 2011 20122009

8.8%

1.0%

MTM3

2013

13.0%

2014 2015+

12.8%

17.3%


Portfolio Metrics (continued)Valuations1

Valuation30 Jun 08

(US$m)

Cap Rate30 Jun 07

(%)

Cap Rate30 Jun 08

(%) US$/sq ft30 Jun 07

US$/sq ft30 Jun 08

MIX 634.3 7.04 7.53 47.72 44.42Market N/A 6.603 7.624 68.003 63.204

> FY08 portfolio revaluations write-down of US$58.1 million

− 69 per cent of the revaluation was driven by 3 submarkets (City South, McHenry and Southwest Suburbs)

− Joliet assets continue to outperform – combined 9.5 per cent increase in value in 2H08

− Weighted average cap rate for the portfolio softened from 7.04 per cent to 7.53 per cent between 30 June 2007 and 30 June 2008 respectively

> During FY08, 46 assets or 66.7 per cent of the portfolio2 were independently revalued

− 31 assets or 42.7 per cent of the portfolio were externally revalued in 2H08 across 14 of the 19 Chicago submarkets

> Current unit price $0.225 implies portfolio cap rate of ~9.60 per cent

1. The portfolio is externally revalued on a 2 year rolling basis – more regularly for material changes in the market or assets. Internal Directors’ revaluations are undertaken on the balance of the portfolio

2. Weighted by number of assets3. Real Capital Analytics Industrial Capital Trends Monthly July 20074. Real Capital Analytics


Post 30 June Update


Post 30 June Update

> NTA increased from 70 cents per unit to 75.9 cents per unit

− Driven by depreciation in A$/US$ from $0.9626 to $0.8656

> Asset sales:

− Sold 2801 Busse Road and 2727 West Diehl Road (land only)

− Settle on 920 Frontenac Road – due 28 August 2008

− Exchanged contracts to sell 2003 South 114th Street near lease expiry

> Vacancy down to 10.6 per cent1 compared to Chicago market at 9.5 per cent2

> Gearing reduced to 55.1 per cent1

1. Post settlement of 920 Frontenac Road2. CBRE Chicago Industrial MarketView Q208

N/A0.82.20.7N/A2727 West Diehl Rd, Naperville (land only)

AssetVacancy

(%)

Book value30 Jun 08

(US$m)Sale price

(US$m)

Profit on book value after costs

(US$m)

Passing yield on sale price

(%)

2801 Busse Rd, Elk Grove Village 100 20.2 20.2 (1.5) Vacant

2003 South 114th St, West Allis 7 7.8 8.7 (0.1) 6.64

920 Frontenac Rd, Naperville 100 4.2 4.2 (0.2) Vacant


Market Update


Leasing

> Chicago industrial vacancy rate was 9.5 per cent as at Q208, an increase of 50bps from Q108 and 110bps on pcp driven by 20 projects totalling 20 million square feet in Q208

> Average warehouse net lease rates increased $0.05 to US$4.48 per square foot on pcp

> User sales have increased modestly for YTD June 08, totalling 4.4 million square feet, a 15 per cent increase on pcp

> YTD construction starts are currently at 2.3 million square feet, a 60 per cent decrease on pcp

Market UpdateChicago industrial update1

> Speculative construction starts as at Q208 were 1.0 million square feet compared to 5.3 million square feet on pcp

1. CBRE Chicago Industrial MarketView Q208

Metropolitan Chicago Historical Vacancy Rates

8.6%

9.0%

8.5%

8.8% 8.7%

8.4%

Q306 Q406 Q107 Q207 Q307 Q407 Q108 Q208

9.0%

9.5%


Market Update (continued)Economic outlook for US

> Economy slowing: growth 2.2 per cent through 2007 expected to slow to 0.7 per cent rate in 2008 > Note positives:

Little scope for the US Fed to increase interest rates Weak US dollar stimulates export volumes

> US recession a possibility but as yet no clear signals of a deep recession – July job cuts suggest a slowdown in industrial activity in 2008

> AUD dollar expected to remain stable with AUD$/US$ forecast of $0.89 for June 20091

Source: Grubb & Ellis Source: Grubb & Ellis

US Industrial Vacancy RateAll Product Types

0%

2%

4%

6%

8%

10%

12%

14%

16%

86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08

Vacancy

Industrial Space Under ConstructionSpecuative vs. Build-to-suit/Owner-built

0

20

40

60

80

100

120

140

160

97 98 99 00 01 02 03 04 05 06 07 08

Spec B-T-S

1. Average estimates of Australia’s domestic banks, August 2008


Market Update (continued)Outlook for US Industrial

National

> Industrial market is showing progressive softening against a weaker economic outlook

> Vacancy rate increased 50 basis points to 8.2 per cent in H108

> The construction pipeline in Q208 was down 20 per cent from the peak in Q307

> Rental rate down 0.5 per cent from Q1, but still up 3.5 per cent over the prior four quarters

> Weaker absorption falling to lowest levels in five years

Chicago

> Vacancy increased to 9.5 per cent driven by company consolidations, facility closures and speculative completions

> Vacancy to remain high through 2008, with 7.6 million of 9.9 million square feet under construction being speculative

> Rental growth has remained flat in Q208

> Demand expected to be strong for well-located, modern facilities of less than 400,000 square feet

> Net absorption is low


FY09 EPU/DPU Guidance


FY09 EPU/DPU Guidance

> FY09 cash earnings guidance of 5.00 cents per unit

− includes an allowance for further economic deterioration

> Earnings sensitive to:

− Achieving budgeted lease up of vacant space and lease renewals

− Additional non-recoverable (snow ploughing and utility) expenses

− Bankruptcies and delinquencies

> FY09 distribution guidance of 5.00 cents per unit

− The Trust’s distribution policy going forward is to distribute 100 per cent of cash earnings


Strategic Review


> Minimising vacancy and short-term expiry to underpin future earnings

> Continuing rationalisation program of non-core assets in non-core markets

− Management have identified a number of non-core assets (primarily vacant)

− Net proceeds from any asset sales will be used towards paying down debt

> Tenant credit strength vigilance in uncertain economic environment

Strategic ReviewOperational


> MIX continues to be significantly undervalued by the equities market

− current unit price represents a significant discount to NTA

> Accordingly Management will seek to maximise Investor value

− will commence discussions with potential acquirers to realise the whole portfolio or privatisation of the investment entity

− will appoint external adviser

> Anticipated that a proposal may be put to Investors prior to the end of the calendar year

Strategic Review (continued)The Way Forward

1. As at 25 August 2008


Annexure


FY08 FY07 Variance

Rent with fixed reviews (%) 69.9 65.5

Weighted average fixed increase (%) 2.6 2.6

Portfolio rental growth from fixed reviews (%) 1.8 1.7

AnnexureContracted rental growth – 1H08

> Contracted rental growth maintained


Annexure (continued)Submarket key statistics

Submarket# of

PropertiesGLA

(sq ft)

Book Value30 Jun 08

(US$m)Portfolio

Weighting %1

MIXVacancy

Rate

Net Passing Rent

(US$/sq ft)

Submarket WALE2

YrsWACR1

%

Milwaukee 13 2,204,278 101.6 16.0% 14.5% 4.09 3.0 7.71%

Joliet Area 2 1,236,054 75.7 11.9% 0.0% 3.32 1.8 6.25%

Southwest Suburbs 8 2,055,446 66.2 10.4% 25.6% 3.46 4.5 7.76%

O'Hare 7 759,625 53.7 8.5% 43.3% 5.83 2.0 7.21%

South Suburbs 5 1,632,908 51.7 8.2% 13.2% 2.88 3.1 7.88%

McHenry County 3 1,923,175 48.5 7.6% 0.0% 2.60 3.3 8.58%

Far West Suburbs 4 823,247 48.3 7.6% 14.7% 4.74 7.8 6.94%

Lake County 6 656,873 33.2 5.2% 7.5% 4.73 2.6 7.86%

Northwest Cook County 6 350,553 28.5 4.5% 0.0% 6.58 6.5 7.33%

Near West Suburbs 2 546,946 25.3 4.0% 19.8% 3.45 6.8 7.46%

West Suburbs 3 281,189 21.4 3.4% 0.0% 6.23 2.4 7.25%

Northeast Cook County 1 302,379 16.6 2.6% 5.9% 5.37 5.0 8.25%

Northwest Indiana 2 523,562 16.6 2.6% 0.9% 3.32 3.6 8.50%

City South 1 529,215 12.7 2.0% 32.5% 3.64 5.2 8.25%

Kenosha/Racine Counties 2 186,762 9.7 1.5% 0.0% 3.89 4.5 7.50%

North Kane County 1 144,578 9.4 1.5% 0.0% 5.04 8.8 7.25%

Far Southwest Suburbs 1 41,600 7.4 1.2% 0.0% 16.18 3.2 8.00%

North DuPage County 1 48,230 4.5 0.7% 0.0% 11.80 0.7 8.00%

Grand Rapids 1 31,854 3.1 0.5% 0.0% 8.93 10.8 8.50%

TOTAL 69 14,278,474 634.3 100.0% 13.0% 3.87 3.9 7.53%1. Weighted by 30 Jun 08 Book Value2. Weighted by Income


Annexure (continued)Debt maturity profile

1. Facility was repaid 9 July 2008. Management are undertaking to secure a replacement revolver facility with a new financier.

1


Annexure (continued)External Valuations

Asset Sub-marketGLA

(sq ft)

Book Value31 Dec 07

(US$m)

Book Value30 Jun 08

(US$m)

Diff(US$m)

UpfrontCap Rate

(%)

900 East 103rd Street City South 529,215 19.7 12.7 (7.0) 8.25%

5450 Kraft Avenue Grand Rapids 31,854 3.4 3.1 (0.3) 8.50%

27413 South Baseline Road Joliet Area 213,500 23.1 25.0 1.9 6.25%

8200 100th Street Kenosha/Racine Counties 148,472 8.2 7.4 (0.8) 7.50%

1810 Northwestern Drive Lake County 122,712 7.2 6.8 (0.4) 8.25%

3145 Central Avenue Lake County 292,000 11.8 11.0 (0.8) 7.75%

620 South Butterfield Road Lake County 24,237 3.1 3.2 0.1 7.50%

1750 South Lincoln Drive McHenry County 499,200 17.2 15.1 (2.1) 8.50%

308 South Division Street McHenry County 1,297,671 38.5 27.5 (11.0) 8.75%

875 West Diggins Street McHenry County 126,304 7.2 5.9 (1.3) 8.00%

11100 West Silver Spring Road Milwaukee 127,400 6.1 5.5 (0.6) 7.50%

2003-2201 South 114th Street Milwaukee 243,350 8.7 7.8 (0.9) 8.00%

301 East Vienna Avenue Milwaukee 116,354 5.3 4.3 (1.0) 7.50%

3511 West Green Tree Road Milwaukee 172,000 5.6 4.3 (1.3) 8.50%

6736 West Washington Milwaukee 113,620 6.6 6.2 (0.5) 7.50%

100 West Whitehall Near West Suburbs 251,584 18.5 14.6 (3.9) 7.25%


Annexure (continued)External Valuations (continued)

Asset Sub-marketGLA

(sq ft)

Book Value31 Dec 07

(US$m)

Book Value30 Jun 08

(US$m)

Diff(US$m)

UpfrontCap Rate

(%)

1605 Penny Lane Northwest Cook County 27,742 2.5 2.3 (0.2) 7.75%

1665 Penny Lane Northwest Cook County 20,757 1.6 2.2 0.6 7.25%

3602 North Kennicott Northwest Cook County 94,300 4.9 5.6 0.7 6.75%

900 West University Drive Northwest Cook County 86,254 6.6 6.3 (0.3) 7.25%

EC VI-4507 Columbia Northwest Indiana 256,595 8.3 8.3 (0.0) 8.50%

EC VI-4531 Columbia Northwest Indiana 266,967 8.2 8.3 0.1 8.50%

850 Arthur Avenue O'Hare 42,490 2.9 3.0 0.1 7.25%

13040 South Pulaski Avenue South Suburbs 395,412 13.0 11.6 (1.4) 7.75%

16750 Vincennes Road South Suburbs 202,510 5.8 6.3 0.5 8.00%

21399 Torrence Avenue South Suburbs 375,475 9.5 10.1 0.6 8.25%

6000 West 73rd Street Southwest Suburbs 148,091 6.2 5.9 (0.3) 7.50%

6510 West 73rd Street Southwest Suburbs 306,552 13.4 8.3 (5.1) 8.00%

7447 South Central Southwest Suburbs 118,218 5.0 3.2 (1.8) 8.00%

9700 Harlem Avenue Southwest Suburbs 101,140 3.9 3.0 (0.9) 7.50%

200 South Mitchell West Suburbs 152,200 10.4 9.1 (1.3) 7.25%

TOTAL 6,904,176 292.7 253.9 (38.7) 7.79%


A$’000

Net profit attributable to unitholders (11,743)

– Recognition of rental income on a straight line basis (1,607)

– Gain on derivative financial instruments (4,991)

– Revaluation of investment properties 63,014

– Non-cash component of minority interest (2,363)

– Deferred tax expense (15,284)

– Depreciation and amortisation 877

Net income available for distribution 27,903

Annexure (continued)AIFRS Adjustments – Reconciliation to stated distributable earnings


Tenant% Gross Income

(annual)Term remaining

(years)

Truserv Corporation 5.5 5.0

DSC Logistics 5.4 2.5

Rockwell Automation 4.4 4.7

APL Logistics 4.1 1.0

Factory Card Outlet 4.0 10.5

Innoware Corporation 3.1 4.5

California Cartage Co 3.0 0.8

Newell Window Furnishings 2.9 1.0

City of Chicago 2.7 5.7

Pactiv Corporation 2.4 10.0

TOTAL 37.5 4.5

Annexure (continued)Top 10 Current Tenants


Annexure (continued)Top 10 FY09 Tenant Expiries

Tenant AssetArea (sqft) Lease Expiry

6600 River Road APL Logistics 630,410 31-May-09 / 30-Jun-09

1750 South Lincoln Drive Newell Window Furnishings 499,200 30-Jun-09

21705-21707 Mississippi Street DSC Logistics 281,068 30-Jun-09

27413 South Baseline Road California Cartage Co 213,500 31-Mar-09

24700 Corporate Circle Russell Athletics 192,000 31-Dec-08

3145 Central Avenue Coleman Cable Systems 180,000 31-Dec-08

2003-2201 South 114th Street Complete Warehouse Inc 146,800 31-Dec-08

308 South Division Street Chemtool Incorporated 137,077 28-Feb-09

525 West Marquette Henkel Corporation 112,144 30-Apr-09

2600 Elmhurst Road B&K Industrial 105,000 28-Feb-09

TOTAL 2,497,199


The information made available through this presentation and appendices, including any expression of opinion or forecast, has been obtained from or based on sources believed by Mirvac Funds Management Limited (ABN 78 067 417 663) (AFSL 220 718) as responsible entity for Mirvac Industrial Trust (ARSN 113 49 624) to be reliable.

The information contained in this presentation is of a general nature and does not constitute financial product advice. This presentation has been prepared without taking account of any person’s objectives, financial situation or needs. Each person should before acting on this presentation consider its appropriateness.

Mirvac Funds Management Limited does not warrant the accuracy, completeness or currency of the information or that the information is suitable for your intended use, and should not be relied upon by you in substitution of you obtaining independent advice. Mirvac Funds Management Limited and its related entities will not be liable for any inaccuracies, omissions or errors in the content nor for any loss or damage arising from action taken in reliance on the information. Past performance is not an indicator of future performance.


Mirvac Industrial Trust – Results Presentation FY08 26 August 2008

Mirvac Industrial Trust – Results Presentation FY08cdn3.blocksassets.com/.../master/qWP6epvzIUZ3PKJ/...Mirvac Industrial Trust Results FY08 Page 8 > No financial covenants on majority

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