2006 Half Yearly Report - 1531 FKP CPT1 HYR FINAL

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2006 Half Yearly Report - 1531 FKP CPT1 HYR FINAL Powered By Docstoc
                             ARSN 102 513 593

         half yearly report
     For the six months ended 31 December 2006
FKP COMMERCIAL PROPERTY TRUST NO.1                                                                                                   HALF YEARLY REPORT 2006

   01                                 02
   financial                          manager’s
   highlights                         report

   • Distribution of                 On behalf of the FKP Commercial       space needs of tenants by                Committee remains in place
     $1.95 million                   Property Trust No.1 (the Trust)       providing additional office area to      consisting of two independent
                                     Management and the Directors of       facilitate expansion, or a               members and a representative of
     (5.64 cents per unit),          FKP Funds Management Limited,         reduction in office space to allow       FKP Funds Management Limited.
     which equates to an             I am pleased to report another        for business consolidation.
                                                                                                                    During the 6 months, the
     annualised distribution         solid financial result for the six
                                                                           This is demonstrated by the new          Trust management team was
                                     months to 31 December 2006.
     yield of 11.3%                                                        5 year lease to Napier and Blakeley      further strengthened with the
     on the original                 The income distribution for the       over Level 7 which included a            appointment of Joe Cama as
                                     period was 5.64 cents per unit,       surrender of their lease on Level        Manager, Fund Operations. Joe
     equity invested
                                     which equates to an annualised        12, allowing Management to               has 20 years experience in real
   • Net profit of                   distribution of 11.3% on the          structure a new 5 year lease with        estate funds management. The
                                     original equity invested. The         Urbis JHD who required additional        leasing and asset management
     $1.95 million
                                     income distribution is in line with   accommodation. Furthermore, the          function for the property
     (2005: $1.93 million)           Management forecast and is            new 6 year lease for FKP Limited         continues to be undertaken by
                                     higher than the corresponding         over Levels 4, 5 and 6 was made          Scott Armstrong, Head of
   • Net tangible assets             period last year.                                                              Asset Management.
                                                                           possible by negotiating a surrender
     per unit of $1.50                                                     of lease from PKF Chartered
                                     The William Buck Centre                                                        Moving forward, Management is
                                                                           Accountants over Level 6 who             focused on the additional 7,470m2
   • The ratio of                    remained 100% leased as at the
                                     close of the reporting period         vacated to alternative premises.         expiring over the next 3 years. As
     borrowings to total
                                     – 31 December 2006.                   The recent transactions have lifted      reported previously, these expiries
     assets was 36.2%                                                                                               are anticipated to occur in a period
                                     During the 6 months, Management       the weighted average lease
                                                                                                                    of relative strength in the Brisbane
   • 120 Edward Street               was successful in mitigating          duration for the property from
                                                                           3.0 years as at 30 June 2006 to          office market.
     was 100% leased,                significant lease expiry risk and
                                     expanding the platform for future     3.7 years as at 31 December 2006.        The trust is due to terminate
     with 17 tenants and                                                   In addition to strengthening the
                                     growth in distributions and capital                                            prior to December 2008 and
     an average lease                value. Approximately 30% of the       lease expiry profile of the asset, the   Management remains highly
     duration, by gross              total building area was re-leased     new rental levels that have been         committed to ensuring that future
     income, of 3.7 years.           or renewed over the period. Key       negotiated reflect an average 22%        investment returns are maximised
                                     lease renewals include: Subway,       increase over the previous level.        in the period ahead.
                                     Napier & Blakeley, Urbis JHD and
                                                                           The FKP Funds Management
                                     FKP Limited.
                                                                           Limited Board of Directors has
                                     The lease renewals were largely       remained unchanged this half year
                                     completed prior to the scheduled      except for the appointment of            ADAM LEARMONTH
                                     expiry dates and were structured      Susan Stewart as Company                 Executive General Manager
                                     to accommodate the changing           Secretary. The Compliance                FKP Funds Management Limited
FKP COMMERCIAL PROPERTY TRUST NO.1                                                                                                                 HALF YEARLY REPORT 2006

                                           The William Buck Centre
                                           remained 100% leased
                                           throughout the period.
                                           The weighted average lease
                                           term (by gross income)
                                           of the building is 3.7 years

   03                                      at 31 December 2006.
                                           A schedule of key tenancies
   property                                is shown below.

  No. of Tenants                       Leased Space          Avg Tenancy Area          Avg Initial Lease Term                                     Avg Lease Duration

  17                                      100%                   914m2                      7.25 years                                                  3.7 years

  Tenant Name                        Leased Area (m2)           % of NLA                   Lease Expiry              Rent Reviews P.A.                   Options

  Sunwater                                3,510                   22.6                       Mar 2009                    Fixed 3.5%                    1*4 years
  Dibbs Abbott Stillman                   1,882                   12.1                       Dec 2011            Fixed 4%, market in 2006              1*5 years
  FKP Limited                             2,820                   18.2                       Sep 2011                    Fixed 4.5%                    1*5 years
  William Buck Chartered Accountants      1,934                   12.5                       Oct 2009            CPI min, 3% max to 2005,              1*2 years
                                                                                                                  market in 2006, CPI min,
                                                                                                                     2% max remainder
  Napier & Blakeley                        967                     6.2                       Oct 2011                    Fixed 4.5%                         None
  Savills (QLD) Pty Ltd                   1,067                    6.9                       Oct 2008                    Fixed 4.0%                         None
  Kings Parking Pty Ltd                 91 spaces                  N/A                       Oct 2011                    Fixed 3.5%                         None

                                                      Lease Expiry by Area                                                                    By Area as at Dec 2005
                                                                                                                                              By Area as at Dec 2006
                                                The William Buck Centre’s
                                                   lease expiry profile as at   2009
                                             December 2005 is compared
                                               with the current profile. The    2010

                                              graph highlights the removal      2011
                                                 of lease expiry risk for the
                                            2007 and 2008 calender years.       2012


                                                                                       0              10            20             30                  40               50
                                                                                                                Percentage of Building Area
FKP COMMERCIAL PROPERTY TRUST NO.1                                                                                                             HALF YEARLY REPORT 2006

                                       There are a number of
                                       development sites that can
                                       accommodate large office towers
                                       in the Brisbane CBD. These
                                       projects are currently seeking
                                       tenant pre-commitment and
                                       include 400 George St (40,000m2)
                                       and 37 Tank St (30,000m2). The
   04                                  estimated date for completion of
                                       these larger projects is in the
   market                              2009 and 2010 calendar years.            investor
   update                              Recent sales activity such as            communication
                                       545 Queen St, 102 Adelaide St
                                       and 316 Adelaide St have all
The Brisbane CBD office market         shown yields well below 7.0%.          FKP Funds Management is                         published reports, from the FKP
continues to show strength in          These yields are being justified by    committed to providing investors                Property Group website.
leasing demand and investment          investors who are anticipating
                                                                              with regular updates on their
sales activity. The driving forces     positive rental reversions from the                                                    Simply go to
                                                                              investment in the Trust.
behind this continued performance      re-letting or refurbishment of                                                         and click on the following links:
                                       office properties. Total return        Investors will receive the
include Queensland’s above                                                                                                    • Core FKP Divisions/
                                       benchmarks for investors continue      following documentation:
average population growth, white
collar employment growth,              to firm, driven by the large flow of                                                   • Funds & Asset Management/
                                                                              • Annual Reports for the years
demand for resources and               domestic and international                                                             • FKP Commercial Property
                                                                                ending 30 June for each year
ongoing capital investment toward      investment funds seeking assets.                                                         Trust No. 1
                                                                                of the Trust, and Half-yearly
major infrastructure projects.         The outlook for the office leasing       Reports for each six-month                    If you have any administrative
Demand for office space or net         and investment market over the           period ending 31 December                     queries on matters such as
absorption has averaged around         next two years remains robust,
                                                                                                                              address changes or how your
54,000m2 p.a. over the past            underpinned by a strong local          • Six-monthly distribution
                                       and national economy, positive                                                         distributions are paid, please
2 years with average take up over                                               statements
                                       business sentiment and                                                                 contact the unit registry
the last 5 years being around
33,000m2 p.a. This sustained           continued growth in the white          Investors can also access                       on 02 8280 7916 (NSW),
period of office take up has driven    collar sector. The rate of rental      information on their investments,               or 1300 133814 (other states).
the overall CBD office vacancy rate    growth is expected to temper           including distributions and
down to 2.3%, making Brisbane          during 2009 and 2010 as the first
one of the tightest leasing markets    major additions to new supply
in the country. The shortage of        reach the market.
office space continues to facilitate   Management continues to
both face and effective rental
growth across all grades of
                                       actively manage the property in          06                                           Period ended          Period ended
commercial property.
                                       light of current and expected            financial summary                         31 December 2006      31 December 2005
                                       market conditions. Part of this
This rental growth has enabled         process includes gaining a clear        Total assets ($’000)                             85,170                68,264
confidence to return to the office     understanding of each tenant’s
development market with a              office space needs and tailoring        Total liabilities ($’000)                        33,453                33,206
number of projects now either          accommodation solutions which           Net assets ($’000)                               51,717                35,058
underway or likely to commence         maximise opportunities for
                                       tenant retention and enhance            Net tangible asset backing ($ per unit)            1.50                 1.01
construction to relieve the
current supply shortages. These        the investment performance of           Total income ($’000)                              4,296                 3,899
projects include mainly smaller        the asset.
                                                                               Total units (’000)                               34,500                34,500
developments which are                 Source: Statistics and data has been
substantially pre-leased such as                                               Distribution to unitholders (cents per unit)      5.64                  5.48
                                       sourced from Property Council of
the Piccadilly Centre at 299           Australia, Colliers International,      Annualised distribution yield (%)                 11.28                 10.96
Adelaide St (8,966m2), QIC’s           CB Richard Ellis and Savills.
140 Elizabeth St (10,000m2) and
Central Plaza III (11,000m2).


   Responsible Entity and            Auditors
   Principal Place of Business       PKF
   FKP Funds                         Chartered Accountants
   Management Limited                Level 6, 10 Eagle Street
   (Australian Financial Services    Brisbane QLD 4000
   Licence No. 222273)
   Level 5, 10 Quay Street           Unit Registry
   Sydney NSW 2000                   Link Market Services Limited
                                     Level 12, 680 George Street
   Registered Office of the          Sydney NSW 2000
   Responsible Entity
   Level 5, 120 Edward Street        Custodian
   Brisbane QLD 4000                 JP Morgan Trust
                                     Australia Limited
   Directors of the                  Level 4, 35 Clarence Street
   Responsible Entity                Sydney NSW 2000
   Ben Macdonald (Chairman)
   David Crombie (Deputy             Country of Incorporation
   Chairman)                         Australia
   Peter Brown
   Rodney Forrester
   Philip Parker
   Leonard McKinnon
   Lee Seng Huang

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