See Greg Chubb speaking at the Big Guns lunch – video below
Perhaps the best way to describe Charter Hall’s retail portfolio performance in 2015 and our optimism for 2016 is by sharing a recent story. Last February, Tropical Cyclone Marcia, a category 5 cyclone, battered central Queensland. In Rockhampton, thousands of families were without power in their homes, and many parents, struggling to keep their children cool and calm, had taken to driving around town, seeking relief from the extreme rain and severe heat through their car air-conditioning.
Charter Hall owns and manages Allenstown Square shopping centre in Rockhampton. Our centre team, upon hearing of the parents’ plight, quickly fitted out a vacant retail tenancy with air-conditioning, comfortable seating, change tables, cribs, electronics and a mobile phone charging station. They invited parents with small children and babies to this ‘Kid’s Nap Zone’ so they could rest and rejuvenate in air-conditioned comfort. The centre team also set up a community notice board where local residents could leave messages for friends and family and thank you notes to community members who worked together to support each other during this devastating natural disaster.
What has this story got to do with Charter Hall’s performance? Well, everything actually. The Allenstown Square team created the nap zone because they recognised that the Rockhampton community faced a unique problem that required an immediate solution. Our team knew how to help, because they are close to our customers and understand the needs of the community. They had the confidence to act, because we encourage our people to be entrepreneurial, and we empower them to make decisions. We firmly believe financial performance starts with talented, motivated team members who are equipped to lead. Our solid performance in 2015 and positive outlook for 2016 reflects that experience.
High performance x 80
Charter Hall operates 80 centres in communities located in every state and territory around Australia. Our aim is to ensure that each centre enjoys an offering that is unique to its location, providing the most convenient shopping experience for that community.
Our strategy is informed by what links and separates those 80 communities, and we apply bespoke or wholesale services accordingly. The performance of our portfolio last year reflects healthy and sustainable growth in the majority of our markets and we enter 2016 in a similar position to that in 2015: high-performing assets, occupancy rates of 98.6%, growth in our portfolio value – currently $3.8 billion – and a strategic focus on achieving results from active management of our current portfolio including our most recent acquisitions in Maroubra, Goulburn and Bass Hill in NSW, and Katherine in the NT.
We expect the capital inflows into the sector we saw in 2015 to continue in 2016 and, where we see value in opportunities, we will remain acquisitive.We are continually improving our portfolio composition; exiting low or no-growth markets while securing new properties that we can improve and which add to shareholder value. Our focus on non-discretionary retail will provide a buffer against any volatility in the global and domestic economies. We will remain committed to evolving our business to respond to market conditions, focusing on the needs of our customers and the quality and care of our people.
Talent development as highest priority
Strong performance stems from engaged employees, and people perform at their best in an environment that encourages and rewards excellence. We have a collaborative culture that values and respects diversity of experience, background and perspective.
We aim to give our team members every opportunity to thrive professionally and personally. We do this by providing a sense of purpose through challenging and meaningful work and an inclusive culture with high levels of social connection. Our innovative learning and talent development platform, called RISE, builds our people’s capability and the Cedric Fuchs scholarship, which honours one of our founders, encourages our people to be innovative, collaborate and approach challenges with a diversity of thinking.
We are determined to improve our gender balance at a senior management and executive level. We recently undertook gender-specific development initiatives that increase the number of females awarded promotions and provide opportunities for female employees in development programs for women in leadership. We are active members of the Property Council’s Male Champions of Change program and remain committed to improving diversity in the property industry.
The development of our people and business capability remains a key focus for 2016 and the years ahead. Our success relies on how we build careers through empowering our people to serve their communities and by providing the resources they need to thrive.
Partnering key to success
A common thread across our centres is our ability to form deep, lasting relationships with our retail partners and broader stakeholders.
With over $15.7 billion of property under management, we deliver smart, integrated property solutions for our customers across our sectors of office, industrial and retail. The scale of our geographically diverse industrial and logistics portfolio means we can respond to the holistic needs of our retail tenants. We ensure their supply chain requirements are met by our $3.7-billion industrial and logistics portfolio through existing facilities and development pipeline.
Recently, we announced industrial leasing pre-commitments with our tenant partner, The Reject Shop, for a $40-million, 37,700m2 warehouse. We are also developing a new warehouse and distribution facility at Drystone Industrial Estate for Target, which will comprise a warehouse and office facility of 63,000m2 situated on a 13-hectare land parcel.
Community is core to performance
For supermarket-anchored, convenience based shopping centres to be successful, they must be enmeshed in the communities they serve. Our partnerships extend beyond our retailers and customers to the broader community and we recognise that our social licence to operate is largely in their hands. A shopping centre in a regional market is more than a shopping destination; it is a community space and we play a role in providing a safe, social and enjoyable environment for the community. We are changing the social fabric of our centres by giving access to amenities previously only experienced in large city centres. Complimentary Wi-Fi, dedicated parents’ rooms, enhanced dining experiences, and importantly, great cafés serving good coffee. All of these amenities are now part of our commitment to providing access to quality products, services and experiences.
We are also closely involved in improving social outcomes for people in the community without homes. At our recently redeveloped Lansell Square shopping centre in Bendigo, Victoria we formed a charity partnership with ‘Haven; Home, Safe’, in support of the Sidney Myer Haven program, that provides services to the homeless and disadvantaged. We raised $25,000 for ‘Haven, Home, Safe’, through workplace giving and fundraising activities with tenant customers, the local community, contractors and consultants all participating. The funds raised will go towards $7.5-million development of a 23-unit housing project in Bendigo providing supported accommodation for up to two years for the homeless community.
At Lake Macquarie Fair, NSW we have partnered with community organisation Centre for Hope, providing space in the centre for a bike shed project called Wheels for Hope. Here, local youth join an eight-week program where they are supported to recondition old bicycles that they then take home. We will continue to provide a space for local youth programs when we redevelop the property, planned for later this year. Importantly, these and similar programs are not generated by head office; rather, these opportunities to partner with the community come from our people on the ground, who are empowered to engage with their communities to create shared commitment and ownership of outreach initiatives.
Regulatory challenges remain
Over-regulation in the retail sector remains a looming issue, and the recent findings (December 2015) of the Productivity Commission are welcome. The Commission identified the need to reform planning and zoning systems at state and territory level, to remove regulations that are restrictive and that unnecessarily limit competition and restrict retail space.
As a national landlord for a significant number of major national retail brands, we encounter inherent inefficiencies in complying with multiple and sometimes contradictory issues in different jurisdictions.
We work constructively with all levels of government within the current fragmented system, but see a need for reform that encourages investment and economic development by simplifying planning and zoning controls.
We will support our industry bodies and state and territory policymakers to resolve these issues which, if properly addressed, will drive development in the sector, benefitting all participants, especially consumers who will receive more choice, better service, and competitive pricing.
We also contest the popular narrative that there isn’t enough competition in the grocery sector. There are several large players providing competition to Coles and Woolworth – notably Aldi, which has rapidly expanded its footprint in shopping centres, including at our own centres such as Secret Harbour, Bateau Bay and Southgate Plaza, and Costco, which has announced new stores in major cities in 2016 and plans for stores in regional locations. Competition in this sector is extremely robust, and customers are benefiting from lower prices and greater choice.
The future
When I am asked what the shopping centre of the future will be like, I talk about our refurbishment of Secret Harbour in Rockingham, Western Australia. Our $53-million expansion of Secret Harbour will more than double its size, and will radically change the experience for shoppers. Our main grocery tenant partners, Aldi, Coles and Woolworths, will offer customers choice and competition; however, a key difference at Secret Harbour will be its high street, showcasing great cafés, family eateries, bars and licensed restaurants.
The next wave of shopping centres will provide access to the very best products and services, comfortable community spaces and offer a strong social experience that is not available online. Tenants will include the big national brands, high-quality niche players and, importantly, local businesses that are operated by members of the community.
I am confident Charter Hall’s network of shopping centres of the future will have centre management teams made up from diverse backgrounds and experiences. Our aim is to create an environment both at our centres and in our head office that encourages our people to bring their whole selves to work, and we will continue to employ teams who care deeply about their community.
As a leader at Charter Hall, my role is to provide an environment that empowers our people to make great decisions that support their communities. That is how I can best future-proof our performance.
About Charter Hall Retail REIT
Charter Hall Group (ASX:CHC) is one of Australia’s leading fully integrated property groups, with over 24 years’ experience managing high-quality property on behalf of institutional, wholesale and retail clients. Charter Hall has over $15.7 billion of funds under management across the office, retail and industrial sectors. The Group has offices in Sydney, Melbourne, Brisbane, Adelaide and Perth.
With a focus on non-discretionary retail, we manage a $3.8-billion Australian retail portfolio. We optimise returns for our investors, and create enjoyable environments for the 100 million shopper visitations to our centres each year, by providing end-to-end property services for each centre.
The Group’s success is underpinned by a highly skilled and motivated team, with diverse expertise across property sectors and risk-return profiles. Sustainability is a key element of its business approach and by ensuring its actions are commercially sound and make a difference to its people, customers and the environment, Charter Hall can make a positive impact for its investors, the community and the Group.
