Breakfast Creek Hotel, Brisbane, QLD New Brighton Hotel ... · Land Tax Expense (0.8) Distributable Fair Value Gains 6.0 Distributable Profit 1 15.3 Distributions Paid 2 14.4 1. Excludes

December 07 Results Presentation - Simple & Secure20 February 2008

Australian Leisure and Entertainment Property Management Limited ABN 45 105 275 278Australian Leisure and Entertainment Property Trust ARSN 106 063 049

1

New Brighton Hotel, Manly, NSW

Breakfast Creek Hotel, Brisbane, QLD

Contents

Highlights Market OverviewALE’s Track RecordDecember 07 Half-Year ResultsProperty PortfolioCPI Hedge TransactionRisk ManagementCapital ManagementFuture DistributionsFY 08 Outlook and Strategy


2

Highlights – strong result and positive outlook

December 07 Half-Year Results

total distribution of 16.75 cents per security, up 6.7% on Dec 06

total distribution amount is 0.97 cents per security below distributable income

revaluation of property assets to $836.0m reflects November 2007 CPI rent increase

security buyback to date of 5.8% or $21.6 million

$245m CPI Hedge transaction in December 07 adds significant distributable cash flow

100% of ALE’s debt remains hedged for a weighted average 11.9 years

Looking forward

financial position and liquidity outlook are both sound

FY 08 full year total distribution guidance of at least 33.50 cents per security

strong focus on capital and risk management

valuable acquisition opportunities are expected to become available

disciplined focus on lower risk and higher quality properties will continue to apply

aim for future distributions to grow by at least CPI

distributions are expected to be 100% tax deferred for both FY 08 and FY 09


3

Market Overview

since July 2007 both property and credit markets have signalled a heightened risk of market volatilityAugust 2007 saw credit spreads start to increase significantly, particularly in sub-investment grade and offshore marketsmany asset and credit markets have now reverted to a more rational pricing of risk…particularly secondary assetsprime property assets continue to be attractive to long term investors with sustainable capital structurespipeline of acquisition opportunities is now increasing


4

ALE’s Track Record

ALE has been proactive in managing risk:

July 2007 onwards - declined to participate in a significant number of transactions that provided inadequate returns for the risks involvedAugust 2007 – ALE completed one of the last CMBS issues in the Australian market before the securitised debt market closedOctober 2007 - diversified funding sources and tapped the Australian banking markets for funding and additional undrawn lines of liquidity Early December 2007 – issued large CPI Hedge that

locked in interest rates for up to 16 yearsdelivered a significant increase in distributable cash flowprovided significant security for future distributions and capital protection

February 2008 – NAB extended financing maturity termFebruary 2008 – ALE delivered above guidance distributable income


5

ALE’s Track Record

ALE has consciously decided to:

acquire prime quality property in terms of strong tenants, long term leases and capital city locationsacquire properties with minimal capital expenditure demandsallow others to assume the various property development risks fund acquisitions with long term funding and hedgingavoid diluting security holder value with discounted equity issues

ALE has consciously decided to keep it simple and avoid additional risk !


6

December 07 Half-Year Results - Distributable Profit1


$M

Revenue 26.0

Borrowing Expense 1 (14.6)

Management Expense (1.3)

Land Tax Expense (0.8)

Distributable Fair Value Gains 6.0

Distributable Profit 1 15.3

Distributions Paid 2 14.4

1. Excludes non-cash accounting items. Figures include rounding.2. $900k under distribution due to positive impact of CPI Hedge post distribution

announcement

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December 07 Half-Year ResultsDistributable Profit1 Compared to December 06


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$M Impact

Increased Land Tax (0.1)

Distributable Profit Dec 2006 Half 14.4 Increased Property Income 0.9 Decreased Interest Income (0.3) Unchanged Borrowing Costs 0.0 Unchanged Management Costs 0.0

Distributable Fair Value Gains 0.4 Distributable Profit Dec 2007 Half 15.3 NB: Excludes non-cash accounting items. Figures include rounding. Up 6.25%


9

December 07 Half-Year Results – Financial Highlights

Income DPS 9.76¢ 0.26¢ 2.74%

Total DPS 16.75¢ 1.05¢ 6.69%

Property Values2 $836.0m $73.6m 12.94%

Gearing3 66% (1.00)%Net Asset per Security2 $3.42 $0.62 22.14%

1. Distributable Profit adds back non-cash accounting items and distributable fair value adjustments2. Based on sum of 102 individual property values + 3 development properties at cost3. Total Liabilities as a % of Total Assets (based on sum of individual valuations)

At 31 December 2007December

06 - 07$ Change

December06 - 07

% ChangeImpact

Property Portfolio - Valuation Results

independent valuation in June 07 assessed an average capitalisation rate on a sum of individual properties basis at 6.07%

independent advice from DTZ at 31 December 2007 confirmed that capitalisation rates for ALE’s prime quality properties remain at June 07 levels

independent assessment by DTZ at 31 December 2007 is that a premium would be paid on portfolio acquisition basis

capitalisation rate represents a margin over current Aust. Government long term real interest rates of around 3.5%

net assets per security of $3.40


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Property Portfolio – Security of Rental Income and Market Demand

Security of Income

ALH - a tenant with strong credit quality

0% property vacancy

ALH has specific development rights

triple net leases with terms of up to 20.8 years + options

properties expanding with Dan Murphy rollouts

ALH earnings have exhibited outstanding growth

Demand from Investors

widespread demand continues for securely tenanted quality Australian properties valued at under $30m


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Property Portfolio – Focus on Quality Acquisitions

Acquisitions totalling $33.3 million - all on long term indexed leases to ALH


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Balmoral Hotel, Perth, WAPritchard’s Hotel, Mt. Pritchard, NSW

The Brass Monkey, Perth, WA

CPI Hedge Transaction - Key Benefits

locks in low real interest rates for the next 16 yearssubstantially reduces any distribution volatility driven by CPI and interest rate mismatchesextends hedging term from 6.7 to 11.9 yearsexpands the capital protection for security holders against any upward movements in real interest ratesimproves interest coverage ratios and reduces refinancing risk for debt maturities in 2011significantly increases distributable free cash flowallows around 75% of higher CPI to continue to be reflected in distribution growth

A value accretive risk management initiative !


13

CPI Hedge Transaction

CPI HedgeALE entered into a long term hedge on 7 Dec 2007term of 16 years to 20 Nov 2023ALE will receive

floating rate interest at BBSW + 25.75 bps on $245m ALE will pay

fixed rate interest at 3.61% on a balance that commences at $245m and escalates by CPI (same basis as existing CIBs)

amount repayable in 2023 under the Hedge is the amount by which $245m escalates by CPIALE can break at anytime and hedge provider has rights to break every five years $9m estimated first full year net cash flow to ALE


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0%

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2008

2009

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2011

2012

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2014

2015

2016

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2019

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2022

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Weighted average hedging term extended from 6.7 to 11.9 years

CMBS Maturity – May 2011ALE Notes Maturity – Sep 2011

CIB Maturity – May 2023

ALE is 100% hedged until September 2011

15


Crystallised value of pre-existing hedging

ALE previously had vanilla interest rate hedging in place in respect of the $245m of CMBS

ALE entered into offsetting swaps (counter swaps)

positive present value of $11m was locked in

will be progressively paid to security holders between FY 08 to FY 15 beginning at around $3m p.a. and gradually declining over time to FY15 (included in $9m first year benefit)


16


$245m CMBS Cash Interest Reduced by $9m in first full year

Before CPI Hedge:

ALE paid fixed rate interest at 6.1% = $15m

After CPI Hedge:

ALE pays fixed rate interest at 3.61% = $9m 1

ALE receives fixed swap benefits 2 = $3m

ALE pays net interest = $6m

Cash Interest Saving year 1 = $9m

Notes:

1. Amount of fixed interest expense will increase by CPI

2. Swap benefits arise due to offsetting of pre-existing fixed rate swaps. $3m pa will gradually reduce to nil by 2015


17


At the time of entering the CPI Hedgelong term real interest rates were at a relative low of 2.31%long term nominal interest rates were at a relative high of 5.99% (thereby maximising the counter swap benefits) long term bond market inflation expectations were at a relative high of 3.59%


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Real & Nominal Interest Rates

0%

1%

2%

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7%

Jan-0

5Mar-

05May

-05Ju

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-06Ju

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7Mar-

07May

-07Ju

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Sep-07

Nov-07

Long Term Nominal Bond Rate Long Term Real Bond Rate

Bond Market's Expectation of Future Inflation = 3.59%

Risk Management – Asset Scorecard

Focus on quality and risk management (as at February 2008)

strong tenant: ALH 75% owned by Woolworths

WAV lease term: 20.5 years

WAV options term: four options of 10 years

lease structure: triple net

rent increases: CPI (state based)

land tax exposure: QLD only

rent as % of pub earnings: compares favourably to market

geographic diversification: five states of Australia


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Risk Management – Liability Scorecard

Focus on quality and risk management (as at February 2008)

WAV debt maturity term: 6.3 years

earliest debt maturity: May 2011 (in 3.3 years)

WAV hedging term: 11.9 years (WAV 5.1 yrs for LPTs)

earliest 100% hedge maturity: Sep 2011 (in 3.6 years)

gearing: 66% (reduced from 88% at IPO)

WAV interest rate: 4.150% p.a. (all up fixed rate)

debt covenant compliance: significant headroom

offshore assets: nil

foreign exchange risk: not applicable


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Risk Management – Capital Structure

Debt Security Amount 1$M

Maturity Date Maturity Term Hedge Term All Up Fixed Interest Rate 2

CIB 132 3 Nov 2023 15.8 15.8 3.400%

CMBS / BANK 282 4 May 2011 3.3 14.6 2.870%

ALE NOTES 150 Sep 2011 3.6 3.6 7.265%

TOTAL DEBT & W. AVERAGES

564 6.3 years 11.9 years 4.150%

Current Capital Structure (as at 20 February 2008)

100% of ALE’s debt is hedged for an average 11.9 years at competitive margins

1 Average amount outstanding during 2008 calendar year (assuming no further funding required)2 Inclusive of credit margin and net of all swaps and counter swaps (excluding non-cash accounting items)3 CIB amount will be $125m increased by CPI over 17.5 years from May 20064 Comprises both $245m CMBS issue, $36m Bank facility and an increasing amount under the CPI Hedge.


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Risk Management – Capital Structure


significant value is embedded in the capital structurelower than current market hedged base interest rateslower than current market credit marginslong term funding maturitieslong term hedging

gearing levels are significantly reduced from IPO levelsmark to market gains on hedging, present value of $11mcash / distributable average interest rate for 2008 of 4.150%

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Risk Management - Capital Structure


diversity of funding sources and banking relationshipsundrawn standby banking facilities of $19mundrawn CMBS facilities of $54m can be tapped when markets reopen and become competitiveunsecured property of $33m is currently heldsignificant covenant headroom existsno material funding impacts from capital market volatilityno reliance on financial guarantors (monoline insurers)

ALE’s financial position remains secure !

23

Capital Management - Security Buyback Is Delivering Value


approval for on-market buyback of up to 10% or 9.08 million securities by 1 May 08status

buyback of 5.8% or 5.29m securities for $21.6m to datefunded from surplus cash and debt3.79m securities yet to be acquired for around $13m (at current prices)

ALE will continue to consider the value created by the buyback in light of acquisition opportunities, gearing levels and other financial risk management parameters

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Future Distributions – December 2007 Distribution

Cents per Security % increase on December 2006

Income Distribution 9.76 up 2.74%

Ongoing Capital Distribution 6.99 up 12.74%

Total Distribution 16.75 up 6.69%

December 2007 Distribution

Confirmed and to be paid 28 February 2008


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Future Distributions - Certainty of Funding

Before$M

After$M

CPI escalated rent 54 54

Land tax and management costs (5) (5)

Interest expense (net of hedging) (33) (24)

Distributable cash flow 16 25

Distributable cash flow (on 85.8 million securities) 29 cps*

Impact of CPI Hedge on distributable cash flow

Current outlook for 12 months to December 2008 (approximations only)

Assumes unchanged portfolio and existing capital / hedging structure continues

* cps: cents per stapled security


20

Future Distributions

CPI Hedge and crystallised hedge profits add to distributable net income

any requirement for debt drawdowns to fund capital distributions is now materially reduced

any medium and longer term distribution volatility is now materially reduced

distribution policy will continue to have regard to gearing levels that match the quality of the assets, acquisitions opportunities and any other relevant financial parameters

distributions expected to be 100% tax deferred until FY 09

and then at least 90% thereafter (on an unchanged portfolio basis)


27

FY 08 Outlook and Strategy - FY 08 Distribution Guidance

FY 08 total distribution guidance of at least 33.5 cps1

guidance equates to

FY 08 total distribution yield of at least 10.4%2

total distribution growth of at least 3.1%

Board’s current aim is to continue to pay total distributions that grow from current levels at a rate at least equal to the growth in CPI

1. cps is cents per security2. based on current security price of $3.23


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FY 08 Outlook and Strategy - Focus Going Forward

Acquisitionsfocus remains on properties with secure long term leasesboth pubs and other commercial propertyselective and value accretivefunding credit margins for new acquisitions will be higher

Capital and Risk Managementcontinue to seek opportunities to reduce cost and riskfurther buyback if relative value is evidentreal interest rates remain low but higher inflation outlookfurther CPI Hedging under consideration

Maintain and increase the security of distributions


29

ALE Property GroupLevel 7, 1 O’Connell Street, Sydney NSW 2000

Disclaimer

This presentation has been prepared by Australian Leisure and Entertainment Property Management Limited (ALEPML) ABN 45 105 275 278 for general information purposes only, without taking into account any potential investors’personal objectives, financial situations or needs. Before investing in securities issued by entities managed by ALEPML, you should consider your own objectives, financial situation and needs or you should obtain financial, legal and/or taxation advice.

Past performance information provided in this presentation may not be a reliable indication of future performance. Information, including forecast financial information, in this presentation should not be considered as a recommendation in relation to holding, purchasing or selling shares, securities or other instruments of entities managed by ALEPML. Due care and attention has been exercised in the forecasts and any variation may be materially positive or negative.

This information contained herein is current as at the date of this presentation.© ALE Property Group

Australian Leisure and Entertainment Property Management Limited ABN 45 105 275 278Australian Leisure and Entertainment Property Trust ARSN 106 063 049 26

Risk Management – Financial Ratio Analysis


31

Loan to Value Ratio (LVR) over time

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Dec 2003 Dec 2004 Dec 2005 Dec 2006 Dec 2007

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t Val

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Total (book) Equity Total (book) Debt LVR

Risk Management – Financial Ratio Analysis


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Distribution of Cash over time

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Dec 2004 Dec 2005 Dec 2006 Dec 2007 Dec 2008*

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Distributable Cash Cash Interest Costs ICR

* estimated

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Jun2004

Dec2004

Jun2005

Dec2005

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Dec2006

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Dec2007

Jun2008

Cen

ts p

er S

tap

led

Sec

uri

ty

5.80¢* 6.20¢ 6.806.65¢

* pro-rata based on Jun 2004 distribution o f 7.50¢ from IPO (Nov 2003) to Jun 2004

9.20

16.80¢

Inco me10.57 ¢

C apita l6.23 ¢

C apita l6 .20 ¢

Inco me9.50 ¢

15.70¢

C apita l6.99 ¢

Inco me9.76 ¢

16.75¢

C apita l

Inco me

Guidance

16.75¢

Capital Management - Distribution Growth


33

16% p.a. (compound) income distribution growth

Documents

Breakfast Creek Hotel, Brisbane, QLD New Brighton Hotel ... · Land Tax Expense (0.8) Distributable Fair Value Gains 6.0 Distributable Profit 1 15.3 Distributions Paid 2 14.4 1. Excludes