Slide 1: FY18 Annual Results
PAGE 1 Arena ArenaREIT REIT FY18 FY18Annual AnnualResults Results Resilience of earnings and distribution growth Resilience of earnings and distribution growth 21 August 2018 21 August 2018 Arena REIT / FY18 Annual Results / www.arena.com.au
Slide 2: Agenda
Agenda PAGE 2 Highlights 3 Financial Results 6 Portfolio Update 11 Outlook 21 Questions 23 Directory 24 Appendices 25 Important notice 40 Bondi Junction Medical Centre, Bondi NSW Arena REIT / FY18 Annual Results / www.arena.com.au
Slide 3: Highlights for FY2018
Highlights for FY2018 PAGE 3 Strong operating performance with capacity for future growth ASX total return3 performance to 30 June 18 23.6% Net operating Earnings per Distributions per 25% profit security (EPS)1 security (DPS) 20% 18.6% 15% 13.2% 12.2% Increase 30% 10.0% $34.7m 13.1 cents 12.8 cents
Slide 4: Strategically well positioned
Strategically well positioned PAGE 4 High level of contracted earnings with growth prospects Quality portfolio with annual rent Predictable reviews and long WALE income stream Population growing and Debt capacity Arena’s investment Supportive Active capital ageing, government policy to fund new obje
Slide 5: FY19 DPS guidance – 13.5 cents
FY19 DPS guidance – 13.5 cents (+5.5%)1 PAGE 5 Earnings and distribution growth underpinned by core earnings drivers Earnings and distributions per security (cents) 16 14 13.5 12.8 13.1 12.3 12.0 12 11.1 10.9 10.0 10.2 10 8.8 8.9 8.0 8.2 8 6 4 2 - FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY19 DPS (cents)
Slide 6: Financial Results
PAGE PAGE66 Financial FinancialResults Results Gareth Winter, Chief Financial Officer Gareth Winter, Chief Financial Officer Arena REIT / FY18 Annual Results / www.arena.com.au
Slide 7: Financial performance
Financial performance PAGE 7 Rent reviews and development completions drive growth in operating earnings FY18 FY17 Change Continued growth in operating income from: ($’000) ($’000) ($’000) (%) ELC developments Property income 43,128 37,437 5,691 15% completed throughout Other income 770 689 81 12%
Slide 8: Contributors to EPS growth
Contributors to EPS growth PAGE 8 Core earnings drivers continue to underpin EPS1 growth EPS1 cents 14 0.65 0.10 ( 0.30 ) 13.10 0.35 12.3 12 10 8 6 FY17 EPS Like-for-like rental Completed Net operating Funding mix FY18 EPS income growth developments, expenses and other acquisitions and income dispos
Slide 9: Financial position
Financial position PAGE 9 Substantial growth with low risk funding profile 2018 2017 Change As at 30 June NAV per security $ ($m) ($m) (%) $1.97 $2.00 $1.84 Total assets 726.1 621.3 +17% $1.80 $1.54 $1.60 Investment properties 699.4 591.7 +18% $1.40 $1.33 $1.13 $1.20 Borrowings 179.5 171.0 +5% $1.00
Slide 10: Capital management
Capital management PAGE 10 Capacity for new investment As at 30 June 2018 2017 Change As at 30 June 2018 2017 Change Borrowings $179.5m $171m +5% Hedge cover 78% 79% -100bps Borrowing facility limit $230m $205m +12% Weighted average 2.44% 2.39% +5bps hedge Gearing 24.7% 27.5% -280bps Weighted averag
Slide 11: Portfolio Update
PAGE PAGE11 11 Portfolio PortfolioUpdate Update Rob de Vos, Head of Property Rob de Vos, Head of Property Arena REIT / FY18 Annual Results / www.arena.com.au
Slide 12: Portfolio performance
Portfolio performance PAGE 12 Value-adding business model focused on social infrastructure property Lease management Working in partnership • 100% occupancy • Extended lease terms out of maintained cycle, taking portfolio • Average like-for-like rent weighted average lease review increase of 2.6% ex
Slide 13: Lease expiry profile
Lease expiry profile PAGE 13 Weighted average lease expiry increased to 12.91 years • 14 completed developments added to portfolio with average initial lease term of 19.7 years • Only 2% of portfolio income subject to expiry prior to FY2023 • Less than 23% of portfolio income subject to expiry prior
Slide 14: Annual rent review profile
Annual rent review profile PAGE 14 FY18 like-for-like rent increase of +2.6% Actual 2.0% +6.3% 100% 9.0% 10.5% 12.0% 17.0% 5.0% 4.5% FY18 rent review summary: 80% – Average like-for-like rent 10.0% review increase of 2.6% achieved % of total portfolio income – Market rent reviews 60% achieved 6.3% r
Slide 15: Valuation movement
Valuation movement PAGE 15 Revaluation uplift of $31.6 million; total portfolio increase of 5.3% 30 Jun 2018 30 Jun 2018 Number of Net revaluations Change valuation passing yield assets movement (bps) ($m) (%) ($m) (%) ELC portfolio 207 614.0 29.7 5.8 6.46 (27) Healthcare portfolio 7 85.4 1.9 2.3 6.
Slide 16: 14 ELC developments completed in FY18
14 ELC developments completed in FY18 PAGE 16 High quality, purpose build projects in preferred locations Number of Initial yield on Initial lease term Long day care Total cost ($m) projects cost (%) (yrs) places Leasehold portfolio 1 2.5 8.7 25.3 108 Freehold portfolio 13 85.8 6.6 19.2 1,617 Total/
Slide 17: Development and acquisition pipeline
Development and acquisition pipeline PAGE 17 Existing development pipeline partially completed, new acquisitions secured • Focus on leveraging our property skills to secure quality assets with Arena’s preferred property characteristics that generate a predictable income stream • Disciplined approach
Slide 18: ELC market supply
ELC market supply PAGE 18 New supply presenting challenges and creating opportunities • 224 net new centres added to supply in 2018 calendar year to date • Approximately 300 additional new childcare centres currently in construction • Tenants are focused on optimising profitability of existing centr
Slide 19: ELC market demand
ELC market demand PAGE 19 Underlying demographics for ELC demand remain positive • Continued population growth in 0-4 year olds • Long day care participation rate of 0-4 year olds has continued to increase • Early positive feedback from tenant partners as a result of changes to government funding Nu
Slide 20: Arena REIT ELC portfolio
Arena REIT ELC portfolio PAGE 20 Proactively managed ELC portfolio, well placed in current market • Portfolio occupancy 100% • Total portfolio comparatives over the twelve month period to 30 June 2018 − Average daily fee increased by 5.3% from $92.54 to $97.49 − Average centre occupancy rate decreas
Slide 21: Summary and outlook
PAGE PAGE21 21 Summary Outlook and outlook Arena REIT / FY18 Annual Results / www.arena.com.au
Slide 22: Outlook
Outlook PAGE 22 FY19 distributions per security guidance of 13.5 cents1, +5.5% on FY18 • Income growth – contracted rent increases, higher level of market rent reviews scheduled for FY19 – full impact of FY18 development completions – five development projects contracted with estimated cost of $31 m
Slide 23: Questions
PAGE PAGE23 23 Summary and outlook Questions Questions Arena REIT / FY18 Annual Results / www.arena.com.au
Slide 24: Directory
Directory PAGE 24 www.arena.com.au Bryce Mitchelson Gareth Winter Rob de Vos Enquiries to Sam Rist Managing Director Chief Financial Head of Property Head of Investor Officer Relations bryce.mitchelson@arena.com.au gareth.winter@arena.com.au rob.devos@arena.com.au samantha.rist@arena.com.au +61 3 90
Slide 25: Appendices
PAGE PAGE25 25 Summary and outlook Questions Appendices Appendices Arena REIT / FY18 Annual Results / www.arena.com.au
Slide 26: Historical financial data
Historical financial data PAGE 26 Period ended/as at 30-Jun-18 30-Jun-17 30-Jun-16 30-Jun-15 30-Jun-14 ASX closing price ($) 2.15 2.25 1.99 1.54 1.20 Securities on issue (m) 269.4 234.8 232.0 228.3 211.5 Market capitalisation ($m) 579.1 528.3 461.7 351.6 253.8 Total annual securityholder return (%)
Slide 27: Historical portfolio data
Historical portfolio data PAGE 27 FY18 FY17 FY16 FY15 FY14 Number of properties 214 205 203 197 193 Sector diversification (by value) Early Learning (%) 88 86 84 84 81 Healthcare (%) 12 14 16 16 19 Occupancy (%) 100 100 100 99 99 Weighted Average Lease Expiry (WALE) (years) 12.9 12.8 9.7 8.9 8.5 Por
Slide 28: Financial performance
Financial performance PAGE 28 FY18 FY17 Change ($’000) ($’000) ($’000) % Property income 43,128 37,437 5,691 15% Other income 770 689 81 12% Total operating income 43,898 38,126 5,772 15% Property expenses (832) (1,152) 320 (28)% Operating expenses (3,493) (3,535) 42 (1)% Finance costs (4,883) (4,71
Slide 29: Balance sheet
Balance sheet PAGE 29 30 Jun 18 30 Jun 17 Change ($’000) ($’000) ($’000) % Cash 8,654 9,082 (428) (5)% Receivables and other assets 7,208 9,672 (2,464) (25)% Investment properties 699,409 591,712 107,697 18% Intangibles 10,816 10,816 - -% Total assets 726,087 621,282 104,805 17% Trade and other liab
Slide 30: Portfolio valuations – at June 2018
Portfolio valuations – at 30 June 2018 PAGE 30 Number of assets Value ($m) Passing yield (%) ELC – Independent Valuations Queensland 10 39.3 6.63% New South Wales 3 14.4 6.05% Western Australia & Northern Territory 2 4.5 7.21% Victoria 14 35.2 5.89% Total ELC independent valuations 29 93.4 6.29% ELC
Slide 31: Borrowing summary
Borrowing summary PAGE 31 As at 30 June 2018 Tranche 1 Tranche 2 Total Total facility $80m $150m $230m Amount drawn $80m $99.5m $179.5m Available debt - $50.5m $50.5m Expiry date 31-Mar-22 31-Mar-23 Remaining term 3.75yrs 4.75yrs 4.4yrs Facility Covenant Ratio requirement Loan to value ratio (LVR)1
Slide 32: Portfolio composition and movement
Portfolio composition and movement PAGE 32 Portfolio movements (30 June 2017 to 30 June 2018) 220 205 214 210 10 -1 5 -1 1 200 10 -14 * 190 180 209 195 170 160 150 30-Jun-17 Development sites Development sites Development sites Operating centre Operating centre 30-Jun-18 acquired divested completed
Slide 33: ELC developments completed in FY18
ELC developments completed in FY18 PAGE 33 Initial lease term Long day care Tenant Partner Total cost ($m) (yrs) places Leasehold properties 108 Torquay North, VIC YMCA 2.5 25 Freehold properties Auburn, NSW Oxanda 5.6 20 111 Killara, NSW Oxanda 7.7 20 92 Port Macquarie, NSW Green Leaves 7.7 20 140
Slide 34: ELC portfolio metrics
ELC portfolio metrics PAGE 34 30 Jun 2018 30 Jun 2017 Change Leased ELCs 202 188 7.4% Development sites 5 10 (50%) Total ELCs 207 198 4.5% WALE (by income) (years) 14.2 14.2 - Tenanted occupancy (%) 100 100 - Average passing yield (%) 6.46 6.73 (27bps) Portfolio value ($m) 614.0 507.6 21.0% Average
Slide 35: Healthcare portfolio metrics
Healthcare portfolio metrics PAGE 35 30 Jun 2018 30 Jun 2017 Change Total healthcare properties 7 7 - WALE (by income) (years) 4.5 5.5 (1yr) Tenanted occupancy (%) 100 100 - Average passing yield (%) 6.85 6.92 (7bps) Property portfolio ($m) 85.4 84.1 1.5% Average rental increase (%) 1.3 2.5 (120bps)
Slide 36: Portfolio diversification
Portfolio diversification PAGE 36 Geographic diversification (by value) Tenant partner diversification (by income) 3% 1% 3% 3% Goodstart Early Learning QLD 3% 8% Primary Health Care 7% VIC Affinity Education 33% 6% 34% NSW Green Leaves ELCs 23% WA 8% G8 Education TAS Petit Early Learning SA 12% YMCA
Slide 37: Portfolio location map
Portfolio location map PAGE 37 Arena REIT / FY18 Annual Results / www.arena.com.au
Slide 38: ‘Jobs for Families’ package – July 2018
‘Jobs for Families’ package – July 2018 PAGE 38 • New activity test (previously minimum 24 hours of subsidy) Maximum number of hours of Hours of activity (per fortnight) subsidy (per fortnight) 8 – 16 hours 36 hours Families earning less than $65,710 that do not 16 – 48 hours 72 hours meet the activ
Slide 39: ELC market transactions
ELC market transactions PAGE 39 QLD passing yields VIC passing yields NSW passing yields 10% 10% 10% 9% 9% 9% 8% 8% 8% 7% 7% 7% 6% 6% 6% 5% 5% 5% 4% 4% 4% 3% 3% 3% 2% 2% 2% Jan-14 Jan-15 Jan-16 Jan-17 Jan-18 Jan-14 Jan-15 Jan-16 Jan-17 Jan-18 Jan-14 Jan-15 Jan-16 Jan-17 Jan-18 Brisbane Metro Area Re
Slide 40: Important notice
Important notice PAGE 40 This presentation has been prepared by Arena comprising Arena REIT Limited (ACN 602 365 186), Arena REIT Management Limited (ACN 600 069 761 AFSL No. 465754) as responsible entity of Arena REIT No.1 (ARSN 106 891 641) and Arena REIT No.2 (ARSN 101 067 878). The information c