Australian Unity Office Fund · ASX:AOF
Australian Unity Office Fund — FY2020 Earnings Presentation
33 slides from Australian Unity Office Fund's earnings presentation, Aug 24, 2020
Slide 1: Australian Unity Office Fund 2020 Full Year Results
24 August 2020 AUSTRALIAN UNITY OFFICE FUND 2020 FULL YEAR RESULTS Webcast: https://webcast.boardroom.media/australian-unity-office-fund/20200824/NaN Teleconference: https://s1.c-conf.com/diamondpass/10009266-invite.html 32 Phillip St. Parramatta
Slide 2: Important Notice and Disclaimer
IMPORTANT NOTICE AND DISCLAIMER The information provided in this presentation has been prepared by Australian Unity Investment Real Estate Limited ABN 86 606 414 368 AFS Licence 477434 (AUIREL), as responsible entity of the Australian Unity Office Fund ARSN 113 369 627 (AOF). The information provide
Slide 3: AOF's Results
AOF’S RESULTS 64 Northbourne Ave, Canberra 3
Slide 4: AOF's FY20 Full Year Result Highlights
AOF’S FY20 FULL YEAR RESULT HIGHLIGHTS Delivering on key objectives Vision To be Australia’s leading income focused office A-REIT Portfolio Construction Capital Management Investment Return Key A portfolio of Australian metropolitan and CBD office A robust capital structure, with conservative gearin
Slide 5: COVID-19
COVID-19 • Actively assisting tenants through this period; including establishing rent relief entitlements under the Government’s Mandatory Code of Conduct (“the Code”) • Rent relief requests: - As at 30 June 2020 ~11% of our tenants by gross monthly income have requested proportionate rent relief (
Slide 6: Financial Results
FINANCIAL RESULTS 468 St Kilda Rd, Melbourne 6
Slide 7: Full year 2020 – key financial metrics
FINANCIAL RESULTS Full year 2020 – key financial metrics Key financial metric FY20 FY19 Change • All assets were independently revalued as at 30 June 2020 Statutory net profit $13.2m $44.8m -$31.6m • Statutory net profit down $31.6 million compared to prior year, driven by lower net FFO(1) $27.6m $2
Slide 8: Strong capital management position
FINANCIAL RESULTS Strong capital management position 30 June 30 June Change 2020 2019 • Debt diversified by three separate tranches and two major banks (CBA and NAB) Total borrowings(1) $215.8m $204.8m +$11.0m • $70 million of debt was refinanced for a new five year Total debt facilities $250.0m $22
Slide 9: Portfolio Management
PORTFOLIO MANAGEMENT 150 Charlotte St, Brisbane 9
Slide 10: Portfolio Highlights
PORTFOLIO HIGHLIGHTS Well positioned portfolio with progress made on 2 Valentine Ave Portfolio is well positioned with 59% allocation by book value to metro markets and 41% to 1 capital city CBDs (excluding Sydney and Melbourne CBDs); which offer significant price point differential Limited expiries
Slide 11: Portfolio Well Positioned
PORTFOLIO WELL POSITIONED • Portfolio of 9 assets weighted 59% by book value to metro markets and 41% to capital city CBDs (excluding Sydney and Melbourne CBDs) • AOF’s gross market rents are between 29% - 49% of Sydney CBD gross effective rents • Metro markets: expected to perform better than major
Slide 12: Portfolio Well Positioned
PORTFOLIO WELL POSITIONED Well positioned going into FY21: • 64% of gross income from top 5 major tenants • Full portfolio independently revalued with COVID-19 implications addressed(1) • Only 4% expiry in FY21 with key focus on reletting / addressing vacancy • Over 95% of the portfolio’s future ren
Slide 13: Portfolio Well Positioned
PORTFOLIO WELL POSITIONED • Leasing activity of ~15,900 sqm since July 2019: - comprising ~7,100 sqm (or ~6.6% of the portfolio(1)) of completed leases in FY20 (22 transactions) - and a further ~8,800 sqm (or ~8.1 % of the portfolio(1)) of leasing deals either completed or under signed heads of agre
Slide 14: Vacancy & Expiry
VACANCY & EXPIRY • Vacancy: 6.3%(1) of portfolio Current Vacancies sqm 64 Northbourne - L5 1,027 - only 1 area over 1,000 sqm 30 Pirie St - Part L22 & Part L23 963 • FY21 expiries: 4.3%(1) of portfolio 5 Eden Park Drive - Part L3 796 - Only 4 tenancies over 400 sqm, 1 under 468 St Kilda Rd - Part L1
Slide 15: Major Expiries (FY22+)
MAJOR EXPIRIES (FY22+) Focus on de-risking major expiries well in advance Lease expiry profile (1) • 10 Valentine Ave, Parramatta (14% of NLA, June 2022) GE 40% 32 Phillip St - Property NSW reviewing required footprint 35% 6% PNSW • 30 Pirie St, Adelaide (21% of NLA, February 2023) 30% 10 Valentine
Slide 16: 2 Valentine Ave, Parramatta
2 VALENTINE AVE, PARRAMATTA Development opportunity well advanced Progress during FY20 • Site Specific Planning Approval obtained • Development Approval received for ~28,000 sqm • Construction tender process completed – Buildcorp preferred • 2-10 Valentine Avenue: valuation up $14.5 million vs June
Slide 17: Valuation Summary
VALUATION SUMMARY All assets independently valued at 30 June 2020 Independent Change in 5 Current cap Cap rate Market rental • Full portfolio independently revalued Property Valuation year CAGR rate (%) change (%) (1) ($ per sqm) as at 30 June 2020 ($m) (%)(2) 10 Valentine Ave 134.50 5.50% 0.00% $57
Slide 18: Outlook
OUTLOOK 180 *ustgiics YEARS Real Wellbeing >
Slide 19: Outlook
OUTLOOK Guidance • FFO guidance not provided due to uncertainty arising from COVID-19 and the potential impact on business operating conditions • FY21 distribution guidance of 15.0 cpu(1) (FY20: 15.0 cpu) Immediate focus and outlook • COVID-19 – tenant and staff safety, maintain active dialogue with
Slide 20: Appendices
APPENDICES 5 Eden Park Drive, Macquarie Park 20
Slide 21: Income Statement
INCOME STATEMENT FY20 FY19 Change ($’000) ($’000) ($’000) Income Statement Rental income(1) 57,844 55,909 1,935 Property expenses(2) (17,400) (14,993) (2,407) Straight lining of rental income and amortisation of leasing commissions and tenant (5,049) (1,562) (3,487) incentives Net property income 35
Slide 22: Reconciliation of Statutory Profit to Property Council FFO
RECONCILIATION OF STATUTORY PROFIT TO PROPERTY COUNCIL FFO FY20 FY19 Change ($’000) ($’000) ($’000) Profit for the year 13,245 44,828 (31,583) Adjusted for: Straight lining of rental income and amortisation of leasing commissions and tenant 5,049 1,562 3,487 incentives Net loss on financial instrume
Slide 23: Balance Sheet
BALANCE SHEET 30 June 2020 30 June 2019 Change ($’000) ($’000) ($’000) Assets Cash and cash equivalents 5,798 7,481 (1,683) Receivables 1,818 1,117 701 Other assets 784 458 326 Investment properties 669,650 668,400 1,250 Total Assets 678,050 677,456 594 Liabilities Distributions payable 4,885 6,432
Slide 24: Capital Management
CAPITAL MANAGEMENT Debt facility expiry profile(1) $120 m $80 m $40 m $0 m Jun-20 Dec-20 Jun-21 Dec-21 Jun-22 Dec-22 Jun-23 Dec-23 Jun-24 Dec-24 Jun-25 Interest rate hedging & average hedged interest rate1 $200 m 4.00% $150 m 3.00% $100 m 2.00% $50 m 1.00% $0 m 0.00% Jun-20 Dec-20 Jun-21 Dec-21 Jun-
Slide 25: Investment Portfolio
INVESTMENT PORTFOLIO As at 30 June 2020 Book Value Cap Rate NLA WALE Occupancy Market Property State ($m) (%) (sqm) (years)(1) (by NLA) Parramatta 2 - 10 Valentine Ave, Parramatta NSW 134.50 5.50% 16,020 2.0 97.3% Parramatta 32 Phillip Street, Parramatta NSW 65.50 5.50% 6,759 3.0 100.0% Macquarie Pa
Slide 26: Key Portfolio Metrics
KEY PORTFOLIO METRICS As at 30 June 2020 Key portfolio metrics Lease expiry profile(1) Number of properties 9 40% 37% 35% Occupancy(1) 93.7% 30% Portfolio Value $669.65m 25% 22% 20% Weighted Average Capitalisation Rate 6.09% 14% 15% 8% 9% 10% 6% WALE(2) 2.9 years 4% 5% Net Lettable Area 107,614 sqm
Slide 27: Environmental
ENVIRONMENTAL NABERS NABERS Property Energy Water 5 Eden Park Drive 4.0 2.5 • Portfolio focus on improving NABERS credentials 10 Valentine Ave 5.0 4.0 • Solar installation being investigated for several assets 32 Phillip St 4.0 3.0 64 Northbourne Ave 4.5 3.5 • 2 Valentine design(1) has leading Envir
Slide 28: 2 Valentine Ave, Parramatta
2 VALENTINE AVE, PARRAMATTA Design(1) – wellness at its core Design(1) – occupant health front of mind 1. Current design, subject to change 28
Slide 29: Office Markets
OFFICE MARKETS Key market statistics Size of Total Vacancy Total Vacancy Net Absorption Prime Gross Face Rent Prime Gross Effective Rent Under Under market (%) (%) (sqm) Face Rent Change from Effective Rent Change from 30 Construction to Construction (sqm) 30 June 20 30 June 19 (12 mths) ($ per sqm)
Slide 30: Metro Markets
METRO MARKETS Major metro markets competitively priced vs Sydney CBD Growth in Market Prime Gross Effective Rent Gross Effect. Rent Market Effective Rent Discount to Sydney (from June 2015 to • Metro markets and other capital cities ($/sqm) CBD June 2020) CBDs rentals at significant discount to Sydn
Slide 31: Market Yields
MARKET YIELDS Commercial office yields well above bond yields Market yields vs OCR & 10 year bonds Parramatta Prime Yield vs 10 Year Gov't Bonds 7.00% 9.00% 6.00% 8.00% 5.00% 7.00% 4.00% 6.00% 3.00% 2.00% 5.00% 1.00% 4.00% 0.00% 3.00% 2.00% 1.00% 0.00% Mar 10 Jul 10 Nov 10 Mar 11 Jul 11 Nov 11 Mar 1
Slide 32: Other Significant Events During The Year
OTHER SIGNIFICANT EVENTS DURING THE YEAR Australian Unity Limited (Australian Unity) and Keppel Capital Holdings Pte Ltd (Keppel Capital) Joint Venture Australian Unity Limited on 28 February 2020 transferred all of the issued shares in the Responsible Entity to a joint venture company owned equally
Slide 33: Years Real Wellbeing
180 "Gn > YEARS Real Wellbeing
Australian Unity Office Fund — FY2020 Earnings Presentation on 6ix