Argosy Property Limited · NZX:ARG
Argosy Property — ING Property Trust — FY2009 Earnings Presentation
25 slides from Argosy Property's earnings presentation, May 20, 2009
Slide 1: ING Property Trust Annual results presentation – May 2009
ING Property Trust Annual results presentation – May 2009 Peter Mence – General Manager Stuart Harrison – Chief Financial Officer
Slide 2: Agenda
Agenda » Highlights and performance » Financial overview » Strategy » Valuations » Market risks » Back to the future
Slide 3: Highlights
Highlights • The most diversified property vehicle listed on the New Zealand stock exchange with a portfolio of 95 buildings valued at $1.1 billion. The Trust provides space solutions for over 290 tenants • In a difficult leasing environment the property portfolio occupancy at year- end was 98% • A
Slide 4: Financial performance
Financial performance FY09 FY08 Change Net rental income $87.8m $84.6m 3.8% Interest expense $35.0m $28.0m -25.1% Operating surplus (pre disposals, revals & tax) $77.5m $75.6m 2.5% (Loss)/gain on disposal of properties (IFRS) $(9.6m) $0.2m $(9.8m) (Loss)/gain on disposal of investment $(3.8m) $0.0m
Slide 5: Financial position
Financial position FY09 FY08 Change Net asset backing per unit (cents) 108.9c 136.2c -20.0% Securities on issue 529.7m 514.3m 3.0% Unitholders’ funds $577.1m $700.5m -17.6% Debt-to-total-assets ratio 39.7% 37.7% -5.3% Total property value $1,051.6m $1,167.3m -9.9% Bank debt $429.8m $457.3m 6.2%
Slide 6: Interest rate management
Interest rate management • Main facility was reduced post year end by $100m to $500m following the close- out of $100m of interest rate swaps. • Weighted duration of facilities of 1.45 years. • Debt hedged 88.2% at 31 March 2009, reduced to 64.3% by 30 April 2009. • Interest rate paid (incl margins
Slide 7: Covenants
Covenants Trust Deed FY09 Total money borrowed $429.8m Borrowing limitation • Gross value of Trust fund $ 1,081.8m Not to exceed 50% 39.7% Bank loan facility - ANZ Loan to valuation ratio - based on - • Fair market value of properties $1016.4m • Total money borrowed from ANZ $411.3m Not to exceed 45
Slide 8: Distributable income
Distributable income FY09 FY08 Change Profit before tax $(64.4m) $90.9m Adjust for: Plus revaluations losses/(gains) $89.9m $(43.0m) Plus property sales IFRS adjustment* $11.5m $3.5m Plus investment disposal $3.8m $0.0m Plus/minus derivative fair value adjustment $4.5m $0.2m Plus management rights a
Slide 9: Distribution
Distribution The full year gross distribution target sustained at 8.0 cents per unit. FY08 Distribution (cpu) June September December March Total Cash Distribution 2.375 2.030 2.110 2.187 8.702 Imputation Credits 0.0 0.345 0.440 0.363 1.148 Gross Distribution 2.375 2.375 2.550 2.550 9.850 FY09 Distr
Slide 10: Gearing
Gearing ING Property - Gearing Movment from 30 September 2008 to 31 March 2009 44 42 40 Gearing % 38 36 34 32 30 Opening Property IMP sale Reval Capex Closing sales
Slide 11: Investment properties - profile
Investment properties - profile Industrial Commercial Retail Total Market capitalisation rate Average 9.12% 9.82%. 8.58% 9.18% Contract capitalisation rate Average 8.91% 8.66% 7.92% 8.51% Maximum 11.27% 11.34% 9.94% 11.34% Minimum 5.20% 1.27% 6.63% 1.27% Occupancy 2009 99.0% 93.4% 97.8% 97.8% 2008 9
Slide 12: Unit price
Unit price 120 110 100 Gross Prices Indexed to 100 90 80 70 60 8 9 9 9 8 -08 8 v-0 b-0 r-0 p-0 t-0 n-0 c Oc Ma No De Fe Se Ja ING Property Trust NZ Property Gross Index NZX 50 Index
Slide 13: Strategy
Strategy The Trust’s strategy, while unchanged in the long term, has been revised in the more immediate term. The current strategy is focused on three key areas: • Risk mitigation – both income and value • Capital management – debt reduction • Portfolio structuring for the future
Slide 14: Risk mitigation: diversification by location and sector
Risk mitigation Diversification by location and sector Assets by sector Assets by region 10% 31% 16% 34% Auckland Office Hamilton Industrial Wellington Retail 3% Regional 71% 35%
Slide 15: Risk mitigation: occupancy and lease term
Risk mitigation Strong occupancy and weighted average lease term Occupancy by sector WALT by sector Total Total Retail Retail Industrial Industrial Office Office 90% 92% 94% 96% 98% 100% 0 1 2 3 4 5 6
Slide 16: Diversification by tenant
Diversification by tenant D e pa rt m e nt o f Int e rna l A f f a irs B ris c o e s G ro up Lim it e d T he Wa re ho us e Lim it e d B unnings Lim it e d D e ut s c he P o s t Wo rld N e t A N Z B a nk ( N Z ) Lim it e d KM A R T E a s y Lo gis t ic s Lim it e d T e P uni Ko k iri P e t e r B a k e
Slide 17: Risk mitigation: diversification by lease maturity
Risk mitigation Diversification by lease maturity 20.00% 15.80% 18.13% 18.00% 16.00% 14.00% 11.70% 11.74% 12.00% 10.98% 10.22% 10.00% 8.00% 5.84% 6.00% 5.31% 4.19% 3.67% 4.00% 2.00% 2.41% 0.00% 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
Slide 18: Capital management – debt reduction
Capital management – debt reduction • 17 property sales for $116.2m • Liquidity under $20m • Activity from high net worth individuals, syndicators and owner occupiers • Little quality stock on the market in the right price range • Enquiry levels have improved • $100m target for FY2010 • $46m of cond
Slide 19: Capital management
Capital management • Assets held at realistic values – backed up by sales • Liquidity in market for assets under $20m • Unitholder dilution issues • Debt issues can be managed by sales without requirement to raise capital • Loan to value target is 35% • Intention to sell $100m of property in current
Slide 20: Valuations
Valuations • Decline of 8.3% at year end, including 1.3% interim decline • Liquid part of the market – less than $20m • Current market activity suggests values to be stable at this level • Little quality stock on the market has helped sales activity • Yield on market rentals over 9.1% • Valuations c
Slide 21: Rent reviews – rental growth
Rent reviews – rental growth 12% 10.20% 10% 8.40% 8% 7.60% 6.10% 6% 4% 2% 0% 2006 2007 2008 2009 Growth of rentals actually reviewed during the year.
Slide 22: Previous Cycles – Supply vs Demand
Previous Cycles – Supply vs Demand … leaving supply as the major vacancy driver Auckla nd CBD Office Supply vs Absorption 120,000 Supply 100,000 Absorption 80,000 60,000 sqm 40,000 20,000 0 - 20,000 - 40,000 5 6 7 8 9 0 1 2 3 4 5 6 7 8 9 0 1 2 3 4 5 6 7 8 -8 -8 -8 -8 -8 -9 -9 -9 -9 -9 -9 -9 -9 -9 -9
Slide 23: CBRE market forecasts
CBRE market forecasts CBRE Composite Property Component Investment Returns 40 40 30 30 20 20 Annua l Return (%) Annual Return (%) 10 10 0 0 - 10 - 10 - 20 Capital return based on yield change - 20 Capital return based on rent change Income return - 30 - 30 Total return - 40 - 40 87 88 89 90 91 92 93
Slide 24: Conclusion
Conclusion • The market remains uncertain. • Occupancy issues remain key • The ING Property Trust portfolio is in good shape and relatively well positioned • Average size $10m – big advantage in this market in sales and leasing • Strong diversification – gives good risk profile • Current unit price
Slide 25: Disclaimer
Disclaimer This presentation has been prepared by ING Property Trust Management Limited. The details in this presentation provide general information only. It is not intended as investment or financial advice and must not be relied upon as such. You should obtain independent professional advice prio