Argosy Property Limited · NZX:ARG
Argosy Property — FY2014 Earnings Presentation
40 slides from Argosy Property's earnings presentation, May 21, 2014
Slide 1: Annual Results Presentation
Annual Results Presentation Argosy Property Limited 21 May 2014
Slide 2: Continued Momentum
CONTINUED MOMENTUM
Slide 3: Highlights
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Slide 4: Highlights of FY14
Highlights of FY14 Valuation gain of $33.5 million, up 2.8% on book values Distributable income increased to $50.0 million (increase of 18.4%) Net property income increased to $82.2 million (increase of 17.7%) Net profit after tax increased to $85.6 million (increase of 118%) Occupancy (by
Slide 5: Financial Overview
Financial Overy Ww bal
Slide 6: Income Reconciliation
Income Reconciliation 0.8 87.9 90 13.9 (0.5) 0.8 80 72.9 70 60 50 40 30 20 10 0 Gross Property Acquisitions Disposals Rent reviews Other Gross Property $m Income Income 31 March 2013 31 March 2014
Slide 7: Financial Performance
Financial Performance FY14 FY13 Net property income $82.2m $69.9m Administration expenses $(7.4m) $(5.9m) Abnormals $(0.0m) $(0.9m) Profit before financial income/ $74.8m $63.1m (expenses) and other gains Interest expense $(25.4m) $(23.7m) Gain/(loss) on derivatives $17.1m $(8.4m) Finance income $0.
Slide 8: Distributable Income
Distributable Income FY14 FY13¹ Profit before income tax $98.8m $38.7m Adjusted for: Revaluation gains $(33.5m) ($9.3m) Investment disposal losses $1.4m $1.8m Derivative fair value adjustment $(17.1m) $8.4m Abnormals - $0.8m Depreciation recovered¹ $0.4m $1.8m Gross distributable income $50.0m $42.2
Slide 9: Investment Properties
Investment Properties 1,250 3.8 1,226.3 33.5 (0.6) 53.6 (11.3) 1,200 170.4 1,150 1,100 1,050 1,000 976.9 950 900 Investment Acquisitions Capex Disposals Change in Transfer to Tenant Investment ` $m Properties fair value properties Incentives Properties 31 March held for sale 31 March 2013 2014
Slide 10: Financial Position
Financial Position FY14 FY13 Shareholders’ funds $739.5m $601.3m Shares on issue 790.9m 680.9m Net tangible asset backing per share (cents) 93.5 88.3 FY14 FY13 Investment properties $1,226.3m $976.9m Other assets $6.1m $15.8m Total assets $1,232.4m $992.7m Bank debt (excl. capitalised borrowing cost
Slide 11: Movement in NTA per share
Movement in NTA per share 96 4.2 (0.4) (0.7) 94 93.5 92 2.2 (0.1) 90 88.3 88 86 84 82 80 NTA Gain on Deferred Tax Revaluation Issue Costs Residual NTA 31 March Derivatives Gain on Earnings less 31 March cps 2013 Investment Dividends 2014 Properties Paid
Slide 12: Portfolio Overview
Argosy Portfolio Overview www.argosy.co.nz
Slide 13: Office
Office NUMBER OF BUILDINGS 18 BOOK VALUE OF ASSETS ($M) $437.34 VACANCY FACTOR (BY RENT) 1.65% WALT (YEARS) 5.33
Slide 14: Industrial
Industrial NUMBER OF BUILDINGS 35 BOOK VALUE OF ASSETS ($M) $441.78 VACANCY FACTOR (BY RENT) 0.63% WALT (YEARS) 6.48
Slide 15: Retail
Retail NUMBER OF BUILDINGS 13 BOOK VALUE OF ASSETS ($M) $347.15 VACANCY FACTOR (BY RENT) 1.57% WALT (YEARS) 5.16
Slide 16: Leasing Environment
Leasing Environment The New Zealand economy is in an expansion phase with growth expected for 2014. Elevated levels of confidence, with activity expectations, employment and investment intentions above historical averages. We expect this to lead to a corresponding improvement in underlying pro
Slide 17: Leasing
Leasing Occupancy, tenant retention and lease expiries remain the key focus areas for the asset management team. Occupancy (by rental) has improved to 98.7%, up from 96.2% at March 2013. (Occupancy improves to approximately 99.1% following the sales of Main Street, Palmerston North and Pacific R
Slide 18: Lease Maturity
Lease Maturity 8 21% 45 20% 19% 40 18% 17% 21 Percentage of portfolio (by income) 16% 35 15% 21.0% 14% 30 13% 12% 32 30 25 11% 42 10% 23 9% 20 40 16.2% 8% 12 7% 15 6% 9.4% 10.3% 10.9% 5% 8.9% 10 10 4% 7.9% 3 3% 13 6.6% 3 5 2% 3.5% 2.9% 1% 1.3% 1.1% 0% 0 Vacant Mar-15 Mar-16 Mar-17 Mar-18 Mar-19 Mar-
Slide 19: Top 10 FY15 Expiries
Top 10 FY15 Expiries Tenant Building NLA Current Expiry (sqm) Rent Date IBM Centre, Wyndham Street, Boffa Miskell 1,951 $631,108 17-Feb-15 Auckland Cnr William Pickering Drive & Electrix Limited 5,110 $540,000 01-Sep-14 Rothwell Ave, Auckland Polarcold Stores Limited 8 Foundry Drive, Christchurch 4,
Slide 20: Weighted Average Lease Term
Weighted Average Lease Term as at 31 March 2014 7 6.48 5.68 6 5.33 5.16 5 4 Years 3 2 1 - TOTAL Retail Industrial Office
Slide 21: Acquisitions: Favona Rd, Mangere
Acquisitions 80 Favona Rd, Mangere, Auckland The property comprises a large integrated distribution centre and head office complex on a large level industrial lot in the Auckland suburb of Mangere. Property type Industrial Net lettable area 59,448 sqm PHOTOS Settlement date June 2013 Lease term at a
Slide 22: Acquisitions: Carlton Gore Rd, Newmarket
Acquisitions 101 Carlton Gore Rd, Newmarket, Auckland A single tenanted, modern office building located in Newmarket, surrounded by quality commercial office blocks with great views of the Auckland Domain. The property has five levels of office space with carparking over two levels. Property type Of
Slide 23: Acquisitions: Nesdale Ave, Wiri
Acquisitions 19 Nesdale Ave, Wiri, Auckland The property is a modern, purpose-built warehouse storage facility located approximately 3 kilometres west of Manukau CBD and has good access to the South Western motorway, allowing direct connection to Auckland International Airport. Property type Industr
Slide 24: Developments
Developments 15-21 Stout Street The redevelopment is progressing well, is on budget and is expected to be completed by mid-2014. Property type Office Net lettable area 19,629 sqm Lease commencement July 2014 Lease term 12 years Passing yield on end cost 8.11% Purchase price $33.2 million Upgrade cos
Slide 25: Upgrade
Upgrade NZ Post House The contract to complete the upgrade has been awarded to Hawkins Construction. Work has commenced and is expected to be complete by the end of 2015. Property type Office Net lettable area 24,977 sqm Lease commencement March 2013 Lease term 7 years Passing yield on end cost 8.50
Slide 26: Valuations
Valuations Increase in property valuations of $33.5 million, up 2.8% on book values immediately prior to the revaluation. This is the fourth year in succession that Argosy has had positive property revaluations. The portfolio is now valued at $1.226 billion. Post revaluation Passing Yield of
Slide 27: Valuations
Valuations Book value 31/3/14, Valuation pre revaluation Gain/(loss) % Yield on Yield on Sector ($000) ($000) ($000) change Contract Market Industrial 441,781 431,006 10,775 2.50% 7.67% 7.73% Retail 347,145 336,231 10,914 3.25% 7.82% 7.73% Office 437,340 425,581 11,759 2.76% 8.36% 8.30% 1,226,266 1,
Slide 28: Strategy
Strategy
Slide 29: A clear investment strategy with a diversified portfolio
We have a clear investment strategy marked by a diversified portfolio of desirable properties that attract high-quality, long-term tenants.
Slide 30: Portfolio Investment Strategy
Portfolio Investment Strategy Argosy is and will remain invested in a portfolio that is diversified by sector, grade, location and tenant mix. The portfolio will be in the Auckland and Wellington markets with modest tenant-driven exposure to provincial markets. Argosy’s portfolio consists of “Core”
Slide 31: Portfolio Mix as at 31 March 2014
Portfolio Mix as at 31 March 2014 TOTAL PORTFOLIO VALUE TOTAL PORTFOLIO VALUE PORTFOLIO MIX BY SECTOR BY REGION 3% 5% 10% 5% 28% 36% 22% 70% 85% 36% Target Target Target Retail 15 – 25% Auckland 65 – 75% Core 75 – 85% Office 35 – 45% Wellington 20 – 30% Value Add properties Industrial 35 – 45% Palme
Slide 32: Capital Management
Capital Management The Board’s policy is for debt-to-total-assets to be between 35 to 40% in the medium term. The reasonable, proportional use of debt and equity to support its assets is a key indicator of balance sheet strength. Astute use of leverage increases the resources available for growt
Slide 33: Bank Covenants
Bank Covenants Loan to valuation ratio (LVR) – FY14 FY13 based on: Total borrowings $449.5m $328.7m Fair market value of properties¹ $1,226.9m $983.6m Not to exceed 50% 36.6% 33.4% Interest cover ratio – based on EBIT/Interest FY14 FY13 and Financing Costs: Must exceed 2:00x 2.62x 2.33x ¹ includes p
Slide 34: Interest Rate Hedging Profile
Interest Rate Hedging Profile 31 March 14 31 March 13 Percentage of drawn debt hedged 69% 86% Weighted average fixed interest rate 4.67%* 5.87% (excl. margin & line fees) Weighted average duration (years) 7.11 5.85 350 300 250 200 150 100 50 - FY15 FY16 FY17 FY18 FY19 FY20 FY21 FY22 FY23 FY24 Face v
Slide 35: Share Price Performance
Performance Share. Price
Slide 36: Share Price Performance – 5 Years
Gross Prices Indexed to 100 80 100 120 140 160 180 200 220 240 260 Mar-09 Jun-09 Sep-09 Dec-09 Mar-10 Jun-10 Sep-10 Dec-10 Argosy Property Limited Mar-11 Jun-11 Sep-11 Dec-11 Mar-12 NZ Property Gross Index Jun-12 Sep-12 Dec-12 Share Price Performance – 5 Years Mar-13 NZX 50 Index Jun-13 Sep-13 Dec-1
Slide 37: Concluding Comments
Concluding Comments
Slide 38: Concluding Comments
Concluding Comments The 2014 financial year was one of continued momentum for Argosy. Our focus remains on maintaining the portfolio’s high level of occupancy as well as increasing the lease expiry profile and tenant retention rate. We will also continue to look for opportunities to develop th
Slide 39: Thank you
Argosy Thank you
Slide 40: Disclaimer
Disclaimer This presentation has been prepared by Argosy Property 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 prior to making an