Arena Reit · ASX:ARF
Arena Reit — H1 FY2020 Earnings Presentation
31 slides from Arena Reit's earnings presentation, Feb 13, 2020
Slide 1: Arena REIT 2020 Half Year Results
ARENA REIT 2020 HALF YEAR RESULTS 13 February 2020
Slide 2: Agenda
AGENDA Highlights 3 Financial Results 5 Portfolio Update 9 Outlook 17 Questions 19 Directory 20 Appendices 21 Important Notice 31 2 ARENA REIT 2020 HALF YEAR RESULTS
Slide 3: HY20 Highlights
$21.4m 7.17 cents HY20 HIGHLIGHTS Net operating Earnings per share Pipeline replenished, asset recycling profit (EPS)1 • Contracted rental growth, acquisitions and development +17% on HY19 +6% on HY19 completions have driven 6% growth in EPS1. • Long WALE maintained at 14.1 years. • Acquisition of t
Slide 4: Delivering on Strategy
DELIVERING ON STRATEGY Positive portfolio and capital management outcomes Lease management: • 100% occupancy. Working in partnership: • Average HY20 like-for-like rent • Commenced renewable energy increase of +3.1%1. program. • Rejuvenation of existing ELCs in Investment and developments: partnershi
Slide 5: Financial Results
FINANCIAL RESULTS Gareth Winter Chief Financial Officer
Slide 6: Financial Performance
FINANCIAL PERFORMANCE New investment enhancing earnings and distribution growth HY20 HY19 Change • Property income continues to ($’000) ($’000) ($’000) (%) increase due to: Property income 26,448 23,488 2,960 +13% – Contracted annual and market rental growth; Other income 293 265 28 +11% – Acquisiti
Slide 7: Financial Position
FINANCIAL POSITION Portfolio and net asset growth remains solid • Growth in total assets continues from the As at 31 Dec 2019 30 June 2019 Change acquisition of operating properties, ELC ($m) ($m) % development completions and property valuation uplift. Total assets 890.4 825.7 +8% Investment proper
Slide 8: Capital Management
CAPITAL MANAGEMENT • Syndicated borrowing facility limit increased post Debt maturity extended and capacity refreshed balance date by $50 million to $330 million, comprised of: – $130 million expiring 31 March 2023; – $150 million expiring 31 March 2024; and – $50 million expiring 31 March 2025. As
Slide 9: Portfolio Update
PORTFOLIO UPDATE Rob de Vos Managing Director
Slide 10: Portfolio Overview
PORTFOLIO OVERVIEW 31 Dec 2019 31 Dec 2019 Number of assets Net valuation movement Change valuation passing yield $m $m % % bps ELC portfolio 223 727.9 +17.9 +2.6% 6.37% (7) Healthcare portfolio 10 125.4 +2.4 +1.9% 6.06% (2) Total portfolio 233 853.3 +20.3 +2.5% 6.32% (6) Sector diversity (by value)
Slide 11: Lease Expiry Profile
LEASE EXPIRY PROFILE 1 Weighted average lease expiry maintained at 14.1 years 18% • Three operating ELC properties added to Healthcare Early Learning 6.3% portfolio with initial lease term of 20 years. 16% 14% 0.8% • One completed ELC development added to 13.4% 13.0% portfolio with an initial 20 yea
Slide 12: Annual Rent Reviews
ANNUAL RENT REVIEWS HY20 average like-for-like rent increase of +3.1% 1 100% • Like-for-like rent increase includes positive impact 3.9% 9.1% of three FY19 market rent reviews which were 12.1% 9.5% resolved during HY20 at an average increase of 80% +15.2%. % rental income 60% • Seven uncapped FY19 a
Slide 13: Acquisitions and Developments
ACQUISTIONS AND DEVELOPMENTS Development pipeline replenished • High quality, purpose built properties. • Three development projects are forecast to complete in 2H20 with the balance of current projects forecast to complete in FY21. Acquisitions/development completions Number of properties Total cos
Slide 14: ELC Sector
ELC SECTOR 65% Female Workforce Participation Rate 2 50% LDC participation rate3 63% 48% Strong underlying demand metrics 60% 45% 58% 43% • Record 781,8301 children attending long day care 55% 40% (LDC) at 30 September 2019; +4% yoy and +12.5% 53% 38% since introduction of Child Care Subsidy (CCS).
Slide 15: Arena REIT ELC Portfolio
ARENA REIT ELC 15% Arena ELC portfolio – net rent to gross operator revenue1 PORTFOLIO 14% 13% 12% Portfolio strength underpinned by asset 11% 10% quality 9% 8% 7% Portfolio operating data to 30 September 20191 6% 5% • Average centre occupancy increased. HY16 FY16 HY17 FY17 HY18 FY18 HY19 FY19 HY20
Slide 16: Healthcare Sector & Arena REIT Portfolio
HEALTHCARE SECTOR & ARENA REIT PORTFOLIO Select opportunities in competitive sector • Strong macro-economic drivers supporting Australian healthcare accommodation. • Arena’s healthcare portfolio continues to perform well: o Strong occupancy across specialist disability accommodation portfolio. o Med
Slide 17: Outlook
OUTLOOK
Slide 18: Outlook
OUTLOOK Resilience in underlying earnings growth I N C O M E G R O WT H • Reaffirming FY20 distribution guidance of 14.3 cents per security, an increase of 6%1 on FY19. • Annual rent increases, of which market rent reviews comprise: o Approximately 8% of income in FY20; and o Approximately 9% of inc
Slide 19: Questions
QUESTIONS
Slide 20: Corporate Directory
CORPORATE DIRECTORY Please direct enquiries to Sam Rist on samantha.rist@arena.com.au or +61 3 9093 9000 ROB DE VOS GARETH WINTER SAM RIST Managing Director Chief Financial Officer Head of Investor Relations 20 ARENA REIT 2020 HALF YEAR RESULTS
Slide 21: Appendices
APPENDICES
Slide 22: Financial Performance – HY20
FINANCIAL PERFORMANCE – HY20 HY20 HY19 Change ($’000) ($’000) ($’000) % Property income 26,448 23,488 2,960 +13% Other income 293 265 28 +11% Total operating income 26,741 23,753 2,988 +13% Property expenses (261) (254) (7) +3% Operating expenses (1,921) (1,853) (68) +4% Finance costs (3,133) (3,324
Slide 23: Balance Sheet – HY20
BALANCE SHEET – HY20 31 Dec 19 30 Jun 19 Change ($’000) ($’000) ($’000) % Facility Covenant Ratio Cash 11,706 8,134 3,572 +44% requirement Receivables and other assets 14,579 8,453 6,126 +72% Loan to value ratio (LVR) Maximum 50% 25.9% Investment properties 853,306 798,318 54,988 +7% Interest cover
Slide 24: Portfolio Composition and Movement
PORTFOLIO COMPOSITION AND MOVEMENT Portfolio movements (30 June 2019 to 31 December 2019)1 240 230 11 16 6 3 220 1 -5 210 200 190 226 220 220 221 219 219 180 170 160 150 30-Jun-19 Development sites Development projects Operating properties Operating centre 31-Dec-19 acquired completed acquired dives
Slide 25: ELC Portfolio Valuations
ELC PORTFOLIO VALUATIONS Number of Value Passing yield As at 31 December 2019 properties ($m) (%) Independent ELC freehold valuations Victoria 16 51.9 5.56 Queensland 9 25.4 6.69 Western Australia 7 18.4 6.40 New South Wales 10 22.2 6.47 South Australia 2 6.6 6.45 Total independent ELC valuations 44
Slide 26: ELC Portfolio Metrics
ELC PORTFOLIO METRICS 31 Dec 2019 30 June 2019 Change Leased ELCs 209 210 - Development sites 14 6 +133% Total ELCs 223 216 +3% WALE (by income) (years) 14.1 14.1 - Tenanted occupancy (%) 100 100 - Average passing yield (%) 6.37 6.44 -7bps Portfolio value ($m) 727.9 676.2 +8% Average rental increase
Slide 27: Healthcare Portfolio Metrics
HEALTHCARE PORTFOLIO METRICS 31 Dec 2019 30 June 2019 Change Total healthcare properties 10 10 - WALE (by income) (years) 13.7 14.2 -0.5 year Tenanted occupancy (%) 100 100 - Average passing yield (%) 6.06 6.08 -2bps Property portfolio ($m) 125.4 122.1 +3% Average rental increase (%) 2.7 2.6 +10bps
Slide 28: Portfolio Location Map
PORFTOLIO LOCATION MAP 28 ARENA REIT 2020 HALF YEAR RESULTS
Slide 29: ELC Market Transactions
ELC MARKET TRANSACTIONS NSW passing yields VIC passing yields QLD 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-15 Jan-16 Jan-17 Jan-18 Jan-19 Jan-15 Jan-16 Jan-17 Jan-18 Jan-19 Jan-15 Jan-16 Jan-17 Jan-18 Jan-19 Sydney Other NSW Melbourne Oth
Slide 30: ELC Sales Yields versus Year Bond
ELC SALES YIELDS VERSUS 10 YEAR BOND Average ELC Sales Yield versus 10 Year Government Bond Yield 10.0% 9.0% 8.0% 7.0% 6.0% 5.0% 4.0% 3.0% 2.0% 1.0% 0.0% ELC Sales Yield (three month rolling average all states) 10 Year Govt Bond Yield 30 ARENA REIT 2020 HALF YEAR RESULTS
Slide 31: Important Notice
IMPORTANT NOTICE This presentation has been prepared by Arena REIT (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) and is author