Argosy Property Limited · NZX:ARG
Argosy Property — H1 FY2020 Earnings Presentation
44 slides from Argosy Property's earnings presentation, Nov 20, 2019
Slide 1: FY2020 Interim Results
FY2020 Interim Results 20.11.2019
Slide 2: Agenda
Agenda PRESENTED BY Highlights 4 Strategy/Portfolio 6 Financials 20 Peter Mence Leasing Update CEO 29 Focus and Outlook 33 Appendices 35 Dave Fraser CFO Note: This results presentation should be read in conjunction with the NZX release dated 20 November 2019. Due to rounding, numbers presented in th
Slide 3: Quote from CEO on portfolio diversity
“Our strength lies in the diversity of our portfolio by sector, location and tenant mix, providing flexibility to support our tenants changing needs, ensuring a resilient business model through various economic cycles." Peter Mence CEO 3—
Slide 4: Highlights
Highlights 4—
Slide 5: 1H20 Interim Result
1H20 Interim Result 24.3% Total shareholder return 100m 2nd successful 7 year green bond for the six month period issued post reporting date $1.28 New NTA, a 4.9% increase driven 3.5% Net distributable income by a $50.8m revaluation gain increase per share 6.275¢ Full year dividend guidance 5—
Slide 6: Strategy / Portfolio
Strategy / Portfolio 6—
Slide 7: Create. Manage. Own.
v Create. Manage. Own. Proactive delivery of sustainable growth. An environmentally focused & sustainable business Transition value add properties to drive earnings and capital growth Streamlined tenant led development process and execution A diversified portfolio of high quality, well located asset
Slide 8: 2020 Focus
2020 Focus OUR PERFORMANCE SO FAR We have continued to transition Value Add properties to drive earnings and Create capital growth. Proactive delivery of sustainable growth. Current organic value add development pipeline of $194m. More opportunities (including green developments) currently being c
Slide 9: $1.69B Portfolio Snapshot
$1.69B Portfolio Snapshot 9—
Slide 10: Portfolio highlights
Portfolio highlights 97.6% 6.0 yrs Weighted average lease term Occupancy (WALT) 70% 47% Auckland portfolio weighting Industrial portfolio weighting 3.2% Like for like rent growth for the half 50.8m $ desktop revaluation gain, 3.1% year above 30 September book value 10 —
Slide 11: Portfolio at a glance
Portfolio at a glance $1.69 BILLION1 @ 30 SEPTEMBER 2019 TOTAL PORTFOLIO VALUE TOTAL PORTFOLIO VALUE TOTAL PORTFOLIO VALUE BY SECTOR BY REGION BY ASSET MIX 3% 4% 13% 11% 27% 47% 40% 70% 85% Bands Bands Bands 40-50% Auckland 65-75% 75-90% Industrial Core Wellington Office 30-40% 20-30% Non Core - Reg
Slide 12: Sector Summary
Sector Summary INDUSTRIAL OFFICE RETAIL Number of buildings Number of buildings Number of buildings 37 16 6 Market value of assets ($m) Market value of assets ($m) Market value of assets ($m) $786.8 $682.1 $221.2 Occupancy (by income) Occupancy (by income) Occupancy (by income) 97.8% 96.6% 100% Weig
Slide 13: Value Add
Value Add OPPORTUNITY TO DRIVE EARNINGS AND CAPITAL GROWTH Value Add properties total 11% of Valuation Property Sector Location $m the portfolio. 90 - 104 Springs Road, East Tamaki Industrial Auckland 6.6 Several major development projects 5 Unity Drive, Albany Industrial Auckland 7.5 underway w
Slide 14: Development Pipeline
Development Pipeline A REAL FOCUS ON GREEN DEVELOPMENTS 180-202 Hutt Road: Works Forecast expected to be completed by Development Major Tenant Type Location $m1 completion FY 2020 FY 2021 Sep-19 Mar-20 Sep-20 Mar-21 December. Underway / commenced 180-202 Hutt Road Placemakers IND WTN 19.4 Dec-19
Slide 15: Green Projects Underway
Green Projects Underway 8-14 Willis Street, 107 Carlton Gore Road, Wellington Newmarket Target completion: April 2021 December 2019 NLA / WALT: 12,300m2/15 years 6,100m2/12 years Tenant: Statistics New Zealand Housing Corporation of NZ Green Star rating: Targeting 6 Star Built Targeting minimum 4 St
Slide 16: Case Study – Mighty Ape
Case Study – Mighty Ape 5 STAR GREEN RATING 9,000m2 of warehouse. 1,600m2 of office across two levels. 116 onsite carparks. 7.3% IRR. “This award is just the beginning for us. We will continue to develop new sustainable business practices with the goal of protecting our country and its envir
Slide 17: 7WQ Leasing Update
7WQ Leasing Update BUILDING NOW 82% LEASED, STRONG INQUIRY FOR OTHER FLOORS Lease Levels 2 and 10: Department of Internal Commence Affairs (DIA) has entered into an initial 9- Plant year lease for 4,130m2. Lease Strong enquiry commencement date 1 February 2020. L12 L11 Strong enquiry Level 3, 4
Slide 18: 7WQ Reinstatement & Insurance Claim
7WQ Reinstatement & Insurance Claim PROGRESS BEING MADE Reinstatement Substantial progress has been made on the reinstatement and seismic works to the building. The reinstatement project is largely complete apart from some works to Level 12. These are expected to be completed this financial year. Th
Slide 19: Revaluations
Revaluations RENTAL GROWTH AND CAP RATE FIRMING KEY DRIVERS Solid revaluation gain 3.1% 30 Sep 19 30 Sep 19 Market Yield Book Value Valuation Δ Δ above book value. Portfolio $m $m $m % 30 Sep 19 31 Mar 19 market yield¹ firmed 29bps. Auckland 1,135.3 1,181.9 46.6 4.1% 6.17% 6.43% Regionally, Auck
Slide 20: Financials
Financials a wan , a , Me pa 7 4 fi mm,
Slide 21: Income Reconciliation
Income Reconciliation SOLID RENTAL GROWTH OFFSET BY DEVELOPMENTS AND DISPOSALS 21 —
Slide 22: Financial Performance
Financial Performance OPERATIONAL PERFORMANCE VERY SOLID 1H20 1H19 Like-for-like rental growth of 3.2% $m $m during the period. Net property income 51.0 50.8 Net property income up slightly Administration expenses (5.6) (5.1) with lower gross rental income Profit before financial income/(expenses),
Slide 23: Distributable Income
Distributable Income INCREASE IN NET DISTRIBUTABLE INCOME PER SHARE 1H20 1H19 After non cash adjustments, $m $m Gross Distributable Income was Profit before income tax 81.3 71.2 up $0.9m or 2.5%. Adjusted for: Gross distributable income per Revaluations gains (50.8) (34.6) share was also up by 2.5%.
Slide 24: Investment Properties
Investment Properties GROWTH DRIVEN BY DEVELOPMENTS AND REVALUATION GAINS Capitalised costs: Driven by large developments including 7WQ, Willis Street, Carlton Gore Rd, Stewart Dawson Corner, Hutt Road, 99 Khyber Pass. Acquisitions: 54 Jamaica Drive Wellington. Transfers: Albany Lifestyle Centre con
Slide 25: NTA per share reconciliation
NTA per share reconciliation GROWTH UNDERPINNED BY REVALUATION GAIN 25 —
Slide 26: Gearing
Gearing CAPITAL STRUCTURE WITHIN TARGET RANGE Current asset held for sale is 1H20 FY19 Albany Lifestyle Centre ($87.6m) $m $m which settles 27th March 2020. Investment properties* 1,690.1 1,667.0 Asset held for sale 87.6 0.0 Target policy gearing range is between 30-40%. Other assets 14.2 8.0 To
Slide 27: Funding & Interest Rate Management
Funding & Interest Rate Management ATTRACTIVE ENVIRONMENT TO EXTEND TENOR & DIVERSIFY CAPITAL MIX In September 2019, Argosy 1H20 FY19 extended its bank facilities, Weighted average duration of bank facility 3.6 years 2.7 years refinanced three tranches of existing debt and expanded its Weighted av
Slide 28: Dividends
Dividends CONSISTENT, SUSTAINABLE DIVIDEND GROWTH A second quarter cash dividend of 1.56875 cents per share has been declared, with imputation credits of 0.26493 cents per share attached, and will be paid on 19 December 2019. FY20 dividend guidance of 6.275 cents per share remains unchanged and
Slide 29: Leasing Update
Leasing Update 29 —
Slide 30: Leasing Success
Leasing Success SOLID FIRST HALF LEASING, MORE TO COME 1H leasing of 47,800m2 across the portfolio, or 9% of the portfolios total net lettable area. 17 transactions over the period, with 8 renewals, 3 extensions and 6 new leases. Notable leases over 1H include: Extension by 3 years to Cardinal
Slide 31: Lease Expiry
Lease Expiry NORMALISED PROFILE OVER THE MEDIUM TERM 5yr average income percentage expiring in any year ~7%. Largest single expiry over next 5 years is 3.7% being MBIE in 147 Lambton Quay (Wellington). Lease expiries to address over 2H include; Digital Island 845m2 (Auckland) Steel & Tube
Slide 32: Sector Summary
Sector Summary INDUSTRIAL OFFICE RETAIL ► Net absorption continues to ► Flexible working environments ► Equilibrium with on-line retailing is drive additional supply. continue to drive a disconnect yet to show full effect. between employment growth ► Limited land supply in Auckland ► Structural chan
Slide 33: Focus and Outlook
Focus and Outlook 33 —
Slide 34: 2020 Focus
2020 Focus Create Continue transitioning Value Add properties to drive earnings and capital growth. Proactive delivery of Ensure projects are completed on time and on budget. sustainable growth. Keep investigating strategic acquisitions (off market or contiguous). Manage Maintain high tenant retenti
Slide 35: Appendices
Appendices 35 —
Slide 36: Adjusted Funds From Operations (AFFO)
Adjusted Funds From Operations (AFFO) 1H20 1H19 $m $m Profit before income tax 81.3 71.2 Revaluation gains (50.8) (34.6) Derivative fair value (gain)/loss 3.6 1.5 Realised losses/(gains) on disposal 0.0 (2.9) Earthquake expense net of recoveries 0.2 (1.7) Gross distributable income 34.3 33.4 Depreci
Slide 37: Rent Reviews by Type, Sector & Location
Rent Reviews by Type, Sector & Location Annualised $ % of Total Previous Rent % of rent New rent $ Increase Annualised % Type # % Increase Increase Annualised (000's) reviewed (000's) (000's) Increase (000's) Increase Total 50 21,135 100% 21,987 852 4.0% 632 100.0% 3.0% By review type Fixed 33 12,53
Slide 38: Rent Reviews – Auckland & Wellington
Rent Reviews – Auckland & Wellington Annualised $ % of Total Previous Rent % of rent New rent $ Increase Annualised % # % Increase Increase Annualised (000's) reviewed (000's) (000's) Increase (000's) Increase Auckland Industrial 13 9,738 49% 10,144 406 4.2% 315 50% 3.2% Office 17 4,736 24% 4,917 18
Slide 39: Portfolio Metrics
Portfolio Metrics STRONG BREADTH AND DEPTH OF TENANTS AND SECTORS 39 —
Slide 40: Portfolio Snapshot
Portfolio Snapshot IMPROVED PORTFOLIO QUALITY IS BEING REFLECTED IN OUR METRICS Occupancy WALT (years) 100.0% 7.00 6.00 80.0% 5.00 60.0% 4.00 40.0% 3.00 2.00 20.0% 1.00 0.0% 0.00 FY16 FY17 FY18 FY19 1H20 FY16 FY17 FY18 FY19 1H20 Net Tangible Assets Debt-to-total-assets $1.40 40.0% $1.20 35.0% 30.0%
Slide 41: Portfolio Summary - Industrial
Portfolio Summary - Industrial Weighted Valuation average lease Net lettable Vacant Contract Property Address $000s term (years) area (m2) Space (m2) Yield Industrial Auckland 90 - 104 Springs Road, East Tamaki $ 6,550 7.4 3,885 - 5.50% 8 Forge Way, Panmure $ 31,500 11.2 4,231 - 4.76% 10 Transport P
Slide 42: Portfolio Summary - Office
Portfolio Summary - Office Weighted Valuation average lease Net lettable Vacant Contract Property Address $000s term (years) area (m2) Space (m2) Yield OFFICE Auckland 99-107 Khyber Pass Road, Grafton $ 14,500 3.5 2,509 1,522 1.98% 101 Carlton Gore Road, Newmarket $ 27,000 1.1 4,821 - 6.69% 8 Nugent
Slide 43: Portfolio Summary - Retail
Portfolio Summary - Retail Weighted Valuation average lease Net lettable area Vacant Contract Property Address $000s term (years) (m2) Space (m2) Yield RETAIL Auckland Albany Mega Centre, Albany $ 122,000 4.7 25,155 - 6.27% 11 Coliseum Drive, Albany $ 27,700 5.5 8,637 - 4.99% 50 & 54-62 Cavendish Dr
Slide 44: 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