Argosy Property Limited · NZX:ARG
Argosy Property — ING Property Trust — Non-Deal Roadshow (March 2009)
39 slides from Argosy Property's roadshow presentation, March 2009
Slide 1: ING Property Trust Investor update presentation – March 2009
ING Property Trust Investor update presentation – March 2009 Peter Mence – General Manager Stuart Harrison – Chief Financial Officer
Slide 2: Agenda
Agenda 1. Financial position 2. Unit price 3. Economic headwinds 4. Is there any good news? 5. Property values 6. What is the market like? 7. What about the risk? 8. The next 24 months
Slide 3: Financial performance
Financial performance Sep 08 Sep 07 Change Net rental income $43.7m $41.5m 5.4% Distributions received $0.7m $0.6m 23.8% Interest expense $18.0m $13.3m (36.0%) Gain / (loss) on derivatives ($1.8m) $0.1m - Revaluations ($14.1m) $0.0m - Operating surplus (pre tax) $5.7m $23.9m (76.4%) Operating surplu
Slide 4: Income
Income • Under the Portfolio Investment Entity (“PIE”) regime distributions now comprise of two components: » Fully imputed income » Excluded income • Distributions to date for the 2009 financial year are as follows: 4th qtr 2009 st nd rd 1 qtr 2 qtr 3 qtr (projected) total Cash distribution 2.175 1
Slide 5: Tax – frequently asked questions
Tax – frequently asked questions Do we have to elect the tax rate to apply? Do you need our Personal Investor Rate (PIR)? No. As the Trust is listed on the stock exchange, we are not required to retain PIRs. PIRs are solely utilised for determining individuals tax obligations from unlisted or manage
Slide 6: Income
Income • Gross distribution yield from ING Property Trust (based on an ING unit price of $0.63 ) compared to non-PIE investment (based on a 12 month term deposit returning 4.0%). 22.0% 20.0% 18.0% 16.0% 14.0% ING Gross 12.0% Non-PIE yield 10.0% 8.0% 6.0% 4.0% 2.0% 0.0% 39.0% 33.0% 19.5% Marginal tax
Slide 7: Income
Income • The gross distribution yield for the New Zealand listed property sector (average of 15%). 24.0% 22.0% 20.0% 18.0% 16.0% Gross distribution 14.0% yield 12.0% 10.0% 8.0% 6.0% 4.0% 2.0% 0.0% KPF NPT ING GMT AMP KIP IMP PFI Source: Forsyth Barr NZ Listed Property Sector Monthly Review – 13 Febr
Slide 8: Financial position
Financial position Sep 08 Sep 07 Change Net asset backing per unit (cents) $1.28 $1.32 (3.3%) Net asset backing per unit (excluding $1.31 $1.35 (2.3%) deferred tax on revaluation gains) Securities on issue 526.2m 535.4m (1.7%) Unitholders’ funds $673.1m $708.0m (4.9%) Debt to total assets ratio 42.0
Slide 9: Interest rate management
Interest rate management • Currently 73.9% of the Trust’s debt is hedged. • Following asset sales, 83.8% of the Trust’s debt will be hedged • The trust’s effective interest rate paid (including margin and fees) is 7.71% for the period. • The swaps have, on average, 5.3 years until expiry – nothing u
Slide 10: NZD Swap rate movements
NZD Swap rate movements 9.50% 12 months ago 6 months ago 3 months ago N ow 8.50% 7.50% 6.50% 5.50% 4.50% 3.50% 2.50% s s s s s s ar th th ar ar ar ar ar ar ye on on ye ye ye ye ye ye m m 1 2 3 4 5 7 10 3 6
Slide 11: Covenants
Covenants Trust Deed HY09 Total money borrowed $531.8m Borrowing limitation • Gross value of Trust fund $1266.5m Not to exceed 50% 42.0% Bank loan facility - ANZ Loan to valuation ratio - based on - • Fair market value of properties $1203.7m • Total money borrowed from ANZ $513.4m Not to exceed 45%
Slide 12: Unit price
ING Property Trust NZ Property MSCI World Dow Jones NZSE50 ASX200 31/12/2008 30/11/2008 31/10/2008 30/09/2008 31/08/2008 31/07/2008 30/06/2008 31/05/2008 30/04/2008 31/03/2008 29/02/2008 Unit price 31/01/2008 31/12/2007 100 80 60 40
Slide 13: Unit price
Unit price • Units are currently trading at a discount to Net Asset Backing • Net Asset Backing is $1.28 • Why the discount and why so large? » Global credit issues » Expectation of softening property values » Negative pressure on income from domestic recession » View that our portfolio will suffer
Slide 14: Economic headwinds in New Zealand
Economic headwinds in New Zealand • Domestic recession » Now fuelled by credit crisis • Unemployment • Migration negative • Vacancy increased and expected to increase further • Consumption down
Slide 15: Is there any good news?
Is there any good news? • Vacancy is coming from historic lows • NZ is a “soft commodity” exporter • Property values were not (in general) pushed as far as offshore • Gearing levels in general lower than offshore • The exchange rate
Slide 16: 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 7 8 5 6 5 6 2 3 4 5 6 7 8 9 0 1 2 3 4 7 8 9 0 1 -9 -8 -8 -8 -9 -8 -8 -9 -9 -9 -9 -9 -9 -9 -9
Slide 17: Previous Cycles – Supply vs Demand
Previous Cycles – Supply vs Demand …with a double whammy added during the odd period of negative absorption Auckla nd CBD Office Stock & Va ca ncy 1,400,000 30% Va ca nt Stock Occupied Stock 1,200,000 Va ca ncy 25% 1,000,000 20% Va ca ncy % Stock sqm 800,000 15% 600,000 10% 400,000 5% 200,000 0 0% e
Slide 18: 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 06 07 08 09 10 11 12
Slide 19: Property values
Property values • September 2008 interims reassessment negative by 1.3% • Sales to date illustrate » Market is stronger than analysts expected » Little quality stock on the market » Size does matter • Full revaluation 31 March 2009
Slide 20: What is the market like?
What is the market like? • Similar to 1987 (but different) » Purchaser activity » Occupancy characteristics » Nature of sales » Vendor activity » Excess capacity and over building
Slide 21: What about the risk?
What about the risk? • Diversification by location and sector Assets by sector Assets by region 10% 27% 16% 36% Auckland Office Hamilton Industrial Wellington Retail 3% Regional 71% 37%
Slide 22: What about the risk?
What about the risk? • Strong occupancy and weighted average lease term Occupancy by sector WALT by sector Total Total Retail Retail Industrial Industrial Office Office 94.00% 95.00% 96.00% 97.00% 98.00% 99.00% 100.00 0 1 2 3 4 5 6 %
Slide 23: What about the risk?
What about the risk? • Diversification by lease maturity 18.00% 13.75% 16.00% 14.66% 14.45% 13.90% 14.00% 12.00% 10.88% 10.00% 9.33% 8.00% 6.91% 6.00% 4.77% 5.04% 4.01% 4.00% 2.00% 2.30% 0.00% 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
Slide 24: Tenant diversification - commercial
Tenant diversification - commercial 12% 30% Government Administration 3% and Defence Property and Business 5% Services Finance and Insurance 6% Retail Trade Construction 8% Communication Services Manufacturing Other 25% 11%
Slide 25: Tenant diversification - industrial
Tenant diversification - industrial 2% 2% 2% 3% 11% 32% Transport and Storage Manufacturing Retail Trade Wholesale Trade Construction Communication Services 24% Finance and Insurance Other 24%
Slide 26: Tenant diversification - retail
Tenant diversification - retail 1% 3% 1% 4% 5% 23% Homeware 5% Department Fashion Supermarket 8% Sport and Leisure Furnishing Services Hardware Gift 11% Jewellery 21% Vehicle 18%
Slide 27: Tenant diversification
Tenant diversification Inla nd R e v e nue D e pa rt m e nt D e pa rt m e nt o f Int e rna l A f f a irs T he Wa re ho us e Lim it e d B ris c o e s G ro up Lim it e d B unnings Lim it e d P ro gre s s iv e E nt e rpris e s 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
Slide 28: Top 20 tenants
Top 20 tenants Tenant name Rent % Tenant name Rent % Inland Revenue Department 3.88% Te Puni Kokiri 1.76% Department of Internal Affairs 3.39% Peter Baker Transport Limited 1.73% The Warehouse Limited 3.21% IBM New Zealand Limited 1.73% Briscoes Group Limited 3.21% New Wave Transport Limited 1.58% B
Slide 29: Commercial
Commercial
Slide 30: Retail
Retail
Slide 31: Industrial
Industrial
Slide 32: The next 24 months
The next 24 months Retail ING Office ING Industrial ING
Slide 33: Albany
Albany
Slide 34: Conclusion
Conclusion NTA $ 1.31 Price / NTA discount 45.8% Cash dividend 8.00 Net dividend yield 13.3% Gearing 42.0% Gearing ex asset sales 36.3% Current cap rate 8.60% Implied cap rate 11.90% Implied portfolio value change -28%
Slide 35: Conclusion
Conclusion • The market remains uncertain. • The ING Property Trust portfolio remains in good shape • Diversified nature of portfolio and its average size is risk averse in nature • Provides good return especially at current prices • Current unit price factors in substantial negatives for the future
Slide 36: Things to watch
Things to watch • Over-building • Over-reaction • Education • Start up business successes • Migration numbers
Slide 37: Questions
Questions For further information on the activities of the Trust visit: www.ingproperty.co.nz
Slide 38: Our team
Our team
Slide 39: 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