Region Group · ASX:RGN
Region — Investor Presentation (February 2024)
43 slides from Region's investor presentation, Feb 6, 2024
Slide 1: 1H FY24 Results Presentation
1H FY24 Results Presentation 5 February 2024 Essentially Local Morisset Shopping Centre, NSW Page 1
Slide 2: Agenda
1H FY24 Results Presentation Agenda 1. Overview and Strategy 2. Operational Performance 3. Financial Performance 4. Value Creation Opportunities 5. Outlook 6. Questions 7. Appendices Page 2
Slide 3: 1. Overview and Strategy
1H FY24 Results Presentation 1. Overview and Strategy Anthony Mellowes Chief Executive Officer Page 3
Slide 4: 1H FY24 Interim Results
1H FY24 Results Presentation 1H FY24 Interim Results FY24 AFFO guidance maintained at 13.7cps Distribution Statutory Financial FFO per security AFFO per security per security net loss after tax Performance 7.6 cps 6.7 cps 6.7 cps ($35.0m) vs 8.4 cps1 vs 7.6 cps1 100% payout of AFFO vs ($95.1m)1 Oper
Slide 5: Our Strategy
Our Strategy Defensive, resilient Focus on convenience-based shopping centres cash flows to support secure and Weighted to non- discretionary retail segments growing long term distributions to our Long leases to quality anchor security holders tenants Growth and value creation opportunities Appropri
Slide 6: 1H FY24 Key Achievements
1H FY24 Results Presentation 1H FY24 Key Achievements Core strategy delivers consistent portfolio performance Portfolio performance underpinned by resilience of 207 specialty leasing deals secures future revenue our non-discretionary tenants growth • 2.2% comparable NOI growth with full year FY24 •
Slide 7: 2. Operational Performance
1H FY24 Results Presentation 2. Operational Performance Anthony Mellowes Chief Executive Officer Page 7
Slide 8: Portfolio Overview
1H FY24 Results Presentation Portfolio Overview Strong weighting towards non-discretionary tenants Yrs 93 2,091 $4,303.6m 790,894 2,491,974 5.3 years Owned retail No. specialty Total owned Gross lettable Land sqm Weighted average properties tenants portfolio value area sqm lease expiry1 Tenants by C
Slide 9: Cumulative Growth: NOI resilience driven by non-discretionary focus
1H FY24 Results Presentation NOI resilience driven by non-discretionary focus Consistent FFO growth reflects quality portfolio Consistent comparable NOI growth drives FFO growth 83.6% 1.1% 3.5% average Comparable NOI growth vs 2.5% average FFO per security growth Gross rent from Low tenant arrears a
Slide 10: Rental income security
1H FY24 Results Presentation Rental income security Improving occupancy with manageable lease expiry profile and predictable specialty income 98.0% • Occupancy improved from 97.8%1 Overall Lease Expiry • Specialty vacancy reduced from 5.0% (% of gross income) to 4.9%1 37.7% Portfolio occupancy • 87%
Slide 11: Portfolio sales performance
1H FY24 Results Presentation Portfolio sales performance Consistent and resilient growth Superior MAT growth vs our peers since FY19 4.1% Comparable MAT growth 20.0% Cumulative MAT growth 15.0% 3.6% Average comparable MAT 10.0% growth since FY19 5.0% 0.0% Comparable MAT Growth by Category FY19 FY20
Slide 12: Continuing to grow our anchor tenant partnerships
1H FY24 Results Presentation Continuing to grow our anchor tenant partnerships Partnering with our anchor tenants to drive sales turnover and value to all stakeholders 127 • 47% of total gross rent provides income stability • 61 Woolworths and 31 Coles stores being Anchor tenants their largest and s
Slide 13: Specialty sales performance
1H FY24 Results Presentation Specialty sales performance Sustainable growth in non-discretionary tenant sales1 4.6% Non-discretionary specialty tenants % of Non-discretionary specialty Comparable MAT growth specialty MAT growth gross rent Food & Liquor 42.7% 2.9% Pharmacy & Healthcare 11.6% (1.7%) M
Slide 14: 1H FY24 specialty leasing activity
1H FY24 Results Presentation 1H FY24 speciality leasing activity Leasing capability drives record number of deals, growing leasing spreads Strategy Renewals 6 months to 6 months to 31 Dec 2023 30 Jun 2023 Proactively remixing to secure quality everyday essentials Number 126 131 tenants within target
Slide 15: FY24 sustainability program update
1H FY24 Results Presentation FY24 sustainability program update On track to deliver full year commitments and targets Energy & Carbon Climate Risk Water & Waste Essentially Local Diversity & Health & Inclusion Wellbeing Commenced the Climate change Consolidating Fourth year 43% female directors Enga
Slide 16: Progress to Net Zero
1H FY24 Results Presentation Progress to Net Zero On track to reach net zero target (scope 1 and 2) by FY30 2.4 0.2 6.2 6.1 8.4 1.7 FY16-FY20 FY21 FY22 FY23 FY24 FY25 Completed Under Construction In Design $31.3m 23.3 MW 100% FY30 target Net Zero investment of solar PV installed or of energy savings
Slide 17: 3. Financial Performance
1H FY24 Results Presentation 3. Financial Performance Evan Walsh Chief Financial Officer Page 17
Slide 18: Financial Results
1H FY24 Results Presentation Financial Results Increased cost of debt and property expenses detract from underlying growth FFO of 7.6cps with comparable NOI $m 31 Dec 23 31 Dec 22 % change growth of 2.2% partially mitigating a 0.7 cps Property income 191.5 184.9 3.6% impact from the WACD increasing
Slide 19: 3.5% underlying FFO per security growth
1H FY24 Results Presentation 3.5% underlying FFO per security growth 1H FY24 underlying FFO growth driven by comparable NOI and a focus on minimising corporate expenses Controlled corporate overheads partially offset the 5.4% increase in net property expenses WACD increase from 3.4% in FY23 to 4.4%
Slide 20: Balance Sheet
1H FY24 Results Presentation Balance Sheet Provides capacity for future investment opportunities $m 31 Dec 23 30 Jun 23 % change $4.8bn AUM (down $123.6m) with $33.3m1 of properties sold at book Cash and cash equivalents 10.3 23.8 (56.7%) value (as part of our capital recycling Investment properties
Slide 21: Property Valuations
1H FY24 Results Presentation Property Valuations 61 bps cap rate expansion since the commencement of the current market revaluation cycle2 Portfolio Value ($m) 15.0 15.7 ( 33.3 ) ( 20.4 ) ( 105.4 ) 4,411.6 4,283.2 June 2023 Acquisitions (including Capital expenditure, Disposals Assets classified as
Slide 22: Capital Management
1H FY24 Results Presentation Capital Management Gearing expected to remain at the lower end of our target range of 30-40% Key debt metrics 31 Dec 2023 30 Jun 2023 A$225m medium term notes expires June 2024 Credit rating (Moody’s) Baa1 Baa1 (stable) (stable) • Excess bank debt lines held to cover exp
Slide 23: Interest rate exposure
1H FY24 Results Presentation Interest rate exposure Zero cost hedge restructure brings forward unrealised value in the existing debt book Hedge Expiry Profile Based on Debt Drawn Near term hedging increased to ($m)1 reduce interest rate volatility • FY24 debt remains 98% hedged 98% 98% • Additional
Slide 24: 4. Value Creation Opportunities
1H FY24 Results Presentation 4. Value Creation Opportunities Anthony Mellowes Chief Executive Officer Page 24
Slide 25: Recycling capital to drive earnings growth
1H FY24 Results Presentation Recycling capital to drive earnings growth Divesting lower yielding properties and deploying into accretive opportunities Capital sources Potential use of proceeds ~$200m Debt reduction properties (with a cap rate between • Proceeds initially applied to 5.0% and 5.5%) id
Slide 26: $65m targeted reinvestment to drive portfolio performance
1H FY24 Results Presentation $65m targeted reinvestment to drive portfolio performance Unlocking value within our portfolio through a targeted strategy Sustainability Investing with our Centre repositioning Acquisitions initiatives anchor tenants and developments FY24 forecast spend ~ $20m ~ $10m ~
Slide 27: Centre repositioning and developments
1H FY24 Results Presentation Centre repositioning and developments Targeted investment to support better communities whilst increasing productivity and value Centre repositioning Committed developments Uncommitted opportunities Supporting better communities Delacombe Town Centre – Greenbank Shopping
Slide 28: Positioned to acquire in a fragmented market
1H FY24 Results Presentation Positioned to acquire in a fragmented market Ownership of the leading everyday essential retail portfolio provides us with this competitive advantage Largest owner of convenience based centres Ownership of Convenience Based Centres • 8% share of the market which is domin
Slide 29: Funds Management
1H FY24 Results Presentation Funds Management Metro Fund offers a platform for funds management growth in the medium to longer term $750m target Initial fund size JV with GIC Growth will resume when acquisition opportunities align with return hurdles Invests in metropolitan neighbourhood centres Pla
Slide 30: 5. Outlook
1H FY24 Results Presentation 5. Outlook Anthony Mellowes and Evan Walsh Chief Executive Officer and Chief Financial Officer Page 30
Slide 31: AFFO Growth Target
1H FY24 Results Presentation AFFO Growth Target Indicative AFFO target growth rate in the medium to longer term is 3-4%+ pa Indicative contribution to AFFO growth rate (% pa) Description and Assumptions Medium to longer term 47% of rental income with 53 anchor tenants in turnover rent Anchors rents
Slide 32: Key Priorities and Outlook
1H FY24 Results Presentation Key Priorities and Outlook • Target full year FY24 comparable NOI growth of 3% Key • 2H FY24 leasing activity expected to be weighted towards renewals priorities / • $200m capital recycling program to continue subject to market conditions outlook • Continue to diversify
Slide 33: 6. Questions
1H FY24 Results Presentation 6. Questions Page 33
Slide 34: 7. Appendices
1H FY24 Results Presentation 7. Appendices Page 34
Slide 35: Portfolio Overview
1H FY24 Results Presentation Portfolio Overview Weighting towards non-discretionary food, health and retail services Sub- Neighbour- Drouin Total At 31 Dec 2023 regional hood Central1 portfolio Number of properties 13 79 1 93 Number of specialties 624 1,462 5 2,091 GLA (sqm) 258,639 528,478 3,777 79
Slide 36: Anchor Tenants
1H FY24 Results Presentation Anchor Tenants 47% of gross rent generated by anchor tenants 30 Jun 30 Jun 30 Jun 30 Jun 31 Dec • Anchor tenants generate 47.1% of gross rent on a fully 2020 2021 2022 2023 2023 leased basis Woolworths Group − Woolworths Group 28.5%, includes Woolworths 23.7% Woolworths
Slide 37: Income Statement: Statutory Loss to AFFO Reconciliation
1H FY24 Results Presentation Income Statement: Statutory Loss to AFFO Reconciliation For the six months ended 31 December 2023 Statutory loss FFO AFFO AFFO $m 6 months to 6 months to 6 months to % change adjustments 31 Dec 2023 31 Dec 2023 31 Dec 2022 Anchor rental income 76.8 - 76.8 75.1 2.3% Speci
Slide 38: Outgoings Recoveries
1H FY24 Results Presentation Outgoings Recoveries 77% recovery rate of recoverable specialty expenses • Total property expenses of $67.3m include: Total Recoverable Net property Recovery rate property − $53.2m of property expenses can be recovered from our income expenses (%) $m expenses tenants wit
Slide 39: Gearing Calculation
1H FY24 Results Presentation Gearing Calculation Gearing (%) $m 31 Dec 2023 30 Jun 2023 Bilateral and syndicated facilities – unsecured Bank and syndicated facilities drawn 485.0 503.0 32.5% 32.0% 31.3% 31.7% 31.3% 485.0 503.0 29.1% AU$ MTN – unsecured 28.3% Unsecured AU$ Medium term notes 525.0 525
Slide 40: Debt facilities & interest rate hedging
1H FY24 Results Presentation Debt facilities & interest rate hedging Financing Facility limit Drawn debt Maturity / Notes capacity A$m A$m A$m Bank and syndicated facilities Bank bilateral 150.0 45.0 105.0 FY26: $50m Dec 2025 and $100m Mar 2026 Bank bilateral (including bank guarantee) 575.0 290.0 2
Slide 41: Glossary
1H FY24 Results Presentation Glossary AUM: Assets under management Look-through gearing: includes our 20% interest in the Metro Fund Comparable MAT: Moving annual turnover measures the growth in sales over the last 12 MER: Management Expense Ratio (corporate months compared to the previous 12 months
Slide 42: Portfolio List
1H FY24 Results Presentation Portfolio List Our Portfolio List is available at regiongroup.au/investor-centre/reports-presentations/ Page 42
Slide 43: For further information, please contact
For further information, please contact: Anthony Mellowes Evan Walsh Chief Executive Officer Chief Financial Officer T: +61 2 8243 4900 T: +61 2 8243 4900 E: anthony.mellowes@regiongroup.au E: evan.walsh@regiongroup.au Disclaimer This presentation has been prepared by Region RE Limited (ABN 47 158 8