Argosy Property Limited · NZX:ARG
Argosy Property — H1 FY2024 Earnings Presentation
39 slides from Argosy Property's earnings presentation, Nov 29, 2023
Slide 1: FY24 Interim Results: Strong Foundations
FY24 Interim Results: Strong Foundations 29 November 2023
Slide 2: Agenda
Agenda Vision & Strategy 4 Peter Mence, CEO Dave Fraser, CFO Results Summary 5 Portfolio Highlights 6 Financials 12 Leasing & Sector Commentary 23 Focus and Outlook 27 Appendices 29 Note: This results presentation should be read in conjunction with the NZX release dated 29 November 2023. Due to roun
Slide 3: Our strength lies in the diversity of our portfolio
“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 through economic cycles.” Peter Mence, CEO Argosy Property Limited Ltd. 3
Slide 4: Building a better future
Building a better future Proactive delivery of sustainable growth A business culture that is environmentally focused Developing green Value Add portfolio opportunities Owning the right assets with the right attributes to drive earnings and capital growth in the right New Zealand locations A commitme
Slide 5: Results Summary
Results Summary $58.4m Net property income increased 6.65c Full year FY24 dividend guidance 3.325c Interim dividends declared for the +6.3% reaffirmed six months to 30 September $1.52 NTA down 3.8% from $1.58 ($50.8m) 36.3% Unrealised revaluation decline of Gearing comfortably in the middle driven b
Slide 6: Portfolio Highlights
Portfolio Highlights 98.4% Occupancy 5.1yrs Weighted Average Lease Term 5.5% Like for like rental growth $1.52 Net tangible assets (NTA) 91.3% Tenant retention rate 34.1% Government sector rental income Argosy Property Limited Ltd. 6
Slide 7: Sector Summary
Sector Summary Large format retail Industrial Office Number of buildings Number of buildings Number of buildings 35 15 4 Market value of assets ($m) Market value of assets ($m) Market value of assets ($m) $1,118.0 $797.0 $196.3 Occupancy (by income) Occupancy (by income) Occupancy (by income) 100% 9
Slide 8: Portfolio at a glance
Portfolio at a glance Sector by value % Region by value % Asset mix by value % (target band) (target band) (target band) 9 3 6 11 26 53 38 71 83 1 2 Industrial (55-65%) Office (25-35%) LFR (5-15%) Auckland (65-75%) Wellington (20-30%) Regional (<10%) Core (75-90%) Value Add (n/a) Divest (n/a) 1. Lar
Slide 9: Revaluations
Revaluations CAP RATE SOFTENING DIMINISHING, 30 Sep 23 30 Sep 23 RENTAL GROWTH STILL EVIDENT Book Value Valuation r r Sep 23 Mar 23 $m % Cap rate Cap rate ($m) ($m) • Independent desktop valuations as at 30 % % Auckland 1,521.3 1,493.2 (28.1) (1.8%) 5.93% 5.66% September were completed on all proper
Slide 10: Value Add & Green Developments
Value Add & Green Developments GREEN ASSETS COMPLETING, UNDERPINNING DEVELOPMENT Valuation @ Property Sector Location PIPELINE 30 Sep 23 224 Neilson Street, Onehunga planning Industrial Auckland 36.2 • Transformation of Value Add properties is a 8-14 Mt Richmond Drive, Mt Wellington planning Industr
Slide 11: Portfolio by Green Asset Type
Portfolio by Green Asset* Type Sustainability Commitment COHESIVE APPROACH ACROSS THE BUSINESS 11 SUBHEADING 1 on the environment, create vibrant spaces for tenants, engage more with stakeholders and To reduce our impact provide transparent and effective governance… Ni sitent. Rion consenda id quam
Slide 12: Financials
Financials Argosy Property Ltd. 12
Slide 13: Gross Property Income Waterfall
Gross Property Income Waterfall Rent reviews and developments key drivers of rental growth over the first half Like for like rental growth of 5.5% 70.0 0.0 0.2 2.4 65.8 3.3 60.4 -0.5 60.0 50.0 40.0 30.0 20.0 Rental income $m 10.0 - Gross Property Rent Reviews Vacancy & leasing Acquisitions Developme
Slide 14: Financial Performance
Financial Performance 1H24 1H23 SOLID TOP LINE GROWTH $m $m Net property income 58.4 55.0 • The net property income increase for the period was principally driven by solid like-for- Administration expenses (5.5) (5.2) like rental growth and development income Profit before financial income/(expenses
Slide 15: Distributable Income
Distributable Income 1H24 1H23 STEADY RESULT $m $m Profit before income tax (16.8) 17.1 • Net distributable income for the six months was $29.5m compared to $32.9m in the Adjustments: prior comparable period, which benefitted Revaluation (gains)/losses on investment property 50.8 23.5 from the $3.0m
Slide 16: Adjusted Funds From Operations (AFFO)
Adjusted Funds From Operations (AFFO) 1H24 1H23 AFFO COVERED DIVIDENDS $m $m Net distributable income 29.5 32.9 • Lower maintenance capex for the half year reflects the significant projects undertaken Amortisation of tenant incentives and leasing costs 1.3 1.4 during the FY23 financial year Share ba
Slide 17: Investment Property Waterfall
Investment Property Waterfall Revaluation impacts portfolio value decline Argosy Argosy Property Property Limited Ltd. 17
Slide 18: Net Tangible Asset
Net Tangible Asset Revaluation key driver of NTA decline 1.70 1.58 0.03 1.60 1.52 (0.06) 1.50 (0.03) 1.40 1.30 1.20 NTA per share ($) 1.10 1.00 NTA at 31 March 2023 Profit for the year Revaluations Dividends paid NTA at 30 Sept 2023 Argosy Argosy Property Property Limited Ltd. 18
Slide 19: Balance Sheet Management
Balance Sheet Management 1H24 FY23 GEARING REMAINS MODEST $m $m • The balance sheet is in very good shape Investment properties 2,151.2 2,184.9 • Argosy has sufficient facility headroom to Asset held for sale complete existing developments and any Other assets 24.3 27.7 near-term opportunities • Gre
Slide 20: Interest Rate Management
Interest Rate Management FIXED RATE COVER OF 70% 1H24 FY23 • Weighted average interest rate increased Weighted average interest rate1 5.6% 5.4% to 5.6% from 5.4% at March Interest Cover Ratio 2.5x 2.8x • Fixed rate cover at 70% of drawdown debt % of fixed rate borrowings 70% 71% • $175m in forward r
Slide 21: Debt Profile
Debt Profile GREEN BOND DIVERSIFICATION 38% • The total amount of the bank facility is $525m with the nearest tranche expiring in April 2025 (FY26) 400 • Argosy’s $325m of green bonds continue to 350 provide important diversification and tenor 100 300 benefits to the business 100 250 125 200 220 190
Slide 22: Dividends
Dividends STEADY AND SUSTAINABLE • A 2nd quarter dividend of 1.6625 cents per 6.80 share has been declared with 0.173398 6.60 6.65 6.65 cents per share imputation credits attached 6.55 6.40 6.45 • Overseas investors will receive an 6.20 6.35 6.28 additional supplementary dividend of 0.078685 cents p
Slide 23: Leasing & sector commentary
Leasing & sector commentary Argosy Argosy Property Property Limited Ltd. 23
Slide 24: Leasing Outcomes
Leasing Outcomes 37,597 M2 of NLA leased during the six 5.8% Equivalent of total portfolio 14 Leases executed, 8 new leases, 5 months to 30 September by NLA renewals and 1 extension 8,138 M2 of NLA renewed with 12yr New lease to Harbour Cancer 62 Rent reviews over the period, Mainfreight for 12 mont
Slide 25: Lease Expiry & Rent Review Profile
Lease Expiry & Rent Review Profile GOOD MEDIUM TERM LEASE EXPIRY As at 30 September 2023 PROFILE • Largest single expiry remains MBIE in 2027 16 • Average annual expiry to 31 March 2026 is 14 only ~9% Total remaining 12 expiry 6.0 10 7.5 8.0 Percentage of portfolio (by income) 8 6 9.7 5.1 5.9 6.3 9.
Slide 26: Market Insights
Market Insights INDUSTRIAL OFFICE LARGE FORMAT RETAIL • Demand continues to drive additional supply but quieter • Flexible working environments continue but full-time remote • Online proportion of total sales has reduced post pandemic. period in 2024 is projected. work is declining. • Large Format R
Slide 27: Focus and outlook
Focus and outlook Argosy Argosy Property Property Limited Ltd. 27
Slide 28: Remainder of FY24 has headwinds but we can deliver
Remainder of FY24 has headwinds but we can deliver STAYING FOCUSED ON ACHIEVING STRONG OPERATIONAL RESULTS AND EXECUTING ON STRATEGIC GOALS • New Zealand’s domestic economy continues to experience headwinds from high interest rates and inflation • Global market and geopolitical volatility are likely
Slide 29: Appendices
Appendices Argosy Property Ltd. 29
Slide 30: Balance Sheet Management
Balance Sheet Management Gearing remains comfortably within the mid-range of the band 50 Target Range 30-40% 40 38.8 35.9 36.3 35.1 30 31.1 20 Debt to total assets (%) 10 0 FY20 FY21 FY22 FY23 1H24 Argosy Argosy Property Property Limited Ltd. 30
Slide 31: Hedges, Interest Rates & Debt Maturity
Hedges, Interest Rates & Debt Maturity Hedges & Weighted Average Debt Maturity Profile (drawn) & Interest Rates (March) Weighted Average Margin and Line Fee 450 0.022 600 6.0% 400 0.02 500 525 5.0% 350 300 0.018 400 4.0% 100 Weighted average margin & Line fee (%) Weighted Average Interest Rate (%) 2
Slide 32: Rent review summary – by type, sector and location
Rent review summary – by type, sector and location Annualised $ % of Total Type # Previous Rent % of rent New Rent $ Increase Increase Annualised Annualised % ($000's) reviewed ($000's) (000's) % Increase (000's) Increase Increase Total 62 51,860 100% 55,987 4,127 8.0% 1,881 100% 3.6% By review type
Slide 33: Rent review summary – Auckland & Wellington
Rent review summary – Auckland & Wellington Annualised $ % of Total Location # Previous Rent % of rent New Rent $ Increase Increase Annualised Annualised % ($000's) reviewed ($000's) (000's) % Increase (000's) Increase Increase Auckland Industrial 15 17,297 54% 18,439 1,142 6.6% 580 30.8% 3.4% Offic
Slide 34: Portfolio metrics
Portfolio metrics Rent Roll by Industry Top 10 Customers by Rent Government Administration MB IE Tra nsport and Storage General Distributors Limited 6% 3%2%2% Retail Trade 3% Statistics New Zealand 4% 10% Cardinal Logistics Limited 34% Ma nufacturing 5% Kainga Ora Property and Business 5% Services T
Slide 35: Portfolio snapshot
Portfolio snapshot Occupancy (%) WALT (years) 100 7.0 98.8 99.0 98.7 99.3 98.4 6.0 80 6.1 5.0 5.5 5.7 5.4 5.1 60 4.0 40 3.0 2.0 20 1.0 0 0.0 FY20 FY21 FY22 FY23 1H24 FY20 FY21 FY22 FY23 1H24 Net Tangible Assets ($ per share) Debt-to-total-assets (%) 2.00 50 1.74 40 1.50 1.53 1.58 1.52 38.8 35.9 35.1
Slide 36: Portfolio summary – Industrial
Portfolio summary – Industrial Net lettable Vacant Valuation WALT Contract 2 2 Property Address $000s (years) area (m ) Space (m ) Yield Auckland 19 Nesdale Avenue, Wiri $77,600 11.1 20,677 - 4.82% 240 Puhinui Road, Manukau $49,000 11.1 17,715 - 4.86% 244 Puhinui Road, Manukau $17,000 11.1 5,504 - 4
Slide 37: Portfolio summary - Office
Portfolio summary - Office Valuation WALT Net lettable Vacant Contract 2 2 Property Address $000s (years) area (m ) Space (m ) Yield Auckland 99-107 Khyber Pass Road, Grafton $15,600 1.7 2,509 - 7.06% 8 Nugent Street, Grafton $47,400 3.4 8,125 - 7.18% 39 Market Place, Viaduct Harbour $10,000 2.2 10,
Slide 38: Portfolio summary – Large Format Retail
Portfolio summary – Large Format Retail Valuation WALT Net lettable Vacant Contract 2 2 Property Address $000s (years) area (m ) Space (m ) Yield Auckland Albany Mega Centre and 11 Coliseum Drive, Albany $143,000 2.7 33,792 1,360 6.79% 50 & 54-62 Cavendish Drive, Manukau $31,500 2.1 9,939 - 6.38% 25
Slide 39: Thank you
Thank you 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