Arena Reit · ASX:ARF
Arena Reit — H1 2021 Earnings Presentation
32 slides from Arena Reit's earnings presentation, Feb 12, 2021
Slide 1: 2021 Half Year Results
ARENA REIT 2021 HALF YEAR RESULTS 12 February 2021
Slide 2: Agenda
AGENDA Highlights 3 COVID-19 Update 5 Sustainability 6 Financial Results 7 Portfolio Update 11 Outlook 19 Questions 20 Directory 21 Appendices 22 Important Notice 32 2 ARENA REIT 2021 HALF YEAR RESULTS
Slide 3: HY21 Highlights
$61.1 million $24.7 million HY21 HIGHLIGHTS Statutory net Net operating Continue to deliver positive portfolio, profit profit investment and community outcomes +45% on HY20 +15% on HY20 • 15% growth in net operating profit driven by contracted rental growth, acquisitions and development completions.
Slide 4: Delivering on Strategy
DELIVERING ON STRATEGY Strategy discipline continues to deliver positive outcomes Lease management: Working in partnership: • 100% portfolio occupancy. • Continue to rollout the installation of • Average HY21 like-for-like rent renewable energy systems. increase of +2.6%1. • Completed rejuvenation o
Slide 5: COVID-19 Update
COVID-19 UPDATE Decisive response, well positioned • All of Arena’s properties remain open and in operation. • 100% of contracted rent has been receipted for the period 1 July 2020 to 31 January 2021. • All tenant partners remain compliant with COVID-19 related rent relief agreements1. • Less than $
Slide 6: Sustainability
SUSTAINABILTY Working in collaboration to deliver beneficial and sustainable outcomes • As an owner, manager and developer of social infrastructure properties Arena plays an important role within society. • Arena’s property portfolio contributes to increased levels of community access, inclusion and
Slide 7: Financial Results
FINANCIAL RESULTS Gareth Winter Chief Financial Officer
Slide 8: Financial Performance
FINANCIAL PERFORMANCE Ongoing investment continues to deliver distribution growth • Property income continues to increase due to: – Contracted annual rental HY21 HY20 Change growth; – Acquisition of operating ELC ($’000) ($’000) ($’000) (%) properties; and Property income 28,232 26,448 1,784 7% – EL
Slide 9: Financial Position
FINANCIAL POSITION Strong balance sheet supporting asset growth • Growth in total assets continues from the acquisition of operating properties, ELC development completions and property valuation uplift. As at 31 Dec 2020 30 June 2020 Change ($m) ($m) % • Undrawn debt capacity of $95 million to fund
Slide 10: Capital Management
CAPITAL MANAGEMENT • Syndicated borrowing facility limit of $330 million Substantial capacity to fund new investment comprised of: – $130 million expiring 31 March 2023; – $150 million expiring 31 March 2024; and – $50 million expiring 31 March 2025. As at 31 Dec 2020 30 June 2020 Change • SPP raise
Slide 11: Portfolio Update
PORTFOLIO UPDATE Rob de Vos Managing Director
Slide 12: Portfolio Overview
PORTFOLIO OVERVIEW 31 Dec 2020 Net valuation movement 31 Dec 2020 Change versus Number of assets valuation versus 30 June 2020 passing yield 30 June 2020 $m $m % % bps ELC portfolio 234 876.4 +31.6 +4.1% 6.16% (8) Healthcare portfolio 11 140.8 +3.7 +2.7% 5.99% (13) Total portfolio 245 1,017.2 +35.3
Slide 13: Lease Expiry Profile
LEASE EXPIRY PROFILE • Seven operating ELC properties added to 1 Weighted average lease expiry increased to 14.7 years portfolio with initial weighted average lease term of 27.3 years. 16% Healthcare (%) Childcare (%) 5.6% • Nine ELC development completions 14% added to portfolio with initial weight
Slide 14: Annual Rent Reviews
ANNUAL RENT REVIEWS HY21 average like-for-like rent increase of +2.6%1 • Like-for-like rent increase excludes 25 100% 1.0% 3.5% 2.4% 1.2% unresolved market rent reviews from FY20 8.2% 8.4% 17.0% and 11 from HY21, each are subject to 0% 80% collar and 7.5% cap; market rent review % rental income 8.7%
Slide 15: Acquisitions and Developments
ACQUISTIONS AND DEVELOPMENTS Creating new accommodation for essential community services • High quality, purpose built properties with existing tenant partners. • Nine ELC development projects were completed 1 in HY21, an additional five are forecast to complete in 2H21 with the balance forecast to
Slide 16: ELC Operating Environment
ELC OPERATING ENVIRONMENT Strong macroeconomic drivers continue to support Australian ELC sector Female Workforce Participation Rate2 • Strong bipartisan government support of ELC sector as it is integral to: 68% o Supporting the economic recovery from COVID-19 in the short 65% term; and 63% 60% o I
Slide 17: ELC Portfolio
ELC PORTFOLIO 15% Arena ELC portfolio – net rent to gross operator revenue1,2 14% Portfolio strength underpinned by asset 13% 12% quality 11% 10% 9% 100% portfolio occupancy as at 31 December 2020. 8% Arena’s ELC portfolio operating data1 to 30 September 2020: 7% 6% • Strong rebound in ELC occupancy
Slide 18: Healthcare Sector & Portfolio
HEALTHCARE SECTOR & PORTFOLIO Strongly sought after asset class • Strong structural macro-economic drivers continue to support Australian healthcare accommodation including growing and ageing population and increased prevalence of chronic health conditions. • Healius completed the sale of medical ce
Slide 19: Outlook
OUTLOOK Well positioned for future opportunities and challenges I N C O M E G R O W TH • FY21 distribution guidance of 14.8 cent per security, an increase of 5.7%1 on FY20. • Annual rent increases, including market rent reviews: o Approximately 8% of FY20 income unresolved; and o Approximately 9% of
Slide 20: Questions
QUESTIONS
Slide 21: Corporate Directory
CORPORATE DIRECTORY Please direct enquiries to Sam Rist on samantha.rist@arena.com.au ROB DE VOS GARETH WINTER SAM RIST Managing Director Chief Financial Officer Head of Investor Relations 21 ARENA REIT 2021 HALF YEAR RESULTS
Slide 22: Appendices
APPENDICES
Slide 23: Financial Performance – HY21
FINANCIAL PERFORMANCE – HY21 HY21 HY20 Change ($’000) ($’000) ($’000) % Property income 28,232 26,448 1,784 +7% Other income 257 293 (36) -12% Total operating income 28,489 26,741 1,748 +7% Property expenses (356) (261) (95) +36% Operating expenses (1,944) (1,921) (23) +1% Finance costs (1,473) (3,1
Slide 24: Balance Sheet – HY21
BALANCE SHEET – HY21 31 Dec 20 30 June 20 Change ($’000) ($’000) ($’000) % Facility Covenant Ratio Cash 28,758 76,330 (47,572) -62% requirement Receivables and other assets 5,501 11,427 (5,926) -52% Loan to value ratio (LVR) Maximum 50% 23.1% Investment properties 1,017,168 914,007 103,161 +11% Inte
Slide 25: Portfolio Composition and Movement
PORTFOLIO COMPOSITION AND MOVEMENT Portfolio movements (30 June 2020 to 31 December 2020)1 250 240 12 2 7 230 17 3 220 7 210 200 239 190 229 233 233 222 222 180 170 160 150 30-Jun-20 Development sites Development projects Operating properties Operating properties 31-Dec-20 acquired completed acquire
Slide 26: ELC Portfolio Valuations
ELC PORTFOLIO VALUATIONS Number of Value Passing yield As at 31 December 2020 properties ($m) (%) Independent ELC freehold valuations Victoria 7 18.4 5.94 Queensland 16 52.9 6.31 Western Australia 7 19.7 6.00 New South Wales 5 29.0 5.32 South Australia 3 11.9 6.48 Total independent ELC valuations 38
Slide 27: ELC Portfolio Metrics
ELC PORTFOLIO METRICS 31 Dec 2020 30 June 2020 Change Leased ELCs 2221 211 +11 Development sites 121 17 -5 Total ELCs 234 228 +6 WALE (by income) (years) 15.1 14.2 +0.9 year Tenanted occupancy (%) 100 100 - Average passing yield (%) 6.16 6.24 -8bps Portfolio value ($m) 876.4 777.4 +13% Average renta
Slide 28: Healthcare Portfolio Metrics
HEALTHCARE PORTFOLIO METRICS 31 Dec 2020 30 June 2020 Change Total healthcare properties 11 11 - WALE (by income) (years) 12.5 12.8 -0.3 years Tenanted occupancy (%) 100 100 - Average passing yield (%) 5.99 6.12 -13bps Property portfolio ($m) 140.8 136.6 +3% Average rental increase (%) 2.3 2.25 +5bp
Slide 29: Portfolio Location Map
PORFTOLIO LOCATION MAP 29 ARENA REIT 2021 HALF YEAR RESULTS
Slide 30: 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-20 Jan-15 Jan-16 Jan-17 Jan-18 Jan-19 Jan-20 Jan-15 Jan-16 Jan-17 Jan-18 Jan-19 Jan-20 Sydney Ot
Slide 31: ELC Sales Yields versus Bond Yield
ELC SALES YIELDS VERSUS 10 YEAR BOND Average ELC Sales Yield versus 10 Year Aust Government Bond Yield) 10.00% 9.00% 8.00% 7.00% 6.00% 5.00% 4.00% 3.00% 2.00% 1.00% 0.00% ELC Sales Yield (three month rolling average all states) 10 Year Govt Bond Yield 31 ARENA REIT 2021 HALF YEAR RESULTS
Slide 32: 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