Slide 1: Welcome to the 2017 Annual Results Briefing
PF: YOUR INDUSTRIAL PROPERTY EXPERTS WELCOME TO THE 2017 ANNUAL RESULTS BRIEFING
Slide 2: Agenda
01. 02. 03. 04. 05. 06. 07. HIGHLIGHTS PORTFOLIO MARKET & STRATEGY CAPITAL MANAGEMENT 2017 ANNUAL RESULTS REVIEW & QUESTIONS APPENDICES
Slide 3: 01. Highlights
Slide 4: Highlights
HIGHLIGHTS ▪ Significant acquisition activity: $84.3 million of property acquired, improving portfolio metrics and providing significant medium to long-term development potential ▪ Transition of the Penrose portfolio: approximately $14 million of shareholder value created equating to a property leve
Slide 5: 02. Portfolio
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Slide 6: Portfolio Snapshot
PORTFOLIO SNAPSHOT ▪ PFI’s portfolio is diversified across 92 properties and 148 tenants, with 99.9% occupancy and a weighted average lease term of 5.33 years, weighted towards Auckland industrial property 31 December 2017 31 December 2016 Book value $1,210.8m $1,083.3m Number of properties 92 83 Nu
Slide 7: Historical Operational Performance
HISTORICAL OPERATIONAL PERFORMANCE Jean - Tuesday ▪ Since 2008, PFI has achieved a year end average occupancy of 98.6% and WALT of 4.81 years PROPERTY FOR INDUSTRY 2017 ANNUAL RESULTS BRIEFING 7
Slide 8: Portfolio Performance
PORTFOLIO PERFORMANCE ▪ Valuations: ▪ $43.6 million or 3.7% portfolio revaluation uplift to $1,210.8 million ▪ Passing yield firmed from 6.69% to 6.57% ▪ Leasing: ▪ 27 leases agreed over ~97,000 sqm of space for an average term of 5.5 years ▪ Lease renewals accounted for approximately half of the co
Slide 9: Lease Events
LEASE EVENTS ▪ Near term leasing outlook remains positive: just 7.4% of contract rent is due to expire during 2018 ▪ Expiries at Carlaw Park, Parnell represent 3.2%, leasing of that space is a key priority in 2018 ▪ ~68% of portfolio subject to some form of lease event during 2018 Tenant % Rent Roll
Slide 10: Penrose Portfolio
PENROSE PORTFOLIO ▪ Portfolio of five Penrose properties purchased in August 2015 ▪ All five properties have been transitioned: four from former tenant Sistema to new tenants, one sold for a gain on sale of $1.9 million ▪ ~$14 million of shareholder value has been created ▪ Property level internal r
Slide 11: Acquisitions
ACQUISITIONS ▪ During 2017 PFI secured ten quality properties for a total acquisition cost of $84.3 million ▪ The acquisitions: ▪ Established PFI’s presence in additional centres across New Zealand, whilst maintaining a high weighting towards the attractive Auckland property market ▪ Improved a numb
Slide 12: Divestments and Development
DIVESTMENTS AND DEVELOPMENT ▪ 65 Hugo Johnston Drive, Penrose sold during H1 2017 to an owner occupier for $14.3 million, with a $1.9 million gain on sale representing a 17.8% premium above the December 2016 book value ▪ ~$32.3 million of divestments over the last three years ▪ Tenant commitment con
Slide 13: 03. Market & Strategy
Slide 14: Market Update
MARKET UPDATE ▪ ANZ retain a broadly positive medium-term expectation: ▪ Forecast annual growth of “…up towards 3% by the end of 2018, and averaging 2½-3% over the next couple of years overall…” ▪ Equates to the average rate of growth experienced since 2010 ▪ CBRE December 2017 Auckland Market Outlo
Slide 15: Strategy
STRATEGY ▪ PFI has always invested in quality industrial property in prime locations, in order to deliver attractive returns with a low level of volatility: our average annual return to shareholders since inception has been ~9.7% 1 ▪ We aim to drive shareholder returns by: ▪ Active asset management
Slide 16: 04. Capital Management
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Slide 17: Equity and Debt Initiatives
EQUITY AND DEBT INITIATIVES ▪ Equity: ~$70 million raised via October/November 2017 one-for-ten rights offer, high level of take-up by existing shareholders: almost 80% of the new shares available ▪ Debt: inaugural bond offer in November 2017, $100 million of senior secured fixed rate seven-year bon
Slide 18: Funding, Covenants, Interest Rates
FUNDING, COVENANTS, INTEREST RATES ▪ Bond helps to diversify PFI’s borrowings and to increase the average term to expiry of all facilities to 3.7 years as at the end of 2017 ▪ Gearing of 30.8% and interest cover ratio of 3.7 times well within bank covenants Dec 2017 Dec 2016 Funding Syndicated Bank
Slide 19: Fixed Rate Payer Hedging
FIXED RATE PAYER HEDGING ▪ Weighted average cost of debt decreased from 5.24% at end FY16 to 4.96% at end FY17 ▪ Cover profile provides for an average of ~59% of debt to be hedged at an average fixed rate of ~4.28% in FY18 PROPERTY FOR INDUSTRY 2017 ANNUAL RESULTS BRIEFING 19
Slide 20: 05. 2017 Annual Results
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Slide 21: Operating Revenue
OPERATING REVENUE ▪ Operating revenues of $73.5 million up $2.4 million or 3.4% ▪ Increases due to positive leasing activity ($1.9 million), acquisitions ($1.7 million) and completed developments ($0.8 million), ▪ Decreases due to increased intra-period vacancy ($1.2 million) and disposals ($0.8 mil
Slide 22: Comprehensive Income
COMPREHENSIVE INCOME For the year ended (audited, $000) Dec 17 Dec 16 Change ▪ Operating revenues up $2.4 Total operating revenue 73,528 71,108 2,420 million or 3.4%, refer slide Non-recoverable property costs (2,357) (1,646) (711) 21: operating revenue Interest expense and bank fees (17,768) (17,83
Slide 23: Distributable Profit (Cents per Share)
DISTRIBUTABLE PROFIT (CENTS PER SHARE, CPS) ▪ Distributable profit per share up 0.50 cps or 6.6% ▪ Internalisation cost savings in H2 2017: ▪ Estimated at ~$2.7 million (0.59 cps) before interest and tax, or $1.4 million (0.30 cps) after interest and tax ▪ Represent a contribution of 7.1% to the H2
Slide 24: FFO, AFFO and Dividends
FFO, AFFO AND DIVIDENDS (Unaudited, $000, unless noted) Dec 2017 Dec 2016 ▪ Funds From Operations Profit and total comprehensive income after income tax attributable to the shareholders of the Company 51,684 123,412 (FFO) earnings up 0.58 cps, Adjusted for: Adjusted Funds From Fair value gain on inv
Slide 25: Investment Properties
INVESTMENT PROPERTIES ▪ Portfolio value of ~ $1.2 billion ▪ Significant acquisition activity: $84.3 million of property acquired, improving portfolio metrics and providing significant medium to long-term development potential ▪ Annual increase from independent valuations of $43.6 million or 3.7% PRO
Slide 26: Net Tangible Assets (Cents per Share)
NET TANGIBLE ASSETS (CENTS PER SHARE, CPS) ▪ Net tangible assets (NTA) per increased by 2.5 cps or 1.6% to 163.2 cps ▪ Excluding the impact of the internalisation payment, net of tax, PFI’s NTA would have increased by 8.7 cps Jean or 5.4% to 169.4 cents (refer Appendix 1) PROPERTY FOR INDUSTRY 2017
Slide 27: Five Year Financial Summary
FIVE YEAR FINANCIAL SUMMARY ($m, unless noted) Dec-13 Dec-14 Dec-15 Dec-16 Dec-17 Operating revenue 48.1 63.8 66.9 71.1 73.5 Total operating earnings 26.9 36.9 36.6 43.1 47.6 Total comprehensive income after tax 40.5 59.9 72.8 123.4 82.6 1 Total assets 877.0 906.9 1,027.2 1,121.8 1,242.2 Total liabi
Slide 28: 06. Review & Questions
06. REVIEW & QUESTIONS
Slide 29: Review & Questions
REVIEW & QUESTIONS ▪ PFI’s strategy is to invest in quality industrial property in New Zealand’s prime locations and the Company aims to deliver strong, stable shareholder returns ▪ 2017 highlights: ▪ Significant acquisition activity ▪ Transition of the Penrose portfolio ▪ Strong balance sheet ▪ Div
Slide 30: 07. Appendices
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Slide 31: Appendix 1: EPS & NTA Excl. Internalisation
APPENDIX 1: EPS & NTA EXCL. INTERNALISATION ▪ Some measures have been presented excluding the impact of internalisation payment, net of tax Adjusted earnings per share (unaudited, $000) Dec 2017 Dec 2016 Total comprehensive income attributable to the shareholders of the Company 51,684 123,412 Adjust
Slide 32: Disclaimer
DISCLAIMER The information included in this presentation is provided as at 12 February 2018 and should be read in conjunction with the NZX annual results announcement, NZX appendix 1 (including the financial statements) and NZX appendix 7 issued on that same day. Property for Industry Limited (PFI)