Arena Reit · ASX:ARF
Arena Reit — FY2023 Earnings Presentation
32 slides from Arena Reit's earnings presentation, Aug 10, 2023
Slide 1: Full Year 2023 Results Presentation
Arena REIT FULL YEAR 2023 RESULTS PRESENTATION 10 August 2023 Better Communities. Together. r Title
Slide 2: Agenda
Agenda 03 Highlights 05 Sustainability 06 Financial Results 11 Portfolio Update 19 Outlook 20 Questions Arena REIT acknowledges the traditional custodians of 21 Directory the lands on which our business and assets operate, and recognises 22 Appendices their ongoing connection to land, waters and com
Slide 3: Highlights for Full Year 2023
Highlights for Full Year 2023 Facilitating access to essential services which deliver strong community benefits • Growth in net operating profit driven by like-for-like contracted Statutory net profit Net operating profit rental increases, acquisitions and development completions. • NAV per security
Slide 4: Delivering on Strategy
Delivering on Strategy Ongoing strategy discipline and partnership approach Portfolio management Working in partnership Two healthcare properties divested at an Continue to progress solar renewable average premium of 2.4% to 30 June 2022 energy program; currently installed on book value. 83% of Aren
Slide 5: Sustainability
Sustainability Investment proposition and approach drives sustainable and commercial outcomes • Sustainability is integral to Arena’s investment approach and best positions Arena to achieve positive long term commercial and community outcomes. • Sustainability outcomes delivered during FY2023 includ
Slide 6: Financial Results
Financial Results Gareth Winter CHIEF FINANCIAL OFFICER Better Communities. Together. r Title
Slide 7: Financial Performance
Financial Performance Increase in property income supporting earnings & distribution growth FY23 FY22 Change Change • Property income continues to increase due to: $’000 $’000 $’000 % – Contracted rental growth from annual rent increases and market rent reviews; – Acquisition of operating ELC Proper
Slide 8: Contributors to EPS Growth
Contributors to EPS Growth Rental growth, acquisition and development completions supporting EPS growth 20 1.27 0.35 0.12 -0.94 18 17.1 16.3 16 14 12 10 8 6 4 2 0 FY22 EPS Contracted like-for-like Completed developments, Net operating expenses Funding mix and costs FY23 EPS rental income growth acqu
Slide 9: Financial Position
Financial Position Strong balance sheet with substantial capacity As at • Growth in total assets continues from the 30 June 2023 30 June 2022 Change acquisition of operating properties, ELC $m $m % development completions and property valuation uplift. • Undrawn debt capacity of $158 million as at 3
Slide 10: Capital Management
Capital Management Hedging discipline and expanded liquidity • Syndicated borrowing facility limit increased by $70 As at 30 June 2023 30 June 2022 Change million to $500 million and extension of maturity dates. As at 30 June 2023 facility is comprised of: – $200 million expiring 31 March 2026; Borr
Slide 11: Portfolio Update
Portfolio Update Rob de Vos MANAGING DIRECTOR Better Communities. Together. r Title
Slide 12: Portfolio Overview
Portfolio Overview Number of 30 June 2023 Net valuation movement versus 30 30 June 2023 Change versus assets1 valuation June 2022 passing yield 30 June 2022 $m $m % % bps Early learning portfolio 263 1,377 21 +1.6 5.13 +23 Healthcare portfolio 9 139 -4 -2.1 5.37 +35 Total portfolio 272 1,516 17 +1.2
Slide 13: Lease Expiry Profile
Lease Expiry Profile Weighted average lease expiry of 19.3 years 35% • Less than 3% of portfolio income subject to expiry prior to FY30. Early Learning (%) Healthcare (%) 30% 28.8% • Over 50% of portfolio lease income expires after FY40. 25% • Ten ELC development completions added to % of income por
Slide 14: Annual Rent Reviews
Annual Rent Reviews FY23 average like-for-like rent increase of +6.8% 100% 9.7% 8.6% 7.9% • Attractive rent review structure with embedded 13.8% income growth and inflation protection. 5.5% 5.5% 5.5% 8.3% 5.5% 9.6% 80% 10.0% • ~95% of FY24, FY25, FY26 and FY27 rent reviews 7.5% contracted at CPI, th
Slide 15: Acquisitions and Developments
Acquisitions and Developments Working with our tenants as property partners • High-quality, purpose-built properties with existing and new tenant partners. • Two operating ELC properties were acquired during FY2023. • Ten ELC development projects were completed in FY2023. Acquisitions and developmen
Slide 16: ELC Operating Environment
ELC Operating Environment Strong social and macroeconomic drivers continue to support early learning sector Australian Parents Workforce Participation Rate1 • Record female workforce participation rate has been driving demand for services and increased 100% long day care participation rates over the
Slide 17: ELC Portfolio
ELC Portfolio 15% Arena ELC portfolio – net rent to gross operator revenue1 14% Asset quality supporting portfolio strength 13% 12% 11% 10% • 99.7% portfolio occupancy as at 30 June 2023. 9% • Arena’s ELC portfolio operating data1 to 31 March 2023: 8% 7% o Average daily fee of $129.57: 6% 5% ▪ +7.1%
Slide 18: Healthcare Sector & Portfolio
Healthcare Sector & Portfolio Supportive macroeconomic drivers • Strong structural macroeconomic drivers continue to support Australian healthcare accommodation including a growing and ageing population and increased prevalence of chronic health conditions. • Ongoing domestic and international inves
Slide 19: Outlook
Outlook Investment objective To deliver an attractive and predictable distribution to investors with earnings Long term inflation protected income growth prospects over the medium to long term. INCOME GROWTH • FY24 distribution guidance of 17.4 cents per security, an increase of 3.6%1 on FY23. • Att
Slide 20: Questions
Questions Better Communities. Together. r Title
Slide 21: Corporate Directory
Corporate Directory Please direct enquiries to Sam Rist samantha.rist@arena.com.au Rob de Vos Gareth Winter Sam Rist Chief of Investor Relations & Managing Director Chief Financial Officer Sustainability FY2023 Results Better Communities. Together. 10 August 2023 | 21 r Title
Slide 22: Appendices
Appendices Better Communities. Together. r Title
Slide 23: Financial Performance
Financial Performance FY2023 FY2022 Change Change $’000 $’000 $’000 % Property income 74,147 66,585 7,562 +11% Other income 594 437 157 +36% Total operating income 74,741 67,022 7,719 +12% Property expenses (507) (576) 69 -12% Operating expenses (4,720) (4,899) 179 -4% Finance costs (9,862) (5,220)
Slide 24: Balance Sheet
Balance Sheet 30 June 2023 30 June 2022 Change Change Covenant Facility Ratio $’000 $’000 $’000 % requirement Cash 16,113 22,200 (6,087) -27% Loan to value ratio (LVR) Maximum 50% 24.6% Receivables and other assets 5,958 4,692 1,266 +27% Interest cover ratio (ICR) Minimum 2x 5.4x Investment properti
Slide 25: Portfolio Composition and Movement
Portfolio Composition and Movement Portfolio movements (30 June 2022 to 30 June 2023)1 280 9 2 2 14 260 10 15 Number of properties 240 220 258 248 200 180 160 30-Jun-22 Development sites Development projects Operating properties Operating properties 30-Jun-23 acquired completed acquired divested 1.
Slide 26: ELC Portfolio Valuations
ELC Portfolio Valuations As at 30 June 2023 Number of Value Passing yield properties1 $m % Independent ELC freehold valuations Queensland 20 108.1 4.98 Victoria 12 57.1 4.93 New South Wales 5 38.5 4.48 Western Australia 5 23.9 4.78 South Australia 3 16.6 5.24 Total independent ELC valuations 45 244.
Slide 27: ELC Portfolio Metrics
ELC Portfolio Metrics 30 June 2023 30 June 2022 Change Leased ELCs 249 237 +12 Development sites 141 152 -1 Total ELCs 263 252 +11 WALE (by income) (years) 20.2 21.1 -0.9 year Tenanted occupancy (%) 99.6 100 -40bps Average passing yield (%) 5.13 4.90 +23bps Portfolio value ($m) 1,377 1,288 +7% Avera
Slide 28: Healthcare Portfolio Metrics
Healthcare Portfolio Metrics 30 June 2023 30 June 2022 Change Total healthcare properties 9 11 -2 WALE (by income) (years) 10.3 10.9 -0.6 year Tenanted occupancy (%) 100 100 - Average passing yield (%) 5.37 5.02 +35bps Property portfolio ($m) 139 174 -20% Average rental increase (%) 4.9 3.5 +140bps
Slide 29: Portfolio Location Map
Portfolio Location Map 1. Excludes two ELC development projects which were conditionally contracted at 30 June 2023. FY2023 Results Better Communities. Together. 10 August 2023 | 29 r Title
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% Jun-15Jun-16Jun-17Jun-18Jun-19Jun-20Jun-21Jun-22Jun-23 Jun-15 Jun-16 Jun-17 Jun-18 Jun-19 Jun-20 Jun-21 Jun-22 Jun-23 Jun-15 Jun-16 Jun
Slide 31: ELC Sales Yields versus 10 Year Bond
ELC Sales Yields versus 10 Year Bond Average Rolling ELC Sales Yield vs 10 Year Australian 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% Apr-11 Dec-11 Apr-12 Apr-13 Apr-14 Dec-14 Apr-15 Apr-16 Apr-17 Apr-18 Apr-19 Apr-20 Apr-21 Apr-23 Apr-22 Dec-12 Dec-13 D
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