Arena Reit · ASX:ARF
Arena Reit — H1 FY2015 Earnings Presentation
43 slides from Arena Reit's earnings presentation, Feb 25, 2015
Slide 1: FY15 Interim Results Presentation and $25 million Institutional Placement
For personal use only Arena REIT ARF.ASX FY15 Interim Results Presentation and $25 million Institutional Placement 25 February 2015 NOT FOR DISTRIBUTION IN THE UNITED STATES
Slide 2: Important notice and disclaimer
Important notice and disclaimer This investor presentation (“Presentation”) has been prepared by Arena REIT (“ARF”) Not an offer comprising Arena REIT Limited (ACN 602 365 186), Arena REIT Management Limited (ACN This Presentation is for information purposes only and should not be considered as a 60
Slide 3: Important notice and disclaimer
Important notice and disclaimer Future performance Stapled securities This Presentation contains certain “forward looking statements”. Forward looking statements Investors should note that ASX reserves the right (without limiting its absolute discretion) to can generally be identified by the use of
Slide 4: Presenters
Presenters For personal use only Bryce Mitchelson Gareth Winter Rob de Vos Managing Director Chief Financial Officer Head of Property • Joined Arena in 2009. • Joined Arena in 2012. • Joined Arena in 2012. • Previously held positions • Executive Director of • Previously held senior with Centro Prope
Slide 5: Agenda
Agenda 1 First Half FY15 overview 6 For personal use only 2 Financial results 8 3 Institutional placement 13 4 Portfolio update 16 5 Outlook 23 6 Questions 26 7 Appendix A: Additional information 27 8 Appendix B: Foreign jurisdictions 36 9 Appendix C: Investment risks 38 Arena REIT 1HFY15 Interim Re
Slide 6: First Half FY15 Overview
For personal use only First Half FY15 Overview 1 Bryce Mitchelson 6
Slide 7: 1HFY15 Key achievements
1.1 1HFY15 Key achievements Active period delivering solid results For personal use only Transition to preferred management and governance Internalisation completed structure; greater alignment of interests and enhanced growth prospects. 1HFY15 distributable income of 4.97¢ per security vs 4.13¢ Ear
Slide 8: Financial results
For personal use only Financial results 2 Gareth Winter 8
Slide 9: Financial highlights
2.1 Financial highlights Acquisitions and rent reviews underpinned earnings growth Key metrics 31 December 2014 31 December 2013 Change (%) For personal use only Statutory net profit $21.5m $12.6m 70.6% Distributable income $10.5m $8.5m 23.5% Distributable income per security 4.97¢ 4.13¢ 20.3% Distr
Slide 10: Delivering distribution growth
2.2 Delivering distribution growth FY14 DPS exceeded expectations with growth continuing into FY15 For personal use only Cents per security 10.0 14.3% 10.0 FY15 expected 9.751 growth 9.5 9.0 8.75 8.65 8.5 Notes: 8.2 1 On a status quo basis 8.0 assuming no new acquisitions 8.0 and developments in pro
Slide 11: Earning growth drivers
2.3 Earning growth drivers 5.3% increase in distributable income per security For personal use only 5.1 5 0.10 (0.17) 4.97 5.3% 0.06 growth in 0.10 distributable 4.9 0.16 income 4.8 4.72 4.7 4.6 4.5 4.4 EPS 6 months to Rental Growth Completed Sold properties Facility fees Other EPS 6 months to 30 Ju
Slide 12: Debt management
2.4 Debt management Strong credit profile For personal use only Key debt metrics Dec 2014 June 2014 Debt maturity profile ($m) 100 Facility limit $175m1 $155m2 Drawn amount $138m $125m 80 Average remaining facility term 3.5 years 4.0 years 60 Interest rate hedging cover 62% 68% 40 87.5 87.5 Weighted
Slide 13: Institutional placement
For personal use only Institutional placement 3 Gareth Winter Arena REIT 1HFY15 Interim Results | arena.com.au 13
Slide 14: Institutional placement overview
3.1 Institutional placement overview Building growth capacity For personal use only • A fully underwritten (Morgan Stanley) placement of $25 million. • New securities issued at $1.60 per security. • Discount of 2.7% to 30 day VWAP to market close on 24 February 2015. • New securities will rank equal
Slide 15: Transaction overview
3.2 Transaction overview Pro-forma balance sheet and indicative timetable For personal use only Abridged pro-forma balance sheet 31 December 2014 Placement Pro-forma ($m) Total assets 403.6 - 403.6 Borrowing 137.8 (24.5) 113.3 Other liabilities 16.4 - 16.4 Net assets 249.5 24.5 274.0 NAV per securit
Slide 16: Portfolio update
For personal use only Portfolio update 4 Rob de Vos 16
Slide 17: Portfolio strategy
4.1 Portfolio strategy Strategy in place to drive portfolio growth For personal use only Priorities Strategy 1HFY15 progress Understand the markets our tenants 15 options exercised in the period operate in, look for opportunities to with a further 20 exercised post Landlord of choice provide efficie
Slide 18: Portfolio metrics
4.2 Portfolio metrics Strengthening portfolio fundamentals Medical Childcare Development Total Total For personal use only As at December 2014 centres centres sites 31 Dec 2014 30 June 2014 No of properties 7 179 101 196 193 Value ($m) 65.3 294.22 22.9 382.3 355.8 Annual passing rent ($m) 5.5 24.72
Slide 19: Tenant strength
4.3 Tenant strength Strong business environment for Australian social infrastructure assets For personal use only • Childcare industry consolidation leading to larger, better capitalised tenants. • Post balance date 45 market rent reviews completed at an average of 6% increase and a further 20 optio
Slide 20: Portfolio value movement
4.4 Portfolio value movement Positive portfolio gains Number Value ($’000) Passing Movement For personal use only Independent Valuations of assets Yield (%) • Net revaluation Queensland 26 50,175 8.83% 2.5% increase of $13.7 New South Wales 11 16,465 7.71% 17.0% million. Victoria 15 29,730 7.66% 12.
Slide 21: Developments
4.5 Developments Successful completion of developments For personal use only • Four child care developments completed in six months to 31 December 2014 at total cost of $9.5 million and average rental yield on cost of 9.1%. A further development at Seaford Meadows was completed post balance sheet da
Slide 22: Development pipeline
4.6 Development pipeline Pipeline in place to drive growth (QLD, VIC, NSW and SA) For personal use only Properties in construction phase Estimated Budgeted Initial construction project yield 3 completion cost range 2HFY15 c$7m 9.0% – 9.5% Marian 4 properties owned and 4 under contract and awaiting p
Slide 23: Outlook
For personal use only Outlook 5 Bryce Mitchelson 23
Slide 24: Social infrastructure investment strategy
5.1 Social infrastructure investment strategy Accommodating operating businesses that provide important services to the local community For personal use only Objective Sectors Preferred characteristics Opportunity Relatively long lease terms. Childcare Premises that have strategic To generate import
Slide 25: FY15 outlook
5.2 FY15 outlook Reaffirming previous FY15 distribution guidance of 10.01 cents For personal use only • Earnings growth from market rental growth encouraging. • Firming capitalisation rates and rental growth is driving growth in the underlying property values. • Continuing to work the development pi
Slide 26: Questions?
For personal use only 26 6Questions?
Slide 27: Appendix A: Additional information
For personal use only Appendix A: 7 Additional information 27
Slide 28: Income statement
7.1 Income statement Half-Year Operating earnings December December Change $ million 2014 2013 (%) Commentary For personal use only Income Growth due to asset acquisitions, stapling of Lease rental 15.2 11.4 33% Arena REIT No. 2, rent reviews. Other 0.1 0.0 100% Total Operating Income 15.3 11.4 34%
Slide 29: Balance sheet
7.2 Balance sheet Secure financial position December June For personal use only $ million 2014 2014 Change (%) Commentary Cash 6.7 3.9 72% Comparative period includes $14.2 million Receivables and other assets 3.9 15.5 (75%) receivable from investment property sales. Development property acquisition
Slide 30: Interest rate management
7.3 Interest rate management Hedge maturity profile extended For personal use only 120 Hedging profile by financial year Hedging profile 31 December 2014 3.67% 3.67% 3.67% 3.67% Amount of debt hedged $85m 100 3.55% 3.6 3.48% % of drawn debt hedged 62%1 3.30% 3.30% Weighted average interest rate of h
Slide 31: Childcare portfolio metrics
7.4 Childcare portfolio metrics Remixing of portfolio has improved portfolio ratios For personal use only Portfolio overview December 2014 June 2014 % change Leased childcare centres 177 174 1.7% Available for sale / lease 2 2 - Development Land 10 10 - Total properties 189 186 1.6% WALE (by income)
Slide 32: Childcare state by state passing yields
7.5 Childcare state by state passing yields Strong cap rate compression For personal use only Number Carrying Rent (pa) Passing of value ($’000) $’000 Yield • Evidence of strong cap rate Portfolio overview assets compression in NSW, Victoria Queensland 70 117,785 10,730 9.11% and WA with Queensland
Slide 33: Underlying demand driven capital growth
7.6 Underlying demand driven capital growth Recent sales show childcare yields firming in Victoria and NSW 11.00% Victoria For personal use only New South Wales 10.00% 12.00% 11.00% 9.00% 10.00% 8.00% 9.00% 8.00% 7.00% 7.00% 6.00% 6.00% 5.00% 5.00% 4.00% 4.00% Sep-11 Apr-12 Oct-12 May-13 Nov-13 Jun-
Slide 34: Childcare Productivity Commission inquiry report
7.7 Childcare Productivity Commission inquiry report Report released February 2015 For personal use only Recommendations to Government include: • Government to combine Child Care Benefit and Child Care Rebate into a single child-based subsidy to be known as Early Care and Learning Subsidy (ECLS). •
Slide 35: Investment case
7.8 Investment case Strong fundamentals For personal use only Relatively Geographic Favourable Experienced Relatively Long leases diversity macro internalised low fundamentals management gearing Weighted average Childcare centres lease expiry (WALE) located across all 6 Strong capability in Growing
Slide 36: Appendix B: Foreign jurisdictions
For personal use only Appendix B: Foreign 8 jurisdictions 36
Slide 37: Foreign jurisdictions
8.1 Foreign jurisdictions This document does not constitute an offer of new stapled securities ("New Securities") of ARF in any jurisdiction in which it would be unlawful. In particular, this document may not be distributed to any person, and the New Securities may not be offered or sold, in any cou
Slide 38: Appendix C: Investment risks
For personal use only 9 Appendix C: Investment risks 38
Slide 39: Investment risks
9.1 Investment risks Investors should carefully consider the risk factors described below. If you require (e) Alternative use risk further information regarding the appropriateness or potential risks of investing in The risks associated with investing in property assets can be greater for special AR
Slide 40: Investment risks
9.1 Investment risks (i) Property valuations (m) Occupational health and safety Changes in the property market, especially changes in the valuation of properties There is a risk that liability arising from occupational health and safety matters at and in market rents, may adversely affect ARF’s fina
Slide 41: Investment risks
9.1 Investment risks Key risks relating to investing in ARF securities Other risks related to ARF and property fund investments (a) Economic and market conditions (a) Interest rates A number of factors affect the performance of the equity market, which could affect Unfavourable movements in interest
Slide 42: Further information
Further information For personal use only Bryce Mitchelson Investor and Adviser Services • Managing Director • Freecall 1800 008 494 • 03 9093 9120 • info@arena.com.au • bryce.mitchelson@arena.com.au Visit us at www.arena.com.au Arena REIT 1HFY15 Interim Results | arena.com.au 42
Slide 43: For personal use only
For personal use only