Argosy Property Limited · NZX:ARG
Argosy Property — FY2013 Earnings Presentation
39 slides from Argosy Property's earnings presentation, May 23, 2013
Slide 1: Argosy Property Annual Results Presentation
ARGOSY PROPERTY ANNUAL RESULTS PRESENTATION 23 MAY 2013
Slide 2: Highlights
Argosy Highlights
Slide 3: Highlights
Highlights Distributable income increased to 6.90 cents per share. Occupancy increased to 96.2%. Weighted average lease term (“WALT”) increased to 5.24 years. Debt to total assets, as at 31 March 2013, lowered to 33.1%, allowing for growth. Guidance to FY 14 dividend of 6.0 cps, payable quarterly. A
Slide 4: Financial Overview
Argosy Financial Overview
Slide 5: Income reconciliation
Income reconciliation 80 76.2 (2.8) 75 (0.8) 0.3 72.9 70 65 60 55 50 Gross Property Sales Vacancy Rent Gross Property $m Income Reviews Income 31 March 2012 31 March 2013
Slide 6: Financial performance
Financial performance FY13 FY12 Net property income $69.9m $71.2m Other income $0.0m $9.9m Interest expense $(23.7m) $(31.1m) Loss on derivatives $(8.4m) $(12.4m) Administration expenses $(5.8m) $(7.0m) Abnormals $(0.9m) $(29.0m) Revaluation gains $9.3m $3.7m Realised gains/(losses) on disposal $(1.
Slide 7: Distributable income
Distributable income FY13 FY12 Profit/(loss) before income tax $38.7m $(3.0m) Adjust for: Revaluation gains ($9.4m) $(3.7m) Investment disposal losses/(gains) $1.8m $0.1m Derivatives fair value adjustment $8.4m $12.4m Abnormals $0.9m $29.0m Christchurch impairment and insurance proceeds $0.0m ($1.4m
Slide 8: Investment properties
Investment properties 1,000 (8.2) 29.2 1.3 976.9 980 (25.1) 65.2 9.3 960 940 920 905.2 900 880 860 840 820 800 Investment Acquisitions Disposals Change in Fair Capex Tenant Transfer to Investment $m Properties Value Incentives Held for Sale Properties 31 March 2012 31 March 2013
Slide 9: Financial position
Financial position FY13 FY12 Shareholders funds (less intangible assets) $601.3m $488.4m Shares on issue $680.9m $558.5m Net tangible asset backing per share (cents) 88.3c 87.5c Investment properties $976.9m $905.2m Other assets $15.9m $24.1m Total assets $992.8m $929.3m Bank debt (excluding capital
Slide 10: Movement in NTA per share
Movement in NTA per share 90 89 1.4 0.1 88.3 88 87.5 (0.7) 87 86 85 84 83 82 81 80 NTA Swap losses Change in Fair Retained NTA cps 31 March 2012 Value Earnings less 31 March 2013 Dividends Paid
Slide 11: Portfolio Overview
Argosy Portfolio Overview
Slide 12: Leasing environment
Leasing environment In general, the leasing environment has improved over the past year: Net absorption has been positive in the industrial and commercial sectors in Auckland, where the majority of Argosy’s portfolio is located, and vacancy rates have fallen, particularly in office space outside the
Slide 13: Leasing
Leasing The asset management team is actively managing current leases to ensure that retention rates are high. Occupancy (by rental) has improved to 96.2% from 94.1% at 31 March 2012. Occupancy remains a key focus. Outstanding lease expiries for the period to 31 March 2014 are 7.2%. During the perio
Slide 14: Lease maturity March 2013
Lease maturity 31 March 2013 18% 16 17% 16% 15% 17.1% 14% 13% 27 % of portfolio (by income) 12% 21 11% 25 10% 11.9% 36 13 9% 40 11.2% 8% 27 10.6% 7% 5 6% 8.7% 8.7% 7.8% 5% 7 6.5% 21 7.2% 4% 3% 3 3.81% 3.9% 2% 2.4% 1 1% 0.2% 0% Total expiry Vacant Largest single expiry
Slide 15: Lease maturity compared to prior period
Lease maturity compared to prior period 31 March 2013 31 March 2012 18% 18% 17% 17% 16% 16% 15% 15% 14% 14% 13% 13% 12% 12% 11% 11% 10% 10% 9% 9% 8% 8% 7% 7% 6% 6% 5% 5% 4% 4% 3% 3% 2% 2% 1% 1% 0% 0% Mar-12 Vacant Mar-13 Mar-14 Mar-15 Mar-16 Mar-17 Mar-18 Mar-19 Mar-20 Mar-21 Mar-22 Vacant Mar-13 Ma
Slide 16: WALT
WALT WALT holding by sector 6 5.8 5.76 5.6 5.4 Years 5.24 5.2 5.10 5 4.88 4.8 4.6 4.4 Total Retail Industrial Commercial
Slide 17: Portfolio mix
Portfolio mix As at 31 March 2013 Portfolio Value by Sector Portfolio Value by Location 1% 5% 6% 33% 34% 18% 71% Auckland Commercial Industrial Wellington 3% Industrial Land Palmerston Retail North 29% Retail Land Regional / Other
Slide 18: Acquisitions
Acquisitions The acquisition of the NZ Post building settled on 28 March 2013. The initial acquisition cost was $60 million with further estimated upgrade expenditures of $40 million. The documentation for the acquisition and redevelopment of the 15 Stout St, Wellington property has now been complet
Slide 19: Risk mitigation
Risk mitigation The largest tenant in the portfolio is New Zealand Post (less than 8% of gross property rental). We will continue to carefully monitor regional asset performance. Initial evaluation assessments by structural engineers have been undertaken for 24 properties (including the New Zealand
Slide 20: Valuations
Valuations Increase in property valuations of $9.3 million (1% on book value immediately prior to revaluation). Portfolio valued at $977 million. Passing yield after revaluations 7.96%. Market yield after revaluations 8.22%. Market evidence since revaluation suggests further improvement.
Slide 21: Valuations
Valuations Book value Valuation Difference Revaluation % 31/3/13, pre 31/3/13 revaluation ($000) ($000) ($000) Industrial 320,780,000 311,381,000 -9,399,000 -2.94% Commercial 324,691,000 336,341,000 11,650,000 3.58% Retail 322,047,000 329,140,000 7,093,000 2.20% TOTAL 967,518,000 976,862,000 9,344,0
Slide 22: Strategic Review
Argosy Strategic Review
Slide 23: Strategic review
Strategic review Following the successful completion of the internalisation and corporatisation processes, the Board and management have conducted a strategic review to reaffirm the company's mission, values, strategy and portfolio. This strategic review process clarified, confirmed and in some case
Slide 24: Portfolio investment strategy
Portfolio investment strategy Argosy is and will remain invested in a portfolio that is diversified by primary sector, grade, location and tenant mix. The portfolio will be in the primary Auckland and Wellington markets with modest tenant-driven exposure to provincial markets. Argosy’s portfolio con
Slide 25: Portfolio investment strategy
Portfolio investment strategy Value Add properties are assets which, through skilled asset management, can increase future earnings and provide capital growth. Value Add properties will already be well-located with the potential for strong long term tenant demand. These properties are available for
Slide 26: Portfolio investment policy
Portfolio investment policy Argosy’s Investment Policy defines what properties we will seek to own, i.e. it sets the boundaries within which we will operate and invest. Argosy has developed an acquisition checklist with its overall strategy in mind – and every potential acquisition (and portfolio as
Slide 27: Portfolio investment policy
Portfolio investment policy Value parameters Greater than $10 million unless strategically imperative ($6 million for Industrial) ✓ No more than 10% of overall portfolio value ✖ Due diligence Apply Argosy due diligence checklist ✓ Seismic integrity ≥ 70% (unless this represents a Value Add opportuni
Slide 28: Portfolio investment policy
Portfolio investment policy Additional Considerations In some cases a portfolio of assets may be considered. The strategy for the acquired portfolio must be consistent with the overall Argosy investment strategy (i.e. the majority by value of the properties are either Core or offer potential to move
Slide 29: Current v target portfolio mix
Current v target portfolio mix Core properties represent 80% of the portfolio after the Wellington acquisitions, and Value Add 8%. Approximately 12% of the portfolio (including land) requires divestment as market conditions allow. Core and Value- 4% 8% Add by Location 12% 29% Target Auckland 65-75%
Slide 30: Capital Management
Argosy Capital Management
Slide 31: Capital management
Capital management The Board’s policy is for debt to total assets to be between 35 to 40% in the medium term. Valuations have been stable/improving over the last 3 years and market activity suggests there is a reduced risk of declines in the future. Divestment of vacant land and under-yielding asset
Slide 32: Bank covenants
Bank covenants FY13 FY12 Loan to valuation ratio (LVR) – based on: Total borrowings $328.7m $384.6m Fair market value of properties $983.6m $905.2m Not to exceed 50% 33.4% 42.5% Interest cover ratio – based on EBIT/Interest and Financing Costs: Must exceed 2:00x 2.33x 2.07x
Slide 33: Interest rate management
Interest rate management Fixed rate debt comprised 86% of total debt as at 31 March 2013. The weighted average interest rate (including margin and line fees) as at 31 March 2013 was 7.22% (31 March 2012: 7.2%). The duration of the hedge portfolio is 5.85 years. Subsequent to balance date, Argosy has
Slide 34: Outlook
Argosy Outlook
Slide 35: Share price performance – one year
Share price performance – one year 130 125 120 115 Gross Prices Indexed to 100 110 105 100 95 Mar-12 Mar-13 Oct-12 Dec-12 Jul-12 Nov-12 Jun-12 Apr-12 Sep-12 Jan-13 May-12 Aug-12 Feb-13 Argosy Property Limited NZ Property Gross Index NZX 50 Index
Slide 36: Share price performance - five years
Gross Prices Indexed to 100 100 105 110 115 120 125 130 135 140 145 155 160 165 170 180 60 65 70 75 80 85 90 95 150 175 Mar-08 Jun-08 Sep-08 Dec-08 Mar-09 Jun-09 Sep-09 Dec-09 Mar-10 Argosy Property Limited Jun-10 Sep-10 Dec-10 Mar-11 Jun-11 Sep-11 NZ Property Gross Index Dec-11 Mar-12 Jun-12 Sep-12
Slide 37: Concluding comments
Concluding comments Argosy has made real progress in FY13. Ongoing operational areas of focus for the asset management team are: focusing on tenant’s requirements and improving retention rates; increasing occupancy levels further; developing growth potential with existing assets; and preserv
Slide 38: Disclaimer
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 making an
Slide 39: Thank You
Argosy Thank You