Arena Reit · ASX:ARF
Arena Reit — FY2021 Earnings Presentation
33 slides from Arena Reit's earnings presentation, Aug 11, 2021
Slide 1: 2021 Full Year Results
ARENA REIT 2021 FULL YEAR RESULTS 11 August 2021
Slide 2: Agenda
AGENDA FY21 Highlights 3 Delivering on Strategy 4 COVID-19 Update 5 Sustainability 6 Financial Results 7 Portfolio Update 12 Outlook 20 Questions 21 Corporate Directory 22 Appendices 23 Important Notice 33 2 ARENA REIT 2021 FULL YEAR RESULTS
Slide 3: FY21 Highlights
$165.4 million $51.9 million FY21 HIGHLIGHTS Statutory net Net operating Continuing strong portfolio, investment profit profit and community outcomes +116% on FY20 +18.5% on FY20 • 18.5% growth in net operating profit driven by contracted rental growth, acquisitions and development completions and l
Slide 4: Delivering on Strategy
DELIVERING ON STRATEGY Strategy discipline and working in partnership continue to deliver positive outcomes Working in partnership: Portfolio management: • Continue to rollout the installation of • Portfolio weighted average lease expiry renewable energy systems. (by income) increased to 20.11,2 yea
Slide 5: COVID-19 Update
COVID-19 UPDATE Arena’s portfolio accommodates essential services • All of Arena’s properties currently remain open and in operation. • 100% of contracted rent has been receipted for the period 1 July 2020 to 30 June 2021. • Origination and development programs largely unaffected. • Medical centre p
Slide 6: Sustainability
SUSTAINABILTY Investment proposition and approach drives sustainability and commercial outcomes Sustainability outcome Commercial outcome • Develop, own and manage social infrastructure property which • Proven track record in securing and executing on high quality facilitates access to essential edu
Slide 7: Financial Results
FINANCIAL RESULTS Gareth Winter Chief Financial Officer
Slide 8: Financial Performance
FINANCIAL PERFORMANCE Ongoing investment supporting earnings and distribution growth • Property income continues to FY21 FY20 Change increase due to: ($’000) ($’000) ($’000) (%) – Contracted annual rental growth and market rent Property income 59,808 53,844 5,964 +11% reviews; Other income 541 559 (
Slide 9: Contributors to EPS Growth
CONTRIBUTORS TO EPS GROWTH Rental growth and development completions supporting EPS growth 18 0.85 - 0.15 - 0.60 15.20 16 14.55 0.55 EPS1 cents per share 14 12 10 8 6 FY20 EPS Contracted like-for-like Completed developments, Net operating expenses and Funding mix - equity FY21 EPS rental income grow
Slide 10: 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 30 June 2021 30 June 2020 Change ($m) ($m) % • Undrawn debt capacity of $90 million to fun
Slide 11: Capital Management
CAPITAL MANAGEMENT Substantial capacity to fund new investment • Syndicated borrowing facility limit of $330 million comprised of: – $150 million expiring 31 March 2024; – $50 million expiring 31 March 2025; and As at 30 June 20211 30 June 2020 Change – $130 million expiring 31 March 2026. Borrowing
Slide 12: Portfolio Update
PORTFOLIO UPDATE Rob de Vos Managing Director
Slide 13: Portfolio Overview
PORTFOLIO OVERVIEW 30 June 2021 Net valuation movement 30 June 2021 Change versus Number of assets valuation versus 30 June 2020 passing yield 30 June 2020 $m $m % % bps ELC portfolio 238 959 +92.0 +11.8% 5.84% (40) Healthcare portfolio 11 153 +15.6 +11.4% 5.34% (78) Total portfolio 249 1,112 +107.6
Slide 14: Lease Expiry Profile
LEASE EXPIRY PROFILE 1 • Post balance date portfolio lease renegotiation Weighted average lease expiry increased to 20.1 years2 with Goodstart included an increase of 25 years of term on 87 ELC properties across Australia. 35% Healthcare (%) ELC (%) 31.7% • Seven operating ELC properties added to 30
Slide 15: Annual Rent Reviews
ANNUAL RENT REVIEWS FY21 average like-for-like rent increase of +3.3%1 • All FY20 and FY21 market reviews were 100% 3.4% 2.4% resolved at an average increase of +6.5%; 9.0% 8.1% 16.0% these review outcomes apply from the 11.2% 11.5% 80% 8.8% original review date. % rental income 11.2% 60% • 16% of F
Slide 16: Acquisitions and Developments
ACQUISTIONS AND DEVELOPMENTS Delivering essential community service accommodation • High quality, purpose built properties with existing and new tenant partners. • 14 ELC development projects were completed in FY21. • Development pipeline scheduled to be completed over FY22 and FY23. Initial yield o
Slide 17: ELC Operating Environment
ELC OPERATING ENVIRONMENT Strong macroeconomic drivers continue to support Australian ELC sector Female Workforce Participation Rate4 • Government support was improved by the introduction of Childcare 68% Subsidy (CCS) in July 2018 and the essential nature of the services 65% provided by the ELC sec
Slide 18: ELC Portfolio
ELC PORTFOLIO 15% 14% Arena ELC portfolio – net rent to gross operator revenue1,2 13% Portfolio strength continues to be 12% underpinned by quality offering 11% 10% 9% 100% portfolio occupancy as at 30 June 2021. 8% 7% Arena’s ELC portfolio operating data1 to 31 March 2021: 6% 5% • Overall ELC occup
Slide 19: 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. • Medical centres participating in COVID-1
Slide 20: Outlook
OUTLOOK Long term income predictability with inflation protection I N C O M E G R O W TH • FY22 distribution guidance of 15.8 cents per security, an increase of 6.8%1 on FY21. • Annual rent increases: o >76% of rent reviews in FY22 and FY23 will increase at the higher of an agreed fixed amount or CP
Slide 21: Questions
QUESTIONS
Slide 22: 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 22 ARENA REIT 2021 FULL YEAR RESULTS
Slide 23: Appendices
APPENDICES
Slide 24: Financial Performance – FY21
FINANCIAL PERFORMANCE – FY21 FY21 FY20 Change ($’000) ($’000) ($’000) % Property income 59,808 53,844 5,964 +11% Other income 541 559 (18) -3% Total operating income 60,349 54,403 5,946 +11% Property expenses (602) (530) (72) +14% Operating expenses (4,382) (4,291) (91) +2% Finance costs (3,422) (5,
Slide 25: Balance Sheet – FY21
BALANCE SHEET – FY21 30 June 21 30 June 20 Change ($’000) ($’000) ($’000) % Facility Covenant Ratio Cash 14,018 76,330 (62,312) -82% requirement Receivables and other assets 14,246 11,427 2,819 +25% Loan to value ratio (LVR) Maximum 50% 21.6% Investment properties 1,112,431 914,007 198,424 +22% Inte
Slide 26: Portfolio Composition and Movement
PORTFOLIO COMPOSITION AND MOVEMENT Portfolio movements (30 June 2020 to 30 June 2021)1 250 9 12 240 7 6 230 17 220 14 210 200 239 236 236 237 190 222 222 180 170 160 150 30-Jun-20 Development sites Development projects Operating properties Operating properties 30-Jun-21 acquired completed acquired d
Slide 27: ELC Portfolio Valuations
ELC PORTFOLIO VALUATIONS Number of Value Passing yield As at 30 June 2021 properties ($m) (%) Independent ELC freehold valuations Queensland 15 $ 59.7 5.83% New South Wales 2 $ 8.1 5.40% Victoria 12 $ 45.6 5.42% Western Australia 4 $ 12.5 5.94% Tasmania 5 $ 17.7 6.21% Northern Territory 2 $ 5.4 6.36
Slide 28: ELC Portfolio Metrics
ELC PORTFOLIO METRICS 30 June 2021 30 June 2020 Change Leased ELCs 226 211 +15 Development sites 121 17 -5 Total ELCs 238 228 +10 WALE (by income) (years) 21.42 14.2 +7.2 years Tenanted occupancy (%) 100 100 - Average passing yield (%) 5.84 6.24 -40bps Portfolio value ($m) 959.1 777.4 +23% Average r
Slide 29: Healthcare Portfolio Metrics
HEALTHCARE PORTFOLIO METRICS 30 June 2021 30 June 2020 Change Total healthcare properties 11 11 - WALE (by income) (years) 11.9 12.8 -0.9 years Tenanted occupancy (%) 100 100 - Average passing yield (%) 5.34 6.12 -78bps Property portfolio ($m) 153.3 136.6 +12% Average rental increase (%) 1.7 2.25 -5
Slide 30: Portfolio Location Map
PORTFOLIO LOCATION MAP 1. Excludes two ELC projects that were conditionally contracted prior to, and one ELC project that was unconditionally contracted post, 30 June 2021. 30 ARENA REIT 2021 FULL YEAR RESULTS
Slide 31: 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-15 Jul-16 Jul-17 Jul-18 Jul-19 Jul-20 Jul-21 Jun-15 Jul-16 Jul-17 Jul-18 Jul-19 Jul-20 Jul-21 Jun-15 Jul-16 Jul-17 Jul-18 Jul-19 Ju
Slide 32: ELC Sales Yields versus Year Bond
ELC SALES YIELDS VERSUS 10 YEAR BOND Average ELC Sales Yield versus 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% Jan-12 Jan-13 Jan-14 Jan-15 Jan-16 Jan-17 Jan-18 Jan-19 Jan-20 Jan-21 Jul-11 Oct-11 Jul-12 Oct-12 Jul-13 Oct-13 Jul-14 Oct-1
Slide 33: 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