Arena Reit · ASX:ARF
Arena Reit — FY2020 Earnings Presentation
33 slides from Arena Reit's earnings presentation, Aug 13, 2020
Slide 1: Arena REIT 2020 Full Year Results
ARENA REIT 2020 FULL YEAR RESULTS 13 August 2020
Slide 2: Agenda
AGENDA Highlights 3 COVID-19 Update 5 Financial Results 7 Portfolio Update 12 Outlook 20 Questions 21 Directory 22 Appendices 23 Important Notice 33 2 ARENA REIT 2020 FULL YEAR RESULTS
Slide 3: FY20 Highlights
$76.6 million 14.55 cents FY20 HIGHLIGHTS Statutory net Earnings per security Result demonstrates portfolio resilience in profit (EPS)1 a challenging environment +29% on FY19 +5% on FY19 • 5% growth in EPS1 driven by contracted rental growth, acquisitions and development completions. • Decisive resp
Slide 4: Delivering on Strategy
DELIVERING ON STRATEGY Consistent approach delivering positive portfolio and capital management outcomes Working in partnership: Lease management: • Commenced renewable energy • 100% occupancy. program. • Average FY20 like-for-like rent increase • Completed rejuvenation of existing of +3.4%1. ELCs i
Slide 5: COVID-19 Update
COVID-19 UPDATE Decisive response, uncertainties remain Impact • All of Arena’s properties remain open and in operation, including greater Melbourne and regional Victoria. • Lockdowns in response to COVID-19 significantly impacted ELC occupancies across the portfolio. o Strong rebound post ease of l
Slide 6: COVID-19 Update: Impact on property income
COVID-19 UPDATE Impact of COVID-19 on property income 1 • For the period 1 July 2019 to 31 March 2020: o 100% of contracted rent has been receipted. Contracted rent 1 April to 30 June 2020 100% • For the period 1 April 2020 to 30 June 2020: 100 84% 90 o 84% of contracted rent has been receipted: 80
Slide 7: Financial Results
FINANCIAL RESULTS Gareth Winter Chief Financial Officer
Slide 8: Financial Performance
FINANCIAL PERFORMANCE • Property income continues to Ongoing investment enhancing earnings and distribution growth increase due to: – Contracted annual and market rental growth; – Acquisition of operating ELC FY20 FY19 Change and healthcare properties; and – ELC developments completed ($’000) ($’000
Slide 9: Contributors to EPS Growth
CONTRIBUTORS TO EPS GROWTH Rental growth and development completions supporting EPS growth 16 0.65 - 0.15 - 0.20 -0.10 14.55 13.8 0.55 14 EPS1 cents per share 12 10 8 6 FY19 EPS Contracted like-for-like Completed Net operating expenses Funding mix - equity Rent abatement FY20 EPS rental income growt
Slide 10: Financial Position
FINANCIAL POSITION Strong balance sheet with capacity to fund future • Growth in total assets continues from the growth acquisition of operating properties, ELC development completions and property valuation uplift. As at 30 June 2020 30 June 2019 Change • Gearing3 remains low with undrawn debt capa
Slide 11: Capital Management
CAPITAL MANAGEMENT • Syndicated borrowing facility limit increased by $50 million to $330 million, comprised of: Debt maturity extended and capacity refreshed – $130 million expiring 31 March 2023; – $150 million expiring 31 March 2024; and – $50 million expiring 31 March 2025. • Institutional place
Slide 12: Portfolio Update
PORTFOLIO UPDATE Rob de Vos Managing Director
Slide 13: Portfolio Overview
PORTFOLIO OVERVIEW Number of 30 June 2020 Net valuation movement 30 June 2020 Change versus assets1 valuation versus 30 June 2019 passing yield 30 June 2019 $m $m % % bps ELC portfolio 228 777.4 +34.7 +5.1% 6.24% (21) Healthcare portfolio 11 136.6 +2.2 +1.8% 6.12% 4 Total portfolio 239 914.0 +36.9 +
Slide 14: Lease Expiry Profile
LEASE EXPIRY PROFILE 1 Weighted average lease expiry maintained at 14 years 18% • Three operating ELC properties added to Healthcare (%) Childcare (%) portfolio each with initial lease term of 20 years. 16% 6.0% 14% 0.7% • One operating healthcare property added to 13.0% 12.7% portfolio with initial
Slide 15: Annual Rent Reviews
ANNUAL RENT REVIEWS FY20 average like-for-like rent increase of +3.4% 1 100% 3.3% 8.7% 3.8% • Like-for-like rent increase includes positive impact 7.7% 9.1% 6.6% of ten FY19 market rent reviews which were 9.7% resolved during FY20 at an average increase of 80% +18.9%. % rental income 60% • 26 FY20 m
Slide 16: Acquisitions and Developments
ACQUISTIONS AND DEVELOPMENTS Targeted pipeline of quality ELCs • High quality, purpose built properties. • 14 development projects are forecast to complete in FY21 with the balance of current projects forecast to complete in FY22. Initial yield on total cost Initial weighted average Acquisitions/dev
Slide 17: ELC Operating Environment
ELC OPERATING ENVIRONMENT Arena’s properties accommodate the provision of essential services Strong macroeconomic drivers supporting Australian ELC sector Female Workforce Participation Rate1 • Provision of ELC’s integral to assisting Australians back to work in the short term and improving workplac
Slide 18: ELC Portfolio
ELC PORTFOLIO 15% Arena ELC portfolio – net rent to gross operator revenue1 14% Pre-COVID-19 portfolio strength 13% 12% underpinned by asset quality 11% 10% 9% Arena’s ELC portfolio operating data to 31 March 20201 8% 7% • 100% occupancy. 6% • Average centre occupancy stable year on year. 5% HY16 FY
Slide 19: Healthcare Sector & Portfolio
HEALTHCARE SECTOR & PORTFOLIO Strongly sought defensive 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 • February 2020 acquisition of $11 mill
Slide 20: Outlook
OUTLOOK Well positioned despite ongoing uncertainty I N C O ME G R O WTH • FY21 distribution guidance of 14.4-14.6 cents per security, an increase of 3-4%1 on FY20. • Annual rent increases, including market rent reviews: o Approximately 8% of FY20 income unresolved; and o Approximately 9% of FY21 in
Slide 21: Questions
QUESTIONS
Slide 22: Corporate Directory
CORPORATE DIRECTORY Please direct enquiries to Sam Rist on samantha.rist@arena.com.au or +61 3 9093 9000 ROB DE VOS GARETH WINTER SAM RIST Managing Director Chief Financial Officer Head of Investor Relations 22 ARENA REIT 2020 FULL YEAR RESULTS
Slide 23: Appendices
APPENDICES
Slide 24: Financial Performance – FY20
FINANCIAL PERFORMANCE – FY20 FY20 FY19 Change ($’000) ($’000) ($’000) % Property income 53,844 48,744 5,100 +10% Other income 559 583 (24) -4% Total operating income 54,403 49,327 5,076 +10% Property expenses (530) (360) (170) +47% Operating expenses (4,291) (3,937) (354) +9% Finance costs (5,738) (
Slide 25: Balance Sheet – FY20
BALANCE SHEET – FY20 30 June 20 30 June 19 Change ($’000) ($’000) ($’000) % Facility Covenant Ratio Cash 76,330 8,134 68,196 +838% requirement Receivables and other assets 11,427 8,453 2,974 +35% Loan to value ratio (LVR) Maximum 50% 23.6% Investment properties 914,007 798,318 115,689 +14% Interest
Slide 26: Portfolio Composition and Movement
PORTFOLIO COMPOSITION AND MOVEMENT Portfolio movements (30 June 2019 to 30 June 2020)1 250 240 14 230 17 6 4 220 -5 3 210 200 190 226 223 222 222 220 220 180 170 160 150 30-Jun-19 Development sites Development projects Operating properties Operating properties 30-Jun-20 acquired completed acquired d
Slide 27: ELC Portfolio Valuations
ELC PORTFOLIO VALUATIONS Number of Value Passing yield As at 30 June 2020 properties ($m) (%) Independent ELC valuations Queensland 77 268.2 6.35 Victoria 65 244.1 6.08 New South Wales 31 95.4 6.19 Western Australia 22 61.7 6.23 Tasmania 7 20.1 6.58 South Australia 7 27.7 6.37 Northern Territory 2 4
Slide 28: ELC Portfolio Metrics
ELC PORTFOLIO METRICS 30 June 2020 30 June 2019 Change Leased ELCs 211 210 +1 Development sites 17 6 +11 Total ELCs 228 216 +12 WALE (by income) (years) 14.2 14.1 +0.1 year Tenanted occupancy (%) 100 100 - Average passing yield (%) 6.24 6.44 -20bps Portfolio value ($m) 777.4 676.2 +15% Average renta
Slide 29: Healthcare Portfolio Metrics
HEALTHCARE PORTFOLIO METRICS 30 June 2020 30 June 2019 Change Total healthcare properties 11 10 +1 WALE (by income) (years) 12.8 14.2 -1.4 years Tenanted occupancy (%) 100 100 - Average passing yield (%) 6.12 6.08 -4bps Property portfolio ($m) 136.6 122.1 +12% Average rental increase (%) 2.25 2.6 -3
Slide 30: Portfolio Location Map
PORFTOLIO LOCATION MAP 1. Includes one project which is subject to an unconditional contract and excludes three projects which are awaiting satisfaction of subdivision or planning approval. 30 ARENA REIT 2020 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% Jan-15 Jan-16 Jan-17 Jan-18 Jan-19 Jan-20 Jan-15 Jan-16 Jan-17 Jan-18 Jan-19 Jan-20 Jan-15 Jan-16 Jan-17 Jan-18 Jan-19 Sydney Other NSW
Slide 32: ELC Sales Yields versus 10 Year Bond
ELC SALES YIELDS VERSUS 10 YEAR BOND Average ELC Sales Yield versus 10 Year Aust Government Bond Yield 10.0% 9.0% 8.0% 7.0% 6.0% 5.0% 4.0% 3.0% 2.0% 1.0% 0.0% ELC Sales Yield (three month rolling average all states) 10 Year Govt Bond Yield 32 ARENA REIT 2020 FULL YEAR RESULTS
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