Arena Reit · ASX:ARF
Arena Reit — Merger or Acquisition (July 2017)
34 slides from Arena Reit's merger presentation, Jul 28, 2017
Slide 1: Acquisition and equity raising
PAGE 1 Acquisition and equity raising Acquisition of ELC portfolio for a total cost of $65 million 28 July 2017 Arena REIT / Acquisition and equity raising / www.arena.com.au
Slide 2: Important notice and disclaimer
Important notice and disclaimer PAGE 2 This investor presentation (“Presentation”) has been prepared by Arena REIT (“Arena Summary information (continued) REIT”) comprising Arena REIT Limited (ACN 602 365 186), Arena REIT Management The historical information in this Presentation is, or is based upo
Slide 3: Important notice and disclaimer (continued)
Important notice and disclaimer (continued) PAGE 3 Not advice Future performance (continued) Nothing in this Presentation constitutes financial product, investment, legal, tax or other You are cautioned not to place undue reliance on forward looking statements, advice. This Presentation has been pre
Slide 4: Important notice and disclaimer (continued)
Important notice and disclaimer (continued) PAGE 4 Disclaimer Disclaimer (continued) No person other than Arena REIT has authorised, permitted or caused the issue, Arena REIT and its advisers, affiliates, related bodies corporate, directors, officers, submission, dispatch or provision of this Presen
Slide 5: Agenda
Agenda PAGE 5 Transaction overview 6 Property details and portfolio impact 10 Transaction funding 17 Financial impact 20 Summary and indicative timetable 22 Contact details 25 Appendices: 27 - Financial information 28 - Key risks 31 - International offer restrictions 34 Arena REIT / Acquisition and
Slide 6: Transaction overview
PAGE 6 Transaction overview Arena REIT / Acquisition and equity raising / www.arena.com.au
Slide 7: Acquisition, equity raising and financial impact
Acquisition, equity raising and financial PAGE 7 impact • Arena has entered into contracts to acquire a portfolio of nine Early Learning Centre (ELC) properties under development for a total cost of $65.0 million1 Acquisition • The properties have planning permits in place, are in various stages of
Slide 8: FY17 financial results and FY18 DPS guidance
FY17 financial results and FY18 DPS PAGE 8 guidance For the year ended 30 June 2017: • Statutory net profit $96.8 million (+33% on FY16) • Net operating profit of $28.7 million (+12% on FY16) • Distributable income (Earnings) per security (EPS) of 12.30 cents (+11% on FY16) • Distribution per securi
Slide 9: Transaction details
Transaction details PAGE 9 • Acquisition of a portfolio of nine properties to be developed into ELCs, each subject to an Structure interdependent Contract of Sale, and a Development Agreement and Agreement for Lease • All of the properties will be settled simultaneously (estimated to be early August
Slide 10: Property details and portfolio impact
PAGE 10 Property details and portfolio impact Arena REIT / Acquisition and equity raising / www.arena.com.au
Slide 11: Portfolio consistent with Arena's preferred investment characteristics
Portfolio consistent with Arena’s preferred PAGE 11 investment characteristics Long lease terms – leased on completion on 20 year initial terms (plus 10 year option) Triple net lease structure – tenant pays all outgoings, including structural capex Attractive review profile – minimum 3% pa ren
Slide 12: Portfolio acquired on attractive pricing
Portfolio acquired on attractive pricing PAGE 12 • Properties are being acquired at a 5.2% pricing discount to independent valuation (on completion) of $66.8 million, reflecting a weighted average passing yield of 6.0% Purchase cost Total cost Initial yield on total Property No. of ELC places (excl.
Slide 13: Growing partnership with high performing tenant
Growing partnership with high performing PAGE 13 tenant Green Leaves Early Learning Centres (Green Leaves) • Principals have over 30 years’ experience in early learning sector • Five existing ELCs in Arena portfolio, and two under construction • Arena and Green Leaves have successfully partnered on
Slide 14: Properties located in preferred markets with sound fundamentals
Properties located in preferred markets PAGE 14 with sound fundamentals • Properties all located in catchments with growing 0-4 year old populations • The portfolio’s average catchment child per place ratio1 is favourable at 4.1 1 The child per place ratio is calculated as the number of children age
Slide 15: Enhanced portfolio metrics – WALE extended to 13.5 years
Enhanced portfolio metrics – WALE PAGE 15 extended to 13.5 years1 Lease expiry profile (by income) Sector diversification (by value) (post transaction) 90% 78.1% 75.9% 80% 70% 13% 60% 50% Early Learning 40% Healthcare 30% 20% 11.9% 10.8% 8.5% 7.7% 10% 2.9% 2.6% 0.3% 0.3% 0.5% 0.5% 87% 0% FY18 FY19 F
Slide 16: Extended ELC development pipeline
Extended ELC development pipeline PAGE 16 FY18 completion schedule Chadstone, VIC 1 Arena pipeline Total Richmond, VIC Number of projects 18 Murrumba Downs, QLD Forecast total cost $113.2 million Craigieburn, VIC Port Macquarie, NSW Weighted average initial yield 6.7% on cost Bellerive, TAS Auburn,
Slide 17: Transaction funding
PAGE 17 Transaction funding Arena REIT / Acquisition and equity raising / www.arena.com.au
Slide 18: Source and use of funds
Source and use of funds PAGE 18 Sources1 $m Uses $m Institutional placement 55.0 Property acquisitions 27.6 Debt facility 10.0 Development payments 35.7 Cash 1.0 Transaction and fundraising costs 2.7 Total sources 66.0 Total uses 66.0 • The properties are being acquired on a Investment timing $m fun
Slide 19: Institutional placement and SPP overview
Institutional placement and SPP overview PAGE 19 • Fully underwritten institutional placement to raise $55 million via the issue of 27.1 million new Structure and size securities • Issue price of $2.03 per security Pricing − 2.9% discount to closing price of $2.09 per security on 27 July 2017 − 3.6%
Slide 20: Financial impact
PAGE 20 Financial impact Arena REIT / Acquisition and equity raising / www.arena.com.au
Slide 21: Positive financial impact
Positive financial impact PAGE 21 FY17 FY18 forecast1 • Transaction is expected to be neutral to EPS in FY18 (due to timing of equity raising and development Distribution per security 12.0 cents 12.8 cents cashflows throughout FY18) and EPS accretive in FY193 Annual distribution growth 10.0% 6.7% •
Slide 22: Summary and indicative timetable
PAGE 22 Summary and indicative timetable Arena REIT / Acquisition and equity raising / www.arena.com.au
Slide 23: Transaction summary
Transaction summary PAGE 23 • Acquisition of a portfolio of nine properties to be developed into ELCs • Acquired at a 5.2% discount to independent valuation (on completion) • Properties well located in markets with favourable demographics Consistent with investment strategy • Leased on completion to
Slide 24: Indicative timetable
Indicative timetable1 PAGE 24 Event Date Offer Trading halt Friday 28 July 2017 Offer opens Friday 28 July 2017 Offer closes Friday 28 July 2017 Trading in Arena REIT Stapled Securities resumes Monday 31 July 2017 Settlement of New Stapled Securities Wednesday 2 August 2017 Allotment and trading of
Slide 25: Contact details
PAGE 25 Contact details Arena REIT / Acquisition and equity raising / www.arena.com.au
Slide 26: Contact details
Contact details PAGE 26 For more information visit www.arena.com.au Bryce Mitchelson Gareth Winter Rob de Vos Susie McPherson Managing Director Chief Financial Officer Head of Property Head of Investor Relations and Marketing +61 3 9093 9000 +61 3 9093 9000 +61 3 9093 9000 +61 3 9093 9000 +61 408 27
Slide 27: Appendices
PAGE 27 Appendices Arena REIT / Acquisition and equity raising / www.arena.com.au
Slide 28: Financial information
Financial information PAGE 28 Pro Forma Balance Sheet Pro forma Unaudited Initial Future forecast at 30-Jun-17 acquisition development completion ($m) ($m) ($m) ($m) Cash and other 29.6 (1.0) 28.6 Investment properties 591.7 29.3 35.7 656.7 Total Assets 621.3 29.3 34.7 685.3 Borrowings 170.6 (24.7)
Slide 29: Financial information (continued)
Financial information (continued) PAGE 29 Debt information Notes 30 Jun 20171 30 Jun 2016 Change • Gearing forecast to Borrowings $171m $138m +24% reduce to 26.4% post Borrowing facility limit $205m $175m +17% acquisition completion Gearing 27.5% 26.8% +70bps • DRP remains in operation Average facil
Slide 30: Financial information (continued)
Financial information (continued) PAGE 30 Valuations at 30 June 2017 (unaudited) Number of assets Value ($m) Passing yield (%) ELC portfolio Freehold – Independent Valuations 58 140.3 6.64% Freehold – Director Valuations 125 315.4 6.69% Leasehold – Director Valuations 5 12.9 8.51% Development portfo
Slide 31: Key risks
Key risks PAGE 31 Investors should carefully consider the risk factors described below. If you require (e) Alternative use risk (continued) further information regarding the appropriateness or potential risks of investing in expenditure and rezoning to be suitable for other commercial purposes. Aren
Slide 32: Key risks (continued)
Key risks (continued) PAGE 32 (j) Fund-through development risks (continued) In addition, environmental laws impose penalties for environmental damage and There is a risk that delays or issues relating to the development of a site could delay contamination which can be material in size. Exposure to
Slide 33: Key risks (continued)
Key risks (continued) PAGE 33 (s) Dependency on key staff (e) Funding The specialised nature of Arena REIT’s asset portfolio requires a manager with Arena REIT’s ability to raise funds from either debt or equity sources in the future extensive experience in the childcare and healthcare sectors. The
Slide 34: International offer restrictions
International offer restrictions PAGE 34 This document does not constitute an offer of new stapled securities ("New Stapled New Zealand Securities") of Arena REIT in any jurisdiction in which it would be unlawful. In This document has not been registered, filed with or approved by any New Zealand pa