Argosy Property Limited · NZX:ARG
Argosy Property — H1 FY2022 Earnings Presentation
50 slides from Argosy Property's earnings presentation, Nov 23, 2021
Slide 1: FY22 Interim Results: Staying Focused
FY22 Interim Results: Staying Focused 23.11.21 Argosy Property Limited
Slide 2: CEO quote on portfolio diversity
“Our strength lies in the diversity of our portfolio by sector, location and tenant mix, providing flexibility to support our tenants changing needs, ensuring a resilient business through various economic cycles.” Peter Mence CEO .2
Slide 3: Agenda
Agenda Vision & Strategy 4 Result Highlights 9 Portfolio 10 Peter Mence CEO Financials 23 Leasing Update 35 Focus and Outlook 39 Appendices 41 Dave Fraser Note: This results presentation should be read in conjunction with the NZX release dated 23 November 2021. Due to rounding, numbers presented in
Slide 4: Vision and Strategy
Vision and Strategy Argosy
Slide 5: Building a Better Future
Building a Better Future Owning the right assets with the right attributes in the right New Zealand locations. ¢ Adiversified property portfolio * Targeting strategic growth opportunities ¢ Maintaining a portfolio of high quality, well located core assets Argosy Proactive delivery of sustainable gro
Slide 6: The business case for green
The business case for green ..”7 in 10 companies in APAC willing to pay rental premiums for Good for the environment and occupants green buildings..” Cost effective JLL Report June 21 Growing demand, particularly from Government Risk mitigation Financial returns .6
Slide 7: The business case for green
The business case for green 0-4% Small upfront design costs 25-30% Energy cost savings Upfront costs offset by lower life cycle costs 0-30% 30-60% Reduced absenteeism Valuation uplift Driven by higher rents, higher Reduced staff turnover occupancy, lower opex World Green Building Counc
Slide 8: Case Study: Wyndham Street
Case Study: 82 Wyndham Street 25% 8% 1st Increase in gross rents Operational cost savings New Zealand building to receive carbon-zero certification from Toitū Envirocare and the New Zealand 11% 8.3% Green Building Council Development margin IRR achieved .8
Slide 9: Key result highlights
Key result highlights 5.1% Increase in net property income $91.7m $127m Interim desk top revaluation increase, or Record interim net profit after tax 4.5% above book value $1.64 NTA up ~7% from $1.53 6.55ps Full year FY22 dividend guidance maintained .9
Slide 10: Portfolio highlights
Portfolio highlights 98.7% Occupancy 5.3yrs 2.4% Weighted average lease term Annualised rent review increase on rents reviewed .10
Slide 11: Portfolio valuation @ 30 September
Portfolio valuation @ 30 September .11
Slide 12: Sector Summary
Sector Summary INDUSTRIAL OFFICE LARGE FORMAT RETAIL Number of buildings 34 Number of buildings 16 Number of buildings 4 Market value of assets ($m) $1,063 Market value of assets ($m) $846.8 Market value of assets ($m) $214.9 Occupancy (by income) 99.9% Occupancy (by income) 97.3% Occupancy (by inco
Slide 13: Portfolio at a glance @ 30 September
Portfolio at a glance @ 30 September Sector by value % Region by value % Asset Mix by value % 1 2 .13 1. Large Format Retail. 2. Regional North Island and South Island. This weighting also includes up to 5% allocation to the Golden Triangle area between Auckland, Tauranga and Hamilton.
Slide 14: Market forecasts help inform investment policy
CBRE July-21 Property Market Monitor (AKL) Market forecasts help inform investment policy 1st 2nd 3rd Ranking of secondary industrial property Ranking of Large Format Retail sector by Ranking of prime industrial property by by total forecast return 2021-2025 total forecast returns 2021-2025 to
Slide 15: Auckland Industrial Portfolio
Silverdale 1 Auckland Industrial Portfolio Albany 7 Number of properties 28 Occupancy by rent Panmure 1 100% Onehunga 2 Mt Wellington 4 WALT 6.2 years Mangere 1 East Tamaki 7 Market value of buildings ($) Wiri 3 $942.4M Manukau 2 .15
Slide 16: South / East Auckland Industrial Portfolio
South / East Auckland Panmure 1 Industrial Portfolio Onehunga 2 Mt Wellington 4 East Tamaki 7 Properties Mangere 1 20 Occupancy 100% Wiri 3 Manukau 2 .16
Slide 17: Value Add Properties
Value Add Properties Green assets underpinning Valuation @ organic growth Property Sector Location 30 Sep 12-16 Bell Avenue, Mt Wellington (underway) Industrial Auckland 39.5 Transformation of value add properties is key to delivering Strategy 2031 18-20 Bell Avenue, Mt Wellington (underway) Indus
Slide 18: Value Add Case Study: Mt Richmond Estate
Value Add Case Study: Mt Richmond Estate1 15km From the CBD 40,000 +$250m m2 of new warehouse space Project end value over quarter of a billion dollars 4,000 m2 of new office space ~7% Internal rate of return 1. Potential development strategy .18
Slide 19: Value Add Case Study: 12-16 & 18-20 Bell Ave
Value Add Case Study: 12-16 & 18-20 Bell Ave $8.8m Refurbishment and redevelopment of site 4 Star Green Built rating being targeted 10yrs Length of new lease entered into by PBT as part of the development ~8.3% Internal rate of return $69m Forecast valuation on completion ~26% Forecast d
Slide 20: Value add case study: Carlton Gore Road
Value add case study: 105 Carlton Gore Road $35m Refurbishment and redevelopment 5 Star Green Built rating would be targeted 7.1% IRR forecast $65m Forecast valuation on completion ~5.3% Forecast yield on cost .20
Slide 21: Development Projects
Development Projects Completion of current projects in CY22 Cost to Forecast Development Major Tenant Type Location complete completion2 FY 2022 FY 2023 Sep-21 Mar-22 Sep-22 Mar-23 8-14 Willis Street Statistics New Zealand OFF/RET WTN 20.4 Mar-22 12-16 & 18-20 Bell Ave Peter Baker Transport (PBT) IN
Slide 22: Interim Revaluations
Interim Revaluations Auckland industrial stars $91.7m revaluation gain reported, or 4.5% increase over book value. Portfolio market yield firms 20bps. On a cap rate basis, the portfolio firmed 28bps to 5.27%. 30 Sep 21 30 Sep 21 Market Yield1 Book Value Valuation $m % 30 Sep 21 31 Mar 21 ($m)
Slide 23: Financials
Financials Argosy
Slide 24: Gross Property Income Waterfall
Gross Property Income Waterfall Solid like for like growth and acquisition income offset by disposals 80.0 Like for like rental growth of 2.8% 70.0 60.0 2.2 1.9 0.2 53.9 3.3 56.4 -0.7 -0.2 -4.2 50.0 40.0 30.0 Rental income $m 20.0 10.0 - Gross Property Rent reviews Vacancy & 7WQ Acquisitions Develop
Slide 25: Financial Performance
Financial Performance Strong result despite COVID 1H22 1H21 Net property income grew 5.1% on strong $m $m rent reviews, full period contribution of Net property income 53.1 50.5 acquisition income and lower rent Administration expenses (5.8) (5.3) rebates, partially offset by disposals. Profit bef
Slide 26: Distributable Income
Distributable Income Prior period comparison 1H22 1H21 affected by ALC deposit $m $m Net distributable income was $33.0 million Profit before income tax 130.9 115.9 compared to $36.0 million in the prior Adjustments: comparable period. The prior comparable period benefited from the Revaluations ga
Slide 27: Adjusted Funds From Operations (AFFO)
Adjusted Funds From Operations (AFFO) Resilient cashflows 1H22 1H21 Lower capitalisation of leasing incentives $m $m due to large incentives on developments Net distributable income 33.0 36.0 (7WQ and 107 Carlton Gore Rd) in prior Amortisation of tenant incentives and leasing costs 3.8 2.1 period.
Slide 28: Investment Properties
Investment Properties Capitalised project costs and revaluations drive portfolio value higher 2,400 2,300 2,200 92 2,166 2,125 34 -1 2,100 2,052 -42 2,000 -11 1,900 1,800 Investment Properties ($m) 1,700 1,600 1,500 1,400 Balance at 1 April Capitalised costs Disposals Revaluations Other Balance 30 S
Slide 29: NTA Per Share
NTA Per Share Revaluations drive increase of ~7% for the first six months 1.80 1.70 0.11 1.64 1.60 0.01 (0.03) 1.53 0.03 1.50 1.40 1.30 NTA per share ($) 1.20 1.10 1.00 NTA at FY21 Profit for the year Derivatives Revaluations Dividends paid NTA at 1H22 Note: Due to rounding, numbers presented in thi
Slide 30: Balance Sheet Management
Balance Sheet Management Revaluation gains, lower capex profile and asset sales drive gearing lower 1H22 FY21 $m $m The balance sheet is in very good shape. Investment properties 2,166.3 2,052.5 There is sufficient facility headroom to Asset held for sale - 87.5 develop near term projects and ac
Slide 31: Balance Sheet Management continued
Balance Sheet Management continued Low gearing provides flexibility to fund near term green value add developments. 50 40 Target Range 30-40% 38.8 35.8 35.6 35.9 30 31.7 Debt to total assets (%) 20 10 0 FY18 FY19 FY20 FY21 1H22 .31
Slide 32: Interest Rate Management
Interest Rate Management Strong interest cover ratio maintained Weighted average interest rate has 1H22 FY21 increased slightly over the period driven Weighted average interest rate1 3.88% 3.69% by higher fixed rate borrowings percentage and floating rate increases. Interest Cover Ratio 3.3x 3.3x
Slide 33: Debt Profile
Debt Profile Green bonds provide diversification and tenor During the first six months Argosy extended $215 million of its existing 350 syndicated bank facilities with its banking group. 300 The total amount of the bank facility has 250 100 also reduced by $35 million and is now $455 million, do
Slide 34: Dividends
Dividends Steady and sustainable on look through basis A 2nd quarter dividend of 1.6375cps has 7.00 been declared with imputation credits of 0.0720cps attached. 6.80 The record date is December 8th and the 6.60 dividend will be paid on December 22nd. 6.40 6.55 The Dividend Reinvestment Plan wi
Slide 35: Leasing
i | 5 al | | 4 rl a: Pa aR Ue i ae ta I ail i Leasing Argosy
Slide 36: Leasing
Value Add Case Study: Mt Richmond Estate Leasing 50,458 8% Of NLA leased over the first 6mths Equivalent of total portfolio by NLA 21 Leasing transactions including 16 new leases, 3 renewals and 2 extensions Green 18,704 15km from CBD Prime industrial location development Of NLA leased to
Slide 37: Lease Expiry Profile
Lease Expiry Profile Improved medium term expiry profile Overall vacancy remains very low Medium term expiry profile enhanced due to strategic lease extensions as part of value add developments and new leasing deals Largest single expiry remains the 9.4% expiry in Mar-27 to Ministry for Busine
Slide 38: Market Insights
Market Insights INDUSTRIAL OFFICE LARGE FORMAT RETAIL Strong demand continues to drive Flexible working environments and Many retailers’ systems have been shown additional supply. remote working models continue to drive to be inadequate to cope with higher a disconnect between employment onlin
Slide 39: Focus & Outlook
Focus & Outlook Argosy
Slide 40: A solid start to FY22, but need to finish strongly
A solid start to FY22, but need to finish strongly We will stay focused on delivering Strategy Ongoing central government stimulus is supporting the domestic economic engine - for now. Strong CPI numbers for Q2 saw the RBNZ start its monetary policy tightening phase – which is expected to occur
Slide 41: Appendices
Appendices- Argosy we
Slide 42: Rent Review Summary
Rent Review Summary Annualised % of Total Previous Rent % of rent New rent $ Increase Annualised Type # % Increase $ Increase Annualised (000's) reviewed (000's) (000's) % Increase (000's) Increase Total 47 26,828 100% 27,569 740 2.8% 653 100% 2.4% By review type Fixed 35 21,717 81% 22,290 573 2.6%
Slide 43: Rent Review Summary – Auckland & Wellington
Rent Review Summary – Auckland & Wellington Annualised % of Total Previous Rent % of rent New rent $ Increase % Annualised # $ Increase Annualised (000's) reviewed (000's) (000's) Increase % Increase (000's) Increase Auckland Industrial 12 15,118 67% 15,479 361 2.4% 361 55% 2.4% Office 20 5,659 25%
Slide 44: Portfolio Summary
Portfolio Summary Valuation Net lettable area Vacant Contract Property Address $000s WALT (years) (m2) Space (m2) Yield Industrial Auckland 19 Nesdale Avenue, Wiri $80,000 13.1 20,677 - 4.06% 240 Puhinui Road, Manukau $52,000 13.1 17,715 - 3.85% 244 Puhinui Road, Manukau $18,300 13.1 5,504 - 3.65% H
Slide 45: Portfolio Summary
Portfolio Summary Valuation WALT Net lettable area Vacant Contract Property Address $000s (years) (m2) Space (m2) Yield OFFICE Auckland 99-107 Khyber Pass Road, Grafton $19,500 3.1 2,509 - 5.34% 8 Nugent Street, Grafton $59,900 4.6 8,125 - 5.59% 39 Market Place, Viaduct Harbour $29,800 3.8 10,365 1,
Slide 46: Portfolio Summary
Portfolio Summary Valuation Net lettable area Vacant Contract Property Address $000sWALT (years) (m2) Space (m2) Yield RETAIL Auckland Albany Mega Centre and 11 Coliseum Drive, Albany $159,500 3.5 33,792 - 5.89% 50 & 54-62 Cavendish Drive, Manukau $32,100 3.7 9,939 - 5.58% 252 Dairy Flat Highway, Al
Slide 47: Portfolio Metrics
Portfolio Metrics Defensive & resilient tenant, high essential service exposure .47
Slide 48: Portfolio Snapshot
Portfolio Snapshot Portfolio quality and resilience reflected in key metrics Occupancy (%) WALT (years) 7.0 100 98.8 97.7 98.8 99.0 98.7 6.0 6.1 6.1 6.1 80 5.0 5.5 5.3 60 4.0 3.0 40 2.0 20 1.0 0 0.0 FY18 FY19 FY20 FY21 1H22 FY18 FY19 FY20 FY21 1H22 Net Tangible Assets ($ per share) Debt-to-total-ass
Slide 49: Portfolio Valuations – Cap rate summary
Portfolio Valuations – Cap rate summary Sept 2021 Mar 2021 Cap rate cap rate cap rate change CAP RATES wgt % wgt % bps Auckland 5.12% 5.43% -0.32% Wellington 5.65% 5.82% -0.17% Regional 5.66% 6.06% -0.40% Total 5.27% 5.54% -0.28% Industrial 4.92% 5.33% -0.40% Office 5.62% 5.81% -0.19% Large Format R
Slide 50: 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