Arena Reit · ASX:ARF
Arena Reit — H1 2022 Earnings Presentation
33 slides from Arena Reit's earnings presentation, Feb 11, 2022
Slide 1: 2022 Half Year Results
ARENA R EIT 2022 HALF YEAR RESULTS 11 February 2022
Slide 2: Agenda
AGENDA Highlights 3 Sustainability 5 COVID-19 Update 6 Financial Results 7 Portfolio Update 12 Outlook 20 Questions 21 Directory 22 Arena REIT acknowledges the Appendices 23 traditional custodians of the Important Notice 33 lands on which our business and assets operate, and recognises their ongoing
Slide 3: HY22 Highlights
$185.8 million $27.5 million HY22 HIGHLIGHTS Statutory net Net operating profit Delivering on our investment objectives profit and improving community outcomes +204% on HY21 +11% on HY21 • 204% growth in statutory net profit driven by increase in operating profit and investment property revaluations
Slide 4: Delivering on Strategy
DELIVERING ON STRATEGY Strategy discipline and working in partnership continue to deliver positive outcomes Portfolio management: Working in partnership: • Two ELC properties sold at average • Continue to progress the installation of solar premium of 15% to book value. renewable energy systems. • Ne
Slide 5: Sustainability
SUSTAINABILTY Investment proposition and approach drives sustainable and commercial outcomes • Sustainability is integral to Arena’s investment approach and best positions Arena to achieve positive long term commercial outcomes. • Arena’s properties facilitate access to essential community services:
Slide 6: COVID-19 Update
COVID-19 UPDATE Arena’s portfolio accommodates essential services • All of Arena’s properties remain open and in operation. • 100% of contracted rent has been received for the period 1 July 2021 to 31 December 2021. • Origination and development programs largely unaffected. • Medical centre properti
Slide 7: Financial Results
FINANCIAL RESULTS Gareth Winter Chief Financial Officer
Slide 8: Financial Performance
FINANCIAL PERFORMANCE Disciplined investment continues to deliver earnings growth • Property income continues to increase due to: HY22 HY21 Change – Contracted annual rental growth; ($’000) ($’000) ($’000) (%) – Acquisition of operating ELC properties; and Property income 32,351 28,232 4,119 15% – E
Slide 9: Contributors to EPS Growth
CONTRIBUTORS TO EPS GROWTH Rental growth and development completions supporting EPS growth 10 - 0.19 7.97 0.30 0.66 - 0.06 8 - 7.26 EPS1 cents per share 6 4 2 0 HY21 EPS Contracted like-for-like Completed developments, Net operating expenses and Funding mix - equity HY22 EPS rental income growth acq
Slide 10: Financial Position
FINANCIAL POSITION Strong balance sheet with substantial capacity • Growth in total assets continues from the acquisition of operating properties, ELC development completions and property valuation uplift. As at 31 Dec 2021 30 June 2021 Change • Undrawn debt capacity of $155 million as at 31 Decembe
Slide 11: Capital Management
CAPITAL MANAGEMENT Debt maturity extended and capacity refreshed • Syndicated borrowing facility limit increased by $100 million to $430 million and extension of maturity dates, as at 31 December 2021 facility is comprised of: – $150 million expiring 31 March 2024; – $130 million expiring 31 March 2
Slide 12: Portfolio Update
PORTFOLIO UPDATE Rob de Vos Managing Director
Slide 13: Portfolio Overview
PORTFOLIO OVERVIEW 31 Dec 2021 Net valuation movement 31 Dec 2021 Change versus Number of assets1 valuation versus 30 June 2021 passing yield 30 June 2021 $m $m % % bps ELC portfolio 245 1,138.6 +139.9 +14.6% 5.13% (71) Healthcare portfolio 11 166.5 +13.4 +8.8% 5.22% (12) Total portfolio 256 1,305.1
Slide 14: Lease Expiry Profile
LEASE EXPIRY PROFILE 1 Weighted average lease expiry of 19.8 years • Less than 2% of portfolio income subject 35% to expiry prior to FY2029. Healthcare (%) 31.1% • Over 31% of portfolio lease income Childcare (%) 30% expires after FY43. • Three ELC development completions 25% added to portfolio with
Slide 15: Annual Rent Reviews
ANNUAL RENT REVIEWS HY22 average like-for-like rent increase of +3.6% • Attractive rent review structure with 100% 2.3% embedded income growth and inflation 8.0% 8.3% 15.6% protection. 8.0% 11.2% 80% 8.0% 9.7% • >80% of FY23, FY24 and FY25 rent reviews % rental income 11.6% at the higher of CPI or a
Slide 16: Acquisitions and Developments
ACQUISTIONS AND DEVELOPMENTS Delivering essential community service accommodation • High quality, purpose built properties with existing tenant partners. • Three ELC development projects were completed in HY22, an additional seven are forecast to complete in 2H22 with the balance forecast to complet
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 the Childcare Subsidy (CCS) 68% in July 2018 and the essential nature of the services provided by the ELC sec
Slide 18: ELC Portfolio
ELC PORTFOLIO 15% Arena ELC portfolio – net rent to gross operator revenue1,2 14% Portfolio strength underpinned by asset 13% 12% quality 11% 10% 9% • 100% portfolio occupancy as at 31 December 2021. 8% • Arena’s ELC portfolio operating data1 to 30 September 7% 6% 2021: 5% HY16 FY16 HY17 FY17 HY18 F
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 a growing and ageing population and increased prevalence of chronic health conditions. • Medical centres participating in COVID
Slide 20: Outlook
OUTLOOK Long term income predictability with inflation protection INCOM E GROW TH • Upgraded FY22 distribution guidance of 16.0 cents per security, an increase of 8.1%1 on FY21. • Attractive rent review structure with embedded income growth and inflation protection >80% of FY23, FY24 and FY25 rent r
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 and Sustainability 22 ARENA REIT 2022 HALF YEAR RESULTS
Slide 23: Appendices
APPENDICES
Slide 24: Financial Performance – HY22
FINANCIAL PERFORMANCE – HY22 HY22 HY21 Change ($’000) ($’000) ($’000) % Property income 32,351 28,232 4,119 +15% Other income 285 257 28 +11% Total operating income 32,636 28,489 4,147 +15% Property expenses (448) (356) (92) +26% Operating expenses (2,511) (1,944) (567) +29% Finance costs (2,186) (1
Slide 25: Balance Sheet – HY22
BALANCE SHEET – HY22 31 Dec 21 30 June 21 Change ($’000) ($’000) ($’000) % Facility Covenant Ratio Cash 26,113 14,018 12,095 +86% requirement Receivables and other assets 4,805 14,246 (9,441) -66% Loan to value ratio (LVR) Maximum 50% 25.4% Investment properties 1,305,094 1,112,431 192,663 +17% Inte
Slide 26: Portfolio Composition and Movement
PORTFOLIO COMPOSITION AND MOVEMENT Portfolio movements (30 June 2021 to 31 December 2021)1 270 8 250 3 1 2 17 12 230 210 249 237 237 239 239 239 190 170 150 30-Jun-21 Development sites Development projects Operating properties Operating properties 31-Dec-21 acquired completed acquired divested Exist
Slide 27: ELC Portfolio Valuations
ELC PORTFOLIO VALUATIONS Value Passing yield As at 31 December 2021 Number of properties ($m) (%) Independent ELC freehold valuations Queensland 16 92.7 5.51 Victoria 15 87.2 4.58 New South Wales 9 32.9 5.35 Western Australia 5 24.4 4.38 South Australia 3 15.3 4.81 Total independent ELC valuations 4
Slide 28: ELC Portfolio Metrics
ELC PORTFOLIO METRICS 31 Dec 2021 30 June 2021 Change Leased ELCs 228 226 +2 Development sites 17 12 +5 Total ELCs 245 238 +7 WALE (by income) (years) 21.1 21.4 -0.3 year Tenanted occupancy (%) 100 100 - Average passing yield (%) 5.13 5.84 -71bps Portfolio value ($m) 1138.6 959.1 +19% Average rental
Slide 29: Healthcare Portfolio Metrics
HEALTHCARE PORTFOLIO METRICS 31 Dec 2021 30 June 2021 Change Total healthcare properties 11 11 - WALE (by income) (years) 11.5 11.9 -0.4 year Tenanted occupancy (%) 100 100 - Average passing yield (%) 5.22 5.34 -12bps Property portfolio ($m) 166.5 153.3 +9% Average rental increase (%) 3.17 1.7 +147b
Slide 30: Portfolio Location Map
PORTFOLIO LOCATION MAP 1. Excludes two ELC developments conditionally contracted post 31 December 2021. 30 ARENA REIT 2022 HALF 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 Jun-16 Jun-17 Jun-18 Jun-19 Jun-20 Jun-21 Jun-15 Jun-16 Jun-17 Jun-18 Jun-19 Jun-20 Jun-21 Jun-15 Jun-16 Jun-17 Jun-18 Jun-19 Ju
Slide 32: ELC Sales Yields Versus Year Bond
ELC SALES YIELDS VERSUS 10 YEAR BOND Average ELC Sales Yield versus 10 Year Aust 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 Jan-22 Apr-11 Jul-11 Oct-11 Apr-12 Jul-12 Oct-12 Apr-13 Jul-
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