Argosy Property Limited · NZX:ARG
Argosy Property — FY2021 Earnings Presentation
42 slides from Argosy Property's earnings presentation, May 19, 2021
Slide 1: FY21 Annual Results: Building a better future
FY21 Annual Results Building a better future 19.05.2021
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 PRESENTED BY Highlights 4 Vision & Strategy 6 Portfolio 10 Peter Mence Financials 19 CEO Leasing Update 31 Focus and Outlook 35 Dave Fraser Appendices 37 CFO Note: This results presentation should be read in conjunction with the NZX release dated 19 May 2021. Due to rounding, numbers presente
Slide 4: 2021 Annual Result Highlights
2021 ANNUAL RESULT HIGHLIGHTS 4—
Slide 5: Key Highlights
KEY HIGHLIGHTS 13.7% 3.3% Net distributable income Annualised rent increase on rents increase reviewed $1.53 NTA up 17.7% from $1.30 driven by a $125m A 3rd successful 7 year green bond $157.7m revaluation gain issue 6.45ps Full year FY21 dividend increased by 1.6% 5—
Slide 6: Vision & Strategy
VISION & STRATEGY Argosy
Slide 7: Vision - Building a Better Future
VISION - BUILDING A BETTER FUTURE 7—
Slide 8: Big Corporate Goals - 2031
BIG CORPORATE GOALS - 2031 >50% Of the portfolio to be green CO2 Target carbon neutral assets >50% >$3bn Increased scale through Of total debt finance being green acquisitions and green non-bank funding developments -30% Greater engagement and bigger Reduction in carbon emissions by contribution to
Slide 9: FY21 Achievements
FY21 ACHIEVEMENTS Carefully managed our way through Covid-19, minimising the financial impact on Argosy Resilient operating results reflecting a high quality portfolio of diversified real estate Continued to progress green developments despite the Covid-19 impact on construction Strong leasi
Slide 10: Portfolio Snapshot
$2.01B Portfolio Snapshot Note: Portfolio value excludes assets held for sale. 10 —
Slide 11: Portfolio Highlights
PORTFOLIO HIGHLIGHTS 99.0% 5.5yrs Weighted average lease term Occupancy (WALT) 6.3% $157.7m Annual revaluation gain 8.5% above Like for like rental growth 31 March book values 11 —
Slide 12: Portfolio at a Glance
PORTFOLIO AT A GLANCE $2.01 BILLION1 @ 31 MARCH 2021 TOTAL PORTFOLIO VALUE TOTAL PORTFOLIO VALUE TOTAL PORTFOLIO VALUE BY SECTOR BY REGION BY ASSET MIX 0% 11% 17% 2% 26% 49% 40% 72% 83% Target Target Target Bands Bands Band Industrial 45-55% Auckland 65-75% 75-90% Core Office Wellington 20-30% - 30-
Slide 13: Sector Summary
SECTOR SUMMARY INDUSTRIAL OFFICE RETAIL LARGE FORMAT Number of buildings Number of buildings Number of buildings 35 16 4 Market value of assets ($m) Market value of assets ($m) Market value of assets ($m) $985 $812.7 $213.2 Occupancy (by income) Occupancy (by income) Occupancy (by income) 99.5% 98.3
Slide 14: Value Add Properties
VALUE ADD PROPERTIES GREEN OPPORTUNITIES WILL DRIVE EARNINGS AND CAPITAL GROWTH Value Add properties total ~17% of the Valuation 1 Property - Value Add Sector Location portfolio. $m Some Covid-19 deferred projects are 5 Allens Road, East Tamaki Industrial Auckland 5.6 likely to be re-initiated i
Slide 15: Current Development Project
CURRENT DEVELOPMENT PROJECT FOCUS ON COMPLETING 6 STAR GREEN DEVELOPMENT Cost to Forecast Development Major Tenant Type Location complete completion FY 2021 FY 2022 Sep-20 Mar-21 Sep-21 Mar-22 Underway 8-14 Willis Street Statistics New Zealand OFF/RET WTN 37.9 Feb-22 TOTAL 37.9 8-14 Willis Street/
Slide 16: 7WQ Update
7WQ UPDATE 16 —
Slide 17: 7WQ Update
7WQ UPDATE STRONG LEASING PROGRESS AND INSURANCE CLAIM SETTLED Leasing The building is now 89% leased with a WALT of 8.8 years underpinned by: • Ground floor & Level 1: NZ Post 5.3 years, 4,430m2; • Levels 2 and 10: Department of Internal Affairs (DIA), 9 years, 4,133m2; • Levels 3, 4 and 5: Kāinga
Slide 18: Annual Revaluations
ANNUAL REVALUATIONS CAP RATE FIRMING AND RENTAL GROWTH KEY DRIVERS OF INCREASE For the year to 31 March, the Market Yield 1 31 Mar 21 31 Mar 21 portfolio recorded a revaluation Book Value Valuation gain of $157.7m or 8.5%. The ($m) ($m) $m % 31 Mar 21 31 Mar 20 portfolio market yield firmed 63bp
Slide 19: Financials
FINANCIALS 19 —
Slide 20: Gross Property Income Waterfall
GROSS PROPERTY INCOME WATERFALL VERY STRONG OPERATIONAL RESULTS DESPITE COVID-19 IMPACTS 20 —
Slide 21: Financial Performance
FINANCIAL PERFORMANCE RESILIENT OPERATIONAL PERFORMANCE Like-for-like gross rental growth of FY21 FY20 6.3% for the financial year. $m $m Net property income 107.7 99.7 Additional income from 7WQ, Administration expenses (12.1) (11.4) acquisitions & recently completed developments were partially off
Slide 22: Distributable Income
DISTRIBUTABLE INCOME STRONG PERFORMANCE ON PER SHARE BASIS FY21 FY20 After non-cash adjustments and $m $m current tax, net distributable Profit before income tax 248.4 123.9 income increased by $8.2 million Adjusted for: or 13.7%. Revaluations gains (157.7) (59.9) Impairment loss on held for sale -
Slide 23: Adjusted Funds From Operations (AFFO)
ADJUSTED FUNDS FROM OPERATIONS (AFFO) A FOCUS ON SUSTAINABLE DISTRIBUTIONS FY21 FY20 $m $m Higher capitalised incentives Net distributable income 67.7 59.6 reflects large leasing deals with Amortisation of tenant incentives and leasing costs 5.1 3.5 government departments ($3.6m Funds from operation
Slide 24: Investment Properties
INVESTMENT PROPERTIES FY21 GROWTH UNDERPINNED BY A COMBINATION OF FACTORS Acquisitions: Mt Richmond Properties for $76m in October. Capitalised costs: Driven by large developments including 8-14 Willis Street/360 Lambton Quay, 7WQ and completion of 54 Jamaica Drive development. Disposals: Corner of
Slide 25: NTA per Share Waterfall
NTA PER SHARE WATERFALL REVALUATION GAIN KEY DRIVER OF ~18% NTA INCREASE 25 —
Slide 26: Balance Sheet Management
BALANCE SHEET MANAGEMENT CAPITAL MANAGEMENT INITIATIVES ENHANCE YEAR END POSITION FY21 FY20 The balance sheet position is $m $m sound. Investment properties 2,010.8 1,782.3 During the period Argosy Asset held for sale 87.5 84.6 recycled $73.5 million of non Core assets which no longer met Right
Slide 27: Interest Rate Management
INTEREST RATE MANAGEMENT COST OF FUNDING CONTINUES TO DECREASE FY21 FY20 1 Weighted average interest rate 3.69% 3.95% Interest Cover Ratio 3.3x 2.8x % of fixed rate borrowings 51% 50% Weighted average duration of payer swaps 3.8 years 4.7 years Average rate of payer swaps 3.85% 3.99% 3.69% Weighted
Slide 28: Debt Profile
DEBT PROFILE GREEN FINANCING ATTRACTIVE DIVERSIFICATION TOOL, INCREASES TENOR Issued of $125m of senior secured fixed rate 7-year green bonds in October 2020 at a coupon of 2.20% (1.95% margin). Green bonds support Argosy’s overall debt capital funding programme diversifying its bond-to- bank de
Slide 29: Dividends
DIVIDENDS RESILIENT AND SUSTAINABLE DIVIDENDS A 4th quarter cash dividend of 1.6125 cents per share has been declared (nil imputation credits) and will be paid on 23 June 2021. Record date 9th June. The Dividend Reinvestment Plan will be available for participation in the 4th quarter dividend wi
Slide 30: New Dividend Policy
NEW DIVIDEND POLICY TRANSITIONING INTO AFFO DIVIDEND POLICY FRAMEWORK FROM FY23 Argosy Div idend New Policy In 2017, Argosy’s Board advised of its Transition Period Commences intention to move (in the medium term) to 7.50 an amended dividend policy, based on AFFO earnings. 7.00 Commensurate with
Slide 31: Leasing
LEASING 31 —
Slide 32: Leasing Success
LEASING SUCCESS STRONG LEASING OUTCOMES OVER FY21 Argosy leased 97,391m2 across the portfolio in FY21, or 15% of the portfolios total net lettable area. There were 38 transactions over the period, with 17 renewals, 10 extensions and 11 new leases. Notable transactions over the financial year inclu
Slide 33: Lease Expiry Profile
LEASE EXPIRY PROFILE RELATIVELY STABLE PROFILE OVER THE MEDIUM TERM Low year end portfolio vacancy. 5yr average income percentage expiring in any year ~10%. Largest single expiry over the next 10 years is Ministry for Business, Innovation and Employment, in 15-21 Stout Street, 9.4% in Mar-27.
Slide 34: Market Update
MARKET UPDATE INDUSTRIAL OFFICE RETAIL LARGE FORMAT ► Net absorption continues to drive ► Flexible working environments ► Many retailers’ systems have been additional supply. continue to drive a disconnect shown to be inadequate to cope between employment growth and with higher online sales volumes.
Slide 35: Focus & Outlook
ye FOCUS & OUTLOOK ATSOSY
Slide 36: 2022 Outlook
2022 OUTLOOK The current domestic and global economic outlook still remains challenging. Vaccination rollouts globally are accelerating. Countries will open up again for tourism in the near term. However, central banks globally are dealing with the conflicting forces of transitory inflationary press
Slide 37: Appendices
APPENDICES 37 —
Slide 38: Rent Review Summary
RENT REVIEW SUMMARY Annualised $ % of Total Type # Previous Rent % of rent New Rent $ Increase Increase Annualised Annualised % ($000's) reviewed ($000's) (000's) % Increase (000's) Increase Increase Total 111 77,886 100% 82,852 4,967 6.4% 2,609 100% 3.3% By review type Fixed 77 41,821 54% 42,937 1,
Slide 39: Rent Reviews - Auckland / Wellington
RENT REVIEWS – AUCKLAND / WELLINGTON % of Total Location # Previous Rent % of rent New Rent $ Increase Annualised $ Annualised Annualised % ($000's) reviewed ($000's) (000's) % Increase Increase (000's) Increase Increase Auckland Industrial 28 34,246 59% 36,361 2,115 6.2% 1,122 43.0% 3.3% Office 36
Slide 40: Portfolio Metrics
PORTFOLIO METRICS DEFENSIVE AND RESILIENT TENANTS, HIGH ESSENTIAL SERVICE EXPOSURE 40 —
Slide 41: Portfolio Snapshot
PORTFOLIO SNAPSHOT PORTFOLIO QUALITY AND RESILIENCE REFLECTED IN METRICS Occupancy WALT (years) 100.0% 7.00 6.00 80.0% 5.00 60.0% 4.00 40.0% 3.00 2.00 20.0% 1.00 0.0% 0.00 FY17 FY18 FY19 FY20 FY21 FY17 FY18 FY19 FY20 FY21 Net Tangible Assets Debt-to-total-assets $1.80 40.0% $1.60 35.0% $1.40 30.0% $
Slide 42: 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