Arena Reit · ASX:ARF
Arena Reit — Merger or Acquisition (November 2013)
34 slides from Arena Reit's merger presentation, Nov 27, 2013
Slide 1: Proposal to staple with Sydney HealthCare Trust and Affinity transaction
For personal use only Arena REIT (ASX Code ARF) Webinar presentation and conference call Proposal to staple with Sydney HealthCare Trust and Affinity transaction Implementing strategy to improve diversification and earnings 27 November 2013 arenainvest.com.au 1
Slide 2: Presenters
Presenters Investor and Adviser Services For personal use only Ph. 1800 008 494 info@arenainvest.com.au www.arenainvest.com.au Bryce Mitchelson James Goodwin Joint Managing Director Joint Managing Director • Appointed to Board in • Appointed to Board in April 2010. January 2012. • Involved continuou
Slide 3: Agenda
For personal use only Agenda 1 Executive Summary 4 2 The Stapling Proposal 5 3 SHCT – the right fit 12 4 Affinity Acquisition 19 5 Combined Portfolio 22 6 Board recommendation 27 7 Questions & Answers 28 8 Appendices 29 9 Important notice 34 Arena REIT | arenainvest.com.au 3
Slide 4: Executive summary
1 Executive summary • Arena is proposing to staple units in Arena REIT (ASX code: ARF) with units in Sydney For personal use only Healthcare Trust (SHCT) on a 1 for 1 NTA per unit basis (Proposal). • SHCT owns 6 medical clinics situated in NSW leased to Primary Health Care Limited. The properties we
Slide 5: The Stapling Proposal
For personal use only 2 The Stapling Proposal 5
Slide 6: Overview
2 Overview Key features Stapling of ARF units with SHCT units on a 1 for 1 NTA per unit basis. For personal use only • • SHCT investors can elect to accept cash of $1.15 per Stapled Security held or continue holding stapled securities. The offer represents an equivalent pricing premium of 2.6% on th
Slide 7: Key conditions
2 For personal use only Key conditions Approval by ARF investors • To be held on Monday, 9 December 2013 at 12.00pm at the Spring Street Conference Centre, 1 Spring St, Melbourne. • Meeting to consider and vote on the Proposal and general constitutional changes. • For the Proposal to be approved, 75
Slide 8: Benefits, disadvantages and risks
2 Benefits, disadvantages and risks Benefits For personal use only Portfolio diversification: • Introduces healthcare exposure. • Broadens tenancy base. Relatively long remaining lease terms. Increase in ARF’s FY14 statutory forecast distribution from 8.2 cents to 8.45 cents per stapled securi
Slide 9: Indicative timetable
2 Indicative timetable If Proposal is approved For personal use only Admission of Stapled Group to official list Stapling Proxy of ASX commencement voting date closes Stapling ARF trades ex ARF & SHCT Securities Stapling investor record Stapled distribution Last day for commence meetings to date Sec
Slide 10: Redemption offer pricing
2 For personal use only Redemption offer pricing The Redemption Price ($1.15) was determined having regard to: • The 30 June 2013 NTA per unit of both ARF and SHCT (both approximately $1.02). • The recent volume weighted average trading price of ARF on ASX prior to announcement on 1 November 2013 (2
Slide 11: Independent Expert Opinion
2 For personal use only Independent Expert Opinion • Independent expert opinion sought from respected accounting firm, Moore Stephens. • The Independent Expert is of the opinion: “ARF Unitholders will be better off if the Proposed Transactions are implemented than if they are not. The Proposed Trans
Slide 12: SHCT – the right fit
For personal use only 3 SHCT – the right fit 12
Slide 13: Properties located in the Sydney area
3 For personal use only 6 properties located in the Sydney area Wentworthville Medical Centre Bondi Junction Medical and Dental centre Leichhardt Medical Centre Mt Druitt Medical Centre Dapto Medical centre Campbelltown Medical and Dental Centre Arena REIT | arenainvest.com.au 13
Slide 14: Relatively long leases, 100% occupied
3 For personal use only Relatively long leases, 100% occupied SHCT Portfolio as at 30 June 2013 WALE Passing Adopted Property NLA (m2) Occupancy (Years) Yield Val Bondi Junction Medical & Dental 1,139 100% 9.5 7.8% $12.0m Campbelltown Medical & Dental 1,622 100% 7.0 10.2% $7.8m Dapto Medical Centre
Slide 15: High credit tenant providing essential services
3 For personal use only High credit tenant providing essential services Primary Health Care • Primary Health Care is a proven listed company in the S&P/ASX 100 Index. • Market capitalisation of approximately $2.5 billion. Strong operational • For FY13, EBITDA increased 9.7% to $385.1 million, net pr
Slide 16: Consistent with ARF investment strategy
3 Consistent with ARF investment strategy The SHCT portfolio of healthcare assets is consistent with ARF’s strategy and investment criteria: For personal use only Sectors Characteristics SHCT – A good fit Relatively long remaining The average WALE of the portfolio is 9 years. lease terms. Premises
Slide 17: Growing sector outperforming property peers
3 For personal use only Growing sector outperforming property peers The demand for healthcare services Healthcare has outperformed the traditional is growing, driven by: commercial property sector over many years • The ageing of Australia’s population – age 65+ forecast to rise from 14% to 23% by 20
Slide 18: Similar lease terms to ARF
3 For personal use only Similar lease terms to ARF The SHCT portfolio has lease terms similar to ARF’s Childcare Centres: ARF Childcare Centres SHCT Medical Centres Lease term WALE 8.3 years. WALE 9.0 years. 100% exposure to Primary Health Tenant 65.2% exposure to Goodstart Care who are a top ASX100
Slide 19: Affinity acquisition
For personal use only 4 Affinity acquisition 19
Slide 20: Acquisition overview
4 For personal use only Acquisition overview • Conditional acquisition of 14 childcare centres situated in Queensland for $24.0m on a 9.05% yield. • Childcare centres are purpose built and to be fully leased to Affinity on 15 year leases on ARF standard terms. • Affinity is seeking to raise $75.5 mi
Slide 21: About Affinity
4 For personal use only About Affinity • Affinity is a newly established provider of education and care for children aged 6 weeks to 12 years. • It has initially contracted to acquire 57 child care centres and the management rights for a further 11 centres. • Its stated strategy is to grow its busin
Slide 22: Combined portfolio
For personal use only 5 Combined portfolio 22
Slide 23: Increased size and scale
5 For personal use only Increased size and scale ARF SHCT Affinity Combined Leased Vacant Childcare Leased childcare childcare sites Medical childcare centres centres (development) centres centres No of properties 167 6 4 6 14 197 Valuation $226.7m $5.7m $2.5m $54.7m $24.0m $313.6m Net Income $21.2m
Slide 24: Significant portfolio diversification
5 Significant portfolio diversification Sector Diversification (%) – Healthcare exposure Pre Stapling Post Stapling Post Stapling & Affinity For personal use only 18.9 17.4 Childcare Healthcare 82.6 82.6 100.0 Geographic Diversification (%) – increased exposure to NSW Pre Stapling Post Stapling Post
Slide 25: Improved lease expiry profile
5 Improved lease expiry profile Tenant Diversification (%) – exposure to Primary Health Care and reduced exposure to Goodstart Post Stapling & Affinity For personal use only Pre Stapling and Affinity Post Stapling 2.5 2.0 1.8 3.0 6.3 2.8 5.8 Goodstart 3.7 7.8 4.1 4.4 Primary Health Care 5.5 7.7 Kids
Slide 26: Increased underlying earnings
5 Increased underlying earnings Cents Per Security 9.4 For personal use only 9.20 9.2 9.0 8.80 8.8 8.70 8.65 8.6 8.50 8.45 8.4 8.20 8.20 8.2 8.0 FY14 Forecast FY14 Statutory FY14 Pro Forma FY14 Statutory FY14 Pro Forma Annualised Annualised Pre Stapling Post Stapling Post Stapling & Affinity Underly
Slide 27: Board Recommendation
6 For personal use only Board Recommendation The Arena Board considers the Proposal to be in the best interests of ARF Investors (in the absence of a superior proposal) and unanimously recommends ARF Investors vote in favour of both resolutions. The Arena Board considers the Proposal to be in best i
Slide 28: Questions & Answers
For personal use only 7 Questions & Answers 28
Slide 29: Appendices
For personal use only 29 8 Appendices
Slide 30: Location of properties Post Stapling and Affinity
8 For personal use only Location of properties Post Stapling and Affinity Arena REIT | arenainvest.com.au 30
Slide 31: Income Statement
8 Income Statement Pre Post Stapling Post Stapling & Affinity For personal use only FY14 Pro FY14 FY14 Pro FY14 FY14 $ million Forma Statutory Forma Statutory Forecast Forecast1 Forecast2 Forecast1 Forecast2 Income Net property income 20.9 25.7 23.4 27.8 24.4 Expenses Management fees (1.9) (2.5) (2.
Slide 32: Balance Sheet
8 Balance Sheet Pre Pro Forma Post Post Stapling & Affinity Adjustments Stapling For personal use only ARF SHCT Stapled Stapled As at 30 June 2013 Pro SHCT Deferred Stapling Group Pro Group Pro $ million Forma Historical Fees1 Proposal2 Forma Affinity3 Forma Cash 4.4 1.0 – – 5.4 – 5.4 Trade and othe
Slide 33: Why invest in childcare?
8 Why invest in childcare? Strong demand fundamentals driving For personal use only growth in demand for childcare More children in care Higher +64% More children workforce growth in children aged 0-4 using formal childcare participation between 1996 to 2011 +1% per annum projected growth 53% More h
Slide 34: Important notice
Important notice This presentation is prepared by Arena Investment Management Limited ACN 077 235 879 AFSL No. 233190 (Arena) as responsible entity of Arena REIT ARSN 106 891 641 (ARF). The information contained in this document is current only as at 27 November 2013 or as otherwise stated herein. T