Arena Reit · ASX:ARF
Arena Reit — HY2023 Earnings Presentation
32 slides from Arena Reit's earnings presentation, Feb 9, 2023
Slide 1: Half Year Results 2023
ARENA REIT 2023 HALF YEAR RESULTS 9 February 2023
Slide 2: Agenda
Arena REIT acknowledges the AGENDA traditional custodians of the lands on which our business and assets operate, and recognises their ongoing connection to Highlights 3 land, waters and community. Sustainability 5 Financial Results 6 Portfolio Update 11 Outlook 19 Questions 20 Directory 21 Appendice
Slide 3: Highlights
$47.6 million $29.9 million HIGHLIGHTS Statutory net Net operating Delivering on our investment objective and profit profit improving community outcomes -74% on HY22 +8.6% on HY22 • +8.6% growth in net operating profit driven by like-for-like contracted rental increases averaging +6.45%, acquisition
Slide 4: Delivering on Strategy
DELIVERING ON STRATEGY Ongoing strategy discipline and partnership approach Portfolio management: Working in partnership: • Two healthcare properties were • Continue to progress solar renewable energy contracted for sale as at 31 December program; currently installed on 81% of Arena’s 2022 at an ave
Slide 5: Sustainability
SUSTAINABILTY Investment proposition and partnership approach drives sustainable and commercial outcomes • Sustainability is integral to Arena’s investment approach and best positions Arena to achieve positive long term commercial and community outcomes. • Arena’s portfolio facilitates access to ess
Slide 6: Financial Results
FINANCIAL RESULTS Gareth Winter Chief Financial Officer
Slide 7: Financial Performance
FINANCIAL PERFORMANCE Property income increase supports earnings & distribution growth HY23 HY22 Change ($’000) ($’000) ($’000) (%) • Property income continues to Property income 36,451 32,351 4,100 +13% increase due to: – Contracted annual rental Other income 190 285 (95) -33% growth; Total operati
Slide 8: Contributors to EPS Growth
CONTRIBUTORS TO EPS GROWTH Rental growth, acquisitions and development completions supporting EPS growth 10 0.08 -0.40 0.34 8.59 0.60 - 7.97 8 EPS1 cents per share 6 4 2 0 HY22 EPS Contracted like-for-like rental Completed developments, Net operating expenses and Funding mix and costs HY23 EPS incom
Slide 9: 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 revaluation uplift. As at 31 Dec 2022 30 June 2022 Change • Undrawn debt capacity of approximately $150 ($m) ($m
Slide 10: Capital Management
CAPITAL MANAGEMENT • Syndicated borrowing facility limit increased by $70 million to $500 million and extension of maturity dates. Maintaining hedging discipline, increase in facility As at 31 Dec 2022 facility is comprised of: – $200 million expiring 31 March 2026; limit and term extension – $150 m
Slide 11: Portfolio Update
PORTFOLIO UPDATE Rob de Vos Managing Director
Slide 12: Portfolio Overview
PORTFOLIO OVERVIEW Number of 31 Dec 2022 Net valuation movement 31 Dec 2022 Change versus assets1 valuation versus 30 June 2022 passing yield 30 June 2022 $m $m % % bps Early Learning portfolio 260 1,348.6 +19 +1.5% 5.03% +13 Healthcare portfolio 112 174.92 -1 -0.4% 5.18% +16 Total portfolio 271 1,5
Slide 13: Lease Expiry Profile
LEASE EXPIRY PROFILE 1 Weighted average lease expiry of 19.5 years • Less than 3% of portfolio income subject 35% to expiry prior to FY30. Healthcare (%) • 50% of portfolio lease income expires 29.7% Early Learning (%) 30% after FY40. • Seven ELC development completions 25% added to the portfolio wi
Slide 14: Annual Rent Reviews
ANNUAL RENT REVIEWS HY23 average like-for-like rent increase of +6.45% 100% • Attractive rent review structure with 9.9% 9.3% 13.6% 7.1% embedded income growth and inflation 7.1% 7.1% protection. 80% 8.8% 10.5% % rental income 8.0% • >90% of FY23, FY24, FY25 and FY26 rent 60% reviews are contracted
Slide 15: Acquisitions and Developments
ACQUISITIONS AND DEVELOPMENTS Creating and investing in accommodation that facilitates the delivery of essential community services • High quality, purpose built properties with existing and new tenant partners. • Two operating ELC properties were acquired during HY23. • Seven ELC development projec
Slide 16: ELC Operating Environment
ELC OPERATING ENVIRONMENT Strong social and macroeconomic drivers continue to support early learning sector Australian Parents Workforce Participation Rate1 • Record female workforce participation rate has been driving demand for services and 100% increased long day care participation rates over the
Slide 17: ELC Portfolio
ELC PORTFOLIO 15% Arena ELC portfolio – net rent to gross operator revenue1 14% Portfolio strength underpinned by asset 13% 12% quality 11% 10% 9% • 99.6% portfolio occupancy as at 31 December 2022. 8% • Arena’s ELC portfolio operating data1 to 30 Sep 2022: 7% 6% o Average daily fee of $127.31: 5% H
Slide 18: Healthcare Sector & Portfolio
HEALTHCARE SECTOR & PORTFOLIO Supportive macroeconomic drivers • Strong structural macroeconomic drivers continue to support Australian healthcare accommodation including a growing and ageing population and increased prevalence of chronic health conditions. • Ongoing domestic and international inves
Slide 19: Outlook
OUTLOOK Inflation protected, predictable long term income IN C OME GR OWTH • FY23 distribution guidance of 16.8 cents per security, an increase of 5%1 on FY22. • Attractive rent review structure with embedded income growth and inflation protection: >90% of FY23, FY24, FY25 and FY26 rent reviews cont
Slide 20: Questions
QUESTIONS
Slide 21: Corporate Directory
CORPORATE DIRECTORY Please direct enquiries to Sam Rist on samantha.rist@arena.com.au ROB DE VOS GARETH WINTER SAM RIST Managing Director Chief Financial Officer Chief of Investor Relations and Sustainability 21 ARENA REIT 2023 HALF YEAR RESULTS
Slide 22: Appendices
APPENDICES
Slide 23: Financial Performance – HY23
FINANCIAL PERFORMANCE – HY23 HY23 HY22 Change ($’000) ($’000) ($’000) % Property income 36,451 32,351 4,100 +13% Other income 190 285 (95) -33% Total operating income 36,641 32,636 4,005 +12% Property expenses (250) (448) 198 -44% Operating expenses (2,325) (2,511) 186 -7% Finance costs (4,199) (2,1
Slide 24: Balance Sheet – HY23
BALANCE SHEET – HY23 31 Dec 22 30 June 22 Change ($’000) ($’000) ($’000) % Facility Cash 16,519 22,200 (5,681) -26% Covenant Ratio requirement Receivables and other assets 7,255 4,692 2,563 +55% Loan to value ratio (LVR) Maximum 50% 26.4% Investment properties 1,523,5081 1,461,888 61,620 +4% Interes
Slide 25: Portfolio Composition and Movement
PORTFOLIO COMPOSITION AND MOVEMENT Portfolio movements (30 June 2022 to 31 December 2022)1 61 270 2 141 7 15 250 230 210 264 255 2572 248 248 190 170 150 30-Jun-22 Development sites Development projects Operating properties Operating properties 31-Dec-22 acquired completed acquired divested Existing
Slide 26: ELC Portfolio Valuations
ELC PORTFOLIO VALUATIONS Number of Value Passing yield As at 31 December 2022 properties ($m) (%) Independent ELC freehold valuations Queensland 16 96.2 5.12 Victoria 18 134.6 4.85 New South Wales 10 34.6 4.67 Western Australia 5 22.1 4.52 South Australia 2 12.1 5.59 Total independent ELC valuations
Slide 27: ELC Portfolio Metrics
ELC PORTFOLIO METRICS 31 Dec 2022 30 June 2022 Change Leased ELCs 246 237 +9 Development sites 141 152 -1 Total ELCs 260 252 +8 WALE (by income) (years) 20.7 21.1 -0.4 year Tenanted occupancy (%) 99.6 100 -40bps Average passing yield (%) 5.03 4.90 +13bps Portfolio value ($m) 1,348.6 1,287.6 +5% Aver
Slide 28: Healthcare Portfolio Metrics
HEALTHCARE PORTFOLIO METRICS 31 Dec 2022 30 June 2022 Change Total healthcare properties 111 11 - WALE (by income) (years) 10.5 10.9 -0.4 year Tenanted occupancy (%) 100 100 - Average passing yield (%) 5.18 5.02 +16bps Property portfolio ($m) 174.91 174.3 +0.3% Average rental increase (%) 4.25 3.5 +
Slide 29: Portfolio Location Map
PORTFOLIO LOCATION MAP 1. Excludes one ELC development project which was conditionally contracted at 31 December 2022. 2. Includes two healthcare properties which were contracted for sale as at 31 December 2022. 29 ARENA REIT 2023 HALF YEAR RESULTS
Slide 30: ELC Market Transactions
ELC MARKET TRANSACTIONS QLD passing yields NSW passing yields VIC 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-22 Jun-15 Jun-16 Jun-17 Jun-18 Jun-19 Jun-20 Jun-21 Jun-22 Jun-15 Jun-16 Jun-17 Ju
Slide 31: ELC Sales Yields versus 10 Year Bond
31 0.00% 1.00% 2.00% 3.00% 5.00% 6.00% 7.00% 8.00% 9.00% 10.00% 4.00% Apr-11 Jul-11 Oct-11 Jan-12 Apr-12 Jul-12 Oct-12 Jan-13 Apr-13 Jul-13 Oct-13 Jan-14 Apr-14 Jul-14 Oct-14 ARENA REIT 2023 HALF YEAR RESULTS Jan-15 Apr-15 Jul-15 Oct-15 Jan-16 Apr-16 Jul-16 Oct-16 Jan-17 Apr-17 Jul-17 ELC Sales Yiel
Slide 32: 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