Argosy Property Limited · NZX:ARG
Argosy Property — H1 FY2019 Earnings Presentation
34 slides from Argosy Property's earnings presentation, Nov 20, 2018
Slide 1: FY19 Interim Results Presentation
FY19 Interim Results Presentation Argosy Property Limited 20 November 2018 www.argosy.co.nz
Slide 2: Agenda
AGENDA Highlights Page 4 Strategy / Portfolio Page 6 Financials Page 13 Leasing Update Page 22 Looking Ahead Page 26 PRESENTED BY: Peter Mence CEO Dave Fraser CFO Note: This result should be read in conjunction with the NZX release dated 20 November 2018. Due to rounding, numbers presented in this p
Slide 3: Our strength lies in the diversity of our properties
Our strength lies in the diversity of our properties across sectors, location and sizes allowing us to adapt to the changing needs of our tenants. Peter Mence CEO 3
Slide 4: Highlights
HIGHLIGHTS » www.argosy.co.nz
Slide 5: FY19 Interim Highlights
FY19 Interim Highlights 4.7% 9.2% Increase in Net Uplift in Net Distributable Property Income Income 3.1% 1.5625 Annualised rental growth Q2 dividend cents per on rents reviewed share 98.4% 5.6 years Occupancy (by rental) WALT 5
Slide 6: Strategy / Portfolio
Strategy / Portfolio 6 » www.argosy.co.nz
Slide 7: Strategy
Strategy Shareholder Transition Value Add properties to drive earnings and capital growth with an return focus environmental focus. Streamlined tenant led development process and execution. AFFO based dividend policy by 2021. Diversified Continue to invest in a diverse range of properties across sec
Slide 8: Portfolio at a Glance
Portfolio at a Glance TOTAL PORTFOLIO VALUE TOTAL PORTFOLIO VALUE PORTFOLIO MIX BY SECTOR BY REGION BY VALUE 5% 10% 22% 7% 24% 41% 71% 37% 83% Industrial Auckland Core properties Office Wellington Value Add properties Retail Regional North Island Properties and land to divest & South Island Divestme
Slide 9: Sector Summary
Sector Summary INDUSTRIAL OFFICE RETAIL NUMBER OF BUILDINGS NUMBER OF BUILDINGS NUMBER OF BUILDINGS 37 16 9 MARKET VALUE OF ASSETS ($M) MARKET VALUE OF ASSETS ($M) MARKET VALUE OF ASSETS ($M) $670.0 $596.8 $356.2 OCCUPANCY (BY INCOME) OCCUPANCY (BY INCOME) OCCUPANCY (BY INCOME) 100% 96.4% 100% WALT
Slide 10: Value Add
Value Add The following properties have been designated as Value Add and make up ~7% of the total portfolio: Property Sector Location Valuation $m 90 - 104 Springs Road, East Tamaki Industrial Auckland 5.6 80 Springs Road, East Tamaki Industrial Auckland 10.7 211 Albany Highway, Albany Industrial Au
Slide 11: 7 Waterloo Quay Update
7 Waterloo Quay Update Damage Assessment Interim damage assessment reports and reinstatement scope reports with insurers. Next stage is cost assessment which should be completed by early 2019. Insurance Claim Six interim claims made under Argosy’s material damage and business interruption insurance.
Slide 12: Revaluations
Revaluations 30 Sep 18 30 Sep 18 Market Yield * Solid revaluation gain 2.2% Δ Δ Book Value Valuation $m % above book value ($m) ($m) 30 Sep 18 31 Mar 18 Auckland 1,121.2 1,151.3 30.1 2.7% 6.50% 6.75% Regionally, Auckland biggest Wellington 393.5 392.8 (0.8) -0.2% 7.32% 7.60% contributor North Island
Slide 13: Financials
FINANCIALS Argosy 13 » www.argosy.co.nz
Slide 14: Income Reconciliation
Rental income $m Income Reconciliation 55.0 50.0 45.0 40.0 35.0 30.0 Like for like rent growth 5.5% 51.9 0.2 Argosy -0.8 Gross Property Income 1H18 Rent reviews Vacancy & Leasing up. 7 Waterloo Quay 14 Acquisitions / Developments Disposals Gross Property Income 1H19 » WWW.argosy.co.nz
Slide 15: Financial Performance
Financial Performance 1H19 1H18 $m $m Like-for-like growth of 5.5% Net property income 50.8 48.5 driving increase in net Administration expenses (5.1) (4.7) income Profit before financial income/(expenses), other Expenses up due to mixture 45.6 43.8 of restructuring and gains/(losses) and tax additi
Slide 16: Distributable Income
Distributable Income 1H19 1H18 $m $m Profit before income tax 71.2 27.4 Adjusted for: Revaluations gains (34.6) - Realised losses/(gains) on disposal (2.9) (0.2) Derivative fair value loss/(gain) 1.5 2.7 Earthquake expense net of recoveries -1.7 1.3 Gross distributable income 33.4 31.2 Depreciation
Slide 17: Investment Properties
Investment Properties Portfolio growth driven by a combination of capital projects, acquisitions and revaluation gains. 17
Slide 18: Movement in NTA per share
Movement in NTA per share Interim revaluation gain strong driver of ~4.5% uplift for the period. 18
Slide 19: Gearing
Gearing 1H19 FY18 $m $m Investment properties 1,623.0 1,513.1 Assets held for sale 9.8 27.4 Other assets 10.3 4.3 Total assets 1,643.1 1,544.8 Bank debt (excl. capitalised borrowing costs) 605.0 554.2 Debt-to-total-assets ratio 36.8% 35.9% The asset held for sale is 626 Gt South Rd (Auckland), sold
Slide 20: Funding & Interest Rate Management
Funding & Interest Rate Management 1H19 FY18 Weighted average duration of bank facility 2.6 years 3.1 years Weighted average interest rate1 4.86% 4.98% Interest Cover Ratio 3.3x 3.3x % of fixed rate borrowings 57% 62% Average fixed interest rate2 4.56% 4.56% Argosy maintains strong relationships wit
Slide 21: Dividends
Dividends A second quarter cash dividend of 1.5625 cents per share has been declared, with imputation credits of 0.3890 cents per share attached, and will be paid on 19 December 2018. FY19 dividend guidance of 6.25 cents per share remains unchanged, an increase of ~1.0% on the previous year. The FY1
Slide 22: Leasing Update
Leasing Update Change image 22
Slide 23: Leasing Success
Leasing Success Strong results over the first half of the year, maintaining a high portfolio WALT of 5.6 years. 24 leasing transactions completed during the period, totalling ~39,500m² of NLA. Notable leasing successes include: Property Tenant NLA (sqm) Lease Term 320 Ti Rakau Drive, East Tamaki, Au
Slide 24: Lease Maturity
Lease Maturity Normalised lease maturity profile relatively stable over the medium term. Government tenants showing strong interest in 7 Waterloo Quay space. Levels 2-4 and 7 of 7 Waterloo Quay paid through to 31 August 2019. 24
Slide 25: NZ Market Update
NZ Market Update Office Flexible working environments driving disconnect between employment growth and net absorption. Structural trend is occupiers relocating taking ~10% less space per person than they had previously. Rental growth impacted by new supply and there has been an increase in incentive
Slide 26: Looking Ahead
Looking Ahead Change image 26
Slide 27: Looking ahead
Looking ahead Income and Earnings per share growth earnings AFFO based dividend policy in medium term sustainability Sound capital Liquid, flexible and diverse capital base position Longer term debt options being considered Improve portfolio Reduce key vacancies and proactive management of expiry pr
Slide 28: Appendices
Appendices www.argosy.co.nz
Slide 29: Adjusted Funds from Operations (AFFO)
Adjusted Funds from Operations (AFFO) 1H19 1H18 $m $m Net distributable income 28.7 26.3 +9.2% Amortisation of tenant incentives and leasing costs 2.0 2.1 Funds from operations (FFO) 30.7 28.5 +8.1% Capitalisation of tenant incentives and leasing costs (3.0) (1.8) Maintenance capital expenditure (2.
Slide 30: Rent Reviews
Rent Reviews Previous Annualised $ New rent $ Increase Annualised % of rent Type # Rent % Increase Increase (000's) (000's) % Increase reviewed (000's) (000's) Total 42 15,508 16,043 535 3.4% 478 3.1% 100.0% By review type Fixed 27 8,792 9,073 281 3.2% 281 3.2% 56.7% Market 4 2,200 2,325 125 5.7% 10
Slide 31: Rent Reviews
Rent Reviews Annualised $ Previous Rent New rent $ Increase Annualised % % of rent # % Increase Increase (000's) (000's) (000's) Increase reviewed (000's) Auckland Office 14 2,195 2,247 52 2.4% 51 2.3% 13.8% Industrial 6 5,760 5,963 203 3.5% 203 3.5% 44.5% Retail 16 4,988 5,142 154 3.1% 136 2.7% 41.
Slide 32: Portfolio Metrics
Portfolio Metrics The strength of our diversified portfolio is in the breadth and depth of our tenant base and sectors they represent. Rent Roll by Industry Government Administration Top 10 Customers by Rent MBIE NZ Post Retail General Distributors Transport and Storage Cardinal Logistics Manufactur
Slide 33: Portfolio Snapshot
Portfolio Snapshot Our focus is delivering improved portfolio quality and is reflected in our strong portfolio 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 FY15 FY16 FY17 FY18 1H19 FY15 FY16 FY17 FY18 1H19 Net Tangible Assets Debt-to-tota
Slide 34: 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