Property For Industry Limited · NZX:PFI
Property For Industry — H1 2018 Earnings Presentation
32 slides from Property For Industry's earnings presentation, Aug 8, 2018
Slide 1: Welcome to the 2018 Interim Results Briefing
PF: YOUR INDUSTRIAL PROPERTY EXPERTS WELCOME TO THE 2018 INTERIM RESULTS BRIEFING
Slide 2: Agenda
01. HIGHLIGHTS 02. PORTFOLIO 03. MARKET 04. 2018 INTERIM RESULTS 05. CAPITAL MANAGEMENT 06. GOVERNANCE 07. REVIEW & QUESTIONS 08. APPENDICES
Slide 3: 01. Highlights
o1. \ HIGHIIGHTS
Slide 4: Highlights
HIGHLIGHTS ▪ Significant portfolio activity: 58,000 square metres or 8% of the portfolio leased during the interim period to 11 tenants for an average increase in term of 6.5 years ▪ Increased earnings and dividends: profit after tax up $35.2 million, 9.4% increase in Funds From Operations (FFO) 1 e
Slide 5: 02. Portfolio
02. PORTFOLIO
Slide 6: Portfolio Snapshot
PORTFOLIO SNAPSHOT ▪ PFI’s portfolio is diversified across 93 properties and 146 tenants, with 98.1% occupancy and a weighted average lease term of 5.39 years, weighted towards Auckland industrial property 30 June 2018 31 December 2017 30 June 2017 Book value $1,239.5m $1,210.8m $1,096.0m Number of
Slide 7: Portfolio Performance
PORTFOLIO PERFORMANCE ▪ Valuations: ▪ Full valuations for ten properties, $7.9 million or 3.7% uplift ($9.6 million or 8.3% excluding Carlaw Park) ▪ Independent desktop review of remainder of portfolio ▪ Leasing: ▪ 11 leases agreed over ~58,000 sqm of space for an average term of 6.5 years ▪ Lease r
Slide 8: Lease Events
LEASE EVENTS ▪ Near term leasing outlook: just 1.9% of contract rent vacant and 2.0% due to expire during H2 2018 ▪ Expiries and vacancy at Carlaw Park, Parnell represent 1.8%, leasing of that space is a key priority in 2018 and 2019 (see next slide) ▪ ~41% of portfolio subject to some form of lease
Slide 9: Carlaw Park, Parnell
CARLAW PARK, PARNELL ▪ Purchased by PFI in 2013 via the merger with Direct Property Fund ▪ Office: Grade A, 4 star green building: 11,150 sqm of office across 4 floors and ~50 car-parks ▪ Gateway: 42 room Quest serviced apartments hotel, 600 sqm of retail space and 655 car-parks ▪ Development of the
Slide 10: Acquisition: Neilson Street
ACQUISITION: 306 NEILSON STREET ▪ Purchased in June 2018 in a sale and lease back transaction for $16.0 million ▪ Yield on purchase price of 5.5% ▪ 5,490 sqm warehouse and 812 sqm of office and amenities on a 9,781 sqm site leased for 10 years on a triple-net basis to Trade Depot ▪ Fixed rental grow
Slide 11: Development: Cavendish Drive
DEVELOPMENT: 212 CAVENDISH DRIVE ▪ PFI committed mid-2017 to a new 2,500 sqm warehouse on surplus land at 212 Cavendish Drive, Manukau, tenant commitment was sought during the design and build programme ▪ A successful marketing campaign secured Kiwi Steel in March 2018 – before the design process wa
Slide 12: 03. Market
LOZF ~ MARKET
Slide 13: Market Update: Economy
MARKET UPDATE: ECONOMY ▪ New Zealand continues to enjoy low levels of unemployment… ▪ … yet CPI inflation forecasts remains well within the RBNZ’s target band… ▪ … supporting a continued low interest rate environment. Sources: ▪ NZ unemployment rate: RBNZ ▪ NZ CPI inflation: Bloomberg ▪ NZ OCR: Hist
Slide 14: Market Update: Property
MARKET UPDATE: PROPERTY ▪ CBRE June 2018 Auckland Market Outlook: ▪ “… there is still good investor demand, and the pricing of some investor categories, especially from offshore, has firmed. Monetary conditions will likely be supportive of yields over the next 18 months…” ▪ Prime industrial ranks th
Slide 15: 04. 2018 Interim Results
‘04. 2018 INTERIM RESULTS
Slide 16: Net Rental Income
NET RENTAL INCOME ▪ Net rental income of $39.3 million up $3.7 million or 10.5% ▪ Increases due to acquisitions ($2.7 million) and positive leasing activity ($1.6 million) ▪ Decrease due to increased intra-period vacancy ($0.6 million) ▪ Average occupancy during H1 2018 of ~98%, guidance assumes ~10
Slide 17: Adjusted Funds From Operations (Cents per Share)
ADJUSTED FUNDS FROM OPERATIONS (CENTS PER SHARE) ▪ Profit after tax up $35.2 million ▪ Cost savings and increased revenues contributed to a 9.4% increase in FFO earnings per share in H1 2018 ▪ Higher-than-average level of maintenance capex resulted in AFFO earnings per share increasing at a lower ra
Slide 18: Earnings, Dividends, Guidance
EARNINGS, DIVIDENDS, GUIDANCE ▪ Funds From Operations earnings up 0.38 cps or 9.4% ▪ Adjusted Funds From Operations earnings up 0.09 cps or 2.5% ▪ H1 2018 cash dividends total 3.60 cps, up 0.10 cps or 2.9% from the prior period payment of 3.50 cps ▪ FY 2018 dividend policy is based on 80-90% of FFO
Slide 19: Investment Properties
INVESTMENT PROPERTIES ▪ Portfolio value of ~$1.24 billion ▪ Neighbouring property acquired for $16.0 million creating an industrial estate of ~4.5 hectares in Penrose ▪ $7.9 million uplift from independent revaluation of ten properties, independent desktop review of remainder of the portfolio PROPER
Slide 20: Net Tangible Assets (Cents per Share)
NET TANGIBLE ASSETS (CENTS PER SHARE) ▪ Net tangible assets (NTA) per share increased by 2.0 cents per share or 1.2% ▪ Change in NTA per share was driven by the increase in the fair value of investment properties (+1.6 cps), retained earnings (+0.3 cps) and the decrease in the net fair value liabili
Slide 21: 05. Capital Management
05. CAPITAL MANAGEMENT LL. ——
Slide 22: Funding, Covenants, Interest Rates
FUNDING, COVENANTS, INTEREST RATES ▪ No changes made to bank facilities during the first half of 2018 ▪ Considering options, including a second senior secured bond issue, to extend and diversify borrowings ▪ Gearing of 31.4% and interest cover ratio of 3.8 times well within policy and covenant limit
Slide 23: Maturity Profile, Hedging
MATURITY PROFILE, HEDGING ▪ Debt facility maturity profile (graph on LHS): average term to expiry of 3.2 years, ~$86 million of unutilised bank facility capacity ▪ Fixed rate payer hedging profile (graph on RHS): cover profile provides for an average of ~57% of debt to be hedged at an average fixed
Slide 24: 06. Governance
J Lud O z < z aa Lu Ex al O6. ‘GOV x CF
Slide 25: Board Update
BOARD UPDATE ▪ Peter Masfen – PFI Board Chair since June 2002 – retired at the annual meeting in May ▪ Anthony Beverley – formerly PFI’s Deputy Board Chair – appointed as new Board Chair ▪ David Thomson joined the PFI Board in February and was re-elected at the annual meeting in May ▪ Audit and Risk
Slide 26: Environmental, Social, Governance
ENVIRONMENTAL, SOCIAL, GOVERNANCE ▪ PFI’s ESG vision: “… is focused on being a responsible and responsive landlord in order to create long term value for key stakeholders.” ▪ First ESG report published in the annual report, released in February ▪ That report notes that Stakeholder Rights, Building S
Slide 27: 07. Review & Questions
07. REVIEW & QUESTIONS
Slide 28: Review & Questions
REVIEW & QUESTIONS ▪ PFI’s strategy is to invest in quality industrial property in New Zealand’s main centres and the Company aims to deliver strong, stable shareholder returns ▪ H1 2018 highlights: ▪ Significant portfolio activity ▪ Increased earnings and dividends ▪ Acquisition ▪ Governance change
Slide 29: 08. Appendices
08. APPENDICES
Slide 30: Appendix 1: FFO and AFFO
APPENDIX 1: FFO AND AFFO (Unaudited, $000, unless noted) 6ME June 2018 6ME June 2017 Profit / (loss) and total comprehensive income after income tax attributable to the shareholders of the Company 29,570 (5,637) Adjusted for: Fair value gain on investment properties (7,948) (5,970) Material damage i
Slide 31: Appendix 2: Distributable Profit
APPENDIX 2: DISTRIBUTABLE PROFIT (Unaudited, $000, unless noted) 6ME June 2018 6ME June 2017 Profit / (loss) and total comprehensive income after income tax attributable to the shareholders of the Company 29,570 (5,637) Adjusted for: Fair value gain on investment properties (7,948) (5,970) Material
Slide 32: Disclaimer
DISCLAIMER The information included in this presentation is provided as at 8 August 2018 and should be read in conjunction with the NZX interim results announcement, NZX appendix 1, NZX appendix 7 and interim report (including financial statements) issued on that same day. Property for Industry Limi
Property For Industry — H1 2018 Earnings Presentation on 6ix