Arena Reit · ASX:ARF
Arena Reit — HY2024 Earnings Presentation
33 slides from Arena Reit's earnings presentation, Feb 15, 2024
Slide 1: Half Year 2024 Results Presentation
Arena REIT HALF YEAR 2024 RESULTS PRESENTATION 15 February 2024 Better Communities. Together. r Title
Slide 2: Agenda
Agenda 03 Highlights 05 Sustainability 06 Financial Results 11 Portfolio Update 20 Outlook 21 Questions Arena REIT acknowledges the traditional custodians of 22 Directory the lands on which our business and assets operate, and recognises 23 Appendices their ongoing connection to land, waters and com
Slide 3: Highlights for Half Year 2024
Highlights for Half Year 2024 Facilitating access to essential services which deliver strong community benefits • Growth in net operating profit driven by like-for-like contracted Statutory net profit Net operating profit rental increases and the full period impact of prior acquisitions and developm
Slide 4: Delivering on Strategy
Delivering on Strategy Inflation protected, predictable income Working in partnership Portfolio management Continue to progress solar renewable Long term WALE (by income) of 18.8 years. energy program; currently installed on Portfolio weighted average passing yield 88% of Arena’s property portfolio.
Slide 5: Sustainability
Sustainability Investment proposition and 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. • Sustainability outcomes delivered during FY2024 to dat
Slide 6: Financial Results
Financial Results Gareth Winter CHIEF FINANCIAL OFFICER Better Communities. Together. r Title
Slide 7: Financial Performance
Financial Performance Increase in property income supporting earnings & distribution growth HY24 HY23 Change Change $’000 $’000 $’000 % • Property income continues to increase due to: – Contracted rental growth from annual Property income 39,060 36,451 2,609 +7% rent increases and market rent review
Slide 8: Contributors to EPS Growth
Contributors to EPS Growth Rental growth, acquisition and development completions supporting EPS growth 12 0.30 -0.24 -0.01 10 0.55 -0.47 8.59 8.72 8 6 4 2 0 HY23 EPS Contracted like-for-like Completed Asset disposals Net operating expenses Funding mix and costs HY24 EPS rental income growth develop
Slide 9: Financial Position
Financial Position Strong balance sheet with substantial capacity As at • Growth in total assets continues from the 31 Dec 2023 30 June 2023 Change acquisition of ELC developments and ELC $m $m % development completions. • Undrawn debt capacity of $144 million to fund ELC development commitments and
Slide 10: Capital Management
Capital Management Ongoing hedging discipline in volatile interest rate markets • $500 million debt facility comprised as follows as at As at 31 Dec 2023 30 June 2023 Change 31 December 2023: – $200 million expiring 31 March 2026; – $150 million expiring 31 March 2027; and Borrowings $356m $342m +$1
Slide 11: Portfolio Update
Portfolio Update Rob de Vos MANAGING DIRECTOR Better Communities. Together. r Title
Slide 12: Portfolio Overview
Portfolio Overview Number of 31 December Net valuation movement versus 30 31 December Change versus assets1 2023 valuation June 2023 2023 passing 30 June 2023 yield $m $m % % bps Early learning portfolio 266 1,404 -3.3 -0.2 5.24 +11 Healthcare portfolio 9 138 -0.5 -0.3 5.50 +13 Total portfolio 275 1
Slide 13: Lease Expiry Profile
Lease Expiry Profile Weighted average lease expiry of 18.8 years 30% • Less than 3% of portfolio income subject to expiry 28.2% prior to FY31. Early Learning (%) Healthcare (%) 25% • Over 52% of portfolio lease income expires after FY40. 20% • Three ELC development completions added to % of income p
Slide 14: Annual Rent Reviews
Annual Rent Reviews HY24 average like-for-like rent increase of +5.4% 100% 9.4% 8.5% 7.8% • Attractive rent review structure with embedded 13.5% income growth and inflation protection. 5.4% 5.4% 5.4% 7.4% 5.4% 8.7% 80% 9.2% • ~95% of FY24, FY25, FY26 and FY27 rent reviews 6.7% contracted at CPI, the
Slide 15: Acquisitions and Developments
Acquisitions and Developments Working with our tenants as property partners • High-quality, purpose-built properties facilitating essential community services. • Three ELC development projects were completed in HY2024. Development completions Number of Total cost Initial yield on total Initial weigh
Slide 16: ELC Operating Environment
ELC Operating Environment Strong social and macroeconomic drivers continue to support early learning sector • Record female workforce participation rate has been driving demand for services and Australian Parent Workforce Participation Rate1 increased long day care participation rates over the mediu
Slide 17: Early Childhood Education and Care Policy Reform
Early Childhood Education and Care Policy Reform Draft recommendations support increased demand for ECEC services • The ACCC’s final report on its inquiry into childcare was released in late January 2024, relevant key recommendations include1: • The Australian Government reconsider and restate the k
Slide 18: Arena's ELC Portfolio
Arena’s ELC Portfolio 15% Arena ELC portfolio – net rent to gross operator revenue1 14% Asset quality supporting portfolio strength 13% 12% 11% 10% • 100% portfolio occupancy as at 31 December 2023. 9% • Arena’s ELC portfolio operating data1 to 30 September 2023: 8% 7% o Average daily fee of $140.63
Slide 19: Healthcare Sector & Arena Portfolio
Healthcare Sector & Arena 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. • Healthcare real estate transaction
Slide 20: Outlook
Outlook Investment objective To deliver an attractive and predictable distribution to Well positioned to explore new opportunities in a changing investors with earnings investment market growth prospects over the medium to long term. INCOME GROWTH • Reaffirm FY24 distribution guidance of 17.4 cents
Slide 21: Questions
Questions Better Communities. Together. r Title
Slide 22: Corporate Directory
Corporate Directory Please direct enquiries to Sam Rist samantha.rist@arena.com.au Rob de Vos Gareth Winter Sam Rist Chief of Investor Relations & Managing Director Chief Financial Officer Sustainability HY2024 Results Better Communities. Together. 15 February 2024 | 22 r Title
Slide 23: Appendices
Appendices Better Communities. Together. r Title
Slide 24: Financial Performance
Financial Performance HY2024 HY2023 Change Change $’000 $’000 $’000 % Property income 39,060 36,451 2,609 +7% Other income 329 190 139 +73% Total operating income 39,389 36,641 2,748 +7% Property expenses (227) (250) 23 -9% Operating expenses (2,509) (2,325) (184) +8% Finance costs (5,901) (4,199) (
Slide 25: Balance Sheet
Balance Sheet 31 Dec 2023 30 June 2023 Change Change Covenant Facility Ratio $’000 $’000 $’000 % requirement Cash 14,605 16,113 (1,508) -9% Loan to value ratio (LVR) Maximum 50% 26.1% Receivables and other assets 8,779 5,958 2,821 +47% Interest cover ratio (ICR) Minimum 2x 4.9x Investment properties
Slide 26: Portfolio Composition and Movement
Portfolio Composition and Movement Portfolio movements (30 June 2023 to 31 December 2023)1 280 3 14 3 14 260 Number of properties 240 220 258 261 200 180 160 30-Jun-23 Development projects Development projects Operating properties Operating properties 31-Dec-23 acquired (net) completed acquired dive
Slide 27: ELC Portfolio Valuations
ELC Portfolio Valuations As at 31 December 2023 Number of Value Passing yield properties1 $m % Independent ELC freehold valuations Queensland 18 107.3 5.20% Victoria 14 71.4 5.09% New South Wales 2 10 5.30% Western Australia 4 17 5.07% South Australia 4 25 5.77% Tasmania 5 20.9 6.01% Northern Territ
Slide 28: ELC Portfolio Metrics
ELC Portfolio Metrics 31 Dec 2023 30 June 2023 Change Leased ELCs 252 249 +3 Development sites 141 142 - Total ELCs 266 263 +3 WALE (by income) (years) 19.8 20.2 -0.4 year Tenanted occupancy (%) 99.7 99.6 +10bps Average passing yield (%) 5.24 5.13 +11bps Portfolio value ($m) 1,404 1,377 +2% Average
Slide 29: Healthcare Portfolio Metrics
Healthcare Portfolio Metrics 31 Dec 2023 30 June 2023 Change Total healthcare properties 9 9 - WALE (by income) (years) 9.8 10.3 -0.5 year Tenanted occupancy (%) 100 100 - Average passing yield (%) 5.50 5.37 +13bps Property portfolio ($m) 138.4 138.8 - Average rental increase (%) 4.38 4.9 -52bps Por
Slide 30: Portfolio Location Map
Portfolio Location Map 1. Excludes three ELC development projects which were conditionally contracted at 31 December 2023. HY2024 Results Better Communities. Together. 15 February 2024 | 30 r Title
Slide 31: ELC Market Transactions
ELC Market Transactions NSW passing yields VIC passing yields QLD 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% Dec-15 Dec-16 Dec-17 Dec-18 Dec-19 Dec-20 Dec-21 Dec-22 Dec-23 Dec-15 Dec-16 Dec-17 Dec-18 Dec-19 Dec-20 Dec-21 Dec-22 Dec-23 Dec-15 De
Slide 32: ELC Sales Yields versus 10 Year Bond
ELC Sales Yields versus 10 Year Bond Average Rolling ELC Sales Yield vs 10 Year Australian Government Bond Yield 10.00% 9.00% 8.00% 7.00% 6.00% 5.00% 4.00% 3.00% 2.00% 1.00% 0.00% Apr-16 Apr-23 Apr-11 Apr-12 Apr-13 Apr-14 Apr-15 Apr-17 Apr-18 Apr-19 Apr-20 Apr-21 Apr-22 Oct-11 Oct-12 Oct-13 Oct-14 O
Slide 33: 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