Argosy Property Limited · NZX:ARG

Argosy Property — FY2016 Earnings Presentation

44 slides from Argosy Property's earnings presentation, May 26, 2016

  1. Slide 1: Annual Results Presentation

    Annual Results Presentation Argosy Property Limited 26 May 2016

  2. Slide 2: 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

  3. Slide 3: Argosy Consistent Growth

    Argosy CONSISTENT GROWTH

  4. Slide 4: Highlights

    Argosy » Www.argosy.co.nz

  5. Slide 5: Highlights of FY16

    Highlights of FY16  Gross distributable income increased to 7.60 cents per share (increase of 7.5%)  6.0% compound annual growth rate of gross distributable income per share since 2012  Net distributable income increased to 6.25 cents per share (increase of 3.8%)  Net property income increased t

  6. Slide 6: Financial Overview

    Financial Overview

  7. Slide 7: Income Reconciliation

    Income Reconciliation 9.9 ( 4.9 ) 110 0.5 103.9 100 98.4 90 80 70 60 50 40 30 20 10 0 Gross Property Acquisitions/ Disposals Rent changes Gross Property $m Income developments Income 31 March 2015 31 March 2016

  8. Slide 8: Financial Performance

    Financial Performance FY16 FY15 Net property income $98.3m $90.8m Administration expenses $(8.9m) $(7.8m) Profit before financial income/(expenses) and $89.4m $83.0m other gains/(losses) Interest expense $(28.2m) $(26.8m) Gain/(loss) on derivatives $(19.4m) $(24.8m) Finance income $0.1m $0.1m Revalu

  9. Slide 9: Distributable Income

    Distributable Income FY16 FY15 Profit before income tax $83.6m $68.6m Adjusted for: Revaluation gains $(42.2m) $(38.6m) Investment disposal losses $0.9m $1.5m Derivative fair value adjustment $19.4m $24.8m Other $(0.4m) - Gross distributable income $61.3m $56.3m Depreciation recovered $0.4m $3.3m Ta

  10. Slide 10: Investment Properties

    Investment Properties 1,400 29.5 ( 56.6 ) 42.2 ( 1.9 ) 1,367.6 - 48.0 1,350 1,306.4 1,300 1,250 1,200 1,150 1,100 1,050 1,000 Investment Acquisitions Capex Disposals Change in fair Other Investment $m Properties value Properties 31 March 2015 31 March 2016

  11. Slide 11: Movement in NTA per share

    Movement in NTA per share 100 0.1 99.7 0.1 0.2 5.2 ( 0.1 ) 99 98 97 95.8 ( 1.6 ) 96 95 94 93 92 91 90 NTA Net loss on Revaluation Realised Tax timing Residual Other NTA cps 31 March derivatives gain on gains/losses adjustments earnings less 31 March 2015 investment on disposal dividends 2016 propert

  12. Slide 12: Gearing

    Gearing FY16 FY15 Investment properties $1,367.6m $1,306.4m Other assets $7.3m $6.8m Total assets $1,374.9m $1,313.2m Bank debt (excl. capitalised borrowing costs) $503.9m $497.0m Debt to total assets ratio 36.7% 37.8%  The Board’s policy is for debt to total assets to be between 35 to 40% in the m

  13. Slide 13: Treasury

    Treasury Banking Arrangements  Argosy continues to maintain strong relationships with its banking partners, ANZ Bank New Zealand Limited, Bank of New Zealand and The Hongkong and Shanghai Banking Corporation Limited, and remains well within its banking covenants.  The weighted average duration of

  14. Slide 14: Dividends

    Dividends  The fourth quarter dividend has increased to 1.525 cents per share, bringing the FY16 dividend to 6.025 cents per share.  The dividend has remained flat over the past 4 years as Argosy transitioned into a tax-paying position.  Based on current projections, it is expected that the divid

  15. Slide 15: Portfolio Overview

    etfolio Overview Su. i aE

  16. Slide 16: Industrial

    Industrial NUMBER OF BUILDINGS 39 BOOK VALUE OF ASSETS ($M) $507.11 VACANCY FACTOR (BY RENT) 0.1% WALT (YEARS) 5.99 PASSING YIELD 7.70%

  17. Slide 17: Office

    Office NUMBER OF BUILDINGS 17 BOOK VALUE OF ASSETS ($M) $548.61 VACANCY FACTOR (BY RENT) 0.9% WALT (YEARS) 4.82 PASSING YIELD 7.56%

  18. Slide 18: Retail

    Retail NUMBER OF BUILDINGS 10 BOOK VALUE OF ASSETS ($M) $311.83 VACANCY FACTOR (BY RENT) 0.8% WALT (YEARS) 4.78 PASSING YIELD 7.36%

  19. Slide 19: Investment Environment

    Investment Environment  In general, the market continues to show solid fundamentals with investment demand in excess of supply.  Over the past five years there has been solid property growth driven by low inflation and low interest rates, together with an increased appreciation of New Zealand as a

  20. Slide 20: Leasing Environment

    Leasing Environment  The amount of new space the market requires (net absorption) continues to be positive and new development is yet to negatively affect vacancy levels.  As yield firming flattens or diminishes, an improvement in rental growth is likely to eventuate, assuming net absorption conti

  21. Slide 21: Leasing

    Leasing  Occupancy, tenant retention and lease expiries remain key focus areas for the asset management team.  Occupancy (by rental) has remained at a very high level at 99.4%, up from 99.2% at March 2015.  Outstanding lease expiries for the period to 31 March 2017 are 10.1%.  During the period,

  22. Slide 22: Lease Maturity

    Lease Maturity 18% 19 40 17% 17.5% 16% 35 15% Percentage of portfolio (by income) 14% 34 30 13% 36 4 12% 12.1% 9 25 11% 11.7% 11.7% 32 24 10% 10.7% 10.1% 9% 20 9.4% 8% 9 7% 7.3% 15 6% 16 5% 5.0% 10 4% 3% 7 3 2% 5 2.0% 1% 1.9% 0.6% 0% 0 Vacant Mar-17 Mar-18 Mar-19 Mar-20 Mar-21 Mar-22 Mar-23 Mar-24 M

  23. Slide 23: Weighted Average Lease Term

    Weighted Average Lease Term WALT remains above 5 years 6.00 5.00 4.00 3.00 2.00 1.00 - Mar 2008 Mar 2009 Mar 2010 Mar 2011 Mar 2012 Mar 2013 Mar 2014 Mar 2015 Mar 2016 Excludes properties held for sale

  24. Slide 24: Occupancy (by rental)

    Occupancy (by rental) Occupancy remains at historically high level at 99.4% 100.0% 99.0% 98.0% 97.0% 96.0% 95.0% 94.0% 93.0% 92.0% 91.0% Mar 2008 Mar 2009 Mar 2010 Mar 2011 Mar 2012 Mar 2013 Mar 2014 Mar 2015 Mar 2016 Excludes properties held for sale

  25. Slide 25: Acquisitions

    Acquisitions 240 Puhinui Road, Wiri 246 Puhinui Road, Wiri Property to be purchased from existing tenant Expansion land for future development Cost Cost $22.6m $2.85m Passing Yield 6.94% Land Area 7,200 sqm Lease Term 15 years Settlement Settlement December 2015 December 2016 8 Nugent Street, Grafto

  26. Slide 26: Developments

    Developments NZ Post Building, Wellington Foundry Drive, Christchurch Upgrade work for NZ Post’s changed requirements Redevelopment of earthquake damaged property Cost Cost $13.0m $7.5m Lease term Lease term 10 years 12 years Completion Completion January 2017 December 2016 Mighty Ape Development, H

  27. Slide 27: Snickel Lane

    Snickel Lane Laneways style development called “Snickel Lane” Part of the modernisation of the Citibank Centre in Auckland Expected positive impact on demand and rentals New retail offerings Due for completion in late 2016

  28. Slide 28: Divestments

    Divestments  Divestment of non-Core assets continues to be a key strategy for the company.  Significant progress has been made during FY16, most notably through the sale of the vacant land at the Manawatu Industrial Park.  The following properties were either sold or put on the market during the

  29. Slide 29: Valuations

    Valuations  Full year increase in property valuations of $42.2 million, up 3.2% on book values.  An interim desktop valuation was performed at 30 September 2015 with a full independent valuation carried out at 31 March 2016.  The portfolio is now valued at $1.367 billion.  Post revaluation Passi

  30. Slide 30: Strategy

    Strategy

  31. Slide 31: Portfolio Mix as at 31 March 2016

    Portfolio Mix as at 31 March 2016 TOTAL PORTFOLIO VALUE TOTAL PORTFOLIO VALUE PORTFOLIO MIX BY SECTOR BY REGION 6% 8% 23% 11% 37% 27% 67% 81% 40% Target Target Target Retail 15 – 25% Auckland 65 – 75% Core 75 – 85% Office 35 – 45% Wellington 20 – 30% Value Add properties Industrial 35 – 45% North Is

  32. Slide 32: Strategy & Capital Management

    Strategy & Capital Management  We have a clear investment strategy marked by a diversified portfolio of desirable properties that attract high-quality, long-term tenants.  The Board’s policy is for debt to total assets to be between 35 to 40% in the medium term.  The debt to total assets ratio wa

  33. Slide 33: Total Shareholder Return

    Total Shareholder Return

  34. Slide 34: Total Shareholder Return – 1 Year

    Total Shareholder Return – 1 Year 120 115 110 Gross Prices Indexed to 100 105 100 95 90 Oct-15 Mar-15 Mar-16 Nov-15 Dec-15 Jun-15 Apr-15 May-15 Jul-15 Aug-15 Sep-15 Jan-16 Feb-16 Argosy Property Limited NZ Property Gross Index NZX 50 Index

  35. Slide 35: Total Shareholder Return – 5 Years

    Gross Prices Indexed to 100 100 120 160 180 200 220 240 80 140 Mar-11 Jun-11 Sep-11 Dec-11 Mar-12 Jun-12 Sep-12 Argosy Property Limited Dec-12 Mar-13 Jun-13 Sep-13 Dec-13 Mar-14 NZ Property Gross Index Jun-14 Sep-14 Total Shareholder return – 5 Years Dec-14 Mar-15 NZX 50 Index Jun-15 Sep-15 Dec-15 M

  36. Slide 36: Concluding comments

    Argosy » www.argosy.co.nz

  37. Slide 37: Concluding comments

    Concluding comments  Argosy has a diversified portfolio of good quality and well located properties.  Our focus remains on adhering to the strategy, maintaining the portfolio’s high level of occupancy, reducing near term lease expiries and improving tenant retention rates.  We will also continue

  38. Slide 38: Thank you

    Argosy » www.argosy.co.nz

  39. Slide 39: Appendices

    > www.argosy.co.nz

  40. Slide 40: Valuations

    Valuations By location 31 Mar 15 Book value 31 Mar 16 r$ r% Market Yield Valuation Valuation 31 Mar 15 31 Mar 16 Auckland $841.4m $878.6m $920.4m $41.8m 4.8% 7.58% 7.38% Wellington $365.8m $373.3m $372.4m ($0.9m) (0.3%) 7.71% 7.65% North Island Regional $99.2m $73.5m $74.8m $1.3m 1.8% 6.77% 8.71% &

  41. Slide 41: 5 Year Summary

    5 Year Summary Net Property Income ($m) Profit Before Finance Income /(Expenses) & Other 120 Gains/(Losses) and Tax ($m) 100 100 90 80 80 70 60 60 50 40 40 30 20 20 10 0 0 2012 2013 2014 2015 2016 2012 2013 2014 2015 2016 Gross Distributable Income (cents per share) Net Distributable Income (cents p

  42. Slide 42: 5 Year Summary (cont)

    5 Year Summary (cont) Investment Properties ($m) Total Equity ($m) 1600 900 1400 800 700 1200 600 1000 500 800 400 600 300 400 200 200 100 0 0 2012 2013 2014 2015 2016 2012 2013 2014 2015 2016 NTA per share (cents) Property Revaluations ($m) 105 45 40 100 35 30 95 25 20 90 15 85 10 5 80 0 2012 2013

  43. Slide 43: 5 Year Summary (cont)

    5 Year Summary (cont) Net Lettable Area (000 sqm) WALT (years) 700,000 6 600,000 5 500,000 4 400,000 3 300,000 2 200,000 100,000 1 - 0 2012 2013 2014 2015 2016 2012 2013 2014 2015 2016 Weighted Average Cap Rate Occupancy (by rent) (Passing Yield) 100.0% 9.00% 99.0% 8.00% 98.0% 7.00% 97.0% 6.00% 96.0

  44. Slide 44: 5 Year Summary (cont)

    5 Year Summary (cont) Interest Cover Ratio Bank Debt ($m) (EBIT x Interest and Financing Costs) 600 3.50 500 3.00 2.50 400 2.00 300 1.50 200 1.00 100 0.50 - 0 2012 2013 2014 2015 2016 2012 2013 2014 2015 2016 Debt-to-Total-Assets Ratio Weighted Average Interest Rate 45.0% 8.00% 40.0% 7.00% 35.0% 6.0

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