Arena Reit · ASX:ARF
Arena Reit — FY2015 Earnings Presentation
34 slides from Arena Reit's earnings presentation, Aug 25, 2015
Slide 1: FY15 Annual Results: Delivering value for investors
For personal use only Arena REIT ARF.ASX FY15 Annual Results Delivering value for investors 25 August 2015
Slide 2: Important notice
Important notice This presentation has been prepared by Arena REIT (ARF) comprising Arena REIT Limited (ACN 602 365 186), Arena REIT Management Limited (ACN 600 For personal use only 069 761 AFSL No. 465754) as responsible entity of Arena REIT No.1 (ARSN 106 891 641) and Arena REIT No.2 (ARSN 101 06
Slide 3: Agenda
Agenda For personal use only Page 1 FY15 Overview 4 2 Financial results 6 3 Portfolio update 11 4 Outlook 21 5 Questions 24 6 Appendix: Additional information 25 Strong Active portfolio Strong operating result management investment case Page 6 Page 11 Page 23 Arena REIT FY15 Results | arena.com.au 3
Slide 4: FY15 Overview
For personal use only 4 1 FY15 Overview
Slide 5: FY15 Highlights
1 FY15 Highlights Active and successful 12 months For personal use only > Statutory Profit $61 million, (+37% on FY14) Strong > Operating Profit $22 million (+19% on FY14) > Operating Profit per security 10.2 cents (+15% on FY14) operating result > NAV per security $1.33 (+18% on FY14) > Return on E
Slide 6: Financial results
For personal use only 6 2Financial results
Slide 7: 2.1 Financial highlights
2.1 Financial highlights Strong earnings result For personal use only • 15% growth in EPS, notwithstanding reduced gearing from equity raised during FY15. • Growth in Operating Profit reflecting new investments and development pipeline post IPO. • Annual MER reduced by 31bps reflecting 6 months of s
Slide 8: 2.2 Key drivers of earnings growth
2.2 Key drivers of earnings growth 15% increase in Operating Profit per security For personal use only 11 10.5 +0.15 +0.3 10.20 15% +0.8 growth 10 -0.1 9.5 -0.2 +0.4 9 8.85 8.5 8 7.5 7 FY14 EPS Rental Growth Completed Net other New Equity Asset Borrowing FY15 EPS developments income & Issuance Dispo
Slide 9: 2.3 Financial highlights
2.3 Financial highlights Strengthened balance sheet Low increase in borrowings compared to For personal use only • funds invested due to asset sales and equity raised. • Gearing below 30% due to equity raised in February placement and DRP, positive asset revaluations and recycling capital from asset
Slide 10: 2.4 Capital management
2.4 Capital management Stable credit profile and liquidity For personal use only Key metrics FY15 FY14 Debt maturity profile and headroom ($m) Facilities (million) $175 $155 100 Drawn (million) $131 $125 80 Undrawn (million) $44 $30 44.0 Average facility term 3.0 years 4.0 years 60 Interest rate hed
Slide 11: Portfolio update
For personal use only 11 3 Portfolio update
Slide 12: 3.1 Portfolio strategy
3.1 Portfolio strategy Positive results from a disciplined approach Objectives FY2015 progress For personal use only • Successful internalisation of property management and accounting functions. • Deeper understanding of business comparative advantage issues. Landlord of choice • 100% lease option r
Slide 13: 3.2 Portfolio metrics
3.2 Portfolio metrics Strengthened portfolio fundamentals For personal use only Portfolio value Average rent review WALE +18% 3.4% +0.4 years Medical Childcare Development Total Total centres centres sites 30 June 2015 30 June 2014 No of properties 7 179 11 197 193 Value (million) $67 $323 $30 $420
Slide 14: 3.3 Portfolio composition
3.3 Portfolio composition Remixing portfolio to improve returns 197 For personal use only properties +11 193 +1 Development Sites properties +6^ +10 $1.8m 186 Development 8% yield operating Sites centres $7.6m $17m 183 6.8% yield 9.4% yield operating centres -4 FY14 Divestments Completed Acquisition
Slide 15: 3.4 Tenant profile
3.4 Tenant profile Strong recurring rental streams For personal use only Tenants by income • 40% of ARF’s income is supported by ASX listed tenants. 4% 4% • Childcare operator profitability up in FY15. 4% • Improved covenant strength with further 7% industry consolidation in childcare operators. • 2
Slide 16: 3.5 Lease maturity profile
3.5 Lease maturity profile No material lease expiries in short term For personal use only 40% 35% 30% Healthcare Portfolio WALE by income 25% Childcare Portfolio 20% 15% 10% 5% 0% FY16 FY17 FY18 FY19 FY20 FY21 FY22 FY23 FY24 FY25+ • No expiries in FY16. • Less than 5% of income expires in next five
Slide 17: 3.6 FY15 completed developments
3.6 FY15 completed developments Successful completion of seven childcare centre projects For personal use only 7 projects Location Maddingley, Port Augustine Griffin, Seaford Caloundra, Marian, Victoria Douglas, Heights*, Queensland Meadows, Queensland Queensland Queensland Queensland SA No. of 103
Slide 18: 3.7 Development pipeline
3.7 Development pipeline Creating quality investments For personal use only 3 properties in construction phase 8 sites $45 million 1 Estimated total project ready to commence construction costs 8.4% Average initial yield 11 4 awaiting development approval 10% Total asset value sites 2 sites already
Slide 19: 3.8 Portfolio value movement
3.8 Portfolio value movement Positive portfolio gains as at 30 June 2015 For personal use only Number of Value Passing Yield 6 month value Valuations assets ($m) Movement (%) Childcare Independent Valuations 18 30 7.9% 18.7% Childcare Director Valuations 172 323 8.0% 6.8% Healthcare Director Valuati
Slide 20: 3.9 Property market environment
3.9 Property market environment Competitive market conditions For personal use only • High investor demand in less than $5 million market likely to continue. • Sales evidence indicates childcare yields during the year are in the range of approximately 6.5% to 7.5%, potential for further compression
Slide 21: Outlook
For personal use only 21 4 Outlook
Slide 22: 4.1 Expected distribution growth
4.1 Expected distribution growth Solid growth set to continue into FY16 For personal use only +7% 11.00 10.71 FY16 DPS 10.50 10.0 10.00 9.50 Cents per security 9.00 8.75 8.50 8.0 8.00 7.50 7.00 FY13 FY14 FY15 FY16 (Actual) (Guidance) 1 On a status quo basis assuming no new acquisitions or dispositio
Slide 23: 4.2 Investment case
4.2 Investment case Solid fundamentals For personal use only Relatively Geographic Favourable Experienced Strong Long leases diversity macro internalised balance fundamentals management sheet Weighted average Childcare centres Growing population Arena REIT’s lease expiry (WALE) located across all 6
Slide 24: Questions?
For personal use only 24 5Questions?
Slide 25: Appendices: Additional information
For personal use only Appendices: 6 Additional information 25
Slide 26: 6.1 Income statement
6.1 Income statement Change • 18% lease rental growth from asset 30 June 30 June acquisitions and new developments For personal use only $ million 2015 2014 $ (%) over FY14 / FY15. Income • Responsible Entity Management Lease rental 31.2 26.4 +4.8 +18% fees ceased post internalisation Other 0.5 0.1
Slide 27: 6.2 Balance sheet
6.2 Balance sheet Secure financial position Change • Cash includes funds for near term 30 June 30 June For personal use only $ million 2015 2014 $ % property acquisition settlements and development capex, plus liquid funds Cash 10.9 3.9 +7.0 +179% for AFSL. Receivables and other assets 8.5 15.5 -7.0
Slide 28: 6.3 Interest rate management
6.3 Interest rate management Hedge maturity profile extended $m For personal use only 120 Hedging profile by financial year % Hedging profile 30 June 2015 100 3.6 Hedge cover 69% Weighted average hedge interest rate 2.62% 80 3.1 Weighted average hedge term 3.5 years 60 2.6 40 2.1 20 0 1.6 FY16 FY17
Slide 29: 6.4 Childcare portfolio metrics
6.4 Childcare portfolio metrics Remixing of portfolio has improved portfolio ratios For personal use only Portfolio overview June 2015 June 2014 Change Leased childcare centres 177 174 +3 Available for sale / lease 2 2 - Development sites 11 10 +1 Total properties 190 186 +4 WALE (by income) years 9
Slide 30: 6.5 Childcare state by state passing yields
6.5 Childcare state by state passing yields Strong cap rate compression For personal use only Number of Carrying Rent (pa) Passing Yield Portfolio overview assets value ($’000) ($’000) Queensland 69 130,567 11,232 8.6% New South Wales 25 39,105 2,932 7.5% Victoria 49 87,855 6,609 7.5% Tasmania 6 9,0
Slide 31: 6.6 Portfolio value movement
6.6 Portfolio value movement Second half positive portfolio gains Number of Value ($’000) Passing Yield Movement For personal use only Independent Valuations assets (%) Queensland 12 18,870 8.0% 20.7% Victoria 2 3,790 7.2% 15.0% South Australia 4 7,200 7.9% 15.8% Total Independent Valuations 18 29,8
Slide 32: 6.7 Market sales evidence
6.7 Market sales evidence Recent sales show childcare centre yields continuing to firm New South Wales 11% Victoria For personal use only 12% 10% 11% 9% 10% 8% 9% 8% 7% 7% 6% 6% 5% 5% 4% 4% Jan-11 May-12 Sep-13 Feb-15 Jan-11 May-12 Sep-13 Feb-15 Metro Regional Linear (Trend) Metro Regional Canberra
Slide 33: Further information
Further information For personal use only Bryce Mitchelson Investor Services • Managing Director • Freecall 1800 008 494 or info@arena.com.au • 03 9093 9120 • Tanya Devine, Investor Relations Manager • bryce.mitchelson@arena.com.au tanya.devine@arena.com.au Visit us at www.arena.com.au Arena REIT FY
Slide 34: For personal use only
For personal use only