Argosy Property Limited · NZX:ARG
Argosy Property — H1 FY2021 Earnings Presentation
44 slides from Argosy Property's earnings presentation, Nov 26, 2020
Slide 1: FY21 Interim Results: Managing through Covid-19
FY21 Interim Results Managing through Covid-19 26.11.2020
Slide 2: CEO quote on portfolio diversity
“Our strength lies in the diversity of our portfolio by sector, location and tenant mix, providing flexibility to support our tenants changing needs, ensuring a resilient business through various economic cycles.” Peter Mence CEO 2—
Slide 3: Agenda
Agenda PRESENTED BY Highlights 4 Strategy/Portfolio 6 Financials 19 Peter Mence Leasing Update 29 CEO Focus and Outlook 33 Appendices 35 Dave Fraser CFO Note: This results presentation should be read in conjunction with the NZX release dated 26 November 2020. Due to rounding, numbers presented in th
Slide 4: Highlights
Highlights 4—
Slide 5: FY21 Interim Result
FY21 Interim Result 21.5% 3.8% Net distributable income Annualised rent increase on rents increase reviewed $1.41 A 8.5% increase in NTA driven by a $125m A 3rd successful 7 year green bond $79.8m revaluation gain issue 6.45cps Full year FY21 dividend guidance increased by 1.6% 5—
Slide 6: Strategy / Portfolio
i Strategy / Portfolio 6— Argosy
Slide 7: Create. Manage. Own.
Create. Manage. Own. Proactive delivery of sustainable growth Manage all elements of the business to deliver the right outcomes for all our stakeholders. Own the right assets, with the right attributes in the right New Zealand locations. 7—
Slide 8: 2021 Focus
2021 Focus Create Maintain our green / sustainable focus on all acquisition and development Proactive delivery of opportunities. sustainable growth. Continue transitioning Value Add opportunities to drive earnings and capital growth. o Make appropriate risk / reward decisions, with pre-commitments
Slide 9: $1.92B Portfolio Snapshot
$1.92B Portfolio Snapshot Note: Portfolio value excludes assets held for sale. 9—
Slide 10: Portfolio highlights
Portfolio highlights 99.4% 5.7yrs Weighted average lease term Occupancy (WALT) 5.2% $79.8m Desktop revaluation gain, 4.3% Like for like rental growth above 30 September book values 10 —
Slide 11: Portfolio at a glance
Portfolio at a glance $1.92 BILLION1 @ 30 SEPTEMBER 2020 TOTAL PORTFOLIO VALUE TOTAL PORTFOLIO VALUE TOTAL PORTFOLIO VALUE BY SECTOR BY REGION BY ASSET MIX 6% 15% 2% 12% 27% 43% 42% 71% 82% Target Target Target Bands Bands Band Industrial 45-55% Auckland 65-75% 75-90% Core Office Wellington 20-30% -
Slide 12: Sector Summary
Sector Summary INDUSTRIAL OFFICE RETAIL LARGE FORMAT Number of buildings Number of buildings Number of buildings 34 16 5 Market value of assets ($m) Market value of assets ($m) Market value of assets ($m) $821.1 $810.2 $285.8 Occupancy (by income) Occupancy (by income) Occupancy (by income) 100% 98.
Slide 13: Value Add
Value Add OPPORTUNITIES TO DRIVE CAPITAL GROWTH AND EARNINGS Value Add properties total 12% of the Valuation1 portfolio. Property - Value Add Sector Location $m Several development projects have 5 Unity Drive, Albany Industrial Auckland 7.6 either completed (e.g. 54-56 Jamaica 15 Unity Drive, Al
Slide 14: Green Strategy
Green Strategy SH1 Mt Richmond Properties Great South Road 12-16 32 Bell Ave Properties 18-20 14 —
Slide 15: 8-14 Mt Richmond Drive & 2 Doraval Place, Mt Wellington
8-14 Mt Richmond Drive & 2 Doraval Place, Mt Wellington (Mt Richmond Properties) Acquisition metrics Acquisition price $76 million Expected settlement 27 March 2021 Initial Yield 4.7% Lease term 1. To December 2027, with break clause in January 2024 2. February 2022 (Licence Agreement) NLA 10.64 hec
Slide 16: Current Developments
Current Developments GREEN DEVELOPMENTS REMAIN THE KEY FOCUS Cost to Forecast Development Major Tenant Type Location complete completion FY 2021 FY 2022 Sep-20 Mar-21 Sep-21 Mar-22 Underway / commenced 7WQ Various Crown tenants OFF WTN 19.3 Mar-21 1 8-14 Willis Street Statistics New Zealand OFF/RET
Slide 17: 7WQ Leasing, Façade Works and Insurance
7WQ Leasing, Façade Works and Insurance PROGRESS CONTINUES Reinstatement / Seismic Works Reinstatement of all office floors now complete. Residual make-good works around the interchange are nearing completion. The building is currently 82% leased with a WALT of 8.7 years. Argosy is in discussions wi
Slide 18: Revaluations
Revaluations CAP RATE FIRMING AND RENTAL GROWTH KEY DRIVERS OF INCREASE For the six months to 30 September, the portfolio Market Yield1 30 Sep 20 30 Sep 20 recorded a revaluation gain of Book Value Valuation Δ Δ 30 Sep 20 $79.8m or 4.3%. ($m) ($m) 31 Mar 20 $m % The portfolio market yield firmed Auc
Slide 19: Financials
Financials 19 —
Slide 20: Income Reconciliation
Income Reconciliation STRONG OPERATIONAL RESULTS OFFSET BY ONE-OFF COVID-19 IMPACTS 20 —
Slide 21: Financial Performance
Financial Performance RESILIENT OPERATIONAL PERFORMANCE Like-for-like gross rental growth of 1H21 1H20 5.2% during the period. $m $m Strong gross rental growth was Net property income 51.1 51.0 offset by Covid-19 rental Administration expenses (5.9) (5.6) abatements and lower insurance proceeds at 7
Slide 22: Distributable Income
Distributable Income INCREASE IN NET DISTRIBUTABLE INCOME PER SHARE 1H21 1H20 After non-cash adjustments and $m $m current tax, net distributable Profit before income tax 115.9 81.3 income increased by $6.4 million Adjusted for: or 21.5%. Revaluations gains (79.8) (50.8) Tax expense was lower due to
Slide 23: Investment Properties
Investment Properties GROWTH UNDERPINNED BY REVALUATION GAINS Capitalised costs: Driven by large developments including 8-14 Willis Street/360 Lambton Quay, 7WQ and completion of 54 Jamaica Drive development. Transfers: Hutt Road and 80 Springs Rd transferred out and Albany Lifestyle Centre transfer
Slide 24: NTA per share reconciliation
NTA per share reconciliation REVALUATION GAIN CONTRIBUTES 10 CENTS PER SHARE 24 —
Slide 25: Balance Sheet and Gearing
Balance Sheet and Gearing CAPITAL STRUCTURE SOUND, WITHIN BANDS AND WELL BELOW COVENANT 1H21 FY20 The balance sheet position is $m $m sound. Investment properties 1,917.1 1,782.3 Argosy recycled $73.5 million of Assets held for sale 38.2 84.6 non Core assets during the period which no longer met
Slide 26: Funding & Interest Rate Management
Funding & Interest Rate Management COST OF FUNDING DECREASING During the interim period, Argosy 1H21 FY20 added a new banking facility, Weighted average duration of debt facility 3.2 years 3.6 years Tranche I, for $75 million. This new Tranche expires in May 2024. Weighted average interest rate1 3
Slide 27: Debt Profile
Debt Profile 3RD GREEN BOND ISSUE INCREASES TENOR The issue of $125m of senior secured fixed rate 7 year green bonds in October at a coupon of 2.20% (1.95% margin) resulted in Argosy’s weighted average debt facility term increasing from 3.2 years to 4.0 years. The green bond issue further divers
Slide 28: Dividends
Dividends RESILIENT AND SUSTAINABLE DIVIDENDS A 2nd quarter cash dividend of 1.6375 cents per share has been declared, with imputation credits of 0.0709 cents per share attached, and will be paid on 23 December 2020. The Dividend Reinvestment Plan will be available for participation in the 2nd q
Slide 29: Leasing Update
7 a? SEN. —~ ¥J Update sing Lea
Slide 30: Leasing Success
Leasing Success STRONG LEASING OUTCOMES OVER 1H21 Argosy leased 55,997m2 across the portfolio over 1H21, or 10% of the portfolios total net lettable area. There were 25 transactions over the period, with 10 renewals, 7 extensions and 8 new leases. Notable transactions over the first six months inc
Slide 31: Lease Expiry
Lease Expiry STABLE PROFILE OVER THE MEDIUM TERM 5yr average income percentage expiring in any year ~9%. Largest single expiry over the next 10 years is 9.5% in March-27 being the Ministry for Business, Innovation and Employment, in 15-21 Stout Street. 0.6% Very low portfolio vacancy at 30 Septe
Slide 32: Sector Summary
Sector Summary INDUSTRIAL OFFICE RETAIL LARGE FORMAT ► Net absorption continues to drive ► Flexible working environments ► Equilibrium with on-line retailing is yet additional supply. continue to drive a disconnect to show full effect. A move to online between employment growth and retailing has pot
Slide 33: Focus and Outlook
Focus and Outlook 33 —
Slide 34: 2020/21 Outlook
2020/21 Outlook The current economic outlook remains challenging with some sectors (e.g. tourism and education) likely to remain under significant pressure. New Zealand monetary policy settings should remain stimulatory for the economy over the short to medium term. Strong execution of strategy and
Slide 35: Appendices
Appendices —$——————$—— # ————— eel a
Slide 36: Adjusted Funds From Operations (AFFO)
Adjusted Funds From Operations (AFFO) 1H21 1H20 $m $m Profit before income tax 115.9 81.3 Revaluation gains on investment property (79.8) (50.8) Realised (gains)/losses on disposal of investment properties (1.0) 0.0 Derivative fair value (gain)/loss (0.1) 3.6 Earthquake expenses 0.5 0.2 Gross distri
Slide 37: Rent Reviews by Type, Sector & Location
Rent Reviews by Type, Sector & Location % of Total Previous Rent % of rent New rent $ Increase Annualised $ Annualised % Type # % Increase Annualised (000's) reviewed (000's) (000's) Increase (000's) Increase Increase Total 53 36,140 100% 38,893 2,753 7.6% 1,358 100.0% 3.8% By review type Fixed 36 1
Slide 38: Rent Reviews – Auckland & Wellington
Rent Reviews – Auckland & Wellington % of Total Location # Previous Rent % of rent New Rent $ Increase Annualised $ Annualised Annualised % ($000's) reviewed ($000's) (000's) % Increase Increase (000's) Increase Increase Auckland Industrial 11 11,283 49% 11,680 396 3.5% 359 26% 3.2% Office 17 4,708
Slide 39: Portfolio Metrics
Portfolio Metrics DEFENSIVE AND RESILIENT TENANTS, HIGH ESSENTIAL SERVICE EXPOSURE 39 —
Slide 40: Portfolio Snapshot
Portfolio Snapshot HIGH PORTFOLIO QUALITY IS BEING REFLECTED IN OUR 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 FY17 FY18 FY19 FY20 1H21 FY17 FY18 FY19 FY20 1H21 Net Tangible Assets Debt-to-total-assets $1.60 40.0% $1.40 35.0% $1.20 30.0
Slide 41: Portfolio Summary - Industrial
Portfolio Summary - Industrial Valuation WALT Net lettable Vacant Contract Property Address $000s (years) area (m2) Space (m2) Yield Industrial Auckland 90 - 104 Springs Road, East Tamaki $6,850 6.4 3,885 - 5.42% 8 Forge Way, Panmure $32,100 10.2 4,231 - 4.79% 10 Transport Place, East Tamaki $31,500
Slide 42: Portfolio Summary - Office
Portfolio Summary - Office Valuation WALT Net lettable Vacant Contract Property Address $000s (years) area (m2) Space (m2) Yield OFFICE Auckland 99-107 Khyber Pass Road, Grafton $17,000 3.9 2,509 - 5.65% 101 Carlton Gore Road, Newmarket $28,100 3.1 4,821 - 6.43% 8 Nugent Street, Grafton $51,300 3.5
Slide 43: Portfolio Summary - Retail
Portfolio Summary - Retail Valuation WALT Net lettable Vacant Contract Property Address $000s (years) area (m2) Space (m2) Yield RETAIL Auckland Albany Mega Centre and 11 Coliseum Drive, Albany $147,000 3.8 33,792 - 6.22% Albany Lifestyle Centre $87,500 6.4 24,955 - 7.09% 50 & 54-62 Cavendish Drive,
Slide 44: 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