Arena Reit · ASX:ARF
Arena Reit — FY2022 Earnings Presentation
32 slides from Arena Reit's earnings presentation, Aug 11, 2022
Slide 1: 2022 Full Year Results
ARENA REIT 2022 FULL YEAR RESULTS 11 August 2022
Slide 2: Agenda
AGENDA Highlights 3 Sustainability 5 Financial Results 6 Portfolio Update 11 Outlook 19 Questions 20 Directory 21 Appendices 22 Arena REIT acknowledges the Important Notice 32 traditional custodians of the lands on which our business and assets operate, and recognises their ongoing connection to lan
Slide 3: Highlights
$334 million $56 million HIGHLIGHTS Statutory net Net operating Positive investment and community profit profit outcomes +102% on FY21 +8.4% on FY21 • 102% growth in statutory net profit driven by increase in operating profit and investment property and derivatives revaluations. • 8.4% growth in net
Slide 4: Delivering on Strategy
DELIVERING ON STRATEGY Ongoing strategy discipline and partnership approach Portfolio management: Working in partnership: • Long portfolio WALE (by income) of 19.8 • Continue to progress solar renewable energy years. program; currently installed on 80% of Arena’s • Portfolio weighted average passing
Slide 5: Sustainability
SUSTAINABILTY Investment proposition and partnership approach drives sustainable and commercial outcomes • Sustainability is integral to Arena’s investment approach and best positions Arena to achieve positive long term commercial and community outcomes. • Arena’s portfolio facilitates access to ess
Slide 6: Financial Results
FINANCIAL RESULTS Gareth Winter Chief Financial Officer
Slide 7: Financial Performance
FINANCIAL PERFORMANCE Disciplined investment delivering ongoing earnings growth • Property income continues to increase due to: FY22 FY21 Change – Contracted annual rental growth; ($’000) ($’000) ($’000) (%) – Acquisition of operating ELC properties; and Property income 66,585 59,808 6,777 11% – ELC
Slide 8: Contributors to EPS Growth
CONTRIBUTORS TO EPS GROWTH Rental growth, acquisitions and development completions supporting EPS growth 18 0.71 0.97 -0.2 -0.38 16.3 15.2 - 16 14 EPS1 cents per share 12 10 8 6 4 2 0 FY21 EPS Contracted like-for-like Completed developments, Net operating expenses and Funding mix and costs FY22 EPS
Slide 9: Financial Position
FINANCIAL POSITION Strong balance sheet with substantial capacity • Growth in total assets continues from the acquisition of operating properties, ELC development completions and property valuation uplift. As at 30 June 2022 30 June 2021 Change • Undrawn debt capacity in excess of $100 million ($m)
Slide 10: Capital Management
CAPITAL MANAGEMENT • Syndicated borrowing facility limit increased by $100 million to $430 million and extension of maturity dates. Hedging discipline and expanded liquidity As at 30 June 2022 facility is comprised of: – $150 million expiring 31 March 2024; – $130 million expiring 31 March 2026; and
Slide 11: Portfolio Update
PORTFOLIO UPDATE Rob de Vos Managing Director
Slide 12: Portfolio Overview
PORTFOLIO OVERVIEW Number of 30 June 2022 Net valuation movement 30 June 2022 Change versus assets1 valuation versus 30 June 2021 passing yield 30 June 2021 $m $m % % bps Early Learning portfolio 252 1,287.6 +232.1 +24.2% 4.90% -94 Healthcare portfolio 11 174.3 +22.4 +14.6% 5.02% -32 Total portfolio
Slide 13: Lease Expiry Profile
LEASE EXPIRY PROFILE 1 Weighted average lease expiry of 19.8 years • Less than 4% of portfolio income subject 35% to expiry prior to FY30. Healthcare (%) 30.6% • Over 50% of portfolio lease income Early Learning (%) 30% expires after FY39. • Six ELC development completions added 25% to portfolio wit
Slide 14: Annual Rent Reviews
ANNUAL RENT REVIEWS FY22 average like-for-like rent increase of +4.1% 100% 2.2% • Attractive rent review structure with 7.5% 15.0% 7.9% 7.5% embedded income growth and inflation 10.7% 80% 7.5% 9.2% protection. % rental income 11.0% • >80% of FY23, FY24 and FY25 rent reviews 60% contracted at the hig
Slide 15: Acquisitions and Developments
ACQUISITIONS AND DEVELOPMENTS Creating and investing in accommodation that facilitates the delivery of essential community services • High quality, purpose built properties with existing and new tenant partners. • Six ELC development projects were completed in FY22. • Acquired a $38 million portfoli
Slide 16: ELC Operating Environment
ELC OPERATING ENVIRONMENT Strong macroeconomic drivers continue to support Australian early learning sector Australian Parents Workforce Participation Rate4 • Government support was improved by the introduction of the Childcare Subsidy (CCS) 100% in July 2018 and the essential nature of the services
Slide 17: ELC Portfolio
ELC PORTFOLIO 15% Arena ELC portfolio – net rent to gross operator revenue1,2 14% Portfolio strength underpinned by asset 13% 12% quality 11% 10% 9% • 100% portfolio occupancy as at 30 June 2022. 8% • Arena’s ELC portfolio operating data1 to 31 March 2022: 7% 6% o Average daily fee of $120.272: 5% H
Slide 18: Healthcare Sector & Portfolio
HEALTHCARE SECTOR & PORTFOLIO Strong long-term macroeconomic drivers remain supportive of sector • Strong structural macroeconomic drivers continue to support Australian healthcare accommodation including a growing and ageing population and increased prevalence of chronic health conditions. • Increa
Slide 19: Outlook
OUTLOOK Long term income predictability with inflation protection IN C OME GR OWTH • FY23 distribution guidance of 16.8 cents per security, an increase of 5%1 on FY22. • Attractive rent review structure with embedded income growth and inflation protection: >80% of FY23, FY24 and FY25 rent reviews co
Slide 20: Questions
QUESTIONS
Slide 21: Corporate Directory
CORPORATE DIRECTORY Please direct enquiries to Sam Rist on samantha.rist@arena.com.au ROB DE VOS GARETH WINTER SAM RIST Managing Director Chief Financial Officer Head of Investor Relations and Sustainability 21 ARENA REIT 2022 FULL YEAR RESULTS
Slide 22: Appendices
APPENDICES
Slide 23: Financial Performance
FINANCIAL PERFORMANCE FY22 FY21 Change ($’000) ($’000) ($’000) % Property income 66,585 59,808 6,777 +11% Other income 652 541 111 +21% Total operating income 67,237 60,349 6,888 +11% Property expenses (791) (602) (189) +31% Operating expenses (4,899) (4,382) (517) +12% Finance costs (5,220) (3,422)
Slide 24: Balance Sheet
BALANCE SHEET 30 June 22 30 June 21 Change ($’000) ($’000) ($’000) % Facility Cash 22,220 14,018 8,202 +59% Covenant Ratio requirement Receivables and other assets 4,692 14,246 (9,554) -67% Loan to value ratio (LVR) Maximum 50% 26.5 Investment properties 1,461,888 1,112,431 349,457 +31% Interest cov
Slide 25: Portfolio Composition and Movement
PORTFOLIO COMPOSITION AND MOVEMENT Portfolio movements (30 June 2021 to 30 June 2022)1 270 9 7 -2 15 250 6 12 230 210 250 248 248 244 237 237 190 170 150 30-Jun-21 Development sites Development projects Operating properties Operating properties 30-Jun-22 acquired completed acquired divested Existing
Slide 26: ELC Portfolio Valuations
ELC PORTFOLIO VALUATIONS Number of Value Passing yield As at 30 June 2022 properties ($m) (%) Independent ELC freehold valuations Queensland 21 123.0 4.86 Victoria 10 34.3 4.79 New South Wales 6 27.1 4.64 Western Australia 6 30.4 4.62 South Australia 2 14.0 5.15 Tasmania 3 13.6 5.53 Total independen
Slide 27: ELC Portfolio Metrics
ELC PORTFOLIO METRICS 30 June 2022 30 June 2021 Change Leased ELCs 237 226 +11 Development sites 151 12 +3 Total ELCs 252 238 +14 WALE (by income) (years) 21.1 21.43 -0.3 year Tenanted occupancy (%) 100 100 - Average passing yield (%) 4.90 5.84 -94bps Portfolio value ($m) 1,287.6 959.1 +34% Average
Slide 28: Healthcare Portfolio Metrics
HEALTHCARE PORTFOLIO METRICS 30 June 2022 30 June 2021 Change Total healthcare properties 11 11 - WALE (by income) (years) 10.9 11.9 -1 year Tenanted occupancy (%) 100 100 - Average passing yield (%) 5.02 5.34 -32bps Property portfolio ($m) 174.3 153.3 +14% Average rental increase (%) 3.5 1.7 +180bp
Slide 29: Portfolio Location Map
PORTFOLIO LOCATION MAP 1. Excludes five ELC developments that are contracted subject to planning or other conditions precedent. 29 ARENA REIT 2022 FULL YEAR RESULTS
Slide 30: 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% Jun-15 Jun-16 Jun-17 Jun-18 Jun-19 Jun-20 Jun-21 Jun-22 Jun-15 Jun-16 Jun-17 Jun-18 Jun-19 Jun-20 Jun-21 Jun-22 Jun-15 Jun-16 Jun-17 Ju
Slide 31: ELC Sales Yields versus 10 Year Bond
ELC SALES YIELDS VERSUS 10 YEAR BOND Average ELC Sales Yields versus 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% ELC Sales Yield (three month rolling average all states) 10 Year Govt Bond Yield 31 ARENA REIT 2022 FULL YEAR RESULTS
Slide 32: 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