Slide 1: FY19 Annual Results
ARENA REIT FY19 ANNUAL RESULTS Strong earnings growth, disciplined strategy 13 August 2019
Slide 2: Agenda
AGENDA Highlights 3 Financial Results 5 Portfolio Update 9 Outlook 17 Questions 20 Directory 21 Appendices 22 Important Notice 34 2 ARENA REIT 2019 ANNUAL RESULTS
Slide 3: FY19 Highlights
$37.7m 13.8 cents FY19 HIGHLIGHTS Net operating Earnings per share Strong result and earnings growth profit (EPS)3 • Annual underlying rental income growth: average like-for-like rent reviews +8.7% on FY18 +5.3% on FY18 +3.6%1. • Healthcare portfolio leases with existing tenant partner Healius exten
Slide 4: Portfolio Performance
PORTFOLIO PERFORMANCE Disciplined strategy supporting positive outcomes Working in partnership: Lease management: • Acquisition of $24 million portfolio of • 100% occupancy. specialist disability accommodation • Average like-for-like rent increase of properties. +3.6%1. • Healthcare portfolio leases
Slide 5: Financial Results
FINANCIAL RESULTS Gareth Winter Chief Financial Officer
Slide 6: Financial Performance
FINANCIAL PERFORMANCE • Continued growth in property New investment and rental increases supporting earnings and income from: – Annual rental growth; distribution growth – Investment in operating healthcare and ELC properties, FY19 FY18 Change including a $24 million portfolio of specialist disabili
Slide 7: Financial Position
FINANCIAL POSITION Solid increase in portfolio and net assets • Growth in total assets arising from new investment, ELC developments and revaluations. • Increase in borrowings to fund new investment As at 30 June FY19 FY18 Change offset by equity issue in May-19. ($m) ($m) % Total assets 825.7 725.8
Slide 8: Capital Management
CAPITAL MANAGEMENT • Syndicated borrowing facility limit increased by $50 million to $280 million, comprised of: Low risk funding profile and refreshed capacity – $130 million expiring 31 March 2022; and – $150 million expiring 31 March 2023. • $50 million fully underwritten institutional placement
Slide 9: Portfolio Update
PORTFOLIO UPDATE Rob de Vos Managing Director
Slide 10: Portfolio Overview
PORTFOLIO OVERVIEW Number of 30 June 2019 30 June 2019 Net revaluation movement Change assets valuation passing yield $m $m % % bps ELC portfolio 216 676.2 21.6 3.5 6.44 (2) Healthcare portfolio 10 122.1 10.8 12.7 6.08 (77) Total portfolio 226 798.3 32.4 4.6 6.38 (14) Sector diversity (by value) Geo
Slide 11: Lease Expiry Profile
LEASE EXPIRY PROFILE • Healius portfolio leases extended by an average of 10.6 years. 1 Weighted average lease expiry of 14.1 years • Four completed ELC developments added to 18% portfolio each with initial lease term of 20 years. Healthcare 0.8% 6.3% Early Learning 16% • Eight operating ELC and hea
Slide 12: Annual Rent Reviews
ANNUAL RENT REVIEWS Average like-for-like rent increase of +3.6%1 • FY19 average market rent review increase of +9.4%1. 100% 4.7% 3.9% 7.6% 9.1% 4.0% • FY20 market rent reviews are subject to 0-7.5% 12.1% 10.4% 9.5% cap and collar. 13.3% 80% 'Fixed' or 'CPI with min. ratchet 2.5%' review 9.9% CPI re
Slide 13: Acquisitions and Developments
ACQUISTIONS AND DEVELOPMENTS High quality, purpose built properties Total cost Number of properties Initial yield on cost (%) Initial lease term (years) ($m) Operating ELC acquisitions 5 23.0 6.7 19.0 Operating healthcare acquisitions 3 24.0 6.0 15.0 ELC development completions 4 25.0 6.4 20.0 Total
Slide 14: Development Completions
DEVELOPMENT COMPLETIONS Efficient delivery maximises earnings accretion Metro VIC Metro QLD Metro QLD Metro SA Regional QLD Metro QLD Metro VIC Metro VIC Regional NSW Metro VIC Regional QLD • 37 developments completed over past seven Metro VIC Metro VIC years at a total cost of $170 million with eig
Slide 15: ELC Sector
ELC SECTOR 64% Female Workforce Participation Rate2 45% LDC participation rate3 44% 62% Supportive underlying demographics 60% 43% 42% 58% 41% Demand 56% 40% 39% 54% • Strong long day care (LDC) participation rate. 38% 52% 37% • Record female workplace participation rate. 50% June-08 June-10 June-12
Slide 16: Arena REIT ELC Portfolio
ARENA REIT ELC 15% Arena ELC portfolio – net rent to gross operator revenue1 PORTFOLIO 14% 13% 12% Pro-actively managed and well- 11% 10% placed for current conditions 9% 8% 7% Portfolio operating data to 31 March 20191 6% 5% • Average centre occupancy increased. HY16 FY16 HY17 FY17 HY18 FY18 HY19 F
Slide 17: Outlook
OUTLOOK
Slide 18: Outlook
OUTLOOK Strong underlying earnings growth I NCOM E G R OWT H • FY20 distribution guidance of 14.3 cents per security, an increase of 5.9%1 on FY19. • Annual rent increases, of which market rent reviews comprise: o Approximately 8% of income in FY20; and o Approximately 9% of income in FY21. • Full i
Slide 19: FY20 DPS Guidance 14.3 Cents
FY20 DPS Earnings and distributions per security (cents) GUIDANCE 20 14.3 CENTS (+5.9%) 1 15 14.3 13.5 13.8 12.8 13.1 12.0 12.3 Earnings and distribution 10.0 10.2 10.9 11.1 growth underpinned by 10 8.8 8.9 core earnings drivers 5 1. FY20 Distribution guidance is estimated on a status quo basis assu
Slide 20: Questions
QUESTIONS
Slide 21: Corporate Directory
CORPORATE DIRECTORY Please direct all enquiries to Sam Rist on samantha.rist@arena.com.au or +61 3 9093 9000 ROB DE VOS GARETH WINTER SAM RIST Managing Director Chief Financial Officer Head of Investor Relations 21 ARENA REIT 2019 ANNUAL RESULTS
Slide 22: Appendices
APPENDICES
Slide 23: Historical Financial Data
HISTORICAL FINANCIAL DATA Period ended/as at 30 June 2019 2018 2017 2016 2015 2014 ASX closing price ($) 2.74 2.15 2.25 1.99 1.54 1.20 Securities on issue (m) 291.3 269.4 234.8 232.0 228.3 211.5 Market capitalisation ($m) 798.2 579.1 528.3 461.7 351.6 253.8 Total annual securityholder return (%) 34.
Slide 24: Historical Portfolio Data
HISTORICAL PORTFOLIO DATA Period ended/as at 30 June 2019 2018 2017 2016 2015 2014 Number of properties 226 214 205 203 197 193 Sector diversification (by value) Early Learning (%) 85 88 86 84 84 81 Healthcare (%) 15 12 14 16 16 19 Occupancy (%) 100 100 100 100 99 99 Weighted Average Lease Expiry (W
Slide 25: Financial Performance
FINANCIAL PERFORMANCE FY19 FY18 Change ($’000) ($’000) ($’000) % Property income 48,744 42,673 6,071 +14% Other income 583 770 (187) -24% Total operating income 49,327 43,443 5,884 +14% Property expenses (360) (377) 17 -4% Operating expenses (3,937) (3,493) (444) +13% Finance costs (7,337) (4,883) (
Slide 26: Balance Sheet
BALANCE SHEET 30 Jun 19 30 Jun 18 Change ($’000) ($’000) ($’000) % Borrowing Cash 8,134 8,654 (520) -6.0% Tranche 1 Tranche 2 Total Summary Receivables and other assets 8,453 6,968 1,485 +21.3% Total facility $130m $150m $280m Investment properties 798,318 699,409 98,909 +14.1% Amount drawn $88.5m $
Slide 27: Portfolio Composition and Movement
PORTFOLIO COMPOSITION AND MOVEMENT Portfolio movements (30 June 2018 to 30 June 2019) 240 230 6 220 5 8 -1 210 5 4 200 190 220 220 180 214 214 209 209 170 160 150 30-Jun-18 Development sites Development projects Operating properties Operating centre 30-Jun-19 acquired completed acquired divested Exi
Slide 28: ELC Portfolio Valuations
ELC PORTFOLIO VALUATIONS Number of Value Passing yield As at 30 June 2019 properties ($m) (%) Independent ELC freehold valuations Victoria 14 63.2 6.1 Queensland 9 26.5 6.8 Western Australia 8 22.1 5.9 New South Wales 5 13.6 6.0 Tasmania 3 10.1 6.6 South Australia 1 6.1 6.7 Independent ELC leasehold
Slide 29: ELC Portfolio Metrics
ELC PORTFOLIO METRICS 30 June 2019 30 June 2018 Change Leased ELCs 210 202 +4.0% Development sites 6 5 +20% Total ELCs 216 207 +4.3% WALE (by income) (years) 14.1 14.2 -0.1 year Tenanted occupancy (%) 100 100 - Average passing yield (%) 6.44 6.46 -2bps Portfolio value ($m) 676.2 614.0 +10.1% Average
Slide 30: Healthcare Portfolio Metrics
HEALTHCARE PORTFOLIO METRICS 30 June 2019 30 June 2018 Change Total healthcare properties 10 7 +43% WALE (by income) (years) 14.2 4.5 +9.7 years Tenanted occupancy (%) 100 100 - Average passing yield (%) 6.08 6.85 -77bps Property portfolio ($m) 122.1 85.4 +43% Average rental increase (%) 2.6 1.3 +13
Slide 31: Portfolio Location Map
PORFTOLIO LOCATION MAP 31 ARENA REIT 2019 ANNUAL RESULTS
Slide 32: ELC Market Transactions
ELC MARKET TRANSACTIONS NSW passing yields QLD passing yields VIC 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% Jan-14 Jan-15 Jan-16 Jan-17 Jan-18 Jan-14 Jan-15 Jan-16 Jan-17 Jan-18 Nov-14 Nov-15 Nov-16 Nov-17 Nov-18 Nov-19 Sydney Other NSW Brisba
Slide 33: ELC Sales Yields versus 10 Year CGB
ELC SALES YIELDS VERSUS 10 YEAR CGB Average ELC Sales Yield versus 10 Year Aust Government Bonds Yield 10.0% 9.0% 8.0% 7.0% 6.0% 5.0% 4.0% 3.0% 2.0% 1.0% 0.0% ELC Sales Yield (All states) 10 Year Govt Bond Yield 33 ARENA REIT 2019 ANNUAL RESULTS
Slide 34: 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). The informat