Slide 1: Arena REIT 2019 Half Year Results
PAGE 1 Arena REIT FY18 Annual Results Resilience of earnings and distribution growth 21 August 2018 Arena REIT 2019 Half Year Results Strong core earnings, lease extensions and acquisitions 19 February 2019 Arena REIT / HY19 Results / www.arena.com.au
Slide 2: Agenda
Agenda PAGE 2 Highlights 3 Financial Results 5 Portfolio Update 9 Outlook 19 Questions 23 Directory 24 Appendices 25 Important notice 35 Arena REIT / HY19 Results / www.arena.com.au
Slide 3: Financial highlights for HY19
Financial highlights for HY19 PAGE 3 Operating performance underpinned by predictable and growing income • Strong earnings and growth Net operating Earnings per Distributions per supported by: profit security (EPS)1 security (DPS) - portfolio rent reviews; - full impact of FY18 and HY19 Increase 30%
Slide 4: Portfolio highlights for HY19
Portfolio highlights for HY19 PAGE 4 Active management further strengthens portfolio position • HY19 rent reviews provide Average rent Weighted Average Portfolio value predictable underlying rental review increase Lease Expiry income growth: (WALE)1 - achieved average market rent Increase 30% review
Slide 5: Financial Results
PAGE PAGE PAGE 55 5 Financial FinancialResults Results Gareth Winter, Chief Financial Officer Gareth Winter, Chief Financial Officer Financial Results Gareth Winter, Chief Financial Officer Arena REIT / HY19 Results / www.arena.com.au
Slide 6: Financial performance
Financial performance PAGE 6 New investment supporting strong operating earnings HY19 HY18 Change • Continued growth in operating income from: ($’000) ($’000) ($’000) (%) structured annual rental Property income 23,729 20,701 3,028 15% growth; and Other income 265 317 (52) -16% ELC acquisitions
Slide 7: Financial position
Financial position PAGE 7 Further capacity to fund additional acquisition opportunities As at 31 Dec 2018 30 June 2018 Change • Increase in investment ($m) ($m) (%) properties primarily due to Total assets 763.7 726.1 +5% investment in ELC development expenditure, Investment properties 742.9 699.4 +
Slide 8: Capital management
Capital management PAGE 8 Well hedged, low risk funding profile 31 Dec 30 June 31 Dec 30June As at Change As at Change 2018 2018 2018 2018 Borrowings $196.0m $179.5m +9% Hedge cover 79% 78% +100bps Borrowing facility limit $280m1 $230m +22% Weighted average 2.42% 2.44% -2bps hedge Gearing 25.7% 24.7
Slide 9: Portfolio Update
PAGE PAGE PAGE 99 9 Portfolio PortfolioUpdate Update Rob de Vos, Head of Property Rob de Vos, Head of Property Portfolio PortfolioUpdate Update Rob de Vos, Head of Property Rob de Vos, Managing Director Arena REIT / HY19 Results / www.arena.com.au
Slide 10: Portfolio performance
Portfolio performance PAGE 10 Value adding business strategy supporting positive outcomes Lease management Working in partnership • 100% occupancy. • Healthcare portfolio leases with tenant partner Healius • Average like-for-like rent extended by an average of review increase +3.1%. 10.6 years. • Av
Slide 11: Healthcare portfolio
Healthcare portfolio PAGE 11 Partnership approach provides an increase in WALE and portfolio value • Healthcare portfolio leases with Healius (formerly Primary Health Care Limited) extended from average 4 years to 14.6 years. • Expiries on initial terms now staggered from FY29 to FY36. • Healthcare
Slide 12: Portfolio overview
Portfolio overview PAGE 12 Healthcare portfolio lease extension increases predictability of earnings 31 Dec 2018 31 Dec 2018 Number of Net revaluations Change valuation passing yield assets movement (bps) ($m) (%) ($m) (%) ELC portfolio 211 646.6 9.4 1.5 6.50 4 Healthcare portfolio 7 96.3 9.2 10.8 6
Slide 13: Lease expiry profile
Lease expiry profile PAGE 13 Weighted average lease expiry increased to 14.21 years • 3 completed developments added to portfolio each with initial lease term of 20 years • Less than 1% of portfolio income subject to expiry prior to FY2024 • Less than 25% of portfolio income subject to expiry prior
Slide 14: Annual rent review profile
Annual rent review profile PAGE 14 HY19 average like-for-like rent review increase of +3.1% 100% 8.0% 9.6% 8.0% 7.0% HY19 rent review summary: 80% – Average like-for-like rent review increase of +3.1% (does not include % of total portfolio income renegotiated leases). 60% 1.5% – 19 market rent revie
Slide 15: ELC acquisitions and developments
ELC acquisitions and developments PAGE 15 High quality purpose built properties acquired, developments completed Initial yield on Initial lease term Quantity Total cost ($m) Number of places cost (%) (yrs) ELC acquisitions 2 10.61 6.7 17.8 231 ELC development completions 3 20.4 6.3 20.0 328 Total/We
Slide 16: ELC operating conditions
ELC operating conditions PAGE 16 New centre supply growth slowed, underlying demand demographics remain supportive • New centre supply growth slowed in last quarter of calendar year 2018 • Female labour force and long day care participation rates remain strong • Tenant partners report positive impac
Slide 17: Arena REIT ELC portfolio
Arena REIT ELC portfolio PAGE 17 Proactively managed ELC portfolio, well placed in current market • Operator comparatives over the six month period to 31 December 2018 − Average daily fee increased from $97.51 to $101.18 − Average centre occupancy rate increased − Net rent to gross revenue ratio sta
Slide 18: Healthcare acquisition
Healthcare acquisition PAGE 18 Post balance date acquisition of specialised use properties • Post balance date acquisition of $24 million portfolio of three specialist disability accommodation properties in metropolitan Adelaide on an initial income yield of 6% on purchase price. • Leased to SACARE,
Slide 19: Summary and outlook
PAGE PAGE19 19 Summary Outlook and outlook Outlook Arena REIT / HY19 Results / www.arena.com.au
Slide 20: Outlook
Outlook PAGE 20 Growing portfolio underpinned by supportive macroeconomic themes • Income growth – Contracted rent increases, higher level of market rent reviews scheduled for completion in 2H19 – Full impact of FY18 and FY19 acquisitions and development completions – Four development projects with
Slide 21: Strategically well positioned
Strategically well positioned PAGE 21 High level of long term contracted earnings with growth prospects Quality portfolio with annual rent Predictable reviews and long WALE income stream Population growing, Capacity Arena’s investment Supportive Active capital government policy focused to fund new o
Slide 22: FY19 DPS guidance reaffirmed – 13.5 cents
FY19 DPS guidance reaffirmed – 13.5 cents PAGE 22 (+5.5%)1 Earnings and distributions per security (cents) 16 13.5 14 12.8 13.1 12.3 12.0 12 11.1 10.9 10.0 10.2 10 8.8 8.9 8.0 8.2 8 6.75 6.77 6 4 2 - FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY19 DPS (cents) EPS (cents) FY19 DPS Guidance 1 FY19 Distributio
Slide 23: Questions
PAGE PAGE23 23 Summary and outlook Questions Questions Questions Arena REIT / HY19 Results / www.arena.com.au
Slide 24: Directory
Directory PAGE 24 www.arena.com.au Rob de Vos Gareth Winter Enquiries to Sam Rist Managing Director Chief Financial Head of Investor Officer Relations rob.devos@arena.com.au gareth.winter@arena.com.au samantha.rist@arena.com.au +61 3 9093 9000 Arena REIT / HY19 Results / www.arena.com.au
Slide 25: Appendices
PAGE PAGE PAGE 25 23 25 Appendices Appendices Arena REIT / HY19 Results / www.arena.com.au
Slide 26: Financial performance – HY19
Financial performance – HY19 PAGE 26 HY19 HY18 Change ($’000) ($’000) ($’000) % Property income 23,729 20,701 3,028 15% Other income 265 317 (52) (16%) Total operating income 23,994 21,018 2,976 14% Property expenses (495) (401) (94) 23% Operating expenses (1,853) (1,687) (166) 10% Finance costs (3,
Slide 27: Balance sheet – 31 December 2018
Balance sheet – 31 December 2018 PAGE 27 31 Dec 18 30 Jun 18 Change ($’000) ($’000) ($’000) % Cash 7,758 8,654 (896) (10%) Receivables and other assets 2,271 7,208 (4,937) (68%) Investment properties 742,853 699,409 43,444 6% Intangibles 10,816 10,816 - 0% Total assets 763,698 726,087 37,611 5% Trad
Slide 28: Borrowing and hedging summary
Borrowing and hedging summary PAGE 28 31 Dec 30 Jun Tranche 1 Tranche 2 Tranche 32 Total 2018 2018 Hedge cover 79% 78% Total facility $80m $150m $50m $280m Weighted average hedge interest rate 2.42% 2.44% Amount $80m $140m1 - $220m drawn Weighted average hedge term 5.3yrs 5.9yrs Undrawn - $10m1 $50m
Slide 29: Portfolio composition and movement
Portfolio composition and movement PAGE 29 Portfolio movements (30 June 2018 to 31 December 2018) 214 218 220 -3 2 2 4 210 5 200 * 190 209 214 180 170 160 150 30-Jun-18 Development sites Development sites Operating centre acquired 31-Dec-18 acquired completed Existing portfolio Development pipeline
Slide 30: ELC portfolio metrics
ELC portfolio metrics PAGE 30 31 Dec 2018 30 Jun 2018 Change Leased ELCs 207 202 2.5% Development sites 4 5 (20%) Total ELCs 211 207 1.9% WALE (by income) (years) 14.2 14.2 - Tenanted occupancy (%) 100 100 - Average passing yield (%) 6.5 6.46 4bps Portfolio value ($m) 646.6 614.0 5.3% Average rental
Slide 31: ELC portfolio valuations
ELC portfolio valuations PAGE 31 Number of assets Value ($m) Passing yield (%) 31 Dec 2018 31 Dec 2018 ELC – Independent Valuations Freehold Queensland 18 61.0 6.49 Victoria 10 38.9 6.00 New South Wales 10 25.6 6.67 South Australia 2 5.1 6.52 Total ELC independent valuations 40 130.6 6.38 ELC – Dire
Slide 32: Healthcare portfolio metrics
Healthcare portfolio metrics PAGE 32 31 Dec 2018 30 Jun 2018 Change Total healthcare properties 7 7 - WALE (by income) (years) 14.6 4.5 +10.1yrs Tenanted occupancy (%) 100 100 - Average passing yield (%) 6.20 6.85 (65bps) Property portfolio ($m) 96.3 85.4 12.8% Average rental increase (%) 2.8 1.3 15
Slide 33: ASX total return performance
ASX total return performance PAGE 33 ASX total return performance (as at 31 December 2018) 25% 22.5% 20% 17.1% 15% 12.9% 12.5% 10% 7.6% 6.7% 5.6% 5% 3.3% 0% One year Three years per annum Five years per annum -3.1% -5% Arena REIT Accumulation Index S&P/ASX300 A-REIT Accumulation Index S&P/ASX300 Acc
Slide 34: ELC market transactions
ELC market transactions PAGE 34 QLD passing yields VIC passing yields NSW 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-16 Jan-17 Jan-18 Jan-16 Jan-17 Jan-18 Jan-16 Jan-17 Jan-18 Metro trend line Other trend line Metro trend line Other trend l
Slide 35: Important notice
Important notice PAGE 35 This presentation has been prepared by 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 information c