Argosy Property Limited · NZX:ARG
Argosy Property — FY2015 Earnings Presentation
39 slides from Argosy Property's earnings presentation, May 28, 2015
Slide 1: Annual Results Presentation
Annual Results Presentation Argosy Property Limited 28 May 2015
Slide 2: Executing Strategy
Argosy EXECUTING STRATEGY |
Slide 3: Highlights
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Slide 4: Highlights of FY15
Highlights of FY15 Gross distributable income increased to 7.07 cents per share (increase of 6.5%) Net distributable income of 6.02 cents per share Net property income increased to $90.9 million (increase of 10.5%) Occupancy (by rental) increased to 99.2% Weighted average lease term at 5.5
Slide 5: Financial Overview
Financial Overview
Slide 6: Income Reconciliation
Income Reconciliation 11.2 (1.2) 1.6 ( 1.1 ) 98.4 100 87.9 90 80 70 60 50 40 30 20 10 0 Gross Property Acquisitions Disposals Rent changes Prior year Gross Property $m Income surrender fees Income 31 March 2014 31 March 2015
Slide 7: Financial Performance
Financial Performance FY15 FY14 Net property income $90.8m $82.2m Administration expenses $(7.8m) $(7.4m) Profit before financial income/(expenses) and $83.0m $74.8m other gains Interest expense $(26.8m) $(25.4m) Gain/(loss) on derivatives $(24.8m) $17.1m Finance income $0.1m $0.1m Other gains/(loss
Slide 8: Distributable Income
Distributable Income FY15 FY14 Profit before income tax $68.6m $98.8m Adjusted for: Revaluation gains $(38.6m) $(33.5m) Investment disposal losses $1.5m $1.4m Derivative fair value adjustment $24.8m $(17.1m) Gross distributable income $56.3m $49.6m Depreciation recovered $3.3m $0.4m Tax paid $(11.6m
Slide 9: Investment Properties
Investment Properties 1,350 ( 59.2 ) 43.6 38.6 ( 3.0 ) 1.0 1,306.4 59.1 1,300 1,250 1,226.3 1,200 1,150 1,100 1,050 1,000 950 900 Investment Acquisitions Capex Disposals Change in fair Transfer to Tenant Investment $m Properties value properties incentives Properties 31 March held for sale 31 March
Slide 10: Movement in NTA per share
Movement in NTA per share 0.5 0.1 95.8 96 4.8 ( 0.2 ) 94 93.5 ( 2.9 ) 92 90 88 86 84 82 80 NTA Loss on Revaluation Realised Tax timing Residual NTA cps 31 March derivatives gain on gains/losses on adjustments earnings less 31 March 2015 2014 investment disposal dividends paid properties
Slide 11: Gearing
Gearing FY15 FY14 Investment properties $1,306.4m $1,226.3m Other assets $6.8m $6.1m Total assets $1,313.2m $1,232.4m Bank debt (excl. capitalised borrowing costs) $497.0m $449.5m Debt-to-total-assets ratio 37.8% 36.5%
Slide 12: Banking
Banking Loan to valuation ratio (LVR) – FY15 FY14 based on: Total borrowings $497.0m $449.5m Fair market value of properties¹ $1,309.4m $1,226.9m Not to exceed 50% 38.0% 36.6% Interest cover ratio – based on EBIT/Interest FY15 FY14 and Financing Costs: Must exceed 2:00x 2.83x 2.62x Hedging FY15 FY14
Slide 13: Dividends
Dividends FY15 cash dividend of 6 cents per share, in line with guidance, fully covered by net distributable income; a better result than had been forecast earlier in the year. Based on current projections, the FY16 dividend will be maintained at 6 cents per share, fully paid from net distributa
Slide 14: Portfolio Overview
Portfolio Overview ee ¢ EE 1 - 5 at 2 s = ae — i 3 —— = - = = a! Wwww.argosy.co.nz
Slide 15: Industrial
Industrial NUMBER OF BUILDINGS 40 MARKET VALUE OF ASSETS ($M) $510.42 VACANCY FACTOR (BY RENT) 0.3% WALT (YEARS) 5.72 PASSING YIELD 7.59%
Slide 16: Office
Office NUMBER OF BUILDINGS 17 MARKET VALUE OF ASSETS ($M) $483.56 VACANCY FACTOR (BY RENT) 1.2% WALT (YEARS) 5.60 PASSING YIELD 7.63%
Slide 17: Retail
Retail NUMBER OF BUILDINGS 11 MARKET VALUE OF ASSETS ($M) $312.42 VACANCY FACTOR (BY RENT) 1.1% WALT (YEARS) 5.15 PASSING YIELD 7.49%
Slide 18: Leasing Environment
Leasing Environment The New Zealand economy remains robust, with forecasts of good economic growth to continue. The outlook for the property market is similarly positive with good levels of enquiry for quality space. Vacancy rates remain low and rental growth is set to continue. Forecasts fo
Slide 19: Leasing
Leasing Incentive levels have reduced, especially in the office market. Occupancy, tenant retention and lease expiries remain the key focus areas for the asset management team. Occupancy (by rental) has been improved to 99.2%, from 98.7% at March 2014. Outstanding lease expiries for the peri
Slide 20: Lease Maturity
Lease Maturity 24 32 7% | = | eas + 16 7 ; it ; » : we & ve 2 . ee & fe incor portfolio (by ntag + NG The number above each bar denotes the total tenant Year ending expiries per year (excluding monthly carparks and tenants with multiple leases within one property) Total expiry Vacant mLargest single
Slide 21: Weighted Average Lease Term
WALT (YEARS) - 1.00 2.00 3.00 4.00 5.00 6.00 7.00 Mar 2008 Sep 2008 Mar 2009 Sep 2009 Mar 2010 Sep 2010 Mar 2011 Sep 2011 WALT remains in a strong position at 5.54 years Mar 2012 Sep 2012 Mar 2013 Weighted Average Lease Term Sep 2013 Mar 2014 Sep 2014 Mar 2015
Slide 22: Occupancy (by rental)
91.0% 92.0% 93.0% 94.0% 95.0% 96.0% 97.0% 98.0% 99.0% 100.0% Mar 2008 Sep 2008 Mar 2009 Sep 2009 Mar 2010 Sep 2010 Mar 2011 Occupancy at 99.2%, highest since 2008 Sep 2011 Occupancy (by rental) Mar 2012 Sep 2012 Mar 2013 Sep 2013 Mar 2014 Sep 2014 Mar 2015
Slide 23: Acquisitions
Acquisitions Industrial Portfolio in Wellington In February 2015, Argosy acquired an industrial portfolio in Wellington for $59 million. The portfolio comprises 5 properties located in the Seaview and Grenada North areas of Lower Hutt. Property type Industrial Net lettable area 42,588 sqm Acquisitio
Slide 24: Developments
Developments The redevelopment at 15 Stout Street, Wellington was successfully completed on time with MBIE occupying in July 2014. The development of NZ Post House, Wellington is continuing and is expected to be complete by late FY17. Property Status Approx. Expected Spend Completion Remaining 15-21
Slide 25: Portfolio Activity since Balance Date
Portfolio Activity since Balance Date There has been a lot of activity in the portfolio since year end, including: The settlement of the sale of 1 Allens Road, East Tamaki for $3.3 million, 10.7% above book value. The settlement of the disposal of 5,733 sqm of vacant land at the Manawatu Busines
Slide 26: Strategy
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Slide 27: Clearly defined investment strategy and acquisition policy
We have a clearly defined investment strategy and acquisition policy which guides our commercial decision making
Slide 28: Portfolio Investment Strategy
Portfolio Investment Strategy Argosy is and will remain invested in a portfolio that is diversified by sector, grade, location and tenant mix. The portfolio will be in the Auckland and Wellington markets with modest tenant-driven exposure to provincial markets. Argosy’s portfolio consists of “Core”
Slide 29: Portfolio Mix as at 31 March 2015
Portfolio Mix as at 31 March 2015 TOTAL PORTFOLIO VALUE TOTAL PORTFOLIO VALUE PORTFOLIO MIX BY SECTOR BY REGION 4%3% 6% 11% 24% 39% 28% 65% 37% 83% Target Target Target Retail 15 – 25% Auckland 65 – 75% Core 75 – 85% Office 35 – 45% Wellington 20 – 30% Value Add properties Industrial 35 – 45% Palmer
Slide 30: Capital & Risk Management
Capital & Risk Management The Board’s policy is for debt to total assets to be between 35% and 40% in the medium term. Divestment of vacant land and non-Core assets will continue to be a key strategy for the company. The sale of vacant land at Manawatu Business Park remains a focus. Argosy has
Slide 31: Share Price Performance
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Slide 32: Total Shareholder Return – 1 Year
Total Shareholder Return – 1 Year 140 135 130 125 120 Gross Prices Indexed to 100 115 110 105 100 95 Oct-14 Mar-14 Nov-14 Dec-14 Mar-15 Apr-14 Jun-14 May-14 Jul-14 Aug-14 Sep-14 Jan-15 Feb-15 Argosy Property Limited NZ Property Gross Index NZX 50 Index
Slide 33: Total Shareholder Return – 5 Years
Gross Prices Indexed to 100 100 120 140 160 180 200 220 80 Mar-10 Jun-10 Sep-10 Dec-10 Mar-11 Jun-11 Sep-11 Dec-11 Mar-12 Argosy Property Limited Jun-12 Sep-12 Dec-12 Mar-13 NZ Property Gross Index Jun-13 Sep-13 Total Shareholder return – 5 Years Dec-13 Mar-14 NZX 50 Index Jun-14 Sep-14 Dec-14 Mar-1
Slide 34: Concluding Comments
Concluding Comments
Slide 35: Concluding Comments
Concluding Comments The New Zealand economy is still reasonably robust, with forecasts of good economic growth to continue. The outlook for the New Zealand property market is similarly positive. Our focus remains on the leasing fundamentals of maintaining the portfolio’s high level of occupancy,
Slide 36: Appendix
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Slide 37: Valuations
Valuations By location 31 Mar 14 2015 Book value 31 Mar 15 r$ r% Market Yield r bps Valuation Movement Valuation 31 Mar 14 31 Mar 15 Auckland $858.5m $(47.9m) $810.6m $841.4m $30.8m 3.8% 7.96% 7.58% (38) Wellington $265.9m $91.2m $357.1m $365.8m $8.7m 2.5% 8.15% 7.71% (44) Palmerston North $58.7m $(
Slide 38: 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
Slide 39: Thank You
Argosy S Thank You <