Argosy Property Limited · NZX:ARG
Argosy Property — FY2022 Earnings Presentation
46 slides from Argosy Property's earnings presentation, May 18, 2022
Slide 1: FY22 Annual Results: Building a Better Future
FY22 Annual Results: Building a Better Future 18.5.22 Argosy Property Limited
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 Vision & Strategy 4 Result Highlights 6 Portfolio Highlights 7 Peter Mence CEO Financials 19 Leasing Update 31 Focus and Outlook 35 Appendices 37 Dave Fraser Note: This results presentation should be read in conjunction with the NZX release dated 18 May 2022. Due to rounding, numbers presente
Slide 4: Vision and Strategy
Vision and Strategy Argosy
Slide 5: Vision: Building a Better Future
VISION — Proactive deli B e | d e of sustainable growth, U | l n g a A business culture that i i tally focused Better Future enna Executing green Value Add portfolio opportunities to drive earnings and capital growth Acommitment to funding for green assets Owning the right assets with the right attr
Slide 6: Key result highlights
Key result highlights $105.1 $m in net property income $163.7 $236.2 $m annual revaluation increase, or 8% $m net profit after tax above book value $1.74 NTA up ~14% from $1.53 @ 31 March 21 6.55ps FY22 dividend delivered .6
Slide 7: Portfolio highlights
Portfolio highlights 98.7% Occupancy 5.7yrs 3.0% Weighted average lease term Annualised rent review increase on rents reviewed .7
Slide 8: Portfolio valuation @ 31 March
Portfolio valuation @ 31 March .8
Slide 9: Sector Summary
Sector Summary INDUSTRIAL OFFICE LARGE FORMAT RETAIL Number of buildings 34 Number of buildings 15 Number of buildings 4 $1,127.0 $857.4 $223.2 1 Market value Market value Market value of assets ($m) of assets ($m) of assets ($m) Occupancy (by income) 100% Occupancy (by income) 97.4% Occupancy (by i
Slide 10: Portfolio at a glance @ 31 March
Portfolio at a glance @ 31 March Sector by value % Region by value % Asset Mix by value % 10 New Previous Band Band Industrial 55-65% (45-55%) Office 25-35% (30-40%) 51 39 2 LFR 1 5-15% (10-20%) 1. Large Format Retail. 2. 2. Regional North Island and South Island. This weighting also includes up to
Slide 11: CBRE Property Market Monitor: market forecasts inform investment policy
CBRE Dec-21 Property Market Monitor (AKL) Market forecasts help inform investment policy 1st 2nd 3rd Ranking of secondary industrial property Ranking of Large Format Retail sector by Ranking of prime industrial property by by total forecast return 2021-2025 total forecast returns 2021-2025 tot
Slide 12: Auckland Industrial Portfolio
Silverdale 1 Auckland Industrial Portfolio Albany 7 Number of properties 28 Occupancy by rent Panmure 1 100% Onehunga 2 Mt Wellington 4 WALT* 6.0 years Mangere 1 East Tamaki 7 Market value of buildings ($) Wiri 3 $1,004M Manukau 2 .12 * Excludes Neilson Street and Mt Richmond.
Slide 13: Value Add Properties
Value Add Properties Valuation @ Green assets driving Property Sector Location 31 Mar 22 organic growth 12-16 Bell Avenue, Mt Wellington (underway) Industrial Auckland 38.9 Transformation of Value Add properties 18-20 Bell Avenue, Mt Wellington (underway) Industrial Auckland 22.0 remains key to de
Slide 14: Value Add Case Study: Mt Richmond Estate
Value Add Case Study: Mt Richmond Estate1 15km From the CBD 40,000 +$250m m2 of new warehouse space Project end value over quarter of a billion dollars 4,000 m2 of new office space ~7% Internal rate of return 1. Potential development strategy .14
Slide 15: Value Add Case Study: 12-16 & 18-20 Bell Ave
Value Add Case Study: 12-16 & 18-20 Bell Ave $8.8m Refurbishment and redevelopment 4 Star Green Built rating being targeted 10yrs Length of new lease entered into by PBT as part of the development 8.3% Internal rate of return $69m Forecast valuation on completion ~26% Forecast developmen
Slide 16: Value add case study: Carlton Gore Road
Value add case study: 105 Carlton Gore Road $35m Refurbishment and redevelopment 6 Star Green Built rating now being targeted 7.2% Internal rate of return (was 5 Star) $65m Forecast valuation on completion 5% Forecast development margin 5.3% Forecast yield on cost .16
Slide 17: Development Projects
Development Projects Organic growth underpinning development pipeline Target Green Star Cost to Forecast Development Major Tenant Built Rating Type Location complete completion 8-14 Willis Street/360 Lambton Quay Statistics New Zealand 6 Star OFF/RET WTN 9.1 May-22 12-16 & 18-20 Bell Ave Peter Baker
Slide 18: Annual Revaluations
Annual Revaluations Auckland industrial stars 31 Mar 22 Book Value 31 Mar 22 Valuation Market Yield 1 ($m) ($m) $m % 31 Mar 22 31 Mar 21 $163.7m gain reported, or 8% increase over book value. Portfolio market yield Auckland 1,436.3 1,578.4 142.1 9.9% 5.20% 5.59% firms 15bps. On a cap rate basi
Slide 19: Financials
Financials Argosy
Slide 20: Gross Property Income Waterfall
Gross Property Income Waterfall Acquisition income offset by disposals of low growth assets .20
Slide 21: Financial Performance
Financial Performance Another solid result despite FY22 FY21 COVID impact $m $m Net property income was bolstered by Net property income 105.1 106.5 steady rental growth, a full year Administration expenses (11.8) (10.9) contribution from Mt Richmond, lower Covid-19 rent rebates over the period, P
Slide 22: Distributable Income
Distributable Income Prior period comparison FY22 FY21 $m $m affected by one offs Profit before income tax 241.2 248.4 Net distributable income was $64.7 million Adjustments: compared to $67.7 million in the prior Revaluations gains (163.7) (157.7) comparable period. The prior comparable period in
Slide 23: Adjusted Funds From Operations (AFFO)
Adjusted Funds From Operations (AFFO) AFFO affected by one-offs FY22 FY21 Capitalisation of leasing incentives was $m $m lower overall due to large incentives on Net distributable income 64.7 67.7 developments (7WQ and 107 Carlton Amortisation of tenant incentives and leasing costs 4.6 5.1 Gore Rd
Slide 24: Investment Properties
Investment Properties Capitalised costs and revaluations continue to drive investment portfolio higher .24 Note: Due to rounding, numbers presented in this presentation may not add up exactly to the totals provided and percentages may not reflect exactly absolute figures.
Slide 25: NTA Per Share
NTA Per Share Revaluations drive 14% increase for year to 31 March Note: Due to rounding, numbers presented in this presentation may not add up exactly to the totals provided and percentages may not reflect exactly absolute figures. .25
Slide 26: Balance Sheet Management
Balance Sheet Management Revaluation gains and FY22 FY21 disposals drive gearing $m $m lower Investment properties 2,247.7 2,052.5 The balance sheet is in good shape. Asset held for sale 22.0 87.5 There is sufficient facility headroom to accommodate existing developments Right of Use Asset - - a
Slide 27: Balance Sheet Management continued
Balance Sheet Management continued Low gearing provides flexibility to fund green developments and strategic opportunities 50 Target Range 30-40% 40 38.8 35.9 35.6 35.9 30 31.1 Debt to total assets (%) 20 10 0 FY18 FY19 FY20 FY21 FY22 .27
Slide 28: Interest Rate Management
Interest Rate Management Strong interest cover ratio maintained Weighted average interest rate has FY22 FY21 increased slightly over the period driven Weighted average interest rate1 4.14% 3.69% by higher fixed rate borrowings percentage and floating rate increases. Interest Cover Ratio 3.1x 3.3x
Slide 29: Debt Profile including Bonds
Debt Profile including Bonds Green bonds provide diversification and tenor During the year Argosy extended $215 million of its existing syndicated bank facilities with its banking group. The total amount of the bank facility has also reduced by $35 million and is now $455 million, down from $490
Slide 30: Dividends
Dividends Steady and sustainable 6.80 A 4th quarter dividend of 1.6375cps has 6.60 6.65 been declared with 0.1276 cents per 6.55 share imputation credits attached. 6.40 6.45 6.35 The record date is 8th June and the 6.20 6.28 payment date is 22nd June. 6.20 6.00 The Dividend Reinvestment Plan h
Slide 31: Leasing
= > - Leasing —F Argosy =-=
Slide 32: Leasing: Mt Richmond Estate
Value Add Case Study: Mt Richmond Estate Leasing 74,376 ~12% Of NLA leased over the year Equivalent of total portfolio by NLA 31 Leasing transactions including 23 new leases, 5 renewals and 3 extensions Green 23,750 15km from CBD Prime industrial location development Of NLA leased to PBT
Slide 33: Lease Expiry & Rent Review profile
Lease Expiry & Rent Review profile Expiry profile remains well managed Overall vacancy remains very low at year end and strategic lease extensions are included as part of new developments and leasing deals. The largest single expiry remains the 9.4% expiry in Mar-27 to Ministry for Business, Inn
Slide 34: Market Insights
Market Insights INDUSTRIAL OFFICE LARGE FORMAT RETAIL Strong demand continues to drive Flexible working environments continue. Many retailers’ systems have been shown additional supply. to be inadequate to cope with higher Changes in the way space is used, online sales volumes. Limited lan
Slide 35: Focus & Outlook
Focus & Outlook Argosy
Slide 36: FY23 has challenges ahead, but we're well placed
FY23 has challenges ahead, but we’re well placed We will stay focused on delivering on Strategy Local and global economy experiencing rising interest rates (tightening) and inflation headwinds. This is creating construction cost tension together with ongoing global supply chain pressure. Globall
Slide 37: Appendices
Appendices- Argosy we
Slide 38: Rent Review Summary
Rent Review Summary % of Total Type # Previous Rent % of rent New Rent $ Increase Annualised $ Annualised Annualised % ($000's) reviewed ($000's) (000's) % Increase Increase (000's) Increase Increase Total 99 60,143 100% 62,057 1,915 3.2% 1,774 100% 3.0% By review type Fixed 69 45,760 76% 47,041 1,2
Slide 39: Rent Review Summary – Auckland & Wellington
Rent Review Summary – 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 I ndustrial 24 27,112 58% 27,861 749 2.8% 749 42.2% 2.8% Office
Slide 40: Portfolio Summary - Industrial
Portfolio Summary - Industrial Valuation WALT Net lettable Vacant Contract Property Address $000s (years) area (m2) Space (m2) Yield Auckland 19 Nesdale Avenue, Wiri $83,000 12.6 20,677 - 3.92% 240 Puhinui Road, Manukau $53,100 12.6 17,715 - 3.77% 244 Puhinui Road, Manukau $18,400 12.6 5,504 - 3.63%
Slide 41: Portfolio Summary - Office
Portfolio Summary - Office Valuation WALT Net lettable Vacant Contract Property Address $000s (years) area (m2) Space (m2) Yield Auckland 99-107 Khyber Pass Road, Grafton $20,200 2.6 2,509 - 5.15% 8 Nugent Street, Grafton $58,800 4.1 8,125 - 5.71% 39 Market Place, Viaduct Harbour $21,500 3.3 10,365
Slide 42: Portfolio Summary – Large Format Retail
Portfolio Summary – Large Format Retail Valuation WALT Net lettable Vacant Contract Property Address $000s (years) area (m2) Space (m2) Yield Auckland Albany Mega Centre and 11 Coliseum Drive, Albany $161,500 3.0 33,792 509 5.82% 50 & 54-62 Cavendish Drive, Manukau $37,000 3.2 9,939 - 4.86% 252 Dair
Slide 43: Portfolio Metrics
Portfolio Metrics Defensive & resilient tenant, high essential service exposure .43
Slide 44: Portfolio Snapshot
Portfolio Snapshot Portfolio quality and resilience reflected in key metrics Occupancy (%) WALT (years) 7.0 100 98.8 98.8 99.0 98.7 6.0 97.7 6.1 6.1 6.1 80 5.0 5.5 5.7 60 4.0 3.0 40 2.0 20 1.0 0 0.0 FY18 FY19 FY20 FY21 1H22 FY18 FY19 FY20 FY21 FY22 Net Tangible Assets ($ per share) Debt-to-total-ass
Slide 45: Portfolio Valuations – Cap Rate Summary
Portfolio Valuations – Cap Rate Summary Mar 2022 Mar 2021 cap rate cap rate % cap rate % change Auckland 4.99% 5.43% -0.44% Wellington 5.57% 5.82% -0.25% Regional 5.75% 6.06% -0.30% Total 5.16% 5.54% -0.39% Industrial 4.75% 5.33% -0.57% Office 5.61% 5.81% -0.20% Large Format Retail 5.49% 5.53% -0.04
Slide 46: 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