Arena REIT : HY2022 Results Presentation

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ARENA REIT

2022 HALF YEAR RESULTS

11 February 2022

For personal use only

AGENDA

Highlights	3
Sustainability	5
COVID-19 Update	6
Financial Results	7
Portfolio Update	12
Outlook	20
Questions	21
Directory	22
Appendices	23
Important Notice	33

Arena REIT acknowledges the traditional custodians of the lands on which our business and assets operate, and recognises their ongoing connection to land, waters and community.

2	A R E N A R E I T 2 0 2 2 H A L F Y E A R R E S U L T S

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HY22 HIGHLIGHTS

Delivering on our investment objectives and improving community outcomes

• 204% growth in statutory net profit driven by increase in operating profit and investment property revaluations.
• 11% growth in net operating profit driven by like-for-like contracted rent increases averaging +3.6%, acquisitions and development completions.
• 18% growth in NAV highlights the continued attractiveness of early learning centre (ELC) and healthcare property investments.
• Progressing solar installations and FY22 sustainability goals.
• Weighted average lease expiry (WALE) of 19.8 years.
• Continued to deliver development completions and expand development pipeline.
• FY22 distribution guidance has been increased from 15.8 to 16.0 cents per security (cps), an increase of 8.1% on FY21 DPS1.

$185.8 million

Statutory net

profit

+204% on HY21

7.97 cents

Earnings per security

(EPS)

+10% on HY21

+3.6%

$27.5 million

Net operating profit

+11% on HY21

$3.02

Net Asset Value

(NAV) per security

+18% on FY21

18.8%

1. FY22 distribution guidance is estimated on a status quo basis assuming no new acquisitions or disposals, all developments in progress are completed in line with forecast assumptions, tenants comply with their existing or adjusted lease obligations and is based on Arena's current assessment of the future impact of the COVID-19 pandemic (which is subject to a wide range of uncertainties) and assumes ongoing government support of the early learning sector.
2. Gearing calculated as ratio of net borrowings over total assets less cash.

Average like-for-like rent

increase

+30 bps on FY21

Gearing ratio2

-110 bps on FY21

3	A R E N A R E I T 2 0 2 2 H A L F Y E A R R E S U L T S

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DELIVERING ON STRATEGY

Strategy discipline and working in partnership continue to deliver positive outcomes

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Portfolio management:

• Two ELC properties sold at average premium of 15% to book value.
• Net valuation uplift of $153 million, +13.8%.
• Portfolio weighted average passing yield 5.14%.
• Long portfolio WALE (by income) of 19.8 years.

Lease management:

• 100% portfolio occupancy.
• Average like-for-like rent increase of +3.6%.
• Post balance date lease extension on 21 properties to facilitate solar installation and access to energy consumption data.

Working in partnership:

• Continue to progress the installation of solar renewable energy systems.
• All tenant partners are compliant with COVID- 19 rent relief agreements1.

Investment and developments:

• One operating property acquired at a net initial yield of 4.7% on total cost with initial lease term of 20 years.
• Terms agreed for the acquisition of six operating ELC properties for $38 million to be leased to an existing tenant partner on a 25 year initial lease term.
• Three ELC developments completed at an average net initial yield on total cost of 6.4% with initial average lease term of 20 years.
• Eight new ELC development projects acquired with forecast total cost of $48 million2.

1. Under the National Cabinet Mandatory Code of Conduct landlords are obliged to provide eligible tenants rental relief in proportion to the reduction in trade resulting from COVID-19.
2. Excludes two ELC developments conditionally contracted post 31 December 2021.

4	A R E N A R E I T 2 0 2 2 H A L F Y E A R R E S U L T S

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SUSTAINABILTY

Investment proposition and approach drives sustainable and commercial outcomes

• Sustainability is integral to Arena's investment approach and best positions Arena to achieve positive long term commercial outcomes.
• Arena's properties facilitate access to essential community services:
  o ELCs provide early childhood education and care which allows parents and carers the opportunity to remain in, join or re-join the workforce.
  o Medical centres provide local, community-based primary health care services.
  o Specialist disability accommodation is designed to provide a better quality of life for residents with high physical support needs.
• Key FY2022 sustainability goals include:
  o Collaborating with tenant partners on ESG initiatives.
  o Reporting on collaboration with tenant partners regarding installing solar renewable energy. o Reporting on renewable energy production for properties where it has been installed.
  o Outlining an organisational carbon emission reduction plan.
  o Outlining a carbon emission reduction plan for Arena's property portfolio.
  o Outlining a plan to align with the Task Force on Climate-Related Financial Disclosures (TCFD). o Voluntarily opting into Modern Slavery reporting.
  o Implementing company specific policies/procedures for managing ESG risks. o Extending and disclosing Arena's approach to various employee initiatives.

5	A R E N A R E I T 2 0 2 2 H A L F Y E A R R E S U L T S