Aspen : 15 Oct 2021 – Aspen Update Q1 FY22

Aspen Group

Update 1st Quarter FY22

15 October 2021

1

Aspen's Business Model

Sustainable Ecological Footprint

Aspen's efficient dwellings use significantly less resources to manufacture and operate than the average Australian home - we also recycle/refurbish dwellings

With solar installed, our dwellings can produce more renewable energy than they consume

We install energy and water saving devices and

metering to reduce resource use

Our communities share resources such as common areas, recreation facilities, gardens and transport

Our parks are highly vegetated, and our land management programs reduce degradation and environmental risks

Aspen's carbon emission reduction target for the assets that it controls is in accordance with the 2015 Paris Agreement

Aspen Provides Quality Accommodation to Australian Households on Competitive Terms

Customer-centric business model typically servicing households that can afford no more than $400 weekly rent or $400k purchase price

We provide a range of products demanded by our customers in

residential, retirement and park communities

We foster a safe, social, diverse, and inclusive culture in our

communities by providing on-site management, customer services, and community facilities which gives our residents a sense of home and meaningful connections to the community

Total value of real estate in Aspen's addressable market >$1 trillion

Average		Average Land		Average
Dwelling Rent of		Site Rent of		Dwelling Sales
$248 per Week*		$166 per Week*		Price of $287k*

Some of our properties are located in past and present Indigenous

communities, and we actively seek to help these communities and conserve

heritage items

Governance

Aspen Group comprises Aspen Group Limited and

Aspen Property Trust with two separate

independent Boards

Aspen provides equal employment opportunities regardless of gender, gender-identity, age, culture, race, religion and lifestyle choices

We continuously strive for the highest WH&S

standards at our properties to keep our employees, suppliers and customers safe

Our Joint CEOs own a combined stake of 8.7% in Aspen Group and 50% of their remuneration package is deferred for up to 3 years and subject to performance hurdles and vesting conditions

* As at 30 June 2021

2

Financial Performance

Key Metrics (management accounts - not audited)	1Q FY22	1Q FY21	Change	FY21
$m	$m	$m
Total Revenue	11.77	9.24	27%	35.95
Operating & Development Net Income	4.34	4.20	3.5%	14.84
Margin	37%	45%		41%
- Rental & ancillary services revenue	8.03	7.67	4.7%	29.07
- Direct property expenses	(4.59)	(4.03)	14%	(16.39)
Net Operating Income	3.44	3.64	(5.6%)	12.68
Operating Margin	43%	47%		44%
- Development & trading revenue	3.74	1.57	139%	6.88
- Cost of sales	(2.84)	(1.01)	180%	(4.72)
Net Development & Trading Income	0.90	0.55	63%	2.16
Development & Trading Margin	24%	35%		31%
Net Corporate overheads	(1.07)	(1.01)	5.8%	(4.50)
Operating EBITDA	3.27	3.18	2.7%	10.34
Net finance expense	(0.35)	(0.33)	5.4%	(1.34)
Tax	-	-	-	-
Operating Profit1	2.92	2.85	2.4%	9.00
Securities (weighted)	125.2	116.4	7.6%	116.4
Operating EPS (cents)	2.33	2.45	(4.8%)	7.73

1QFY22 performance was reasonable in a challenging operating environment:

• Rental and ancillary services revenue up 4.7% - mainly attributable to higher contributions from Darwin Freespirit Resort (DFR) and new acquisitions including Uniresort and Lewis Fields, offset by a material decline in Aspen Karratha Village (AKV) revenue post expiry of the Woodside lease while a new customer base is being built
• Net Operating Income down 5.6% - margin declined from 47% to 43% driven by a change in business mix (eg. greater contribution from relatively low margin DFR and lower contribution from AKV) and cessation of JobKeeper receipts after 1QFY21
• Net Development & Trading Income up 63% - sale of 9 houses mainly from the Perth House Portfolio
• Net corporate overheads up 5.8% - net of project management fees of $0.27m from the Mill Hill Capital funds
• Net interest expense up 5.4% - increased debt and increased hedging over the quarter with $70m of BBSW exposure (65% of current drawn debt) fixed to April 2024 at 50bps
• Nil tax - Aspen has a material amount of historic tax losses that currently shelters taxable profits
• Operating EPS down 4.8% - impacted by acquisition of Perth Apartment Portfolio (PAP) in September that did not contribute to earnings, but were funded with new equity and debt

Aspen's total earnings are not seasonal in our opinion - some of our parks

communities are highly seasonal, however our Darwin Freespirit Resort and NSW coastal parks peak in winter and summer respectively

1. Non-IFRS measure used by management to assess the underlying performance of Aspen - excludes depreciation and amortisation, revaluations, and one-off and non-operating items. Refer to definition in financial statements.

3

Residential

• Upper Mount Gravatt Co-livingCommunity (UMG) has performed above expectations to date and is now the largest contributor to residential portfolio NOI - in 1QFY22:
• • Occupancy rate of only 76% and average rent of only $208 per week per room, constrained by international border closures
  • Material cost reduction helped lift NOI to about $350k in the quarter, equating to an annualised yield of 7.5% on purchase price
• Perth House Portfolio - prices and rents continue to increase and we have improved the quality of our tenant base which has significantly reduced rental arrears and R&M
• Treatts Road Lindfield - rents have increased as the tenant mix changed over time - only 2 of the retirement village tenants remain with most relocating to Pacific Highway
• Burleigh Heads redevelopment is progressing well and we expect to complete and lease the first 4 houses by 31 December 2021 and the remainder by 4QFY22:
• • Expected average weekly rent is now $750 versus $540 at time of purchase
  • Current median sale price of local 3 bedroom house / apartment is now $954k / $1.03m (source: domain) versus expected average cost of $480k per house
• Cooks Hill redevelopment has commenced - expect to complete project by 30 June 2022

Burleigh Heads and Cooks Hill projects detracted about $50k from NOI for the quarter as we expense all operating costs (eg. land tax, council rates) - these properties are expected to generate NOI of about $1m per annum on completion of refurbishment and leasing

			Residential
		1QFY22	1QFY21		Change
Revenue	$1,211	$972		25%
NOI		$517	$309		67%
Margin		43%	32%		11%

Chart source: Corelogic

4

Residential - Perth Apartment Portfolio

PAP Refurbishment Targets - # of Apartments

▪ Perth Apartment Portfolio repositioning and refurbishment program

is progressing well:

- The portfolio comprises 514 apartments, averaging about 55sqms

and 1.7 bedrooms

0

100

200

300

400

500

- For the c.150 apartments that are already in good condition we

are aiming to retain the good quality tenants on average rents of

about $255 per week (increase of about $35 per week or +13%)

132 Guildford Rd

Refurb

- We notified termination of about 45 leases to make way for

refurbishment - we plan to empty 132 Guildford Road (120

apartments) to provide flexibility for a more substantial

Stage 2 Refurb

repositioning of the property

- Stage 1 Refurbishment Works have commenced - 113 apartments

using 3 main contractors - contracted cost for a complete internal

Stage 1 Refurb -

gut and refit of a 2 bedroom unit is about $30-35k (excludes

Underway

common area and external works)

- Stage 1 refurbished apartments will be progressively handed back

and offered for lease from early next month

No Refurb

- We believe the acquisition will become neutral to FY21 pro-forma

Required

EPS when around 300 apartments are occupied

Currently

Target

Occupied

30

June 22

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