25 Nov

2021 AGM Presentation

A R E N A R E I T A n n u a l G e n e r a l M e e t i n g 25 November 2021 2 A R E N A R E I T 2 0 2 1 A N N U A L G E N E R A L M E E T I N G A R E N A D I R E C T O R S From left: Gareth Winter, David Ross, Rob de Vos, Rosemary Hartnett, Dennis Wildenburg, Simon Parsons. 3 A R E N A R E I T 2 0 2 1 A N N U A L G E N E R A L M E E T I N G A G E N D A Instructions for virtual meeting 4 Chair’s address 7 Managing Director’s report 11 Questions 16 Formal Business 17 Meeting Close 26 Important Notice 27 A R E N A R E I T 4 A R E N A R E I T 2 0 2 1 A N N U A L G E N E R A L M E E T I N G A S K I N G Q U E S T I O N S V I A L U M I • To submit a written question select the messaging tab. • Type your question in the “Ask a question” box. • Once you have finished typing your question press the arrow symbol to send. 5 A R E N A R E I T 2 0 2 1 A N N U A L G E N E R A L M E E T I N G A S K I N G Q U E S T I O N S V I A L U M I • To submit an audio question, please pause the broadcast before clicking on the link under “Asking Audio Questions.” • A new page will open, as shown to the right. • Please enter the requested details and then click “Submit Request” to join the audio queue. 6 A R E N A R E I T 2 0 2 1 A N N U A L G E N E R A L M E E T I N G V O T I N G V I R T U A L L Y V I A L U M I • When the poll is open, the vote will be accessible by selecting the voting icon at the top of the screen. • To vote simply select the direction in which you would like to cast your vote. The selection will change colour and a confirmation message will appear. • There is no submit or send button, your selection is automatically counted. David Ross Chair C H A I R ’ S A D D R E S S 8 A R E N A R E I T 2 0 2 1 A N N U A L G E N E R A L M E E T I N G F Y 2 1 H I G H L I G H T S +116% on FY20 $165.4 million Statutory net profit +18.5% on FY20 $51.9 million Net operating profit +15% on FY20 20.1 years 1 Weighted Average Lease Expiry (WALE) +4.5% on FY20 15.2 cents Earnings per security 4 (EPS) 1. Post balance date portfolio lease renegotiation with Goodstart included an increase of 25 years of term on 87 ELC properties. 2. Gearing calculated as ratio of net borrowings over total assets less cash. 3. 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 COVID - 19 pandemic (which is subject to a wide range of uncertainties) and assumes ongoing government support of the early learning sector. 4. EPS is calculated as net operating profit over weighted average number of securities on issue. 14.8 cents Distributions per security (DPS) +5.7% on FY20 $2.56 Net Asset Value (NAV) per security • 18.5% growth in net operating profit driven by contracted rental growth, acquisitions and development completions and lower finance costs. • 15% growth in NAV reflects the essential nature of early learning (ELC) and healthcare properties. • $106 million of capital deployed in FY21: o $40 million acquisition of seven operating ELC properties; and o Continued delivery of development completions and expanded development pipeline. • Divestment of six ELC properties at 16% premium to book value. • Existing long WALE further increased to 20.1 1 years. • Gearing ratio of 19.9% 2 . • FY22 DPS guidance of 15.8 cents per security, an increase of 6.8% 3 on FY21. Continuing strong portfolio, investment and community outcomes +6.1 years on FY20 9 A R E N A R E I T 2 0 2 1 A N N U A L G E N E R A L M E E T I N G S U S T A I N A B I L T Y Investment proposition and approach drives sustainable and commercial outcomes • Completed external stakeholder materiality assessment. • Completed independent review of remuneration framework for implementation in FY22. • Reported fully against the GRI, partially against SASB and in more detail against the UN SDG’s. • Additional 45% of properties agreed to install solar renewable energy; 67% of total properties have now agreed to install solar renewable energy. • Created a dedicated renewable energy dashboard for tenants. • Developing model to forecast future savings of electricity, carbon emissions and monetary saving. • Results of employee engagement survey improved. • Tenant partner survey results informed Arena’s approach to actively engage on Partnerships for Change. • Commenced inaugural community partnership with RizeUp. Key FY2021 Sustainability Outcomes Key FY2022 Sustainability Goals • Collaborate with tenant partners on appropriately identified ESG initiatives and report progress. • Report on collaboration with tenant partners regarding installing solar renewable energy systems. • Report on renewable energy production for properties where it has been installed. • Outline an organisational carbon emission reduction plan. • Outline a carbon emission reduction plan for Arena’s property portfolio. • Outline a plan to align with the TCFD. • Voluntarily opt into Modern Slavery reporting. • Extend and disclose Arena’s approach to various employee initiatives including relevant statistics. • Implement company specific policies/procedures for managing ESG risks. 10 A R E N A R E I T 2 0 2 1 A N N U A L G E N E R A L M E E T I N G D E L I V E R I N G O N I N V E S T M E N T O B J E C T I V E To generate attractive and predictable distributions to investors with earnings growth prospects over the medium to long term. • FY22 DPS guidance of 15.8 CPS +6.8% on FY21 1. • Earnings and distribution growth underpinned by core earnings drivers. 8.8 10.0 10.9 12.0 12.8 13.5 14.0 14.8 15.8 8.9 10.2 11.1 12.3 13.1 13.8 14.6 15.2 0 5 10 15 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21 FY22 Earnings and distributions per security (cents) DPS (cents) EPS (cents) 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 COVID - 19 pandemic (which is subject to a wide range of uncertainties) and assumes ongoing government support of the early learning sector. - - - DPS Guidance (cents) M A N A G I N G D I R E C T O R ’ S R E P O R T Rob de Vos Managing Director 12 A R E N A R E I T 2 0 2 1 A N N U A L G E N E R A L M E E T I N G D E L I V E R I N G O N S T R A T E G Y Strategy discipline and working in partnership continue to deliver positive outcomes Working in partnership: • Continue to rollout the installation of renewable energy systems. • Completed rejuvenation of six ELCs in partnership with two tenant groups. • All tenant partners remain compliant with COVID - 19 rent relief agreements 4 . Investment and developments: • Seven operating properties acquired at an average net initial yield of 6.1% on total cost with initial weighted average lease expiry of 27.3 years. • 14 ELC developments completed at an average net initial yield on total cost of 6.6% with initial weighted average lease expiry of 20.8 years. • Nine new ELC development projects acquired with forecast total cost of $54 million 5 . Portfolio management: • Portfolio weighted average lease expiry (by income) increased to 20.1 1,2 years. • Six ELC properties sold at average premium of 16% to book value. • Net valuation uplift of $107.6 million. • Portfolio weighted average passing yield 5.77%. Lease management: • Post balance date portfolio lease renegotiation with Goodstart on 87 ELC properties across Australia 2 . • 100% portfolio occupancy. • Average FY21 like - for - like rent increase of +3.3% 3 . 1. Pro - forma WALE as at 30 June 2021. 2. Arena REIT (ASX: ARF) ASX Announcement Market Update 29 July 2021. 3. Includes 25 market rent reviews from FY20 which were all resolved at an average increase of +6.5%. 4. Under the National Cabinet Mandatory Code of Conduct landlords are obliged to provide eligible tenants rental relief in propo rti on to the reduction in trade resulting from COVID - 19. 5. Excludes two ELC projects that were conditionally contracted prior to, and one ELC project that was unconditionally contracte d p ost, 30 June 2021. 13 A R E N A R E I T 2 0 2 1 A N N U A L G E N E R A L M E E T I N G C O N T R I B U T O R S T O E P S G R O W T H 14.55 15.20 0.55 0.85 - 0.15 - 0.60 6 8 10 12 14 16 18 FY20 EPS Contracted like-for-like rental income growth Completed developments, acquisitions and disposals Net operating expenses and other income Funding mix - equity FY21 EPS EPS 1 cents per share 1. EPS is calculated as net operating profit over weighted average number of securities on issue. Rental growth and development completions supporting EPS growth 14 A R E N A R E I T 2 0 2 1 A N N U A L G E N E R A L M E E T I N G P O R T F O L I O O V E R V I E W 86% 14% Sector diversity (by value) ELC Healthcare 34% 29% 20% 8% 6% 3% 1% Geographic diversity (descending by value) QLD VIC NSW WA SA TAS NT 27% 17% 10% 7% 6% 6% 4% 3% 2% 18% Tenant diversity (descending by income) Goodstart Green Leaves BGH Fund Affinity G8 Education Edge Petit Oxanda SACare Other Number of assets 30 June 2021 valuation Net valuation movement versus 30 June 2020 30 June 2021 passing yield Change versus 30 June 2020 $m $m % % bps ELC portfolio 238 959 +92.0 +11.8% 5.84% (40) Healthcare portfolio 11 153 +15.6 +11.4% 5.34% (78) Total portfolio 249 1,112 +107.6 +11.8% 5.77% (45) Totals may not add due to rounding. 15 A R E N A R E I T 2 0 2 1 A N N U A L G E N E R A L M E E T I N G I N C O M E G R O W T H • FY22 distribution guidance of 15.8 cents per security, an increase of 6.8% 1 on FY21. • Annual rent increases: o >76% of rent reviews in FY22 and FY23 will increase at the higher of an agreed fixed amount or CPI; and o 16% of FY24 reviews are market rent reviews . • Full impact of FY21 and partial impact of FY22 acquisitions and development completions. • $91 million development pipeline comprising 15 ELC projects 2 . O U T L O O K • Essential nature of early learning and healthcare reinforced through COVID - 19 period. • Gearing 3 at 19.9%, no debt expiry until March 2024. • Proven ability to secure and execute on high quality opportunities while maintaining a disciplined investment process for opportunities that meet Arena’s preferred property characteristics. O U T L O O K Long term income predictability with inflation protection 1. Guidance is estimated on a status quo basis assuming no new acquisitions or disposals, all developments in progress are compl ete d in line with forecast assumptions, tenants comply with their existing or adjusted lease obligations and is based on Arena’s curr ent assessment of the future impact of COVID - 19 pandemic (which is subject to a wide range of uncertainties) and assumes ongoing government support of the early learning sector. 2. Includes two ELC projects that were conditionally contracted prior to, and one ELC project that was unconditionally contracte d p ost, 30 June 2021. 3. Gearing calculated as ratio of net borrowings over total assets less cash. Investment objective: To deliver an attractive and predictable distribution to investors with earnings growth prospects over the medium to long term. Q U E S T I O N S F O R M A L B U S I N E S S 18 A R E N A R E I T 2 0 2 1 A N N U A L G E N E R A L M E E T I N G O R D I N A R Y B U S I N E S S Financial Reports To receive and consider the Financial Report, the Directors’ Report and the Auditor’s Report, each for the financial year ended 30 June 2021 . 19 A R E N A R E I T 2 0 2 1 A N N U A L G E N E R A L M E E T I N G O R D I N A R Y B U S I N E S S Resolution 1: Non - binding advisory vote on the Remuneration Report To consider and, if thought fit, pass the following as an advisory resolution of the Company: ‘That the Remuneration Report for the financial year ended 30 June 2021 be adopted.’ Proxy voting results For Against Open Abstain Proxy votes for Resolution 1 (%) 95.67% 3.75% 0.58% Proxy votes for Resolution 1 (quantity) 205,318,047 8,057,425 1,234,732 8,857,467 20 A R E N A R E I T 2 0 2 1 A N N U A L G E N E R A L M E E T I N G O T H E R B U S I N E S S Resolution 2: Election of Mr Dennis Wildenburg as a director of the Company To consider and, if thought fit, pass the following as an ordinary resolution of the Company: ‘ That Mr Dennis Wildenburg who retires by rotation in accordance with ASX Listing Rules 14.4 and 14.5 and, being eligible, offers himself for re - election, be re - elected as a director of the Company .’ Proxy voting results For Against Open Abstain Proxy votes for Resolution 2 (%) 96.18% 3.26% 0.56% Proxy votes for Resolution 2 (quantity) 208,041,562 7,051,585 1,216,294 8,943,766 21 A R E N A R E I T 2 0 2 1 A N N U A L G E N E R A L M E E T I N G O T H E R B U S I N E S S Resolution 3: Grant of deferred STI rights to Mr Rob de Vos To consider and, if thought fit, pass the following as separate ordinary resolutions of the Company and each of the Trusts: ‘That for the purposes of ASX Listing Rule 10.14 and for all other purposes, the grant to the Managing Director, Mr Rob de Vos, of rights as his deferred short term incentive under the Arena REIT Deferred Short Term and Long Term Incentive Plan on the terms set out in the Explanatory Memorandum to this Notice of Meeting, is approved .’ Proxy voting results For Against Open Abstain Proxy votes for Resolution 3 (%) 99.11% 0.32% 0.57% Proxy votes for Resolution 3 (quantity) 212,964,126 696,379 1,221,283 9,583,640 22 A R E N A R E I T 2 0 2 1 A N N U A L G E N E R A L M E E T I N G O T H E R B U S I N E S S Resolution 4: Grant of LTI performance rights to Mr Rob de Vos To consider and, if thought fit, pass the following as separate ordinary resolutions of the Company and each of the Trusts: ‘That for the purposes of ASX Listing Rule 10.14 and for all other purposes, the grant to the Managing Director, Mr Rob de Vos, of performance rights as his long term incentive under the Arena REIT Deferred Short Term and Long Term Incentive Plan on the terms set out in the Explanatory Memorandum to this Notice of Meeting, is approved.’ Proxy voting results For Against Open Abstain Proxy votes for Resolution 4 (%) 99.06% 0.37% 0.57% Proxy votes for Resolution 4 (quantity) 212,869,332 792,763 1,221,283 9,582,050 23 A R E N A R E I T 2 0 2 1 A N N U A L G E N E R A L M E E T I N G O T H E R B U S I N E S S Resolution 5: Grant of deferred STI rights to Mr Gareth Winter To consider and, if thought fit, pass the following as separate ordinary resolutions of the Company and each of the Trusts: ‘That for the purposes of ASX Listing Rule 10.14 and for all other purposes, the grant to the chief financial officer and an executive director of the Responsible Entity, Mr Gareth Winter, of rights as his deferred short term incentive under the Arena REIT Deferred Short Term and Long Term Incentive Plan on the terms set out in the Explanatory Memorandum to this Notice of Meeting, is approved.’ Proxy voting results For Against Open Abstain Proxy votes for Resolution 5 (%) 99.08% 0.35% 0.57% Proxy votes for Resolution 5 (quantity) 212,904,489 754,159 1,221,283 9,582,050 24 A R E N A R E I T 2 0 2 1 A N N U A L G E N E R A L M E E T I N G O T H E R B U S I N E S S Resolution 6: Grant of LTI performance rights to Mr Gareth Winter To consider and, if thought fit, pass the following as separate ordinary resolutions of the Company and each of the Trusts: ‘That for the purposes of ASX Listing Rule 10.14 and for all other purposes, the grant to the chief financial officer and an executive director of the Responsible Entity, Mr Gareth Winter, of performance rights as his long term incentive under the Arena REIT Deferred Short Term and Long Term Incentive Plan on the terms set out in the Explanatory Memorandum to this Notice of Meeting, is approved.’ Proxy voting results For Against Open Abstain Proxy votes for Resolution 6 (%) 99.06% 0.37% 0.57% Proxy votes for Resolution 6 (quantity) 212,865,885 790,263 1,223,783 9,582,050 25 A R E N A R E I T 2 0 2 1 A N N U A L G E N E R A L M E E T I N G O T H E R B U S I N E S S Resolution 7: Remuneration of non - executive directors To consider and, if thought fit, pass the following as an ordinary resolution of the Company: ‘ That, in accordance with clause 2.11(a) of the Company constitution and ASX Listing Rule 10.17, the maximum total aggregate amount of fees payable to the non - executive directors be increased to $1,000,000 per annum.’ Proxy voting results For Against Open Abstain Proxy votes for Resolution 7 (%) 99.02% 0.32% 0.58% Proxy votes for Resolution 7 (quantity) 212,734,243 692,277 1,246,639 8,791,065 M E E T I N G C L O S E 27 A R E N A R E I T 2 0 2 1 A N N U A L G E N E R A L M E E T I N G I M P O R T A N T N O T I C E This presentation has been prepared by Arena REIT (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 ) and is authorised to be given to the ASX by Gareth Winter, Company Secretary . The information contained in this document is current only as at 30 June 2021 or as otherwise stated herein . This document is for information purposes only and only intended for the audience to whom it is presented . This document contains selected information and should be read in conjunction with the Annual Report for the full - year ended 30 June 2021 lodged with the ASX on 28 September 2021 and other ASX announcements released from time to time . This document may not be reproduced or distributed without Arena’s prior written consent . The information contained in this document is not investment or financial product advice and is not intended to be used as the basis for making an investment decision . Arena has not considered the investment objectives, financial circumstances or particular needs of any particular recipient . You should consider your own financial situation, objectives and needs, conduct an independent investigation of, and if necessary obtain professional advice in relation to, this document . Except as required by law, no representation or warranty, express or implied, is made as to the fairness, accuracy, completeness or correctness of the information, opinions and conclusions, or as to the reasonableness of any assumption, contained in this document . By receiving this document and to the extent permitted by law, you release Arena and its directors, officers, employees, agents, advisers and associates from any liability (including, without limitation, in respect of direct, indirect or consequential loss or damage or any loss or damage arising from negligence) arising as a result of the reliance by you or any other person on anything contained in or omitted from this document . This document contains certain forward - looking statements along with certain forecast financial information . The words “anticipate”, “believe”, “expect”, “project”, “forecast”, “guidance”, “estimate”, “outlook”, “upside”, “likely”, “intend”, “should”, “could”, “may”, “target”, “plan”, and other similar expressions are intended to identify forward - looking statements . The forward - looking statements are made only as at the date of this document and involve known and unknown risks, uncertainties, assumptions and other important factors, many of which are beyond the control of Arena and its directors . Such statements reflect the current expectations of Arena concerning future results and events, and are not guarantees of future performance . Actual results or outcomes for Arena may differ materially from the anticipated results, performance or achievements expressed, projected or implied by these forward - looking statements or forecasts . Other than as required by law, although they believe that there is a reasonable basis for the forward - looking statements, neither Arena nor any other person (including any director, officer or employee of Arena or any related body corporate) gives any representation, assurance or guarantee (express or implied) that the occurrence of these events, or the results, performance or achievements expressed in or implied by any forward - looking statements in this announcement will actually occur and you are cautioned not to place undue reliance on such forward - looking statements . Risk factors (which could be unknown or unpredictable or result from a variation in the assumptions underlying the forecasts) could cause actual results to differ materially from those expressed, implied or projected in any forward - looking statements or forecast . Past performance is not an indicator or guarantee of future performance or results .
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