ASSET PLUS LIMITED Special Meeting 29 September 2020 - Artist impression of the Munroe Lane Development
←
→
Page content transcription
If your browser does not render page correctly, please read the page content below
ASSET PLUS LIMITED
Special Meeting
29 September 2020
Artist impression of the Munroe Lane Development
Asset Plus, Shareholder Vote on the Munroe Lane Development | September 2020 Assetplusnz.co.nz
MEETING PROCEDURES
2 2 Assetplusnz.co.nz
Artist impression of 35 Graham St Development
Asset Plus, Shareholder Vote on the Munroe Lane Development | September 2020
Special Meeting Agenda
01 02 03
Meeting
Portfolio update Munroe Lane
Procedures &
Development
Chairman’s
Address
04 Key Risks
05 Shareholder
Q&A
06 Resolutions
3 Assetplusnz.co.nz
Asset Plus, Shareholder Vote on the Munroe Lane Development | September 2020
Chairman’s Address
2. Chairman’s Address
Bruce Cotterill
Bruce Cotterill
4 4 Artist impression of the Munroe Lane De
Assetplusnz.co.nz
Asset Plus, Shareholder Vote on the Munroe Lane Development | September 2020
0
2
PORTFOLIO UPDATE
5 Assetplusnz.co.nz
Asset Plus, Shareholder Vote on the Munroe Lane Development | September 2020
2.0 Portfolio Update
Key Metrics – estimated as at 31 August 2020
Properties1 WALE4 LVR1,2,3
Portfolio Value1,2,3
5 2.9 years 35.6%
(Mar-20: 4) (Mar-20: 3.2) (Mar-20: 34.3%)
$153.4m Number of Tenants Occupancy NTA3
(Mar-20: $142.1m)
72 98% $0.63
(Mar-20: 71) (Mar-20: 98%) (Mar-20: $0.57)
1. In the period since 31 March 2020, the Kamo property was acquired on 30 July 2020 for $2.125m
2. Final valuations have been received and approved by the Board but are subject to further auditor review as part of the half year reporting process at 30 September 2020. See Section 5 (Key Risks – Property valuation uncertainty) of the Investor Presentation
3. Portfolio value and LVR exclude capital expenditure incurred in relation to the developments at Munroe Lane and Graham Street, amounting to $3.1m in total. Such amount is included in the NTA figure shown above
4. Eastgate WALE and occupancy excludes the agreement to leases entered into with Restaurant Brands, one of which is subject to resource consent and completion of a development
6 Assetplusnz.co.nz
Asset Plus, Shareholder Vote on the Munroe Lane Development | September 2020
Impacts of COVID-19 to date
Update on APL’s portfolio performance
• Rental abatements and relief expected to impact 1H21
operating income by $0.68m ($0.49m after-tax), equivalent to
approximately 5% of the current annualised gross rental income
• Majority of rental abatements and relief are now agreed,
however regular monitoring of smaller retail operator
performance continues
• The NPAT impact of the above will be partially offset by a lower
tax expense due to the reintroduction of building depreciation in
the current financial year
• The full impact of COVID-19 will not be known for some time
• While upfront rental abatement and relief has been granted in
respect of the first lock-down period, preservation of long-term
value is also a key strategy.
7 Assetplusnz.co.nz
Asset Plus, Shareholder Vote on the Munroe Lane Development | September 2020
Portfolio overview
Graham Street, Auckland Eastgate, Christchurch Stoddard Rd, Auckland Munroe Lane, Auckland Kamo, Whangarei
Valuation ($m)1 $57.5 (Mar-20: $50.1) $47.4 (Mar-20: $47.0) $38.5 (Mar-20: $37.5) $7.5 (Mar-20: $7.5) $2.5 (On acquisition: $2.1)
WALE (years) 1.0 (Mar-20: 1.2) 4.2 (Mar-20: 4.5)2 3.8 (Mar-20: 4.0) - -
Occupancy (%) 100% (Mar-20: 100%) 95% (Mar-20: 95%)2 100% (Mar-20: 100%) - -
Net Rental Income ($m) $3.98 (Mar-20: $3.95) $3.60 (Mar-20: $3.66) $2.65 (Mar-20: $2.63) - -
Passing yield (%) 6.9% (Mar-20: 7.9%) 7.6% (Mar-20: 7.8%) 6.9% (Mar-20: 7.0%) - -
Comments • Acquired June 2019 • Bargain Chemist recently • The property continues to • Acquired off-market • Acquired on 30 July 2020
• Auckland Council lease has secured as a new tenant on a perform well and provide December 2019 • Large 38,000m2 industrial site
approximately 1 year to run 6-year lease a steady income stream • Large ~4,200m2 corner site located adjacent to SH1
• Attractive holding income • Agreement to Lease entered • 100% of expiring leases with three road frontages
• 6 month extension agreed with Restaurant Brands, were renewed by existing
for basement and ground subject to Resource Consent tenants so far during the
floors from July 2021 for and completion of year
$1m rental development
• Seismic work for The
Warehouse completed
Largest tenant exposures • Auckland Council • Countdown, The Warehouse • The Warehouse • Auckland Council
1. Based on final valuations received and approved by the Board which are subject to further auditor review as part of the half year reporting process at 30 September 2020. Further details will be included in APL’s half year results announcement for the six months
ended 30 September 2020. See Section 5 (Key Risks – Property valuation uncertainty) of the Investor Presentation.
2. Eastgate WALE and occupancy excludes the agreements to lease entered into with Restaurant Brands, one of which is subject to resource consent and completion of a development.
8 Assetplusnz.co.nz
Asset Plus, Shareholder Vote on the Munroe Lane Development | September 2020
Office sector outlook
• APL believes that the office sector remains attractive on a long-term basis despite the impacts of COVID-19
• As a result of COVID-19, peak vacancy rates in the Auckland office market are expected to increase from 6.3% as at June 2020 (25,171m2
available for sublease as a direct result of COVID-19), but stabilise to vacancy levels of ~8.0% by the end of 2023, which sits below the long
term average vacancy rate of 10.4%1
• Annual average prime office rental growth projections have reduced from 3% to 2%, and incentives are forecast to increase from ~13% to
~18%1
• Auckland office sector remains attractive with supportive long-term demand drivers2
• Auckland is expected to achieve average 5-year annual rental growth of 2.2%
• While Colliers expects the concept of core markets and core assets to be emphasised again, in the office sector “core” does not
necessarily imply location in CBDs. Office assets in decentralised areas and business parks may well be more attractive
• Colliers believes office markets with solid rent growth (specifically including Auckland) have the greatest potential for long-term capital
appreciation
1. Source: Colliers NZ Research, June 2020
2. Source: Colliers APAC 1H 2020 Report & 5-year outlook
9 Assetplusnz.co.nz
Asset Plus, Shareholder Vote on the Munroe Lane Development | September 2020
0 MUNROE LANE
3
DEVELOPMENT
Artist impression of the Munroe Lane Development
10 Assetplusnz.co.nz
Asset Plus, Shareholder Vote on the Munroe Lane Development | September 2020The Munroe Lane Development
• On 20 December 2019, APL announced the development of a
26,500m2 (GFA) / 15,100m2 (NLA) building in Albany, 63% by Albany: Albany has been identified for
its office sector growth and low
forecast income pre-leased, with a 15-year lease to Auckland Vacancy (prime) 0.0%4
vacancy levels
Council • As one of Auckland’s three
• Resource Consent was obtained in May 2020, which increased the key nodes outside of the city
centre, it will continue to
GFA to 27,200m2 and NLA to 15,900m2
evolve and develop over time
• Funding condition to be satisfied by 30 October 2020 CBD: as the key node for the North
Vacancy (prime) 3.5%4 of Auckland2
• The marketing process for the remaining vacant space at Munroe • Recent large infrastructure
Lane will commence after the special meeting developments, including the
extended busway, improve
• Construction is expected to commence in November 2020, with an
links and access3
anticipated completion date of 14 November 2022 and a targeted
completion date of 16 December 2022 under the ADL
• Development funded by $60 million equity raise (which will be
used to repay outstanding debt) and increase in committed bank
debt
1. Source: Auckland Council “Auckland Plan 2050” (https://www.aucklandcouncil.govt.nz/plans-projects-policies-reports-bylaws/our-
plans-strategies/auckland-plan/development-strategy/future-auckland/Pages/what-albany-look-like-future.aspx)
2. Source: NZTA
3. Source: Colliers International Research, June 2020
Artist impression of the Munroe Lane Development
11 Assetplusnz.co.nz
Asset Plus, Shareholder Vote on the Munroe Lane Development | September 2020Munroe Lane, Albany
• 6 levels plus 2 basement carparking level development in
the heart of Albany with 224 carparks
• Large floor plates of ~3,000 m2 each
• ~425m2 of expected Café / Food & Beverage / Retail
outlets on ground level
Munroe Lane – Indicative Metrics1 • Excellent daylighting due to three street frontages and an
adjoining laneway
Gross Floor Area (GFA) 27,200 m2
Net Lettable Area (NLA) 15,900 m2 • 63% (by forecast income) pre-leased on a 15-year lease to
Expected yield on cost2 5.9% Auckland Council.
Estimated total development cost2 $129.3m • Estimated remaining cost to completion of $119.8m as at
Value on Completion (JLL) $142.0m
31 August 2020
Development margin2 9.8%
• The development has an ‘as if complete’ valuation by
Jones Lang LaSalle (JLL) of $142.0m (dated 31 August
2020), representing a development margin of 9.8%
including land1
• It is intended that Munroe Lane will be held as a long-term
asset upon completion
1. See Appendix 3 of the investor presentation for a description of key assumptions surrounding these Indicative Metrics, including the
12 Assetplusnz.co.nz
Asset Plus, Shareholder
valuer’s assumptions.Vote on the Munroe Lane Development | September 2020
2. Includes forecast capitalised interest costs, Managers fees and contingencyBNZ New Office Auckland CBD
IAG
Risland Apartments
Northern Motorway North Harbour QBE
Westfield Albany Stadium
Munroe Lane
Albany Park-and- Ride
Oteha Valley Road
Munroe Lane
Location and Amenity
• Close proximity to both Albany Heights and Albany Lake Reserves
• Ready access to State Highway 1
• Minutes to the Albany Bus Station Park & Ride
• Highly visible and accessible site
• Extensive local amenities including: childcare, retail, food & beverage,
13
Note:
AssetPhotos
Plus, in boxes showVote
Shareholder expected new
on the buildings
Munroe Lane Development | September 2020 leisure, reserves and sport facilities Assetplusnz.co.nzUpdate on the Munroe Lane
Development construction process
• Developed design has been completed with detailed design well underway
• Early Contractor Involvement (ECI) Agreement awarded to Icon after
competitive procurement process – to be converted to construction
contract (based on NZS 3910 form) subject to shareholder approval at
today’s meeting
• Parent company guarantee from Icon’s Australian parent with liability
limited to the same level as Icon, being $50m plus 50% of the
remaining contract value
• Construction contract includes a 4% performance bond, and 2%
retentions from progress payments.
• If the contractor does not complete the project by the target
completion date, liquidated damages are payable on a tiered basis of
$10,000 per day, increasing to $20,500 per day. Liquidated damages
of $12,883 per day are payable from APL to Auckland Council if
completion is delayed beyond 16 December 20221
1. All dates noted in this point are subject to the extension of time and event of delay provisions in the Agreement to Develop and Lease with Auckland Council and the
Construction Contract with Icon.
14 Assetplusnz.co.nz
Asset Plus, Shareholder Vote on the Munroe Lane Development | September 2020Update on the Munroe Lane
Development construction process
• Buffer period of 4 weeks and 4 days between anticipated completion date of
14 November 2022 and target completion date of 16 December 2022 under
the ADL
• Icon have now submitted a fixed price offer representing 80% of the
estimated construction costs, which are currently being reviewed by Asset
Plus and will be fixed prior to entering the construction contract
• Balance (~20%) to be competitively tendered by Icon with APL oversight as
design packages become available to take advantage of competitive sub-
contractor market conditions
• Staged consenting strategy, with early works (utility diversions) underway,
with piling and construction commencing in November 2020
• Contingency of $5.75m being carried (6% on total construction cost of
$95m)
1. All dates noted in this point are subject to the extension of time and event of delay provisions in the Agreement to Develop and Lease with Auckland Council and the
Construction Contract with Icon.
15 Assetplusnz.co.nz
Asset Plus, Shareholder Vote on the Munroe Lane Development | September 2020Key terms of the Agreement to Develop and Lease
Key Terms of the Agreement to Develop and Lease
Key Development Obligations • Build to agreed building performance specifications. In most cases these specifications align with typical A-Grade office building
specifications
• Achieve 5-star design and built Greenstar rating
• Use reasonable endeavours to achieve 5-star NABERSNZ rating
• Deliver in accordance with the agreed milestone schedule to deliver practical completion by 16 December 2022
• Construct within pre-agreed tolerances of the target NLA
• Integrate Te Aranga design principles into the development
Target Lease Commencement Date
• 16 December 2022
(Target Completion Date)
Sunset Date • 18 Months from the Target Completion Date, as extended by tenant variations or delays
Liquidated damages • $12,883 + GST for every day of delay beyond the Target Completion Date (save for tenant delay and certain force majeure events)
Key lease terms
Term & Rights of Renewal • Initial term of 15 years from Lease Commencement Date
• 2 rights of renewal for a further 6 years each
Rent • $4,702,525 p.a. excluding GST and outgoings, subject to final measure and options selected
Rent review • 2.75% p.a. from the third anniversary of the Lease Commencement Date (but no fixed increases during any renewal term)
• Market review on the 10th anniversary of the Lease Commencement Date, on each renewal date and on the 3rd anniversary of each
renewal date (subject to a cap and collar)
Seismic Warranty • The Munroe Lane Development is required to be constructed to 100% of New Building Standard, and maintained at a minimum of 67% of
New Building Standard following any earthquake (measuring MM6.5 or greater) in Auckland or any future code changes
16 Assetplusnz.co.nz
Asset Plus, Shareholder Vote on the Munroe Lane Development | September 2020Indicative Munroe Lane Development Timetable
Dec- Mar- Jun- Sep- Dec- Mar- Jun- Sep- Dec- Mar- Jun- Sep- Dec- Mar-
19 20 20 20 20 21 21 21 21 22 22 22 22 23
Munroe Lane
Development
Land acquired
ADL with Auckland
Council signed
ADL unconditional
Resource Consent
Design and building
consent
ECI tender
Construction works
Completion
17 Assetplusnz.co.nz
Asset Plus, Shareholder Vote on the Munroe Lane Development | September 2020Pro-forma portfolio on completion of the Munroe Lane Development
The development is expected to increase the quality, size and value of APL’s portfolio as well as raising the NLA, net rental income and WALE.
The table below shows indicative key portfolio metrics, on the following four bases:
• APL today – portfolio value is based on final valuations that have been received and approved by the Board.
• APL post Equity Raise – reflects the impact of the Equity Raise immediately post-completion. The LVR reduces to 0%.
• APL post Munroe Lane Development (no divestments) – pro-forma view reflects the Munroe Lane Development on a completed basis in
December 2022 at a valuation of $142m.
• APL post Munroe Lane Development (with Stoddard Road divested) – APL has the flexibility to sell Stoddard Road, if necessary, during the
development period, although no decision has been taken at this time.
APL APL post APL post Munroe Lane Development2,3
Portfolio metrics1
today Equity Raise – No divestments – Stoddard Rd divested
Value of Investment Properties ($m) 153.4 153.4 295.8 257.3
Net Rental Income – All Properties ($m) 10.2 10.2 17.8 15.2
Weighted Average Lease Expiry (WALE – years) 2.9 2.9 6.5 7.0
Loan to Value Ratio (LVR) 35.6% 0% 43.0% 34.4%
Management Expense Ratio (MER) 1.15% 1.15% 0.93% 1.00%
1. Pro-forma financial information presented in this table has not been subject to external accountant review or audit. See Appendix 3 for the assumptions relating to forecast metrics
2. APL intends to introduce a dividend reinvestment plan, commencing at its next dividend payment date in December 2020.
3. Final valuations have been received and approved by the Board but are subject to further auditor review as part of the half year reporting process at 30 September 2020. Further details will be included in APL’s half year results announcement for the six months
ended 30 September 2020. See Section 5 (Key Risks – Property valuation uncertainty)
18 Assetplusnz.co.nz
Asset Plus, Shareholder Vote on the Munroe Lane Development | September 20200
4 KEY RISKS
19 Assetplusnz.co.nz
Asset Plus, Shareholder Vote on the Munroe Lane Development | September 2020Key risks of the Munroe Lane Development
The following is a brief summary of key risks relating to the Munroe Lane Development.
Further detail is set out in Section 5 of the Presentation circulated to shareholders alongside the Special Notice of
Meeting
• Increased levels of debt and higher LVR
– APL’s borrowing capacity will increase from $75 million to $130 million under the restructured facility
- LVR increases to ~43% on completion of development without any divestments
- Ability to manage LVR within loan covenants
• Cost overrun and construction risk
–Offer representing 80% of anticipated construction costs received from Icon, and will be fixed prior to entering into
the construction contract
- Risk of unforeseen costs or costs falling within the standard variation grounds or exclusions to the fixed costs
- General construction risks relating to the Munroe Lane Development which are outside of APL’s control
-$5.75m contingency is also being carried
20 Assetplusnz.co.nz
Asset Plus, Shareholder Vote on the Munroe Lane Development | September 2020Key risks of the Munroe Lane Development Continued
• Delay to completion
– If completion is delayed beyond 16 December 2022 then liquidated damages are payable to Auckland Council, full
recovery may not be possible from Icon
• Leasing of remaining Munroe Lane space
- APL may not be able to secure leasing commitments for the un-let space at Munroe Lane (~37%)
- Reduced rent, or other incentives, may be required to let any residual space, which would affect project returns, yields
and margins
• Impact on dividends during the development period
- APL’s ability to maintain dividends at current levels may be negatively impacted during the period of the Munroe Lane
development, including if development costs are greater than forecast
• Portfolio mix and ability to secure long-term leasing commitments
- APL’s portfolio is heavily weighted towards retail tenants, and the non-retail component comprises office space
- Increased likelihood of short-term demand for retail and office space
- APL’s ability to obtain sufficient leasing commitments is critical to its ability to source debt funding and/or to raise
further equity in the future to fund and complete its developments
Further detail on the key risks identified are set out in Section 5 of the Presentation circulated to shareholders alongside the Special Notice of Meeting.
21 Assetplusnz.co.nz
Asset Plus, Shareholder Vote on the Munroe Lane Development | September 2020Key risks of the Munroe Lane Development Continued
• Tenant default, rent relief and abatement
– APL’s tenants may be unable to fulfil their contractual obligations, including payment of rent. Default by
tenants and the cost of replacing such tenants is likely to have a negative impact
– If further Alert Level 3 or 4 restrictions are in place for an extended period of time during the balance of
FY21, there is a risk that tenant default and the level of rental support required to be given by APL materially
increases reducing the available funding to complete the developments
• Property valuation uncertainty
– There is a greater degree of caution around valuer’s opinions in the current market
– A valuation fall would impact the price at which APL would be able to divest one of its assets and could affect
APL’s capacity to borrow or its ability to comply with banking covenants
• Economic downturn and impact of COVID-19
– An economic downturn may materially impact on leasing demand, market rents, APL’s ability to lease
premises or keep premises tenanted, and on its operating and financial performance
Further detail on the key risks identified are set out in Section 5 of the Presentation circulated to shareholders alongside the Special Notice of Meeting.
22 Assetplusnz.co.nz
Asset Plus, Shareholder Vote on the Munroe Lane Development | September 2020Implications of the Munroe Lane Development not proceeding
• If the resolution is not approved then, absent an alternative agreement being made with Auckland
Council that is viable for APL, the development will not proceed and APL will need to cancel the
Agreement to Develop and Lease with the Auckland Council.
• Costs incurred to date may not be able to be recovered in full – the land was acquired for $7.25m
and approximately $2.00m of costs have been incurred to 30 September.
• APL’s pathway to growth via the Munroe Lane Development would be lost, creating uncertainty
over its growth strategy.
• Components of the equity raise still complete, and APL would be over capitalised.
• Alternative development options would need to be considered to realise a return on Munroe Lane.
• APL’s reputation is likely to be damaged which could affect APL’s ability to transact in the future.
23 Assetplusnz.co.nz
Asset Plus, Shareholder Vote on the Munroe Lane Development | September 20205.0
Q&A
24 Assetplusnz.co.nz
Asset Plus, Shareholder Vote on the Munroe Lane Development | September 20206.0
Resolutions
Asset Plus, 25
Asset Plus,shareholder
Shareholdervote
Voteonon
Munroe Lane Development
the Munroe | September
Lane Development 2020 2020
| September Assetplusnz.co.nzResolution 1 –
“That:
(i) the entry into and performance of the Agreement to Develop and
Lease; and
Munroe Lane (ii) the undertaking of the Munroe Lane Development,
Development together with all associated and related agreements, transactions,
actions and matters, and incurrence of any expenditure, that are
reasonably necessary to perform the Agreement to Develop and
Lease and complete the development, construction and leasing of the
Munroe Lane Property, by Asset Plus (or any of its wholly-owned
subsidiaries), as described or referred to in the Explanatory Notes, be
ratified and approved for all purposes (including Listing Rule 5.1.1(b)
and section 129 of the Companies Act).”
26 Assetplusnz.co.nz
Asset Plus, Shareholder Vote on the Munroe Lane Development | September 2020Resolution 2
“That the previous issue under Listing Rule
Ratification of issue of 4.5.1 of 40,480,108 fully paid ordinary
shares in Asset Plus to investors at an issue
40,480,108 Shares price of $0.30 per share on or around 16
September 2020 under the Placement, be
under the Placement approved and ratified for all purposes,
including Listing Rule 4.5.1(c).”
27 Assetplusnz.co.nz
Asset Plus, Shareholder Vote on the Munroe Lane Development | September 2020Important Notice
Please read this presentation in the wider context of the material previously published by Asset Plus Limited (APL) and announced through
NZX Limited. In particular, you should read the Notice of Meeting and the Presentation dated 10 September 2020 (Presentation) circulated
to shareholders alongside the Notice of Meeting in full, as they contain important information to assist you in determining whether to vote
in favour of the Resolutions.
This presentation contains not only a review of operations, but may also contain some forward looking statements (including forecasts and
projections) about APL and the environment in which APL operates. Because these statements are forward looking, APL’s actual results
could differ materially.
No representation, warranty or undertaking, express or implied, is made as to the fairness, accuracy, completeness or correctness of the
information contained, referred to or reflected in this presentation or supplied or communicated orally or in writing to you (or your advisers
or associated persons) in connection with it, as to whether any forecasts or projections will be met, or as to whether any forward looking
statements will prove correct. You will be responsible for forming your own opinions and conclusions on such matters.
No person is under any obligation to update this presentation at any time after its release to you.
To the maximum extent permitted by law, none of APL, Augusta Funds Management Limited (AFM) nor any of their directors, officers,
employees or agents or any other person shall have any liability whatsoever to any person for any loss (including, without limitation, any
liability arising from any fault or negligence on the part of APL, AFM, their directors, officers, employees or agents or any other person)
arising from this presentation or any information contained, referred to or reflected in it or supplied or communicated orally or in writing to
you (or your advisers or associated persons) in connection with it.
Acceptance of this presentation constitutes acceptance of the terms set out above in this Important Notice and in the Disclaimer and
Important Notice contained within the Presentation.
Asset Plus, Shareholder Vote on the Munroe Lane Development | September 2020 28 Assetplusnz.co.nzYou can also read
