ABACUS GROUP — Investor Presentation 2017

Aug 17, 2017

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‘It’s all about the property’
FY17 Results Presentation
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Abacus Property Group – FY17 Results Presentation 18 August 2017

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FY17 financial summary

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14 Martin Place, Sydney NSW
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Statutory profit Underlying profit $285.1 million $186.8 million Up 53% Up 51%

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710 Collins Street, Melbourne VIC
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Underlying EPS 32.7 cps Up 46%

Underlying DPS 17.5 cps Up 3%

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201 Pacific Highway, Sydney NSW
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Total assets Group gearing $2.4 billion 20.5%

Net tangible asset $3.02 per security Up 13.5%

Payout ratio 53.5% Interest cover ratio 7.4x

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FY17 highlights

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Spice apartments, Brisbane QLD
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Oasis Shopping Centre, Broadbeach QLD
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710 Collins Street, Melbourne VIC
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Record underlying profit of $186.8 million, up 51% from FY16

• All aspects of the business contributed to this result

Strong transactional activity during the period across our investment portfolio

• Acquired 7 commercial properties totalling over $205 million in value during the period to date

• Added 4 self-storage assets valued at $22 million to the portfolio

• Sold 4 commercial properties for over $160 million

Expanding our third party capital program

• Expanding relationships with global capital partners

• Strong performance fee income turbo charging investment returns

Residential developments platform delivers multiple projects as anticipated

• Realised over $170 million of cash from residential development projects

• Completed three residential developments during the year

• Sold one multi-site residential project following approval

Abacus Property Group – FY17 Results Presentation 18 August 2017

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Financial results and

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capital management
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Abacus Property Group – FY17 Results Presentation 18 August 2017

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Diversified business delivers record results

	Key financial metrics	Jun 17	Jun 16
	Consolidated Group1 AIFRS statutory profit	$285.1m	$185.9m
	Abacus AIFRS statutory profit	$257.9m	$169.7m
	Underlying profit2	$186.8m	$124.0m
	Underlying earnings per security	32.7c	22.4c
	Distributions per security3	17.5c	17.0c
	Cashflow from operations	$168.5m	$85.7m
	Interest cover ratio4	7.4x	4.2x
	Weighted average securities on issue	571m	555m

Underlying earnings per security growth of 46% to 32.7cps

• 17.5 cps distribution covered by recurring earnings

Increased underlying results from the commercial and self-storage sectors while solid results from residential developments maintained revenue on the prior corresponding period (pcp)

Highlights of underlying profit result in FY17:

• $10 million of additional net rental income across the commercial and self-storage portfolios

• $13 million of additional fee income

• $50 million of gains from the sale of commercial properties

• $30 million of profits from residential development projects

Recent acquisitions and improvement in rental returns at 14 Martin Place, Ashfield Mall and Bacchus Marsh delivered an 8% increase ($4.7 million) in net rental income across the commercial portfolio

1. The Group consists of the merged Abacus Property Group, Abacus Hospitality Fund, Abacus Wodonga Land Fund and ADIF II

14% increase ($5.5 million) in self-storage EBITDA

1. Calculated in accordance with the AICD/Finsia principles for reporting Underlying Profit

2. Continuing to deliver gains across RevPAM, occupancy and net lettable area

3. Includes distributions declared post period end (3 July 2017 and 1 July 2016)

4. Calculated as underlying EBITDA divided by interest expense and includes impairments on inventory

Abacus Property Group – FY17 Results Presentation 18 August 2017

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13.5% growth in net tangible assets per security

Abacus has a strong balance sheet

Balance sheet gearing reduced to 20.5% on the back of realisations across our investment portfolio and residential developments

• Remains well below targeted limit of up to 35%

NTA per security grew by 13.5% to $3.02 driven by strong earnings performances across the entire business and portfolio cap rate compression

• 8.6% contribution from increased retained earnings

• 4.9% contribution from fair value movements

Increased liquidity of $295 million provides for $500 million+ of acquisition capacity

1. 8.75c distribution in August 2017 and 8.5c in August 2016 respectively

	Balance sheet metrics	Jun 17	Jun 16
	NTA per security	$3.02	$2.66
	NTA per security less August
	distribution1	$2.93	$2.59
	Abacus total assets	$2,386m	$2,322m
	Net tangible assets2	$1,737m	$1,480m
	Total debt facilities	$873m	$873m
	Total debt drawn Average cost of drawn debt	$514m 5.2%	$629m 5.4%
	Abacus gearing ratio3	20.5%	25.8%
	Covenant gearing ratio4	23.9%	29.5%
	Debt term to maturity	3.4 yrs	3.5 yrs
	% hedged of drawn debt	49%	53%
	Weighted average hedge maturity	2.5 yrs	2.7 yrs

1. Excludes external non–controlling interests of $48.5 million (FY16: $43.3 million)

2. Bank debt minus cash divided by total assets minus cash. If joint venture and fund assets and debt are consolidated proportionately based on Abacus’ equity interest, look through gearing is 25.1%

3. Covenant gearing calculated as Total Liabilities (net of cash) divided by Total Tangible Assets (net of cash)

Abacus Property Group – FY17 Results Presentation 18 August 2017

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Investment

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portfolio overview
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Abacus Property Group – FY17 Results Presentation 18 August 2017

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It’s all about the property Investment portfolio of $1.8 billion

Key portfolio metrics	Jun 17	Jun 16
Investment portfolio value1 ($m)	1,831	1,714
Commercial portfolio1 ($m)	1,202	1,140
Self-storage portfolio ($m)	629	574
Investment portfolio WACR1,4 (%)	7.08	7.48
No. of commercial assets1	34	32
Net lettable area (NLA) (m2)2,3	226,811	254,048
Occupancy2,3 (% by area)	90.5	91.2
WALE2,3 (yrs by income)	4.1	4.3
Like for like rental growth2,3 (%)	2.7	2.7

Investment portfolio remixing continues with increases across the self-storage, office and retail portfolios

Investment portfolio delivered 5.0% or $74.8 million revaluation gains in FY17

Commercial portfolio delivered a 2.0x increase in underlying EBITDA to $133.7 million in FY17 from $68.2 million in FY16 driven by both increased rental income from existing and new assets and asset sales

Occupancy slightly reduced to 90.5% following the sale of higher occupancy assets and the acquisition of lower occupancy assets with strong value add characteristics

Occupancy continues to be impacted by a number of redevelopment/refurbishment projects

Commercial portfolio like for like rental growth of 2.7%

1. Includes assets acquired under our third party capital platform, inventory and PP&E

2. Excludes self-storage assets

3. Excludes development assets

4. Weighted Average Cap Rate

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It’s all about the property Building long term returns – Third Party Capital

• $1.3 billion current AUM ($495m Abacus share)

• We pride ourselves with investing alongside our partners

Continuing to add partnerships

• Red Cross building mandate for private investors

• GAW opportunity fund and 2 industrial acquisitions

• 324 Queen Street, Brisbane transaction with Investec

Delivering stronger returns from performance fee revenue

• Sale of third Heitman asset, 35 Boundary St in Brisbane delivered an asset level IRR of 14.7%

• Sale of KKR JV asset, World Trade Centre in Melbourne delivered an asset level IRR of 33.1%

Continuing to discuss opportunities to work with major global investors focused on the syndication of development finance projects

		Current capital partnering assets	Sector	Amount1
		4 & 14 Martin Place, Sydney NSW	Office/Retail	$153.5m
		32 Walker Street, North Sydney NSW	Office	$35.6m
		180 Queen Street, Brisbane QLD	Office/Retail	$29.5m
		35 Boundary Street, Brisbane QLD	Office	$40.25m
		Oasis, Gold Coast QLD	Retail	$103.5m
		201 Pacific Highway, St Leonards NSW	Office/Retail	$115.0m
		Lutwyche City, Brisbane QLD	Retail	$65.0m
		Merivale, South Brisbane QLD	Residential development	$275.0m
		324 Queen Street, Brisbane QLD	Office	$132.0m
		182–198 Maidstone Street, Altona VIC	Industrial	$30.0m
		2-34 Davidson Street, Chullora NSW	Industrial	$35.0m
		Red Cross Building, Sydney NSW	Office	$112.9m
		Total		$

1. Represents the acquisition price for commercial properties or the total estimated sales revenue from residential developments

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It’s all about the property Office portfolio – vacancy provides upside

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7.0%
WACR [1,3]
81.5%
Portfolio
occupancy [1]
$623m
Portfolio value
(2.2)%
rental growth [1,2]
3.7 yrs
WALE [1,4]
1. Excludes development assets
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33 Queen Street, Brisbane QLD

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• Occupancy currently 62%

• Expansive ground floor space now leased to F&B provider

• Office refurbishment program ongoing as space comes up

• Leasing progressing well with spec fitout space

• 1,000m[2] or 16.6% of space currently under negotiation

201 Pacific Highway, Sydney NSW

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• Occupancy currently 74%

• Good leasing progress to date

• HOA out for 1,200m[2] or 7.3% of space

• Remaining 2 floors of vacancy, 2,900m[2] , have multiple parties shortlisted

• NAB renewal for 1,250m[2] @ $570pm[2] for 3 years

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3. Weighted Average Cap Rate
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1. Like for like rent growth - Excluding movement in occupancy, rental growth would be 4.1%

2. Weighted Average Lease Expiry

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It’s all about the property Retail portfolio – development driving growth

33 Queen Street and 199 George Street, Brisbane QLD Bacchus Marsh, Bacchus VIC

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6.3%
WACR [1,3]
92.0%
Portfolio
occupancy [1]
$402m
Portfolio value
9.5%
rental growth [1,2]
5.2 yrs
WALE [1,4]
1. Excludes development assets 3. Weighted Average Cap Rate
2. Like for like rent growth - Excluding movement in occupancy, rental growth would be 6.0% 4. Weighted Average Lease Expiry
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• Refurbishment program completed in FY16

• Occupancy improved to 88% in FY17

• 7.5 year lease expiry profile

• 36% like for like rental growth driven by new format expanded majors and strong specialty leasing

• Sale of Coles Express pad site for $2m profit and a 74% return on cost

Oasis, Broadbeach QLD

• Redevelopment program ongoing throughout FY17/18

• Occupancy improved to 89% in FY17

• 3.9 year lease expiry profile

• Restaurant precinct project completed

• Monorail dismantled providing unobstructed views and potential additional NLA

• Focus on implementing leasing strategy

Abacus Property Group – FY17 Results Presentation 18 August 2017 11

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It’s all about the property Industrial portfolio – low WALE provides opportunity

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8.3%
WACR [1,3]
100%
Portfolio
occupancy [1]
$177m
Portfolio value
3.3%
rental growth [1,2]
1.6 yrs
WALE [1,4]
1. Excludes development assets 2. Like for like rent growth
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33 Queen Street and 199 George Street, Brisbane QLD 169 Australis Drive, Derrimut VIC

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• Occupancy currently 100%

• All tenancies expire in FY18

• Rent growth of 50% experienced on re-leasing

• 23% recently re-leased for further 3 years at $75pm[2]

• Upcoming vacancy presents opportunity

2-34 Davidson Street, Chullora NSW

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• Acquired 100% vacant in GAW JV

• Executed a new lease over 10,000m[2] warehouse space at $125pm[2] for 5 yrs

• Marketing 7,900m[2] office space

• Office space can be split to add further warehouse space when needed

• Considering ability to add further improvements to site including possible residential uses

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3. Weighted Average Cap Rate
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1. Weighted Average Lease Expiry

Abacus Property Group – FY17 Results Presentation 18 August 2017

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It’s all about the property Self-storage: continuing growth strategy

Self-storage portfolio: $629 million

14.2% increase in underlying EBITDA to $43.7 million in FY17 driven by strong trading and recent acquisitions

• 13.6% increase in self-storage revenue

Portfolio delivered c.$27.3 million of valuation gains driven by an improvement in revenue and a decrease in average cap rate to 7.7% from 8.0%

Established portfolio’s metrics improved over the 12 months to:

• 89.2% occupancy up 1.8%

• $262m[2] rental rate up 1.2%

• $234m[2] RevPAM[4] up 3.1%

12,000m[2] or 4.1% increase in portfolio NLA during the period

High occupancy levels to dictate stronger growth in overall rental rate to drive future RevPAM growth

• Focus on adding extra NLA from organic NLA growth

• Includes commercial and industrial properties held for redevelopment

• Average over last 12 months (by area) of established facilities

• Adjusted to FY17 FX rate of NZ/AUD $1.05 for comparison purposes

• RevPAM: Revenue per available square metre

	Key metrics	AUS	NZ	Jun 17	Jun 16
	Portfolio value ($m)	501.5	128.0	629.5	574.4
	No. of self-storage assets	53	12	65	62
	WACR	7.7%	7.9%	7.7%	8.0%
	NLA1 (m2) Land (m2)	241,000 399,000	61,000 105,000	302,000 504,000	290,000 480,000
	Occupancy2	89.0%	89.8%	89.2%	87.4%
	Average rental rate2, $psm RevPAM4 (per available sqm)2	$260 $232	NZ$281 NZ$252	$262 $234	$259 $227

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Greensborough facility, Melbourne VIC
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Abacus Property Group – FY17 Results Presentation 18 August 2017

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It’s all about the property Self-storage: continuing growth strategy

Portfolio consists of:

• 53 established self-storage facilities and

• 7 newly converted self-storage facilities with further expansion potential – average age 2 years

• 5 non storage assets with conversion potential of 16,000+m[2] of NLA

• Average length of stay approximately 40 months

Portfolio growth continues with a further 4 assets added in FY17

• $12.2 million on 2 established facilities

• $9.8 million on 2 non storage assets with conversion potential

• $4.6 million of growth capex spent during period

Focused on acquisition, development, expansion and optimisation

Like for like portfolio – comprises 51 established facilities

• 5.5% rent roll growth year on year driven by occupancy gains of 3.3% and rental rate growth of 2.1%

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Portfolio value compound growth of 13.9% pa
since FY13
650 70
Portfolio size ($m‐lhs) Portfolio size (no. of assets‐rhs)
600
65
550
60
500
450
55
400
50
350
300 45
$’000 Total rent roll [1] compound growth of 4.1% pa since
4,000 July 08
3,900
3,800
3,700
3,600
3,500
3,400
3,300
3,200
3,100
3,000
2,900
2,800
2,700
Jun-13 Jun-14 Jun-15 Jun-16 Jun-17
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1. Total rent roll per month for like for like portfolio of 41 facilities held since July 2008

Abacus Property Group – FY17 Results Presentation 18 August 2017 14

The Eminence residential development, Carlton, Melbourne VIC

Developments

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overview
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Abacus Property Group – FY17 Results Presentation 18 August 2017

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It’s all about the property Developments – delivering on strategy

$55.0 million underlying EBITDA contribution

• Strong results to maintain levels of earnings following record FY16 year

• 3.5% fall due to a reduction of finance income as projects realised

Business has again delivered impressive returns with the completion of residential projects in Melbourne, Brisbane, Sydney and Canberra

• $30 million of equity profits from developments and loans

	Key metrics	Jun 17	Jun 16
	Residential exposure	95.8%	96.2%
	Sydney exposure (by $)	77%	73%
	Loans	$308.0m	$370.3m
	Equity	$140.3m	$129.3m
	Average interest rate	9.3%	10%

• $4.5 million of fee income

Reduction of $51 million to $448 million of assets reflects:

• $135 million of capital and interest repayments offset by additional interest accruals and drawdowns on new and existing loans

• Additional drawdowns heavily weighted to existing construction projects Ashfield Central, One A and Luminary

Pipeline remains heavily focused on the Sydney residential market

• Almost 90% of units or land lots are located in this market

• Sydney residential market outlook remains positive

Unit and land lot diversification by state and average cost base per unit/land lot (subject to planning approval)

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Melbourne, Brisbane, 700
433
Average
cost base
~$47,000
Sydney,
8,366
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It’s all about the property Residential pipeline – developments

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Doncaster, Melbourne VIC
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$118 million of invested capital across 8 residential development projects completing, under construction or planning for c1,400 units

Completed and committed projects of 945 units are 98% sold down

• 1 completed project is 100% sold and 80% settled

• 4 projects under construction are 97% pre-sold

Successful FY17 with the completion of three residential projects delivering robust earnings to the Group

FY18 pipeline project updates:

• The Eminence: 80% settled earlier than scheduled. No terminations to date despite high FIRB sales percentage. Anticipating full settlement on time by September 2017

• One A Apartments: 11 sales remaining. Strong pricing of units in Sydney. Construction well advanced and anticipating completion in H218

• Ashfield Central: All units sold. Settlements due in H218

• Ivy and Eve: 12 sales remaining. Brisbane unit market is anticipating valuation pressure at low quality end of market. Affordable sales prices, location and quality of build important factors in maintaining settlement success. Ivy and Eve completion anticipated in H118 and H218

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The Eminence, Carlton, Melbourne VICSpice, Brisbane QLD
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Abacus Property Group – FY17 Results Presentation 18 August 2017

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It’s all about the property Residential pipeline – land approvals

$233 million of invested capital across 11 residential land projects actively progressing through the local and state government approvals process

100% exposure to the Sydney metropolitan market

• Fundamentals remain solid with demand exceeding supply

FY17 delivered full or partial project realisations following successful sales outcomes during the year

• French Street, Werrington – Settlement of 138 land lots. Stages 3 and 4 remain (251 lots)

• Campsie – 441 unit approved site sale settled delivering c.$10m profit in excess of all accrued interest

Future projects will be expedited as quickly as practically possible:

• Camellia: Council elections due in September 2017. Awaiting response from RMS and TfNSW on traffic studies. Parramatta light rail service to stop adjacent to site

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Artist’s impression of 55 Aird Street, Parramatta NSW. Site has an approved
planning proposal from council providing 15:1 FSR ratio that can provide up to
136 units
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• Riverlands: Development application for 241 lots has been submitted to council. A s.96 will further subdivide site into 422 duplex lots. Considering all strategies for the site

• 55 Aird Street, Parramatta: Awaiting gazettal for 136 units prior to a sale of the council approved site

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Summary
Abacus Property Group – FY17 Results Presentation 18 August 2017
Artist’s impression of Ashfield Central residential development, Sydney NSW
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Summary – strong value proposition

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Artist’s impression of residential development
Hawthorn, VIC
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Bacchus Marsh Village Shopping Centre, Bacchus
Marsh, VIC
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Lutwyche City Shopping Centre, Brisbane ,QLD
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Very proud of our record results this year

• Delivered growth in recurring earnings

• Profits achieved on sale or realisation of assets or projects during the period continues to validate our diversified core plus strategy while delivering on our high expectations

Increased FY17 DPS covered by recurring earnings despite transactional activity

• DPS payout ratio of 53.5% of underlying earnings per security

• DPS growth is stable and sustainable despite EPS fluctuations

FY18 outlook remains positive

• Diversified balance sheet well positioned with a strong pipeline to continue to outperform

• Significant liquidity available to drive investments into self-storage and investment assets

• Investment product availability will be key

• Third party relationships enhanced through track record

• Capital management initiatives will also be considered

Targeting an FY18 distribution per security of 18.0cps a 3% increase on FY17

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Important information

The information provided in this document is general, and may not be suitable for the specific purposes of any user of this document. It is not financial advice or a recommendation to acquire Abacus Property Group securities (ASX: ABP). Abacus Property Group believes that the information in this document is correct (although not complete or comprehensive) and does not make any specific representations regarding its suitability for any purpose. Users of this document should obtain independent professional advice before relying on this document as the basis for making any investment decision and should also refer to Abacus Property Group’s financial statements lodged with the ASX for the period to which this document relates. This document contains non-AIFRS financial information that Abacus Property Group uses to assess performance and distribution levels. That information is calculated in accordance with the AICD/Finsia principles and is not audited.

Any forecasts or other forward looking statements contained in this presentation are based on assumptions concerning future events and market conditions. Actual results may vary from forecasts and any variations may be materially positive or negative.

The information in this document is current only as at the date of this document, and that information may not be updated to reflect subsequent changes.

To the extent permitted by law, the members of Abacus Property Group and those officers responsible for the preparation of this document disclaim all responsibility for damages and loss incurred by users of this document as a result of the content of, or any errors or omissions in, this document.

Abacus Property Group:

Abacus Group Holdings Limited ACN: 080 604 619

Abacus Group Projects Limited ACN: 104 066 104

Abacus Funds Management Limited ACN: 007 415 590 AFSL No. 227819

Abacus Storage Funds Management Limited ACN: 109 324 834 AFSL No. 277357

Abacus Storage Operations Limited ACN: 112 457 075

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