ARENA REIT. — AGM Information 2019

Nov 21, 2019

A R E N A R E IT

Annual General Meeting 22 November 2019

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AGENDA

Chair’s address 3 Managing Director’s report 6 Questions 11 Formal Business 12 Counting of Votes, Close 23 Important Notice 24

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2

A R E N A R E I T 2 0 1 9 A N N U A L G E N E R A L M E E T I N G

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CHAIR’S ADDRESS David Ross Chair

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FY19 HIGHLIGHTS

Strong result and earnings growth

• Annual underlying rental income growth: average like-for-like rent reviews +3.6%[1] .

• Healthcare portfolio leases with existing tenant partner Healius extended by an average of 10.6 years contributing to valuation increase and portfolio WALE of 14.1 years.

• Acquisition of operating ELC and healthcare properties, ELC development completions and new investment in ELC development projects to support future earnings growth.

ASX total return[2] performance to 30 June 2019

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50%
40%
34.3%
30%
25.0%
19.4%
17.6%
20%
13.8%
8.4%
10%
0%
1 year 3 years p.a. 5 years p.a.
Arena REIT ASX300 AREIT Accum Index
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1. Excludes ten market rent reviews which had not been resolved as at 30 June 2019.

2. UBS, UBS Australian REIT month in review, June 2019.

3. EPS is calculated as net operating profit over weighted average number of securities on issue. 4. Gearing calculated as ratio of borrowing over total assets.

$37.7m

13.8 cents

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Net operating Earnings per security
profit (EPS) [3 ]
+8.7% on FY18 +5.3% on FY18
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$72m Acquisitions and development completions At 6.4% initial yield

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13.5 cents
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Distributions per
security (DPS)
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+5.5% on FY18
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+3.6%
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22.8%
Gearing ratio [4 ]
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Average like-for-like
rent increase
+100 bps on FY18
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24.7% at FY18
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4 A R E N A R E I T 2 0 1 9 A N N U A L G E N E R A L M E E T I N G

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• DELIVERING ON INVESTMENT OBJECTIVE Earnings and distributions per security (cents)

To generate attractive and predictable distributions to investors with earnings growth prospects over the medium to long term.

20

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15
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15 14.3
13.8
13.5
13.1
12.8
12.3
12.0
11.1
10.9
10.2
10.0
10
8.8 8.9
5
0
FY14 FY15 FY16 FY17 FY18 FY19 FY20
DPS (cents) EPS (cents)
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• FY20 DPS guidance of 14.3 CPS +5.9% on FY19[1. ]

• Earnings and distribution growth underpinned by core earnings drivers.

• FY20 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, and tenants comply with their lease obligations.

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MANAGING DIRECTOR’S REPORT

Rob de Vos Managing Director

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PORTFOLIO PERFORMANCE Disciplined strategy supporting positive outcomes

Working in partnership:

Lease management:

• 100% occupancy.

• • Average like-for-like rent increase of +3.6%[1] .

• Average market rent review increase of +9.4%[1] .

• Investment and developments:

• Eight operating properties acquired at a net initial yield of 6.4% with weighted average lease term (by income) of 17 years.

• • Four ELC developments completed at a net initial yield on cost of 6.4% on new 20 year leases.

• Eight new ELC development projects .

• acquired[2]

  • Acquisition of $24 million portfolio of specialist disability accommodation properties.

• Healthcare portfolio leases with tenant partner Healius extended by an average of 10.6 years.

• SOCIAL • Rejuvenation of existing ELCs in

• INFRASTRUCTURE partnership with three tenant groups. PROPERTY Portfolio management: • Portfolio weighted average lease expiry (by income) increased by 1.2 years to 14.1 years.

  • One ELC property sold.

  • • Net revaluation uplift of $32m.

  • • Portfolio weighted average passing yield 6.38%.

• Excludes ten market rent reviews which had not been resolved as at 30 June 2019.

• Three ELC development projects were conditionally contracted prior to 30 June 2019.

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• FY19 CONTRIBUTORS TO EPS GROWTH

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15
14
13
12
11
10
9
8
7
6
FY18 EPS Rental income growth Completed Funding mix - equity Net other income and FY19 EPS
acquisitions and expenses
developments
Cents Per Security (CPS)
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• Continued growth in property income from:

• Annual rental growth;

• – Investment in operating healthcare and ELC properties, including a $24 million portfolio of specialist disability accommodation properties; and

• – ELC developments completed throughout FY18 and FY19.

• Operating expenses are higher primarily due to increased registry, regulatory costs and resourcing changes.

• Finance costs have increased in line with the settlement of new investment and development completions.

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PORTFOLIO OVERVIEW	PORTFOLIO OVERVIEW	PORTFOLIO OVERVIEW	PORTFOLIO OVERVIEW	PORTFOLIO OVERVIEW	PORTFOLIO OVERVIEW	PORTFOLIO OVERVIEW
	Number of assets	30 June 2019 valuation	Net revaluation movement		30 June 2019 passing yield	Change
		$m	$m	%	%	bps
ELC portfolio	216	676.2	21.6	3.5	6.44	(2)
Healthcare portfolio	10	122.1	10.8	12.7	6.08	(77)
Total portfolio	226	798.3	32.4	4.6	6.38	(14)
85% 15% Sector diversity (by value) C althcare 33% 28% 23% 7% 5% 3% 1% Geographic diversity (by value) QLD VIC NSW WA SA TAS NT 14 12% 11% 7% 5% 3% 17% Tenant diversity (by income) Goodstart Early Learning Green Leaves Healius Affinity G8 Education Petit Early Learning Oxanda Other

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15%
ELC
Healthcare
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Goodstart Early Learning 17%
Green Leaves
31%
Healius 3%
Affinity 5%
G8 Education
7%
Petit Early Learning
Oxanda
11%
14%
Other
12%
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9 A R E N A R E I T 2 0 1 9 A N N U A L G E N E R A L M E E T I N G

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OUTLOOK Strong underlying earnings growth

INCOME GROWTH

• FY20 distribution guidance of 14.3 cents per security, an increase of 5.9%[1] on FY19.

• Annual rent increases, of which market rent reviews comprise:

• Approximately 8% of income in FY20; and

• Approximately 9% of income in FY21.

• Full impact of FY19 and FY20 acquisitions and development completions.

• $50 million development pipeline comprising nine ELC projects as at 30 June 2019[2]

• .

• $9 million additional acquisitions post balance date[3]

NEW INVESTMENT OPPORTUNITIES

• Disciplined investment process for opportunities that meet Arena’s preferred property characteristics.

• Debt capacity available at low incremental cost.

• Market conditions remain conducive to new opportunities.

• FY20 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, and tenants comply with their lease obligations.

Our investment objective: To deliver an attractive and predictable distribution to investors with earnings growth prospects over the medium to long term.

1. Three ELC development projects were conditionally contracted prior to 30 June 2019.

2. Contracted post balance date, includes one operating property which has settled, and one conditionally contracted development project.

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QUESTIONS

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FORMAL BUSINESS

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ORDINARY BUSINESS Resolution 1: Non-binding advisory vote on the Remuneration Report To consider and, if thought fit, to pass the following as an advisory resolution of the Company:

‘That the Remuneration Report for the financial year ended 30 June 2019 be adopted.’

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• OTHER BUSINESS Resolution 2: Election of Ms Rosemary Hartnett as a director of the Company

To consider and, if thought fit, to pass the following as an ordinary resolution of the Company:

‘That Ms Rosemary Hartnett, who was appointed as a director of the Board on 13 August 2019 in accordance with ASX Listing Rules 14.4 and clause 2.3(b) of the Company’s constitution and whose appointment as director expires at the conclusion of the Annual General Meeting and, being eligible, offers herself for election, be elected as a director of the Company.’

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OTHER BUSINESS Resolution 3: Re-election of Dr Simon Parsons as a director of the Company

To consider and, if thought fit, to pass the following as an ordinary resolution of the Company:

• ‘That Dr Simon Parsons, 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.’

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OTHER BUSINESS

Resolution 4: Ratification of Placement

• To consider and, if thought fit, to pass the following as separate ordinary resolutions of the Company and each of the Trusts:

• ‘That for the purposes of ASX Listing Rule 7.4 and for all other purposes, the previous issue of 18,726,592 Securities at an

• issue price of $2.67 per Security, under a placement to institutional investors as detailed in the Explanatory Memorandum (Placement) be ratified.’

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OTHER BUSINESS Resolution 5: Grant of deferred STI rights to Mr Rob de Vos

To consider and, if thought fit, to 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.’

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OTHER BUSINESS Resolution 6: Grant of LTI performance rights to Mr Rob de Vos

To consider and, if thought fit, to 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.’

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OTHER BUSINESS Resolution 7: Grant of deferred STI rights to Mr Gareth Winter

To consider and, if thought fit, to 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.’

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OTHER BUSINESS Resolution 8: Grant of LTI performance rights to Mr Gareth Winter

To consider and, if thought fit, to 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.’

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PROXY VOTING RESULTS

Resolutions 1 through 4

Proxy votes	For	Open	Against	Abstain
Proxy votes for Resolution 1 (%)	98.22%	1.29%	0.49%
Proxy votes for Resolution 1 (quantity)	162,293,532	2,138,177	813,510	2,506,492
Proxy votes for Resolution 2 (%)	98.69%	1.16%	0.15%
Proxy votes for Resolution 2 (quantity)	165,488,350	1,950,662	243,225	1,113,558
Proxy votes for Resolution 3 (%)	98.71%	1.21%	0.08%
Proxy votes for Resolution 3 (quantity)	165,453,759	2,035,618	129,026	1,177,392
Proxy votes for Resolution 4 (%)	93.73%	5.49%	0.78%
Proxy votes for Resolution 4 (quantity)	37,313,676	2,184,651	310,858	42,035,399

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PROXY VOTING RESULTS

Resolutions 5 through 8

Proxy votes	For	Open	Against	Abstain
Proxy votes for Resolution 5 (%)	98.11%	1.19%	0.70%
Proxy votes for Resolution 5 (quantity)	162,212,504	1,974,159	1,162,452	3,446,680
Proxy votes for Resolution 6 (%)	94.57%	1.21%	4.22%
Proxy votes for Resolution 6 (quantity)	154,885,537	1,974,159	6,906,183	5,029,916
Proxy votes for Resolution 7 (%)	98.11%	1.19%	0.70%
Proxy votes for Resolution 7 (quantity)	162,217,555	1,974,159	1,157,401	3,446,680
Proxy votes for Resolution 8 (%)	94.56%	1.21%	4.23%
Proxy votes for Resolution 8 (quantity)	154,890,079	1,974,159	6,920,431	5,011,126

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COUNTING OF VOTES, CLOSE

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IMPORTANT NOTICE

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). The information contained in this document is current only as at 30 June 2019 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 2019 lodged with the ASX on 26 September 2019 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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