ASPEN GROUP — Capital/Financing Update 2020

May 19, 2020

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Aspen Group Limited
ABN 50 004 160 927
Aspen Property Trust
ARSN 104 807 767
21 Oxford Street
Bondi Junction NSW 2022
Telephone: 02 9151 7500
Email: homemail@aspengroup.com.au
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ASX ANNOUNCEMENT 20 May 2020

Aspen Group

Acquisition of Newcastle Co-Living Community

Aspen Group (which comprises Aspen Group Limited and Aspen Property Trust) (ASX: APZ) (“ Aspen ”) is pleased to announce that it has entered into a contract to acquire a partially refurbished co-living community at Cooks Hill, Newcastle, NSW under a liquidator’s sale.

Newcastle is NSW’s 2[nd] largest metropolitan area and it has a very diverse economy. Cooks Hill is one of Newcastle’s premium suburbs located between the CBD and coastline. This residential building is currently operated as a co-living community with 55 rooms that are suitable for singles. It is part way through a refurbishment and only about 60% occupied. We intend to complete the refurbishment of the community areas, and combine some units and add en-suites, to enhance the accommodation offer and tenant mix. There is also the potential to add more “affordable rental housing” floorspace to the site under current planning guidelines and develop the entire site for higher and better use in future.

The purchase price is $3.75 million, and settlement is expected to occur in 6 weeks. Total all-in cost after refurbishment is expected to be approximately $4.75 million, equating to $116k per unit (under a 41-unit scheme) and $3,167 per sqm of dwelling area. Net rental yield on cost is expected to be about 4.5-5.0% upon completion at gross rents of $175-200 per week, which is about half the rent of onebedroom units in Cooks Hill (realestate.com.au).

This acquisition follows the Burleigh Heads acquisition and reinstatement of earnings and distribution guidance announced on 18 May 2020. We expect to be able to continue to grow Aspen’s business and portfolio profitability in future and we believe the opportunities will increase during this economic downturn.

Please find attached a presentation with more details.

END

Announcement authorised by the Board of Aspen Group Limited.

For further information, please contact: David Dixon John Carter Joint Chief Executive Officer Joint Chief Executive Officer Phone: (+61) 2 9151 7584 Phone: (+61) 2 9151 7586 Email: davidd@aspengroup.com.au Email: johnc@aspengroup.com.au For media enquiries, please contact: Lucy Horan Head of Marketing & Sales Phone: (+61) 2 9151 7545 Email: lucyh@aspengroup.com.au

Acquisition of Cooks Hill, Newcastle Co-Living Community

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20 May 2020 Newcastle, NSW

Cooks Hill, Newcastle Co-Living Community

Aspen has entered into a contract to acquire a residential building located in Newcastle through a liquidator’s sale

• Location: 82 Parkway Avenue, Cooks Hill, NSW

• Land: Freehold – 1,948 square metres

• Building: 3 levels totalling c.1,500 sqm floorspace

Background

• Originally purpose-built by YWCA

• Currently configured and operated as a co-living community with 55 single units (four with en-suites)

• Significant communal lounge, dining and bathroom areas

• Vendor fell into receivership while property was being refurbished

Strategy

• Leverage Aspen’s platform and skills in operating and developing communities with varied lease duration (long and short stay)

• Complete refurbishment - change mix of unit types by combining some units and adding en-suites, and enhance shared communal facilities in order to improve the community and diversify the tenant base

• Lease on competitive terms - low end of Newcastle market

• Longer term development into higher and better use

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Sweetwater Grove (Tomago) Koala Shores
Acquisition
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2

82 Parkway Avenue, Cooks Hill

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Bar Beach (650m)
The Junction (650m)
Residential Building & Front Yard
Dining Room Single Unit
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Video: https://youtu.be/R_XpqhmZNuI

Cooks Hill - Investment Case

Growing Aspen’s Newcastle region cluster alongside Sweetwater Grove (Tomago) and Koala Shores

Newcastle:

• Australia’s 7[th] largest and NSW’s 2[nd] largest metropolitan area

• Population of 460k increasing at over 13k / 3% per annum (SUA*)

• High level of local infrastructure and facilities: employment hub, retail, education, medical, recreation & entertainment

Cooks Hill (SA2*):

• Above average sociodemographic compared to Australia and rest of Newcastle region with relatively high housing costs (ABS 2016 Census – median comparisons to Australia):

• age 37 – 1 year younger

• household income of $1,648 per week - 15% higher

• mortgage repayment of $462 per week - 14% higher

  • rent of $380 per week - 7% higher

Provision of co-living units on competitive terms in one of Newcastle’s premium residential suburbs:

o Shared communal facilities reduce unit sizes and accommodation cost

o Aiming for optimal blend of unit types and tenant mix

Potential to develop additional units on excess land or redevelop whole site

Further de-risking of Aspen’s portfolio – increased weighting to metropolitan locations, longer term rentals, more liquid markets

Expected to be accretive to NAV and EPS post development completion

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Population - Australia’s Largest Significant Urban Areas
(millions)
Sydney
Melbourne
Brisbane
Perth
Adelaide
Gold Coast - Tweed Heads
Newcastle - Maitland (Cooks Hill acquisition)
Canberra - Queanbeyan
Sunshine Coast
Central Coast
0.0 1.0 2.0 3.0 4.0 5.0
Dwelling Split
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
Australia Cooks Hill Newcastle (SUA)
Separate House Semi Detached-Townhouse Apartment
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SUA: Significant Urban Area of Newcastle-Maitland. SA2: Statistical Area 2 of Newcastle-Cooks Hill ABS 2016 Census

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Cooks Hill - Investment Case

Pricing

Volume of Sales by Price Category

Acquisition cost of $4.00m (including transaction costs):

• $73k per unit (currently 55 units)

• $2,667psm of gross building area

Expected refurbishment cost of $0.75m taking total development cost to $4.75m, equating to:

• $116k per unit (41-unit scheme)

• $3,167psm of gross building area

Estimated Net Yield on Completion of Refurbishment

• Gross rent of $175 - $200 per week

• Net Operating Income of c. $0.20-0.25m at a margin of 60-65%

• Expected Net Yield: 4.5-5.0% on cost

Development Potential

• Current planning may allow ~1,000sqms of additional floorspace as affordable rental housing

• Potential for higher and better use - nearby new 1 bedroom units sell for c.$500k and 4 bedroom townhouses for c.$2m

Funding

• Acquisition expected to be debt funded – pro forma LTV of 35% (including Burleigh Heads)

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120
100
80
60
40
20
0
$200-400k $400-600k $600-800k $800-1M $1M-2M >$2M
Apartments Houses / Townhouses
Cooks Hill - Average Rents
$580
$423
$395
Apartment - 1 Bed Apartment - 2 Bed Apartment - 3 Bed
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Price data: CoreLogic RP Data – number of sales by price category for 12 months to Feb 2020 Rent: Realestate.com.au – 10 May 2020

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Aspen’s Portfolio Growth

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Portfolio Composition [1] and Acquisition History + Lindfield Apartments
+ Perth Residential Portfolio
+ Burleigh Heads (under contract)
$m + Cooks Hill (under contract)
180 $167m
160 AKV + Koala Shores + Highway 1
Four Lanterns + Darwin FSR 23%
140 + Tween Waters $129m
Mandurah
120 + Barlings Beach $106m
Tomago 28% 22%
100 ACP 13%
$79m
80 total value of
60 $58m properties 17% 43% 36% 28%
19% 23%
40 19% 14% 10% 9% 7%
20 62% 45% 34% 28% 21%
0
FY 2016 FY 2017 FY 2018 FY 2019 May YTD 2020
Land Lease workforce Short-Stay Mixed-Use Residential
Location of Portfolio [1] Property Type by Location [1]
$18m
(11%)
$3m
$44m (2%)
(27%)
$34m [2]
(20%)
$68m
(40%) X
Metropolitan
Regional
(61%)
(39%)
Newcastle light rail – commissioned Feb 2019
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• 1: Value weighted based on book values at 31 Dec 2019, also includes Burleigh Heads and Cooks Hill acquisitions at cost - both are currently under contract

• Excludes value of CREST, Rockleigh and Coorong Quays which are managed by Aspen Group and owned by Funds

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Disclaimer

This presentation has been prepared by Aspen Group Limited on behalf of Aspen Group Limited and Aspen Property Trust (“Aspen”) and should not be considered in any way to be an offer, invitation, solicitation or recommendation with respect to the subscription for, purchase or sale of any security, and neither this document nor anything in it shall form the basis of any contract or commitment. Prospective investors should make their own independent evaluation of an investment in Aspen. Nothing in this presentation constitutes investment, legal, tax or other advice. The information in this presentation does not take into account your investment objectives, financial situation or particular needs. The information does not purport to constitute all of the information that a potential investor may require in making an investment decision.

Aspen has prepared this presentation based on information available to it. No representation or warranty, express or implied, is made as to the fairness, accuracy, completeness or correctness of the information, opinions and conclusions contained in this presentation. To the maximum extent permitted by law, none of Aspen, its directors, employees or agents, nor any other person accepts any liability, including, without limitation, any liability arising from fault or negligence on the part of any of them or any other person, for any loss arising from the use of this presentation or its contents or otherwise arising in connection with it. This presentation contains forward looking information. Indications of, and guidance on, future earnings, distributions and financial position and performance are forward looking statements. Forward looking statements are based on Aspen’s current intentions, plans, expectations, assumptions, and beliefs about future events and are subject to risks, uncertainties and other factors which could cause actual results to differ materially. Aspen and its related bodies corporate and their respective directors, officers, employees, agents, and advisers do not give any assurance or guarantee that the occurrence of any forwardlooking information, view or intention referred to in this presentation will actually occur as contemplated. All references to dollar amounts are in Australian currency.

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Newcastle, NSW
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