Asset Plus Limited — AGM Information 2019

Jul 30, 2019

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2019 Annual Meeting

30 July 2019

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Agenda

1. Chairman’s Introduction and Address

2. Annual Results

3. Strategy Update

1. Resolutions

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Chairman’s Address

Bruce Cotterill

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STRATEGIC UPDATE

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Strategic Mandate

• Close the share price to NTA gap by maximising value of the existing assets and exit of non-core assets as appropriate

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• Create sustainable growth of shareholder total returns through disciplined acquisition and development

• A growth mandate to target assets for their ability to contribute to a yield plus growth strategy

Provide the S&P/NZX All Real Estate Index with a real estate growth stock which is capable of taking advantage of inevitable changing economic conditions..

• Adopt a wide-ranging diversified value-add strategy that is sector agnostic

• Seek assets capable of individual sector outperformance through active management and development

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Strategic Update

• The past 12 months has been a period of ongoing transition for Asset Plus, including the change to an external manager, Augusta Funds Management, but also implementation of the new value-add strategy.

• The first step to that strategy has now been taken with the 35 Graham St acquisition in FY20.

• The Manager and the Board have actively pursued a number of potential acquisitions, however the current market is highly contested which at times is driving unattractive target financial deal metrics.

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The Board is committed to growing the portfolio in a disciplined manner, with a primary focus to close the gap between share price and net tangible assets..

• The Manager is exploring all property classes, including non-traditional sectors, and deal sizes in order to seek better value creation opportunities for shareholders.

• Successful exit of non core assets – Heinz Watties.

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ANNUAL RESULTS Joel Lindsey, Chief Operating Officer Augusta Funds Management Limited

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Key Points for the year ended 31 March 2019

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Adjusted funds
Multiple number
Net profit after tax of from operations (AFFO)
of leasing initiatives
$3.80m , an increase of of $4.74m were 23% Sale of AA Centre,
completed at both
23% against the prior lower than prior year. This settlement on
Stoddard Road &
year represents a pay-out ratio 12 July 2018
Eastgate
of 123%
Transition of the
management to
Portfolio occupancy at
Augusta Funds $34m of debt repaid 31 March was 96.7%
Net Tangible Asset Value
Management Limited
per share reduced to post the AA Centre (which is reduced from
completed & 69.4 cents (from 70.6 sale & interest rate 97.4% in the prior year
externalisation cost
cents) swap contracts due to AA Centre sale) .
savings generated cancelled
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*AFFO is a non-GAAP financial information, calculated based on guidance issued by the Property Council of Australia. Asset Plus considers that AFFO is a useful measure for shareholders and management because it assists in assessing the Company’s underlying operating performance. This non-GAAP financial information does not have a standardised meaning prescribed by GAAP and therefore may not be comparable to similar financial information prescribed by other entities. The calculation of AFFO has been reviewed by the auditors. A reconciliation of AFFO to net profit after tax is included on page 14 of the Annual Report.

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Eastgate Shopping Centre

• Management have been very active with this property, with a number of leases renewed during the past 12 months.

• Countdown has exercised a 4 year right of renewal (RoR).

• A further 4 year RoR has been agreed subject to payment of the landlord contribution towards works within the tenancy. This contribution has been accrued in FY19.

				2019	2018
			Valuation ($m) Net Contract Income ($m)	54.5 3.63	58.0 3.91
	>		Passing Initial Yield (%)	6.66%	6.74%
			Cap Rate (%)	8.13%	8.00%
			Net Market Rental ($m)	4.46	4.69
			WALT (years)	5.07	4.70

• Other key lease renewals during 2019 include Postie Plus, Paper Plus, Sushi Time, Number One Shoes and Westpac.

• Net contract income is down due to McDonalds and NZ Post vacating the centre in early 2019.

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Heinz Watties Distribution Centre, Hastings

• This asset is now sold unconditionally and will settle in December 2019

• The previously proposed redevelopment including a warehouse extension and concurrent lease extension is no longer proceeding in the near term.

• On this basis the asset no longer aligns with Asset Plus value-add strategy.

• Given the asset is no longer core and regional, but with 7.9 years of lease term still remaining at balance date, it was determined that this property should be divested now with the opportunity to achieve book value.

	>		2019	2018
		Valuation ($m)	29.1	27.3
		Net Contract Income ($m)	2.20	2.13
		Passing Initial Yield (%)	7.56%	7.82%
		Cap Rate (%)	8.00%	8.13%
		Net Market Rental ($m)	2.36	2.31
		WALT (years)	7.9	8.9

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22 Stoddard Road, Mt Roskill

• A total of 7 lease renewals were completed during the year.

• The total rent from the renewals equate to $0.57m, or 21.5% of the total rental income for the centre, taking the centre WALT from 3.76 years in March last year to 4.02 years currently.

• The future focus is to secure upcoming lease renewals and further boost the WALT of the property.

				2019	2018
			Valuation ($m) Net Contract Income ($m)	39.5 2.57	38.0 2.50
>			Passing Initial Yield (%)	6.50%	6.58%
			Cap Rate (%)	6.13%	6.25%
			Net Market Rental ($m)	2.46	2.42
			WALT (years)	4.02	3.76

• Recent tenant retention is a positive signal and we expect this trend to continue.

• Mt Roskill is a sought-after area, with significant government-led residential development currently underway and planned for in the future.

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35 Graham Street, Auckland Central

• Settlement occurred 28 June 2019

• $58m acquisition; transaction was fully debt funded taking current gearing to 38% (excluding Heinz Watties divestment).

• Contracted gross rental of $3.975m.

• Leased to Auckland Council for a term two years.

• Funding for the development phase will be contingent on the Company’s balance sheet at the time and additional funding may be required. Development funding will likely be made available through the recycling of existing assets, future debt facilities and/or future capital raise.

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The acquisition of 35 Graham Street fits with the value-add strategy and > restores near term earnings as the balance sheet is utilised.

• Initial focus post acquisition has been on appointment of project manager and leasing agent.

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Portfolio Summary

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	Portfolio (March 2019)		35 Graham Street acquisition (June 2019)		Portfolio (July 2019)		Heinz Watties divestment (Dec 2019)		Anticipated Portfolio (Dec 2019)
Asset Value	$123.10m		$58.72m		$181.82		($29.10m)		$152.72m
WALE	5.5 years		2 years		4.5 years		(7.5 years)		3.6 years
Occupancy	96.7%		100%		97.7%		(100%)		97.5%
Net Rental Yield	6.82%		6.85%		6.83%		(7.60%)		6.71%
LVR	8.5%				38.0%				26.1%
EPS	3.12cps		0.64cps		3.76cps		(0.41cps)		3.35cps

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Outlook

The future strategic operating priorities include:

• 35 Graham St, progressing the repositioning strategy.

• Progression of the value-add opportunities left within the existing portfolio.

• Exit of non-core assets as appropriate, i.e. Heinz Watties.

• Close the share price gap to NTA.

• Continuing to investigate future acquisitions to transform Asset Plus.

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The Board remains patient and disciplined in the current market to ensure we find the best investments which we think provide appropriate risk-adjusted returns and align with the new strategy.

• The Board remains patient to find opportunities that offer attractive risk-adjusted returns.

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Q & A

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RESOLUTIONS

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Resolution 1

Election of Bruce Cotterill

That Donald Bruce Cotterill be re-elected as a director of the Company.

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Resolution 2

Election of Paul Duffy

That Paul John Duffy be re-elected as a director of the Company.

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Resolution 3

Re-appointment of the Auditor

That the board be authorised to fix the auditor’s fees and expenses from time to time

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Resolution 4

Amendment of the constitution – special resolution

The proposed amendments, as detailed in the notice of meeting, fall into two categories :

1. Amendments arising from the Company’s transition to the new NZX Listing Rules on 1 July 2019

2. Other changes to update the constitution by either:

3. Deleting redundant provisions; or

4. Modernising outdated provisions.

That approval is given for amendments to Asset Plus Limited’s > constitution, in the form and manner set out in the marked up version of the constitution attached to the notice of meeting.

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Important Notice

This presentation contains not only a review of operations, but may also contain some forward looking statements (including forecasts and projections) about Asset Plus Limited (APL) and the environment in which APL operates. Because these statements are forward looking, APL’s actual results could differ materially. Please read this presentation in the wider context of material previously published by APL and announced through NZX Limited.

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.

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