Rfa Financial Inc. · TSX:RFA
Rfa Financial — Artis Real Estate Investment Trust — Q3 2018 Earnings Presentation
27 slides from Rfa Financial's earnings presentation, Nov 1, 2018
Slide 1: Artis Real Estate Investment Trust Q3-18 Investor Presentation
1 Artis Real Estate Investment Trust Q3-18 Investor Presentation November 1, 2018
Slide 2: Forward-Looking Information
Forward-Looking Information 2 This presentation contains forward-looking statements. For this purpose, any statements contained herein that are not statements of historical fact may be deemed to be forward-looking statements. Particularly, statements regarding the REITs future operation results, per
Slide 3: Strategy and Business Model
Strategy and Business Model 01 Geographic Diversification • Canada and the United States 02 Product Diversification • Office • Retail • Industrial 03 Internal Growth • Results driven active asset management • Increasing same property net operating income • Accretive recycling of capital • Accretive
Slide 4: Diversified Commercial Properties
Diversified Commercial Properties 4 0.4M sq.ft 3.9M sq.ft 1.5M 3.9M sq.ft sq.ft 4.0M sq.ft 5.7M 1.2M sq.ft 1.7M sq.ft sq.ft 2.0M sq.ft 0.4M sq.ft Office Industrial Retail 2 countries – 3 asset classes – 10 major markets 234 properties – 24.8 million square feet – $5.6B GBV – 94% leased Excellent Man
Slide 5: Portfolio Diversification
Portfolio Diversification 5 NOI by Asset Class NOI by Geographical Region 55% Canada 45% USA US - Other SK Retail 8% 6% 20% WI ON 9% Office 11% 53% AZ 10% MB 0 14% BC 3% MN Industrial 18% AB - Other 27% Calgary - Office 13% 8% Property NOI for three months ended September 30, 2018, inclusive of Arti
Slide 6: Office Asset Class
Office Asset Class 6 Number of Properties 71 GLA 10.5 million sq. ft. Leased 90% Nine major markets in Diversification Canada and the US IFRS GBV / IFRS Weighted-Average Cap Rate $3.0 billion / 6.6% Same Property NOI Growth YTD +4.4% Weighted-Average Renewal Rent Increase YTD +1.4% Property NOI 2017
Slide 7: Retail Asset Class
Retail Asset Class 7 Number of Properties 54 GLA 3.5 million sq. ft. Leased 95% Five major markets in Diversification Canada and the US IFRS GBV / IFRS Weighted-Average Cap Rate $1.1 billion / 6.4% Same Property NOI Growth YTD +4.5% Weighted-Average Renewal Rent Increase YTD +5.2% Property NOI 2017
Slide 8: Industrial Asset Class
Industrial Asset Class 8 Number of Properties 109 GLA 10.8 million sq. ft. Leased 97% Nine major markets in Diversification Canada and the US IFRS GBV / IFRS Weighted-Average Cap Rate $1.4 billion / 6.2% Same Property NOI Growth YTD +5.8% Weighted-Average Renewal Rent Increase YTD +4.6% Property NOI
Slide 9: The Sum of All Parts
The Sum of All Parts 9 Share of Same Weighted-Average IFRS Weighted- Property Number of Property NOI Increase in Average Cap IFRS NOI Properties GLA Leased Growth YTD Renewal Rents YTD Rate GBV Office 53% 71 10.5 million sq. ft. 90% 4.4% 1.4% 6.6% $3.0B Retail 20% 54 3.5 million sq. ft. 95% 4.5% 5.2
Slide 10: Lease Expiration Schedule
Lease Expiration Schedule 10 Percentage of Portfolio GLA Expiring 20.0% 18.0% 16.0% 14.0% 13.2% 11.6% 12.0% 10.6% 9.7% 10.0% 8.0% 6.0% 4.0% 2.3% 2.0% 0.0% 2018 2019 2020 2021 2022 Weighted-average rental increase on renewals YTD: 4.3% excluding Artis’ Calgary office properties (3.6% including Calgar
Slide 11: Leverage Profile DBRS: BBB- Credit Rating
Leverage Profile DBRS: BBB- Credit Rating 11 Healthy Balance Sheet and Liquidity DBRS Fiscal quarter September 30, 2017 December 31, 2017 September 30, 2018 Recommended ending: Threshold Debt: GBV 49.6% 49.3% 48.6% ≤ 53.0% Secured mortgages 33.3% 31.9% 30.9% N/A and loans: GBV Unencumbered assets $1
Slide 12: Current and Projected Portfolio Overview
Current and Projected Portfolio Overview 12 Information as of November 2, 2018: Analyst Consensus Information per Unit (1) Unit price: $10.08 Target price: $12.17 Distribution per unit: $0.54 Net Asset Value: $13.90 Cash Yield: 5.4% Artis IFRS NAV: $15.11 Market cap: $1.6B Implied cap rate: 7.4% 201
Slide 13: Corporate Sustainability
Corporate Sustainability 13 We are committed to improving the energy efficiency of our properties and reducing our 23% office properties environmental footprint. are LEED certified 25% office properties are BOMA BEST certified 21% office properties are Energy Star certified Please view our full Sust
Slide 14: Artis Unitholders' Returns
Artis Unitholders' Returns 14 • Artis has generated over an 11% annual return over the last 10 years, providing superior returns to its unitholders over the S&P TSX Index (1) Total Unitholder Returns | Last 10 Years 300% 250% Annual Return: 11.3% 200% Total 10-Year: 191.3% 150% Annual Return: 7.4% 1
Slide 15: Current Considerations
Current Considerations 15 • Macro-economic environment is changing – Central Bankers are committed to more rate hikes • This has a negative impact on cost of capital • REITs are increasingly expected to generate AFFO growth without reliance on new equity • Recycling out of Alberta office has put a s
Slide 16: Key Objectives for 2019 and Beyond
Key Objectives for 2019 and Beyond 16 1 2 3 Improve Payout Ratio Improve Balance Deliver AFFO and Sheet FFO per unit growth 4 5 Deliver NAV per Maximize Unitholder unit growth Value These initiatives will ensure that Artis is best positioned for long term and sustainable NAV per unit growth Q3-18 In
Slide 17: New Initiatives – Improving Unitholder Value
New Initiatives – Improving Unitholder Value 17 1 December 14, 2018 Distribution set at $0.54 per unit annualized, effective for the November 2018 distribution payable on • $83 million increase in retained cash flow per year • New conservative payout ratio ~55% 2 • Liquidity is in place to commence
Slide 18: Classification of Assets
Classification of Assets 18 Artis has recategorized the current portfolio into three asset types: Core Artis Assets, Development Assets, and Non-Core Artis Assets Core Artis Assets Development Assets Non-Core Artis Assets ~$4.2 billion ~$200 million ~$800 million to $1 billion • Invaluable assets lo
Slide 19: Core Artis Assets
Core Artis Assets 19 Core Artis Assets will continue to be actively and prudently managed to ensure maximum growth is realized MAX at Kierland, Greater Phoenix Area, AZ 360 Main Street, Winnipeg, MB Cara Foods Building, Greater Toronto Area, ON Crowfoot Corner, Calgary, AB 175 Westcreek Boulevard, G
Slide 20: Recent and Upcoming Developments
Recent and Upcoming Developments 20 Park Lucero Phase II, Greater Phoenix Area, AZ Park Lucero Phase IV, Greater Phoenix Area, AZ Cedar Port Phase I, Greater Houston Area, TX Tower Business Center, Greater Denver Area, CO Prime Therapeutics Phase I (1), Twin Cities Area, MN Park 8Ninety Phase I, Gre
Slide 21: Development Assets
Development Assets 21 Over the last decade, Artis has established a solid track record of greenfield developments, in both Canada and the US, which provides the REIT with new generation real estate assets at relatively higher yields. Over the next three years, Artis plans to focus on developing prim
Slide 22: Non-Core Artis Assets – To Be Sold
Non-Core Artis Assets – To Be Sold 22 Artis’ new initiatives includes the sale of $800 million to $1 billion of non-core properties over the next three years. Non-core properties are assets that have achieved their maximum growth potential, are underperforming, are in markets that Artis no longer an
Slide 23: Non-Core Artis Assets – To Be Sold
Non-Core Artis Assets – To Be Sold 23 • $800 million to $1 billion of Non-Core Artis Assets, representing 17% of current portfolio, to be sold opportunistically over the next three years • Assets in markets and/or asset classes that Artis does not have a competitive advantage in and does not anticip
Slide 24: Improved Operating and Financial Metrics
Improved Operating and Financial Metrics 24 The goal of these new initiatives is to deliver improved operating and financial metrics to drive AFFO and NAV per unit growth $83M Year 3 AFFO ~$1.12/unit Increase in Retained Cash Year 3 FFO ~$1.45/unit ~53% Flow per year Pro Forma Payout Ratio ~$600M 4%
Slide 25: Current and Projected Portfolio Overview
Current and Projected Portfolio Overview 25 Q3-18 NOI by Asset Class Projected 2020/2021 NOI by Asset Class and Geography and Geography upon implementation of new initiatives Calgary Calgary Office Office 8% 5% Industrial 27% Industrial Office 40% Office 40% 45% Retail 20% Retail 15% Canada USA 40%
Slide 26: Why Invest in Artis?
Why Invest in Artis? 26 1 High Quality Yield • ~ 5.0% distribution yield • Investment-grade rating – BBB (low) • 7.4% implied cap rate • Strong balance sheet and conservative payout ratio 2 Diversified Platform by Geography and Asset Class • Highly diversified platform • 2 countries, 3 asset classes
Slide 27: Artis Real Estate Investment Trust
27 Artis Real Estate Investment Trust Q3-18 Investor Presentation November 1, 2018
Artis Real Estate Investment Trust — Q3 2018 Earnings Presentation on 6ix