Highlights Annual Results Briefing 2019 RECORD ANNUAL RESULTS: profit after tax of $176.3 million, Funds From Operations (FFO) 1 earnings up 2.6% to 9.07 cents per share, Adjusted Funds From Operations (AFFO) earnings up 4.4% to 7.79 cents per share DIVIDENDS AFFO COVERED: cash dividends of 7.60 cents per share, AFFO dividend pay- out ratio of 98% 25 LANGLEY ROAD STRONG BALANCE SHEET: net tangible assets up 15.6% or 27.8 cents per share, bank facilities and bonds secured for an average of 4.1 years, PRIORITIES ADVANCED: gearing of 28.2% four Auckland industrial opportunities secured totalling $106.4 million, $40 million of non-industrial divestments contracted during the year, POSITIVE PORTFOLIO ACTIVITY: committed to or completed ~$26 million of value-add strategies nearly 100,000 square metres or 17% of the portfolio leased during the year to 24 tenants for an average increase in term of 6.7 years, rent reviews completed on 103 leases delivered an average annual uplift of ~4.6% 1 Funds From Operations and Adjusted Funds From Operations are non-GAAP financial information and are common property investor metrics, which have been calculated in accordance with the guidelines issued by the Property 4 Council of Australia. Please refer to slide 33 for further details.
Portfolio Annual Snapshot Results Briefing 2019 ▪ PFI’s portfolio is diversified across 94 properties DECEMBER 2019 DECEMBER 2018 and 144 tenants, with 99.0% occupancy and a weighted average lease term of 5.38 years, BOOK VALUE $1,476.2m $1,322.0m weighted towards Auckland industrial property NUMBER OF PROPERTIES 94 94 NUMBER OF TENANTS 144 148 74 4 CONTRACT RENT $84.9m $82.0m 1 4 1 OCCUPANCY 99.0% 99.3% 1 4 WEIGHTED AVERAGE LEASE TERM 5.38 years 5.39 years 1 AUCKLAND PROPERTY 84.1% 83.1% 4 INDUSTRIAL PROPERTY 90.0% 87.3% 6
Historical Annual Operational Results Performance Briefing 2019 ▪ Since 2010 PFI has achieved 100% 6 a year end average occupancy of 98.5% and a weighted average lease term 99% 5 of 4.97 years 98% 4 97% 3 96% 2 95% 1 94% 93% 0 Dec-10 Dec-11 Dec-12 Dec-13 Dec-14 Dec-15 Dec-16 Dec-17 Dec-18 Dec-19 Occupancy (%) WALT (years) 7
Valuations Annual Results Briefing 2019 ▪ Annual increase from independent valuations of $125.2 million or 9.3% to $1,476.2 million ▪ Around one-third of valuation outcome was due to rental growth ▪ Passing yield firmed from 6.21% to 5.75% ▪ Independent market rental assessment estimates portfolio is ~3.5% under rented ▪ Internal estimates of PFI’s Auckland industrial portfolio estimates ~6% under-renting ▪ CBRE estimate 1 Auckland prime industrial yields are 4.96% and secondary industrial yields are 5.83% 6 DONNOR PLACE 1 CBRE “Auckland Rent and Yield Trends”, January 2020. 8
Leasing Annual Results Briefing 2019 ▪ 24 leases agreed over ~99,000 sqm of space ADDRESS TENANT TERM AREA % RENT ROLL for an average term of 6.7 years ▪ Eight new leases and 16 renewals secured 7-9 NIALL BURGESS RD DHL 7.0 years 23,525 sqm 2.8% ▪ Lease renewals accounted for more than 76% CARLAW PARK Jacobs 5.4 years 4,334 sqm 2.1% of the contract rent secured ▪ Average leasing costs less than half a month 6 DONNOR PL Coca-Cola Amatil 6.0 years 3,858 sqm 1.7% per year of term 92-98 HARRIS RD GrainCorp 13.0 years 7,194 sqm 1.6% 2 PACIFIC RISE Hewlett-Packard 0.5 years 2,757 sqm 1.1% 320 ROSEBANK RD Doyle Sails 12.0 years 6,625 sqm 1.0% 9 NESDALE RD CHEP 5.0 years 14,163 sqm 0.9% VARIOUS 17 Other Transactions 6.0 years 36,646 sqm 6.0% 24 LEASING TRANSACTIONS 6.7 years 99,102 sqm 17.3% 9
Rent Annual Reviews Results Briefing 2019 Vacant 1.0% ▪ 103 rent reviews delivered an average annual uplift of ~4.6% on Expiry 6.5% ~$52.7 million of contract rent ▪ 11 market rent reviews delivered an annualised increase of 4.7% Market 9.1% over an average review period of 3.6 years on $5.3 million of contract rent, reviews settled at average of 7.5% above December 2018 market rental assessment Fixed 41.6% ▪ At the end of the year, the portfolio was 99.0% occupied and just CPI 14.7% 6.5% of contract rent is due to expire in 2020. When combined with rent reviews, almost 73% of PFI’s portfolio is subject to some form of lease event during 2020 ▪ CBRE predict 1 industrial rental growth over the next five years to average 2.5% per annum for prime properties and 3.0% per annum for secondary properties ▪ PFI will continue to access projected market rental growth as approximately 23% of the Company’s 2020 lease events are market related No Event 27.1% 1 CBRE “Auckland Market Outlook”, December 2019. 10
2020 Lease Annual Expiries Results Briefing 2019 ▪ Portfolio is 99.0% occupied (1.0% vacancy) and 6.5% of contract H2 2019 EXPIRIES TENANT % RENT ROLL rent is due to expire in 2020 59 DALGETY DRIVE Goodman Fielder 1.7% ▪ 2 Pacific Rise has been sold (with settlement due to take place CARLAW PARK OFFICE Jacobs 0.5% in March 2020) and is therefore excluded from any 2020 expiries analysis 23 ZELANIAN DRIVE Exclusive Tyre Distributors 0.5% ▪ 59 Dalgety Drive to be redeveloped post Goodman Fielder 2-6 NIALL BURGESS ROAD Repco 0.5% expiry (refer slide 29) OTHER Various 3.3% TOTAL (EXCLUDING 2 PACIFIC RISE) 6.5% 25% 23.5% 20% 15.6% 15% 12.7% 9.5% 9.4% 10% 6.8% 6.6% 6.5% 4.7% 5% 3.7% 1.0% 0% Vacant 2020 2021 2022 2023 2024 2025 2026 2027 2028 Onwards 11
Net Rental Annual Income Results Briefing 2019 ▪ Net rental income of $83.3 $85m +0.2 +0.9 million up $4.2 million or 5.3% $84m +1.8 -0.4 83.3 ▪ Increases due to positive leasing -0.3 -0.3 $83m -0.2 activity totalling $3.3 million and acquisitions ($1.8 million) $82m +2.5 ▪ Partially offset by lost rental $81m income from disposals ($0.4 million) and lost rental income $80m from the fire at 314 Neilson 79.1 Street, Penrose in April 2019 $79m ($0.2 million) 1 $78m $77m $76m $75m $74m 2018 net rental Rent reviews & Acquisitions New leases Other Disposals Vacancy Developments Fire 2019 net rental income adjustments & lease income renewals 1 PFI has 24 months of business interruption insurance in place for this property. 13
Adjusted Annual Funds From Results Operations Briefing (cents per share) 2019 +0.21 ▪ Profit after tax up $66.2 million 8.4 to $176.3 million +0.71 ▪ FFO earnings of 9.07 cents 8.2 per share, 0.23 cents per share or 2.6% ahead of the 8.0 prior year -0.44 ▪ AFFO earnings of 7.79 cents -0.05 7.79 7.8 -0.05 per share, 0.33 cents per -0.05 share or 4.4% ahead of the prior year 7.6 7.46 ▪ FY19 maintenance capex of $3.4 million or 25 basis points, 7.4 down from FY18 maintenance capex of $4.5 million or 35 7.2 basis points 7.0 2018 AFFO Net rental income Maintenance Current taxation Non-recoverable Interest expense Administrative 2019 AFFO capex property costs and bank fees expenses / Other 14
Earnings, Annual Dividends, Results Guidance Briefing 2019 ▪ 2019 cash dividends of 7.60 cents per EARNINGS 2019 CPS 2018 CPS CHANGE share (cps), up 0.05 cps from 2018 FUNDS FROM OPERATIONS 9.07 8.84 +0.23 CPS or +2.6% ▪ 2020 dividend guidance of 7.65 – 7.70 cps, up 0.05 – 0.10 cps ADJUSTED FUNDS FROM OPERATIONS 7.79 7.46 +0.33 CPS or +4.4% ▪ 2020 earnings guidance: 2020 dividend of 7.65 – 7.70 cps forecast to equate to 80%- 90% of FFO, 95%-100% of AFFO DIVIDEND PAY-OUT POLICY 2019 PAY-OUT RATIO 2018 PAY-OUT RATIO ▪ Given volatility in maintenance capex and 80 – 90% other AFFO adjustments, PFI will be 84% 85% FUNDS FROM OPERATIONS mindful of the AFFO dividend pay-out ratio 95 – 100% ADJUSTED FUNDS FROM OPERATIONS 98% 101% over a longer time horizon than any one year when setting dividends ▪ For example, average AFFO dividend pay- out ratio is 101.0% since PFI began disclosing AFFO 15
Investment Annual Properties Results Briefing 2019 ▪ Portfolio value of ~$1.47 billion $1,540m +0.4 +14.2 ▪ Increase from annual +45.7 independent valuations of $1,490m $125.2 million or 9.3% 1,469.3 -34.9 ▪ 25 Langley Road, Wiri, +125.2 $1,440m purchased in December 2019 for $36.0 million 2 ▪ 51-61 Spartan Road, Takanini, $1,390m purchased in March 2019 for $17.2 million $1,340m ▪ Significant capex at 6 Donnor 1,318.7 Place (refurbishment) and 212 Cavendish Drive (development) $1,290m ▪ 229 Dairy Flat Highway, Albany, sold in October for $33.0 million $1,240m December 2018 Fair value gain Additions Capitalised Movement in lease Disposals December 2019 investment expenditure & incentives, fees and investment properties interest fixed rental income properties 1 Investment properties as at 31 December 2019 exclude 2 Pacific Rise, Mt Wellington, as this property had been moved to “non -curr ent assets classified as held for sale”. 16 2 Initial settlement of $28.5 million completed in December 2019, with a second settlement expected to take place in May 2020 on completion of an additional 3,240 sqm of warehouse and 120 sqm of office, which is currently under construction.
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