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Forsyth Barr

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New Zealand Professional Investment Services Firm, Forsyth Barr

Equity Bottom-Up

<h2>Arvida Group<br>NZ$330m Capital Raise</h2>
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<p><strong>RESTRICTED</strong></p>
<p>Arvida Group (ARV) has announced a capital raise, totalling NZ$330m (NZ$155m underwritten placement and NZ$175m underwritten rights offer). The proceeds raised will support the purchase of the Arena Living retirement village portfolio for NZ$345m (which represents a 12% discount to the 30 June 2021 CBRE valuation of NZ$394m). The Arena Living portfolio comprises of six retirement villages located in Auckland (five) and Tauranga (one). Our rating is RESTRICTED.</p>
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<h3>Key points</h3>
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<ul>
<li><strong>The offer</strong>:&nbsp;The offer comprises a NZ$155m underwritten placement at a price of NZ$1.96 per share (6.9% discount to five-day VWAP), and (2) NZ$175m underwritten 1 for 6.57 rights offer at a price of NZ$1.85 (12.2% discount to five-day VWAP).&nbsp;The placement is expected settle&nbsp;on Thursday, 21 October and the rights issue is expected to settle on Monday, 15 November.</li>
<li><strong>Acquisition&nbsp;funding</strong>:&nbsp;The NZ$345m purchase&nbsp;will be predominately equity funded&nbsp;with NZ$23m of bank debt utilised.</li>
<li><strong>Portfolio overview</strong>:&nbsp;In total, the acquisition will add 648 villas, 340 apartments and 58 serviced apartments to ARV’s existing portfolio – this represents a 24% increase in portfolio size and&nbsp;shifts ARV’s portfolio more towards Auckland (an area it has historically under-indexed). The Arena Living portfolio is a mature set of broad acre&nbsp;villages located on 48.3 hectares of land area (39.9 in Auckland and 8.4 in&nbsp;Tauranga). Four of the sites have remedial work outstanding&nbsp;(historical water tightness issues), a cost estimation of ~NZ$55m has already been accounted for in the CBRE valuation.</li>
<li><strong>Future development opportunities:</strong>&nbsp;ARV have also identified development opportunities of over 100 care suites and over 150 units (combination of&nbsp;greenfield,&nbsp;brownfield&nbsp;and retrofitting). At this stage, 69 apartments are in advanced plans at the Mount Eden site (along with other opportunities) while 13 apartments are set for delivery in mid-FY23 at&nbsp;Peninsula Club (Whangaparoa)&nbsp;and 29 apartments are planned at Mayfair (Browns Bay) for re-development.&nbsp;</li>
<li><strong>Financial contribution</strong>:&nbsp;Based on ARV’s estimates, the acquisition is assumed to add NZ$32-34m of underlying profit and NZ$35-37m of EBITDA in FY22E. On a pro-forma basis, this equates to expected underlying earnings per share accretion in the mid-teens percentage based off&nbsp;ARV's&nbsp;estimate of consensus.</li>
<li><strong>Gearing</strong>:&nbsp;Post transaction gearing is expected to be&nbsp;~26%, this is at the lower end of ARV’s targeted gearing range of 25% to 35%.</li>
<li><strong>1H22 sales and development update</strong>:&nbsp;ARV also provided a&nbsp;trading update showing 253 settlements (120 new sales and 133&nbsp;resales) resulting in total gains of NZ$23.7m in 1H22. Prior FY22 development guidance for &gt;200 units was retained.</li>
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Arvida Group NZ$330m Capital Raise

RESTRICTED
Arvida Group (ARV) has announced a capital raise, totalling NZ$330m (NZ$155m underwritten placement and NZ$175m underwritten rights offer). The proceeds raised will support the purchase of the Arena Living retirement village portfolio for NZ$345m (which represents a 12% discount to the 30 June 2021 CBRE valuation of NZ$394m). The Arena Living portfolio comprises of six retirement villages located in Auckland (five) and Tauranga (one). Our rating is RESTRICTED.


Key points



The offer:&nbsp;The offer comprises a NZ$155m underwritten placement at a price of NZ$1.96 per share (6.9% discount to five-day VWAP), and (2) NZ$175m underwritten 1 for 6.57 rights offer at a price of NZ$1.85 (12.2% discount to five-day VWAP).&nbsp;The placement is expected settle&nbsp;on Thursday, 21 October and the rights issue is expected to settle on Monday, 15 November.
Acquisition&nbsp;funding:&nbsp;The NZ$345m purchase&nbsp;will be predominately equity funded&nbsp;with NZ$23m of bank debt utilised.
Portfolio overview:&nbsp;In total, the acquisition will add 648 villas, 340 apartments and 58 serviced apartments to ARV’s existing portfolio – this represents a 24% increase in portfolio size and&nbsp;shifts ARV’s portfolio more towards Auckland (an area it has historically under-indexed). The Arena Living portfolio is a mature set of broad acre&nbsp;villages located on 48.3 hectares of land area (39.9 in Auckland and 8.4 in&nbsp;Tauranga). Four of the sites have remedial work outstanding&nbsp;(historical water tightness issues), a cost estimation of ~NZ$55m has already been accounted for in the CBRE valuation.
Future development opportunities:&nbsp;ARV have also identified development opportunities of over 100 care suites and over 150 units (combination of&nbsp;greenfield,&nbsp;brownfield&nbsp;and retrofitting). At this stage, 69 apartments are in advanced plans at the Mount Eden site (along with other opportunities) while 13 apartments are set for delivery in mid-FY23 at&nbsp;Peninsula Club (Whangaparoa)&nbsp;and 29 apartments are planned at Mayfair (Browns Bay) for re-development.&nbsp;
Financial contribution:&nbsp;Based on ARV’s estimates, the acquisition is assumed to add NZ$32-34m of underlying profit and NZ$35-37m of EBITDA in FY22E. On a pro-forma basis, this equates to expected underlying earnings per share accretion in the mid-teens percentage based off&nbsp;ARV's&nbsp;estimate of consensus.
Gearing:&nbsp;Post transaction gearing is expected to be&nbsp;~26%, this is at the lower end of ARV’s targeted gearing range of 25% to 35%.
1H22 sales and development update:&nbsp;ARV also provided a&nbsp;trading update showing 253 settlements (120 new sales and 133&nbsp;resales) resulting in total gains of NZ$23.7m in 1H22. Prior FY22 development guidance for &gt;200 units was retained.



Arvida

Arvida Group: NZ$330m Capital Raise