Kiwi Property Group Ltd. · NZX:KPG
Kiwi Property — FY2024 Earnings Presentation
61 slides from Kiwi Property's earnings presentation, May 27, 2024
Slide 1: Annual Results Presentation FY24
Annual Results Annual Results Presentation Presentation FY23 For the year ended 31 March 2024 22 May 27• May 2024 2023
Slide 2: Disclaimer
Disclaimer Kiwi Property Group Limited has prepared this document. By accepting this document and to the maximum extent permitted by law, you acknowledge and agree to the following matters. No liability Kiwi Property Group Limited, its advisers, affiliates, related bodies corporate, directors, offic
Slide 3: Contents
Contents Section Page Business highlights 4 FY24 financial results 12 Resido and development update 16 Dividend and outlook 21 Appendix 1: Property update 24 Appendix 2: Financial update 42 Glossary 58 This annual results presentation for the year ended 31 March 2024 should be read in conjunction wi
Slide 4: Business highlights
Business highlights 4
Slide 5: Delivering on strategy
Delivering on strategy Kiwi Property made progress on priority initiatives • Resido due to be completed on 4 June 2024 • Urban Rest has rented 12% of Resido • 3 Te Kehu Way 96% leased • Tenant net promoter score increased • Yardi ERP platform successfully deployed on time and budget • 9% headcount r
Slide 6: Driving rental growth
Driving rental growth Leasing spreads remain strong despite macro conditions ~590 Total leasing transactions +4.4% Rental movement: total +5.3% Rental movement: new leases (total) +18.7% Rental movement: new office leases General note: Figures include Vero Centre, which was held for sale at 31-Mar-2
Slide 7: Sustaining sales performance
Sustaining sales performance Sales were resilient in FY24 - however growth has moderated • Portfolio sales were $2.1b in FY24. Mixed-use1 Total portfolio2 Year ended 31-Mar-24 31-Mar-23 31-Mar-24 31-Mar-23 • Total sales growth of 1.4% across Kiwi Property centres outpaced the 3% year-on-year Total s
Slide 8: Asset values stabilising
Asset values stabilising Resilient capitalisation rates underpin solid valuations • Property portfolio value increased 0.1% or $3.3 million Mar-24 valuation 6-month movement in the six months to 31 March 2024. Cap. rate Val. Cap. Val. Val. % $m rate $m % • Mixed-use capitalisation rate was broadly f
Slide 9: Driving cost control
Driving cost control Increasing efficiency and reducing overheads • Implementation of new Yardi enterprise IT Year ended 31-Mar-24 31-Mar-23 31-Mar-22 system is complete. $m $m $m • The technology rollout and other initiatives Total property revenue1 244.7 259.1 255.9 have enabled a 9% reduction in
Slide 10: Recycling capital
Recycling capital Vero Centre sale unlocks new opportunities • Kiwi Property announced the conditional sale of the Vero Centre to a Hong Kong, China-based institutional investor on 16 May 2024. • The $458 million sale price represents a 1.9% discount to the September 2023 valuation and delivers a pr
Slide 11: Delivering on our sustainability strategy
Delivering on our sustainability strategy Enhancing our assets’ ESG performance 3 Te Kehu Way awarded Sylvia Park achieves 4-Star minimum NABERSNZ Over 1,300,000 kWh of New Zealand’s first indicative 6-Star NABERS rating achieved across solar power generated at 6-Green Star Design & Shopping Centre
Slide 12: FY24 financial results
—— Uk ae —_ vat * FY24 financial results
Slide 13: FY24 financial results
FY24 financial results Operating Adjusted • We continue to rebalance our portfolio towards Net rental assets that we expect will be more resilient and profit funds from income1 higher performing over time. before tax1 operations1 March 2023: reported $203.7m $129.6m $116.5m • Decrease in reported ne
Slide 14: Mixed-use, office and retail leasing activity
Mixed-use, office and retail leasing activity 4.4% Rental growth • Overall rental growth from mixed-use, office and retail leasing activity was +4.4%, with new leasing +5.3% and Total rental growth rent reviews +4.2%. FY23: 4.8% • Uplift in leasing spreads for new lease deals across the mixed-use po
Slide 15: Capital management and balance sheet
Capital management and balance sheet 5.61% 3.6 years • Increase in weighted average cost of debt reflects the rising interest rate environment. Weighted average Weighted average • Refinance was completed in November 2023: cost of debt term to maturity of debt • Bank facilities maintained at $950m. •
Slide 16: Resido and development update
Resido and development update 16
Slide 17: Resido construction nears completion
Resido construction nears completion On track for opening in early June 2024 • Construction of Resido buildings • Leasing of Resido has begun. • Australian serviced apartment A, B and the residents’ pavilion are provider, Urban Rest, will rent 12% now complete, with building C • Marketing and promot
Slide 18: Resido: a significant opportunity
Resido: a significant opportunity Expected yield and IRR remain in-line with prior forecast Project metrics Projected completion date 4 June 2024 Target sustainability rating 8 Home Star Total project cost ~$240m1 Cost to complete $20.5m2 Net operating income $11.8m3 Ancillary income $1.7m3,4 Target
Slide 19: Realising our mixed-use strategy at Sylvia Park
Realising our mixed-use strategy at Sylvia Park Phase one of the precinct's transformation comes to fruition 1. Resido 295 units Completing 4 June 2024 Residential (Live) 2 1 5 1 2. ANZ Raranga 3. 3 Te Kehu Way 11,620 sqm office 7,269 sqm office 5 4 Completed 2018 Completed 2023 6 3 2 (Work) Office
Slide 20: Activating Drury
Activating Drury Bringing our plans for Drury to life • Stage 1 earthworks are nearing completion, with the civil works Key metrics Stage 1 Stage 2 Total contract due to be awarded. Gross land area 53.3ha • Advanced negotiations taking place with several local and Acquisition cost $55.3m internation
Slide 21: Dividend and outlook
Dividend and outlook 21
Slide 22: Dividend and guidance
Dividend and guidance 6.30cps 90% • FY24 AFFO per share decreased 15.1%, driven by asset sales, higher interest costs, and the positive impact of COVID-19 accrual release in the prior year. FY24 AFFO AFFO payout ratio • When viewed on a like-for-like basis, AFFO has -1.12 cps (-15.1%) decreased by 1
Slide 23: FY25 priorities
FY25 priorities Strategic initiatives will help drive returns and create value for shareholders Successfully lease up Complete Vero Centre Execute sell-down of Drury Drive sustained Resido divestment large format retail sites operational excellence Grow and deliver returns for shareholders 23
Slide 24: Appendix 1: Property update
Appendix 1: Property update 24
Slide 25: Contents
Contents Appendix Slide Page 1.1 Our investment portfolio 27 1.2 Investment portfolio summary 28 1.3 Net rental income 29 1.4 Portfolio statistics 30 1.5 Capitalisation rate history 31 1.6 Geographic diversification 32 1.7 Sector and tenant diversification 33 1.8 Mixed-use portfolio diversification
Slide 26: 1.1 Our investment portfolio
1.1 Our investment portfolio Sylvia Park Shopping Centre 3 Te Kehu Way LynnMall The Plaza (Sylvia Park Precinct) (Sylvia Park Precinct) Sylvia Park Lifestyle ANZ Raranga The Base Centre Place North (Sylvia Park Precinct) (Sylvia Park Precinct) ASB North Wharf Aurora Centre Vero Centre Mixed-use Offi
Slide 27: 1.2 Investment portfolio summary
1.2 Investment portfolio summary 31-Mar-24 31-Mar-23 Mixed-use Office Retail Total Mixed-use Office Retail Total Number of assets (Appendix 1.4) 4 2 2 8 4 3 2 9 Value ($m)1 (Appendix 1.4) 2,086.6 358.0 144.2 2,588.8 1,912.6 879.1 138.6 2,930.3 % of total portfolio by value (Appendix 1.7) 76 13 5 94
Slide 28: 1.3 Net rental income
1.3 Net rental income Year ended 31-Mar-24 31-Mar-23 Variance $m $m $m % Sylvia Park 60.6 58.7 1.9 +3.3 • Net operating income (NOI) decreased ANZ Raranga 5.1 5.1 0.0 +0.6 $18.5m (-9.2%) on the prior year, driven 3 Te Kehu Way 1.2 - 1.2 N/A primarily by asset disposals. Sylvia Park Lifestyle 5.4 5.4
Slide 29: 1.4 Portfolio statistics
1.4 Portfolio statistics Adopted value $m Capitalisation rate % NLA sqm Occupancy % WALE years As at 31-Mar-24 31-Mar-23 31-Mar-24 31-Mar-23 31-Mar-24 31-Mar-23 31-Mar-24 31-Mar-23 31-Mar-24 31-Mar-23 Sylvia Park 1,025.0 1,012.0 5.88 5.75 94,261 94,205 99.4 99.8 3.2 3.8 ANZ Raranga 90.0 96.5 6.00 5.
Slide 30: 1.5 Capitalisation rate history
1.5 Capitalisation rate history 10.00% 9.00% Retail - 8.94% 8.00% 7.00% Investment Portfolio - 6.44% Office - 6.35% 6.00% Mixed Use - 6.25% 5.00% 4.00% Global Christchurch COVID-19 Financial Crisis earthquakes 3.00% Mar-19 Mar-20 Mar-07 Mar-08 Mar-09 Mar-10 Mar-11 Mar-12 Mar-13 Mar-14 Mar-15 Mar-16
Slide 31: 1.6 Geographic diversification
1.6 Geographic diversification ($2.2b) Auckland Geographic diversification Auckland region: Pop. 1,739,300 by investment portfolio value (Largest region, 33.3% of NZ) 3 x mixed-use assets 1 x office asset 1 x development land ($237m) Hamilton Waikato region: Pop. 522,600 (4th largest region, 10.0% o
Slide 32: 1.7 Sector and tenant diversification
1.7 Sector and tenant diversification Sector diversification Tenant diversification by portfolio value by investment portfolio gross income Mixed-use 76% Specialty stores 49% Mini-majors 16% Office 13% Banking 10% Department stores and DDS 7% Retail 5% Government 6% Consultancy and other 6% Developm
Slide 33: 1.8 Mixed-use portfolio diversification
1.8 Mixed-use portfolio diversification Property type Geographic diversification Tenant diversification by mixed-use portfolio value by mixed-use portfolio value by mixed-use portfolio gross income Regional centres1 69% Auckland 90% Specialty stores 53% Office2 7% Hamilton 10% Mini-majors 22% Large
Slide 34: 1.9 Office portfolio diversification
1.9 Office portfolio diversification Property type Geographic diversification Tenant diversification by office portfolio value by office portfolio value by office portfolio gross income A-grade campus 59% Auckland 59% Banking 50% A-grade 41% Wellington 41% Government 41% Specialty stores 6% Other 3%
Slide 35: 1.10 Retail portfolio diversification
1.10 Retail portfolio diversification Property type Geographic diversification Tenant diversification by retail portfolio value by retail portfolio value by retail portfolio gross income Regional centres 78% Palmerston North 78% Specialty stores 75% Sub-regional 22% Hamilton 22% Department stores an
Slide 36: 1.11 Rent reviews and new leasing
1.11 Rent reviews and new leasing Rent reviews Mixed-use Office Retail Total Rent reviews No. 340 33 68 441 • High percentage of future rent reviews are NLA (sqm) 144,144 36,666 12,193 193,003 structured (95%), providing consistent uplift. % investment portfolio NLA 34 8 3 45 Rental movement (%) +4.
Slide 37: 1.12 Lease expiry profile
1.12 Lease expiry profile Mixed-use Lease expiry profile • Mixed-use expiries remain relatively steady % of investment portfolio gross income over the next five years. Office 60% • The longer-dated WALE of the office portfolio means 93% of gross office income 50% expires in FY30 and beyond. 40% Inve
Slide 38: 1.13 Tenant diversification
1.13 Tenant diversification Tenant diversification Top 20 tenants Our top 20 tenants % of investment portfolio gross income % of investment portfolio gross income ● Department stores and DDS 7.1 ASB Bank 9.2 ● Supermarkets 2.8 Ministry of Social Development 6.2 occupy ● Cinemas 2.0 Farmers 4.3 ● Hom
Slide 39: 1.14 Retail sales
1.14 Retail sales All centres1 Mixed-use Mixed-use Other • Portfolio sales were +1.4% on the previous year (incl. large format centres2 shopping shopping centres) (incl. large format centres3 centres4 and continue to sit at over $2b. For the year ended 31 centres) (excl. large March 2024 format cent
Slide 40: 1.15 Retail sales by property
1.15 Retail sales by property MAT $m1 % var • The Base sales have now reached over Year ended 31-Mar-24 vs 31-Mar-23 $530m, boosted by the opening of Mecca Sylvia Park 858.7 -0.4% and JB Hi-Fi. Sylvia Park Lifestyle2 45.2 +7.8% • LynnMall celebrated its 60th birthday and saw Total Sylvia Park Precin
Slide 41: 1.16 Retail sales by category
1.16 Retail sales by category MAT $m % var. from 31-Mar-23 • Food and pharmacy performed strongly in Year ended 31-Mar-24 Total Like-for-like FY24, driven by the increase in customer visits across our portfolio. Supermarkets 184.4 +5.8% +5.8% Department stores and DDS 166.0 -1.1% -1.1% • Unsurprisin
Slide 42: Appendix 2: Financial update
Appendix 2: Financial update 42
Slide 43: Contents
Contents Appendix Slide Page 2.1 Loss after income tax 45 2.2 Operating profit before income tax 46 2.3 Interest and finance charges 47 2.4 Management expense ratios (MER) 48 2.5 Funds from operations (FFO) 49 2.6 Adjusted funds from operations (AFFO) 50 2.7 Dividends 51 2.8 Financial results like-f
Slide 44: 2.1 Loss after income tax
2.1 Loss after income tax Year ended 31-Mar-24 31-Mar-23 Variance $m $m $m % • Decrease in property revenue Property revenue 240.5 256.5 -16.0 -6.2 of $16.0m arising from net property Property management revenue 4.1 2.5 +1.6 +64.0 disposals during the year (-$29.7m). Total revenue 244.7 259.1 -14.5
Slide 45: 2.2 Operating profit before income tax
2.2 Operating profit before income tax Year ended 31-Mar-24 31-Mar-23 Variance $m $m $m % (Appendix 2.1) Profit/(loss) before income tax 24.7 - 214.8 +239.5 +111.5 Adjusted for: Net fair value loss on investment properties (Appendix 2.1) 77.8 352.6 -274.8 -77.9 Litigation settlement income (Appendix
Slide 46: 2.3 Interest and finance charges
2.3 Interest and finance charges 31-Mar-24 31-Mar-23 Variance Year ended $m $m $m % • Interest costs were reflective of the Interest on bank debt - 35.8 - 34.8 -1.0 -3.1 higher interest rate environment, with Interest on bonds - 26.5 - 19.7 -6.8 -34.9 the weighted average interest rate Interest on l
Slide 47: 2.4 Management expense ratios (MER)
2.4 Management expense ratios (MER) 31-Mar-24 31-Mar-23 31-Mar-22 Year ended $m $m $m • Kiwi Property is focused on reducing Total property revenue (including property management revenue) 244.7 259.1 255.9 MER and has the objective of bringing Direct operating expenses -55.6 -52.8 -75.4 the ratio of
Slide 48: 2.5 Funds from operations (FFO)
2.5 Funds from operations (FFO) 31-Mar-24 31-Mar-23 Variance Year ended $m $m $m % • Lower operating profit before income Loss after tax (Appendix 2.1) - 2.1 - 227.7 +225.6 +99.1 tax has contributed to an $18.9m Adjusted for: reduction in FFO primarily due to Net fair value loss on investment proper
Slide 49: 2.6 Adjusted funds from operations (AFFO)
2.6 Adjusted funds from operations (AFFO) 31-Mar-24 31-Mar-23 Variance • Lower FFO – driven by a lower Year ended $m $m $m % operating profit before income tax - Funds from operations (FFO)1 (Appendix 2.5) 102.6 121.5 -18.9 -15.6 resulted in a $16.7m AFFO decrease on Adjusted for the prior year. Mai
Slide 50: 2.7 Dividends
2.7 Dividends 31-Mar-24 31-Mar-23 31-Mar-24 31-Mar-23 Year ended $m $m cps1 cps1 • Dividend payout ratio returns to within Dividend 90.5 89.5 5.70 5.70 target payout range of 90-100% of Imputation credits 16.1 17.7 1.01 1.13 AFFO, following the prior years’ retention of earnings to assist Gross divi
Slide 51: 2.8 Financial results like-for-like comparison
2.8 Financial results like-for-like comparison Operating profit Adjusted funds from Net rental income1 before income tax1 operations (AFFO)1 • Decrease in net rental income, operating profit before tax and AFFO March 2023: reported $203.7m $129.6m $116.5m follows disposal of Northlands, 44 The Terra
Slide 52: 2.9 Balance sheet
2.9 Balance sheet 31-Mar-24 31-Mar-23 Movement As at • Investment properties value decrease $m $m $m % of $72.2m driven by $131.2m of net Investment properties (Appendix 2.10) 3,121.8 3,194.0 -72.2 -2.3 disposals, $73.5m transfer to inventories Inventories 73.5 - +73.5 +100.0 and a $77.8m fair value
Slide 53: 2.10 Investment properties movement
$m Property portfolio fair value as at Mar-23 Westgate Lifestyle, IKEA land disposals Disposals Transfer to Inventories Transfer Acquisitions Acquisitions Sylvia Park Precinct LynnMall The Plaza Vero Centre Capital Expenditure Drury 2.10 Investment properties movement Other Fair value change Movemen
Slide 54: 2.11 Net finance debt movement
2.11 Net finance debt movement Movement As at 31-Mar-24 31-Mar-23 $m % (Appendix 2.9 Bank debt 694.0 506.0 +188.0 +37.2 Bonds (Appendix 2.9) 501.2 625.1 -124.0 -19.8 Cash on deposit (Appendix 2.9) -18.2 -17.9 -0.3 -1.8 Net finance debt 1,177.0 1,113.2 +63.2 +5.7 $m income Net rental As at 31 Mar-24
Slide 55: 2.12 Capital management metrics
2.12 Capital management metrics Finance debt metrics as at 31-Mar-24 31-Mar-23 Weighted average term to maturity 3.6 years 3.8 years Weighted average interest rate (Incl. of bonds, active interest rate derivatives, 5.61% 5.18% margins and line fees) Covenants – gearing as at 31-Mar-24 31-Mar-23 Gear
Slide 56: 2.13 Fixed-rate debt profile
2.13 Fixed-rate debt profile Fixed-rate profile (inclusive of bonds on issue Mar-24: $500m, Mar-23: $625m) 31-Mar-24 31-Mar-23 Percentage of drawn finance debt at fixed rates 89% 84% • Kiwi Property will proactively manage hedging levels to optimise economic Weighted average interest rate of active
Slide 57: 2.14 Finance debt facilities
2.14 Finance debt facilities 31-Mar-24 Debt maturity profile as at: $0 $m % Debt sources FY25 $125 125.0 8.6% 17.2% FY26 $100 $50 100.0 6.9% $33.0 $50.0 34.5% 4.8% FY27 $50 $50 100.0 6.9% FY28 $100 $70 $100 $50 $90 $34 $70 514.0 35.4% 13.8% FY29 $150 $100 $50 $100 $50 $36 486.0 33.5% 4.8% 6.9% 4.8%
Slide 58: Glossary
Glossary 58
Slide 59: Glossary
Glossary Adjusted funds from operations Adjusted funds from operations (AFFO) is an alternative non-GAAP performance measure used by Kiwi Property. AFFO is a measure (AFFO) commonly used by real estate entities to describe their underlying and recurring cash flows from operations. Broadly, AFFO adju
Slide 60: Glossary
Glossary Loss after income tax The reported loss after income tax has been prepared in accordance with GAAP and complies with New Zealand Equivalents to International Financial Reporting Standards. The reported loss information has been extracted from the Company’s annual consolidated financial stat
Slide 61: Thank you
Kiwi Property Thank you