Kiwi Property Group Ltd. · NZX:KPG
Kiwi Property — H1 FY2017 Earnings Presentation
68 slides from Kiwi Property's earnings presentation, Nov 21, 2016
Slide 1: 2017 Interim Result Presentation, 30 September 2016
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Slide 2: Contents
Contents Strategy overview 03 How we delivered 05 Our onward journey 13 Outlook and dividend guidance 14 Appendices 15 1. Financial review 17 2. Property portfolio review 29 3. Development update 43 4. Acquisition of The Base 58 5. Market update 63 6. Other information 66 This interim result present
Slide 3: Our vision, objective and goals
Kiwi Property OUR VISION, OBJECTIVE AND GOALS Our vision > To be synonymous with New Zealand’s best retail and workplace experiences Our objective > To provide investors with a reliable investment in New Zealand property, targeting superior, risk-adjusted returns over time through the ownership and
Slide 4: Our investment strategy
Kiwi Property OUR INVESTMENT STRATEGY Our investment strategy and core portfolio > To invest in a diversified portfolio of retail and office assets that are expected to outperform by consistently attracting high levels of tenant demand > Focused on Auckland Retail assets Office assets Third party •
Slide 5: Our retail strategy at work
For more information, refer to the following appendices Our retail strategy at work • 3.1–3.10 Sylvia Park • 3.11 Westgate Lifestyle CREATING EXCEPTIONAL PLACES TO SHOP • 4.1–4.4 Acquisition of The Base • Successfully • Fashion opened all retailers remaining H&M and tenancies at Zara open Westgate t
Slide 6: Our office strategy at work
For more information, refer to the following appendices Our office strategy at work • 3.5 and 3.6 Sylvia Park • 3.13 The Aurora Centre CREATING EXCEPTIONAL PLACES TO WORK • 3.14 44 The Terrace The Aurora Centre and 44 The Terrace Office at Sylvia Park WELLINGTON AUCKLAND > Our Government office prec
Slide 7: Positive six-month period
For more information, refer to the following appendices Positive six-month period • 1.1 Rental income • 1.5 Funds from operations GROWTH IN REVENUE, PROFIT AND DIVIDENDS • 1.2 Profit after tax • 1.6 Dividends Profit after tax Funds from operations Key contributors Improved rental $45.6m $47.7m per
Slide 8: Robust balance sheet and proactive capital management
For more information, refer to the following appendices Positive six-month period • 1.7 Balance sheet • 1.10 Finance debt facilities ROBUST BALANCE SHEET AND PROACTIVE CAPITAL MANAGEMENT • 1.9 Net finance debt mvmt • 1.11 Fixed-rate debt profile Net asset backing Property assets Gearing per share $2
Slide 9: Bigger, better, stronger
For more information, refer to the following appendices Bigger, better, stronger • 1.1 Rental income • 2.10 Portfolio statistics OUR STRATEGY AT WORK • 2.9 New leasing and rent reviews > Portfolio value $2.88 billion We have a stronger core portfolio and a significant investment in Auckland ($m) > N
Slide 10: Robust retail sales
For more information, refer to the following appendices Robust retail sales • 2.6 and 2.7 Retail sales > Total retail sales of $1.64 billion • +5.8% over prior year • Like-for-like sales growth of +3.4% > Most major categories continue to perform positively • home improvement +9.3% • mini-majors +7.
Slide 11: Development activity
For more information, refer to the following appendices Development activity • Section 03 Development update INTERNAL PIPELINE OF OPPORTUNITIES Sep-16 Mar-17 Sep-17 Mar-18 Sep-18 Mar-19 Sep-19 Mar-20 Beyond Westgate Lifestyle ($82.9m) The Aurora Centre ($72.0m) 44 The Terrace ($12.6m) Sylvia Park H&
Slide 12: Earthquake update
Earthquake update STRENGTHENED BUILDINGS PERFORM WELL > Our significant investment in strengthening works meant our Wellington assets performed to expectations with minor, non-structural damage only following the 14 November earthquake events > After passing same-day engineering evaluations, the bui
Slide 13: Our onward journey
Our onward journey CONTINUE TO DELIVER ON STRATEGY Retail > Progress development plans for the retail expansion at Sylvia Park and commence construction of the dining lane > Continue enhancing our customer experiences through continued roll-out of • carpark management systems • WiFi and digital medi
Slide 14: Outlook and dividend guidance
For more information, refer to the following appendices Outlook and dividend guidance • 1.6 Dividends KIWI PROPERTY REMAINS IN GREAT SHAPE Outlook Cash dividend guidance for FY17 > Kiwi Property is in great shape and set to benefit from 6.75 cents per share1 • increased rental income from recent acq
Slide 15: Appendices
Appendices APPENDICES 2017 INTERIM RESULT PRESENTATION 21 NOVEMBER 2016 15
Slide 16: Index
Index 01 03 Financial review Development update 1.1 Rental income 18 3.1 - 3.2 Sylvia Park – Overview of redevelopment 44 1.2 Profit after tax 19 3.3 Sylvia Park – H&M 46 1.3 Interest and finance charges 20 3.4 Sylvia Park – Zara 47 1.4 Management expense ratio (MER) 21 3.5 - 3.6 Sylvia Park – Offic
Slide 17: Financial review
01 APPENDIX FINANCIALREVIEW 2017 INTERIM RESULT PRESENTATION 21 NOVEMBER 2016 17
Slide 18: Rental income
Rental income Appendix RECENT ACQUISITIONS AND COMPLETED DEVELOPMENTS PROVIDE RENTAL INCOME UPLIFT 1.1 30-Sep-16 30-Sep-15 Variance Like-for-like var. For the six months ended $m $m $m % $m % Lift in total net rental Sylvia Park1 18.4 19.0 ▼ -0.6 -2.7 +0.7 +3.7 income Sylvia Park Lifestyle 2.4 2.2 ▲
Slide 19: Profit after tax
Profit after tax Appendix 27% UPLIFT IN PROFIT DRIVEN BY STRONG UNDERLYING OPERATING PERFORMANCE 1.2 30-Sep-16 30-Sep-15 Variance For the six months ended $m $m $m % Increased profit Property revenue [Appendix 1.1] 114.2 101.4 ▲ +12.8 +12.6 > Predominantly driven by Property management income 0.4 0.
Slide 20: Interest and finance charges
Interest and finance charges Appendix INCREASED INTEREST EXPENSE DRIVEN BY HIGHER DEBT LEVELS, PARTIALLY OFFSET BY LOWER INTEREST RATES 1.3 30-Sep-16 30-Sep-15 Variance For the six months ended $m $m $m % Increased interest expense Interest on bank debt -18.0 -15.3 ▲ -2.7 -17.6 > Driven by higher de
Slide 21: Management expense ratio (MER)
Management expense ratio (MER) Appendix COMPETITIVE MER MAINTAINED 1.4 30-Sep-16 30-Sep-15 Variance Twelve months ended $m $m $m Growth in expenses Employment and administration expenses 17.3 15.6 ▲ -1.7 > Driven by Less property management fee recoveries -6.6 -5.9 ▲ +0.7 • the underlying number of
Slide 22: Funds from operations (FFO)
Funds from operations (FFO) Appendix STRONG UNDERLYING OPERATING RESULT 1.5 30-Sep-16 30-Sep-15 Variance For the six months ended $m $m $m % > Another improved FFO Profit after tax [Appendix 1.2] 45.6 36.0 ▲ +9.6 +26.7 result driven by growth in underlying rental income Adjusted for Net fair value l
Slide 23: Dividends
Dividends Appendix SHAREHOLDERS TO RECEIVE INTERIM DIVIDEND OF 3.375 CENTS PER SHARE 1.6 30-Sep-16 30-Sep-15 30-Sep-16 30-Sep-15 For the six months ended $m $m cps1 cps1 Funds from operations [Appendix 1.5] 47.7 45.3 3.705 3.583 Amount retained -4.3 -3.5 -0.330 -0.283 Cash dividend 43.4 41.8 ▲ 3.375
Slide 24: Balance sheet
Balance sheet Appendix BALANCE SHEET STRENGTH MAINTAINED 1.7 30-Sep-16 31-Mar-16 Movement As at $m $m $m % Investment properties Investment properties [Appendix 1.8] 2,879.1 2,669.9 +209.2 +7.8 > No independent valuations Cash [Appendix 1.9] 8.5 6.2 +2.3 +37.1 were undertaken at 30-Sep-16 Deferred t
Slide 25: Investment properties movement
Investment properties ($m, movement for the six months ended 30-Sep-16) Appendix INCREASE DRIVEN BY ACQUISITIONS AND OTHER CAPITAL EXPENDITURE 1.8 3,000 2,900 +$15.2 +$4.7 +$2.6 +$16.8 +$193.1 +$18.5 +$7.1 -$2.4 2,800 -$46.4 2,700 2,600 2,500 =$2,879.1 2,400 +$2,669.9 2,300 2,200 2,100 Acquisitions
Slide 26: Net finance debt movement
Net finance debt ($m, movement for the six months ended 30-Sep-16) Appendix INCREASE DRIVEN BY ACQUISITIONS 1.9 +$10.0 1,000 31-Mar-16 30-Sep-16 +$27.9 Bank debt 690.5 756.5 +$208.4 +$50.6 950 Bonds 123.7 247.7 Cash on deposit -6.2 -8.5 900 Net finance debt 808.0 995.7 -$46.2 850 800 +$9.3 750 +$20.
Slide 27: Finance debt facilities
Finance debt facilities Appendix $1.2 BILLION OF DIVERSIFIED FACILITIES IN PLACE 1.10 Facilities expiring As at 30-Sep-16 $m % Increased total facilities and diversified debt sources FY17 - - > Established a further FY18 - - $200 million of additional FY19 ANZ $52.5 BNZ $73.0 CBA $80.0 WNZ $52.5 258
Slide 28: Fixed-rate debt profile
Fixed-rate debt profile Appendix 1.11 Fixed-rate profile (inclusive of bond issuances (Sep-16: $250 million, Mar-16: $125 million)) 30-Sep-16 31-Mar-16 Percentage of drawn finance debt at fixed rates 67% 68% Weighted average interest rate of active fixed-rate debt (excl. fees and margins) 3.76% 3.96
Slide 29: Property portfolio review
02 APPENDIX PROPERTY PORTFOLIO REVIEW 2017 INTERIM RESULT PRESENTATION 21 NOVEMBER 2016 29
Slide 30: Property portfolio summary
Property portfolio summary Appendix KEY METRICS 2.1 30-Sep-16 31-Mar-16 Core portfolio metrics1 As at Retail Office Total Total Number of assets 9 5 14 ■ 14 Value ($000)2,3,4 [Appendix 2.4] $1,979.0 $838.1 $2,817.1 ▲ $2,608.2 Proportion of total portfolio by value 69% 29% 98% ■ 98% Weighted average
Slide 31: Geographic diversification
Geographic diversification Appendix OUR PORTFOLIO IS CONCENTRATED IN NEW ZEALAND’S LARGEST CITY, AUCKLAND 2.2 ($1.75b) Auckland Geographic diversification Auckland region: Pop. 1,416,000 (% of total portfolio value) (Largest region, 33.4% of NZ) 2 x shopping centres 2 x large format retail centres 2
Slide 32: Sector and grade diversification
Sector and grade diversification Appendix WE ARE PREDOMINANTLY RETAIL FOCUSED AND INVEST IN HIGHER GRADE ASSETS 2.3 Sector diversification Retail grade diversification (% of total portfolio value) (% of retail portfolio value) 3% 2% 8% Regional Large format 29% CBD 89% 69% Office grade diversificati
Slide 33: Property values and capitalisation rates
Property values and capitalisation rates Appendix ACQUISITION OF THE BASE CONTRIBUTES TO PORTFOLIO VALUE GROWTH 2.4 Capitalisation rates %1 Adopted value $m1 Portfolio / property As at 30-Sep-16 31-Mar-16 30-Sep-16 31-Mar-16 Sylvia Park4 6.00 6.00 723.6 704.0 Sylvia Park Lifestyle 6.50 6.50 70.0 69.
Slide 34: Capitalisation rate history
Capitalisation rate history Appendix FIRMING TREND 2.5 9.00% > The weighted average capitalisation rates shown represent the 31-Mar-16 rates; 8.50% assets were not independently valued at 30-Sep-16 8.00% > Research and anecdotal evidence from valuers indicates that capitalisation 7.50% rates firmed
Slide 35: Retail sales
Retail sales Appendix STRONG SALES PERFORMANCE 2.6 MAT $m % var. from 30-Sep-15 Specialty sales Centre 30-Sep-16 Total Like-for-like $/sqm GOC % Like-for-like sales growth by centre Sylvia Park 461.2 +5.3 +5.2 10,300 14.2 Sylvia Park Sylvia Park Lifestyle1 9.0 n/a n/a n/a n/a LynnMall LynnMall 230.0
Slide 36: Retail sales
Retail sales Appendix SALES DRIVEN BY DISCRETIONARY SPENDING 2.7 MAT $m % var. from 30-Sep-15 Category 30-Sep-16 Total Like-for-like Like-for-like sales growth by category ● Home improvement1 49.4 +9.3 +9.3 Home improvement ● Department stores / DDS 249.8 +4.5 +4.5 Department stores ● Cinemas 34.9 +
Slide 37: Lease expiry profile
Lease expiry profile Appendix ACTIVE LEASING AND HIGHER RETENTION RATES IMPROVE EXPIRY PROFILE 2.8 Lease expiry profile Retail (% of core portfolio gross income) > A cyclical expiry peak occurs at Sylvia Park 60% across 2018 and 2019, coinciding with our 55.7% retail expansion plans Office 50% > The
Slide 38: New leasing and rent reviews
New leasing and rent reviews Appendix STRUCTURED RENT REVIEWS UNDERPIN GROWTH 2.9 Rent reviews Retail Office Total Retail Office No. 317 18 335 > Performance > Given active portfolio NLA (sqm) 82,505 28,287 110,792 underpinned by leasing over the past % portfolio NLA 23 23 23 predominance of few yea
Slide 39: Portfolio statistics
Portfolio statistics Appendix LARGER PORTFOLIO WITH STABLE OCCUPANCY AND IMPROVED WALT 2.10 Ownership % NLA sqm Occupancy %1 WALT years Portfolio / property As at 30-Sep-16 31-Mar-16 30-Sep-16 31-Mar-16 30-Sep-16 31-Mar-16 30-Sep-16 31-Mar-16 > Portfolio Sylvia Park2 100 100 73,925 68,783 100.0 100.
Slide 40: Tenant diversification
Tenant diversification Appendix OUR PORTFOLIO HAS A DIVERSE SPREAD OF TENANTS 2.11 Total portfolio Top 20 tenants Top 20 tenants (% of core portfolio gross income) (% of core portfolio gross income) (contribution to portfolio) ● Supermarkets 4 ● ASB Bank 6.6 ● Department stores 3 ● Ministry of Socia
Slide 41: Sustainability achievements
Sustainability achievements Appendix HOW WE HAVE BEEN DELIVERING 2.12 > In October 2016, included in the > The output from the solar > Support of > 5,400 new LED Carbon Disclosure Project’s Carbon array panels at Sylvia Park is NABERSNZ to lights installed in Leadership Group by scoring an A- in lin
Slide 42: Marketing, brand and digital experience
Marketing, brand and digital experience Appendix WE’RE ENHANCING OUR CUSTOMERS’ EXPERIENCE 2.13 > We’re enhancing our customers’ experience through • implementation of new carpark management systems at Sylvia Park and LynnMall • installation of new state-of-the-art digital media solutions • implemen
Slide 43: Development update
APPENDIX 03 DEVELOPMENT UPDATE 2017 INTERIM RESULT PRESENTATION 21 NOVEMBER 2016 43 43
Slide 44: Sylvia Park: overview of redevelopment, ground floor
Sylvia Park Appendix OVERVIEW OF REDEVELOPMENT – GROUND FLOOR 3.1 3 2 1 H&M and Zara 2 Office building and town square 3 Dining lane and pavilion COMPLETE UNDER CONSTRUCTION APPROVED The first stage of expansion is 12,200 sqm building – incl. ground floor Contemporary, landscaped alfresco complete w
Slide 45: Sylvia Park: overview of redevelopment, upper level
Sylvia Park *Concept only. Subject to change. Any Appendix OVERVIEW OF REDEVELOPMENT – UPPER LEVEL scheme will be market led, appropriately de-risked and subject to commercial viability. 3.2 5 4 4 Galleria* 5 Carparking ADVANCED PLANNING Potential cost: POTENTIAL START 2017 ~$180 million • Up to 20,
Slide 46: Sylvia Park: H&M
Sylvia Park Appendix H&M OPEN AND TRADING FROM 1 OCTOBER 2016 3.3 Successfully completed Our new fashion retailers are attracting customers > 2,600 sqm store from a wider geographic spread > Total project cost of $7.7 million for H&M and BNZ Marketview research indicates that more adjacent mall upgr
Slide 47: Sylvia Park: Zara
Sylvia Park Appendix ZARA OPEN AND TRADING FROM 6 OCTOBER 2016 3.4 Successfully completed Our new fashion retailers are attracting new > 2,500 sqm store customers to Sylvia Park > Total project cost $11.5 million1 BNZ Marketview research indicates that 21% of Zara’s customers had not previously visi
Slide 48: Sylvia Park: office development
Sylvia Park Appendix CREATING A UNIQUE HIGH-QUALITY OFFICE TOWER 3.5 Project overview Leasing progress > New 10-level building > 3,324 sqm (29% of total office NLA) leased to IAG • Nine levels of office accommodation (11,370 sqm) New Zealand • New ground floor alfresco dining precinct (800 sqm) > St
Slide 49: Sylvia Park: office artist's impression
Sylvia Park Appendix OFFICE – ARTIST’S IMPRESSION Concept only. Subject to change. 3.6 2017 INTERIM RESULT PRESENTATION, 21 NOVEMBER 2016 49
Slide 50: Sylvia Park: dining lane and pavilion
Sylvia Park Appendix DINING LANE AND PAVILION 3.7 Project overview Concept only. Subject to change. > A contemporary alfresco dining experience that will set a new standard for suburban dining in Auckland. The project includes • new and refreshed dining experiences on the ground floor of the office
Slide 51: Sylvia Park: dining lane artist's impression
Sylvia Park Appendix DINING LANE AND PAVILION – ARTIST’S IMPRESSION Concept only. Subject to change. 3.8 2017 INTERIM RESULT PRESENTATION, 21 NOVEMBER 2016 51
Slide 52: Sylvia Park: Galleria development
Sylvia Park Appendix GALLERIA DEVELOPMENT 3.9 Concept only. Subject to change. Future expansion plans • Up to 20,000 sqm • Department store • Potential cost: ~$180m of additional first • Exciting new brands and concept stores • Potential start: 2017 floor retail • New concept café court • Potential
Slide 53: Why Sylvia Park?
Sylvia Park Appendix WHY SYLVIA PARK? 3.10 Location • Sits at the junction of three Annual retail sales ($m) major highways 475 $455m Scale • 12.6 million annual visitors 450 +26 % =3.4% AVERAGE SINCE • Over $455m annual retail sales 2009 ANNUAL GROWTH 425 Extensive • Main trade area: 764,470
Slide 54: Westgate Lifestyle
Westgate Lifestyle Appendix TENANCIES OPENED AND TRADING WELL 3.11 “Trade from our new Westgate Lifestyle store is exceeding our initial expectations.” Jerome O’Sullivan, HARVEY NORMAN “Customer feedback at our Briscoes and Rebel Sport stores at Westgate Lifestyle has been very positive. Momentum co
Slide 55: The Majestic Centre
The Majestic Centre Appendix SEISMIC STRENGTHENING PROJECT IN FINAL STAGES 3.12 Project status > Final stages of works being concluded, including • isolated works on the tower shear core • works to the podium level > Works forecast to conclude at the end of 2016 calendar year Financial status > Fore
Slide 56: The Aurora Centre
The Aurora Centre Appendix REFURBISHMENT COMPLETE AND GOVERNMENT TENANT IN OCCUPATION 3.13 > Completed on time and on budget • Cost: $72.0 million1 • Development margin achieved: $10.0 million > Ministry of Social Development commenced occupation of all commercial floors from August 2016 > Ground fl
Slide 57: 44 The Terrace
44 The Terrace Appendix TOWER WORKS COMPLETE AND GOVERNMENT TENANTS IN OCCUPATION 3.14 Seismic strengthening and refurbishment complete > Completed in Sep-16, on time and on budget • Cost: $12.6 million1 • Yield on cost: ~7.3% • Development margin achieved: $3.7 million > Government tenants now in o
Slide 58: Acquisition of The Base
04 APPENDIX ACQUISITION OF THE BASE 2017 INTERIM RESULT PRESENTATION 21 NOVEMBER 2016 58
Slide 59: Transaction overview
Transaction overview Appendix ACQUIRED A 50% INTEREST IN THE BASE 4.1 Interest acquired Acquisition price Pre-paid ground rent 50 % $192.5m 120 years Management Settled Kiwi Property 31 May 2016 managing the entire centre Initial yield1 Initial yield2 IRR2 Funded through 6.1% 6.4% 8.5% bank debt and
Slide 60: Investment rationale
Investment rationale Appendix ALIGNS WITH STRATEGY 4.2 > Aligns with our strategy of owning dominant regional shopping centres • The Base - is New Zealand’s largest single-site retail centre - is located within New Zealand’s ‘golden triangle’ of economic and residential growth (Auckland, Hamilton an
Slide 61: Property overview
Property overview Appendix LARGEST SINGLE-SITE RETAIL CENTRE IN NEW ZEALAND 4.3 Te Awa (Regional shopping mall) Large format retail NLA 31,294 sqm NLA 54,104 sqm Completed 2011 Completed 2005 – 2014 No. tenants 102 No. tenants 67 Majors Farmers Majors The Warehouse Hoyts Cinema Mitre 10 Mega Mini-ma
Slide 62: Investment summary
Investment summary Appendix 4.4 Valuation summary for 50% interest1,2 Valuation summary for 50% interest (continued)1,2 Valuer JLL Incl. land2 Excl. land2 Value $192.5 million Initial yield – passing 6.1% 6.4% Capitalisation rate 6.63% Initial yield – fully leased 6.8% 7.1% Net passing income $11.7
Slide 63: Office market update
05 APPENDIX OFFICE MARKET UPDATE 2017 INTERIM RESULT PRESENTATION 21 NOVEMBER 2016 63
Slide 64: Auckland CBD office market
Auckland CBD office market Appendix MARKET ANALYSIS 5.1 Outlook Key points (Premium and A-grade accommodation) Our Auckland office exposure ► Supply > No change to Premium-grade stock until the 2019 completion of the 39,000 sqm PwC Tower > ~65,000 sqm of new A-grade space expected over 2016 and 2017
Slide 65: Wellington CBD office market
Wellington CBD office market Appendix MARKET ANALYSIS 5.2 Outlook Key points (A-grade and B-grade accommodation) Our Wellington office exposure ▲ Supply > Approximately 50,000 sqm of space will re-enter the market in 2016 (The Aurora Centre, 133 Molesworth, 33 Bowen), however this is predominantly p
Slide 66: Other information
06 APPENDIX OTHER INFORMATION 2017 INTERIM RESULT PRESENTATION 21 NOVEMBER 2016 66
Slide 67: Glossary of terms
Glossary of terms Appendix 6.1 Department stores Includes both full line and discount department stores (i.e. Farmers, Kmart and The Warehouse) Funds from operations (FFO) FFO is an alternative performance measure used to assist investors in assessing the Company’s underlying operating performance a
Slide 68: Disclaimer
Disclaimer Kiwi Property Group Limited (‘Kiwi Property’) has prepared this presentation (the ‘Presentation’) and the information contained in it is intended to provide general information only and does not take into account your individual objectives, financial situation or needs. It is not intended
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