Kiwi Property Group Ltd. · NZX:KPG
Kiwi Property — H1 2023 Earnings Presentation
54 slides from Kiwi Property's earnings presentation, Nov 28, 2022
Slide 1: Interim Results Presentation
Interim Results Presentation For the six months ended 30 September 2022
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 update 4 Financial results 10 Appendix 1: Property update 18 Appendix 2: Financial update 34 Glossary 51 This interim results presentation for the six months ended 30 September 2022 should be read in conjunction with the NZX announcement and financial statements releas
Slide 4: Business update
Kiwi Property Business update
Slide 5: A strategy for driving long term value and shareholder returns
A strategy for driving long term value and shareholder returns 5
Slide 6: 1H23: A strong operational performance
1H23: A strong operational performance $100m 4.9% 99.7 % Net rental income Leasing uplift Portfolio occupancy 9.6% >$750m 81 Total sales growth Sylvia Park precinct sales GRESB score 6
Slide 7: Delivering on strategy through targeted development at Sylvia Park
Delivering on strategy through targeted development at Sylvia Park Sylvia Park BTR 3 Te Kehu Way Sylvia Lane dining precinct > Construction of Sylvia Park’s 295 > Building exterior largely finished > Exciting all-weather upgrade to apartment BTR complex is moving and internal fitouts are underway. S
Slide 8: Unlocking value and a funding pathway at Drury
Unlocking value and a funding pathway at Drury Kiwi Property Drury landholding > Private Plan Change approved by the Environment Court. > Stage one earthworks underway and forecast to take two years. > Land value expected to increase further once earth and civil works complete. > Fast-track consenti
Slide 9: A disciplined and proactive approach to capital management
A disciplined and proactive approach to capital management Strategic capital recycling Northlands goes unconditional Pragmatic development timing > 44 The Terrace sold for $48m (with > Northlands shopping centre sold > Large landholding provides $2m retained for seismic costs) post for $151m (net of
Slide 10: Financial results
Kiwi Property Financial results
Slide 11: Interim financial results 2023
Interim financial results 2023 $100.0m > Net rental income increased 6.3% on the prior period to a record $100m, assisted by improved performance at Sylvia Park and the release of COVID-19 rental Net rental income abatement accruals which were not required. +$6.0m (+6.3%) > Net loss after tax includ
Slide 12: Mixed-use and office leasing activity
Mixed-use and office leasing activity 4.9% Rental growth > Overall rental growth from mixed-use and office leasing activity was +4.9%, with new leasing up +4.1% and rent Total rental growth reviews up +5.2%. FY22: 4.2% > Strong uplift in leasing spreads for new lease deals across the mixed-use portf
Slide 13: Retail sales
Retail sales $1.51b > Extra 13 days traded in Auckland versus the prior comparable period, while Hamilton traded for 10 fewer days. Total sales1 > We have seen a positive performance from most centres, Sep 21: $1.38b resulting in total sales growth of +9.6% in the first-half. +9.6% > Growth is being
Slide 14: Capital management
Capital management 4.41% > Bank debt facilities were increased from $850m to $950m. Weighted average > Increase in weighted average cost of debt reflects the cost of debt rising interest rate environment. FY22: 3.85% > Interest rate rises continue to drive fair value gains on interest rate swaps. 2.
Slide 15: Balance sheet
Balance sheet $3.4b > Unrealised fair value decrease in property assets partially offset by $93m in further capital expenditure and property acquisitions. Property assets > Allowing for the settlement of Northlands on FY22: $3.6b 30 November 2022 and 44 The Terrace on 15 December 2022, pro-forma gea
Slide 16: AFFO, dividend and guidance
AFFO, dividend and guidance 4.15cps 69% > AFFO per share increased 35.7%, driven by higher operating profit and a lower impact of COVID-19 in 1H23. AFFO AFFO payout ratio > Kiwi Property confirms its FY23 cash dividend guidance of +1.09 cps (+35.7%) 5.70 cps2, representing an attractive gross divide
Slide 17: Building momentum for strategic evolution: 2H23 priorities
Building momentum for strategic evolution: 2H23 priorities 1. Maintain balance sheet flexibility and capacity. 2. Advance Drury earthworks and Fast-track consent application. 3. Progress leasing at 3 Te Kehu Way, aiming to be fully committed on opening. 4. Continue driving operational excellence acr
Slide 18: Appendix 1: Property update
Appendix 1: Property update 18
Slide 19: Contents
Contents Appendix Title Page 1.1 Investment portfolio summary 20 1.2 Portfolio statistics 21 1.3 Net rental income 22 1.4 Capitalisation rate history 23 1.5 Geographic diversification – investment portfolio 24 1.6 Sector and tenant diversification – property portfolio 25 1.7 Mixed-use portfolio dive
Slide 20: 1.1 Investment portfolio summary
1.1 Investment portfolio summary 30-Sep-22 31-Mar-22 Mixed-use Office Total Mixed-use Office Total Number of assets (Appendix 1.2) 4 4 8 4 4 8 Value ($m)1 (Appendix 1.2) 1,900.6 981.0 2,881.6 1,911.6 1,042.3 2,953.9 % of total portfolio by value (Appendix 1.6) 55 28 84 54 29 83 Weighted average capi
Slide 21: 1.2 Portfolio statistics
1.2 Portfolio statistics Adopted value $m Capitalisation rate % NLA sqm Occupancy % WALE years As at 30-Sep-22 31-Mar-22 30-Sep-22 31-Mar-22 30-Sep-22 31-Mar-22 30-Sep-22 31-Mar-22 30-Sep-22 31-Mar-22 Sylvia Park1 1,059.0 1,071.9 5.63 5.38 94,832 94,769 99.9 99.8 3.9 4.1 ANZ Raranga 102.5 114.5 5.38
Slide 22: 1.3 Net rental income
1.3 Net rental income Six months ended 30-Sep-22 30-Sep-21 Variance $m $m $m % > Net operating income (NOI) increased $6.1m Sylvia Park 27.5 23.9 3.6 +15.3 (+6.5%) on the prior period, driven primarily by ANZ Raranga 2.5 2.4 0.1 +3.5 improved performance at Sylvia Park and the Sylvia Park Lifestyle
Slide 23: 1.4 Capitalisation rate history
1.4 Capitalisation rate history 10.00% 9.00% 8.00% 7.00% 5.77% 6.00% 5.56% 5.15% 5.00% 4.00% Global Christchurch COVID-19 Financial Crisis earthquakes 3.00% Sep-22 Mar-07 Mar-08 Mar-09 Mar-10 Mar-11 Mar-12 Mar-13 Mar-14 Mar-15 Mar-16 Mar-17 Mar-18 Mar-19 Mar-20 Mar-21 Mar-22 Key: Mixed-use Office In
Slide 24: 1.5 Geographic diversification – investment portfolio
1.5 Geographic diversification – investment portfolio ($2.5b) Auckland Geographic diversification Auckland region: Pop. 1,572,000 by investment portfolio value (Largest region, 33.4% of NZ) 3 x mixed-use assets 2 x office assets ($199m) Hamilton Waikato region: Pop. 458,000 (4th largest region, 9.7%
Slide 25: 1.6 Sector and tenant diversification – property portfolio
1.6 Sector and tenant diversification – property portfolio Sector diversification Tenant diversification by portfolio value by investment portfolio gross income Mixed-use 55% Specialty stores 38% Mini-majors 15% Office 28% Banking 10% Government 8% Other 8% Legal 6% Consultancy and other 5% Held for
Slide 26: 1.7 Mixed-use portfolio diversification
1.7 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 85% Auckland 90% Specialty stores 55% Other 11% Hamilton 10% Mini-majors 22% Large f
Slide 27: 1.8 Office portfolio diversification
1.8 Office portfolio diversification Property type Geographic diversification Tenant diversification by office portfolio value by office portfolio value by office portfolio gross income Premium 53% Auckland 78% Government 25% A-grade campus 25% Wellington 22% Banking 25% A-grade 17% Legal 20% B-grad
Slide 28: 1.9 Rent reviews and new leasing
1.9 Rent reviews and new leasing Rent reviews Mixed-use Office Total Rent reviews No. 169 26 195 > High percentage of structured reviews (82%) NLA (sqm) 96,067 12,539 108,606 provided consistent uplift, averaging +4.0% on a % investment portfolio NLA 24 3 27 compound annual basis across the investme
Slide 29: 1.10 Lease expiry profile
1.10 Lease expiry profile Mixed-use > Mixed-use expiries remain relatively steady over Lease expiry profile the next five years. % of investment portfolio gross income 60% > Only 5% of the investment portfolio is currently vacant or on holdover, a solid result given the 50% 48% current economic clim
Slide 30: 1.11 Tenant diversification
1.11 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 5 ASB Bank 8.2 ● Supermarkets 2 Ministry of Social Development 5.7 occupy ● Cinemas 2 Farmers 3.4 ● Home and
Slide 31: 1.12 Retail sales
1.12 Retail sales All centres Shopping centres > The year to September 2022 saw an extra (incl. large format centres) (mixed-use only) 13 days traded in Auckland. In For the year ended 30-Sep-22 contrast, Hamilton trade for 10 fewer Actual sales Actual sales days than the previous period. Total sale
Slide 32: 1.13 Retail sales by property
1.13 Retail sales by property MAT $m1 MAT $m1 % Var. from 30-Sep-21 > A full year of trade for new stores in the mini- Year ended Year ended 30-Sep-22 30-Sep-22 Total Like-for- major category and the resurgence of travel in like commercial services is driving total sales growth Sylvia Park 736.5 Mix
Slide 33: 1.14 Retail sales by category
1.14 Retail sales by category MAT $m % var. from 30-Sep-21 > The move away from the traffic light settings Year ended 30-Sep-22 Total Like-for-like helped cinemas to continue their rebound. The success of Top Gun: Maverick was key to their Supermarkets 171.5 +0.9 +0.9 performance amidst the limited
Slide 34: Appendix 2: Financial update
Appendix 2: Financial update 34
Slide 35: Contents
Contents Appendix Title Page 2.1 Profit after tax 36 2.2 Operating profit before income tax 37 2.3 Interest and finance charges 38 2.4 Management expense ratios (MER) 39 2.5 COVID-19 rent relief 40 2.6 Funds from operations (FFO) 41 2.7 Adjusted funds from operations (AFFO) 42 2.8 Dividends 43 2.9 B
Slide 36: 2.1 Profit after tax
2.1 Profit after tax 30-Sep-22 30-Sep-21 Variance Six months ended $m $m $m % > Property revenue increased $7.9m, Property revenue 129.3 121.4 +7.9 +6.5 assisted by rental growth across the Property management income 0.9 0.9 -0.0 -4.7 portfolio and reduced impact of COVID- Total income 130.2 122.3 +
Slide 37: 2.2 Operating profit before income tax
2.2 Operating profit before income tax 30-Sep-22 30-Sep-21 Variance Six months ended $m $m $m % (Loss)/profit before income tax (Appendix 2.1) -135.4 161.0 -296.3 -184.1 Adjusted for: Net fair value loss/(gain) on investment properties (Appendix 2.1) 213.3 -93.6 +307.0 +327.9 (Appendix 2.1) Litigati
Slide 38: 2.3 Interest and finance charges
2.3 Interest and finance charges 30-Sep-22 30-Sep-21 Variance > Interest on bonds favourably impacted by Six months ended $m $m $m % maturity of KPG010 at 6.15% (August-21) and issue Interest on bank debt -14.3 -9.6 -4.7 -49.4 of KPG050 at 2.85% (July-21). Interest on bonds -9.8 -11.6 +1.8 +15.5 Int
Slide 39: 2.4 Management expense ratios (MER)
2.4 Management expense ratios (MER) 30-Sep-22 30-Sep-21 > Increase in employment and administration 12-month period ended $m $m expenses largely driven by IT costs, co-investment Employment and administration expenses 28.5 25.1 platform costs and investment in personnel and Direct property expenses
Slide 40: 2.5 COVID-19 rent relief
2.5 COVID-19 rent relief Period ended 30-Sep-22 31-Mar-22 > The table shows the accounting treatment $m $m of rent relief agreed, or expected to be Gross cost of abatements agreed, for the six months ended 30 Abatements capitalised and amortised over remaining lease terms(Appendix 2.7) -3.8 13.1 Sep
Slide 41: 2.6 Funds from operations (FFO)
2.6 Funds from operations (FFO) 30-Sep-22 30-Sep-21 Variance Six months ended $m $m $m % > Higher operating profit as well as costs on Operating profit before tax 65.1 62.5 +2.6 +4.2 share-based plans and depreciation have Adjusted for: contributed to a 7.4% increase in FFO. Straight-lining of fixed
Slide 42: 2.7 Adjusted funds from operations (AFFO)
2.7 Adjusted funds from operations (AFFO) 30-Sep-22 30-Sep-21 Variance > Reduction in COVID-19 rent Six months ended $m $m $m % abatements, coupled with higher FFO, Funds from operations (FFO)1 (Appendix 2.6) 62.0 57.7 +4.3 +7.4 resulted in a 35.8% AFFO increase on the Adjusted for prior period. Mai
Slide 43: 2.8 Dividends
2.8 Dividends 30-Sep-22 30-Sep-21 30-Sep-22 30-Sep-21 > The dividend reinvestment plan will not apply to Six months ended $m $m cps1 cps1 the quarterly dividend payable in December Cash dividend 44.8 43.2 2.85 2.75 2022. Imputation credits 8.9 11.8 0.56 0.75 Gross dividend 53.6 55.0 3.41 3.50 > Reta
Slide 44: 2.9 Balance sheet
2.9 Balance sheet 30-Sep-22 31-Mar-22 Movement > Investment properties value decrease driven As at $m $m $m % by a $213.3m unrealised fair value loss, offset Investment properties (Appendix 2.10) 3,447.1 3,567.6 -120.5 -3.4 by an additional $93m in capital expenditure Cash (Appendix 2.11) 15.6 11.6
Slide 45: 2.10 Investment properties movement
$m Property portfolio fair value as at Mar-22 Acquisitions Acquisitions Sylvia Park Precinct LynnMall 2.10 Investment properties movement The Plaza Capital Expenditure Drury Other Fair value change Property portfolio fair value as at Sep-22 45
Slide 46: 2.11 Net finance debt movement
2.11 Net finance debt movement As at 30-Sep-22 31-Mar-22 (Appendix 2.9) Bank debt 739.0 635.0 Bonds (Appendix 2.9) 501.4 500.9 Cash on deposit (Appendix 2.9) -15.6 -11.6 Net finance debt 1,224.8 1,124.3 $m development charges Dividends admin expenses Net rental income Interest and finance Employment
Slide 47: 2.12 Finance debt facilities
2.12 Finance debt facilities 30-Sep-22 Debt maturity profile as at: Debt sources $m % 10.3% FY24 $50 $125 175.0 12.1% $125.0 10.3% $50 34.5% FY25 $50 $50 $50 $ 33 $$50 50 $125 358.0 24.7% $50.0 $33.0 $50.0 FY26 $50 $50 $50 $50 $ 34 $$50 50 $100 $33 367.0 25.3% $50.0 $34.0 $50.0 13.8% FY27 $50 $50 $5
Slide 48: 2.13 Capital management metrics
2.13 Capital management metrics Finance debt metrics as at 30-Sep-22 31-Mar-22 Weighted average term to maturity1 2.9 years 3.4 years Weighted average interest rate (Incl. of bonds, active interest rate derivatives, margins and line fees) 4.41% 3.85% Covenants – gearing as at 30-Sep-22 31-Mar-22 2 G
Slide 49: 2.14 Fixed-rate debt profile
2.14 Fixed-rate debt profile Fixed-rate profile (inclusive of green bonds on issue Sep-22: $500m, Mar-22: $500m) 30-Sep-22 31-Mar-22 Percentage of drawn finance debt at fixed rates 59% 68% Weighted average interest rate of active fixed-rate debt (excl. fees and margins) 2.45% 2.53% Weighted average
Slide 50: 2.15 Finance debt facilities – post half-year
2.15 Finance debt facilities – post half-year 30-Sep-22 Debt maturity profile as at: Debt sources $m % FY24 $125 125.0 8.3% 13.3% FY25 $125 $50 $50 125.0 8.3% 33.3% 10.0% $33.0 $50.0 FY26 $50 $25 $100 $33 $50 208.0 13.9% $50.0 13.3% FY27 $150 $50 $ 150 $33 $100 383.0 25.5% 10.0% 6.7% FY28 $150 $175
Slide 51: Glossary
Kiwi Property Glossary
Slide 52: Glossary
Glossary Adjusted funds from operations AFFO is an alternative non-GAAP performance measure used by Kiwi Property. AFFO is a measure commonly used by real estate entities to (AFFO) describe their underlying and recurring cash flows from operations. Broadly, AFFO adjusts FFO by deducting the cost of
Slide 53: Glossary
Glossary Like-for-like retail sales Only includes sales from those tenants who have traded for the past 24 months. (Loss)/profit after tax The reported (loss)/profit has been prepared in accordance with GAAP and complies with New Zealand Equivalents to International Financial Reporting Standards. Th
Slide 54: Thank you
Kiwi Property Thank you