Kiwi Property Group Ltd. · NZX:KPG
Kiwi Property — FY2021 Earnings Presentation
56 slides from Kiwi Property's earnings presentation, May 2021
Slide 1: Annual Results Presentation 2021
Annual Results Presentation 2021
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 FY21 financial results 13 Appendix 1: Property update 21 Appendix 2: Financial update 37 Glossary 54 This annual result presentation for the year ended 31 March 2021 should be read in conjunction with the NZX announcement and financial statements released on 2
Slide 4: Business update
Business update 4
Slide 5: FY21 annual result highlights
FY21 annual result highlights $196.5m $99.8m $116.3m $89.4m 5.15cps Net profit Property portfolio Operating profit Adjusted funds FY21 full year after tax fair value gain1 before tax from operations dividend +$383.2m on pcp $1.36 NTA per share -$13.4m (-10.3%) -$12.8m (-12.5%) 2.95cps (+10cps) FY21
Slide 6: Our value creation strategy
Our value creation strategy 6
Slide 7: Getting fit for the future: portfolio rebalancing
Getting fit for the future: portfolio rebalancing Reducing retail exposure Centre Place North JV Rationale for rebalancing > Portfolio rebalancing programme > 50:50 joint venture formed with > Recycle capital to fund Kiwi stepped-up in FY21. Tainui Group Holdings at Property’s growth pipeline. Centr
Slide 8: Sylvia Park: the next level
Sylvia Park: the next level > Level 1 expansion has performed well since opening, underpinned by robust sales across specialty stores and ‘The Terrace at Sylvia Park’ dining precinct. > Flagship store openings continue to strengthen the centre’s compelling retail offering including: – Sephora – Supe
Slide 9: Development gains pace
Development gains pace Sylvia Park office gets green light Drury builds momentum BTR planning continues > 3 Te Kehu Way office building set > Drury development programme > BTR remains a potentially to begin construction in October made significant progress in FY21. significant mixed-use opportunity.
Slide 10: Embedding sustainability
Embedding sustainability FY21 sustainability highlights > 60% emissions reduction compared to 2012 baseline. > Carbon Disclosure Project (CDP) ‘A’ Rating – the only New Zealand company to achieve this milestone. > Sustainable Debt Framework launched, paving the way for the company to issue additiona
Slide 11: FY21 dividend and FY22 guidance
FY21 dividend and FY22 guidance > Kiwi Property will pay a final cash dividend of 2.95 cents per share for the six-month period ended 31 March 2021. > The total cash dividend for FY21 amounts to 5.15 cents per share, equivalent to 90% of AFFO. > AFFO guidance for FY22 will be provided once the sales
Slide 12: FY21 financial results
FY21 financial results 12
Slide 13: FY21 financial results
FY21 financial results $173.6m > Net rental income (NRI) increased across the office portfolio (+2.1%), but decreased for mixed-use (-7.3%), driven by COVID-19 related rent abatements. Net rental income > Adjusted Funds from Operations (AFFO), a key -$13.2m (-7.1%) performance metric used to determi
Slide 14: Mixed use and office leasing activity
Mixed use and office leasing activity 3.2% > Overall rental growth from mixed-use and office leasing activity was +3.2% driven by rent reviews (+3.3%) and new leasing (+2.8%). Total rental growth > Positive leasing spreads recorded in mixed-use (+2.7%) FY20: 4.0% and office portfolio (+3.5%) led by
Slide 15: Retail sales
Retail sales All centres Shopping centres 6 month actual > Alert level 3 and 4 restrictions prevented Year ended 31-Mar-21 (incl. large format centres) (excl. large format centres) sales Auckland retail centres from trading for Actual sales Adjusted sales1 Actual sales Adjusted sales1 Oct 20 – Mar 2
Slide 16: Capital management
Capital management 4.19% > $700m of bank debt was refinanced post balance date to take advantage of favourable rates and to extend the term. Weighted average cost of debt > As a result of the refinancing, the weighted average term to debt maturity has increased from 2.9 years to 3.5 FY20: 4.35% year
Slide 17: Balance sheet
Balance sheet $3.3b > Property assets increased in value following a fair value gain of $99.8m after accounting for acquisitions and capex during the year (including an additional $2.5m Property assets gross up of lease liabilities due to increases in ground lease costs). FY20: $3.1b (+$0.2b) > The
Slide 18: FFO and AFFO per share
FFO and AFFO per share 7.20 cps > FFO per share declined 5.4%, largely driven COVID-19 related costs and an increase in the weighted average number of shares on issue, compared to the prior year. FFO > AFFO per share decreased 16.8%, also due to the -0.41 cps (-5.4%) increased weighted average numbe
Slide 19: Heading into FY22 with a clear focus
Heading into FY22 with a clear focus 1. Progress the sale process for The Plaza and Northlands. 2. Commence Drury earthworks. 3. Begin construction of the second office building at Sylvia Park. 4. Progress BTR resource consents at Sylvia Park and LynnMall. 5. Successfully launch Sylvia Park urban an
Slide 20: Appendix 1: Property update
Appendix 1: Property update 20
Slide 21: Contents
Contents Appendix Title Page 1.1 Our investment portfolio 23 1.2 Investment portfolio summary 24 1.3 Portfolio statistics 25 1.4 Net rental income 26 1.5 Capitalisation rate history 27 1.6 Geographic diversification – investment portfolio 28 1.7 Sector and tenant diversification – property portfolio
Slide 22: 1.1 Our investment portfolio
1.1 Our investment portfolio Sylvia Park Lifestyle LynnMall Vero Centre ASB North Wharf Sylvia Park The Base (50%) The Aurora Centre 44 The Terrace Mixed-use portfolio Office portfolio 22
Slide 23: 1.2 Investment portfolio summary
1.2 Investment portfolio summary 31-Mar-21 31-Mar-20 Mixed-use Office Total Mixed-use Retail Office Total Number of assets (appendix 1.3) 4 4 8 4 4 4 12 Value ($m)1 (appendix 1.3) 1,623.0 1,001.6 2,624.6 1,499.3 480.5 910.4 2,890.2 % of total portfolio by value (appendix 1.7) 49 30 79 48 16 29 93 We
Slide 24: 1.3 Portfolio statistics
1.3 Portfolio statistics Adopted value $m Capitalisation rate % NLA sqm Occupancy % WALE years As at 31-Mar-21 31-Mar-20 31-Mar-21 31-Mar-20 31-Mar-21 31-Mar-20 31-Mar-21 31-Mar-20 31-Mar-21 31-Mar-20 Sylvia Park 1,100.0 982.0 5.50 5.50 105,875 84,714 99.8 99.9 4.3 3.8 Sylvia Park Lifestyle 86.5 74.
Slide 25: 1.4 Net rental income
1.4 Net rental income Year ended 31-Mar-21 31-Mar-20 Variance > Net operating income (NOI) reduced $11.2m $m $m $m % year-on-year, due to COVID-19 impact. Sylvia Park 44.8 47.2 -2.4 -5.1 Sylvia Park Lifestyle 5.0 5.3 -0.3 -5.7 > COVID-19 impact includes rent relief, increases LynnMall 17.2 19.3 -2.1
Slide 26: 1.5 Capitalisation rate history
1.5 Capitalisation rate history 8.50% 8.00% 7.50% 7.00% 6.50% 6.00% 5.79% 5.50% 5.49% 5.00% 4.99% Global Christchurch COVID-19 Financial Crisis earthquakes 4.50% 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 Key: Mixed-use Retail Office Inve
Slide 27: 1.6 Geographic diversification – investment portfolio
1.6 Geographic diversification – investment portfolio ($2.2b) 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 ($188m) Hamilton Waikato region: Pop. 458,000 (4th largest region, 9.7%
Slide 28: 1.7 Sector and tenant diversification – property portfolio
1.7 Sector and tenant diversification – property portfolio Sector diversification Tenant diversification by portfolio value by investment portfolio gross income Mixed-use 49% Specialty stores 42% Mini-majors 13% Office 30% Banking 10% Government 8% Held for sale 11% Legal 7% Department stores and DD
Slide 29: 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 95% Auckland 88% Specialty stores 61% Large format centres 5% Hamilton 12% Mini-majo
Slide 30: 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 Premium 50% Auckland 76% Government 25% A-grade campus 26% Wellington 24% Banking 24% A-grade 18% Legal 20% B-grad
Slide 31: 1.10 Rent reviews and new leasing
1.10 Rent reviews and new leasing Rent reviews Mixed-use Office Total Rent reviews No. 346 44 390 > High percentage of structured reviews (82%) has NLA (sqm) 114,151 41,018 155,169 provided consistent uplift, averaging +2.8% on a % investment portfolio NLA 33 12 45 compound annual basis. Rental move
Slide 32: 1.11 Lease expiry profile
1.11 Lease expiry profile Mixed-use > Mixed-use tenant retention remains a focus. Lease expiry profile % of investment portfolio gross income > Sylvia Park Level 1 expansion contributed to a 50% 50% longer term mixed-use expiry profile. > Elevated holdovers and expiries within the next 40% year due
Slide 33: 1.12 Tenant diversification
1.12 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 8.3 ● Supermarkets 2 ● Ministry of Social Development 6.1 occupy ● Cinemas 2 ● Farmers 3.9 ● Hom
Slide 34: 1.13 Retail sales by property
1.13 Retail sales by property % Var. last six months FY21 > Sylvia Park and LynnMall were closed for MAT $m1 % Var. from Mar-20 vs PCP3 approximately 10 weeks of the year due to Alert Year ended 31-Mar-21 Total Like-for-like Total Like-for-like Level 3 and 4 lockdowns. Cinemas and travel Sylvia Park
Slide 35: 1.14 Retail sales by category
1.14 Retail sales by category % Var. last six months > Supermarkets were impacted by reduced trading MAT $m1 % Var. from Mar-20 FY21 vs PCP2 hours during lockdown periods. Year ended 31-Mar-21 Total Like-for-like Total Like-for-like Supermarkets 167.0 -3.8 -3.8 -5.9 -5.9 > Department stores and DDS
Slide 36: Appendix 2: Financial update
Appendix 2: Financial update 36
Slide 37: Contents
Contents Appendix Title Page 2.1 Profit after tax 39 2.2 Operating profit before income tax 40 2.3 Interest and finance charges 41 2.4 Management expense ratio (MER) 42 2.5 Rent relief 43 2.6 Funds from operations (FFO) 44 2.7 Adjusted funds from operations (AFFO) 45 2.8 Dividends 46 2.9 Balance she
Slide 38: 2.1 Profit after tax
2.1 Profit after tax 31-Mar-21 31-Mar-20 Variance > Property revenue decreased 3.6%, driven Year ended $m $m $m % by the impact of COVID-19, partially Property revenue 232.5 241.3 -8.8 -3.6 offset by higher rental income from a full Property management income 1.5 2.3 -0.8 -34.8 year of ANZ Raranga,
Slide 39: 2.2 Operating profit before income tax
2.2 Operating profit before income tax 31-Mar-21 31-Mar-20 Variance Year ended $m $m $m % Profit/(loss) before tax (Appendix 2.1) 222.4 - 170.1 +392.5 +230.7 Adjusted for: Net fair value (gain)/loss on disposal of investment properties (Appendix 2.1) - 99.8 289.9 -389.7 -134.4 (Appendix 2.1) Net fai
Slide 40: 2.3 Interest and finance charges
2.3 Interest and finance charges 31-Mar-21 31-Mar-20 Variance > Interest on bank debt reduced relative to prior Year ended $m $m $m % year following the November 2019 equity issue. Interest on bank debt -20.3 -23.6 +3.3 +14.0 Interest on bonds -23.2 -23.3 +0.1 +0.4 > Capitalised interest reduced fol
Slide 41: 2.4 Management expense ratio (MER)
2.4 Management expense ratio (MER) 31-Mar-21 31-Mar-20 > Increase in employment and administration Year ended $m $m expenses largely relates to IT and valuation fees. Employment and administration expenses (Appendix 2.1) 23.1 22.6 Less recovered through management fees -7.3 -8.6 > Management fees ar
Slide 42: 2.5 Rent relief
2.5 Rent relief 31-Mar-21 > The table to the left shows the accounting Year ended $m treatment of rent relief agreed with tenants Gross cost of abatements during the year. Abatements capitalised and amortised over remaining lease terms(Appendix 2.7) 15.2 Abatements expensed directly in profit and lo
Slide 43: 2.6 Funds from operations (FFO)
2.6 Funds from operations (FFO) 31-Mar-21 31-Mar-20 Variance > Includes positive impact of tax Year ended $m $m $m % depreciation on buildings. Profit/(loss) after tax (Appendix 2.1) 196.5 - 186.7 +383.2 +205.2 Adjusted for: > Adjusts for COVID-19 related Net fair value (gain)/loss on investment pro
Slide 44: 2.7 Adjusted funds from operations (AFFO)
2.7 Adjusted funds from operations (AFFO) Year ended 31-Mar-21 31-Mar-20 Variance > COVID-19 rent abatements, partially $m $m $m % offset by reduced maintenance CAPEX, Funds from operations (FFO)1 (appendix 2.6) 113.0 113.6 -0.6 -0.5 were the main drivers of the decline. Adjusted for Maintenance cap
Slide 45: 2.8 Dividends
2.8 Dividends 31-Mar-21 31-Mar-20 31-Mar-21 31-Mar-20 > Kiwi Property revised its dividend policy in May Year ended $m $m cps1 cps1 2020 and aims to pay out 90% to 100% of AFFO. Cash dividend 80.8 55.3 5.15 3.53 Dividends were previously based on FFO. Imputation credits 21.4 12.4 1.36 0.79 Gross div
Slide 46: 2.9 Balance sheet
2.9 Balance sheet 31-Mar-21 31-Mar-20 Movement > Investment properties value increased due to As at $m $m $m % capital expenditure, predominantly due to Investment properties (Appendix 2.10) 3,331.5 3,114.7 +216.8 +7.0 Sylvia Park, and a $99.8m fair value gain. (Appendix 2.11) Cash 16.0 21.3 -5.3 -2
Slide 47: 2.10 Investment properties movement
2.10 Investment properties movement Acquisitions Capital Expenditure 3,400 3,350 +$99.8 +$2.5 3,300 3,250 +$2.8 +$4.5 +$9.7 +$6.5 +$87.0 3,200 =$3,331.5 3,150 +$4.0 3,100 +$3,114.7 3,050 Mar-20 The Base fair value Mar-21 other LynnMall acquisitions Drury Sylvia Park gross up of change as at as at li
Slide 48: 2.11 Net finance debt movement
2.11 Net finance debt movement As at 31-Mar-21 31-Mar-20 Bank debt 573.0 534.0 Bonds 476.9 475.9 Cash on deposit (Appendix 2.9) -16.0 -21.3 Net finance debt 1,033.9 988.6 1,050 +$14.9 +$34.5 1,000 -$176.3 +$111.8 950 900 =$1,033.9 +$21.3 +$4.0 $988.6 +$35.1 850 800 750 finance charges development ta
Slide 49: 2.12 Finance debt facilities – year end
2.12 Finance debt facilities – year end 31-Mar-21 Debt maturity profile as at: $m % FY22 $125.0 125.0 9.6% 11% FY23 $32.5 $25.0 $33.0 $32.5 123.0 9.5% 37% 14% FY24 $27.5 $20.0 $100.0 $67.0 $27.5 $125.0 367.0 28.2% FY25 $31.5 $47.0 $56.0 $31.5 $125.0 291.0 22.4% 12% FY26 $52.5 $109.0 $80.0 $52.5 $100
Slide 50: 2.13 Capital management metrics
2.13 Capital management metrics Finance debt metrics as at 31-Mar-21 31-Mar-20 Weighted average term to maturity 2.9 years 3.9 years Weighted average interest rate (Incl. of bonds, active interest rate derivatives, margins and line fees) 4.19% 4.35% Covenants – gearing as at 31-Mar-21 31-Mar-20 Gear
Slide 51: 2.14 Fixed-rate debt profile
2.14 Fixed-rate debt profile Fixed-rate profile (inclusive of green bonds on issue Mar-21: $475m, Mar-20: $475m) 31-Mar-21 31-Mar-20 Percentage of drawn finance debt at fixed rates 69% 67% Weighted average interest rate of active fixed-rate debt (excl. fees and margins) 3.11% 3.31% Weighted average
Slide 52: 2.15 Refinance of debt facilities – post year end
2.15 Refinance of debt facilities – post year end 31-Mar-21 Pro-forma debt maturity profile as at: $m % FY22 $125.0 125.0 9.8% 12% FY23 $0.0 0.0 0.0% 12% 37% FY24 $100.0 $125.0 225.0 9.8% 12% FY25 $50.0 $50.0 $50.0 $33.0 $50.0 $125.0 358.0 28.1% FY26 $50.0 $50.0 $50.0 $34.0 $50.0 $100.0 334.0 26.2%
Slide 53: Glossary
Glossary 53
Slide 54: 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 55: Glossary
Glossary Like-for-like retail sales Only includes sales from those tenants who have traded for the past 24 months. Management expense ratio MER is an alternative non-GAAP measure used by Kiwi Property to assist investors in assessing the company’s underlying operating costs. MER is a (MER) measure c
Slide 56: Thank you
Kiwi Property Thank you