Kiwi Property Group Ltd. · NZX:KPG
Kiwi Property — FY2015 Earnings Presentation
45 slides from Kiwi Property's earnings presentation, May 18, 2015
Slide 1: 2015 annual result presentation
Kiwi Property 2015 annual result presentation
Slide 2: Contents
Contents 03 2015 result overview 04 Corporate structure, capital management and financial review 11 Portfolio performance 17 Development activity 26 Outlook and dividend guidance 27 Appendices This annual result presentation should be read in conjunction with the NZX announcement and online annual r
Slide 3: 2015 result overview
2015 result overview Corporate Financial Property > Year of transformation > Record operating profit of > Record property portfolio • Corporatised $89.0 million (+13.1%) value of $2.28 billion • Rebranded > Improved after tax profit at > Stable occupancy and > Delivered long-term total $115.2 millio
Slide 4: Corporate structure, capital management and financial review
Corporate structure, capital management and financial review Gavin Parker Stuart Tabuteau Chief Operating Officer Chief Financial Officer 4
Slide 5: Our year of transformation
Our year of transformation Internalisation DECEMBER • Completed separation and transition ahead of time and budget 2013 • Subsequently completed organisational efficiency review and implemented new employee remuneration framework Bank debt refinance JULY • Refinanced all $875 million of facilities 2
Slide 6: Record operating result
Record operating result Driven by active asset and capital management activities and new corporate structure Financial performance 31-Mar-15 31-Mar-14 Variance For the year ended $m $m $m % > Improved operating profit Gross rental income 205.8 208.2 -2.4 -1.2 assisted by: Property operating expendit
Slide 7: Rental income increases
Rental income increases Assisted by developments, leasing and internalisation 31-Mar-15 31-Mar-14 Variance Like-for-like var. > Retail income assisted by: For the year ended $m $m $m % $m % • continued strong Sylvia Park 36.0 34.1 + 1.9 +5.6 + 1.9 +5.6 performance at Sylvia Park • full 12-months of
Slide 8: Dividend targets met
Dividend targets met Shareholders to receive 6.50 cents per share Distributable income 31-Mar-15 31-Mar-14 Variance For the year ended $m $m $m % > Improved distributable Operating profit 89.0 78.7 +10.3 +13.1 income driven by improved Fixed rental income adjustments -4.1 -2.6 -1.5 -57.7 operating p
Slide 9: Balance sheet strength maintained
Balance sheet strength maintained Through the continued execution of our strategy Financial position 31-Mar-15 31-Mar-14 Movement As at $m $m $m % > Total assets increased due to: Investment properties (Appendix 4) 2,275.8 2,130.2 +145.6 +6.8 • Highest ever recorded value for Cash (Appendix 5) 6.2 9
Slide 10: Debt sources diversified
Debt sources diversified Following inaugural bond offer Finance debt facilities Facilities expiring As at 31 March 2015 $m % FY16 - - FY17 WBC $57.5 57.5 6.4 FY18 ANZ $52.5 BNZ $65.0 CBA $100.0 217.5 24.2 FY19 ANZ $52.5 BNZ $65.0 CBA $65.0 WBC $100.0 282.5 31.3 FY20 ANZ $52.5 BNZ $65.0 CBA $100.0 21
Slide 11: Portfolio performance
Portfolio performance Chris Gudgeon Chief Executive 11
Slide 12: Active portfolio management
Active portfolio management Delivered improvement in key portfolio metrics Core portfolio metrics1 31-Mar-15 31-Mar-14 As at Retail Office Total Total Number of assets 7 5 12 12 Value (Appendix 9) $1,531.8m $673.0m $2,204.8m $2,064.8m ▲ Proportion of total portfolio by value (Appendix 10) 67% 30% 97
Slide 13: Record portfolio value
Record portfolio value Of $2.3 billion Retail Office Other Total Value $1,531.8m $673.0m $71.0m $2,275.8m Fair value change +$58.0m -$4.5m +$4.8m +$58.3m Capitalisation rate 6.97% 6.80% n/a 6.92% Highlights • Continued strong • Strong performance • Strong performance • Portfolio has benefitted perfo
Slide 14: Active year for leasing
Active year for leasing Delivered ongoing rental uplift and extended lease terms NLA Uplift over prior passing rent % leases Static portfolio leasing No. of % of total WALT Fixed/CPI By portfolio tenancies sqm portfolio $000 % CAGR years reviews Rent reviews 597 112,167 31 +2,852 +3.8 3.8% - 91 New
Slide 15: Expiries and WALT
Expiries and WALT Leasing activity extends office WALT to longest in over 10 years Weighted average lease term (years) Lease expiry profile ● Retail portfolio By gross income % portfolio gross income ● Office portfolio ● Total portfolio As at 31-Mar-15 31-Mar-14 Vacant 6% or 4% Retail 3.4 3.8 holdov
Slide 16: Retail sales lift 4% over prior year
Retail sales lift 4% over prior year Driven by resurgence of discretionary spending MAT $m % variance from prior Specialty sales Centre Mar-15 Mar-14 Sep-14 $/sqm GOC > Positive growth in sales on both a Sylvia Park 422.1 +6.0 +4.0 8,700 total (+4.3%) and unaffected Sylvia Park Lifestyle Tenants do
Slide 17: Development activity
—_— c i) al Oe Oo] 'S Ale aed e° gr. i.
Slide 18: LynnMall development
LynnMall The development incorporates: - a new 8-screen Reading Cinemas multiplex on a 15-year lease development - ‘The Brickworks’ a new dining lane containing restaurants /cafés - an expanded retail mix 18
Slide 19: LynnMall leasing status and financial metrics
Leasing status 86% By area Joining Reading’s eight-screen cinema complex are a gastro bar and a café, together with food offers specialising in Japanese, 81% By income Vietnamese, Asian fusion, and wood fired BBQ cuisine. Tenants taking new leases in the centre as part of the existing Leasing statis
Slide 20: 56 The Terrace
56 The Terrace Programme status > Preliminary strip out, demolition and enabling Cost status > Total cost increased from refurbishment works commenced in Sep-14 > Construction works commenced Nov-14 $67.3 million to $72.0 million1 due to For further details on the > Tower floor refurbishment is prog
Slide 21: The Majestic Centre
The Majestic Centre Seismic strengthening Project status > Two critical elements completed – foundation Level 22 works and transfer beam wall > On-floor and shear core works for 13 of 23 floors bracing ► now 100% structurally complete > All remaining tower strengthening works scheduled for completio
Slide 22: 44 The Terrace
44 The Terrace Proposed new 12-year Crown lease agreements and refurbishment Proposed leases > 12-year lease agreements to be concluded in Jun-15 • Area: 8,059 sqm of office space (84% of the office area) • Tenants: Sitting tenants Tertiary Education Commission, Commerce Commission and Energy Effici
Slide 23: Sylvia Park
Sylvia Sylvia Park Park Standout performer since opening Sylvia Park is already New Zealand’s largest regional shopping centre, yet offers significant potential and the opportunity to create a world-class retail offer 23
Slide 24: Sylvia Park
Sylvia Park Standout performer since opening Annual retail sales ($m) 422 ▲Since 2009 Sylvia Park has built on its market +17 % dominance, with over 12 million shoppers per annum contributing to 361 increasing annual sales, strong rental growth and a rising asset value FY09 FY10 FY11 FY12 FY13 FY14
Slide 25: Sylvia Park
Sylvia Park Bringing to life our town centre vision > Significant opportunities to capitalise on: • the centre’s ‘Metropolitan Centre’ status under Auckland City’s new Unitary Plan • its location adjacent to major road networks • rail and bus transport links • waiting list of prospective tenants > T
Slide 26: Outlook and dividend guidance
Outlook and dividend guidance Focus on strategy Strategy pillars > Progress our Auckland-focused investment strategy > Maintaining a strong financial position • Launch our new dining and entertainment precinct at LynnMall > Intensively managing our assets to drive investment • Progress the next stag
Slide 27: Appendices
Appendices Appendix Page Financial Net interest expense 1 28 review Management expense ratio (MER) 2 29 Operating profit movement (FY14 to FY15) 3 30 Investment properties movement (FY14 to FY15) 4 31 Net finance debt movement (FY14 to FY15) 5 32 Hedging profile 6 33 Swap restructure 7 34 Property P
Slide 28: Net interest expense
Appendix 1 Net interest expense 31-Mar-15 31-Mar-14 Variance For the year ended $m $m $m % Interest income 0.4 0.4 - - Interest on bank debt -42.0 -50.4 +8.4 +16.7 Interest on bonds -5.4 - -5.4 -100.0 Interest on MCNs -7.8 -10.7 +2.9 +27.1 Net interest expense incurred -54.8 -60.7 +5.9 +9.7 Interest
Slide 29: Management expense ratio (MER)
Appendix 2 Management expense ratio (MER) 31-Mar-15 31-Mar-14 For the year ended $m $m Management and administration expenses 15.1 14.3 Less: property management fee recoveries -5.9 -1.7 Net expenses 9.2 12.6 Average property assets 2,203.0 2,103.3 Management expense ratio 0.42 bps 0.60 bps > Intern
Slide 30: Operating profit movement (FY14 to FY15)
Appendix 3 Operating profit movement (FY14 to FY15 $m) 110 100 +$8.1 90 +$4.1 +$5.6 +$1.5 +$0.3 80 +$3.1 +$2.8 -$8.8 +$1.2 70 -$7.6 60 50 -$0.5 million from NOI change =$89.0 40 $78.7 $6.6 million from NRI change 30 20 10 0 Mar-14 NOI: asset NOI: asset NOI: NOI: balance Property Fixed rental Other N
Slide 31: Investment properties movement (FY14 to FY15)
Appendix 4 Investment properties movement (FY14 to FY15 $m) 2,400 +$58.3 2,300 +$22.3 -$6.9 +$22.0 +$9.5 +$32.3 -$56.6 +$64.7 2,200 2,100 =$2,275.8 2,000 +$2,130.2 1,900 1,800 As at Mar-14 Acquisition of Development Development Development Other capital Fair value Other Disposal of 2nd As at Mar-15
Slide 32: Net finance debt movement (FY14 to FY15)
Appendix 5 Net finance debt movement (FY14 to FY15 $m) 1,100 +$80.6 1,000 +$64.7 900 +$14.6 +$48.3 800 -$159.8 +$8.7 -$55.9 700 -$59.3 +$40.9 $777.3 =$760.2 600 500 Net finance Net interest Management Acquisition of Investment Net rental Disposal of 205 Insurance Dividends Tax and other Net finance
Slide 33: Hedging profile (prior to swap restructure)
Appendix 6 Hedging profile (prior to swap restructure) Hedging profile (inclusive of $125m bond issuance) 31-Mar-151 31-Mar-14 Percentage of drawn finance debt hedged (fixed rate) 81% 74% Weighted average interest rate of active swaps (excl. fees and margin) 4.68% 4.70% Weighted average term to matu
Slide 34: Swap restructure (post year end)
Appendix 7 Swap restructure (post year end) > Partial restructure of the interest rate hedging portfolio post year end, resulting in: • lengthened duration • reduced weighted average interest rate Restructured1 31-Mar-152 Percentage of drawn debt hedged 61% 81% Weighted average term to maturity of p
Slide 35: Portfolio statistics
Appendix 8 Portfolio statistics Portfolio / property Ownership % NLA sqm Occupancy % WALT years As at Mar-15 Mar-14 Mar-15 Mar-14 Mar-15 Mar-14 Mar-15 Mar-14 Sylvia Park, Auckland 100 100 72,165 71,185 99.6 99.6 3.1 3.6 Sylvia Park (Lifestyle), Auckland 100 - 16,182 - 100.0 - 4.9 - LynnMall, Aucklan
Slide 36: Portfolio values and cap rates
Appendix 9 Portfolio values and cap rates Portfolio / property Capitalisation rates % Adopted value $m Fair value mvmt As at Mar-15 Mar-14 Var. bps Mar-15 Mar-14 $m % Sylvia Park 6.25 6.50 25 601.0 564.0 +31.0 +5.4 Sylvia Park (Lifestyle)1 7.00 - n/a 64.4 - -0.3 -0.5 LynnMall2 7.00 7.13 12 225.5 206
Slide 37: Diversification
Appendix 10 Diversification Sector Geographic diversification diversification (by portfolio value) (by portfolio value) 67% 30 % 3 % 64 % Auckland % 5 Hamilton Retail Office Other 9 % Palmerston North 12 % Wellington 10 % Christchurch Kiwi Property > 2015 annual result presentation > 18 May 2015 3
Slide 38: Our tenants
Appendix 11 Our tenants 31% ● ASB Bank 7.5% Total New Zealand chains Australian and international chains 24% Top ● Farmers 3.9% portfolio Department stores 7% 20 ● Progressive Enterprises ● Vero Insurance 3.3% 2.4% (% of core Supermarkets 5% (% of core portfolio gross portfolio gross ● Bell Gully 2.
Slide 39: LynnMall development imagery
Appendix 12 LynnMall development Northern entrance Central Plaza Internal looking east to Brickworks South view 39
Slide 40: The Terrace project metrics
Appendix 13 56 The Terrace project metrics Key project metrics Development cost $72.0m Estimated value on completion $120.9m Estimated yield on completion ~7.5% Crown net lettable area 24,200 sqm Crown initial lease term 18 years Crown lease commencement August 2016 Fixed 1.75% pa (3-yearly rests) R
Slide 41: Retail market
Appendix 14 Retail market Portfolio weighting by value Outlook Key points ▲ Sales growth outlook is > Consumer are spending again - Boosted by improving household incomes, falling fuel prices, low positive mortgage rates, buoyant housing market and strong population growth 67% through net migration
Slide 42: Auckland CBD office market
Appendix 15 Auckland CBD office market Portfolio weighting Key points by value Outlook (Premium and A-grade accommodation) > Stable supply in Premium-grade until Downtown Tower completes in 2020 22% ► Supply > Increase in A-grade stock from 2015 with Victoria Street and Wynyard Quarter > Solid tenan
Slide 43: Wellington CBD office market
Appendix 16 Wellington CBD office market Portfolio weighting Key points by value Outlook (A-grade and B-grade accommodation) 8% > Minimal additions to A-grade supply > B-grade environment is complex with ► Supply numerous seismic upgrades underway and a number of planned projects dependent on pre-co
Slide 44: Glossary of terms
Appendix 17 Glossary of terms Comparable sales Comparable sales provides a more normalised picture of sales trends by excluding centres which have undergone redevelopment in either year of comparison, in this instance Centre Place. Department stores Includes both full line and discount department st
Slide 45: Disclaimer
Disclaimer Kiwi Property Group Limited (‘KPG’) 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 as invest