Slide 1: Exceptional Annual Result Presentation 2016
EX % CEPTIONAL | | | ANNUAL RESULT | | | PRESENTATION 2078 7 ey Kiwi ® Property
Slide 2: Contents
Contents Strategy overview 03 How we delivered in FY16 06 Our onward journey 13 Outlook and dividend 18 guidance Appendices 19 1. Financial review 21 2. Property portfolio review 33 3. Development update 46 4. Acquisition of The Base 55 5. Office market update 60 6. Other information 63 This annual
Slide 3: Our vision, objective, goals and investment strategy
Kiwi Property Our vision, objective, goals and investment strategy 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 throu
Slide 4: Our vision, objective, goals and investment strategy (continued)
Kiwi Property Our vision, objective, goals and investment strategy (continued) Our investment strategy > To invest in a diversified portfolio of retail and office assets that are expected to outperform by consistently attracting high levels of tenant demand Diversification > Reduces the volatility o
Slide 5: Our investment strategy (continued)
Kiwi Property Our vision, objective, goals and investment strategy (continued) Our investment strategy (continued) Our core portfolio comprises: Retail portfolio Office portfolio • Auckland • Auckland Dominant regional shopping centres and Prime-grade office with desired attributes large format reta
Slide 6: We’re delivering on our retail strategy
We’re delivering on our retail strategy Acquired $39m Conditional Announced the Westgate entertainment contract to acquisition of a Lifestyle and dining sell Centre 50% interest in for precinct opened Place – South The Base $82.5m at LynnMall secured for $192.5m POST SEP OCT NOV DEC 2015 2015 2015 2
Slide 7: We’re delivering on our office strategy
We’re delivering on our office strategy Wellington Auckland > Creating our Government office > Maintaining our office buildings as precinct best-in-class • 35,000 sqm of office space in • Invested $1.7 million in upgrading adjacent buildings the Vero Centre lobby and outdoor • 44 The Terrace – three
Slide 8: A record year: Delivered our highest ever profit
A record year Delivered our highest ever profit Profit after tax Funds from operations Key contributors $250.8m $91.1m Improved rental performance +$135.6m +117.7% +$6.3m +7.4% Interest expense savings Positive asset revaluations Increased cash dividend Robust retail sales Cash dividend grow
Slide 9: A record year: Highest portfolio value and lowest cost of debt
A record year Highest portfolio value and lowest cost of debt Strong balance sheet maintained Net asset backing Property assets Gearing per share $2.67b 30.3% $1.34 +$394m +17.3% -320 bps +$0.13 cps Lowest cost of debt in over 10 years Weighted average Weighted average term to maturity cost of debt
Slide 10: Strong portfolio metrics
Strong portfolio metrics Delivered by active asset management > Record portfolio value > Firmer cap rates > Comparable rental income growth > Improved key portfolio metrics > Continued sustainability leadership position For more information, refer to the following appendices: • 1.1 Rental income • 2
Slide 11: Robust retail sales growth
Robust retail sales growth Evolving the retail mix reaping rewards > Total retail sales of $1.36 billion • +5.8% over prior year > Uplift in discretionary spending categories including • Cinemas +7.4% • Commercial services +9.6% • Music video and games +14.0% • Food +4.2% • Personal services +5.0% •
Slide 12: Development activity
Development activity $225 million of developments concluding Completed > LynnMall dining and cinema precinct Concluding in FY17 > Westgate Lifestyle > New stores for H&M and Zara at Sylvia Park > Transformational projects in Wellington • The Majestic Centre • The Aurora Centre • 44 The Terrace For m
Slide 13: Our onward journey
Our onward journey Continue to deliver on strategy Retail > Deliver development projects > Progress development plans at Sylvia Park > Settle disposal of Centre Place – South > Settle the purchase of The Base and take on property management Office > Deliver development projects > Focus on forthcomin
Slide 14: Sylvia Park: Creating a world-class retail destination
Sylvia Park Creating a world-class retail destination Galleria/Café Court junction. Concept only. Subject to change. First stage Future expansion plans For more information refer to Appendices 3.1 to 3.3 underway • 2nd level • One or more department stores • Potential cost: $180m Stores for • Up to
Slide 15: Sylvia Park: Bringing our town centre vision to life
Sylvia Park Bringing our town centre vision to life Concept only. Subject to change. For more information refer to Appendices 3.1 to 3.3 • Office building created in the airspace above the dining lane • Potential cost: $80m • Ground floor restaurants and nine-levels of office (11,200 sqm) • Potentia
Slide 16: Why Sylvia Park?
Sylvia Park Why Sylvia Park? Annual retail sales ($m) Location • Sits at the junction of three 475 major highways $455m 450 +26 % =3.4% Scale • 12.6 million annual visitors SINCE AVERAGE ANNUAL 2009 • Over $455m annual retail sales 425 GROWTH Extensive • Main trade area: 764,470 400 trade area
Slide 17: The Base: Acquired a 50% interest
The Base Acquired a 50% interest (post-period) Acquiring Management Initial yield1 IRR1 Value add opportunities For more information 50% interest for Kiwi Property 6.4% 8.5% • Develop the 6.7 hectares refer to Appendix 4 $192.5m, to manage of vacant land settling the entire • Apply our retail expert
Slide 18: Outlook and dividend guidance
Outlook and dividend guidance Further uplift in cash dividend Outlook Cash dividend guidance for FY17 > New Zealand economy Increased to continues to grow positively 6.75 > Supportive investment property cents per share1 fundamentals > Kiwi Property has: Growth in cash dividend (cents per share) 6.9
Slide 19: Appendices
Appendices 19
Slide 20: Index
Section Page Section Page Financial review 1 21 Development update 3 46 Sylvia Park – Overview of Rental income 1.1 22 3.1 47 expansion plans (ground floor) Sylvia Park – Overview of Profit after tax 1.2 23 3.2 48 expansion plans (upper level) Interest and finance charges 1.3 24 Sylvia Park – H&M an
Slide 21: Appendix 1. Financial review
Vero Centre, Auckland Appendix 1. 21 FINANCIAL REVIEW
Slide 22: Rental income
Rental income 1.1 Positive contributions from all properties not under development 31-Mar-16 31-Mar-15 Variance Like-for-like var. For the year ended $m $m $m % $m % Total income Sylvia Park 36.4 36.0 ▲ +0.4 +1.0 +1.1 +2.9 > Positive Sylvia Park Lifestyle 4.5 1.2 ▲ +3.3 +286.2 contributions LynnMall
Slide 23: Profit after tax
Profit after tax 1.2 Driven by strong operating performance and rise in value of property portfolio 31-Mar-16 31-Mar-15 Variance For the year ended $m $m $m % Record result Property revenue [Appendix 1.1] 208.2 205.9 ▲ +2.3 +1.1 > Assisted by: Property management income 0.4 0.4 ■ - - • A significant
Slide 24: Interest and finance charges
Interest and finance charges 1.3 Significant reduction driven by repayment of debt and a lower cost of debt 31-Mar-16 31-Mar-15 Variance For the year ended $m $m $m % Interest on bank debt Interest on bank debt -31.1 -42.0 ▼ +10.9 +26.0 > Lower due to: Interest on bonds -8.0 -5.4 ▲ -2.6 -48.1 • Lowe
Slide 25: Management expense ratio (MER)
Management expense ratio (MER) 1.4 Competitive MER maintained 31-Mar-16 31-Mar-15 Variance For the year ended $m $m $m Expense growth Employment and administration expenses 16.2 15.1 ▲ +1.1 > Driven by the underlying Less: property management fee recoveries -6.0 -5.9 ▲ -0.1 number of assets owned, a
Slide 26: Funds from operations
Funds from operations 1.5 Strong underlying operating result 31-Mar-16 31-Mar-15 Variance For the year ended $m $m $m % > Record result Profit after tax [Appendix 1.2] 250.8 115.2 ▲ +135.6 +117.7 achieved, despite the tax Adjusted for: expense Net fair value gain on investment properties -175.9 -58.
Slide 27: Dividends
Dividends 1.6 Shareholders to receive a 6.60 cents per share cash dividend 31-Mar-16 31-Mar-15 31-Mar-16 31-Mar-15 For the year ended $m $m cps1 cps1 Funds from operations [Appendix 1.5] 91.1 84.8 7.16 7.87 Amount retained -7.2 -14.5 -0.56 -1.37 Cash dividend 83.9 70.3 ▲ 6.60 6.50 ▲ Imputation credi
Slide 28: Balance sheet
Balance sheet 1.7 Balance sheet strength maintained 31-Mar-16 31-Mar-15 Movement As at $m $m $m % Other assets Investment properties [Appendix 1.8] 2,669.9 2,275.8 ▲ +394.1 +17.3 > Includes litigation settlement Cash [Appendix 1.9] 6.2 6.2 ■ - - receivable Deferred tax asset 6.9 5.1 ▲ +1.8 +35.3 Oth
Slide 29: Investment properties movement
Investment properties ($m, movement FY15 to FY16) 1.8 Increase driven by value-add activities and revaluation gains 2,700 +$24.0 +$175.9 2,600 2,500 +$42.5 +$4.4 +$29.5 -$6.3 +$28.4 2,400 +$15.4 +$13.3 +$67.0 =$2,669.9 2,300 2,200 +$2,275.8 2,100 Acquisitions Development costs Other 2,000 Other Sylv
Slide 30: Net finance debt movement
Net finance debt ($m, movement FY15 to FY16) 1.9 Active year for investment and financing activities 900 31-Mar-15 31-Mar-16 +$11.1 Bank debt 643.0 690.5 +$137.6 850 Bonds 123.4 123.7 Cash on deposit -6.2 -6.2 +$14.9 800 Net finance debt 760.2 808.0 +$64.1 750 +$77.9 -$148.1 700 +$15.6 650 =$808.0 +
Slide 31: Finance debt facilities
Finance debt facilities 1.10 Active treasury management delivers reduction in cost Facilities expiring As at 31 March 2016 $m % > All bank debt facilities FY17 - - extended in Nov-15 • Reduced fees and FY18 - - margins by around 20 basis points FY19 ANZ $52.5 BNZ $73.0 CBA $80.0 WBC $52.5 258.0 28.7
Slide 32: Fixed-rate debt profile
Fixed-rate debt profile 1.11 Disciplined treasury management Fixed-rate profile (inclusive of $125m bond issuance) 31-Mar-16 31-Mar-15 Percentage of drawn finance debt at fixed rates 68% 81% Weighted average interest rate of active fixed-rate debt (excl. fees and margin) 3.96% 4.68% Weighted average
Slide 33: Appendix 2. Property portfolio review
Sylvia Park, Auckland Appendix 2. 33 PROPERTY PORTFOLIO REVIEW
Slide 34: Property portfolio summary
Property portfolio summary 2.1 Key metrics Core portfolio metrics1 31-Mar-16 31-Mar-15 As at Retail Office Total Total Number of assets2 9 5 14 ▲ 12 Value ($000)3 [Appendix 2.2] $1,788.8 $819.4 $2,608.2 ▲ $2,204.8 Proportion of total portfolio by value [Appendix 2.7] 67% 31% 98% ▲ 97% Weighted avera
Slide 35: Property values and cap rates
Property values and cap rates 2.2 Highest value ever and firmest portfolio cap rate in 10 years Capitalisation rates % Adopted value $m Fair value mvmt 1. The capitalisation rate at Portfolio / property 31 March 2016 is the ‘on As at 31-Mar-16 31-Mar-15 Var. bps 31-Mar-16 31-Mar-15 $m % completion’
Slide 36: Capitalisation rate history
Capitalisation rate history 2.3 Firming trend continues 9.0% 8.48% 8.5% 7.99% 8.0% 7.5% 7.74% 7.18% 7.0% 6.91% 6.69% 6.61% 6.70% 6.5% 6.44% 6.0% Mar-07 Mar-08 Mar-09 Mar-10 Mar-11 Mar-12 Mar-13 Mar-14 Mar-15 Mar-16 ● Retail portfolio ● Office portfolio ● Total portfolio Kiwi Property > 2016 annual r
Slide 37: New leasing and rent reviews
New leasing and rent reviews 2.4 Active leasing delivered ongoing rental uplift and extended lease terms NLA Uplift over prior passing rent % of all leases subject to Static portfolio leasing No. of % of total WALT fixed/CPI rent By portfolio tenancies sqm portfolio $000 % CAGR years reviews Rent re
Slide 38: Portfolio statistics
Portfolio statistics 2.5 Active asset management has assisted in maintaining sound portfolio metrics Portfolio / property NLA sqm Occupancy %1 WALT years Vacancy As at 31-Mar-16 31-Mar-15 31-Mar-16 31-Mar-15 31-Mar-16 31-Mar-15 > Centre Place – North: Sylvia Park2 68,783 72,165 100.0 99.6 3.6 3.1 la
Slide 39: Lease expiry profile
Lease expiry profile 2.6 Active leasing and higher tenant retention rates extend WALT Weighted average lease term (years) Lease expiry profile ● Retail portfolio By gross income By gross income ● Office portfolio ● Total portfolio As at 31-Mar-16 31-Mar-15 Vacant 4% Retail 3.9 3.4 or 0% Office 8.2 7
Slide 40: Sector and geographic diversification
Sector and geographic diversification 2.7 Our diversification Auckland ($1.7b) Auckland region: Pop. 1,416,000 (Largest region, 33.4% of NZ) 2 x shopping centres 2 x large format retail centre 2 x office buildings 1 property managed on behalf of third party 64% Hamilton ($112m) 4% Waikato region: Po
Slide 41: Strategy delivery – Mar-10 vs. Mar-16 statistics
Strategy delivery – Mar-10 vs. Mar-16 statistics 2.8 How we have delivered on our strategy > Our investment strategy is outlined on pages 3 to 5 > This slide demonstrates how delivery of our strategy has moved our portfolio statistics over the past five years In the retail portfolio 31-Mar-16 Strate
Slide 42: Tenant diversification
Tenant diversification 2.9 Our tenants Total portfolio Top 20 % of core portfolio gross income % of core portfolio gross income New Zealand chains 30 ● ASB Bank 7.3 Collectively, our top 1 20 tenants: Australian and international chains 25 ● Farmers 3.8 Department stores 7 ● Progressive Enterprises
Slide 43: Retail sales
Retail sales 2.10 Strong performance driven by discretionary spending MAT $m Specialty sales > Strong sales growth at all centres except Northlands % var. from • Northlands is impacted by an increase in floorspace Centre 31-Mar-16 31-Mar-15 $/sqm GOC % in the post-earthquake re-build environment, pa
Slide 44: Sustainability achievements
Sustainability achievements 2.11 How we delivered in 2016 > Only New Zealand company and one > The output from the solar > Continued > 5,000 new LED of only 113 globally, included on the array panels at Sylvia support of the lights installed in 2015 Climate A-List Park is ahead of forecast NZ Green
Slide 45: Digital and signage
Digital and signage 2.12 We’re enhancing our customer experience > We’re enhancing our customer experiences through: • Upgraded and mobile optimised corporate and retail websites • Implementing new carpark management systems • New state-of-the-art digital media solutions • Installing digital in-cent
Slide 46: Appendix 3. Development update
DEVELOPMENT UPDATE Appendix 3. Westgate Lifestyle, Auckland (as at 14 April 2016) 46
Slide 47: Sylvia Park: Overview of expansion plans (ground floor)
Sylvia Park 3.1 Overview of expansion plans (ground floor) Ground level Concept only. Subject to change. Any scheme will be market led, appropriately de-risked and subject to commercial viability. 1 1 2 3 1 International retailers 2 Expand and refresh 3 Office building and town square Potential cost
Slide 48: Sylvia Park: Overview of expansion plans (upper level)
Sylvia Park 3.2 Overview of expansion plans (upper level) Concept only. Subject to change. Any scheme will be market led, appropriately de-risked and subject to commercial viability. 5 4 4 South fashion galleria Potential cost: 5 Carparking Up to $180 million • Up to 20,000 sqm of additional retail
Slide 49: Sylvia Park: H&M and Zara developments
Sylvia Park 3.3 H&M and Zara developments Programme status > Works on each tenancy are progressing on schedule > Mall ambience upgrade design works in progress Financial status > The forecast cost of $19.2 million1 remains on track • $11.5 million for Zara • $7.7 million for H&M and adjacent mall up
Slide 50: Westgate Lifestyle
Westgate Lifestyle 3.4 Opening progressively from March 2016 to mid-2016 Centre details (On completion) Leasing to date (On completion) Financial metrics > At 31 March 2016, three tenancies were open NLA 25,800 sqm Occupancy (by area) 90% Cost (Acquired Sep-15) $82.5m1 and trading. A further Tenanci
Slide 51: LynnMall
LynnMall 3.5 Development: Opened on time, on budget and fully leased Development complete Financial metrics achieved > An eight-screen Reading Cinemas multiplex on a Pre-development value $206m 15-year lease Development cost $39m > ‘The Brickworks’ dining lane containing restaurants /cafés Total inv
Slide 52: The Majestic Centre
The Majestic Centre 3.6 Seismic strengthening: Further milestones achieved Project status > Further project milestones reached: • on-floor strengthening works complete • all key tower seismic works complete • all tenants relocated to their final tenancies > Remaining works include the tower and podi
Slide 53: The Aurora Centre
The Aurora Centre 3.7 24,000 sqm government office project on programme and budget Programme status > Base building office works completed and handed over for tenant fit-out > Residual works on the lobby and carpark on programme to complete in July 2016 Financial status > The forecast cost of $72.0
Slide 54: 44 The Terrace
44 The Terrace 3.8 On programme to complete late 2016 Project status > Works commenced June 2015 > Seven of the 10 floors leased to Crown tenants have now been handed back to tenants strengthened and refurbished > Refurbishment work progressing ahead of programme and due for completion September 201
Slide 55: Appendix 4. Acquisition of The Base
Appendix 4. 55 ACQUISITION OF THE BASE
Slide 56: Transaction overview
Transaction overview 4.1 Binding agreement to acquire a 50% interest in The Base Interest to be acquired Acquisition price Pre-paid ground rent 50% $192.5m 120 years Kiwi Property to Settlement due manage the 31 May 2016 entire centre Initial yield1 Initial yield2 IRR2 Funded through 6.1 % 6.4 % 8.5
Slide 57: Investment rationale
Investment rationale 4.2 Aligns with strategy > Aligns with our strategy of owning dominant regional shopping centres • The Base - is New Zealand’s largest single-site retail centre at 85,256 sqm - is located within New Zealand’s ‘golden triangle’ of economic and residential growth (Auckland, Hamilt
Slide 58: Property overview
Property overview 4.3 Te Awa (Regional shopping mall) Large format retail NLA 31,380 sqm NLA 53,876 sqm Completed 2011 Completed 2005 – 2014 No. tenants 103 No. tenants 89 Majors Farmers Majors The Warehouse Hoyts Cinema Mitre 10 Mega Mini-majors Noel Leeming, Briscoes, Rebel Sport, Postie Plus, Num
Slide 59: Investment summary
Investment summary 4.4 Valuation summary for 50% interest1,2 Property statistics Valuer JLL Occupancy 95.8% Value $192.5 million WALT (by income) 3.18 years Capitalisation rate 6.63% Moving annual turnover3 $263 million Net passing income $11.7 million Te Awa specialty GOC3 14.6% Net passing income
Slide 60: Appendix 5. Office markets update
Appendix 5. 60 OFFICE MARKETS UPDATE
Slide 61: Auckland CBD office market
Auckland CBD office market 5.1 Market analysis Auckland office weighting (by total portfolio value) Outlook Key points (Premium and A-grade accommodation) ► Supply > No major changes to Premium-grade until 2019 when two buildings are assumed to come on stream, although market expectation is that onl
Slide 62: Wellington CBD office market
Wellington CBD office market 5.2 Market analysis Wellington office weighting (by total portfolio value) Outlook Key points (A-grade and B-grade accommodation) ▲ Supply > Stable supply in the A-grade market in the short term, but a large amount of space will re-enter the market in 2016/17 (largely pr
Slide 63: Appendix 6. Other information
Sylvia Park, Auckland Appendix 6. 63 OTHER INFORMATION
Slide 64: Glossary of terms
Glossary of terms 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 and to det
Slide 65: 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