Kiwi Property Group Ltd. · NZX:KPG
Kiwi Property — H1 FY2019 Earnings Presentation
67 slides from Kiwi Property's earnings presentation, Nov 19, 2018
Slide 1: Ayedosd Imp,
Ayedosd Imp,
Slide 2: interim result
interim result FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2018 kiwi 3-17 our strategy and how we're delivering 3-8 our interim result 9-15 priorities, outlook and dividend guidance 16-17 property 18-46 appendix 1.00 property portfolio review 20-33 appendix 2.00 development update 34-43 appendix 3.00 mark
Slide 3: our vision and objective
our vision and objective remains consistent our vision to deliver New Zealand's best retail and workplace experiences our objective to provide investors with a reliable investment in New Zealand property through the ownership and active management of a diversified, high- quality portfolio XS Kiwi Pr
Slide 4: our investment strategy positions us for growth
our investment strategy positions us for growth our investment strategy we invest in a diversified portfolio of retail and office assets that are expected to outperform by consistently attracting high levels of tenant demand our core portfolio Auckland we have a strong bias to Auckland given its sup
Slide 5: our portfolio rebalancing programme almost complete
our portfolio rebalancing programme almost complete sector diversification geographic diversification Sep-18 (outside ring) versus Sep-18 (outside ring) versus Sep-10 (inside ring) Sep-10 (inside ring) 9/ 28% 4 key: retail office non-core key: Auckland preferred non-core non-Auckland property asset
Slide 6: our mixed-use opportunities
our mixed-use opportunities Sylvia Park, Auckland The Base, Hamilton = = 2019 interim result presentation | 19 November 2018 | 6
Slide 7: realising our mixed-use opportunities at Sylvia Park
realising our mixed-use opportunities at Sylvia Park No.1 Sylvia Park COMPLETE - 10-level, $80 million office tower now complete IAG in occupation over 2.5 floors (on a 12-year lease) ANZ Bank have leased 5.5 floors. Lease commences between Jun-19 and Dec-19 (on a 9-year lease) - on target to delive
Slide 8: development update
development update LANGDONS QUARTER . Langdons Quarter, Northlands NEARING COMPLETION - on programme for new tenancies to open for trading from late Nov-18 - total project cost now $21 million (including $8 million seismic capex) - on-target to deliver initial yield on non-seismic spend of 6.0% G 2.
Slide 9: sound financial result
sound financial result $48.3m profit after tax +$0.4m +0.9% $52.3m Oo -$1.9m -3.4% $89.9m net rental income -$5.2m -5.4% as expected, the current period earnings reflect - the sale of non-core assets, North City (Jul-18) and The Majestic Centre (Dec-17) - vacancy and lease up periods at Vero Centre
Slide 10: FFO and AFFO
FFO and AFFO 3.66 cps 3.11 cps AFFO -0.16 cps -4.2% +0.07 cps +2.3% 3-475 cps FY19 interim cash dividend +0.05 cps +1.5% 95” 112” FFO payout ratio AFFO payout ratio an interim dividend of 3.475 cents per share will be paid - up 1.5% on the prior comparable period - in-line with guidance 4.04 FFO 4.0
Slide 11: our balance sheet remains strong
our balance sheet remains strong t base h duced $3.0Ob our asset base has reduce due to the sale of North City, property assets offset by value-added expenditure, predominantly at -$12.9m -0.4% Sylvia Park and Northlands 29 4% period-end gearing remains e within our target band gearing (25%-35%) FY1
Slide 12: we continue to be active in our capital management programme
we continue to be active in our capital management programme 4.97” weighted average cost of debt FY18: 4.99% 3.0 years weighted average term to maturity of debt FY18: 3.6 years credit ratings B B B* B B B (stable) post the reporting period, we issued our fourth bond series (KPGO4O) - issue: $100 mil
Slide 13: our property portfolio continues to perform strongly
our property portfolio continues to perform strongly 3 3” portfolio strength has been e maintained through intensive asset rental growth from new management leasing and rent reviews FY18: +3.5% - rental growth was provided through rental reviews +3.2 and new leasing 99 3% activity +6.8% UC - occupan
Slide 14: positive retail sales trend
positive retail sales trend $1.7b total sales ° re) +2.4% +2.7% total sales like-for-like growth sales growth $11,000 specialty sales ($/sqm) Sep-17: $10,200 11.8% specialty GOC Sep-17: 12.8% total sales of $1.68 billion have been recorded across our retail centres, with strong growth in experientia
Slide 15: we continue to achieve recognition in our sustainability programme
we continue to achieve recognition in our sustainability programme WcppP FTSE4Good 10,000 plastic bottles recycled to A- rating in Carbon 4.0 (out of 5.0) ESG Be. Accessible rated encourage people to follow our lead Disclosure Project! FTSE4Good Rating? - all our shopping in recycling - retained A-
Slide 16: we have a clear focus
we have aclear focus key priorities for the remainder of 2019 - continue to advance our mixed-use vision at Sylvia Park * prepare for ANZ’s occupation and lease commencement at No.1 Sylvia Park * open the central carpark in November 2018 * advance construction of the galleria and south carpark devel
Slide 17: outlook and dividend guidance
outlook and dividend guidance growth 6.95 i - high-quality portfolio cents per share’ - strong balance sheet - pipeline of development opportunities cash dividend (cents per share) - exceptional team of committed people 7.00 6.90 6.80 6.85 6.70 6.75 6.60 6.60 6.50 6.50 6.40 6.40 6.30 4.04 FFO 6.20 4
Slide 18: property
property
Slide 19: property appendices: index
property appendices: index property portfolio review development update G market update 1.01 our portfolio 20 2.01 development pipeline 34 3.01 New Zealand economic overview 44 1.02 property portfolio summary 21 2.02 Sylvia Park ground floor 35 3.02 Auckland CBD office market 45 1.03 portfolio stati
Slide 20: our portfolio
our portfolio > Dppbynnmall 4 ict DINING DIST® Vero.Centre Se Kiwi teri A Property 2019 interim result presentation | 19 November 2018 | 20
Slide 21: property portfolio summary
property portfolio summary G 1.02 30-Sep-18 31-Mar-18 retail office total retail office total number of assets G@ 1.03 8 4 12 9 4 13 value ($m)!2 G 1.03 2,059.9 836.6 2,896.5 2,080.6 8312 = - 2,911.8 proportion of total portfolio by value @ 1.07 68% 28% 96% 68% 27% 95% weighted average capitalisatio
Slide 22: portfolio statistics
portfolio statistics G 1.03 adopted value $m capitalisation rate % NLA sqm occupancy % WALT years as at 30-Sep-18 31-Mar-18 30-Sep-18 31-Mar-18 30-Sep-18 31-Mar-18 30-Sep-18 31-Mar-18 30-Sep-18 31-Mar-18 Sylvia Park 891.9 835.0 5.38 78,215 74,843 100.0 100.0 AA 3.7 Sylvia Park Lifestyle 74.0 74.0 8
Slide 23: rental income
rental income 30-Sep-18 30-Sep-17 variance like-for-like variance six months ended $m $m $m % $m % Sylvia Park 214 21.4 +0.5 42.3 Sylvia Park Lifestyle 25 2.4 +0.1 45.2 +0.1 45.2 LynnMall 93 9.2 +0.1 41.3 +0.1 41.3 Westgate Lifestyle 3.0 3.0 1.2 1.2 The Base 6.0 5.9 +01 +2.8 +01 +2.8 Centre Place -
Slide 24: capitalisation rate history
capitalisation rate history G1.05 9.00% 8.48% 8.50% 7.99% 8.00% 750% 7.74% 7.00% 6.50% 6.25% 6.11% 6.00% 5.76% 5.50% = ice} Q fo} = N oO st ite) o fo} ° [o) 7 a LZ “ * L a S g 3 = = = = = 2 = Mar-17 Mar-18 key: ec Jpotice J nvestmentportfotio Kiwi Property 2019 interim result presentation | 19 Novem
Slide 25: geographic diversification
geographic diversification (Large 2g 2 x shopping centres 2x large format retail centres 2x office buildings ($268m) Hamilton Naike ion: Pop. 404,000 1, 9.5% of NZ) 2.x shopping centres 2.x 3" party management mandates tor ($209m) Palmerston North 1x shopping centre (3 2x office buildings * Christch
Slide 26: sector and income diversification
sector and income diversification G 1.07 sector diversification income diversification by portfolio value by investment portfolio gross income 1) retail 68” BB government 7 [majors 13% office anking mini-majors 1 Bi off 28% BB bank eo 3% other 4 lega 5 specialty 4 BB oth % BB legal % I 7% §§) financ
Slide 27: retail portfolio diversification
retail portfolio diversification G1.08 property type geographic diversification tenant diversification by retail portfolio value by retail portfolio value by retail portfolio gross income ao a oe / {regional centres 89% BB Auckland 65% BB specialty 64% BB large format centres 8% BE Hamilton 13% BB m
Slide 28: office portfolio diversification
office portfolio diversification G1.09 property type geographic diversification tenant diversification by office portfolio value by office portfolio value by office portfolio gross income DOC BE Premium 51% BB Auckland 76% i government 26% Bi A-grade 18% BB Wellington 24% Mi banking 25% A-grade camp
Slide 29: new leasing and rent reviews
new leasing and rent reviews G110 rent reviews retail office total _retail no. 297 28 325 - rental performance supported by high percentage (92%) NLA (sqm) 77200 36,200 113,400 of structured rent reviews % investment portfolio NLA 18 9 97 ~~ +good leasing uplift reported from a number of centres ren
Slide 30: lease expiry profile
lease expiry profile G 1.11 lease expiry profile retail % of investment portfolio gross income - our focus for the remainder of FY19 is on the cyclical expiry peak which occurs at Sylvia 70% Park, coinciding with our Galleria retail expansion 60% 57% office - our focus for the remainder of FY19 will
Slide 31: ● ● ● ● ● ● ● ● ● ● ● ● ● ●
● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ●
Slide 32: retail sales by centre
° retail sales by centre G 1.13 shopping centre pedestrian count MAT $m % var. fromm Sep-17 specialty sales! millions per annum twelve months ended 30-Sep-18 total like-for-like $/sqm GOC% 30-Sep-18 shopping centres Sylvia Park 553.2 +0.9 43.8 13,600 N17 15.2 LynnMall 2479 +4.0 42.5 10,200 10.9 8.1
Slide 33: retail sales by category
retail sales by category G 1.14 MAT $m % var. from Sep-17 twelve months ended 31-Sep-18 total like-for-like total sales growth by category supermarkets P| shopping centres department stores / DDS. | © supermarkets 302.0 -37 +0.5 I s a § department stores / DDS 175.7 42.4 42.4 cinemas BI cinemas 36.1
Slide 34: development pipeline
development pipeline G 2.01 Sep-18 Mar-19 Sep-19 Mar-20 Sep-20 Mar-21 beyond ;ti(isi‘siszCY The Base outlet centre ($2.1m) hy Sylvia Park No.1 Sylvia Park office building ($80.2m) $140 million of - development complete htt Northlands Langdons Quarter ($21.1m) or nearing completion LTT IY sywia Park
Slide 35: Sylvia Park ground floor redevelopment
Sylvia Park ground floor redevelopment central carpark ieeeniee| The Grove “}Di istri ining District | r ; No.1 Sylvia Park COMPLETED OCT-18 11,400 sqm of office space over nine levels, together with ground floor restaurants yj COMPLETED DEC-17 contemporary, landscaped alfresco dining experience and
Slide 36: Sylvia Park first floor - galleria expansion
Sylvia Park G2.03 first floor - galleria expansion ad dining terrace — — R 7 ee galleria and south carpark IN PROGRESS anew galleria level providing a Farmers department store, a next generation casual dining experience, an expanded retail offer including international brands new to New Zealand alon
Slide 37: Sylvia Park site photo
~ Syivia Park site photo La a
Slide 38: No1 Sylvia Park office building
No1 Sylvia Park G 2.05 office building project status - building completed Oct-18 - IAG in occupation over 2.5 floors (ona 12-year lease) - ANZ Bank have leased 5.5 floors (on a 9-year lease) * lease commences between Jun-19 and Dec-19 financial metrics cost profile ($m incl letting up asd “8 ky i %
Slide 39: Sylvia Park central carpark
Sylvia Park central carpark project status - new five-level carpark building * ~600 carparks + vehicle management system * well located between Zara and H&M * enhanced customer amenity financial metrics total project cost $36.3m timetable construction commenced Apr-17 construction completion Nov-18
Slide 40: Sylvia Park Kmart
Sylvia Park Kmart project overview - conversion of the store previously occupied by Countdown - 5,000 sqm of retail premises - initial 10-year lease - trading to commence mid-2019 financial metrics total project cost $10.6m timetable construction commenced Oct-18 target construction completion mid-1
Slide 41: Sylvia Park galleria and south carpark
Sylvia Park galleria and southtearpark project overview - new galleria retail level * ~18,000 sqm with ~60 new retailers * two-level Farmers department store * next generation casual dining experience * new international brands and concept stores and selected specialty tenants - additional multi-dec
Slide 42: Sylvia Park galleria and south carpark
Sylvia Park galleria and south carpark existing other galleria galleria completed centre projects! (lost) (new) centre net lettable area (sqm) majors 30,600 - - 8,100 38,700 mini-majors 17,600 - - 2,200 19,800 specialty/other 26,800 - (400) 7,700 34,100 offices - 11,400 - - 11,400 total centre 75,00
Slide 43: Langdons Quarter, Northlands
aa al te ne” r, Northlands G 2.10 project overview - new food and entertainment precinct below the existing cinema complex + 14 new tenancies to open for trade from November 2018 * refurbished HOYTS Cinema complex opened in May 2018 following Langdons Quarter, a reconfiguration and remix of former f
Slide 44: New Zealand economic overview
0% 1% 2% 3% 4% 5% 0% 2% 4% 6% 8% 2008 2008 2009 2009 2010 2010 2011 2011 2012 2012 2013 2013 2014 2014 2015 2015 2016 2016 2017 2017 2018 2018 2019 2019 2020 2020 2021 2021
Slide 45: Auckland CBD office market
Auckland CBD office market G 3.02 outlook key points (Premium and A-grade accommodation) our Auckland office exposure > supply - nochange to Premium-grade stock until the 2019 completion of the 39,000 sqm PwC Tower ~5,000 sam increase to A-grade supply is forecast over 2018, predominantly due to the
Slide 46: Wellington CBD office market
Wellington CBD office market outlook key points (A-grade and B-grade accommodation) 4 supply > absorption > vacancy a rents ($/sqm/net effective) v yield in 2019, over 50,000 sqm of A-grade space is expected to re-enter supply, predominantly the return of buildings withdrawn for repair post the 2016
Slide 47: group
Slide 48: group appendices: index
group appendices: index G financial review other information 4.01 profit after tax 49 5.01 glossary 63 4.02 interest and finance charges 50 5.02. calendar of key dates 65 4.03 management expense ratio (MER) 51 5.03 disclaimer 66 4.04 FFO 52 4.05 dividends 5} 4.06 AFFO 54 4.07 balance sheet Sey 4.08
Slide 49: profit after tax
profit after tax 30-Sep-18 30-Sep-17 variance six months ended $m $m $m % property revenue Gi.04 116.9 123.1 -6.2 -5.0 property management income 1.0 08 +0.2 +19.0 interest and other income 0.1 0.2 -0.1 -35.4 gain on disposal of investment properties 06 +0.6 +100.0 total income 118.6 124.1 5.5 44 di
Slide 50: interest and finance charges
interest and finance charges 30-Sep-18 30-Sep-17 variance six months ended $m $m $m % interest on bank debt -13.2 -16.9 +37 +21.9 interest on bonds -9.4 -6.6 2.8 42.4 interest expense incurred -22.6 -23.5 +0.9 +3.8 interest capitalised to Sylvia Park 2.9 O7 +2.2 +3143 Drury land 11 0.2 +0.9 +450.0 o
Slide 51: management expense ratio (MER)
management expense ratio (MER) 30-Sep-18 =. 31-Mar-18 twelve months ended $m $m employment and administration expenses 21.5 20.5 less recovered through property management fees -8.2 -8.1 net expenses 13.3 12.4 weighted average assets 3,039.9 3,011.8 management expense ratio! (non-GAAP measure) 44 bp
Slide 52: FFO
FFO GA4.O4 30-Sep-18 30-Sep-17 variance six months ended $m $m $m % profit after tax GA 48.3 479 +0.4 +0.9 adjusted for gain on disposal of investment properties G4.01 -0.6 - -0.6 -100.0 net fair value loss on interest rate derivatives G40 2.9 19 +1.0 +54.9 straight-lining of fixed rental increases
Slide 53: dividends
dividends G 4.05 30-Sep-18 30-Sep-17 30-Sep-18 30-Sep-17 six months ended $m $m ops? cps? funds from operations (FFO)! eG 4.04 52.3 54.2 3.661 3.821 amount retained -2.6 5.6 -0.186 -0.396 cash dividend 49.7 48.6 3.475 3.425 imputation credits 13.3 13.0 0.930 0.920 gross dividend 63.0 61.6 4.405 4.34
Slide 54: AFFO
AFFO G4.06 30-Sep-18 30-Sep-17 variance six months ended $m $m $m % funds from operations (FFO)! eG 4.04 52.3 54.2 1.9 -3.4 adjusted for maintenance capital expenditure -2.9 -2.6 -0.3 -15.4 tenant incentives and leasing fees -5.0 -8.5 43.5 +421 adjusted funds from operations (AFFO)? (non-GAAP me 44.
Slide 55: balance sheet
balance sheet G 4.07 30-Sep-18 31-Mar-18 movement investment properties as at $m $m $m % ~~ decreased due to the disposal investment properties GA.08 3,039.1 3,052.0 12.9 -0.4 of North City cash G4.09 N2 107 +0.5 +47 offset by deferred tax assets 46 4A +0.5 412.2 - capital expenditure, , other asset
Slide 56: investment properties movement
investment properties movement ¢:,) G 4.08 3,100 4 4927 : +9105 3,000 2,900 2,800 +$3,052.0 =$3,039.1 2,700 2,600 as at Mar 18 North City Sylvia Park LynnWall The Plaza other as at Sep-18 G 4.07 balance sheet Kiwi Property 2019 interim result presentation | 19 November 2018 | 56
Slide 57: net finance debt movement
1,000 1,100 1,200 400 500 600 700 800 900 net finance debt Mar-18 net rental income interest and finance charges employment/admin expenses investment/development expenditure disposal proceeds dividends tax and other net finance debt Sep-18
Slide 58: finance debt facilities
finance debt facilities ¢-) G410 debt maturity profile debt sources as at 30-Sep-18 $m % FY19 aaess25 |s7a0|scoo 258 20 aMass25|s740 [so eases) 292 23 ry22 EE Or 194 15 APE $32.5 |$25.0])$3251| $33.0] 123 9 PM $27.5 |520| $275| S20 s100.O | 300 23 Fv25 EXE 125 10 total facilities 1,292 100 facilitie
Slide 59: capital management metrics
capital management metrics G Al finance debt metrics as at 30-Sep-18 31-Mar-18 weighted average term to maturity 3.3 years 3.6 years weighted average interest rate 4.97% 4.99% (incl. of bonds, active interest rate derivatives, margins and line fees) covenants - gearing as at 30-Sep-18 31-Mar-18 gear
Slide 60: fixed-rate debt profile
fixed-rate debt profile GAaAA2 fixed-rate profile (inclusive of bonds on issue (Sep-18: $375 million, Mar-18: $375 million) 30-Sep-18 31-Mar-18 percentage of drawn finance debt at fixed rates 81% 83% weighted average interest rate of active fixed-rate debt (excl. fees and margins) 3.52% 3.55% weight
Slide 61: finance debt facilities (pro-forma)
finance debt facilities ¢) pro-forma debt maturity profile’ as at 30-Sep-18 $m % FYI9 FY20 EE Ee 166 13 FY2] EE SZ Ec ree 292 22 FY? OE 194 5 APE $32.5 | $25.d)g3250) $83.01) 123 9 1 Sc sc 2 YS Ss 125 10 FY26 SES 100 8 total facilities 1,300 100 - completed our fourth bond offer on 12 November 2018
Slide 62: pro-forma gearing
5% 10% 15% 20% 25% 30% 40% 45% 0% 35% as at Sep-18 settlement of Drury land No.1 Sylvia Park central carpark, Sylvia Park Langdons Quarter, Northlands Kmart, Sylvia Park galleria and south carpark, Sylvia Park pro-forma as at Sep-18
Slide 63: glossary
glossary G 5.01 adjusted funds from operations (AFFO) AFFO is an alternative non-GAAP performance measure used by Kiwi Property. AFFO is a measure commonly used by real estate entities to describe their underlying and recurring cash flows from operations. Broadly, AFFO adjusts FFO by deducting the c
Slide 64: glossary continued
glossary continued G 5.01 gross occupancy cost (Goc) total gross occupancy costs expressed as a percentage of moving annual turnover (excluding GST). like-for-like rental income excludes rental income from assets or portions of assets purchased, disposed of or undergoing development in either year o
Slide 65: calendar of key dates
calendar of key dates G 5.02 interim dividend payment (for the six months ended 30 September 2018) + exdate 3 December 2018 * record date 4 December 2018 * payment date 19 December 2018 KPGO30 bond interest payment (2024 maturity) 19 December 2018 KPGO10 bond interest payment (2021 maturity) 20 Febr
Slide 66: disclaimer
disclaimer G 5.03 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 i
Slide 67: kp.co.nz
kp.co.nz Kiwi Property
Kiwi Property Group — H1 FY2019 Earnings Presentation on 6ix