Kiwi Property Group Ltd. · NZX:KPG
Kiwi Property — FY2022 Earnings Presentation
58 slides from Kiwi Property's earnings presentation, May 2022
Slide 1: Annual Results Presentation
Annual Results Presentation For the year ended 31 March 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 FY22 financial results 14 Appendix 1: Property update 22 Appendix 2: Financial update 39 Glossary 55 This annual result presentation for the year ended 31 March 2022 should be read in conjunction with the NZX announcement and financial statements released on 2
Slide 4: Business update
Business update Kiwi Property
Slide 5: FY22 annual result highlights
FY22 annual result highlights $124.8m $224.3m $3.6b Operating profit Net profit Property portfolio before tax after tax value +$8.5m (+7.3%) +$27.8m (+14.1%) $120.5m fair value gain $1.45 6.39cps 5.60cps Net tangible assets Adjusted funds from FY22 cash per share operations per share dividend +9 cps
Slide 6: A strong operational performance despite COVID-19
A strong operational performance despite COVID-19 4.2% 6.7% 99.8 % Leasing Total sales Occupan Occupancy uplift growth cy (+10bps) 6
Slide 7: Delivering on strategy in FY22
Delivering on strategy in FY22 Purpose: To create connected communities 7
Slide 8: Unlocking value through mixed-use
Unlocking value through mixed-use 1. Diversifies revenue streams. 2. Helps build a critical mass of customers, workers and residents. 3. Drives site-wide capitalisation rate compression and valuation growth. 4. Enables site enhancement and redevelopment over time. 8
Slide 9: Intensifying mixed-use assets: transforming Sylvia Park
Intensifying mixed-use assets: transforming Sylvia Park Bringing IKEA a step closer BTR ramps up Building begins at 3 Te Kehu Way > 3.2ha of land on Te Ahoterangi > Building work has begun on the > Construction of Sylvia Park’s Rise conditionally sold to IKEA in 295 apartment Sylvia Park BTR second
Slide 10: Exciting opportunities ahead
Exciting opportunities ahead Breaking ground at Drury LynnMall mixed-use tower Planning for BTR 2 > Private Plan Change application > Resource consent obtained for > Planning of a second Sylvia Park now approved by Auckland LynnMall mixed-use tower. BTR development in progress. Council’s independent
Slide 11: Growing with third party capital: a clear strategy for funding growth
Growing with third party capital: a clear strategy for funding growth Establishing a CBD office co-investment platform > Kiwi Property has begun the process of establishing a standalone CBD office co-investment platform. > The opportunity is expected to attract strong interest. > Further updates wil
Slide 12: Empowering customer success through digital
Empowering customer success through digital 12
Slide 13: Stepping up on solar
Stepping up on solar > Kiwi Property is proud to be working with Meridian to build New Zealand’s largest rooftop solar installation at Sylvia Park. > The array will include over 2,000 panels, covering almost 1ha of roof area (Level 1 expansion, ANZ Raranga and ultimately, 3 Te Kehu Way). > Peak capa
Slide 14: FY22 financial results
FY22 financial results 14
Slide 15: FY22 financial results – growth across the board
FY22 financial results – growth across the board $187.1m > Net rental income (NRI) increased 7.8% on the prior year, driven primarily by the addition of Sylvia Park’s Level 1 expansion. Net rental income > Net profit after tax includes a $120.5m net fair value gain +$13.5m (+7.8%) on investment prop
Slide 16: Mixed-use and office leasing activity
Mixed-use and office leasing activity 4.2% Rental growth > Overall rental growth from mixed-use and office leasing activity was +4.2%, with both new leasing and rent reviews Total rental growth1 growing by this amount. FY21: 3.2% > Strong uplift in leasing spreads for new lease deals across both mix
Slide 17: Retail sales
Retail sales $1.38b > Retail sales bounced back from the prior comparable period due to a full period of sales at Sylvia Park’s Level 1 expansion. Total sales1 > On a MAT basis, total sales were up 6.7% across our FY21: $1.29b mixed-use and large format retail centres, a strong result given the redu
Slide 18: Capital management
Capital management 3.85% > Bank debt facilities increased from $825m to $850m in FY22, with a further $100m increase to $950m after balance date. Weighted average cost of debt > Enabled Kiwi Property to take advantage of favourable lending terms, increase its weighted average debt term FY21: 4.19% a
Slide 19: Balance sheet
Balance sheet $3.6b > Property assets valued at $3.6b at year end, following a fair value gain on the Company’s diversified asset portfolio. Property assets > An increase in transactional activity has contributed to a FY21: $3.3b (+$0.2b) general strengthening of valuation metrics, although Omicron
Slide 20: AFFO, dividend and guidance
AFFO, dividend and guidance 6.39cps > AFFO per share increased 12.3%, driven by higher operating profit and a lower level of COVID-19 impact in FY22. AFFO > The FY22 dividend of 5.60cps represents a payout ratio +0.70 cps (+12.3%) of 88%, with the balance being retained to fund growth. 2.85cps 5.60c
Slide 21: FY23 strategic priorities
FY23 strategic priorities 1. Launch CBD office co-investment platform. 2. Maintain development momentum (3 Te Kehu Way, BTR, Drury). 3. Progress capital recycling activity. 4. Finalise preparations for LynnMall mixed-use tower and second Sylvia Park build-to-rent development. 5. Unlock shareholder v
Slide 22: Appendix 1: Property update
Appendix 1: Property update 22
Slide 23: Contents
Contents Appendix Title Page 1.1 Our investment portfolio 24 1.2 Investment portfolio summary 25 1.3 Portfolio statistics 26 1.4 Net rental income 27 1.5 Capitalisation rate history 28 1.6 Geographic diversification – investment portfolio 29 1.7 Sector and tenant diversification – property portfolio
Slide 24: 1.1 Our investment portfolio
1.1 Our investment portfolio Sylvia Park Lifestyle LynnMall Vero Centre ASB North Wharf Sylvia Park ANZ Raranga (Sylvia Park) The Base (50%) The Aurora Centre 44 The Terrace Mixed-use portfolio Office portfolio 24
Slide 25: 1.2 Investment portfolio summary
1.2 Investment portfolio summary 31-Mar-22 31-Mar-21 Mixed-use Office Total Mixed-use Office Total Number of assets (Appendix 1.3) 4 4 8 4 4 8 Value ($m)1 (Appendix 1.3) 1,911.6 1,042.3 2,953.9 1,787.3 1,001.6 2,788.9 % of total portfolio by value (Appendix 1.7) 54 29 83 54 30 84 Weighted average ca
Slide 26: 1.3 Portfolio statistics
1.3 Portfolio statistics Adopted value $m Capitalisation rate % NLA sqm Occupancy % WALE years As at 31-Mar-22 31-Mar-21 31-Mar-22 31-Mar-21 31-Mar-22 31-Mar-21 31-Mar-22 31-Mar-21 31-Mar-22 31-Mar-21 Sylvia Park1 1,186.4 1,100.0 5.31 5.50 106,372 105,875 99.8 99.8 4.3 4.3 Sylvia Park Lifestyle 92.0
Slide 27: 1.4 Net rental income
1.4 Net rental income Year ended 31-Mar-22 31-Mar-21 Variance $m $m $m % > Net operating income (NOI) increased $9.7m Sylvia Park Precinct 60.5 54.4 6.1 +11.2 on the prior year, assisted by a full period of trading at Sylvia Park Level 1. LynnMall 17.4 17.2 0.2 +1.2 The Base 12.4 11.8 0.6 +5.5 Mixed
Slide 28: 1.5 Capitalisation rate history
1.5 Capitalisation rate history 8.50% 8.00% 7.50% 7.00% 6.50% 6.00% 5.50% 5.48% 5.23% 5.00% Global Christchurch 4.78% 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 Mar-22 Key: Mixed-use Retail Offi
Slide 29: 1.6 Geographic diversification – investment portfolio
1.6 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 ($198m) Hamilton Waikato region: Pop. 458,000 (4th largest region, 9.7%
Slide 30: 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 54% Specialty stores 38% Mini-majors 15% Office 29% Banking 10% Government 8% Other 11% Legal 6% Consultancy and other 6% Held fo
Slide 31: 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 92% Auckland 94% Specialty stores 54% Other 5% Hamilton 6% Mini-majors 22% Large for
Slide 32: 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 51% Auckland 76% Government 25% A-grade campus 25% Wellington 24% Banking 24% A-grade 18% Legal 20% B-grad
Slide 33: 1.10 Rent reviews and new leasing
1.10 Rent reviews and new leasing Rent reviews Mixed-use Office Total Rent reviews No. 374 48 422 > High percentage of structured reviews (82%) NLA (sqm) 158,525 44,389 202,914 provided consistent uplift, averaging +3.4% on a % investment portfolio NLA 40 11 51 compound annual basis. Rental movement
Slide 34: 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 > Mixed-use expiries remain relatively steady over 60% the next five years. 50% > WALE of new mixed-use leases increased to 5.5 46% years in FY22, up from 4.9
Slide 35: 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 8.1 ● Supermarkets 2 Ministry of Social Development 5.8 occupy ● Cinemas 2 Farmers 3.2 ● Home and
Slide 36: 1.13 Retail sales
1.13 Retail sales All centres Shopping centres > Alert level 3 and 4 restrictions prevented (incl. large format centres) (mixed-use only) Auckland retail centres from trading for For the year ended 31-Mar-22 approximately 12 weeks and Hamilton Actual sales Adjusted sales1 Actual sales Adjusted sales
Slide 37: 1.14 Retail sales by property
1.14 Retail sales by property MAT $m1 % Var. from Mar 21 > The mini-major and major categories are driving Like-for- total sales growth at Sylvia Park. 31-Mar-22 Total Year ended like Sylvia Park 637.4 > Culture Kings and JD Sports anchor the new urban and athleisure precinct at Sylvia Park and Lynn
Slide 38: 1.15 Retail sales by category
1.15 Retail sales by category MAT $m % var. from Mar-21 > DDS and department stores are benefiting from a Year ended 31-Mar-22 Total Like-for-like full year of Farmers trading at Sylvia Park, reflected in total sales growth, however supply Supermarkets 171.7 +2.7 +2.7 chain and stock issues are affe
Slide 39: Appendix 2: Financial update
Appendix 2: Financial update 39
Slide 40: Contents
Contents Appendix Title Page 2.1 Profit after tax 41 2.2 Operating profit before income tax 42 2.3 Interest and finance charges 43 2.4 Management expense ratio (MER) 44 2.5 COVID-19 rent relief 45 2.6 Funds from operations (FFO) 46 2.7 Adjusted funds from operations (AFFO) 47 2.8 Dividends 48 2.9 Ba
Slide 41: 2.1 Profit after tax
2.1 Profit after tax 31-Mar-22 31-Mar-21 Variance Year ended > Property revenue increased $12.6m, $m $m $m % Property revenue 245.1 232.5 +12.6 +5.4 assisted by the Sylvia Park Level 1 Property management income 1.7 1.5 +0.2 +13.7 expansion. Total income 246.8 234.0 +12.8 +5.5 > The fair value gain
Slide 42: 2.2 Operating profit before income tax
2.2 Operating profit before income tax 31-Mar-22 31-Mar-21 Variance Year ended $m $m $m % Profit before income tax (Appendix 2.1) 260.7 222.4 +38.3 +17.2 Adjusted for: Net fair value gain on investment properties (Appendix 2.1) -120.5 -99.8 -20.7 -20.8 (Appendix 2.1) Loss on disposal of investment p
Slide 43: 2.3 Interest and finance charges
2.3 Interest and finance charges 31-Mar-22 31-Mar-21 Variance > Interest on bonds favourably impacted by Year ended $m $m $m % maturity of KPG010 at 6.15% and issue of KPG050 Interest on bank debt -20.5 -20.3 -0.2 -0.8 at 2.85%. Interest on bonds -21.4 -23.2 +1.8 +7.7 Interest on lease liabilities -
Slide 44: 2.4 Management expense ratio (MER)
2.4 Management expense ratio (MER) 31-Mar-22 31-Mar-21 > Increase in employment and administration Year ended $m $m expenses largely driven by IT costs and investment Employment and administration expenses (Appendix 2.1) 25.8 23.1 in personnel and capabilities to deliver Kiwi Less recovered through
Slide 45: 2.5 COVID-19 rent relief
2.5 COVID-19 rent relief Year ended 31-Mar-22 31-Mar-21 > The table to the left shows the accounting $m $m treatment of rent relief agreed, or expected Gross cost of abatements to be agreed, for the year ended 31 March Abatements capitalised and amortised over remaining lease terms(Appendix 2.7) 13.
Slide 46: 2.6 Funds from operations (FFO)
2.6 Funds from operations (FFO) 31-Mar-22 31-Mar-21 Variance > Higher operating profit and unwinding of Year ended $m $m $m % COVID-19 rent deferrals from the prior year Profit after tax (Appendix 2.1) 224.3 196.5 +27.8 +14.1 have contributed to a 6.1% increase in FFO. Adjusted for: Net fair value g
Slide 47: 2.7 Adjusted funds from operations (AFFO)
2.7 Adjusted funds from operations (AFFO) Year ended 31-Mar-22 31-Mar-21 Variance > Reduction in COVID-19 rent abatements $m $m $m % and maintenance capex, coupled with Funds from operations (FFO)1 (Appendix 2.6) 119.9 113.0 +6.9 +6.1 higher FFO, resulted in a 12.3% AFFO Adjusted for increase on the
Slide 48: 2.8 Dividends
2.8 Dividends 31-Mar-22 31-Mar-21 31-Mar-22 31-Mar-21 > The dividend reinvestment plan will not apply to Year ended $m $m cps1 cps1 the final dividend for FY22. Cash dividend 87.9 80.8 5.60 5.15 Imputation credits 22.5 21.4 1.43 1.36 > Additional earnings retained to fund future Gross dividend 110.4
Slide 49: 2.9 Balance sheet
2.9 Balance sheet 31-Mar-22 31-Mar-21 Movement > Investment properties value increase driven by As at $m $m $m % a $120.5m fair value gain as well as capital Investment properties (Appendix 2.10) 3,567.6 3,331.5 +236.1 +7.1 expenditure and acquisitions, offset by the Cash (Appendix 2.11) 11.6 16.0 -
Slide 50: 2.10 Investment properties movement
$m Property portfolio fair value as at Mar-21 Centre Place North 50% disposal Disposals Acquisitions Acquisitions Sylvia Park Precinct LynnMall 2.10 Investment properties movement Drury Capital Expenditure Other Fair value change Movement in lease liabilities Property portfolio fair value as at Mar-
Slide 51: 2.11 Net finance debt movement
$m As at Bank debt Bonds (Appendix 2.9) Net finance debt As at Mar-21 (Appendix 2.9) Cash on deposit (Appendix 2.9) Net rental income Interest and finance charges -11.6 500.9 635.0 31-Mar-22 1,124.3 Employment/ admin expenses 2.11 Net finance debt movement Acquisition of investment -16.0 476.9 573.0
Slide 52: 2.12 Finance debt facilities
2.12 Finance debt facilities 31-Mar-22 Debt sources Debt maturity profile as at: $m % 11.1% FY24 $50 $125.0 $125 175.0 13.0% 11.1% FY25 $50 $50 $50$50 $33 $50 $50 $125 358.0 26.5% 37.1% $50.0 $33.0 $50.0 FY26 $50 $50 $50$50 $34 $50 $50 $100 334.0 24.7% $50.0 $34.0 $50.0 14.8% FY27 $50 $50$50 $50$50
Slide 53: 2.13 Capital management metrics
2.13 Capital management metrics Finance debt metrics as at 31-Mar-22 31-Mar-21 Weighted average term to maturity 3.4 years 2.9 years Weighted average interest rate (Incl. of bonds, active interest rate derivatives, margins and line fees) 3.85% 4.19% Covenants – gearing as at 31-Mar-22 31-Mar-21 Gear
Slide 54: 2.14 Fixed-rate debt profile
2.14 Fixed-rate debt profile Fixed-rate profile (inclusive of green bonds on issue Mar-22: $500m, Mar-21: $475m) 31-Mar-22 31-Mar-21 Percentage of drawn finance debt at fixed rates 68% 69% Weighted average interest rate of active fixed-rate debt (excl. fees and margins) 2.53% 3.11% Weighted average
Slide 55: Glossary
Glossary 55
Slide 56: 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 57: 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 58: Thank you
Thank you Kiwi Property