Kiwi Property Group Ltd. · NZX:KPG
Kiwi Property — H1 2024 Earnings Presentation
64 slides from Kiwi Property's earnings presentation, Nov 27, 2023
Slide 1: Interim Results Presentation
Interim Results Annual Results Presentation Presentation FY23 For the six months ended 30 September 2023 22 May 2023 27• November 2023
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 highlights and financial results 4 Development update 15 FY24 priorities 23 Appendix 1: Property update 25 Appendix 2: Financial update 43 Glossary 61 This interim results presentation for the six months ended 30 September 2023 should be read in conjunction with the NZ
Slide 4: Business highlights and financial results
Business highlights and financial results 4
Slide 5: Our strategy for growing returns for shareholders
Our strategy for growing returns for shareholders • Focus on retail-led mixed-use properties at key transport nodes. • Prioritise strategic assets with strong redevelopment and value-creation Lead the market Grow with potential. on retail-led diverse sources mixed-use of capital • Maximise the perfo
Slide 6: Kiwi Property's strategic advantage
Kiwi Property’s strategic advantage A leading portfolio of assets, with favourable zoning at key transport nodes LynnMall Sylvia Park Drury The Base Zoning: Business - Metropolitan Zoning: Business - Metropolitan Zoning: Business - Metropolitan Zoning: Sub-regional Centre Centre Centre Centre Transi
Slide 7: Maximising the operational performance of our assets
Maximising the operational performance of our assets Sales and rental growth continues, despite economic headwinds +$280m +16.5% Total portfolio sales (MAT)1 Mixed-use sales (MAT)1 +5.1m Mixed-use customer visits (LTM)1 ~350 Total leasing transactions +4.5% Mixed-use rent reviews and new +13.9% Offi
Slide 8: Unlocking value at our retail-led mixed-use assets
Unlocking value at our retail-led mixed-use assets Delivering new stores and diversifying revenue streams Leveraging the power of Continuing to strengthen Delivering brilliant brand Growing advertising our portfolio the retail mix activations income JD Sports expands its store JB Hi-Fi, Footlocker a
Slide 9: Delivering on our sustainability strategy
Delivering on our sustainability strategy Kiwi Property continues to drive strong ESG performance Kiwi Property’s mental Sylvia Park leads the market Resido awarded wellbeing initiative brings 8,000 with NABERS pilot energy 8 Homestar Design rating New Zealanders together rating 9
Slide 10: Interim financial results 2024
Interim financial results 2024 Operating Adjusted • We continue to rebalance our portfolio Net rental Net loss profit funds from towards assets that we expect will be more income after tax before tax operations resilient and higher performing over time. September 2023: $89.1m $52.4m -$36.5m $48.6m •
Slide 11: Retail sales
Retail sales • Mixed-use centres include Sylvia Park, Mixed-use1 Total portfolio2 LynnMall and The Base. Twelve months 30 Sep 2023 30 Sep 2022 30 Sep 2023 30 Sep 2022 ended • Total portfolio includes the mixed-use centres plus Centre Place North and The Plaza. Total sales $1.77b $1.52b $2.13b $1.85b
Slide 12: Mixed-use, office and retail leasing activity
Mixed-use, office and retail leasing activity 3.7% Rental growth • Overall rental growth from mixed-use, office and retail leasing activity was +3.7%, with new leasing +2.1% and Total rental growth rent reviews +4.1%. FY23: 4.8% • Strong uplift in leasing spreads for new lease deals across the mixed
Slide 13: Capital management and balance sheet
Capital management and balance sheet 5.52% 3.6 years • Increase in weighted average cost of debt reflects the rising interest rate environment. Weighted average Weighted average • KPG030, KPG040 and KPG050 bond gearing covenants cost of debt term to maturity of debt successfully raised from 45% to 5
Slide 14: AFFO, dividend and guidance
AFFO, dividend and guidance 3.08cps 92% • AFFO per share decreased 25.7%, driven by asset sales, rising interest rates, and the positive impact of COVID-19 adjustments in the prior period. When viewed on a like- AFFO AFFO payout ratio for-like basis, the decrease in AFFO was 0.2% (versus 1H23). -1.0
Slide 15: Development update
Development update 15
Slide 16: Build-to-rent is growing quickly internationally
Build-to-rent (BTR) is growing quickly internationally Capital inflows to BTR overseas highlight potential trajectory in New Zealand • Strong growth in BTR internationally provides confidence in the sector’s prospects in New Zealand, including its ability to attract new capital. UK: BTR Pipeline 201
Slide 17: Market conditions are contributing to the rise in renting
Market conditions are contributing to the rise in renting BTR has the potential to benefit significantly from broader rental growth • A sharp rise in net migration, coupled with a decline in building consents and increased cost of living, is contributing to reduced housing affordability and a rise i
Slide 18: Auckland's supply constraints expected to drive strong rent growth
Auckland’s supply constraints expected to drive strong rent growth Significant opportunity to grow returns over time Rent to income proportion (2023)1 Mortgage payment as a proportion of 30 income (2023)2 27.0 70 65 Percentage % 25 58.4 Percentage % 60 56.0 21.5 55 20.1 50 46.5 19.5 42.4 20 45 40 35
Slide 19: Sylvia Park BTR progress continues
Sylvia Park BTR progress continues Resido on track for opening from May 2024 • Construction of Resido Lynton continues at pace. Project metrics Buildings were ‘topped out’ in August 2023 and internal Projected opening date From May 2024 fitouts are now underway. Target sustainability rating 8 Home S
Slide 20: Conditions support development at Drury
Conditions support development at Drury Kiwi Property is well-placed to benefit from regional growth The wider Drury area is earmarked for substantial development over the next 20 - 30 years, underpinned by Central Government financial support towards critical infrastructure upgrades. A range of fac
Slide 21: Drury development continues
Drury development continues Stage 1 residential and large format retail move closer to fruition • Stage 1 2023/2024 summer earthworks season underway. • Potential sale of residential super-lots and large format retail (LFR) sites and/or joint ventures or external capital partnerships will help fund
Slide 22: Unlocking AFFO and earnings at Drury
Unlocking AFFO and earnings at Drury Drury has the potential to produce attractive long-term returns for shareholders Total Key metrics Stage 1 Stage 2 project Gross land area 53.3ha Acquisition cost $55.2m Costs incurred to date $25.1m3 Current market value (Sep 2023) $135m Saleable land area 20.0h
Slide 23: FY24 priorities
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Slide 24: FY24 priorities
FY24 priorities We have a clear set of objectives and focus on delivering for shareholders Proactively manage Maintain operational Prepare for BTR Position Kiwi Property capital: excellence: launch: for the future: • Strict capital management • Grow sales, rents, • Progress Sylvia Park BTR • Advance
Slide 25: Appendix 1: Property update
Appendix 1: Property update 25
Slide 26: Contents
Contents Appendix Slide Page 1.1 Our investment portfolio 27 1.2 Investment portfolio summary 28 1.3 Net rental income 29 1.4 Portfolio statistics 30 1.5 Capitalisation rate history 31 1.6 Geographic diversification 32 1.7 Sector and tenant diversification – property portfolio 33 1.8 Mixed-use portf
Slide 27: 1.1 Our investment portfolio
1.1 Our investment portfolio Sylvia Park Shopping Centre 3 Te Kehu Way (Sylvia Park Precinct) LynnMall Sylvia Park Lifestyle ANZ Raranga (Sylvia Park Precinct) The Base ASB North Wharf Aurora Centre Vero Centre Mixed-use Office Retail 27
Slide 28: 1.2 Investment portfolio summary
1.2 Investment portfolio summary 30-Sep-23 31-Mar-23 Mixed-use Office Retail Total Mixed-use Office Retail Total Number of assets (Appendix 1.4) 4 3 2 9 4 3 2 9 Value ($m)1 (Appendix 1.4) 1,998.1 829.0 139.0 2,966.0 1,912.6 879.1 138.6 2,930.3 % of total portfolio by value (Appendix 1.7) 64 27 4 96
Slide 29: 1.3 Net rental income
1.3 Net rental income 30-Sep-23 30-Sep-22 Six months ended variance (restated) $m $m $m % • Net operating income (NOI) decreased $16.8m Sylvia Park 28.7 29.1 -0.4 -1.5 (-16.0%) on the prior period, driven primarily by asset ANZ Raranga 2.5 2.6 -0.1 -1.5 disposals. 3 Te Kehu Way 0.3 - 0.3 N/A Sylvia
Slide 30: 1.4 Portfolio statistics
1.4 Portfolio statistics Adopted value $m Capitalisation rate % NLA sqm Occupancy % WALE years As at 30-Sep-23 31-Mar-23 30-Sep-23 31-Mar-23 30-Sep-23 31-Mar-23 30-Sep-23 31-Mar-23 30-Sep-23 31-Mar-23 Sylvia Park 1,012.0 1,012.0 5.88 5.75 94,280 94,205 99.2 99.8 3.5 3.8 ANZ Raranga 90.0 96.5 6.00 5.
Slide 31: 1.5 Capitalisation rate history
1.5 Capitalisation rate history 10.00% 9.00% 8.93% 8.00% 7.00% 6.27% 6.26% 6.00% 5.84% 5.00% 4.00% Global Christchurch COVID-19 Financial Crisis earthquakes 3.00% Sep-23 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 Mar-23 General not
Slide 32: 1.6 Geographic diversification
1.6 Geographic diversification ($2.61b) Auckland Geographic diversification Auckland region: Pop. 1,695,200 by portfolio value (Largest region, 33.1% of NZ) 3 x mixed-use assets 2 x office assets 1 x development land ($235m) Hamilton Waikato region: Pop. 513,800 (4th largest region, 10.0% of NZ) 1 x
Slide 33: 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 64% Specialty stores 43% Mini-majors 14% Office 27% Banking 9% Department stores and DDS 6% Retail 4% Government 6% Legal 6% Othe
Slide 34: 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 84% Auckland 90% Specialty stores 54% Other2 12% Hamilton 10% Mini-majors 22% Large
Slide 35: 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 27% Premium 56% Auckland 82% Banking 27% A-grade campus 26% Wellington 18% Legal 20% A-grade 18% Government 20% Fi
Slide 36: 1.10 Retail portfolio diversification
1.10 Retail portfolio diversification Property type Geographic diversification Tenant diversification by retail portfolio value by retail portfolio value by retail portfolio gross income Regional centres 78% Palmerston North 78% Specialty stores 75% Sub-regional 22% Hamilton 22% Department stores an
Slide 37: 1.11 Rent reviews and new leasing
1.11 Rent reviews and new leasing Rent reviews Mixed-use Office Retail Total No. 184 31 46 261 Rent reviews NLA (sqm) 67,292 28,005 9,281 104,578 • High percentage of structured reviews (94%) provided % investment portfolio NLA 16 7 2 25 consistent uplift, averaging +4.0% on a compound annual basis
Slide 38: 1.12 Lease expiry profile
1.12 Lease expiry profile Lease expiry profile Mixed-use % of investment portfolio gross income • Mixed-use expiries remain relatively steady over the next five years. 60% Office • The longer-dated WALE of the office portfolio 50% means 60% of gross office income expires in FY29 and beyond. 40% 38%
Slide 39: 1.13 Tenant diversification
1.13 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 6.2 ASB Bank 7.6 ● Supermarkets 2.5 Ministry of Social Development 5.4 occupy ● Cinemas 1.8 Farmers 3.8 ● Hom
Slide 40: 1.14 Retail sales
1.14 Retail sales All centres1 Mixed-use Mixed-use Other • Portfolio sales exceeded $2b for the (incl. large format centres2 shopping shopping centres) (incl. large format centres3 centres4 12 months to 30 September 2023. For the year ended 30 centres) (excl. large Sep 2023 format centres) • Portfol
Slide 41: 1.15 Retail sales by property
1.15 Retail sales by property MAT $m1 % var • The Sylvia Park Precinct sales continue to climb Year ended 30-Sep-23 vs Sep 22 with Precinct sales exceeding $900m. Sylvia Park 879.1 19.0% Sylvia Park Lifestyle2 36.4 0.6% • The Base sales have now reached over $520m. Total Sylvia Park Precinct 915.5 1
Slide 42: 1.16 Retail sales by category
1.16 Retail sales by category MAT $m % var. from 30-Sep-22 • Cinemas continue to rebound, helped by strong movie Year ended 30-Sep-23 Total Like-for-like releases (pre-writers strike). Supermarkets 181.1 +4.6 +4.6 • Mini-majors continued their strong performance, Department stores and DDS 169.0 +15.
Slide 43: Appendix 2: Financial update
Appendix 2: Financial update 43
Slide 44: Contents
Contents Appendix Slide Page 2.1 Loss after income tax 45 2.2 Operating profit before income tax 46 2.3 Interest and finance charges 47 2.4 Management expense ratios (MER) 48 2.5 Treatment of COVID-19 rent relief – prior period restatement 49 2.6 Funds from operations (FFO) 50 2.7 Adjusted funds fro
Slide 45: 2.1 Loss after income tax
2.1 Loss after income tax Six months ended 30-Sep-23 30-Sep-22 Variance (restated) • Decrease in property revenue of $m $m $m % $16.1m arising from net property Property revenue 115.7 131.8 - 16.1 -12.2 disposals during the year (-$20.2m). Property management income 2.0 0.9 +1.1 +130.0 Like-for-like
Slide 46: 2.2 Operating profit before income tax
2.2 Operating profit before income tax Six months ended 30-Sep-23 30-Sep-22 Variance $m $m $m % Loss before tax (Appendix 2.1) -24.9 -135.4 +110.5 +81.6 Adjusted for: Net fair value loss on investment properties (Appendix 2.1) 81.1 219.7 -138.6 -63.1 Litigation settlement income (Appendix 2.1) - -6.
Slide 47: 2.3 Interest and finance charges
2.3 Interest and finance charges 30-Sep-23 30-Sep-22 Variance • Interest costs were reflective of the Six months ended $m $m $m % higher interest rate environment, with Interest on bank debt -15.6 -14.3 -1.3 -9.0 the weighted average interest rate Interest on bonds -13.5 -9.8 -3.7 -37.7 increasing 1
Slide 48: 2.4 Management expense ratios (MER)
2.4 Management expense ratios (MER) 30-Sep-23 30-Sep-22 • Kiwi Property is focused on reducing MER and has 12-month period ended (restated) the objective of bringing the figure back to pre- $m $m COVID levels, through initiatives including Direct property expenses 54.0 66.3 headcount optimisation an
Slide 49: 2.5 Treatment of COVID-19 rent relief - prior period restatement
2.5 Treatment of COVID-19 rent relief - prior period restatement 30-Sep-22 30-Sep-22 • The Group previously recognised rental Six months ended Reported Restatement Restated $m $m $m abatements on a straight-line basis over Revenue recognised on past due debt1 -0.1 -0.1 the remaining lease term. Reve
Slide 50: 2.6 Funds from operations (FFO)
2.6 Funds from operations (FFO) 30-Sep-23 30-Sep-22 (restated) Variance • Lower operating profit has contributed to a Six months ended $m $m $m % $16.3m decrease in FFO. (Appendix 2.1) Loss after tax -36.5 -151.1 +114.5 +75.8 Adjusted for: Net fair value loss on investment properties (Appendix 2.1)
Slide 51: 2.7 Adjusted funds from operations (AFFO)
2.7 Adjusted funds from operations (AFFO) 30-Sep-23 30-Sep-22 • Lower FFO – driven by a lower Variance Six months ended (restated) $m $m $m % operating profit - resulted in a $16.6m AFFO decrease on the prior period. Funds from operations (FFO)1 (Appendix 2.6) 49.5 65.8 -16.3 -24.8 Adjusted for • On
Slide 52: 2.8 Dividends
2.8 Dividends 30-Sep-23 30-Sep-22 30-Sep-23 30-Sep-22 Six months ended 1 • Dividend payout ratio returns to within $m $m cps cps1 target payout range of 90-100% of Cash dividend 45.2 44.8 2.85 2.85 AFFO, following the prior years’ Imputation credits 7.8 8.9 0.49 0.56 retention of earnings to assist
Slide 53: 2.9 Financial results like-for-like comparison
2.9 Financial results like-for-like comparison Net rental Operating Net loss after Adjusted funds • Decrease in net rental income, profit before from income tax tax operations operating profit before tax and AFFO follows disposal of Northlands, 44 The September 2022: reported $106.4m $71.5m -$151.1m
Slide 54: 2.10 Balance sheet
2.10 Balance sheet 30-Sep-23 31-Mar-23 Movement • Investment properties value decrease As at $m $m $m % driven by $131.2m of net disposals and an $81.1m fair value loss, offset by an Investment properties (Appendix 2.11) 3,101.5 3,194.0 -92.5 -2.9 additional $96.3m in capital Cash (Appendix 2.12) 15
Slide 55: 2.11 Investment properties movement
$m Property portfolio fair value as at Mar-23 Westgate Lifestyle, IKEA land disposals Acquisitions Disposals Acquisitions Sylvia Park Precinct LynnMall The Plaza 2.11 Investment properties movement Vero Centre Capital Expenditure Drury Other Fair value change Movement in lease liabilities Property p
Slide 56: 2.12 Net finance debt movement
$m As at Net finance debt Bonds (Appendix 2.10) As at Mar-23 Bank debt (Appendix 2.10) Cash on deposit (Appendix 2.10) Net rental income Interest and finance charges Employment/ -15.9 500.4 605.0 30-Sep-23 1,089.5 admin expenses 2.12 Net finance debt movement Acquisition of investment properties -17
Slide 57: 2.13 Capital management metrics
2.13 Capital management metrics Finance debt metrics as at 30-Sep-23 31-Mar-23 1 Weighted average term to maturity 3.6 years 3.8 years Weighted average interest rate (Incl. of bonds, active interest rate derivatives, margins and line fees) 5.52% 5.18% Covenants – gearing as at 30-Sep-23 31-Mar-23 1
Slide 58: 2.14 Fixed-rate debt profile
2.14 Fixed-rate debt profile Fixed-rate profile (inclusive of bonds on issue Sep-23: $500m, Mar-23: $625m) 30-Sep-23 31-Mar-23 • Percentage of drawn finance debt at Percentage of drawn finance debt at fixed rates 78% 84% fixed rates has decreased primarily Weighted average interest rate of active fi
Slide 59: 2.15 Finance debt facilities
2.15 Finance debt facilities 30-Sep-23 Debt maturity profile as at: Debt sources $m % 13.8% FY24 - - 34.5% 8.6% FY25 $125 $50 125.0 8.6% $33.0 $50.0 FY26 $100 $50 $25 $33 208.0 14.3% 13.8% FY27 $125 $50 $33 $125 333.0 23.0% 8.6% 6.9% 6.9% 6.9% FY28 $150 $175 $100 $50 $34 509.0 35.1% FY29 $150 150.0
Slide 60: 2.16 Finance debt facilities – post half-year
2.16 Finance debt facilities – post half-year 30-Sep-23 Debt maturity profile as at: Debt sources $m % 6.2% FY24 - - 17.2% FY25 $125 $50 125.0 8.6% 4.8% $33.0 $50.0 34.5% FY26 $100 100.0 6.9% 13.8% FY27 $50 $50 100.0 6.9% 6.9% 4.8% 4.8% 6.9% FY28 $100 $70 $100 $50 $34 $70 $90 514.0 35.4% FY29 $150 $
Slide 61: Glossary
Glossary 61
Slide 62: 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 63: Glossary
Glossary Like-for-like retail sales Only includes sales from those tenants who have traded for the past 24 months. Loss after income tax The reported loss after income tax has been prepared in accordance with GAAP and complies with New Zealand Equivalents to International Financial Reporting Standar
Slide 64: Thank you
Thank you 64