Kiwi Property Group Ltd. · NZX:KPG
Kiwi Property — H1 2022 Earnings Presentation
55 slides from Kiwi Property's earnings presentation, Nov 22, 2021
Slide 1: Interim results presentation
Interim results presentation For the six months ended 30 September 2021
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: Agenda
Agenda Section Page Business update 4 Interim financial results 10 Appendix 1: Property update 19 Appendix 2: Financial update 36 Glossary 52 This interim result presentation for the six months ended 30 September 2021 should be read in conjunction with the NZX announcement and financial statements r
Slide 4: Business update
Business update 4
Slide 5: Interim result highlights
Interim result highlights $62.5m $143.2m $3.5b $1.42 3.06cps 2.75cps Operating profit Net profit Property portfolio Net tangible assets Adjusted funds from FY22 interim before tax after tax value per share operations per share dividend +$4.7m (+8.0%) + 89.0m (+164.1%) $ $93.6m fair value gain +6cps
Slide 6: Delivering on strategy in the 2022 financial year
Delivering on strategy in the 2022 financial year Strategy Intensify mixed-use assets Grow with third party capital Empower customer success 6
Slide 7: Build-to-rent begins at Sylvia Park
Build-to-rent begins at Sylvia Park > Development of New Zealand’s first major build-to-rent (BTR) scheme has begun at Sylvia Park. > The $221m project comprises 295 residential apartments across three separate buildings. > Facilities include co-working facilities, gymnasium, residents’ lounge, as w
Slide 8: Accelerating our development pipeline
Accelerating our development pipeline 3 Te Kehu Way now underway Delivering mixed-use at LynnMall Drury consenting continues > Construction of Sylvia Park’s > Resource consent obtained for > Fast-track application now second office building has LynnMall mixed-use tower. referred to the Environmental
Slide 9: Maintaining strong sustainability momentum
Maintaining strong sustainability momentum GRESB rating secured Vaccinating our communities Delivering on our ESG targets > Kiwi Property participated in The > Waikato’s largest vaccination > 4.5 star NABERSNZ rating achieved Global Real Estate Benchmark centre established at The Base. across three
Slide 10: Interim financial results
Interim financial results 10
Slide 11: Interim financial results 2022
Interim financial results 2022 $94.0m > Net rental income (NRI) increased 11.5% in the first half of the 2022 financial year (1H22) driven by a full period of Sylvia Park Level 1 trading. Net rental income > Net profit after tax includes a $93.6m net fair value gain +$9.7m (+11.5%) on investment pro
Slide 12: Mixed-use and office leasing activity
Mixed-use and office leasing activity 3.0% > Overall rental growth from mixed-use and office leasing activity was +3.0% driven by rent reviews (+3.7%) and new leasing (+0.6%). Total rental growth Occupancy and WALE FY21: 3.2% > 51 new leases and renewals were completed in the period. 99.8% > Occupan
Slide 13: Retail sales
Retail sales $1.41b > Retail sales bounced back from the prior comparable period, due to a combination of reduced store lockdowns and the benefit of a full period of sales at Total sales1 Sylvia Park’s Level 1 expansion. Sep 20: $1.22b > On an MAT basis, total sales were up 15.5% across our mixed-us
Slide 14: Capital management
Capital management 3.77% > $700m of bank debt facilities were refinanced in May 2021, with a further $100m refinanced in August 2021. Overall bank facilities were reduced from $825m to Weighted average $800m. cost of debt > KPG010 $125m green bond matured in August 2021. FY21: 4.19% > KPG050 $150m g
Slide 15: Balance sheet
Balance sheet $3.5b > Property assets increased in value following a $93.6m fair value gain (after accounting for acquisitions and capex). Property assets > The COVID-19 related decline in property values recorded in March 2020 continues to unwind. FY21: $3.3b (+$0.2b) > Uplift in property portfolio
Slide 16: FFO and AFFO per share
FFO and AFFO per share 3.67cps > AFFO per share increased 31.6%, driven by a lower level of COVID-19 rent abatements in the period. FFO > The AFFO payout ratio of 90% remains in-line with the target range. +0.13 cps (+3.8%) 3.06cps AFFO +0.74 cps (+31.6%) 90% AFFO payout ratio General note: FFO and
Slide 17: Dividend payment and guidance
Dividend payment and guidance > Kiwi Property will pay an interim dividend of 2.75 cents per share (cps) for the six months ended 30 September 2021. > 2H22 rental abatement costs expected to be similar to those incurred in 1H221. > Despite this impost, the company continues to target a total full-ye
Slide 18: Strategic priorities for the second half of FY22
Strategic priorities for the second half of FY22 1. Move ahead with BTR and 3 Te Kehu Way developments at Sylvia Park. 2. Secure Drury Fast-track approval and begin earthworks. 3. Advance the sale process for The Plaza and Northlands. 4. Progress opportunities to grow with third party capital. 18
Slide 19: Appendix 1: Property update
Appendix 1: Property update 19
Slide 20: Contents
Contents Appendix Title Page 1.1 Our investment portfolio 21 1.2 Investment portfolio summary 22 1.3 Portfolio statistics 23 1.4 Net rental income 24 1.5 Capitalisation rate history 25 1.6 Geographic diversification – investment portfolio 26 1.7 Sector and tenant diversification – property portfolio
Slide 21: 1.1 Our investment portfolio
1.1 Our investment portfolio Sylvia Park Lifestyle LynnMall Vero Centre ASB North Wharf Sylvia Park The Base (50%) The Aurora Centre 44 The Terrace Mixed-use portfolio Office portfolio 21
Slide 22: 1.2 Investment portfolio summary
1.2 Investment portfolio summary 30-Sep-21 31-Mar-21 Mixed-use Office Total Mixed-use Office Total Number of assets (appendix 1.3) 4 4 8 4 4 8 Value ($m)1 (appendix 1.3) 1,694.0 1,051.8 2,745.8 1,623.0 1,001.6 2,624.6 % of total portfolio by value (appendix 1.7) 49 31 80 49 30 79 Weighted average ca
Slide 23: 1.3 Portfolio statistics
1.3 Portfolio statistics Adopted value $m Capitalisation rate % NLA sqm Occupancy % WALE years As at 30-Sep-21 31-Mar-21 30-Sep-21 31-Mar-21 30-Sep-21 31-Mar-21 30-Sep-21 31-Mar-21 30-Sep-21 31-Mar-21 Sylvia Park 1,145.0 1,100.0 5.38 5.50 108,164 105,875 100.0 99.8 4.3 4.3 Sylvia Park Lifestyle 94.5
Slide 24: 1.4 Net rental income
1.4 Net rental income Half year ended 30-Sep-21 30-Sep-20 Variance > Net operating income (NOI) increased $10.0m $m $m $m % on pcp, driven by a full period of Sylvia Park Sylvia Park 26.2 20.0 6.2 +31.4 Level 1, coupled with a reduction in the Sylvia Park Lifestyle 2.5 2.5 0.0 +1.4 financial impact
Slide 25: 1.5 Capitalisation rate history
1.5 Capitalisation rate history 8.50% 8.00% 7.50% 7.00% 6.50% 6.00% 5.67% 5.50% 5.33% COVID-19 5.00% Global Christchurch 4.79% Financial Crisis earthquakes 4.50% Sep-21 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 Key: Mixed-use Retail Offi
Slide 26: 1.6 Geographic diversification – investment portfolio
1.6 Geographic diversification – investment portfolio ($2.3b) 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 ($195m) Hamilton Waikato region: Pop. 458,000 (4th largest region, 9.7%
Slide 27: 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 49% Specialty stores 41% Mini-majors 14% Office 31% Banking 10% Government 8% Held for sale 9% Legal 7% Department stores and DDS
Slide 28: 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 94% Auckland 89% Specialty stores 59% Large format centres 6% Hamilton 11% Mini-majo
Slide 29: 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 21% B-grad
Slide 30: 1.10 Rent reviews and new leasing
1.10 Rent reviews and new leasing Rent reviews Mixed-use Office Total Rent reviews No. 152 15 167 > High percentage of structured reviews (81%) NLA (sqm) 53,253 31,596 84,849 provided consistent uplift, averaging +2.9% on a % investment portfolio NLA 15 9 25 compound annual basis. Rental movement (%
Slide 31: 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 > Sylvia Park Level 1 expansion contributed to a 60% longer term mixed-use expiry profile. 54% 50% > A higher percentage of longer term deals are being achiev
Slide 32: 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 8.3 ● Supermarkets 2 Ministry of Social Development 6.0 occupy ● Cinemas 2 Farmers 3.2 ● Home and
Slide 33: 1.13 Retail sales
1.13 Retail sales All centres Shopping centres > Alert level 3 and 4 restrictions prevented For the twelve months ended (incl. large format centres) (Mixed Use only) Auckland retail centres from trading for 30-Sept-2021 approximately seven weeks and non- Actual sales Adjusted sales1 Actual sales Adj
Slide 34: 1.14 Retail sales by property
1.14 Retail sales by property MAT $m1 % Var. from Sep-20 % Var. 1H22 vs PCP3 > The opening of the Sylvia Park Level 1 expansion Like-for- has driven positive growth in total sales at the 30-Sep-21 Total Total Like-for-like Year ended like centre. Sylvia Park 659.2 > Culture Kings and JD Sports ancho
Slide 35: 1.15 Retail sales by category
1.15 Retail sales by category MAT $m % var. from Sep-20 6 Mths Apr-Sep > DDS and department stores have been boosted Year ended 30-Sep-21 total like-for-like Total like-for-like by the opening of Farmers at Sylvia Park and strong performance of Kmart. Supermarkets 170.0 -1.4 -1.4 +3.4 +3.4 Departmen
Slide 36: Appendix 2: Financial update
Appendix 2: Financial update 36
Slide 37: Contents
Contents Appendix Title Page 2.1 Profit after tax 38 2.2 Operating profit before income tax 39 2.3 Interest and finance charges 40 2.4 Management expense ratio (MER) 41 2.5 COVID-19 rent relief 42 2.6 Funds from operations (FFO) 43 2.7 Adjusted funds from operations (AFFO) 44 2.8 Dividends 45 2.9 Ba
Slide 38: 2.1 Profit after tax
2.1 Profit after tax 30-Sep-21 30-Sep-20 Variance Six months ended > Property revenue increased $10.1m, $m $m $m % Property revenue 121.4 111.3 +10.1 +9.1 enabled by a full period of trading at Property management income 0.9 0.9 +0.0 +2.7 Sylvia Park’s Level 1 expansion. Total income 122.3 112.2 +10
Slide 39: 2.2 Operating profit before income tax
2.2 Operating profit before income tax 30-Sep-21 30-Sep-20 Variance Six months ended $m $m $m % Profit before income tax (Appendix 2.1) 161.0 64.2 +96.8 +150.8 Adjusted for: Net fair value gain on investment properties (Appendix 2.1) -93.6 -9.2 -84.4 -920.3 (Appendix 2.1) Loss on disposal of investm
Slide 40: 2.3 Interest and finance charges
2.3 Interest and finance charges 30-Sep-21 30-Sep-20 Variance > Capitalised interest has reduced on the pcp Six months ended $m $m $m % following the completion of works at Sylvia Park Interest on bank debt -9.6 -10.2 +0.6 +5.8 Level 1. Interest on bonds -11.6 -11.6 -0.0 -0.2 Interest on lease liabi
Slide 41: 2.4 Management expense ratio (MER)
2.4 Management expense ratio (MER) 30-Sep-21 31-Mar-21 > Growth in employment and administration Year ended $m $m expenses partially driven by investment in key Employment and administration expenses (Appendix 2.1) 25.1 23.1 personnel and additional capabilities required to Less recovered through ma
Slide 42: 2.5 COVID-19 rent relief
2.5 COVID-19 rent relief 30-Sep-21 31-Mar-21 > The table to the left shows the accounting Period ended $m $m treatment of expected rent relief for the six 6 months 12 months Gross cost of abatements months to 30 September 2021. Abatements capitalised and amortised over remaining lease terms(Appendix
Slide 43: 2.6 Funds from operations (FFO)
2.6 Funds from operations (FFO) 30-Sep-21 30-Sep-20 Variance > Higher operating profit, partially offset by Six months ended $m $m $m % higher current tax, has driven an increase in Profit after tax (Appendix 2.1) 143.2 54.2 +89.0 +164.1 FFO of 3.8%. The increase in current tax is Adjusted for: larg
Slide 44: 2.7 Adjusted funds from operations (AFFO)
2.7 Adjusted funds from operations (AFFO) Six months ended 30-Sep-21 30-Sep-20 Variance > COVID-19 rent abatements reduced on $m $m $m % the prior period, contributing to an AFFO Funds from operations (FFO)1 (appendix 2.6) 57.7 55.6 +2.1 +3.8 increase of 31.6%. Adjusted for Maintenance capital expen
Slide 45: 2.8 Dividends
2.8 Dividends 30-Sep-21 30-Sep-20 30-Sep-21 30-Sep-20 > The dividend reinvestment plan will not apply to Six months ended $m $m cps1 cps1 the 1H22 dividend. Cash dividend 43.2 34.5 2.75 2.20 Imputation credits 11.8 13.4 0.75 0.86 Gross dividend 55.0 48.0 3.50 3.06 Cash dividend payout ratio to AFFO
Slide 46: 2.9 Balance sheet
2.9 Balance sheet 30-Sep-21 31-Mar-21 Movement > Investment properties value increased driven As at $m $m $m % by a $93.6m fair value gain as well as capital Investment properties (Appendix 2.10) 3,450.3 3,331.5 +118.8 +3.6 expenditure, offset by the sale of 50% of Cash (Appendix 2.11) 11.3 16.0 -4.
Slide 47: 2.10 Investment properties movement
Property portfolio fair value as at Mar-21 Centre Place North 50% disposal Disposals Property acquisitions Acquisitions Sylvia Park LynnMall 2.10 Investment properties movement Drury Capital Expenditure Other Fair value change Movement in lease liabilities Property portfolio fair value as at Sep-21
Slide 48: 2.11 Net finance debt movement
2.11 Net finance debt movement As at 30-Sep-21 31-Mar-21 (Appendix 2.9) Bank debt 568.3 573.0 Bonds (Appendix 2.9) 500.6 476.9 Cash on deposit (Appendix 2.9) -11.3 -16.0 Net finance debt 1,057.6 1,033.9 1,150 +$32.8 +$46.3 +$10.8 1,050 +$6.8 +$18.8 +$11.9 -$8.3 950 $1,033.9 -$95.5 $1,057.6 850 750 N
Slide 49: 2.12 Finance debt facilities
2.12 Finance debt facilities 30-Sep-21 Debt maturity profile as at: Debt sources $m % FY24 - $125 125.0 9.6% $125.0 11.5% FY25 $50 $50 $50 $ 33 $50 $125 358.0 27.5% $50.0 $33.0 $50.0 11.5% 38.6% FY26 $50 $50 $50 $ 34 $50 $100 334.0 25.7% $50.0 $34.0 $50.0 FY27 $50 $50 $50 $ 33 $50 $100 333.0 25.6% 1
Slide 50: 2.13 Capital management metrics
2.13 Capital management metrics Finance debt metrics as at 30-Sep-21 31-Mar-21 Weighted average term to maturity 3.9 years 2.9 years Weighted average interest rate (Incl. of bonds, active interest rate derivatives, margins and line fees) 3.77% 4.19% Covenants – gearing as at 30-Sep-21 31-Mar-21 Gear
Slide 51: 2.14 Fixed-rate debt profile
2.14 Fixed-rate debt profile Fixed-rate profile (inclusive of green bonds on issue Sep-21: $500m, Mar-21: $475m) 30-Sep-21 31-Mar-21 Percentage of drawn finance debt at fixed rates 73% 69% Weighted average interest rate of active fixed-rate debt (excl. fees and margins) 2.53% 3.11% Weighted average
Slide 52: Glossary
Glossary 52
Slide 53: 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 54: 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 55: Thank you
Thank you Kiwi Property