Kiwi Property Group Ltd. · NZX:KPG
Kiwi Property — H1 2020 Earnings Presentation
65 slides from Kiwi Property's earnings presentation, Nov 18, 2019
Slide 1: Half-Year 2020 Result Presentation
HALF-YEAR 2020 RESULT PRESENTATION 18 November 2019
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 Half-year result….....…….……………...…………………… 4 Our strategic focus..….……………………………………… 10 Our mixed-use opportunities…………………….………….. 11 Optimising our performance ..……………………………… 14 Priorities, outlook and dividend guidance .......................... 15 Appendix one: Property update ……..........
Slide 4: Sound half-year result
Sound half-year result $89.6m • Like-for-like (excluding Sylvia Park galleria, ANZ Raranga, and the sale of North City) net rental income Net rental income was +$1.8m or +2.1% -$0.3m -0.3%1 • Net profit after tax impacted by fair value loss on interest rate swaps of $51.9m $12.9m, following recent i
Slide 5: Solid rental growth
Solid rental growth 4.6% • Portfolio strength continues to improve, driven by intensive asset Total rental growth management FY19: +4.0% • New leases and renewals particularly pleasing: 99.4% • Mixed-use portfolio +14.1% • Office portfolio +8.5% • Retail portfolio +0.8% Occupancy FY19: 99.3% • Occup
Slide 6: Positive retail sales
Positive retail sales All centres Shopping centres (excl. large format • Total retail sales of $1.71 billion, (incl. large format centres) centres)1 $1.54 billion of which came from shopping centre assets Total sales (billion) $1.71 $1.54 (Mar-19: $1.53) • Increase in sales performance, with total s
Slide 7: Active capital management
Active capital management 4.52% • During the period we extended $166m of existing debt facilities Weighted average cost of debt • Equity raise undertaken post- FY19: 4.80% balance date: • Raised $180m to reduce 3.3 years gearing and fund development pipeline, and new acquisition opportunities Weight
Slide 8: Solid balance sheet
Solid balance sheet $3.3b • Property assets have increased due to development expenditure, Property assets primarily at Sylvia Park and the acquisition of 51-53 Carbine Road +$0.1b +3.5% and 7-10 Arthur Brown Place • Pro-forma gearing after allowing for 32.8% new equity of ~27.4% comfortably within
Slide 9: FFO, AFFO and half-year dividend
FFO, AFFO and half-year dividend 3.60 cps 3.21 cps • A half-year dividend of 3.525 cents per share will be paid FFO AFFO • Up 1.4% on the comparable period last year -0.07 cps -1.8% +0.10 cps +3.1% • In-line with guidance 3.525 cps FY20 half-year cash dividend +0.05 cps +1.4% 98% 110% FFO payout rat
Slide 10: Our strategic focus
Our strategic focus We have embedded our mixed-use strategy in the first six months of the 2020 financial year, realigning the business to our core priorities and creating a platform for future growth Focus on Intensify the developing a mixed-use component Optimise funds management of our business p
Slide 11: Our mixed-use opportunities
Our mixed-use opportunities Sylvia Park, Auckland LynnMall, Auckland total land holdings total land holdings 35 hectares 7 hectares The Base, Hamilton Drury, Auckland total land holdings total land holdings 30 hectares 51 hectares Kiwi Property > Type Presentation Name > Date Kiwi Property half-year
Slide 12: Delivering mixed-use at Sylvia Park
Delivering mixed-use at Sylvia Park Concept only. Subject to change Concept only. Subject to change Indicative only. Commercial tower two Build to rent (BTR) Land acquisition ADVANCED PLANNING UNDER ASSESMENT ONGOING WHERE REQUIRED • Concept plan progressing, including • Analysis of macro-fundamenta
Slide 13: Sustained progress at Sylvia Park
Sustained progress at Sylvia Park south carpark galleria Photo credit: Kmart Artist’s impression September 2019 Kmart Galleria South carpark COMPLETE IN PROGRESS IN PROGRESS • 5,000 sqm store commenced trading • New ~19,000 sqm galleria retail level • New ~900 space multi-level carpark on 15 August
Slide 14: Optimising our performance
Optimising our performance Rental growth Organisation realignment Embedding sustainability DELIVERED IN PROGRESS ONGOING • Solid growth in new and renewed • Business-wide realignment instigated • 35 free "top up while you shop" EV leases, in particular: to match teams to mixed-use and charging stati
Slide 15: We have a clear focus
We have a clear focus Intensify mixed-use Sylvia Park • Continue construction and leasing of galleria and south carpark • Progress planning of commercial tower two and confirm build to rent feasibility The Base Develop funds management • Progress plans for new food and beverage precinct • Actively p
Slide 16: Outlook and dividend guidance
Outlook and dividend guidance FY20 cash dividend guidance Kiwi Property is well positioned for 7.05 growth: • Clearly defined strategy • High-quality asset portfolio cents per share1 • Robust balance sheet • Gearing well within range • Strong development pipeline • Organisation aligned to strategic
Slide 17: Property update
Property update
Slide 18: Property update: index
Property update: index 1.01 Our portfolio 19 1.02 Property portfolio summary 20 1.03 Portfolio statistics 21 1.04 Net rental income 22 1.05 Capitalisation rate history 23 1.06 Geographic diversification 24 1.07 Sector and tenant diversification 25 1.08 Mixed-use portfolio diversification 26 1.09 Ret
Slide 19: Our portfolio
Our portfolio 1.01 Sylvia Park Sylvia Park Lifestyle LynnMall The Base (50%) The Base (50%) Westgate Lifestyle Centre Place North Vero Centre ASB North Wharf The Plaza Northlands The Aurora Centre 44 The Terrace Kiwi PropertyMixed-use Key: > Type Presentation portfolio Name > Date Retail portfolio O
Slide 20: Property portfolio summary
Property portfolio summary 1.02 30-Sep-19 31-Mar-19 Mixed-use Retail Office Total Mixed-use Retail Office Total Number of assets 1.03 4 4 4 12 4 4 4 12 Value ($m)1,2 1.03 1,612.2 604.2 894.8 3,111.2 1,533.5 597.5 893.0 3,024.0 % of total portfolio by value 1.07 49 18 27 94 48 18 28 94 Weighted avera
Slide 21: Portfolio statistics
Portfolio statistics 1.03 Adopted value $m Capitalisation rate % NLA sqm Occupancy % WALE years As at 30-Sep-19 31-Mar-19 30-Sep-19 31-Mar-19 30-Sep-19 31-Mar-19 30-Sep-19 31-Mar-19 30-Sep-19 31-Mar-19 Sylvia Park 1,030.5 955.0 5.38 87,455 86,427 99.6 100.0 4.1 4.2 Sylvia Park Lifestyle 77.0 77.0 6.
Slide 22: Net rental income
Net rental income 1.04 30-Sep-19 30-Sep-18 Variance • Solid growth in rental income at The Base Six months ended $m $m $m % underpinned by new lettings, while in Sylvia Park 21.8 21.4 +0.4 +1.8 contrast, Centre Place North experienced Sylvia Park Lifestyle 2.6 2.6 +0.1 +2.8 increased vacancies durin
Slide 23: Capitalisation rate history
Capitalisation rate history 1.05 8.48% 8.50% 8.43% 8.00% 7.99% 7.50% 7.53% 7.09% 7.00% 6.50% 6.00% 5.99% 5.71% 5.50% 5.45% 5.00% Mar-10 Mar-11 Mar-12 Mar-13 Mar-14 Mar-15 Mar-16 Mar-17 Mar-18 Mar-19 Mar-07 Mar-08 Mar-09 Key: Mixed-use Retail Office Investment portfolio Kiwi Property > Type Presentat
Slide 24: Geographic diversification
Geographic diversification 1.06 Geographic diversification ($2.37b) Auckland by portfolio value Auckland region: Pop. 1,572,000 (Largest region, 33.4% of NZ) 3 x mixed-use assets 1 x retail asset 2 x office assets ($278m) Hamilton Waikato region: Pop. 458,000 (4th largest region, 9.7% of NZ) 1 x mix
Slide 25: Sector and tenant diversification
Sector and tenant diversification 1.07 Sector diversification Tenant diversification by portfolio value by investment portfolio gross income Mixed-use 49% Specialty stores 47% Mini-majors 13% Retail 18% Banking 8% Government 7% Office 27% Department stores and DDS 6% Legal 5% Other 6% Supermarkets 4
Slide 26: Mixed-use portfolio diversification
Mixed-use portfolio diversification 1.08 Property type Geographic diversification Tenant diversification by mixed-use portfolio value by mixed-use portfolio value by mixed-use portfolio gross income Regional centres1 95% Auckland 86% Specialty stores 60% Large format centres 5% Hamilton 14% Mini-maj
Slide 27: Retail portfolio diversification
Retail portfolio diversification 1.09 Property type Geographic diversification Tenant diversification by retail portfolio value by retail portfolio value by retail portfolio gross income Regional centres 76% Christchurch 41% Specialty stores 66% Large format centres 15% Palmerston North 35% Mini-maj
Slide 28: Office portfolio diversification
Office portfolio diversification 1.10 Property type Geographic diversification Tenant diversification by office portfolio value by office portfolio value by office portfolio gross income Premium 50% Auckland 76% Government 26% A-grade campus 26% Wellington 24% Banking 25% A-grade 18% Legal 20% B-gra
Slide 29: Rent reviews and new leasing
Rent reviews and new leasing 1.11 Rent reviews Mixed-use Retail Office Total Rent reviews No. 149 105 28 282 • High percentage of structured reviews (81%) NLA (sqm) 54,296 34,841 54,433 143,570 has again provided consistent uplift, % investment portfolio NLA 12 8 12 33 averaging +2.6% on a compound
Slide 30: Lease expiry profile
Lease expiry profile 1.12 Mixed-use and retail Lease expiry profile % of investment portfolio gross income • Our focus for FY20 is on specialty store 50% expiries across our mixed-use and retail 47% portfolios 40% Office 30% • We remain focused on leasing up vacancy at the Vero Centre 20% • Approxim
Slide 31: Tenant diversification
Tenant diversification 1.13 Tenant diversification Top 20 tenants Our top 20 tenants % of investment portfolio gross income % of investment portfolio gross income ● Department stores and DDS 6 ASB Bank 7.0 ● Supermarkets 4 Ministry of Social Development 5.0 occupy 51% ● Cinemas 2 Farmers 3.2 ● Home
Slide 32: Retail sales by centre
Retail sales by centre 1.14 Pedestrian MAT $m % Var. from Sep-18 Specialty sales1 count • Overall sales (excluding large format Like-for- centres) grew by +2.3% or 2.2% like-for- Year ended 30-Sep-19 Total like $/sqm GOC% Million pa like Sylvia Park 559.0 • Specialty sales grew to $11,400 per LynnMa
Slide 33: Retail sales by category
Retail sales by category 1.15 MAT $m % Var. from Sep-18 • Positive growth has been recorded across Year ended 30-Sep-19 Total Like-for-like most categories, with particularly good uplift from: Shopping centres ● Supermarkets 295.4 -2.3 +3.1 • Commercial services; discretionary spend ● Department sto
Slide 34: Development update
Development update
Slide 35: Development update: index
Development update: index 2.01 Development pipeline 36 2.02 Sylvia Park: Kmart 37 2.03 Sylvia Park: galleria and south carpark 38 2.04 Sylvia Park: progress update image 39 2.05 Sylvia Park: completed project render 40 Kiwi Property > Type Presentation Name > Date Kiwi Property half-year 2020 result
Slide 36: Development pipeline
Development pipeline 2.01 Mar-18 Sep-18 Mar-19 Sep-19 Mar-20 Sep-20 Mar-21 Sep-21 beyond Langdons Quarter Sylvia Park Kmart ~$258 million of Sylvia Park galleria & south carpark development in progress Drury structure planning Drury plan change activities Drury design & development The Base food & b
Slide 37: Sylvia Park: Kmart
2.02 Sylvia Park Kmart Project overview • New 5,000 sqm store • Conversion of the previous Countdown tenancy • Initial 10-year lease • Commenced trading 19 August 2019 Financial metrics Total project cost $12.6m Timetable Construction commenced Oct-18 Construction completed Aug-19 spent to to spend
Slide 38: Sylvia Park: Galleria and south carpark
2.03 Sylvia Park Galleria and south carpark Project overview • New galleria retail level: •~19,000 sqm with ~60 new retailers •Two-level Farmers department store •Next generation casual dining experience •Retailers have committed to two-thirds of space by NLA • New five level ~900 space carpark buil
Slide 39: Sylvia Park galleria and south carpark progress update
Sylvia Park galleria and south carpark Progress update as at September 2019 2.04 39
Slide 40: Sylvia Park galleria and south carpark render
Sylvia Park galleria and south carpark 2.05 Render showing completed project Artist’s impression. Concept only. Subject to change 40
Slide 41: Market update
Appendix break slide Market update Kiwi Property > Type Presentation Name > Date Kiwi Property half-year result presentation 2020 41
Slide 42: Market update: index
Market update: index 3.01 NZ economic overview 43 3.02 Auckland CBD office market 44 3.03 Wellington CBD office market 45 Kiwi Property > Type Presentation Name > Date Kiwi Property half-year 2020 result presentation 42
Slide 43: New Zealand economic review
New Zealand economic review 3.01 Gross domestic product (GDP)1 GDP trend GDP growth pa (Mar-19 estimate) 2.7% 400 $296b 6% GDP growth (% pa) GDP (LHS) GDP ($ billion) 300 4% GDP (2019 estimate) $296 billion 200 2% GDP per capita (2019 estimate) $60,995 2.7% 100 0% GDP growth (RHS) 0 -2% Inflation2 M
Slide 44: Auckland CBD office market
Auckland CBD office market 3.02 Outlook Key points (premium and a-grade accommodation) Our Auckland office exposure ► Supply - Premium: no change to stock until completion of the 39,000 sqm PwC Tower, now 2020 - A-grade: stock is expected to increase by over 35,000 sqm in 2021 with the completion of
Slide 45: Wellington CBD office market
Wellington CBD office market 3.03 Outlook Key points (a-grade and b-grade accommodation) Our Wellington office exposure ▲ Supply - A-grade: in 2019, nearly 50,000 sqm of a-grade space is expected to re-enter supply, predominantly the return of buildings withdrawn for repair post the 2016 earthquake
Slide 46: Financial update
Financial update Kiwi Property > Type Presentation Name > Date Kiwi Property half-year 2020 result presentation 46
Slide 47: Financial update: index
Financial update: index 4.01 Profit after tax 48 4.02 Interest and finance charges 49 4.03 Management expense ratio (MER) 50 4.04 Funds from operations (FFO) 51 4.05 Dividends 52 4.06 Adjusted funds from operations (AFFO) 53 4.07 Balance sheet 54 4.08 Investment properties movement 55 4.09 Net finan
Slide 48: Profit after tax
Profit after tax 4.01 30-Sep-19 30-Sep-18 Variance Rental income Six months ended $m $m $m % • Increased due to rental growth at the Vero Centre and lease up of Property revenue 1.04 117.3 116.9 +0.4 +0.3 ANZ Raranga Property management income 0.9 1.0 -0.1 -16.4 Interest and other income 0.1 0.1 - I
Slide 49: Interest and finance charges
Interest and finance charges 4.02 30-Sep-19 30-Sep-18 Variance Interest on bank debt Six months ended $m $m $m % • Reduced due to lower Interest on bank debt -12.8 -13.2 +0.4 +3.0 interest rates and new bond Interest on bonds -11.6 -9.4 -2.2 -23.4 issue Interest expense incurred -24.4 -22.6 -1.8 +8.
Slide 50: Management expense ratio (MER)
Management expense ratio (MER) 4.03 30-Sep-19 31-Mar-19 • 30-Sep-19 costs include one-off Twelve months ended $m $m organisational realignment expenses Employment and administration expenses 4.01 20.8 20.9 Less recovered through property management fees -8.3 -8.5 • Asset growth due to new Net expens
Slide 51: Funds from operations (FFO)
Funds from operations (FFO) 4.04 30-Sep-19 30-Sep-18 Variance Six months ended $m $m $m % Profit after tax 4.01 36.8 48.3 -11.5 -23.8 Adjusted for Loss/(gain) on disposal of investment properties 4.01 - -0.6 +0.6 +100.0 Net fair value loss on interest rate derivatives 4.01 12.9 2.9 +10.0 +340.1 Stra
Slide 52: Dividends
Dividends 4.05 30-Sep-19 30-Sep-18 30-Sep-19 30-Sep-18 2 Six months ended $m $m cps cps2 Funds from operations (FFO)1 4.04 51.9 52.3 3.605 3.661 Amount retained -1.0 -2.6 -0.08 -0.186 Cash dividend 50.9 49.7 3.525 3.475 Imputation credits 13.0 13.3 0.900 0.930 Gross dividend 63.9 63.0 4.425 4.405 Ca
Slide 53: Adjusted funds from operations (AFFO)
Adjusted funds from operations (AFFO) 4.06 30-Sep-19 30-Sep-18 variance Six months ended $m $m $m % Funds from operations (FFO)1 4.04 51.9 52.3 -0.5 -0.9 Adjusted for Maintenance capital expenditure -2.5 -2.9 +0.5 +16.9 Tenant incentives and leasing fees -3.2 -5.0 +1.8 +45.8 Adjusted funds from oper
Slide 54: Balance sheet
Balance sheet 4.07 30-Sep-19 31-Mar-19 Movement • Investment properties and As at $m $m $m % gearing increased due to: Investment properties 4.08 3,330.0 3,207.4 +122.6 +3.8 • Acquisition of properties Cash 4.09 11.1 9.9 +1.2 +12.1 adjacent to Sylvia Park Other assets 15.0 19.1 -4.1 -21.5 • Capital
Slide 55: Investment properties movement
Investment properties movement ($m) 4.08 3,500 3,400 +$3.4 +$6.1 +$75.8 +$5.8 +$6.0 3,300 +$25.5 3,200 3,100 3,000 2,900 =$3,330.0 +$3,207.4 2,800 2,700 2,600 2,500 Retail assets Mixed-use assets Mar-19 NZ IFRS 16 Right-of-use assets Acquisition: Sylvia Park adjoining Sylvia Park Sep-19 Office asset
Slide 56: Net finance debt movement
Net finance debt movement ($m) 4.09 As at 30-Sep-19 31-Mar-19 Bank debt 625.5 527.0 Bonds 475.2 474.7 Cash on deposit -11.1 -9.9 Net finance debt 1,089.6 991.8 1,200 +$88.9 +$32.2 +$18.7 1,100 1,000 +$18.8 +$12.8 +$25.5 900 800 -$99.1 $1,089.6 700 $991.8 600 500 400 Tax and other Net finance debt Se
Slide 57: Finance debt facilities
Finance debt facilities ($m) 4.10 Debt maturity profile Debt sources as at 30-Sep-19 $m % FY20 11% FY21 $52.5 $74.0 $80.0 $33.0 $53.0 292 22 FY22 $35.0 $34.0 $125.0 194 15 37% 14% FY23 $32.5 $25.0 $33.0 $32.5 123 10 FY24 $27.5 $20.0 $100.0 $27.5 $125.0 300 23 FY25 $31.5 $47.0 $56.0 $31.5 $125.0 291
Slide 58: Capital management metrics
Capital management metrics 4.11 Finance debt metrics as at 30-Sep-19 31-Mar-19 Weighted average term to maturity 3.3 years 3.2 years Weighted average interest rate (Incl. of bonds, active interest rate derivatives, margins and line fees) 4.52% 4.80% Covenants – gearing as at 30-Sep-19 31-Mar-19 Gear
Slide 59: Fixed-rate debt profile
Fixed-rate debt profile 4.12 Fixed-rate profile (inclusive of bonds on issue Sep-19: $475 million, Mar-19: $475 million) 30-Sep-19 31-Mar-19 Percentage of drawn finance debt at fixed rates 73% 80% Weighted average interest rate of active fixed-rate debt (excl. fees and margins) 3.40% 3.40% Weighted
Slide 60: Other information
Appendix break slide Other information Kiwi Property > Type Presentation Name > Date Kiwi Property half-year result presentation 2020 60
Slide 61: Other information: index
Other information: index 5.01 Glossary 62 5.02 Calendar of key dates 64 Kiwi Property > Type Presentation Name > Date Kiwi Property half-year 2020 result presentation 61
Slide 62: Glossary
Glossary 5.01 Adjusted funds from operations AFFO is an alternative non-GAAP performance measure used by Kiwi Property. AFFO is a measure commonly (AFFO) used by real estate entities to describe their underlying and recurring cash flows from operations. Broadly, AFFO adjusts FFO by deducting the cos
Slide 63: Glossary
Glossary 5.01 Gross occupancy cost Total gross occupancy costs expressed as a percentage of moving annual turnover (excluding GST). (GOC) Like-for-like retail sales Only includes sales from those tenancies who have traded for the past 24 months. Management expense ratio MER is an alternative non-GAA
Slide 64: Calendar of key dates
Calendar of key dates 5.02 2020 half-year result announcement 18 November 2019 Retail share offer settlement and commencement of new share trading 21 November 2019 Half-year dividend payment (for the six months ending 30 September 2019) • Ex date 2 December 2019 • Record date 3 December 2019 • Payme
Slide 65: Disclaimer
Disclaimer 5.03 Kiwi Property Group Limited (‘Kiwi Property’) has prepared this presentation (the ‘Presentation’). 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 intend