Kiwi Property Group Ltd. · NZX:KPG
Kiwi Property — FY2017 Earnings Presentation
64 slides from Kiwi Property's earnings presentation, May 22, 2017
Slide 1: kiwi
kiwi
Slide 2: annual result
annual result FOR THE YEAR ENDED 31 MARCH 2017 Kiwi Property kiwi 2-19 strategy overview 3-4 how we've delivered 5-13 annual result 14-17 outlook and dividend guidance 18-19 property 20-49 appendix 1.00 property portfolio review 22-34 appendix 2.00 development update 35-46 appendix 3.00 markets upda
Slide 3: we are guided by our vision, objective and goals
we are guided by our vision, objective and goals our vision our goals to deliver New Zealand’s best retail and workplace experiences our objective to provide investors with a reliable investment in New Zealand property, targeting superior, risk-adjusted returns over time through the ownership and ac
Slide 4: we have a clear investment strategy
we have aclear investment strategy our investment strategy our core portfolio we invest in a diversified portfolio of retail and office assets that are expected to outperform by consistently attracting high levels of tenant demand Auckland we have a strong bias to Auckland given its superior prospec
Slide 5: WESTGATE LIFESTYLE ASB NORTH WHARF VERO CENTRE
WESTGATE LIFESTYLE ASB NORTH WHARF VERO CENTRE SYLVIA PARK LIFESTYLE LYNNMALL SYLVIA PARK DRURY
Slide 6: we're growing with Auckland
we're growing with Auckland TR econ ap. fp we've assembled a mixed-use town @ Ro ey ee centre development site in Drury, yo i se, 35kms south of Auckland’s CBD if Not to scale. A : Actual boundary Rhee s Baty, locations may s ie differ a 2 ae Ae, a Swe a Bt ‘ | _ a key transaction and property metri
Slide 7: we're increasing our exposure to dominant regional assets
we're increasing our exposure to dominant regional assets investment rationale @ New Zealand’s largest single-site retail centre @ located in New Zealand's ‘golden triangle’ of population growth @ located in Hamilton’s growth corridor @ dominates its catchment, with >30% share of retail sales @ posi
Slide 8: we're creating exceptional retail places
we're creating exceptional retail places Zp ?? 208 Sibi ark development we're investing in Sylvia Park to create a vibrant, customer-focused town centre H&M and Zara dining lane office building central carpark galleria/south carpark Status complete under construction under construction under constru
Slide 9: we're evolving our retail mix
we're evolving our retail mix specialty retail composition change 2011 to 2017 (NLA sqm) General | Services as Food De shod -3,000 -2,000 -1,000 +0 41,000 +2,000 +3,000 since 2011, we've downsized our specialty fashion offer to provide a greater range of food and retail services specialty retail pro
Slide 10: we're providing better customer experiences
we're providing better customer experiences our ongoing investment in technology is helping us provide our customers with a better overall retail experience carpark electric vehicle wifi websites management charging stations systems carpark management 22 electric vehicle we're rolling out better our
Slide 11: our centres are responding with improved sales
our centres are responding with improved sales DD *', (eal sles by conte 1.12 retail sales by category total sales of $1.7 billion have been recorded across our shopping centre portfolio, with strong growth in discretionary spend categories total sales growth overall excl. supermarkets ce) e) +5.8%
Slide 12: we're creating exceptional office environments
we're creating exceptional office environments 2.10 The Aurora Centre 2.11 44 The Terrace we've created a modern, seismically resilient government office precinct in Wellington The AuroraCentre 44 The Terrace Status Complete Complete! Completion Jul-16 Sep-16 % NBS 90% - 100% 85% Current value $140.
Slide 13: we're growing external assets under management
we're growing external assets under management since 2014, we've grown external assets under management to approximately $400 million external assets under management ($m) $400 A The Base, Hamilton Managed on behalf of joint-venture owners > 205 Queen, Auckland Managed on behalf of third-party owner
Slide 14: our strategy is delivering robust financial results
our strategy is delivering robust financial results $ we've delivered record funds from 143.0m operations, assisted by increased profit after tax rental income from development and acquisition activity and supported by underlying rental growth $102.8m funds from operations +$11.7m_ +12.8% 7.95cps 6.
Slide 15: we've maintained a strong balance sheet
we've maintained a strong balance sheet $ we've increased the size and quality 3.O0b of the portfolio while maintaining property assets conservative gearing +$299.5m +11.2% 34.5” gearing +420 bps $1.39 net asset backing per share 1.03 portfolio statistics 4.06 balance sheet 4.09 finance debt facilit
Slide 16: our active capital management approach continues to add value
our active capital management approach continues to add value $125m bond issue 7 years, 4.00% coupon 4.61” weighted average cost of debt FY16: 4.88% 3.5 years weighted average term to maturity of debt FY16: 3.9 years we've continued to diversify our sources of debt with a successful bond issue and h
Slide 17: we've created a stronger portfolio
we've created a stronger portfolio 2 7% the successful execution of our ° investment strategy has resulted ina like-for-like rental growth stronger portfolio - +17.0% total rental growth - supported by high percentage of structured rent reviews 98.8” occupancy - above the portfolio long-term average
Slide 18: we will continue to deliver on our strategy
we will continue to deliver on our strategy advance our town centre vision Sylvia Park - complete the dining lane - advance our office building and central carpark projects - obtain board approval for the galleria expansion and south carpark Drury - settle our land acquisitions and commence the rezo
Slide 19: we're forecasting an increased dividend
we're forecasting an increased dividend FY18 cash dividend guidance 6.85 cents per share! Cash dividend (cents per share) 7.00 6.90 6.85 6.80 6.70 6.75 6.60 6.60 6.50 6.50 6.40 6.40 6.30 6.20 2014 2015 2016 2017 2018 Note 1 Subject to a continuation of reasonable economic conditions. Kiwi Property r
Slide 20: property
property
Slide 21: property appendices: index
property appendices: index property portfolio review development update @ market update 1.01 our portfolio 22 development pipeline 35 3.01 New Zealand economic overview 47 1.02 property portfolio summary 23 2.02 Sylvia Park ground floor 36 3.02 Auckland CBD office market 48 1.03 portfolio statistics
Slide 22: our portfolio
our portfolio JA Sylvia Park ¢ ly retail portfolio [Westgate Lifestyle Centre Place - NoRth office portfolio 44 The Terrace Kiwi Property 2017 annual result presentation | 22 May 2017 | 22
Slide 23: property portfolio summary
property portfolio summary 71.02 31-Mar-17 31-Mar-16 Retail Office Total Total Number of assets @ 1.03 9 5 14 14 Value ($000)!2 @ 1.03 2,019.4 879.1 2,898.5 2,608.2 Proportion of total portfolio by value 68% 30% 98% 98% Weighted average capitalisation rates? @ 1.03 6.52% 6.13% 6.40% 6.61% Over/(unde
Slide 24: portfolio statistics
portfolio statistics 1.03 Adopted value $m Capitalisation rate % NLA sqm Occupancy % WALT years 31-Mar-17__31-Mar-16 31-Mar-17 31-Mar-16 31-Mar-17 31-Mar-16 31-Mar-17 31-Mar-16 31-Mar-17 31-Mar-16 Sylvia Park 755.0 704.0 5.88 6.00 73,852 68,783 100.0 100.0 3.6 3.6 Sylvia Park Lifestyle 70.9 69.8 6.3
Slide 25: rental income
rental income 31-Mar-17 31-Mar-16 Variance Like-for-like variance $m $m $m % $m % Sylvia Park! 40.8 38.6 +2.2 +5.6 +21 +5.8 Sylvia Park Lifestyle 48 AT +0.1 +2.6 LynnMall 18.3 16.4 +1.9 411.8 Westgate Lifestyle 44 - +4.4 +100.0 The Base 98 - +9.8 +100.0 Centre Place - North 5.6 5.7 -0.1 2.8 -0.2 2.8
Slide 26: capitalisation rate history
capitalisation rate history 21.05 9.00% 8.48% 8.50% 7.99% 8.00% 714% 7.50% 7.00% 6.50% 6.52% 6.40% 6.13% 6.00% S S 3 2 i = 2 = 2 2 = a 2 rus a c s a pes jas A js = = $s 2 = = = = = = 2 Key: Retail Pottice | Investment portfolio Kiwi Property 2017 annual result presentation | 22 May 2017 | 26
Slide 27: geographic diversification
geographic diversification ($1.82b) Aucklan 01 2 x shopping centres 2 x large format retail centres 2 x office buildings 1x 34 party management mandate ($265m) Hamilton... 900 ¢ 6 } 2.x shopping centres 2.x 3" party management mandates 2% 0 1x shopping centre 1x shopping centre 3 x office buildings
Slide 28: sector and grade diversification
sector and grade diversification sector diversification by investment portfolio value Retail 68% Office 30% Other 2% 71.07 retail diversification by retail portfolio value ya Regional centres 89% Large format centres 8% Sub-regional centres 3% office diversification by office portfolio value a Premi
Slide 29: new leasing and rent reviews
new leasing and rent reviews 71.08 Rent reviews Retail Office Total _ retail office No. 593 31 624 - performance - rent reviews have NLA (sqm) 152,200 37,400 189,600 underpinned by provided uplift ahead of % investment portfolio NLA 32 8 40 predominance of annual CPI Rental movement (%) +3.4 +3.5 +3
Slide 30: lease expiry profile
lease expiry profile lease expiry profile % of investment portfolio gross income 60% 50% 40% 30% 20% 15.2% 10.3% 10.3% 10% 75% 9 0% Vacant or FY18 FY19 FY20 FY21 holdover Key: [) retail Potice 3.0% TT | 53.7% FY22+ 71.09 retail -acyclical expiry peak occurs at Sylvia Park across 2018 and 2019, coinc
Slide 31: ● ● ● ● ● ● ● ● ● ● ● ● ● ●
● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ●
Slide 32: retail sales by centre
retail sales by centre JA 1.11 MAT $m % var. from Mar-16 Specialty sales? 31-Mar-17 Total Like-for-like $/sqm GOC% like-for-like sales growth by centre Sylvia Park 504.9 +11.0 +42 12,000 12.6 Sylvia Park | Sylvia Park Lifestyle! 9.6 +15.4 n/a 3,900 9.4 LynnMall | LynnMall 233.5 +10.7 +17 9,500 11.2
Slide 33: retail sales by category
retail sales by category PP 1.12 MAT $m. % var. from Mar-16 31-Mar-17 Total Like-for-like like-for-like sales growth by category e Home improvement! 41.5 -0.1 -0.1 Home improvement I e Department stores / DDS 251.7 4+2.2 4+2.2 Department stores / DDS — e Cinemas 36.5 +178 +2.6 Cinemas a e Supermarke
Slide 34: sustainability achievements
sustainability achievements JA 1.13 - @ f = Zz - in October 2016, included in the - 22 electric car charging - support of - 7,700 new LED Carbon Disclosure Project's Carbon stations have now been NABERSNZ to lights installed in Leadership Group by scoring an A- installed across the portfolio, promot
Slide 35: development pipeline
development pipeline A 2.01 Sep-16 Mar-17 Sep-17 Mar-18 Sep-18 Mar-19 Sep-19 Mar-20 Beyond a Westgate Lifestyle ($82.9m) a The Aurora Centre ($71.8m) | Sylvia Park H&M ($7.3m) >$270 million of | development work | Sylvia Park Zara ($11.4m) completed in FY17 ; fs Majestic Centre ($87.5m) ; ss 44 The
Slide 36: Sylvia Park ground floor redevelopment
Sylvia Park 2.02 ground floor redevelopment LT aC Wem Wee central carpark j COMPLETE 7 UNDER CONSTRUCTION i UNDER CONSTRUCTION k UNDER CONSTRUCTION The first ever NZ _ Contemporary, landscaped pe MEenee 12,200 sqm building é A five-level carpark stores for H&M = alfresco dining experience ii compris
Slide 37: Sylvia Park first floor redevelopment
Sylvia Park P2.03 first floor redevelopment ht tiny is Le Sit es ea itil galleria and E south carpark Triad i Potential cost ~$200 million ADVANCED PLANNING _ Potential start 2018 A new galleria level providing at least one department store, a new concept café court, an expanded retail Potential com
Slide 38: Sylvia Park H&M and Zara
Sylvia Park H&M and Zara H&M successfully opened 1-Oct-16 Zara successfully opened 6-Oct-16 - 2,600 sqm store, their first in NZ - 2,500 sqm store, their first in NZ - total project cost of $7.3 million for H&M and adjacent - total project cost $11.4 million mall upgrades 8 Kiwi Property 2017 annual
Slide 39: Sylvia Park dining lane and pavilion
Sylvia Park dining lane and pavilion project overview - a contemporary alfresco dining experience that will set a new standard for suburban dining *a new landscaped town square will incorporate a signature dining pavilion *a retractable canopy will enable year-round, all-weather dining *a refreshed
Slide 40: Sylvia Park office building
Sylvia Park office building project overview - new 10-level building «nine levels of offices (11,370 sqm) * ground floor dining precinct (800 sqm) - key features + large, efficient floorplates (avg ~1,250 sqm) « ‘vertical villages’ created by central atriums -5-star Greenstar design rating * bike pa
Slide 41: Sylvia Park central carpark
Syivia Park central carpark project overview - new five-level carpark building *~600 carparks «vehicle management system *well located between Zara and H&M «will improve parking ratio to 6.0 per 100 sqm of retail NLA and relieve current parking pressures * enhanced customer amenity Financial metrics
Slide 42: Sylvia Park galleria and south carpark
Sylvia Park galleria and south carpark project overview - new galleria retail level *up to 20,000 sqm *at least one department store *new concept café court *an expanded retail offer with exciting new brands and concepts * additional multi-deck carpark providing ~900 spaces Financial metrics Forecas
Slide 43: Westgate Lifestyle
Westgate Lifestyle A 2.09 project overview - tenancies progressively opened from Mar-16 through to Aug-16 - has added to our large format retail portfolio - trading in line with expectations and expected to consolidate its position as a lifestyle shopping destination now all shops are open and the l
Slide 44: The Aurora Centre
The Aurora Centre OP project overview - completed on time and within budget * $71.8 million final cost * $10 million development margin delivered - Ministry of Social Development commenced occupation of all office floors from Aug-16 - ground floor retail tenants - Mojo and Matthews Eyewear - both co
Slide 45: 44 The Terrace
44 The Terrace a seismic strengthening and refurbishment - completed in Sep-16, on time and within budget - 12-year government leases have commenced with *Commerce Commission * Energy Efficiency and Conservation Authority * Tertiary Education Commission - post balance date, the remaining floor has b
Slide 46: The Majestic Centre
The Majestic Centre a 2.12 project overview - seismic strengthening works completed Jan-17 - tower achieved NBS rating of 100% - since project commencement in Jul-12, office leases have been completed for * 21,950 sqm (99% of office NLA) *an average lease tenure of 8.9 years - focus for FY17 is on a
Slide 47: New Zealand economic overview
New Zealand economic overview Gross domestic product (GDP)! GDP growth pa (2017 est.) —— 34% GDP (2017 est) — $264 billion GDP per capita (2017 est) $56,092 Inflation! Annual inflation (2017 est.) — 18% Labour market? Unemployment rate — 49% Currency Currency (at 14 May-17) US $1.00 = NZ $1.46 JPY10
Slide 48: Auckland CBD office market
Auckland CBD office market Ha 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 ~50,000 sqm of new A-grade space expected over 2017, incl. 17,000 sqm at the refurbi
Slide 49: Wellington CBD office market
Wellington CBD office market A 3.03 Outlook Key points (A-grade and B-grade accommodation) our Wellington office exposure A Supply - |n 2017 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 earthquake (BNZ, Defe
Slide 50: group
group
Slide 51: group appendices: index
group appendices: index O financial review oO other information 4.01 profit after tax 52 5.01 glossary 62 4.02 interest and finance charges 53 5.02 disclaimer 63 4.03 management expense ratio (MER) 54 4.04 FFO and dividends 15) 4.05 AFFO 56 4.06 balance sheet 57 4.07 investment properties movement 5
Slide 52: profit after tax
profit after tax 31-Mar-17 31-Mar-16 Variance $m $m $m % Property revenue a 1.04 238.1 208.2 +29.9 +144 Property management income 1.5 0.4 +11 +275.0 Interest and other income 0.3 02 +0.1 +50.0 Litigation settlement income 6.3 6.3 -100.0 Net fair value gain on investment properties 41.0 175.9 -134.9
Slide 53: interest and finance charges
interest and finance charges PP 4.02 31-Mar-17 31-Mar-16 Variance $m $m $m % increased interest expense Interest on bank debt -35.1 31.1 4.0 -12.9 - driven by Interest on bonds 10.8 -8.0 2.8 -35.0 * higher debt levels due to Interest expense incurred -45.9 -39.1 -6.8 -17.4 acquisitions and Interest
Slide 54: management expense ratio (MER)
management expense ratio (MER) 74.03 31-Mar-17_—31-Mar-16 Variance em $m $m_—- expense growth due to Employment and administration expenses 18.0 16.2 18 *an increase in the underlying Less expenses recov'd through property management fees 79 -6.0 41.9 number of assets owned, and Net expenses 10.1 10
Slide 55: FFO and dividends
FFO and dividends PaO 31-Mar-17 31-Mar-16 Variance $m $m $m % Profit after tax @ 4.01 143.0 250.8 -107.8 -43.0 Adjusted for Net fair value gain on investment properties @ 4.01 -41.0 -175.9 4134.9 +76.7 Loss on disposal of investment properties @ 4.01 13 - 41.3 +100.0 Net fair value loss/(gain) on in
Slide 56: AFFO
AFFO 31-Mar-17 $m Funds from operations (FFO)! @ 4.04 102.8 Adjusted for Maintenance capex -8.6 Tenant incentives provided -16.2 Adjusted funds from operations (AFFO)* 78.0 Cash dividend payout ratio to AFFO. 112% Note 1 Funds from operations (FFO) is an alternative performance measure used by Kiwi
Slide 57: balance sheet
balance sheet 31-Mar-17 31-Mar-16 Movement $m $m $m % Investment properties a 4.07 2,969.4 2669.9 +299.5 411.2 Cash @ 4.08 98 62 +3.6 +58.1 Deferred tax assets 42 6.9 -2.7 -39.1 Other assets 16.5 15.4 +1 +74 Total assets 2,999.9 2,698.4 +301.5 +11.2 Finance debt @ 4.08 1,030.4 814.2 +216.2 +26.6 Def
Slide 58: investment properties movement
OAOT t (gm) ies movemen estment propert Inve Other a@GLeyo enjen 1e4 +$20.2 $4.0 ca) £ (e) st 3 a0eua| ay! yr BURL) BION YL 5 anus onsale, ey + a 2 3 ae oO 2 r= anuag O19, gs 2 RUID O18/\ ° a a S| a al 2Ze|d OU YON - 808g aUed 5 [| ed BIAS ea 2 x 3 S QI] anos - a0e|q a1]UED oe 2 fo} Ke) a] ajAjsey!7
Slide 59: net finance debt movement
net finance debt movement ¢~) a 4.08 31-Mar-16 31-Mar-17 Bank debt 690.5 782.5 Bonds 123.7 247.9 Cash on deposit -6.2 -9.8 Net finance debt 808.0 1,020.6 1,200 4 +$91.2 +$53.5 +$218 1000 + a LS —_ | -$46.1 800 Seo =$1,020.6 600 400 T T T T T Net rental income Disposal proceeds Dividends Tax and othe
Slide 60: finance debt facilities
finance debt facilities Facilities expiring As at 31-Mar-17 $m % FY18 FYI9 258 21 FY20 258 2 FY21 259 2 FY22 325 27 FY23 FY24 125 10 Total facilities 1,225 100 Facilities drawn 1,033 84 Undrawn facilities 192 16 As at 31-Mar-17 31-Mar-16 Weighted average term to maturity for undrawn debt 3.5 years 3
Slide 61: fixed-rate debt profile
fixed-rate debt profile PaAO Fixed-rate profile (inclusive of bonds on issue (Mar-17: $250 million, Mer-16: $125 million)) 31-Mar-17 31-Mar-16 - fixed-rate term extended, Percentage of drawn finance debt at fixed rates 65% 68% assisted by the issue ofa Weighted average interest rate of active fixed-
Slide 62: glossary
glossary 75.01 Adjusted funds from operations (AFFO) AFFO is determined by adjusting FFO for further non-cash and other items which have not been adjusted in determining FFO. AFFO is calculated in accordance with the Voluntary Best Practice Guidelines issued by the Property Council of Australia. Dis
Slide 63: disclaimer
disclaimer 275.02 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 64: Kiwi Property
Kiwi Property kp.co.nz