Kiwi Property Group Ltd. · NZX:KPG
Kiwi Property — FY2023 Earnings Presentation
56 slides from Kiwi Property's earnings presentation, May 22, 2023
Slide 1: Annual Results Presentation FY23
Placeholder image Annual Results Annual Presentation Results Presentation For FY23 the year ended 31 March 2023 2222 May May 2023 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 update 4 Financial results 13 Appendix 1: Property update 21 Appendix 2: Financial update 37 Glossary 53 This annual results presentation for the year ended 31 March 2023 should be read in conjunction with the NZX announcement and consolidated financial statements rele
Slide 4: Business update
Business update 4
Slide 5: Kiwi Property has a clear strategy for creating long term value
Kiwi Property has a clear strategy for creating long term value Lead the market on mixed-use Reposition the business by creating flagship mixed-use assets at high-growth metropolitan town centres, driving increased income, more resilient valuations and greater shareholder returns. Lead the Grow with
Slide 6: Delivering record sales in FY23
Delivering record sales in FY23 Enabling customer and partner success $1.7b 25m Mixed-use sales Customer visits $889m $508m Sylvia Park Precinct sales The Base sales 6
Slide 7: Our robust tenant portfolio diversifies risk during economic volatility
Our robust tenant portfolio diversifies risk during economic volatility Enable customer and partner success Kiwi Property’s tenant portfolio is weighted to essential services, everyday essentials, government departments and financial services, and has a weighted average lease expiry of 4.4 years, of
Slide 8: Creating a path to value at Drury
Creating a path to value at Drury Lead the market on mixed-use • Stage one Drury earthworks progressing well. • All 13 residential super-lots now formed and at grade. • Titles expected early 2026. • Government is spending around $500m per year for the next five years on infrastructure to enable Drur
Slide 9: Building a thriving commercial hub at Sylvia Park
Building a thriving commercial hub at Sylvia Park Lead the market on mixed-use • 3 Te Kehu Way was completed in March 2023 and tenant fit outs are now underway. • The building caters to the requirements of office and medical tenants, enabling us to target new customer segments. • Continues Sylvia Pa
Slide 10: BTR moves closer
BTR moves closer Lead the market on mixed-use Auckland residential rental growth (rolling 10-year Rolling 10-year CAGR CAGR 1) 6.0% • Construction of New Zealand’s first major build-to-rent 5.0% (BTR) development is well advanced. 4.0% CAGR • Towers up to nine levels high and apartment fit-outs 3.0%
Slide 11: Executing our capital management strategy
Executing our capital management strategy Grow with diverse capital sources • Capital recycling is a central pillar of Kiwi Property’s funding strategy. Asset sales deliver a dual benefit: • Comparatively low cost of capital. • Reinvestment of proceeds helps create a newer, higher quality and lower
Slide 12: ESG: our plan to do well by doing good
ESG: our plan to do well by doing good Building a future fit business Places People Partnerships Sustainable development • Create places that • Foster wellbeing in our • Partner with others to • 8 star Homestar Design promote wellbeing. communities. enhance the wellbeing of rating – Sylvia Park BTR.
Slide 13: Financial results
Financial results 13
Slide 14: Annual financial results 2023
Annual financial results 2023 $203.7m • Net rental income increased 13.9% on the prior year to a record $203.7m, driven by the strong performance of Sylvia Park and supported by the release of COVID-19 Net rental income rental abatement accruals that were not required. +$24.9m (+13.9%) • Excluding t
Slide 15: Retail sales
Retail sales $1.72b • This is the first full year since FY19 with no COVID related closures although food courts, restaurants and cafes didn’t return to full capacity until April 2022. Total sales1 • We have seen a positive performance from all centres, FY22: $1.34b resulting in total sales growth o
Slide 16: Mixed-use and office leasing activity
Mixed-use and office leasing activity 5.2% Rental growth • Overall rental growth from mixed-use and office leasing activity was +5.2%, with new leasing +4.4% and rent Total rental growth reviews +5.3%. FY22: 4.2% • Strong uplift in leasing spreads for new lease deals across the mixed-use portfolio +
Slide 17: Balance sheet
Balance sheet $3.2b • Fair value decrease in property assets of $352.6m partially offset by an additional $184.5m in capital expenditure and property acquisitions. Property assets • Allowing for the settlement of Westgate Lifestyle on FY22: $3.6b 1 May 2023, pro-forma gearing is approximately 33.3%.
Slide 18: Capital management
Capital management 5.18% • Bank debt facilities were increased during the year from $850m to $1b and tenor extended to increase weighted average term to maturity of debt. Weighted average cost of debt • KPG060 $125m green bond issued in March 2023 for a 6.5-year term at a 6.24% coupon. FY22: 3.85% •
Slide 19: AFFO, dividend and guidance
AFFO, dividend and guidance 7.42cps 77% • AFFO per share increased 16.0%, driven by higher operating profit and a lower impact of COVID-19 in FY23. AFFO AFFO payout ratio • The Dividend Reinvestment Plan will be reinstated for the +1.02 cps (+16.0%) Q4 FY23 dividend: • Contributes to the company’s m
Slide 20: We have a clear set of priorities for FY24
We have a clear set of priorities for FY24 Artist’s impression Artist’s impression Proactive capital Drive operational Prepare for BTR Position Kiwi Property management: excellence: launch: for the future: • Mitigate interest cost • Grow sales, rents, • Launch Resido brand. • Finish Drury Stage 1 in
Slide 21: Appendix 1: Property update
Appendix 1: Property update 21
Slide 22: Contents
Contents Appendix Slide Page 1.1 Our investment portfolio 23 1.2 Investment portfolio summary 24 1.3 Portfolio statistics 25 1.4 Net rental income 26 1.5 Capitalisation rate history 27 1.6 Sector and tenant diversification – property portfolio 28 1.7 Mixed-use portfolio diversification 29 1.8 Office
Slide 23: 1.1 Our investment portfolio
1.1 Our investment portfolio Sylvia Park Shopping Centre 3 Te Kehu Way (Sylvia Park Precinct) LynnMall Sylvia Park Lifestyle ANZ Raranga (Sylvia Park Precinct) The Base Mixed-use Office Vero Centre ASB North Wharf Aurora Centre 23
Slide 24: 1.2 Investment portfolio summary
1.2 Investment portfolio summary 31-Mar-23 31-Mar-22 Mixed-use Office Total Mixed-use Office Total Number of assets (Appendix 1.3) 4 3 7 4 4 8 Value ($m)1 (Appendix 1.3) 1,912.6 879.1 2,791.7 1,911.6 1,042.3 2,953.9 % of total portfolio by value (Appendix 1.6) 60 28 88 54 29 83 Weighted average capi
Slide 25: 1.3 Portfolio statistics
1.3 Portfolio statistics Adopted value $m Capitalisation rate % NLA sqm Occupancy % WALE years As at 31-Mar-23 31-Mar-22 31-Mar-23 31-Mar-22 31-Mar-23 31-Mar-22 31-Mar-23 31-Mar-22 31-Mar-23 31-Mar-22 Sylvia Park1 1,063.8 1,071.9 5.75 5.38 94,205 94,769 99.8 99.8 3.8 4.1 ANZ Raranga 96.5 114.5 5.50
Slide 26: 1.4 Net rental income
1.4 Net rental income Year ended 31-Mar-23 31-Mar-22 Variance (restated) • Net operating income (NOI) increased $26.7m $m $m $m % (+15.3%) on the prior year, driven primarily by lower Sylvia Park 58.7 43.2 15.5 +36.0 COVID-19 rental abatements during the year. ANZ Raranga 5.1 4.8 0.3 +7.0 Sylvia Par
Slide 27: 1.5 Capitalisation rate history
1.5 Capitalisation rate history 10.00% 9.00% 8.00% 7.00% 6.07% 6.00% 5.84% 5.37% 5.00% 4.00% Global Christchurch COVID-19 Financial Crisis earthquakes 3.00% 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 Key: Mixed-use Office In
Slide 28: 1.6 Sector and tenant diversification – property portfolio
1.6 Sector and tenant diversification – property portfolio Sector diversification Tenant diversification by portfolio value by investment portfolio gross income Mixed-use 60% Specialty stores 38% Mini-majors 15% Office 28% Banking 10% Government 7% Other 8% Legal 6% Department stores and DDS 6% Held
Slide 29: 1.7 Mixed-use portfolio diversification
1.7 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% Other 11% Hamilton 10% Mini-majors 22% Large f
Slide 30: 1.8 Office portfolio diversification
1.8 Office portfolio diversification Property type Geographic diversification Tenant diversification by office portfolio value by office portfolio value by office portfolio gross income 26% Premium 55% Auckland 81% Banking 26% A-grade campus 26% Wellington 19% Legal 21% A-grade 19% Government 21% Fi
Slide 31: 1.9 Rent reviews and new leasing
1.9 Rent reviews and new leasing Rent reviews Rent reviews Mixed-use Office Total • High percentage of structured reviews (93%) No. 397 38 435 provided consistent uplift, averaging +4.0% on a NLA (sqm) 198,001 67,370 265,371 compound annual basis across the investment % investment portfolio NLA 51 1
Slide 32: 1.10 Lease expiry profile
1.10 Lease expiry profile Lease expiry profile Mixed-use % of investment portfolio gross income • Mixed-use expiries remain relatively steady over 60% the next five years. • Only 6% of the investment portfolio is currently 50% vacant or on holdover, providing significant stability. 40% 36% Office 30
Slide 33: 1.11 Tenant diversification
1.11 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 5.6 ASB Bank 8.2 ● Supermarkets 2.3 Ministry of Social Development 6.3 occupy ● Cinemas 1.9 Farmers 3.6 ● Hom
Slide 34: 1.12 Retail sales
1.12 Retail sales Vs FY22 Vs FY19 • Total sales are up 28.5% on the All centres1 Shopping centres2 All centres Shopping centres previous period and shopping centre (incl. large format (mixed-use only) (incl. large format (mixed-use only) sales are +31.8%. For the year ended 31-Mar-22 centres) centre
Slide 35: 1.13 Retail sales by property
1.13 Retail sales by property MAT $m1 MAT $m1 % Var. from 31-Mar-22 • The Sylvia Park Precinct has reached a record Year ended 31-Mar-23 Year ended 31-Mar-23 Total Like-for- $889m in sales in FY23. like Sylvia Park 860.5 Mixed-use centres 1,400.4 31.8 25.8 • The Base has reached the $500m sales Sylv
Slide 36: 1.14 Retail sales by category
1.14 Retail sales by category MAT $m % var. from 31-Mar-22 • The resolution of supply chain issues helped Year ended 31-Mar-23 Total Like-for-like department stores and DDS produce strong results on the previous year. Supermarkets 171.6 -1.8% -1.8% Department stores and DDS 167.8 27.9% 27.9% • Mini-
Slide 37: Appendix 2: Financial update
Appendix 2: Financial update 37
Slide 38: Contents
Contents Appendix Slide Page 2.1 (Loss)/profit after tax 39 2.2 Operating profit before income tax 40 2.3 Interest and finance charges 41 2.4 Management expense ratios (MER) 42 2.5 Treatment of COVID-19 rent relief – prior year restatement 43 2.6 Funds from operations (FFO) 44 2.7 Adjusted funds fro
Slide 39: 2.1 (Loss)/profit after tax
2.1 (Loss)/profit after tax Year ended 31-Mar-23 31-Mar-22 Variance (restated) • Property revenue increased $2.4m - $m $m $m % Property revenue 256.5 254.1 +2.4 +1.0 despite property disposals during the Property management income 2.5 1.8 +0.7 +44.7 year - assisted by rental growth across the portfo
Slide 40: 2.2 Operating profit before income tax
2.2 Operating profit before income tax Year ended 31-Mar-23 31-Mar-22 Variance $m $m $m % (Loss)/profit before tax (Appendix 2.1) - 214.8 260.7 -475.9 -182.4 Adjusted for: Net fair value loss/(gain) on investment properties (Appendix 2.1) 352.6 - 128.8 +481.4 +373.7 Litigation settlement income (App
Slide 41: 2.3 Interest and finance charges
2.3 Interest and finance charges 31-Mar-23 31-Mar-22 Variance • Interest costs were reflective of the Year ended $m $m $m % higher interest rate environment, with Interest on bank debt - 34.8 - 20.5 -14.3 -69.6 the weighted average interest rate Interest on bonds - 19.7 - 21.4 +1.7 +8.0 increasing 1
Slide 42: 2.4 Management expense ratios (MER)
2.4 Management expense ratios (MER) 31-Mar-23 31-Mar-22 • Decrease in MER supported by continued income Year ended generated from management of Northlands. $m $m Direct property expenses 52.8 75.4 • Reduction in direct property expenses driven by Employment and administration expenses 32.7 25.8 redu
Slide 43: 2.5 Treatment of COVID-19 rent relief - prior year restatement
2.5 Treatment of COVID-19 rent relief - prior year restatement 31-Mar-22 31-Mar-22 • The Group previously recognised rental Year ended Reported Restatement Restated $m $m $m abatements on a straight-line basis over Revenue recognised on past due debt1 +4.3 4.3 the remaining lease term. Reverse abate
Slide 44: 2.6 Funds from operations (FFO)
2.6 Funds from operations (FFO) 31-Mar-23 31-Mar-22 (restated) Variance • Higher operating profit has contributed to a Year ended $m $m $m % 13.7% increase in FFO. (Appendix 2.1) (Loss)/profit after tax - 227.7 224.3 -452.0 -201.5 Adjusted for: Net fair value loss/(gain) on investment properties (Ap
Slide 45: 2.7 Adjusted funds from operations (AFFO)
2.7 Adjusted funds from operations (AFFO) 31-Mar-23 31-Mar-22 • Higher FFO – driven by a higher Variance Year ended (restated) $m $m $m % operating profit - resulted in a +16.1% AFFO increase on the prior year. Funds from operations (FFO)1 (Appendix 2.6) 121.5 106.8 +14.7 +13.7 Adjusted for • One-of
Slide 46: 2.8 Dividends
2.8 Dividends 31-Mar-23 31-Mar-22 31-Mar-23 31-Mar-22 Year ended 1 • Retained earnings have been used to $m $m cps cps1 assist development funding, resulting in Cash dividend 89.5 87.9 5.70 5.60 a lower dividend payout ratio to AFFO. Imputation credits 17.7 22.4 1.13 1.43 Gross dividend 107.2 110.4
Slide 47: 2.9 Balance sheet
2.9 Balance sheet 31-Mar-23 31-Mar-22 Movement • Investment properties value decrease As at $m $m $m % driven by a $352.6m fair value loss, $197.7m of net disposals, offset by an Investment properties (Appendix 2.10) 3,194.0 3,567.6 -373.6 -10.5 additional $184.5m in capital Cash (Appendix 2.11) 17.
Slide 48: 2.10 Investment properties movement
$m Property portfolio fair value as at Mar-22 Northlands, 43 Langdons Road, 44 The Terrace disposals Acquisitions Disposals Acquisitions Sylvia Park Precinct LynnMall 2.10 Investment properties movement The Plaza Capital Expenditure Drury Other Fair value change Movement in lease liabilities Propert
Slide 49: 2.11 Net finance debt movement
$m As at Bonds (Appendix 2.9) Net finance debt As at Mar-22 Bank debt (Appendix 2.9) Cash on deposit (Appendix 2.9) Net rental income Interest and finance charges Employment/ -17.9 625.1 506.0 31-Mar-23 1,113.2 admin expenses 2.11 Net finance debt movement Acquisition of investment properties -11.6
Slide 50: 2.12 Finance debt facilities
2.12 Finance debt facilities 31-Mar-23 Debt sources Debt maturity profile as at: $m % 12.3% FY24 $125 125.0 7.7% 9.2% 38.5% FY25 $125 $50 $50 125.0 7.7% $33.0 $50.0 12.3% FY26 $100 $50 $25 $33 208.0 12.8% 6.2% FY27 $150 $50 $33 $150 383.0 23.6% 9.2% 6.2% 6.2% FY28 $150 $175 $100 $50 $34 509.0 31.3%
Slide 51: 2.13 Capital management metrics
2.13 Capital management metrics Finance debt metrics as at 31-Mar-23 31-Mar-22 Weighted average term to maturity 3.8 years 3.4 years Weighted average interest rate (Incl. of bonds, active interest rate derivatives, margins and line fees) 5.18% 3.85% Covenants – gearing as at 31-Mar-23 31-Mar-22 1 Ge
Slide 52: 2.14 Fixed-rate debt profile
2.14 Fixed-rate debt profile Fixed-rate profile (inclusive of green bonds on issue Mar-23: $625m, Mar-22: $500m) 31-Mar-23 31-Mar-22 • Allowing for the settlement of Percentage of drawn finance debt at fixed rates 84% 68% Westgate Lifestyle on 1 May 2023, pro- Weighted average interest rate of activ
Slide 53: Glossary
Glossary 53
Slide 54: 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 55: Glossary
Glossary Like-for-like retail sales Only includes sales from those tenants who have traded for the past 24 months. (Loss)/profit after tax The reported (loss)/profit has been prepared in accordance with GAAP and complies with New Zealand Equivalents to International Financial Reporting Standards. Th
Slide 56: Thank you
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