Kiwi Property Group Ltd. · NZX:KPG
Kiwi Property — Kiwi Income Property Trust — FY2014 Earnings Presentation
40 slides from Kiwi Property's earnings presentation, May 20, 2014
Slide 1: Annual Result, Kiwi Income Property Trust, 31 March 2014
KIWI INCOME 31 MARCH PROPERTY TRUST 2014 Hata uuitisty arti & TN Za i i A gy of |
Slide 2: Contents
Contents 02 Result overview 06 Financial review 11 Portfolio performance 17 Development and disposal activity 21 Market overview 24 Priorities and outlook 26 Appendices This annual result presentation should be read in conjunction with the NZX announcement and 2014 online annual report released 20 M
Slide 3: Result Overview: KIP reaches milestone
RESULT OVERVIEW KIP reaches milestone Internalisation Approved - Unit Holders voted overwhelming in 12 December 2013 favour of internalisation Settlement - The settlement of the internalisation 13 December 2013 created New Zealand’s largest internally managed property entity Cost and - $72.5 million
Slide 4: Strategy Review
STRATEGY Post internalisation review of objectives, REVIEW goals and strategy OBJECTIVE GOALS STRATEGY The Trust’s objective remains Our goal is to deliver consistent The strategy to deliver on our goals unchanged and reliable returns to our continues to have three core pillars investors We remain
Slide 5: Result Overview
RESULT OVERVIEW MARKETS FINANCIAL OPERATING General economy growing positively A solid result notwithstanding one-off Improving market conditions assisted and property markets in recovery internalisation costs value growth and key metrics Economy - Recovery broadening - Business confidence positive
Slide 6: Result Overview: developments and divestment
RESULT OVERVIEW COMPLETED DEVELOPMENTS ACTIVE DEVELOPMENTS DIVESTMENT Three projects successfully Solid progress has been made on the Capital recycling to maintain balance completed during the period Trust’s development activity sheet flexibility ASB North Wharf The Majestic Centre 205 Queen - Opene
Slide 7: Rental Income
RENTAL Assisted by developments, leasing and INCOME internalisation Net operating income1 31-Mar-14 31-Mar-13 Variance For the year ended $m $m $m % - NOI increase assisted by: Sylvia Park 34.7 32.5 +2.2 +6.8 continued strong LynnMall 15.6 15.1 +0.5 +3.3 performance at Sylvia Park Centre Place 4.0
Slide 8: Financial Performance
FINANCIAL Solid performance notwithstanding one-off PERFORMANCE internalisation costs Financial performance 31-Mar-14 31-Mar-13 Variance For the year ended $m $m $m % - Operating profit increased by: Gross rental income 208.2 197.1 +11.1 +5.6 improved NRI Property operating expenditure -59.5 -61.6
Slide 9: Distributions
DISTRIBUTIONS In line with guidance Distributable income 31-Mar-14 31-Mar-13 Variance For the year ended $m $m $m % - Distributable Operating profit before other income/(expenses) and tax1 78.7 69.4 +9.3 +13.4 income improved Depreciation recovery offset2 - 3.4 -3.4 -100.0 by tax deductibility Fixed
Slide 10: Financial Position
FINANCIAL POSITION Committed to a strong financial position Financial position 31-Mar-14 31-Mar-13 Movement As at $m $m $m % Assets The Trust has a long and Investment properties Appendix 5 2,130.2 2,076.5 +53.7 +2.6 successful track record of maintaining a strong Cash Appendix 6 9.2 12.0 -2.8 -23.3
Slide 11: Bank Debt Profile
BANK DEBT Facility levels increased and PROFILE active management continues Bank facilities Facilities expiring As at 31 March 2014 $m % - Debt facilities increased FY15 - - $25 million to $875 million in FY16 ANZ $72.5 72.5 8.3 December 2013 to assist in financing internalisation payment FY17 ANZ $
Slide 12: Portfolio Metrics
PORTFOLIO METRICS Sound portfolio metrics maintained 31-Mar-14 31-Mar-13 Core portfolio metrics1 Retail Office Total Total - The addition of ASB Number of assets 6 6 12 11 North Wharf to the Value ($000) 1,390.2 674.6 2,064.8 1,874.9 portfolio has improved most metrics including, Proportion of total
Slide 13: Portfolio Value
PORTFOLIO VALUE Positive revaluation result Fair value Portfolio / property Capitalisation rates % Adopted value $m increase/(decrease) As at Mar-14 Mar-13 Var. bps Mar-14 Mar-13 $m % Sylvia Park 6.50 6.63 -13 564.0 540.0 +21.5 +4.0 An improving Auckland office LynnMall 7.13 7.38 -25 206.0 204.0 +0.
Slide 14: Portfolio Cap Rates
PORTFOLIO CAP RATES Firming trend continues March 2007 March 2011 March 2014 Valuation peak Valuation trough Current valuation 8.75% 8.48% 8.25% 7.99% 7.75% 7.74% 7.18% 7.23% 7.25% 7.19% 7.17% 6.91% 6.75% 6.70% 6.25% Mar-07 Mar-08 Mar-09 Mar-10 Mar-11 Mar-12 Mar-13 Mar-14 Sep-07 Sep-08 Sep-09 Sep-10
Slide 15: Leasing and Rent Reviews
LEASING AND RENT REVIEWS An active year for portfolio leasing NLA Uplift over prior passing rent CPI and fixed rent reviews Static portfolio activity No. of % of CAGR WALT underpin retail growth By portfolio tenancies sqm portfolio $000 % % years - Fixed and CPI-related rent Rent reviews 550 115,500
Slide 16: Expiries and WALT
EXPIRIES AND WALT WALT extended - The weighted average lease term has Weighted average lease term (by gross income) improved primarily due to: 2014 3.8 years completion of Centre Place leasing 2013 4.0 years completion of ASB North Wharf 2014 6.4 years leasing at 205 Queen 2013 4.8 years 2014
Slide 17: Sales
SALES Consumer confidence lifts sales Total sales Specialty stores Centre $m % Sales $/sqm GOC % - Increasing consumer confidence lifts Sylvia Park 459.6 +1.0 9,595 discretionary spending LynnMall 217.6 -1.2 7,441 Centre Place 80.2 +22.5 6,536 - Portfolio sales +2.1% Sales increased for 5 out of 6
Slide 18: Development Activity
DEVELOPMENT ACTIVITY Two major projects completed ASB NORTH WHARF CENTRE PLACE - ASB’s 18-year lease commenced 1 July 2013 - Opened October 2013 with Farmers, METRO by - All food and beverage tenancies now leased Hoyts and ~30 new specialty stores - Won recent NZIA ‘New Zealand Architecture Medal’ -
Slide 19: The Majestic Centre
THE MAJESTIC CENTRE Strengthening assists tenant retention PROJECT STATUS LEASING Foundations Due for structural completion August 2014 Since project commencement, a number of large occupiers have Concrete works complete by late August 2014 taken new leases within the building, including: Transfer b
Slide 20: 56 The Terrace
56 THE TERRACE Long-term Crown lease over all office space FINANCIAL METRICS Cost and value Pre-development value (Sep-13) $51.2m Development cost1 $65.7m Total investment $119.1m Estimated value on completion $120.5m Cap rate on completion 7.25% Income and yield Estimated NOI on completion ~$9.0m E
Slide 21: 205 Queen
205 QUEEN Disposal in line with strategy Transaction details Purchaser Auckland City Holdings Ltd (a company associated with Brisbane-based Bloomberg Incorporation Ltd) Tranche 1 Interest 50% Purchase price1 $47.5 million (reflecting Mar-13 independent valuation) Settled 31 January 2014 Tranche 2 In
Slide 22: Market Overview: Retail sales
MARKET OVERVIEW Retail sales Portfolio weighting by value Outlook Key points Sales growth - Increasing consumer and business confidence outlook positive - Positive GDP growth forecasts over medium term (3.6% for 2015) 65.2% - Reducing unemployment - Wages growth - Positive migration Retail sales a
Slide 23: Market Overview: Auckland CBD office
MARKET OVERVIEW Auckland CBD office Portfolio weighting by Key points: value Outlook (Premium and A-grade accommodation) Supply Prime office (Premium and A-grades) forecast to remain static over 2014 before fringe CBD A-grade development comes on stream from 2015 Absorption Solid occupier demand env
Slide 24: Market Overview: Wellington CBD office
MARKET OVERVIEW Wellington CBD office Portfolio weighting by Key points: value Outlook (A-grade and B-grade accommodation) Supply Limited new building activity forecast and the supply environment is unpredictable, being dictated by removal of buildings from the market for seismic strengthening Absor
Slide 25: 2015 Priorities
2015 PRIORITIES Continue to build for the future MAINTAIN A STRONG INTENSIVE ASSET ADD-VALUE THROUGH GENERAL BALANCE SHEET MANAGEMENT INVESTMENT DECISIONS Bed down internalisation Actively manage treasury Maintain active portfolio 56 The Terrace (Unisys - Continue to bed down the Trust position leas
Slide 26: Outlook
OUTLOOK Projected cash distribution of 6.50cpu OUTLOOK - Economy is growing and business confidence is positive - Property sector fundamentals are positive, under-pinned by rental growth prospects DISTRIBUTION GUIDANCE - Projected FY15 distribution guidance of 6.50 cents per unit Based on the outl
Slide 27: Appendices Index
APPENDICES Index Contents Appendix Page No. Strategy review Benefits of diversification 1 27 Benefits of diversification - correlation 2 28 Financial review Net interest expense 3 29 Operating profit before tax (FY13 to FY14) 4 30 Investment properties (FY13 to FY14) 5 31 Net bank debt (FY13 to FY14
Slide 28: Benefits of diversification
APPENDIX Strategy review 1 Benefits of diversification Diversification delivers superior risk-adjusted returns KIP - Income return analysis Key: Retail Office Total over time by reducing the volatility of income returns 12% Enables consistency of income through the cycle 11% 10% Provides flexibi
Slide 29: Benefits of diversification - correlation
APPENDIX Strategy review 2 Benefits of diversification - correlation Total returns between core sectors Total returns correlation – 10-year (%) show strong positive correlation >80% Retail Office Office (Akld) Office (Wgtn) Retail 100 Capital growth is similarly positively correlated Office 86 1
Slide 30: Net interest expense
APPENDIX 3 Net interest expense 31-Mar-14 31-Mar-13 Variance For the year ended $m $m $m % Interest income 0.4 1.6 -1.2 -75.0 Interest on bank debt -50.4 -52.3 +1.9 +3.6 Interest on MCNs -10.7 -10.7 - - Net interest expense incurred -60.7 -61.4 +0.7 +1.3 Interest capitalised to: ASB North Wharf 1.9
Slide 31: Operating profit before tax (FY13 to FY14)
APPENDIX 4 Operating profit before tax (FY13 to FY14, $m) 100 90 +$3.5 +$0.2 +$1.4 +$5.3 +$7.9 80 +$1.9 -$3.2 -$0.6 -$6.0 70 -$1.1 60 50 40 =$78.7 $69.4 +$11.8m from NOI change 30 20 +$13.2m from NRI change 10 0 Mar-13 NOI: asset NOI: retail NOI: ASB NOI: balance NOI: balance NOI: other NZ IFRS Net
Slide 32: Investment properties (FY13 to FY14)
APPENDIX 5 Investment properties (FY13 to FY14, $m) 2,200 +$16.3 +$14.5 +$8.5 +$19.6 +$11.6 +$22.9 -$50.2 2,100 +$10.5 2,000 =$2,130.2 +$2,076.5 1,900 1,800 As at Mar-13 Development Development Development Development Other capital Fair value Other Disposal of As at Mar-14 costs: ASB costs: Centre c
Slide 33: Net bank debt (FY13 to FY14)
APPENDIX 6 Net bank debt (FY13 to FY14, $m) 1,000 +$3.7 +$45.5 +$113.9 +$2.3 900 +$74.5 800 -$148.7 -$5.2 +$12.4 -$46.9 +$56.8 700 =$777.3 600 -$669.0 500 Net bank Net interest Manager's Termination Investment Tax Distributions 1 Other Net rental Insurance and Disposal Net bank debt Mar-13 expense f
Slide 34: Interest rate hedging profile
APPENDIX 7 Interest rate hedging profile Hedging profile 31-Mar-14 31-Mar-13 Percentage of drawn debt hedged [fixed rate] 74% 80% Weighted average interest rate of active swaps [excl margin and fees] 4.70% 5.85% Weighted average term to maturity of interest rate hedges 2.9 years 2.4 years Hedge matu
Slide 35: Portfolio statistics
APPENDIX 8 Portfolio statistics Ownership % NLA sqm Occupancy % WALT years Property / portfolio As at Mar-14 Mar-13 Mar-14 Mar-13 Mar-14 Mar-13 Mar-14 Mar-13 Sylvia Park, Auckland 100 100 71,185 71,267 99.6 100.0 3.6 3.9 LynnMall, Auckland 100 100 32,220 32,129 100.0 100.0 3.6 4.0 Centre Place, Hami
Slide 36: Sector and geographic diversification
APPENDIX 9 Sector and geographic diversification (by value) Total by sector Palmerston By value [%] Auckland Wellington Christchurch North Hamilton Mar-14 Mar-13 Retail 36.1 4.5 9.6 9.2 5.8 65.2 65 Office 24.3 7.4 - - - 31.7 25 Other 2.5 0.1 0.3 - 0.2 3.1 10 Total by region Mar-14 62.9 12.0 9.9 9.2
Slide 37: Tenant diversification and top tenants
APPENDIX 10 Tenant diversification and top 20 tenants Tenant diversification (% portfolio gross income) Top 20 tenants (% portfolio gross income) 01. New Zealand chains 27 1. ASB Bank 6.7 02. Australian and international chains 22 2. Farmers 3.7 03. Department and discount department stores 6 3. Pro
Slide 38: Auckland office market
APPENDIX 11 Auckland office market Actual Forecast Forecast As at / YE As at / YE As at / YE Statistic Grade Dec-12 Mvmt Dec-13 Mvmt Dec-14 Comments - ANZ Centre returned to stock in 2013 post redevelopment but no Premium 109,669 141,575 141,575 additional supply forecast over the next four year
Slide 39: Wellington office market
APPENDIX 12 Wellington office market Actual Forecast Forecast As at / YE As at / YE As at / YE Statistic Grade Dec-12 Mvmt Dec-13 Mvmt Dec-14 Comments - The 2013/2014 change in stock represents the temporary removal A-grade 257,518 232,930 257,518 of BNZ’s earthquake-damaged building for repair.
Slide 40: Disclaimer
DISCLAIMER Kiwi Property Management Limited is the manager (the ‘Manager’) of Kiwi Income Property Trust (KIP). The information contained in this presentation (the ‘Presentation’) is intended to provide general information only and does not take into account your individual objectives, financial sit
Kiwi Income Property Trust — FY2014 Earnings Presentation on 6ix