KPG - Kiwi Property Group Limited

[whatsup]

Yes.p.a.
A good result.

Percy, your the one to go to.
I think if I remember correctly that when Kiwi was set up all those years ago that it was a mixture of the ex Unity Property guys ( Unity went bust in the 87 crash ) and a Canadian enterprise who early on bought into and largely funded what has turned into the Shortland St property.
Shortland Property Group then went onto develope the Mt Wellington property shopping centre which in its early years had a very rocky start as was discussed at the Shortland Property AGMs at great length and wisdom.
My how things can change, now the shopping centre is the jewel and the office investment has had its day !!
Can you enlighten us if possible.

[percy]

Percy, your the one to go to.
I think if I remember correctly that when Kiwi was set up all those years ago that it was a mixture of the ex Unity Property guys ( Unity went bust in the 87 crash ) and a Canadian enterprise who early on bought into and largely funded what has turned into the Shortland St property.
Shortland Property Group then went onto develope the Mt Wellington property shopping centre which in its early years had a very rocky start as was discussed at the Shortland Property AGMs at great length and wisdom.
My how things can change, now the shopping centre is the jewel and the office investment has had its day !!
Can you enlighten us if possible.

Sorry I only really got interested in them a couple of years ago when a friend was telling me he held them and liked their outlook.
Only bought a small holding for the wife.
I did work at Northlands Mall in Christchurch while KPG owned it.Was not impressed with them or a previous owner FBU.
But as you point out Sylvia Park is an outstanding success and Drury looks exciting.
I am sitting on a bit of cash at present and finding it hard not to spend it on KPG,HGH or SCL.

[whatsup]

Jan 2020 @ $1.55 to todays .84 , says it all !

[percy]

Jan 2020 @ $1.55 to todays .84 , says it all !

https://en.wikipedia.org/wiki/Kiwi_P...e%20properties.

[LaserEyeKiwi]

Been looking at what the conditional $458m sale means for KPGs debt profile. Yesterday they said cash would be used to pay down debt (which would take gearing down to a fantastically healthy 25%).

As at the last report, Sep 30th 2023, they had $1,105 million in debt. This was split as follows:

$605m in bank debt
$500m in bonds

The bonds have a lower average interest rate, so the $458m will likely all go towards the outstanding bank debt, which would bring it down to ~$150m range.

However there will likely have been somewhere north of $100m in capex between Sep 30th 2023 and the deal closing (most of that towards finishing BTR1) , so bank debt may still remain above $200m perhaps post transaction.

So presuming they put all the cash towards reducing debt, that should be somewhere above $725m post deal, with a gearing ratio around 27.5%

[Sideshow Bob]

https://www.nzx.com/announcements/431745

• Net rental income: $184.9m (-9.2%)
• Operating profit before tax: $108.2m (-16.5%)
• Net loss after tax: $2.1m (+99.1%)
• Adjusted funds from operations: $99.8m (-14.3%)
• Net tangible assets per share: $1.17 (-5.1%)
• Full-year dividend: 5.70 cps (No change)

Kiwi Property released its annual results for the year ended 31 March 2024 (FY24) today, announcing a solid underlying operational performance and progress on key aspects of its mixed-use strategy.

Financial performance

Kiwi Property recorded net rental income of $184.9 million in FY24, down 9.2% on the year before, due to the sale of non-core assets such as Northlands and Westgate Lifestyle in recent periods. Operating profit before tax was similarly affected, declining 16.5% to $108.2 million, while adjusted funds from operations (AFFO) decreased 14.3% to $99.8 million. When viewed on a like-for-like [1] basis to enable a more accurate comparison of Kiwi Property’s underlying performance, net rental income rose 5.8% in FY24, demonstrating the company’s ability to grow revenue from its remaining assets.

Kiwi Property continued to drive leasing spreads in FY24 despite the challenging economic conditions, with total rental movement up 4.4% and new leases rising 5.3%. Leasing spreads on new office leases rose 18.7%, underpinned by success at Vero Centre over recent months.

Sales performance

The Base Te Awa and LynnMall achieved sales uplift of 13.1% and 1.8%, respectively, in FY24, fuelled by the opening of new stores such as JD Sports and JB Hi-Fi. Sylvia Park sales were flat for the year following several periods of significant growth, but remain well ahead of pre-COVID levels. The company’s specialty gross occupancy cost ratio was flat at 13.0%, reflecting the high productivity and value of Kiwi Property’s tenancies.

Asset values stabilising

The fair value of Kiwi Property’s asset portfolio increased by 0.1% or $3.3 million in the second half of FY24 and finished the year 2.4% down overall. The company’s property portfolio was worth $3.2 billion on 31 March 2024 [2,3].

The Sylvia Park Precinct [4] posted a fair value uplift of 1.5% in the last six months of the financial year, driven by rental growth and a marginal firming of capitalisation rates, while Kiwi Property’s CBD office portfolio declined in value by 2.0% or $16.4 million, underpinned by macroeconomic headwinds facing the asset class. The decrease in valuations contributed to a net loss after tax of $2.1 million in FY24.

According to Kiwi Property Chief Executive Officer, Clive Mackenzie, “the resilient valuation of our mixed-use portfolio highlights the strength and defensive characteristics of these flagship properties. By continuing to drive sales, grow rents and diversify our income streams, we will encourage valuation uplift as the economy stabilises and capitalisation rates improve.”

Progressing mixed-use

Construction of Kiwi Property’s 295 apartment build-to-rent (BTR) complex, Resido, is nearly complete, with two of the development’s three buildings already finished and the final set to open on 4 June 2024. Resido’s launch is a key milestone on Kiwi Property’s mixed-use journey and will bring residential accommodation to Sylvia Park for the first time. The company expects to move towards full occupancy within the next 12-18 months.

In February 2024, Kiwi Property announced it had leased 12% or 34 of the Resido apartments to leading Australian flexible accommodation provider, Urban Rest. The deal delivers guaranteed income from day one, helping to de-risk the project, while simultaneously providing an endorsement of BTR’s potential in New Zealand.
Also at Sylvia Park, 3 Te Kehu Way is now 96% leased, with ASB recently signing an agreement to rent over 1,700 square metres of floor space in the building. The bank joins corporates such as ANZ and IAG, which also have a presence at Sylvia Park, attracted by its amenities, location, and sustainability credentials.

Strict cost control

Kiwi Property undertook several initiatives during FY24 to reduce costs and enhance business efficiency. First among these was the implementation of the company’s new Yardi enterprise IT system, which has unlocked a range of efficiency gains and assisted Kiwi Property in achieving a 9% reduction in employee headcount.
The full financial benefit of these and other cost-saving initiatives is expected to be realised from FY25, including an approximately $2.9 million decrease in people-related costs [5]. The company’s aim is to reduce management expenses as a percentage of net rental income (including property management revenue) to FY22 levels.

Recycling capital

Kiwi Property remains focused on reducing gearing, with asset recycling an important aspect of its capital management agenda. On 16 May 2024, the company announced the conditional sale of the Vero Centre to a Hong Kong China-based institutional investor for $458 million, subject to Overseas Investment Office approval. Presuming the transaction settles, the funds raised will be used to repay bank debt, reducing gearing to around 27% on a pro forma basis and providing headroom to pursue new opportunities.

Continued progress on ESG

The company’s commitment to sustainability continued in FY24, resulting in several ESG highlights. Kiwi Property increased Sylvia Park’s on-site renewable energy capacity, with the addition of a new solar array that contributed to the generation of over 1,300,000 kWh of power across the precinct in FY24. 3 Te Kehu Way received New Zealand’s first 6-Green Star Design & As Built NZ v1.0 Built rating, while a successful pilot of the NABERS shopping centre rating tool, saw Sylvia Park obtain an indicative 6-Star NABERS Energy rating.

Changes to the Kiwi Property Board

Jane Freeman has signalled she will step down as a director of Kiwi Property at its upcoming annual shareholder meeting, bringing a close to her nine-year governance career with the company. The search for a new director is in its final stages, with an appointment expected to be announced shortly.

Kiwi Property Chair, Simon Shakesheff, said, “Jane has made a significant contribution to the board for almost a decade, including leadingthe Remuneration and Nominations Committee. We’ve benefitted greatly from her digital and customer experience expertise, and we wish her all the best for the future.”

Dividend and guidance

Kiwi Property will pay a final dividend of 1.425 cents per share for the fourth quarter of FY24 on 21 June 2024 taking the full-year dividend payment to 5.70 cents per share. Looking ahead, the company today also confirmed its dividend guidance at 5.40 cents per share for FY25 [6], a 5.3% reduction on the year before; primarily driven by the financial impact of the legislative change removing its ability to claim tax depreciation on commercial buildings.

“We’ve been unable to offset the reduction in AFFO caused by the removal of building depreciation and as a result, have lowered the dividend guidance for FY25. We remain committed to delivering dividend growth from FY26, fuelled by Resido rental income, additional revenue from a fully leased 3 Te Kehu Way and Drury land sales, among other things,” said Shakesheff.

FY25 Outlook

According to Mackenzie, Kiwi Property is well-positioned to benefit from a range of macroeconomic trends facing New Zealand heading into the new financial year.
“The shortage of housing, fuelled by record migration and declining building consents, is driving demand for quality rental accommodation, creating opportunities for Resido. In parallel, low online shopping penetration and a limited amount of new retail space look set to benefit established retail destinations such as Sylvia Park, LynnMall and The Base. Against this backdrop, we will remain focused on strategic execution and delivering for our shareholders in FY25 and beyond,” Mackenzie concluded.

[winner69]

Jeez the KPG narrative and accounts even more confusing than what Oceania produce.

But they say ‘solid results’ so suppose it’s a good report

No pay rise for punters though

I’ll wait for LEK’s summary

[777]

No pay rise for punters though

But a reduction for the next period announced.

[LaserEyeKiwi]

About to dive into the reports, but from the summary some quick thoughts:

- As expected, Vero sale will reduce gearing down to ~27% range. Excellent stuff.
- Like-for-like net rental increase of 5.8%, very nice.
- Focus on cost control with reduction in headcount is appreciated.
- The removal of building depreciation finally shows its teeth, unfortunately resulting in that guided 5.3% divi reduction for current financial year, before the new revenue sources kick in to increase dividends again next year.

All in all a bit of a non-news event so far, with the main event being the Vero sale already announced.

[LaserEyeKiwi]

Reminder that the earnings call is available online at 10am:

A live webcast for analysts, investors and media is scheduled for 10:00 am (NZT) on this date and can be viewed online at: https://edge.media-server.com/mmc/p/nzqutjd3