CONSISTENTLY DAIWA PAN ASIA REIT DAY DELIVERING 1 – 2 SEPTEMBER 2014 0 0 CONTENTS 03 Fund overview 08 Result overview 12 Portfolio overview 24 Outlook 29 Appendices - The Trust’s balance date is 31 March. - All data is stated in New Zealand dollars. - All data is as at 31 March 2014, unless noted otherwise. - Subsequent to the March 2014 balance date the Trust sold its remaining 50% interest in 205 Queen. Refer to: kipt.co.nz or nzx.com Northlands Shopping Centre Christchurch 1 1 FURTHER INFORMATION For further information please contact: CHRIS GUDGEON GAVIN PARKER MATHEW CHANDLER Chief Executive Chief Financial Officer Investor Relations and Communications Manager Phone: +64 9 359 4011 Phone: +64 9 359 4012 Phone: +61 2 4377 1590 Mobile: +64 21 855 907 Mobile: +64 21 777 055 Mobile: +61 458 110 042 Email: [email protected] Email: [email protected] Email: [email protected] ASB North Wharf Auckland Kiwi Income Property Trust • Daiwa Pan Asia REIT Day • September 2014 2 ASB North Wharf Auckland FUND OVERVIEW 3 3 FUND OVERVIEW Key attributes TRADITIONAL LISTED SOUND FINANCIAL SOLID PROPERTY HISTORY OF SOLID PROPERTY ENTITY POSITION FUNDAMENTALS RETURNS - New Zealand’s - Bank debt Diversified - Portfolio of 12 - Total return Largest largest internally 35.2% gearing ratio key retail and 9.7% pa since inception managed - Conservative office assets property entity gearing by asset value position Top 15 - Ranked within $ - Total assets - Net lettable the top 15 on 2.2b 373,000 area the NZX 50 sqm Index $ - Market $ - Net tangible - Tenants 1.3b capitalisation 1.17 assets per unit 919 (incl. MCNs) - Weighted - Occupancy 3.4 yrs average term 97.1% to maturity of bank debt - Weighted 4.7yrs average lease term Kiwi Income Property Trust • Daiwa Pan Asia REIT Day • September 2014 4 FUND OVERVIEW KIP reaches milestone Internalisation Approved - Unit Holders voted overwhelmingly 12 December 2013 in 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 termination payment funding ($52.2 million after tax) - Inland Revenue confirmed that the payment is deductible for tax - Funded by bank debt Effects and - Established a new manager benefits controlled by Unit Holders - Directors appointed by Unit Holders - Provides further alignment of interests between management and - On 3 December 2013, the Trust celebrated 20 years Unit Holders since listing on the New Zealand Stock Exchange - Expected pre-tax net expenditure savings of ~$8 million per annum (after funding costs) 5 5 FUND Post internalisation review of objectives, OVERVIEW goals and strategy OBJECTIVES GOALS STRATEGY The Trust remains focused on its Our goal is to deliver consistent The strategy to deliver on our goals objectives and reliable returns to our continues to have three core pillars investors . We remain committed to Long-term total returns Maintain a strong financial position By maintaining a strong financial position and providing investors with a >9% per annum secure, reliable investment in conservative gearing with appropriate diversity New Zealand property of debt capital sources, a low cost of capital can be maintained thereby optimising equity returns . We will continue to target Pre-tax distributable Intensively manage our property superior risk-adjusted earnings per unit growth assets To optimise income and investment returns over time through the per annum >2% performance ownership and active management of a diversified high-quality portfolio Add value through investment decisions To optimise earnings through the strategic acquisition, divestment and development of property assets Kiwi Income Property Trust • Daiwa Pan Asia REIT Day • September 2014 6 FUND OVERVIEW Investment strategy Diversification Retail Office . The Trust intends to remain a . Our retail strategy is to focus on . Our office strategy is to invest in diversified vehicle of retail and office the continuous enhancement of quality, well-located assets which assets our centres through: have consistent income performance and high levels of - The correlation of returns between - improvement of the shopping centre tenant demand retail and office assets is low, reducing experience through the the volatility of income returns and enhancement of dining and leisure - In Auckland we will investigate enabling greater consistency of income options, superior customer service opportunities within the preferred performance through property cycles and the provision of additional northern end of the CBD, close to facilities and services the waterfront and key transport - Diversification allows flexibility to nodes and the development of allocate capital to the sector or - rebalancing the retail mix while campus-style office accommodation property with the superior business maximising destinational appeal and at Sylvia Park case at the time sales and rental productivity - In Wellington we will target the - reduction of exposure to categories Government sector, building on our JV opportunities with greatest online penetration existing relationship with the Crown . The Trust will also investigate - embracing multi-channel retail and opportunities to joint venture with developing initiatives to support capital partners, leveraging on our distribution capability reputation as a leader in funds and property management Kiwi Income Property Trust • Daiwa Pan Asia REIT Day • September 2014 7 Sylvia Park Auckland RESULT OVERVIEW 8 8 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 - GDP growth 2.6% pa - Development activity $ - Increased rental income $ b - Business confidence positive 78.7m 2.13 - Reflects uplift from cap rate from developments Portfolio - Household spending Operating profit firming offset by reductions (ASB North Wharf, value recovering before tax at Centre Place and Unisys Centre Place, Northlands) - Unemployment reducing - Property management fees House - Positive migration earned post internalisation - Wages growth - Over 196,000 sqm of NLA - Improved by: 764 Retail - Improving confidence and $ m - Average 3.0% rent growth 101.3 • investment property and New leases and economic indicators should Profit after tax achieved over prior passing interest rate derivative rent reviews assist sales growth target of concluded rentals (excluding valuation gains 2-4% over the medium term development leasing) • insurance income Auckland - Reducing vacancy and - Offset by: - Office WALT increases office increasing rents forecast for • one-off internalisation years 4.7 from 4.8 to 6.4 years prime grades with stable payment (net of tax) WALT - Retail WALT down supply and positive absorption. Firming yields - Increased due to marginally to 3.8 years % with strong investment 35.2 internalisation payment and Bank debt demand capital expenditure - Office occupancy improved gearing ratio % - Offset by proceeds from the 97.1 to 93.0% assisted by - Trust favourably positioned Occupancy Wellington sale of the first 50% tranche accelerated leasing at 205 with NZ Government sector office of 205 Queen Queen - Tenant and investment - Retail occupancy healthy at demand greatest for buildings - Cash distribution for full cpu 99.4% exhibiting seismic strength 6.40 year, in line with guidance Cash distribution Kiwi Income Property Trust • Daiwa Pan Asia REIT Day • September 2014 9 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 - Opened on-time and on- - Foundations and transfer - First 50% sold for budget, delivering a year- beam works due for $47.5 million, settled Jan-14 one initial yield of 8.5% completion Aug-14 - Remaining 50% sold post on $134.0 million - Overall project balance date for development cost completion scheduled for $56.3 million, settled - Now fully leased and 2015 Jun-14 valued at $162.2 million Centre Place 56 The Terrace - Final stage opened (Unisys House) Oct-13 - New 18-year Crown lease - Completed offer well negotiated received by shoppers - $67 million building - Initial yield of 5.4%, upgrade to commence late increasing to ~7% by 2014 with completion 2018 programmed for Jul-16 Northlands - Re-opened 11 shops after reconstruction - Restored $1million in net income Kiwi Income Property Trust • Daiwa Pan Asia REIT Day • September 2014 10 RESULT OVERVIEW Projected FY15 cash distribution of 6.50cpu OUTLOOK - Economy is growing and business confidence is positive - Property sector fundamentals are positive, underpinned by rental growth prospects DISTRIBUTION GUIDANCE - Projected FY15 distribution of 6.50 cents per unit . Based on the outlook for the Trust and subject to a continuation of reasonable economic conditions . The Trust’s distribution reserve, together with the financial benefits arising from internalisation, will enable the Trust to accommodate the rental void at 56 The Terrace as the building is refurbished Vero Centre, Auckland Kiwi Income Property Trust • Daiwa Pan Asia REIT Day • September 2014 11 The Plaza Palmerston North PORTFOLIO OVERVIEW 1212 PORTFOLIO OVERVIEW Portfolio metrics 31-Mar-14 31-Mar-13 Core portfolio