FIXED RATE SENIOR SECURED BOND OFFER

Transcription

1 FIXED RATE SENIOR SECURED BOND OFFER July 2014 Arranger and Joint Lead Manager Joint Lead Manager Joint Lead Manager 1

2 DISCLAIMER A simplified disclosure prospectus (SDP) dated 1 July 2014 has been prepared by Kiwi Property Management Limited (in its capacity as manager of Kiwi Income Property Trust (KIP)) (Issuer) in respect of fixed rate senior secured bonds (Bonds) 1 and registered in accordance with section 42 of the Securities Act This document (Presentation) does not constitute a recommendation by the Issuer (in its own capacity or in its capacity as manager of KIP), New Zealand Permanent Trustees Limited (Trustee and Bond Trustee), Deutsche Craigs Limited (Arranger), Bank of New Zealand and Forsyth Barr Limited (together with the Arranger, the Joint Lead Managers), Craigs Investment Partners Limited (Organising Participant), Public Trust (Security Trustee) or any of the directors, officers, employees or agents of the Issuer, the Trustee, the Bond Trustee, the Arranger, the Joint Lead Managers, the Organising Participant or the Security Trustee to subscribe for, or purchase, any of the Bonds. None of the Issuer (except as required by law), the Trustee, the Bond Trustee, the Arranger, the Joint Lead Managers, the Organising Participant, the Security Trustee, nor any of their respective directors, officers, employees or agents accept any liability whatsoever for any loss arising from this document or its contents or otherwise arising in connection with any offer of the Bonds. This Presentation is for preliminary information purposes only and is not an offer to sell or the solicitation of an offer to purchase or subscribe for the Bonds and no part of it shall form the basis of or be relied upon in connection with any contract or commitment whatsoever. The information in this Presentation is given in good faith and has been obtained from sources believed to be reliable and accurate at the date of preparation, but its accuracy, correctness and completeness cannot be guaranteed. You should not decide whether to purchase the Bonds until you have read the Issuer s SDP relating to the Bonds. No applications will be accepted or money received unless the subscriber has received the SDP. The Issuer intends to offer the Bonds to the public in New Zealand. No action has been or will be taken by the Issuer which would permit an offer of Bonds, or possession or distribution of any offering material, in any country or jurisdiction where action for that purpose is required (other than New Zealand). The Bonds constitute fixed rate senior secured debt obligations of the Issuer and rank equally among themselves and equally with all other senior secured obligations owed to KIP s other senior secured creditors (which include KIP s Bank Lenders, Hedging Providers and any new future secured creditors). Capitalised terms used in this Presentation and not otherwise defined have the meanings given to them in the SDP. To receive a copy of the SDP free of charge please contact your usual authorised financial adviser or visit kipt.co.nz/investor-information/bonds Application has been made to NZX Limited (NZX) for permission to quote the Bonds on the NZX Debt Market and all the requirements of NZX relating thereto that can be complied with on or before the date of this Presentation have been duly complied with 2. However, the Bonds have not yet been approved for quotation and NZX accepts no responsibility for any statement in this Presentation. NZX is a registered exchange and the NZX Debt Market is a registered market under the Securities Markets Act The security for the Bonds is discussed on Page KIP has received a waiver from NZX to Listing Rule in respect of the Bonds. 2

3 KEY TERMS OF THE OFFER Issuer Instrument Issue amount Use of proceeds Tenor Kiwi Property Management Limited, in its capacity as manager of Kiwi Income Property Trust (KIP) Fixed rate senior secured bonds (Bonds) Up to $100 million, with the ability to accept oversubscriptions of up to $25 million General corporate purposes including the repayment of bank debt 7 years Maturity Date 20 August 2021 Interest Rate The Interest Rate will be set following the bookbuild on 10 July 2014 Interest payments Guarantors Security Ranking Credit rating Semi-annual in arrear on 20 February and 20 August. The first interest payment will be on 20 August 2014 to the original subscriber of the Bonds and will include early bird interest New Zealand Permanent Trustees Limited (in its capacity as trustee of KIP), Kiwi Property Holdings Limited (KPHL) and Sylvia Park Business Centre Limited (SPBCL) (the Guarantors) on a joint and several basis 1 The Guarantors have granted security over all of their assets (including all of the properties in the Appendices) under a general security agreement in favour of the Security Trustee for the benefit of all Beneficiaries (including Bond Holders, the Bank Lenders, Hedging Providers and any new future secured creditors) on an equal ranking basis. The security includes a security interest over all personal property, a charge over real property and an agreement in respect of real property and secures all amounts owing to the applicable secured creditors Senior secured obligations of the Issuer that will rank equally amongst themselves and equally with all other senior secured obligations owed to KIP s other senior secured creditors (including the Group s bank and hedging facilities, and ahead of the listed MCNs and Units in KIP). In an insolvency of a Guarantor, the claims of these senior secured creditors, including the Bond Holders, will (by virtue of that security) rank ahead of all other creditors of the relevant Guarantor other than certain statutorily preferred creditors KIP and the Bonds are unrated Application amount Minimum of $5,000 and in multiples of $1,000 thereafter Listing It is expected the Bonds will be quoted under the code KIP010 on the NZX Debt Market 1. The guarantee obligations of the Guarantors are not limited, but recourse to the Trustee in respect of the guarantee is limited to the assets of KIP. The security secures all guarantee obligations of the Guarantors. 3

4 ASB North Wharf Auckland KIP OVERVIEW 4

5 ABOUT KIP New Zealand s largest listed property entity LISTED PROPERTY ENTITY STRONG FINANCIAL POSITION 1 SOLID PROPERTY FUNDAMENTALS New Zealand s largest listed property entity (by total asset value) $ 2.2b Total assets Diversified portfolio of high-quality assets Listed on the NZX Main Board for over 20 years $ 1.0b Total liabilities (including MCNs) Broad base of high-quality tenants Internal management structure from December % Gearing ratio years 3 Portfolio weighted average lease term (WALT) Ranked in NZX 15 Index with a market capitalisation of $1.3 billion (including MCNs) $ 101.3m Profit after tax 97.2% 3 Portfolio occupancy 1. Total assets and total liabilities are each as at 31 March Profit after is for the year ended 31 March These figures have been extracted from the Group s audited financial statements for the year ended 31 March Ratio of Finance Debt to Total Tangible Assets. Finance Debt, for the purposes of the Gearing Covenant, excludes any subordinated debt (including MCNs) and any unrealised indebtedness or exposure in respect of a derivative contract before its close-out. Total Tangible Assets, for the purposes of the Gearing Covenant, excludes any unrealised amount owing under a derivative contract before its close-out. 3. As at 31 March 2014, adjusted for the sale of KIP's remaining 50% interest in 205 Queen, Auckland, which settled on 3 June

6 STRATEGY Our goal is to deliver consistent and reliable returns to our investors OBJECTIVE STRATEGY We target superior risk-adjusted returns over time through the ownership and active management of a diversified high-quality portfolio The strategy to deliver on our goals has three core pillars Maintain a strong financial position By maintaining a strong financial position and conservative gearing with appropriate diversity of debt capital sources, a low cost of capital can be maintained thereby optimising equity returns Intensively manage our property assets To optimise income and investment performance Add value through investment decisions To optimise earnings through the strategic acquisition, divestment and development of property assets 6

7 DIVERSIFIED PORTFOLIO By sector and geography Sector diversification (by property portfolio value) 1 Reduces the volatility of income returns through the property cycle Geographic diversification (by property portfolio value) 1 Across major city and regional economies, with investment emphasis in Auckland Office 30% Other 3% Wellington 12% Christchurch 10% Palmerston North 10% Hamilton 6% Retail 67% Auckland 62% 1. As at 31 March 2014, adjusted for the sale of KIP's remaining 50% interest in 205 Queen, Auckland, which settled on 3 June

8 DIVERSIFIED PORTFOLIO By tenants Tenant diversification (% portfolio gross income) 1 Over 850 tenants The single largest tenant contributes 7% of annual portfolio gross income 01. New Zealand retail chains 29% 02. Australian and international retail chains 23% 03. Department and discount department stores 7% 04. Supermarkets 5% 05. Independent retailers 5% Cinemas 2% Retail 71% 08 Office Retail 07. Banking 6% 08. Legal 6% 07 29% income 76 tenants 71% income 778 tenants 09. Government 6% Insurance 4% 11. Financial services 2% 12. Consultancy 2% 13. Other 3% Office 29% 1. As at 31 March 2014, adjusted for the sale of KIP's remaining 50% interest in 205 Queen, Auckland, which settled on 3 June

9 FY15 FY16 FY17 FY18 FY19 FY20 FY21 FY22 FY23 FY24 Beyond % of gross income EXPIRIES AND WALT Sound operational metrics and a well balanced lease expiry profile Weighted average lease term (WALT) 1 (by gross income) Lease expiry profile 1 (by gross income) 6.8 years 40% 35% Retail Office 30% 3.8 years 4.7 years 25% 20% Retail portfolio Office portfolio Total portfolio 15% 10% 5% 0% For the financial years ending 31 March 1. As at 31 March 2014, adjusted for the sale of KIP's remaining 50% interest in 205 Queen, Auckland, which settled on 3 June

10 RECENT ACTIVITY COMPLETED DEVELOPMENTS ACTIVE DEVELOPMENTS DIVESTMENT Three projects successfully completed during FY14 ASB North Wharf - New head office for ASB Bank - 18-year lease commenced Jul-13 Solid progress has been made on KIP s development activity The Majestic Centre - Seismic strengthening works being undertaken Capital recycling to maintain balance sheet flexibility 205 Queen - Sold in two tranches for $103.8 million Centre Place - Redevelopment which added new Farmers department store, METRO by Hoyts cinema and 30 new specialty stores Northlands - Reinstatement of stores following earthquake strengthening and remediation 56 The Terrace (Unisys House) - Refurbishment and expansion to be completed to facilitate new 18-year Crown lease 10

11 2015 PRIORITIES Continue to build for the future Diversification Retail Office KIP intends to remain a diversified vehicle of retail and office assets - The correlation of returns between retail and office assets is low, reducing the volatility of income returns and enabling greater consistency of income performance through property cycles - Diversification allows flexibility to allocate capital to the sector or property with the superior business case at the time Joint venture opportunities KIP will also seek opportunities to joint venture with capital partners, leveraging its reputation as a leader in fund and property management Corporatisation KIP is developing a corporatisation proposal to put to Unit Holders Our retail strategy is to focus on the continuous enhancement of our centres through: - improvement of the shopping centre experience through the enhancement of dining and leisure options, superior customer service and the provision of additional facilities and services - rebalancing the retail mix while maximising destinational appeal and sales and rental productivity - reduction of exposure to categories with greatest online penetration - embracing multi-channel retail and developing initiatives to support distribution capability Our office strategy is to invest in quality, well-located assets which have consistent income performance and high levels of tenant demand - In Auckland we will investigate opportunities within the preferred northern end of the CBD, close to the waterfront and key transport nodes and the development of campus-style office accommodation at Sylvia Park - In Wellington we will target the Government sector, building on our existing relationship with the Crown 11

12 Sylvia Park Shopping Centre Auckland THE BONDS 12

13 $ million OBJECTIVES A continuation of our active approach to capital management KIP has: a history of conservative gearing a strong balance sheet The Bonds will: further diversify our sources of funding extend the weighted average duration of our funding base A $100 million Bond issue, in conjunction with the recently announced refinancing of bank debt facilities, will extend the term of the Group s debt facilities from 3.4 years (as at March 2014) to 4.3 years (at 30 June 2014) Bond proceeds will be used for general corporate purposes, including the repayment of bank debt Committed debt facilities maturity profile % % % % 7.9% FY15 FY16 FY17 FY18 FY19 FY20 FY21 FY22 FY23 FY24 ANZ BNZ CBA Westpac Bond 1. Following the issue of the Bonds, some of the committed bank debt facilities may be cancelled. 13

14 SECURITY The Bonds are guaranteed by the Trustee (in its capacity as trustee of KIP) and KIP s two property holding subsidiaries KPHL and SPBCL on a joint and several basis 1 General security granted over all of the assets of the Group Security interest over all personal property Charge over all real property Agreement to grant mortgages in respect of real property following certain trigger events, including an Event of Default Restrictions on granting further security interests Held for the benefit of Bond Holders, Bank Lenders, Hedging Providers and any new future secured creditors on an equal ranking basis 1. The guarantee obligations of the Guarantors are not limited, but recourse to the Trustee in respect of the guarantee is limited to the assets of KIP. 2. As at 31 March 2014, adjusted for the sale of KIP's remaining 50% interest in 205 Queen, Auckland, which settled on 3 June

15 COVENANT AND DEFAULT Gearing Covenant 1 Group Finance Debt to Total Tangible Assets must not exceed 45% This ratio was 35.5% at 31 March Default Breach of Gearing Covenant is an Event of Review, requiring rectification within a 13-month remedy period (once that breach is disclosed to the Bond Trustee in a director s report) Events of Default include (among others): Non-payment of interest or principal Cross-acceleration Insolvency 1. Ratio of Finance Debt to Total Tangible Assets. Finance Debt, for the purposes of the Gearing Covenant, excludes any subordinated debt (including MCNs) and any unrealised indebtedness or exposure in respect of a derivative contract before its close-out. Total Tangible Assets, for the purposes of the Gearing Covenant, excludes any unrealised amount owing under a derivative contract before its close-out. 2. Based on information extracted from the audited financial statements of the Group for the year ended 31 March

16 KEY CREDIT STRENGTHS 20-year track record History of conservative gearing Diversified portfolio of high-quality retail and office assets Broad base of high-quality tenants Long-term fixed cash flows Active asset and capital management Strong corporate governance 16

17 Vero Centre Auckland THE OFFER 17

18 OFFER STRUCTURE Firm offer NZX firms, institutional investors and other approved parties are invited to participate in the bookbuild process No public pool Minimum applications $5,000 and multiples of $1,000 thereafter Fees Firm fee of 0.50% to those participating in the bookbuild Retail brokerage fee of 0.75% Early bird interest Accrues at the Interest Rate until the Issue Date from the date application moneys are banked Payable on the first Interest Payment Date (20 August 2014) First interest payment to the original subscriber of the Bonds 18

19 KEY DATES Prospectus registered Roadshow presentations Bookbuild closes Interest Rate set and firm allocations notified Offer opens Hard copies of SDP expected to be delivered Offer closes Issue Date Quotation and trading expected to commence Tuesday 1 July Tuesday 1 to Thursday 3 July Midday, Thursday 10 July Thursday 10 July 9.00am, Friday 11 July From Monday 14 July 5.00pm, Friday 1 August Wednesday 6 August Thursday 7 August The Issuer reserves the right to extend the Closing Date and to vary any of the other dates set out in the timetable. 19

20 The Plaza Palmerston North APPENDICES 1 Key retail assets 2 Key office assets 3 Corporatisation of KIP: Proposed structure Sylvia Park Auckland 20

21 Centre details APPENDIX 1 Key retail assets (as at 31 March 2014) Centre Sylvia Park LynnMall Centre Place The Plaza North City Northlands Location Auckland Auckland Hamilton Palmerston Nth Porirua Christchurch Centre type Regional Regional CBD Regional Regional Regional Owned since Jun-07 Dec-10 Dec-94 Aug-93 Dec-93 Mar-94 NLA [sqm] 71,185 32,220 26,869 32,281 25,702 41,497 Tenants [No.] Carparks [No.] 4,002 1, ,251 1,080 1,870 Occupancy [%] WALT [years] MAT [$m]

22 Centre details APPENDIX 2 Key office assets (as at 31 March 2014) Building Vero Centre ASB North Wharf The Majestic Centre 56 The Terrace (Unisys House) 1 44 The Terrace Location Auckland Auckland Wellington Wellington Wellington Grade Premium A-grade A-grade B-grade B-grade Owned since Apr-01 Jun-13 Mar-94 Apr-04 Sep-04 NLA [sqm] 39,445 21,625 24,507 22,158 10,109 Typical floor [sqm] 1,200 4,000 1,000 1, Carparks [No.] Occupancy [%] WALT [years] Statistics presented are as at 31 March In Nov-13, KIP announced that it had secured a new 18-year New Zealand Government lease commitment as part of a comprehensive refurbishment and expansion of the 45-year-old building. 22

23 APPENDIX 3 Corporatisation of KIP: Proposed structure Current structure of the Group Anticipated post corporatisation structure of the Group Corporate Trust Limited 1 100% Kiwi Property Management Limited (Issuer of Bonds in its capacity as Manager of KIP) New Zealand Permanent Trustees Limited (Independent Trustee) KIWI INCOME PROPERTY TRUST Guaranteeing Group Listed Parent Company 2 (Issuer of Bonds) Guaranteeing Group 100% 100% Kiwi Property Holdings Limited (Owner of properties other than Sylvia Park) Sylvia Park Business Centre Limited (Owner of Sylvia Park) Kiwi Property Holdings Limited (Owner of properties other than Sylvia Park) Sylvia Park Business Centre Limited (Owner of Sylvia Park) Proposed corporatisation should not have a material effect on Bond Holders 1. Corporate Trust Limited is not a Guarantor and does not guarantee the obligations of the Issuer in respect of the Bonds. The sole share of the Issuer is held by Corporate Trust Limited for the benefit of Unit Holders. 2. Resulting entity should the corporatisation of KIP be approved by Unit Holders and, as currently proposed, following an amalgamation of Kiwi Property Management Limited and a newly incorporated Company. 23