KPG - Kiwi Property Group

[winner (n)]

Although we are a bit off recent highs, it's amazing seeing the inevitable rush back into high dividend yield paying REITs over the last couple of quarters as bank interest rates have plummeted.

And to think there was doubt when those of us were saying this at the bottom of the cycle when stocks like KPG were trading 30% lower not that long ago.

Patience really is one of the core qualities needed to be a successful investor.

(For what its worth I am still investing with the belief that retail is the next cycle to recover - and we will all be sitting here in a years time marveling out how cheap retail stocks were today given the retail recovery was inevitably going to occur eventually)

There's 411,012 working age people on a benefit LEK .... up 18,735 from a year ago. In spite of everybody'd efforts the number is still rising

A retail recovery is some eay off I fear ... maybe late 2027

[Basil]

Most data has been anything but stellar since RBNZ cut the cash rate by 50 bps a while ago.  Maybe they cut by another 50 bps on 26 November ?

[LaserEyeKiwi]

There's 411,012 working age people on a benefit LEK .... up 18,735 from a year ago. In spite of everybody'd efforts the number is still rising

A retail recovery is some eay off I fear ... maybe late 2027

yes its a crap fest for those impacted.

Mortgage holders however make up approximately 42.5% of retail spending in New Zealand, and the impacts of lower interest rates are ever so slowly trickling through now. This time next year things will I think be drastically different for retail. 

[Basil]

Looking forward to KPG reporting tomorrow. My sense is we are just past low tide and the tide is starting to come in. Usually catch bigger fish on an incoming tide, so they tell me so I have put a large net out and am cautiously hopeful.

[Plata]

They have a pathway to 6 cps dividends in the next few years, I reckon the risk reward here is pretty good. I think $1.2 by end of next year is a fair price, while we wait we get over 5% cash yield. Plus getting costco at the new flagship drury site was a big win. That place is a mecca of activity every time I've been.

[Basil]

6 cps tax free PIE yield for FY28 would be 5.5% tax free net yield at $1.09  9% gross for 39% taxpayers.  That's very attractive.

[lorraina]

Kiwi Property delivering on FY26 strategic priorities
24/11/2025, 08:30 NZDT, HALFYR
Net rental income: $102.0m (+7.0%)
Operating profit before tax: $62.9m (+11.5%)
Net profit after tax: $9.8m (-77.3%)
Adjusted funds from operations: $51.9m (+7.2%)
Net tangible assets per share: $1.12 (-2.2% from FY25)
Interim dividend: 2.80 cents per share (+3.7%)

Key highlights:
• Strong leasing momentum: ASB North Wharf lease extended to 2040, Vero Centre occupancy up to 94.3%, and Resido (build-to-rent) now 99% leased.
• Establishment of the Mackersy Large Format Retail Fund (seeded with Sylvia Park Lifestyle) is expected to release at least $53 million in capital.
• Conditional sales of Drury land to Costco, Rebel Sport/Briscoes, and Harvey Norman means around 77% of large-format retail land at Drury is now conditionally sold, with total sales proceeds of $115 million to be received in FY27-FY29.

[777]

Div 1.4c/sh taking interim div to 2.8c/sh.

[Basil]

Looks like a really solid result to me in what we know has been a very challenging economic environment.  Payout as a percentage of AFFO down to only 88% now with solid growth in income so together with rental growth and improving economic conditions going forward there would appear to be strong prospects for dividend growth in the years ahead.  Broker estimates of 5.8 cps in FY27 and 6.0 cps in FY28 look easily achievable. Could be even more although I would be happy with that and expect to see 6.2 cps and 6.4 cps in FY29 and FY30 respectively.  Looks like the dividend reinvestment plan has been suspended ? 
https://api.nzx.com/public/announcement/463213/attachment/457436/463213-457436.pdf

[LaserEyeKiwi]

Kiwi Property delivering on FY26 strategic priorities

24/11/2025, 08:30 NZDT, HALFYR

Net rental income: $102.0m (+7.0%)
Operating profit before tax: $62.9m (+11.5%)
Net profit after tax: $9.8m (-77.3%)
Adjusted funds from operations: $51.9m (+7.2%)
Net tangible assets per share: $1.12 (-2.2% from FY25)
Interim dividend: 2.80 cents per share (+3.7%)

Key highlights:
• Strong leasing momentum: ASB North Wharf lease extended to 2040, Vero Centre occupancy up to 94.3%, and Resido (build-to-rent) now 99% leased.
• Establishment of the Mackersy Large Format Retail Fund (seeded with Sylvia Park Lifestyle) is expected to release at least $53 million in capital.
• Conditional sales of Drury land to Costco, Rebel Sport/Briscoes, and Harvey Norman means around 77% of large-format retail land at Drury is now conditionally sold, with total sales proceeds of $115 million to be received in FY27-FY29.

Kiwi Property has announced its interim results for the six months ended 30 September 2025 (HY26), with Chair Simon Shakesheff noting that this result "highlights a robust business performance and demonstrates the strength of our strategy as broader economic conditions begin to stabilise."

Clive Mackenzie, Kiwi Property's CEO, added that the "portfolio continues to deliver solid net rental income growth, up 7.0% for the half-year and supported by the now-complete lease up of Resido." Operating profit before tax increased by 11.5% to $62.9 million, reflecting income growth and disciplined cost management. Net profit after tax was $9.8 million (down 77.3%), which included an unrealised fair value loss of $30.3 million during the period, compared with an increase in the prior period. AFFO increased by 7.2%, driven by the uplift in operating profit.

As at 30 September 2025, the total Kiwi Property portfolio was valued at $3.3 billion, incorporating a fair value movement of -0.9% since 31 March 2025. Net tangible assets were $1.12 per share, reflecting a decline of -2.2%.

Progress on strategic priorities

At the beginning of the financial year, Kiwi Property announced four strategic priorities intended to create value for shareholders. Strong progress has been made across each area:

1. Manage the balance sheet and free up additional capacity

"Maintaining a strong and flexible balance sheet is fundamental to our strategy", Mackenzie noted. "We continued the dividend reinvestment plan which funded our business-as-usual capital expenditure requirements, while reducing total capital expenditure by 49% compared to the prior comparable period. This has allowed us to keep gearing relatively stable at 38.5%, up 0.1% from March 2025."

Following the investment into the property funds management business Mackersy Property in November 2024, Kiwi Property announced on 10 November the establishment of a large format retail fund that will be managed by Mackersy Property. The fund will be seeded with Sylvia Park Lifestyle (the large-format retail property adjacent to Sylvia Park shopping centre) and Kiwi Property expects to maintain an interest of up to 50% over the life of the fund. The initial sale of Sylvia Park Lifestyle into the fund is expected to release at least $53m in funds to Kiwi Property.

The pro forma impact of this transaction reduces gearing to 37.5%.

2. Continue to drive rent growth

Despite a weak economy and a challenging leasing market during HY26, Kiwi Property delivered strong leasing outcomes across the portfolio, with total rental growth, including new leasing and rent reviews, of +3.5% [Note 1].

Office new leasing spreads were +3.4%, supported by the ASB lease extension and Mixed-use new leasing spreads were +3.2% [Note 1].

 "These results underscore the enduring appeal of our assets and the effectiveness of our leasing strategy in subdued market conditions. We are focused on ensuring our centres and office assets remain the destinations of choice for tenants, allowing us to maximise rental growth," said Mackenzie.

3. Maintain strong discipline on costs

Kiwi Property remains strongly committed to controlling costs and delivering operational efficiency. Through disciplined management and a culture of continuous improvement, employment and administrative expenses were down by 5% against the same period last year, when normalised for costs associated with the lease extension at ASB North Wharf and other one-off transaction costs.

To reduce interest costs, Kiwi Property has increased bank debt facilities by $135m and used these proceeds to refinance the KPG040 green bond series which matured recently. Mackenzie noted that "when combined with a lower interest rate environment, our weighted average interest rate has reduced from 5.30% in March this year to 4.89% as at 30 September.

These outcomes reflect the ongoing benefits of our cost initiatives and our focus on delivering value for shareholders."

4. Progress sell-down of Drury large format retail sites

Unlocking value from our Drury development remains a key strategic priority and major focus for the business.

Shakesheff commented: "We are pleased to confirm that additional land sales have been achieved, with the total large-format retail (LFR) land conditionally sold at Drury now around 77% of the LFR precinct." Proceeds from the land sales are expected in FY27-FY29.

Strong leasing progress across the portfolio

The extension of ASB's lease at ASB North Wharf during HY26 was a significant milestone, with the lease extended for a further nine years through to 2040. The lease extension at the award-winning, seven-level office building in Wynyard Quarter provides long-term income security and highlights the strength of Kiwi Property's partnership with ASB.

Strong progress on leasing space at the Vero Centre has also been made, with occupancy now at 94.3% (up from 92.4% at the end of FY25), with just under two floors remaining to be leased.

The initial leasing campaign for Kiwi Property's flagship build-to-rent (BTR) development, Resido at Sylvia Park, is now complete. As at 30 September Resido was 99% leased, in line with the original 12 to 18-month lease-up target. Mackenzie said that "this result validates the product offering and the attractiveness of well-located, amenity-rich rental accommodation."

Mixed-use sales marginally up with prospects for growth ahead

Sales (+0.2%) and foot traffic (+1.1%) across the mixed-use portfolio were marginally up in the twelve months to 30 September 2025, with stronger sales in the second half (+1.0%) signalling positive momentum.

Mackenzie said "sales appear to be recovering with catalysts for further growth expected, including interest rate cuts flowing through to consumer spending and the highly anticipated opening of IKEA adjacent to Sylvia Park in early December. The opening of IKEA is expected to act as a significant drawcard to the precinct. A short walk via a pedestrian walkway between IKEA and Level One of Sylvia Park will provide for the seamless integration of the two sites.

We anticipate that the opening of IKEA will drive additional consumer activity and reinforce the long-term value proposition of Sylvia Park."

Three conditional LFR land sales in October

The Drury development continues to gain momentum as a key driver of long-term value for Kiwi Property.

Confirming the conditional sale of 6.4ha to Costco Wholesale, a major international retailer, was pleasing and this will serve as a catalyst for further development and growth at the site. This sale, along with conditional sales to Rebel Sport/Briscoes and Harvey Norman, will provide capital for reinvestment and, together with the recent Stage 2 Fast-track approval, validates the strategic vision for Drury as Auckland's next major metropolitan centre.

Mackersy loan converts to equity; first fund to be established

Last year's investment into Mackersy Property has created value for Kiwi Property shareholders. The business has made strong progress over the last 12 months and increased earnings to meet the targets in the convertible loan agreement. This will result in the conversion of the original loan to equity in early December, at which point Kiwi Property will own a 50% shareholding in the investment management business, which currently has $2.2 billion in assets under management.

Mackenzie noted that: "We are very pleased with this progress and the strong working relationship we have with the Mackersy Property team. The strategy behind our investment in Mackersy Property was to support the growth of Kiwi Property by providing us with a new source of capital. The recently announced Mackersy Large Format Retail (LFR) fund, with Sylvia Park Lifestyle as the seed asset, offers us a potential future source of capital to develop LFR assets across existing KPG sites, providing us with greater balance sheet flexibility."

Some of the proceeds from the Mackersy LFR Fund will be used to fund key smaller-scale developments, including the new Pedestrian Plaza and addition of an Asian supermarket at Sylvia Park, and the further development of Level One at The Base.

Regulatory tailwinds supporting sector growth

Recent regulatory developments have provided a welcome boost for Kiwi Property and the property sector as a whole.

The proposed changes to seismic regulations announced in September have the potential to reduce expected remediation costs and provide greater certainty for asset owners. Kiwi Property in particular is likely to benefit, given the concentration of its assets in Auckland, where the Government intends to remove the earthquake-prone building regime entirely. The changes are still to be legislated.

Dividend guidance confirmed

"We remain committed to growing sustainable returns for shareholders. Consistent with the guidance provided in our FY25 annual results, we confirm our FY26 full-year dividend guidance of 5.60 cents per share [Note 2]. This is expected to be within our target payout range of 90% to 100% of year-end AFFO. We will pay a cash dividend of 1.40 cents per share for the second quarter of FY26 on 19 December 2025, taking the interim cash dividend payment to 2.80 cents per share," said Mackenzie.

Positioned for growth

For the remainder of FY26 and beyond, Kiwi Property is well positioned to benefit from improving economic conditions and the continued execution of its strategy.

"Our high-quality asset base, strong tenant relationships, and disciplined approach to capital management provide a solid foundation for long-term value creation. We are excited about the opportunities ahead, including the opening of IKEA at Sylvia Park in early December, further progress at Drury, and continued improvement in operating conditions for our assets," Shakesheff concluded.

[LaserEyeKiwi]

Q&A:

Q: decrease in specialty sales per sqm?
Answer: Economic climate, Sylvia & The Base: some speciality retailers moved to mini-majors category which changed figures.

Q: Kmart renewal at The Plaza - was main driver of rental income increase?
Answer: yes.

Q: Sylvia park lifestyle sale?
Answer: An answer elaborating on how cash released is higher than sale price is its combination cash from sale, and also debt from new fund provides cash.
 
Q: Vero centre remaining 2000sqm to lease?
Answer: another lease of 1200 sqm almost closed, will be just one floor remaining to lease after that.

Q: Drury: what are risks to settlements of conditional sales?
Answer: have to finish infrastructure.

Q:  Mackersy  fund - any more assets in portfolio to consider adding/selling to fund?
Answer: new development like any unsold LFR at Drury, land beside IKEA development at Sylvia possibility

Q: valuations of ASB wharf post renewal?
Answer: valuers haven't moved valuation yet based on current market conditions

Q: non-core assets?
Answer: we want to continue to focus on mixed use assets in golden triangle, so will continue to look to exit regional retail, and also office asset sales.

Q: any help from Mackersy for office assets?
Answer: Mackersy may help office sales, have had some interest for ASB north wharf now post lease renewal.

Q: Sylvia park rental income drop?
Answer: rent reviews were up, but a $1.9m surrender fee caused a one off drop that needs to be adjusted out.

Q: 2nd half guidance implies weaker half, details?
Answer: maintenance Capex, timing issue on new leasing deals, capitalized leasing incentive on ASB north wharf.

Q: seismic disclosures?
Answer: This is the first time disclosing seismic total budget

Q: gearing?
Answer: 35% target, and any additional asset sales may reduce that further

Q: Drury sales / retained earnings?
Answer: Payout ratio will technically be lower when Drury land sales hit the balance sheet (as those funds will be used for Capex at Drury)

Q: Reside net rental income $3.6m for half, high occupancy, update on outlook going forward stabilized income? 3 years out?
Answer: $8m total net income in this financial year, will grow next year, some rental softness so a little less than expected initially.

Q: ASB north wharf: $22m commitment
Answer:  next couple of years will be refresh of fit out for new lease term through 2040, there and additional space built out, 3

Q: Vero commitment: is it Capex?
Answer: Upgrading and Maintenance - no incentives.
 
Q: old church site (?)
Answer: current leasing negotiations, may be LFR asset into Mackersy fund.

[BlackPeter]

Anybody still remembering all these discussions in previous years whether they manage to rent out all those residential properties?

According to yesterdays review Resido is now 99% leased out. Not too bad:

Our flagship build-to-rent development, Resido at Sylvia Park, is now 99% leased, in line with our 12 to 18-month lease-up target. This validates the product and the appeal of amenity-rich rental accommodation.

[LaserEyeKiwi]

Anybody still remembering all these discussions in previous years whether they manage to rent out all those residential properties?

According to yesterdays review Resido is now 99% leased out. Not too bad:

Yup - they have just 2 vacant apartments currently out of 295 - who would have thunk that living right next to New Zealand's most popular retail destination with excellent public transport links would be attractive to many?

But to drop the sarcasm for a moment, they did acknowledge the rent achieved is lower than what was initially expected, so that isn't ideal, but they were still getting good premium to market, and rents will lift over time.

So while the higher build cost and lower rents are both slight negatives vs initial business case, they have still proved out the concept, and also now have a diversified rental stream that wont be impacted by things like a pandemic in the same manner. Will also be great experience for future BTR developments (I think they can probably afford to go downmarket slightly, and also have a better idea of what mix of units are popular - eg 1,2 or 3 bedrooms)   

[Basil]

99%+ occupancy is a very good outcome in a very weak market for apartment rentals.  I'm very impressed with that.    Also conditionally selling 77% of the land area at Drury that's available for large format retail is quite a lot better than where I thought they would be at this stage of the development.   As I said yesterday, I think It was a really solid half year result. 

[Shareguy]

To lease out 99 percent at Resido is a great achievement given the state of the market. Understandable that they have not achieved the initial rental figures quoted. The rental market in Auckland is still not flash with rents continuing to decline. I wonder how much Simplicity's apartment block down the road will affect them. Gearing still an issue at 38.5 percent.