Investor Update CONTENTS SECTION 01 SECTION 02 Construction and - PowerPoint PPT Presentation

FEBRUARY 2020 Investor Update

CONTENTS SECTION 01 SECTION 02 Construction and urban Overview development SECTION 03 SECTION 04 Financing Financial approach overview 2

SECTION 01 Overview Photo: Yola and Tenancy Manager, Mo outside Yola’s Lower Hutt home 3

Kāinga Ora – established October 2019 Legal structure The creation of Kāinga Ora brings a more cohesive, Crown joined- up approach to supporting the Government’s (controlling entity) priorities for housing and urban development. Kāinga Ora (incorporating HNZC, HLC and KiwiBuild) Kāinga Ora supports people across New Zealand to have good quality, affordable homes, and live in strong, healthy communities. Housing New Zealand Limited 4

Focus of Kāinga Ora – Homes and Communities Kāinga Ora has two key roles: 1 2 Being a world-class Partnering with the development public housing community, iwi and Māori, local and landlord central government, and community organisations to lead and facilitate urban development projects of all sizes 5

Kāinga Ora and Housing New Zealand Limited are inextricably linked with the Crown 6

New Zealand’s largest residential landlord We own or manage 187,000+ 5,110 65,500 People live in our houses Families placed into homes Which is 4% of New Zealand’s 4.9m population last year Properties Over 98% Occupancy rate Value of group assets $29.1 billion 7

SECTION 02 Construction and urban development Photo: Weymouth Road, Manurewa, Auckland 8

Becoming New Zealand’s largest residential developer, with an increasing state house build TARGET ACTUAL FORECAST FORECAST 1,380 1,461 1,800 >7,500 2018/19 2018/19 2019/20 Over the next four years 9

The largest build programme in decades has three key drivers Growth in the public housing Requirement for more affordable Significant renewal and register housing realignment requirement • Public housing register has tripled since • New Zealand housing is among the • Average age of houses is around September 2016 most unaffordable in the world 45 years – many are cold and damp • Majority of growth in Priority A • House price to incomes remain very • Over 45,000 homes are due for category (most at risk) high, particularly in Auckland renewal in the next 20 years 15,000 Public Housing Register 12,500 10,000 7,500 5,000 2,500 0 Sep 16 Mar 17 Sep 17 Mar 18 Sep 18 Mar 19 Sep 19 10

Around half of all new builds planned for Auckland, with the remainder spread across the country Auckland people 1.7m (34% of NZ’s population) state houses 29,400 (45% of HNZ’s total stock) least affordable housing globally 7th (Demographia, 2019) houses (state, affordable, 24,300 market) planned to be built by 2026 11

Using scale and innovation to deliver new housing at lower cost Leveraging the build programme to lower costs • Scaled-up procurement practices • Supplier panels • Standardised designs to speed up consent process Innovation and new construction methods • Offsite manufacturing • Use of cross-laminated timber • Minimum Homestar 6 certification for new builds (except apartments) contracted from 1 July 2019, apartments from 1 January 2021 12

Urban development – delivery and planning Delivery • working in partnerships • community engagement • density and amenity • affordability Planning • at scale and pace • innovation • sustainable neighbourhoods • expert masterplanning 13

SECTION 03 Financing approach Photo: 135 Britomart Street, Berhampore, Wellington 14

Credit ratings equalized with New Zealand Sovereign Agency Entity Domestic currency Foreign currency Last updated Kāinga Ora Aaa (stable) Aaa (stable) 8 November 2019 HNZL Aaa (stable) Aaa (stable) HNZL AA+ (positive) AA (positive) 2 October 2019 Note, there is no explicit government guarantee “We believe HNZL will continue business as usual. “ Because of its public policy mandate, Kāinga Ora's We also continue to believe that there is an almost and HNZL's key role in the New Zealand social certain likelihood the New Zealand government housing sector and government oversight, there would provide extraordinary support to HNZL, is no meaningful distinction between Kāinga Ora, if needed.” S&P Global Ratings, October 2019 HNZL and the Crown from a credit perspective.” Moody’s, November 2019 15

Our debt programmes Medium-term notes Commercial paper • $1,000 million programme limit Notes offered are: • Unsecured & unsubordinated • Regular fortnightly tenders of $25 million • Repo-eligible with the RBNZ (3-month paper) • Approved Issuer Levy paid by HNZL • Private placements as required 16

New debt sourced from the market, legacy Crown loans rolled over Crown loans Bonds on Issue • Legacy loans of around $2.0 billion • Annual appropriation allows for refinancing Market debt • $7.1 billon of debt can be sourced from the market under Kāinga Ora’s Borrowing Protocol • $2.3 billion bonds issued to date • Issuance of around $2.5 billion per year in 2020 • $700 million commercial paper on issue 17

Sustainability Financing Framework includes focus on wellbeing Sustainability + Wellbeing 18

Redevelopment of 139 Greys Avenue Key features Key features • Resource consent received • 200 state homes and 76 non-state homes • Demolition and civil works begin first quarter 2020 • 24/7 on-site support services and security • Due for completion late 2022 • Over 200 bike spaces • Around 3,000 sqm of floor space for communal, For more info visit: https://hnzc.co.nz/housing-developments-and-programmes/greys-ave support services, HNZ office and commercial space. BEFORE AFTER 19

SECTION 04 Financial overview Photo: Universal Drive, Henderson, Auckland 20

Strong, stable and consistent financial performance Year ended ($m) June 2019 June 2018 Year ended ($m) June 2019 June 2018 Revenue 1,465 1,338 Total assets 29,102 27,490 Expenses Total liabilities 5,171 970 842 6,074 EBITDA 495 496 Total equity 23,028 22,319 Depreciation and amortization 259 Total debt 2,653 285 3,536 EBIT 210 237 Interest expense 84 106 Tax 34 49 Gains/(losses) (28) (66) Year ended ($m) June 2019 June 2018 Net profit after tax 4 76 Liabilities / Assets 18.8% 20.9% Debt / Assets 12.2% 9.7% Year ended ($m) June 2019 June 2018 Debt / EBITDA 5.3 7.1 EBITDA / Interest expense 4.7 5.9 Operating cash flow 210 360 Investing cash flow (590) (1,266) Financing cash flow 883 697 21

More than 90 percent of income received comes from the Crown Year ended June 2019 $m % total Year ended June 2019 $m % total Repairs and maintenance 366 27% Rental revenue – income-related rent subsidy (IRRS) 880 60% Depreciation on rental properties 265 19% Rental revenue – tenants receiving IRRS 368 25% Rates on properties 124 9% Crown appropriation revenue 102 7% Personnel 162 12% Other 115 8% Interest expenses 106 8% Total 1465 100% Grants 84 6% Third-party rental leases 51 4% Water rates 36 3% Depreciation and amortization on infrastructure assets 20 1% Other expenses 147 11% Total 1361 100% 22

Strong and stable credit Largest Critical Aaa / AA+ residential property owner To the delivery of Government’s in New Zealand urban development programmes 90% of income received from the Crown Conservative Treasury policies 23

Investor relations Direct contacts News, credit ratings, borrowing programmes, Matthew Needham Sustainability Financing Framework, and more Deputy Chief Executive, Finance Matthew.Needham@kaingaora.govt.nz https://kaingaora.govt.nz/investor-centre Sam Direen Treasurer Sam.Direen@kaingaora.govt.nz Nicki Reeves Liquidity and Investor Relations Manager Nicki.Reeves@kaingaora.govt.nz 24

QUESTIONS AND ANSWERS Photo: Frankmoore Avenue, Johnsonville, Wellington 25