Investor Update April 2021 - Kāinga Ora
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Investor Update
April 2021
1
CONTENTS
SECTION 01
SECTION 02
Construction
Overview and urban
development
SECTION 03
Financing and
financials
2
SECTION 01
Overview
Photo: Weymouth Road, Manurewa,
Auckland
3
New Zealand’s largest residential landlord and developer
We own or manage
189,000+ 5,180
People live in our houses Families placed into homes 66,253
Which is 4% of New Zealand’s 5.0m population
last financial year Properties
Over 98%
Occupancy rate
Value of group assets
$30.8 billion
4
COVID-19: heading in, and the recovery COVID-19 - lessons learned
• Stable and secure rents and income - over 90% of
income directly or indirectly from the Crown Customer welfare
• $871 million of cash and financial assets available to the Improvements to
business - as at 31 March 2021 customer
programme on
• Construction work quickly recommenced - following one welfare calls and
month of a stringent national lockdown in April 2020 check ins
Supporting the
• Tenant debt largely unchanged - lower risk given most sector
tenants receive a benefit ($9 million of $1,465 million
total annual revenue) Immediate
payment terms for
• Continue to work closely with our stakeholders - making all build partners
sure contingencies are in place should infections escalate and suppliers as
• Supporting the sector as a key economic driver - more BAU
than 100 build partners and contractors supporting the
national recovery from the impacts of COVID-19
5
Kāinga Ora – established October 2019
The creation of Kāinga Ora brings a more cohesive, joined-up approach to supporting the Government’s priorities
for housing and urban development.
Kāinga Ora supports people across New Zealand to have good quality, affordable homes, and live in strong,
healthy communities.
Two key roles
Being a world-class public housing landlord Partnering to lead and facilitate urban
development projects of all sizes
6
Kāinga Ora
On 1 October 2019 the people, capabilities and resources of Housing New Zealand Corporation, KiwiBuild and
HLC (a subsidiary of Housing New Zealand) came together as Kāinga Ora – Homes and Communities.
Past Present
Crown Crown
(controlling entity) (controlling entity)
Housing New Zealand Corporation Kāinga Ora (incorporating HNZC, HLC and KiwiBuild)
KiwiBuild
Housing Housing (A department of the
HLC (2017) Ministry of Housing Housing New Zealand Housing New Zealand
New Zealand New Zealand
Ltd and Urban Limited Build Ltd
Limited Build Ltd Development -
Planning)
7
Our outcomes
• Public housing customers - Our public housing customers live well in their homes with
dignity, stability, and the greatest degree of independence possible
• Māori interest - Partnering with Māori ensures Māori interests are protected and their
needs and aspirations are met and allows Kāinga Ora to fulfil its obligations in respect of Te
Tiriti o Waitangi
• Housing access - We provide good quality, affordable housing choices that meet diverse
needs
• Communities - We create sustainable, inclusive and thriving communities: supporting
good access to jobs, amenities and services
• Environment - Environmental wellbeing is enhanced and preserved for future
generations
• System transformation - System transformation is catalysed and delivered
8
Overview of funding and financing
Ministry of Social Minister of Housing
Development Minister of Finance
Budget
appropriations
Governance NZD $500 million
Independent Crown loans
Board
Housing NZ Build Ltd.
~68% of rent (income-related rent subsidy)
~22% of rent (benefits, pensions, deducted at source) NZD $1,500 million
~10% (other income) Bonds, Commercial Paper
Tenant Capital
Markets
Source: Moody’s Investors Service
9
Sustainability Financing Framework includes focus on Wellbeing
C
B Wellbeing
UN Sustainable
Development Human capital
Goals
A B • Social connections
• Knowledge and skills
NZ Living • Time use
Standards
Framework Social capital
A • Cultural identity
• Civic engagement and
ICMA principles governance
and guidelines • Jobs and earnings
Financial/Physical capital
C • Housing
• Income and
Kāinga Ora consumption
• Subjective wellbeing
Sustainability
Financing Natural capital
Framework
• Environment
• Health
• Safety
10Impact attributed to Wellbeing Bonds
In FY20 we raised $2,321 million, allocated as follows: Eligible projects ICMA
(Social / Green)
• Social housing for people in the greatest need
• Retrofit existing social housing
• Modifications / accessibility
• Transitional housing
Natural
capital
• Green buildings minimum 6 homestar rating
• Reduction in waste from construction
activities
• Reduced rate of Financial
embodied emissions
and Physical
capital
• Supporting top 5% of most at risk tenants
with high and complex needs
*programme start 1-Jul-19
11Credit ratings of Kāinga Ora and HNZL equalized with New Zealand Sovereign
Agency Domestic currency Foreign currency Last updated
Aaa (stable) Aaa (stable) 04 February 2021
AAA (stable) AA+ (stable) 22 February 2021
Note, there is no explicit government guarantee
“Because of its public policy mandate, Kāinga Ora's “We believe HNZL will continue business as usual as a core
and HNZL's key role in the New Zealand social subsidiary of Kāinga Ora. We also believe there is an
housing sector and government oversight, there almost certain likelihood the New Zealand government
is no meaningful distinction between Kāinga Ora, would provide it with extraordinary support in a stress
HNZL and the Crown from a credit perspective.” scenario, if needed.”
Moody’s, February 2021 S&P Global Ratings, February 2021
12SECTION 02
Construction and
urban development
Photo: 135 Britomart Street, Berhampore,
Wellington
13Build programme overview
• The Government announced plans to deliver an
additional 8,000 new homes as part of May 2020 Budget, Forecast build programmes
made up of 6,000 state houses and 2,000 transitional
houses
• The 2,000 transitional houses are targeted for delivery
over the next two years, with the 6,000 new state houses
targeted in the following two years
• Kāinga Ora will be responsible for around 70% of these
new houses
• The Government announced in March 2021, Kāinga Ora’s
borrowing would increase by $2 billion to enable land
acquisitions (over 10-year period)
• We plan to update the market on our financing
requirements around the time of the Government Budget
(20 May 2021)
• The Borrowing Protocol limit is expected to increase to
accommodate the additional build
14Build programme and capital expenditure has increased in recent years
Newly constructed public and supported homes Gross capital expenditure
• Around 600 homes moved from 2020 to 2021 year • Significant pre-financing for 2021 has already occurred
as a result of disruptions from COVID-19
15The largest build programme in decades has three key drivers
Growth in our public housing Requirement for more affordable Significant renewal and
register housing realignment requirement
• Public housing register has quadrupled • New Zealand housing is among the • Average age of houses is around
in the past four years 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
Source: Kāinga Ora Source: Interest.co.nz Source: Kāinga Ora
16Using 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
• Multi-year Construction Partnering Agreements
– providing certainty to innovate and scale up
Innovation and new construction methods
• Offsite manufacturing
• Use of cross-laminated timber
• All new builds now have minimum 6 Homestar
certification (except apartments), apartments
from 1 January 2021
• Bathroom pods with accessibility modifications
• New Building Consent Authority: Consentium
17Urban development
Leading the largest urban
regeneration ever undertaken in
New Zealand, by creating
sustainable, inclusive and thriving
communities that will transform
suburbs by:
Evaluating new land
opportunities to
Reviewing existing deliver large scale
concentrated projects
landholdings for
opportunities
Working in
partnership with
others (Councils,
private developers,
Iwi) to enable quality
urban development
18SECTION 03
Financing
and
financials
Photo: Universal Drive, Henderson,
Auckland
19Our debt programmes
Bonds Bills
Notes offered are: • $1.5 billion programme limit
• 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
20New debt sourced from the market, legacy Crown loans rolled over
Crown loans
• Legacy loans of around $2.0 billion HNZL bonds on issue
• Annual appropriation allows for refinancing
Market debt
• $7.1 billon of debt can be sourced from the
market under Kāinga Ora’s Borrowing
Protocol – expected to increase over time
• Annual programme around $2.0 billion,
subject to Government decisions
• Total market debt on issue $4.65 billion:
$4,200 million nominal bonds
$300 million inflation-indexed bonds
$150 million bills
21Market conditions
HNZL yield to maturity HNZL spread to NZGB (interpolated)
HNZL Yield to Maturity HNZL spread to NZG
4.00 1.20
2023 2025 2026 2023 2025 2026
2028 2030 2035 2028 2030 2035
3.50
1.00
3.00
0.80
2.50
2.00 0.60
1.50
0.40
1.00
0.20
0.50
0.00 0.00
22Bond tender programme
Overview FY2020/21
• Monthly bond tender operated through Bond tender schedule to 30 June 2021
the Yieldbroker Auction System, to
Announcement Tender Settlement Volume Coverage
complement the use of syndicated issues
30-Nov-20 02-Dec-20 07-Dec-20 100 4.3 x
• Expected to account for around half of
annual issuance on an ongoing basis 18-Jan-21 20-Jan-21 26-Jan-21 100 4.9 x
15-Feb-21 17-Feb-21 22-Feb-21 100 3.0 x
• Volumes up to aggregate $100 million
per tender 29-Mar-21 31-Mar-21 07-Apr-21 100 3.0 x
• Up to three bonds offered, existing 23-Apr-21 28-Apr-21 03-May-21 100
maturities only 17-May-21 19-May-21 24-May-21 100
• No reallocations across maturities if 21-Jun-21 23-Jun-21 28-Jun-21 100
undersubscribed
Tender announcement and results published via Bloomberg landing page
23Diversifying our investor base
• Primary issues supported by both Bank and Fund • Offshore (non-resident) holdings on average
Manager accounts represent ~10% of total bonds outstanding
• Non-bank holdings from 34% (2019) to 54% • Noticeable offshore investor enquiry
Bank / Non-bank holdings of HNZL bonds Domestic / Offshore holdings of HNZL bonds
24Demonstrating strong ability to service financing requirements
90% of
revenue
from Crown
2020 2019 2020 2019
$m % Total $m % Total $m % Total
Repairs and maintenance 359 24% 366 27% Rental revenue - income-related rent
Depreciation and amortisation 301 20% 287 21% subsidy (IRRS) 959 59% 880 61%
Rental revenue - tenants receiving
Personnel 176 12% 152 11%
IRRS 386 24% 368 25%
Rates 171 11% 160 12%
Crown appropriation revenue 103 6% 102 7%
Interest expenses 135 9% 106 8%
Other 166 11% 101 7%
Grants 78 5% 84 6%
Total 1,614 100% 1,451 100%
Third-party rental leases 67 4% 64 5%
Other expenses 206 14% 133 10%
Total 1,493 100% 1,352 100%
25Strong, stable and consistent financial performance
Year ended (NZ$m) Jun-20 Jun-19 Jun-18 As at (NZ$m) Jun-20 Jun-19 Jun-18
Revenue 1,614 1,464 1,338 Total assets 32,934 28,996 27,490
Expenses 1,078 973 854 Total liabilities 8,964 6,072 5,171
Total equity 23,970 22,924 22,319
EBITDA 536 491 484
Total debt 6,439 3,536 2,653
Depreciation and amortisation 301 287 259
EBIT 235 204 225
Net Interest expense 114 92 72
Tax 32 (24) 49
Gains/(losses) (147) (76) (28) As at (NZ$m) Jun-20 Jun-19 Jun-18
Net profit after tax (58) 60 76 Liabilities / Assets 27.2% 20.9% 18.8%
Debt / Assets 19.6% 12.2% 9.7%
Debt / EBITDA 12.0 7.2 5.5
EBITDA / net interest expense 4.7 5.3 6.7
Year ended (NZ$m) Jun-20 Jun-19 Jun-18
Operating cash flow 184 294 360
Investing cash flow (2,968) (1,404) (590) Retain strong
Financing cash flow 2,909 883 697 standalone
credit metrics
on gearing &
serviceability
26Strong and stable credit
Largest Critical Domestic currency credit ratings
residential property owner
and developer in New
To the delivery of Government’s
urban development
AAA / Aaa
Zealand programmes
90% of income received
from the Crown
Conservative
Treasury policies
27Investor relations Direct contacts
News, credit ratings, borrowing programmes,
Matthew Needham
Sustainability Financing Framework, and more Chief Financial Officer
Matthew.Needham@kaingaora.govt.nz
https://kaingaora.govt.nz/investor-centre
Jason Bligh
Treasurer (Acting)
Jason.Bligh@kaingaora.govt.nz
Nicki Reeves
Liquidity and Investor Relations Manager
Nicki.Reeves@kaingaora.govt.nz
28QUESTIONS AND ANSWERS
Photo: Frankmoore Avenue, Johnsonville, Wellington
29DISCLAIMER
This presentation has been prepared by Housing New forward-looking statements and they should not be its contents or otherwise arising in connection with the
Zealand Limited (HNZL). This presentation does not regarded as a representation or warranty by HNZL, the offer of Securities; (b) authorised or caused the issue of,
constitute or form part of, and should not be construed directors of HNZL or any other person that those forward- or made any statement in, any part of this presentation;
as, an offer to sell or issue or the solicitation of an offer to looking statements will be achieved or that the and (c) make any representation, recommendation or
buy or acquire any securities (Securities) of HNZL or any assumptions underlying the forwarding-looking warranty, express or implied regarding the origin, validity,
of its subsidiaries or affiliates in any jurisdiction or an statements will in fact be correct. It is likely that actual accuracy, adequacy, reasonableness or completeness of,
inducement to enter into investment activity. results will vary from those contemplated by these or any errors or omissions in, any information, statement
forward-looking statements and such variations may be or opinion contained in this presentation and accept no
The information in this presentation is in summary form
material. liability (except to the extent such liability is found by a
and must be considered in conjunction with and subject
court to arise under the Financial Markets Conduct Act
to publicly available information of HNZL. It is of a general The information in this document is given in good faith
2013 or cannot be disclaimed as a matter of law).
nature and does not constitute financial product advice, and has been obtained from sources believed to be
investment advice or any recommendation by HNZL or reliable and accurate at the date of preparation, but its A credit rating is not a recommendation to buy, sell or
any other person to subscribe for, or purchase, any accuracy, correctness and completeness cannot be hold any Securities and may be subject to suspension,
Securities. Nothing in this presentation constitutes legal, guaranteed. HNZL makes no representation or warranty change or withdrawal at any time by the assigning rating
financial, tax or other advice. as to the accuracy or completeness of the information in agency.
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to any offer of Securities, to any person in New Zealand
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