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

FEBRUARY 2020

Investor Update

CONTENTS

SECTION 01 SECTION 02

Construction and urban development Overview

SECTION 03

Financing approach

SECTION 04

Financial

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SECTION 01

Overview

Photo: Yola and Tenancy Manager, Mo outside Yola’s Lower Hutt home

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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.

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Crown

(controlling entity)

Legal structure

Kāinga Ora (incorporating HNZC, HLC and KiwiBuild)

Housing New Zealand Limited

Focus of Kāinga Ora – Homes and Communities

Kāinga Ora has two key roles: Being a world-class public housing landlord Partnering with the development community, iwi and Māori, local and central government, and community

• rganisations to lead and facilitate

urban development projects of all sizes

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

New Zealand’s largest residential landlord

187,000+

People live in our houses

Which is 4% of New Zealand’s 4.9m population

5,110

Families placed into homes last year We own or manage

65,500

Properties

Over 98%

Occupancy rate Value of group assets

$29.1 billion

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SECTION 02

Construction and urban development

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Photo: Weymouth Road, Manurewa, Auckland

Becoming New Zealand’s largest residential developer, with an increasing state house build

ACTUAL

1,461

2018/19 TARGET

1,380

2018/19 FORECAST

1,800

2019/20 FORECAST

>7,500

Over the next four years

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The largest build programme in decades has three key drivers

Growth in the public housing register

• Public housing register has tripled since

September 2016

• Majority of growth in Priority A

category (most at risk)

Requirement for more affordable housing

• New Zealand housing is among the

most unaffordable in the world

• House price to incomes remain very

high, particularly in Auckland

Significant renewal and realignment requirement

• Average age of houses is around

45 years – many are cold and damp

• Over 45,000 homes are due for

renewal in the next 20 years

2,500 5,000 7,500 10,000 12,500 15,000 Sep 16 Mar 17 Sep 17 Mar 18 Sep 18 Mar 19 Sep 19

Public Housing Register

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Around half of all new builds planned for Auckland, with the remainder spread across the country

1.7m

Auckland

29,400

people (34% of NZ’s population) houses (state, affordable, market) planned to be built by 2026 state houses (45% of HNZ’s total stock) least affordable housing globally (Demographia, 2019)

7th 24,300

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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

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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

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SECTION 03

Financing approach

Photo: 135 Britomart Street, Berhampore, Wellington

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Credit ratings equalized with New Zealand Sovereign

Agency Entity Domestic currency Foreign currency Last updated Kāinga Ora HNZL Aaa (stable) Aaa (stable) Aaa (stable) Aaa (stable) 8 November 2019 HNZL AA+ (positive) AA (positive) 2 October 2019

Note, there is no explicit government guarantee

“Because of its public policy mandate, Kāinga Ora's and HNZL's key role in the New Zealand social housing sector and government oversight, there is no meaningful distinction between Kāinga Ora, HNZL and the Crown from a credit perspective.” Moody’s, November 2019 “We believe HNZL will continue business as usual. We also continue to believe that there is an almost certain likelihood the New Zealand government would provide extraordinary support to HNZL, if needed.” S&P Global Ratings, October 2019

Our debt programmes

Medium-term notes Notes offered are:

• Unsecured & unsubordinated
• Repo-eligible with the RBNZ
• Approved Issuer Levy paid by HNZL

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Commercial paper

• $1,000 million programme limit
• Regular fortnightly tenders of $25 million

(3-month paper)

• Private placements as required

New debt sourced from the market, legacy Crown loans rolled over

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Crown loans

• 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

Bonds on Issue

Sustainability Financing Framework includes focus on wellbeing

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Sustainability + Wellbeing

Redevelopment of 139 Greys Avenue

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Key features

• Resource consent received
• Demolition and civil works begin first quarter 2020
• Due for completion late 2022

For more info visit: https://hnzc.co.nz/housing-developments-and-programmes/greys-ave

Key features

• 200 state homes and 76 non-state homes
• 24/7 on-site support services and security
• Over 200 bike spaces
• Around 3,000 sqm of floor space for communal,

support services, HNZ office and commercial space.

AFTER BEFORE

SECTION 04

Financial

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Photo: Universal Drive, Henderson, Auckland

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Strong, stable and consistent financial performance

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

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More than 90 percent of income received comes from the Crown

Year ended June 2019 $m % total Rental revenue – income-related rent subsidy (IRRS) 880 60% Rental revenue – tenants receiving IRRS 368 25% Crown appropriation revenue 102 7% Other 115 8% Total 1465 100% Year ended June 2019 $m % total Repairs and maintenance 366 27% Depreciation on rental properties 265 19% Rates on properties 124 9% Personnel 162 12% Interest expenses 106 8% 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%

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Strong and stable credit

Largest

residential property owner in New Zealand

Critical

To the delivery of Government’s urban development programmes

Aaa / AA+

90% of income received

from the Crown

Conservative

Treasury policies

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Investor relations

News, credit ratings, borrowing programmes, Sustainability Financing Framework, and more https://kaingaora.govt.nz/investor-centre

Direct contacts

Matthew Needham Deputy Chief Executive, Finance Matthew.Needham@kaingaora.govt.nz 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

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DISCLAIMER

This presentation has been prepared by Housing New Zealand Limited (HNZL). This presentation does not constitute or form part of, and should not be construed as, an offer to sell or issue or the solicitation of an offer to buy or acquire any securities (Securities) of HNZL or any

• f its subsidiaries or affiliates in any jurisdiction or an

inducement to enter into investment activity. The information in this presentation is in summary form and must be considered in conjunction with and subject to publicly available information of HNZL. It is of a general nature and does not constitute financial product advice, investment advice or any recommendation by HNZL or any other person to subscribe for, or purchase, any

• Securities. Nothing in this presentation constitutes legal,

financial, tax or other advice. The information in this presentation does not take into account the particular investment objectives, financial situation, taxation position or needs of any person. You should not rely on this presentation in relation to any investment assessment. You should conduct your own research on HNZL and analysis of its financial condition, assets and liabilities, financial position and performance, profits and losses, prospects and business affairs of HNZL, and the contents of this presentation. This presentation contains certain forward-looking statements with respect to HNZL. All of these forward- looking statements are based on estimates, projections and assumptions made by HNZL about circumstances and events that have not yet occurred. Although HNZL believes these estimates, projections and assumptions to be reasonable, they are inherently uncertain. Therefore, reliance should not be placed upon these estimates or forward-looking statements and they should not be regarded as a representation or warranty by HNZL, the directors of HNZL or any other person that those forward- looking statements will be achieved or that the assumptions underlying the forwarding-looking statements will in fact be correct. It is likely that actual results will vary from those contemplated by these forward-looking statements and such variations may be material. The information in this document 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. HNZL makes no representation or warranty

as to the accuracy or completeness of the information in this presentation and does not undertake to update it. HNZL has not prepared or registered an investment statement, prospectus, product disclosure statement or

• ther regulated offer document in relation to any offer of
• Securities. No action has been taken or is proposed to be

taken by HNZL to register any Securities under the laws

• f any jurisdiction (including New Zealand) for which such

registration is required or otherwise to enable the Securities to be offered to the public or under a regulated

• ffer. This presentation may not be distributed or

published in or from any jurisdiction except under circumstances that will result in compliance with all applicable laws of any such jurisdiction. No Arranger or Lead Manager for any offer of Securities nor any of their respective directors, officers, employees and agents: (a) accept any responsibility or liability whatsoever for any loss arising from this presentation or its contents or otherwise arising in connection with the

• ffer of Securities; (b) authorised or caused the issue of,
• r made any statement in, any part of this presentation;

and (c) make any representation, recommendation or warranty, express or implied regarding the origin, validity, accuracy, adequacy, reasonableness or completeness of,

• r any errors or omissions in, any information, statement
• r opinion contained in this presentation and accept no

liability (except to the extent such liability is found by a court to arise under the Financial Markets Conduct Act 2013 or cannot be disclaimed as a matter of law). A credit rating is not a recommendation to buy, sell or hold any Securities and may be subject to suspension, change or withdrawal at any time by the assigning rating agency. By attending this presentation or otherwise accessing this document, you agree to be bound by the terms and restrictions set out above. No person may offer or sell Securities, or distribute or publish any offering material or advertisement in relation to any offer of Securities, to any person in New Zealand

• ther than to wholesale investors within the meaning of

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