Housing New Zealand Investor Update - May 2018
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Housing New Zealand Investor Update May 2018 Matthew Needham CFO Matthew.needham@hnzc.co.nz Sam Direen Treasury Manager Sam.direen@hnzc.co.nz
Disclaimer
This presentation has been prepared by Housing New Zealand Limited guaranteed. HNZ makes no representation or warranty as to the
(HNZ). This presentation does not constitute or form part of, and should accuracy or completeness of the information in this presentation and
not be construed as, an offer to sell or issue or the solicitation of an offer does not undertake to update it.
to buy or acquire any securities (Securities) of HNZ or any of its
subsidiaries or affiliates in any jurisdiction or an inducement to enter into HNZ has not prepared or registered an investment statement,
investment activity. prospectus, product disclosure statement or other regulated offer
document in relation to any offer of Securities. No action has been taken
The information in this presentation is in summary form and must be or is proposed to be taken by HNZ to register any Securities under the
considered in conjunction with and subject to publicly available laws of any jurisdiction (including New Zealand) for which such
information of HNZ. It is of a general nature and does not constitute registration is required or otherwise to enable the Notes to be offered to
financial product advice, investment advice or any recommendation by the public or under a regulated offer. This presentation may not be
HNZ or any other person to subscribe for, or purchase, any Securities. distributed or published in or from any jurisdiction except under
Nothing in this presentation constitutes legal, financial, tax or other circumstances that will result in compliance with all applicable laws of
advice. any such jurisdiction.
The information in this presentation does not take into account the None of the Arrangers, Joint Lead Managers nor any of their respective
particular investment objectives, financial situation, taxation position or directors, officers, employees and agents: (a) accept any responsibility
needs of any person. You should not rely on this presentation in relation or liability whatsoever for any loss arising from this presentation or its
to any investment assessment. You should conduct your own research contents or otherwise arising in connection with the offer of Securities;
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adequacy, reasonableness or completeness of, or any errors or
This presentation contains certain forward-looking statements with omissions in, any information, statement or opinion contained in this
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believes these estimates, projections and assumptions to be reasonable,
they are inherently uncertain. Therefore, reliance should not be placed A credit rating is not a recommendation to buy, sell or hold any
upon these estimates or forward-looking statements and they should not Securities and may be subject to suspension, change or withdrawal at
be regarded as a representation or warranty by HNZ, the directors of any time by the assigning rating agency.
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statements will in fact be correct. It is likely that actual results will vary agree to be bound by the terms and restrictions set out above.
from those contemplated by these forward-looking statements and such No person may offer or sell Notes, or distribute or publish any offering
variations may be material. material or advertisement in relation to any offer of Notes, to any person
The information in this document is given in good faith and has been in New Zealand other than to wholesale investors within the meaning of
obtained from sources believed to be reliable and accurate at the date of clause 3(2)(a), (c) or (d) of Schedule 1 to the FMCA.
preparation, but its accuracy, correctness and completeness cannot be
2
CONTENTS 1. Overview 2. Build programme 3. Financing approach 4. Financial overview 3
1. Overview 4
OUR VISION: BUILDING LIVES AND COMMUNITIES BY HOUSING NEW ZEALANDERS
New Zealand’s largest residential landlord
We own or manage approximately More than
63,000
properties
180,000
people who live in our houses
Value of our assets
$26 billion
Over More than
98%
occupancy rates
8,000
new families housed last year
5
LEGAL STRUCTURE
HNZC is a Statutory Corporation set up under the Housing Corporation
Act (1974) and a Crown Agency under the Crown Entities Act (2004)
• Total HNZL Assets $25 billion • Manages Crown land
(97% of Group assets) at Hobsonville
• Total HNZL Debt $1.5 billion • Master plans large-scale
(79% Group debt) developments in Auckland
6
WHAT WE ARE BUILDING
New Zealand’s largest residential builder
Target
1,524
new and replacement properties
1,460
new properties delivered this year
delivered nationally last year
Target
2,507
new properties delivered in 18/19
7,000
new homes in the next three years
7
2. Build programme 8
OUR PLAN Working to ensure we have the right kind of homes, in the right places, to meet demand New and renewed houses across the country • 75% of our stock across New Zealand needs to be renewed over the next 20 years Auckland • The Government has signalled the need for more public housing Free-up land in Auckland • The new Auckland Unitary Plan frees-up HNZ land for 30,000 homes • High occupancy rates => additional public housing capacity required to release land for affordable and market homes 9
AUCKLAND - OVERVIEW
New Zealand’s largest and fastest growing city
1.6 million 9th
people (34% of NZ’s population) least affordable housing globally (Demographia, 2018)
28,200 24,300
houses (state, affordable, market) built by 2026
state houses (44% of total stock)
10AUCKLAND HOUSING PROGRAMME
Utilises land capacity in Auckland to accelerate the supply of housing
The Auckland Housing Programme (AHP)
• HNZ’s overarching initiative in Auckland to renew stock and increase
housing supply using land capacity
• Has government approval, and has been in planning since 2016
Phase 1 Phase 2 Total
(2016/17 (2020/21
# houses (gross) to 2020) to 2026/27) (P1 & P2)
Additional new and renewed state houses 4,305 7,200 11,505
New affordable/market houses 2,383 10,446 12,829
Total houses 6,688 17,646 24,334
$million
Total gross capital investment 2,231
Less sales of land / land and buildings (625)
Less budgeted capacity to invest in Auckland (530)
Net investment required 1,076
11BUSINESS STRATEGY
Details of new Government’s housing strategy
will inform overall financing requirements
Auckland
• $1.1b financing required in Phase One of Auckland Housing Programme to
create capacity and free-up land for affordable and market homes
All of New Zealand
• Details around the additional build are currently being finalised through the
Government’s Budget discussions
• Once finalised, HNZ will be coming to market with a long-term financial
strategy
12KIWIBUILD
KiwiBuild programme is a separate Government initiative
• Government initiative to build 100,000 affordable houses across New
Zealand over 10 years
• Aimed at first home buyers
• Details, including financing approach, currently being finalised by
Government
• HNZ will contribute to affordable housing developments as part of
KiwiBuild
100,000 2018 10 years
Affordable houses
13INDUSTRY SHAPING Use scale to deliver new housing at lower cost Innovative construction methods • Offsite manufacturing • Use of cross-laminated timber Leveraging the build programme to lower costs • Scaled-up procurement practices • Supplier panels • Standardised designs to speed up consent process 14
3. Financing approach 15
FINANCING SUMMARY All debt currently sourced from the Crown HNZC group debt totalling $1,953m currently sourced exclusively from the Crown • HNZL (issuer) $1,545m • HNZC (parent) $408m • Crown debt is refinanced upon maturity Borrowing Protocol • Approved additional debt can be sourced from avenues other than the Crown • Approved by Minister of Finance, Minister for Housing and Urban Development • As agreed between HNZC Board and Ministers 16
CREDIT RATINGS - OVERVIEW “HNZC is essentially an arm of the Government” S&P Global Ratings, Dec-17 S&P Global Ratings’ assessment of HNZL and HNZC • AA+ (stable) long-term local currency credit ratings • Ratings equalised with the New Zealand sovereign • Benefit from an “almost certain” likelihood of receiving government support in the event of financial distress • ‘aa’ stand-alone credit profiles • No explicit government guarantee AA+ Issuer credit rating 17
CREDIT RATINGS – OVERVIEW
HNZ is the only issuer assessed to have an “almost certain”
level of support from the New Zealand government
* GRE = Government-related entity
18DEBT MATURITY PROFILE Debt refinanced with the Crown via annual appropriation HNZ’s Crown debt 19
DEBT CAPITAL MARKET FINANCING
Commercial paper issuance underway, notes to follow in due course
Commercial paper programme
• Fortnightly tenders of $25m (3-month paper) since Feb-18
• $500m programme limit
Medium term note programme
• Established for use following 17 May 2018 Budget
• Notes offered will be:
— unsecured and unsubordinated
— subject to negative pledge provisions
— repo eligible
— offered to domestic and offshore (in certain jurisdictions) institutional investors
• Approved Issuer Levy paid by HNZL
20TREASURY POLICIES Conservative treasury policies Liquidity policies • Maintain committed bank standby facility • No more than 25% of term debt maturing in any one year • Cash required four months prior to need • Maintain rolling 36 month forecasts Other policies and procedures • Maintain current strong credit rating • Controls around taking on new debt • Reinvest net surpluses into housing 21
4. Financial overview 22
KEY FINANCIAL STATISTICS (HNZC GROUP)
Strong, stable and consistent financial performance
Financial Performance Financial Position
Year ended June June Year ended June June
($m) 2017 2016 ($m) 2017 2016
Revenue 1,318 1,284 Total assets 25,907 23,400
Expenses 864 774 Total liabilities 4,309 4,233
EBITDA 454 510 Total equity 21,598 19,167
Depreciation and amortization 246 231 Total debt 1,953 1,859
EBIT 208 279
Interest expense 87 93
Tax 16 44
Gains/(losses) (40) (8)
Net profit after tax 65 134
Cash Flow Credit Metrics
Year ended June June Year ended June June
($m) 2017 2016 ($m) 2017 2016
Operating cash flow 284 321 Liabilities / Assets 16.6% 18.1%
Investing cash flow (346) (280) Debt / (Debt + Equity) 8.3% 8.8%
Financing cash flow 89 (27) Total Debt / EBITDA 4.3 3.6
EBITDA / Interest expense 5.2 5.5
23FINANCIAL PERFORMANCE
85 percent of rental income received from the Crown
Revenue Expenses
Year ended June 2017 $m % total Year ended June 2017 $m % total
Rental revenue – income-related rent subsidy Repairs and maintenance 315 26%
(IRRS) 758 58%
Depreciation on rental properties 224 19%
Rental revenue – tenants receiving IRRS 338 26%
Rates on properties 113 9%
Crown appropriation revenue 88 7%
Personnel 104 9%
Other 134 10%
Interest expenses 87 7%
Total 1,318 100%
Grants 77 6%
Third-party rental leases 59 5%
Water rates 33 3%
Depreciation and amortization on infrastructure
assets 22 2%
Other expenses 163 14%
Total 1,197 100%
24KEY CREDIT SUMMARY Strong and stable credit • AA+ credit rating equalised with the Crown • Critical to the delivery of the Government’s public housing programme • Largest residential property owner in New Zealand • 85 percent of rental income received from the Crown • Conservative treasury policies 25
OTHER INFORMATION
Wholesale investor information https://hnzc.co.nz/about-us/
wholesale-investor-information
Credit ratings, borrowing programmes,
publications, additional information
Direct contacts
Matthew Needham
CFO
Matthew.needham@hnzc.co.nz
Sam Direen
Treasury Manager
Sam.direen@hnzc.co.nz
26QUESTIONS AND ANSWERS
A chance for a discussion
OUR VISION
Building lives and communities by housing
New Zealanders
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