Citibank Centre, corner Customs St East and Commerce St, Auckland. Photo / supplied
Citibank Centre, corner Customs St East and Commerce St, Auckland. Photo / supplied
Multibillion-dollar diversified landlord Argosy Property pushed up revenue in its latest half-year but in a sign of changing markets, revaluations became devaluations.
Last year’s $91 million revaluation gains turned to $23m devaluations or losses, pushing down bottom-line profit.
In the half-year to September 30, 2022, the listed real estate company reported a net profit after tax of $10.6m, down from the September 21 half-year’s profit of $127m due to those changing property valuations, partly influenced by rising interest rates.
Yet gross property income from rents rose from $56m to $60m and pre-tax profit was up from $47m to $49m.
Other property and retirement village businesses reporting results lately are also recording devaluations including Goodman Property Trust whose $555m interim profit last year turned to just $41.1m this year when revaluations, up $504.7m in the September 2021 half-year, only rose $1.3m in the latest period.
Argosy’s portfolio is 98.9 per cent rent for a weighted average lease term of 5.5 years, it completed many new leasing deals and chairman Jeff Morrison said the board was pleased with how it continued to build on its foundations.
“While rising interest rates, inflation and cost of living concerns continue to create headwinds for the economy, Argosy has continued to deliver on strategy underpinned by a robust capital position and resilient portfolio,” Morrison said today.
Argosy owns 82 Wyndham St, Auckland. Photo / Google Maps
Argosy had struck a deal to sell its Albany Lifestyle Centre to Augusta which defaulted so in the latest half-year, the company got $3m compensation under that contract. Since then, the company has sold the property to Oyster Property Group.
“Argosy also received $3m during the period from the defaulting purchaser under the March 2020 contract for the sale of the Albany Lifestyle Centre. The sale of the property to an alternative purchaser was subsequently completed in May 2021,” the business said today, not naming either defaulter Augusta or buyer Oyster.
Augusta was delisted from the NZX when Sydney-headquartered Centuria Capital took it over.
The lifestyle centre includes the large-format Mitre 10 MEGA and other stores.
The Albany property was to be a flagship for Augusta but it cancelled the contract in March 2020 when New Zealand entered its first lockdown.
Auckland’s Citibank Centre, partly leased to the American Embassy, office buildings on Khyber Pass Rd, Grafton and Carlton Gore Rd, Newmarket and its own headquarters at 39 Market Pl, Viaduct Harbour are in its portfolio.
The office building at 82 Wyndham St, Auckland, Wellington’s 15-21 Stout St, large office blocks at 143 and 147 Lambton Quay and another at 8-14 Willis St are also owned by Argosy which holds many warehouses and logistics centres in Manukau, Silverdale, Onehunga, Tāmaki and elsewhere.
Today’s result said the fact that the business owned properties in different sectors and areas gave it strength.
“A key benefit of Argosy’s portfolio is the resilience that diversification by location and sector provides through various economic cycles. The bottom-up fundamentals of the Auckland industrial and Wellington office sectors remain strong, with both experiencing ongoing rental growth and low vacancy levels. Rental income from Government tenancies also helps to underpin the company’s earnings and dividends,” it said today.
In May, the Herald reported the full-year result when net profit dropped marginally by 5 per cent annually mainly because of property income falling and expenses rising.
Last year’s $248.4 million net profit after tax fell to $236.2m in the year to March 31, 2022. The 2021 net property income of $106.5m fell to $105.1m in 2022 and administration expenses rose from $10.9m to $11.8m.
Yet valuations rose from $157.7m to $163.7m, indicating the strength of its portfolio. Although those boosted the bottom line, they were not enough to offset the falling income from rents and rising costs.
Peter Mence heads Argosy Property. Photo / supplied
Today, chief executive Peter Mence said: “We have started the year very well. Operationally, the business is in good shape with several new leases and renewals being addressed.”
The Auckland office market was more resilient than some people expected, particularly in the non-CBD segment, he said.
“We expect that the next 12 months will be challenging for the domestic economy but believe the business is well placed and expect dividends to be consistent with guidance. We will remain focused on achieving the best long-term results for our shareholders while being cognisant of the immediate hurdles and opportunities.”
In the annual result declared in May, profit before tax dropped from $248.4m to $241.2m and the tax bill fell from last year’s $6.7m to $5m in 2022.
The business owns properties valued at $2.26 billion, mainly in the North Island.
