Result for Sylvia Park owner out today. Photo / supplied
Result for Sylvia Park owner out today. Photo / supplied
Unrealised real estate devaluations pushed one of New Zealand’s biggest listed landlords to a $151.1 million net after-tax loss in its latest half-year, but rental income rose 6 per cent.
Kiwi Property Group - which owns Sylvia Park and has $3.4b of assets - says a $213.3m fall in property valuations from the softening real estate market meant bottom-line profit fell.
But other metrics were up for the six months to September 30.
The pandemic’s lessening impact and higher operating profit meant it made $65.2m adjusted funds from operations, up 36 per cent on the previous corresponding half-year.
Its portfolio was valued at $3.6b but is now $3.4b.
The company referred to challenging macroeconomic conditions but said results highlight the strong property portfolio performance.
It said the evolution into developing mixed-use communities at key metropolitan centres and transport hubs was also paying off.
Net rental income rose 6.3 per cent to a record $100m, driven by sustained revenue growth at Sylvia Park especially. Operating profit before tax was also up 4.2 per cent to $65.1m.
The company’s leasing programme drove an uplift in rent reviews and new leasing. Only 0.3 per cent of Kiwi’s properties are empty.
Few big commercial property sales are being concluded and rising inflation means valuers are cutting numbers when portfolios like Kiwi’s are reassessed, the company said.
“As a result, the fair value of Kiwi Property’s property portfolio decreased by an unrealised 5.8 per cent or $213.3m, leading to a net loss after tax of $151.1m,” it said.
Clive Mackenzie, Kiwi chief executive, said the falling property portfolio value and impact on net profit was disappointing, but not unexpected given challenges facing the global economy.
“By actively managing our properties, tightly managing costs and delivering on our mixed-use strategy, we will help accelerate the recovery of our asset values as the financial climate improves.”
At Sylvia Park, Kiwi is building 295 apartments to rent. The steel superstructure is now up to three levels high.
A new six-level medical and office development at 3 Te Kehu Way has its exterior complete and internal fit-outs underway. That is due to be finished in next year’s first quarter.
The Drury holding is now worth more than double what Kiwi paid for it. Photo / supplied
The company and others also succeeded this month in getting a private plan change for a new Drury town centre in south Auckland.
Kiwi, Oyster Capital and Fulton Hogan won an action against appeals opposing their schemes there. That clears the way for 6000 new homes and a new town centre on the land.
Judge Jeff Smith allowed the plan change to go ahead, enabling developers to begin work on their holdings.
The earthworks will take two years and civil infrastructure like roads, sewers, water mains and electricity will go in at Drury after that.
“The improvement of our site has delivered substantial valuation gains, with the landholding now worth more than double the purchase price. This places us in a position to unlock additional value, if we choose to subdivide our residential landholding into super-lots, for example,” Mackenzie said today.
Drury was an exciting opportunity but he said the company was pragmatic about the rate of development there, which depended on the economic climate and funding.
The company said it struck an unconditional deal to sell 44 The Terrace, Wellington for $48m. That is due to settle on December 15 and the building was regarded as non-core.
Mackenzie said proceeds from selling assets like that will repay debt and help fund new development, unlocking better growth and more long-term value for shareholders.
The company owns more than 125ha of land it plans to develop at Sylvia Park, LynnMall, Drury, and The Base in Hamilton.
It has about $217m of development expenditure remaining at 3 Te Kehu Way and Sylvia Park build-to-rent.
Arie Dekker, Jarden research head, said the result was stronger than expected. He expected net property income to be $95.3m but came in at $100m.
Kiwi has Auckland’s Westgate lifestyle centre for sale and has already sold its Northlands mall at Papanui.
Dekker called today’s announcement “a strong operating result, as Kiwi emerges out of Covid”. The key downside risk was deterioration in trading conditions hitting Kiwi’s retail tenants.
