Revaluations push up Argosy profit, 'significant' $39.6m Wellington insurance claim lodged

Wellington's 7 Waterloo Quay: $39.6m insurance claims lodged. Photo/Mark Mitchell

Annual property revaluation gains of $70.5 million saw diversified listed Argosy Property push up net after-tax profit from $98.2m last year to $133.7m but it claimed a 'significant' $39.6m insurance on an earthquake-damaged Wellington office block.

Argosy owns 61 properties valued at $1.66b, including Wellington's ex-Defence House on Stout St but its 7 Waterloo Quay in Wellington was hit in the 7.5 magnitude Kaikoura earthquake in late 2016, resulting in the huge claim.

In its result just released to the NZX, the business showed how revaluation gains last year were $47.3m but these rose to $70.5m in the latest period "driven by a mix of cap rate firming and rental growth." Solid realised gains were due to the favourable market for vendors, it noted.

"The valuations showed further evidence of improved market conditions since the last desktop valuation performed at the half year," Argosy said in a statement out with the result.

"The total revaluation gain for the 12 months to 31 March 2019 was $70.5 million, or 4.3 per cent per cent above book value. The portfolio is 1.3 per cent under-rented excluding market rentals on vacant space," it said.

Of the 14-level Waterloo Quay office block, Argosy announced: "Claims for the cost of reinstatement works undertaken have been submitted based on costs actually incurred. The total claimed from inception of the claim to March 31, 2019 is $39.6m."

NZ Post had naming rights on that waterfront building and leased large portions but Argosy said the business had relinquished floors and paid a $2.9m termination fee to Argosy last year.

Limited reinstatement works had been carried out to the block but Argosy said the timing of the rest of the work depended on reaching agreement with its insurers who it did not name.

"As with many significant insurance claims, it is uncertain when agreement with insurers will be reached," it said.

Wellington's former Defence House, owned by Argosy. Photo/Mark Mitchell

On prospective tenants for the quake-hit block, the business said: "The office leasing environment in Wellington remains very favourable and Argosy is currently in lease negotiations with a number of Crown organisations. These negotiations are at an advanced stage."

Net property income rose only marginally from $101m to $102.5m.

Peter Mence, chief executive, said "We are pleased to have delivered a solid full-year result with a number of highlights across the business. Rental income, earnings and distributable profit all improved on the back of strong leasing and rent review outcomes during the year. Our portfolio metrics have been maintained or improved and the quality of our buildings is high."