Argosy owns the 15-level Citibank Centre, 23 Customs St East, home to the American Embassy. Photo / Argosy
Argosy owns the 15-level Citibank Centre, 23 Customs St East, home to the American Embassy. Photo / Argosy
Multibillion-dollar diversified landlord Argosy Property's net profit dropped marginally by 5 per cent annually mainly because of net 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.
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.
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.
It gave tenants rental rebates of $1.6m in the previous year but said Covid rent rebates were lower during this most recent period.
Although its income fell, Argosy's notes in the investor presentation gave the opposite impression. Those said net property income had been "bolstered" by steady rental growth and a full-year rent contribution from its new Mt Wellington properties.
In late 2020, the company announced it was buying properties at 8-14 Mt Richmond Dr and 2 Doraval Pl for $76m, referring to both as the Mt Richmond properties.
Solid revaluation gains were due to a combination of cap rates firming and rental growth, Argosy said. Auckland was the largest contributor to the total year-end valuation gains with an unrealised revaluation increase of $142.1m or 87 per cent of the total portfolio uplift.
Industrial gained the most in value of all the sectors, at $144.7m, up 14.7 per cent on book value.
Peter Mence, Argosy Property chief executive. Photo / supplied
The office portfolio value increased $9.1m and large format retail valuations rose by $9.8m.
Interest rate expenses on its loans fell from $28.6m to $25.6m, the company saying this was primarily because of higher capitalised interest and lower overall debt levels. Its debt to asset ratio is 31 per cent, down on 36 per cent a year ago.
Jeff Morrison, Argosy's chairman, said the board was "very pleased with the way the business has delivered through yet another Covid-19-impacted year".
"This has laid a strong foundation for FY23 and beyond. The business continues to demonstrate the resilience offered by a portfolio diversified by sector, tenant and location."
In the last two years, the company's exposure to the Auckland industrial sector had been a positive influence, underpinning its ability to deliver dividend and revaluation growth through difficult economic conditions, Morrison said.
Peter Mence, Argosy chief executive, called the last year "challenging" because he said it had been yet another 12 months affected by lockdowns and restrictions. However, Mence still said the result was pleasing and a solid result for shareholders.
Auckland's Citibank Centre, partly leased to the American Embassy, office buildings on Khyber Pass Rd, Grafton as well as 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 included in its portfolio.
The business also holds many warehouses and logistics centres from Manukau to Silverdale, Onehunga to Tāmaki.
"We delivered on our operational focus areas around vacancies, key expiries and developments. We also divested our non-core asset at 25 Nugent St at a healthy premium to book value. Our core portfolio metrics have remained sound despite the operational environment being so difficult for everyone."
Argosy's Wellington office building at 8-14 Willis St is now substantially complete and has been handed to Statistics New Zealand for fitout.
"The handover sees Argosy complete the largest green development project in its history. We are targeting a six Green Star rating for this high-quality core asset. The Wellington office market continues to exhibit strong fundamentals and our ongoing exposure to government rental streams provides resilience during uncertain times," the company's presentation today said.
Master planning for two new Auckland industrial estates at Mt Wellington and in Onehunga was well under way and Argosy said it had been fielding strong market inquiry from tenants keen to strike lease deals on those two sites.
Both will be redeveloped into green industrial estates.
"We're excited about the potential these sustainably focused properties bring to the portfolio and the cross-section of new industrial tenants showing interest. Strong industrial fundamentals mean this sector is forecast to be the best performer over the next five years," the commentary said.
Argosy plays up the spread of its portfolio, saying it has been able to take advantage of different market conditions depending what is doing best. Right now, that's industry, which is around 51 per cent of the company's portfolio by asset class.
Argosy's strength comes from its diversity across property grades, sizes, sectors and locations, it says.
It has a big holding around the government end of town in the capital.
The company is trading around $1.20, down 23 per cent annually.
It has a market capitalisation of $1.01b, with 846 million shares issued. It had been trading as high as $1.73 last September, before global sharemarket movements.
