NPT Ltd, which has struggled to gain either critical mass or momentum since its inception as a listed trust in 1994, reported a miserable annual result yesterday, as shareholders’ funds again declined.
The answer is to adopt the more aggressive style of its new manager & 18.85% shareholder, Augusta Capital Ltd: buy properties to reposition, redevelop & lease – and sell rather than remain a passive investor.
Once its $47 million sale of the AA Centre to SkyCity Entertainment Group Ltd settles in July, NPT will be down to a portfolio of just 3 properties worth a combined $124.6 million – the Eastgate shopping centre in Christchurch, 22 Stoddard Rd retail centre in Mt Roskill, Auckland, and Heinz Wattie’s national distribution centre in Hastings. The company sold Print Place in Christchurch in March for $8.25 million – 25% less than its $11 million carrying value.
Augusta also started life as a small portfolio owner and was destined to stay that way unless it changed its strategy. It’s sold down all but the remaining 2 parts of the Finance Centre in Auckland (scheduled to settle on 1 April 2019), and now manages $1.85 billion of assets held by syndicates & NPT.
Without the $4.5 million sale of its management rights to Augusta, right on balance date, NPT would have struggled to make a profit. Including those management rights, its net profit after tax was $3.095 million – $22,000 more than in 2017.
NPT chair Bruce Cotterill said in the company’s annual results announcement yesterday revaluations had reduced net tangible assets by $2.95 million ($1.65 million last year). In both 2017 & 2018, NPT paid out about $5.8 million in dividends. Shareholders’ funds have dropped by $5.5 million in 2 years, and just under $20 million in the last 3 years, to $114.3 million.
Mr Cotterill, appointed independent chair in April 2017 when Augusta staved off Kiwi Property Group Ltd’s bid for control, said operating earnings for the 12 months to March 2018 were consistent with the previous year, but revaluations & the $2.97 million loss on disposal of assets had reduced net tangible assets by 2.3%.
“We are confident that the position of the existing portfolio is now sustainable & positioned for value add-related growth moving forward.
“With Augusta, the board have now identified a defined value-add strategy in which the company will seek to acquire properties with the potential to reposition, redevelop & lease; all with the aim of creating future value. The future strategy differentiates NPT from the sector and provides a framework for relative outperformance,” he said.
Other points from the annual result:
- Net operating income after tax, down 1.4% to $5.8 million ($5.88 million)
- Adjusted funds from operations up 4.1% to $6.15 million ($5.9 million)
- Gearing (loan:value ratio) 26.6% (33.1%)
- Net tangible assets/share 70.6c (72.3c)
- Basic & diluted earnings/share up 1c to $1.91
- Portfolio occupancy 97.4% (96%) due to higher occupancy at Stoddard Rd and the sale of Print Place
- Weighted average lease term 4.4 years (4.6 years)
- An unchanged final quarter dividend of 0.9c/share has been declared; total dividends paid for the year are also unchanged at 3.6c/share; payout ratio is 95% based on adjusted funds from operations of $6.15 million
27 March 2018: Augusta settles NPT management rights payment
21 March 2018: Francis talks about a livelier future for NPT
20 December 2017: NPT accepts 25% cut to sell Christchurch property
15 October 2017: SkyCity buys AA Centre to consolidate precinct control
28 August 2017: Cotterill sees opportunity for NPT as tenants quit
Attribution: Company release, presentation, annual report.