Kiwi Property Group Ltd embarked on a new strategy in March, essentially to create multi-purpose precincts as it’s been doing this year at Sylvia Park in Mt Wellington, Auckland.
That strategic emphasis didn’t affect the company’s half-year results, out on Monday, but certainly colours the outlook.
Company chair Mark Ford & chief executive Clive Mackenzie pointed to a financial precaution turned wrong – debt interest rate swaps –as the main cause of a 24% drop in the bottom line. At the same time, the company’s weighted average cost of debt was reduced.
On a number of measures, Kiwi performed well, or close to the level of a year ago.
Assessing that by visiting the company’s half-year report, however, is a tricky exercise. In that report, Kiwi varies comparisons with past performance, sometimes comparing with the September 2018 half-year, sometimes with 6-month calculations for the March 2019 year-end. Throughout this article, comparisons are with the 2018 half-year, except for a couple of instances where I gave up the search.
Below, you can check:
- main features of the forward programme
- a few comments from Mr Ford & Mr Mackenzie
- the main financial results, and
- some of the property results.
The links take you to further detail on the company website, including comprehensive property details, and to earlier stories.
The forward programme focuses on:
- Sylvia Park for office, hotel, continuing retail development, parking and the latest fad, build to rent
- nearby land likely to be devoted to a mix of uses
- other mixed-used opportunities at LynnMall in New Lynn, The Base in Hamilton, 51ha at Drury in South Auckland, and
- developing a funds management arm.
Concept planning is progressing for Sylvia Park’s second office tower, potentially comprising 15,000m² of office & a 140-room hotel. The company said strong interest had been expressed by office tenants & international hotel operators. The target for construction is late 2020.
Build-to-rent: The proposal is being assessed. The company said: “Analysis of macro-fundamentals suggests strong potential” for it. Initial design is underway for a potential complex of 150-250 apartments.
Mt Wellington development site: Kiwi bought the 20,745m² at 51-53 Carbine Rd & 7-10 Arthur Brown Place, next to Sylvia Park & the railway station, for $25.5 million and said it offered strong potential for mixed-use development.
Work in progress: Galleria, 19,000m² retail level featuring 60 new stores. Retailers have committed to two-thirds of the space (by area). It’s planned to open from August 2020.
The multi-level south carpark will add 900 spaces and have 10 charging stations for electric vehicles. It’s on target to open in mid-2020.
Across the whole portfolio, chief executive Clive Mackenzie said, “The demand for space at leading mixed use & retail locations, as well as premium grade office buildings, is driving solid rental growth. New leases & renewals were particularly pleasing, with mixed-use up 14.1%, office up 8.5% & retail up 0.8%.”
Mr Mackenzie said the new equity from last month’s $180 million placement & this month’s retail offer of up to $30 million “will enable us to reduce pro forma gearing below 30% and create additional capacity to fund our development pipeline, and pursue new acquisition opportunities”.
Kiwi chair Mark Ford said: “Our goal is to create modern mixed-use communities, where Kiwis want to shop, work, play & stay. Our refreshed strategy will help position the company for future growth by aligning the organisation to key opportunities in the market. We see significant scope to create additional value for our shareholders by integrating a range of complementary uses at our significant landholdings.”
Key financial points:
Net profit after tax, down 23.9% to $36.8 million ($48.3 million)
Net fair value loss on interest rate swaps, $12.9 million ($2.93 million loss)
Pretax profit, down 20.2% to $47.3 million ($59.2 million)
Funds from operations (alternative non-GAAP performance measure), down 0.8% to $51.9 million ($52.3 million)
Adjusted funds from operations (alternative non-GAAP performance measure), up 4% to $46.2 million ($44.4 million)
Adjusted funds from operations/share, 3.21c (3.11c)
Total income, $118.28 million ($118.68 million)
Total expenses, up 19.4% to $70.98 million ($59.45 million)
Weighted average cost of debt, 4.52% (4.8% in March)
Gearing ratio, 32.8%, reducing to an anticipated 27.4% after capital-raising (29.4%)
Net tangible assets/share, $1.42 ($1.40)
Basic & diluted earnings/share, down 24.8% to 2.55c (3.39c)
Portfolio value, up 9.5% to $3.33 billion ($3.04 billion)
Half-year cash dividend, up 1.4% to 3.525c/share; full-year cash dividend to be held at 7.05c/share
Property revenue, up 0.3% to $117.3 million ($116.9 million) following the $99.6 million North City sale, settled in July 2018
Net rental income, $89.6 million ($89.9 million)
Net rental income, like for like, up 2.1% ($1.8 million), excluding the sale of North City, the impact of Sylvia Park galleria and new rental income from the ANZ Raranga office building at Sylvia Park
Retail sales, up 2.1% to $1.71 billion
Traditional shopping centre sales, up 2.3% to $1.54 billion
Specialty sales/m², $11,400/m² ($11,000/m² in March)
Occupancy, 99.3% – office 97.6%, retail 99.9%
Weighted average lease expiry, 5.1 years
Management expense ratio, 44 basis points (41).
1 November 2019: Kiwi Property raises $180 million from placement, opens retail offer
20 May 2019: Propbd on Q Mon20May19 – Revaluations boost Kiwi Property, Steel & Tube cuts forecast after re-analysing data
2 April 2019: Kiwi Property collects 1.5% in fair value gains
6 March 2019: Kiwi Property embarks on new strategy
21 December 2018: Kiwi Property buys site across tracks from Sylvia Park
21 November 2018: Kiwi Property returns steady as it nears completion of rebalancing
Attribution: Company release, half-year report.