Kiwi Property Group Ltd posted an after-tax profit of $120.1 million ($143 million in 2017), driven by another record operating result as measured by funds from operations (FFO – see note at foot).
The company said funds from operations grew by 8.2% to $111.3 million ($102.8 million), reflecting a 5.2% lift in rental income to $192.1 million, largely due to contributions from developments & strategic acquisitions completed the previous year.
While after-tax profit for the year was down, the company focuses in its annual report on long-term growth. Its target is 9%/year long-term total returns, last year it achieved 9.7%, this year it slipped to 9.3%.
Funds from operations/share slipped to 7.84c (7.95c). Net tangible assets/share were up a cent to 140c (139c).
Specialty retail sales rose 7.1% to $10,600/m² ($9900/m²).
A full-year dividend of 6.85c/share (6.75c) will be paid.
Chair Mark Ford said: “We continued to grow revenues while improving the quality of our investment portfolio through the sale of non-core assets, strategic acquisitions and the commencement of new development projects. We have also improved our conservative gearing position and executed strongly on capital management initiatives…
“In February, we were delighted to give the green light to the previously foreshadowed $223 million Galleria retail expansion at Sylvia Park, following 11 years of outstanding performance & growth at the centre. Our vision for Sylvia Park is the creation of a world-class town centre offering our customers exceptional retail, dining, entertainment & workplace experiences. This latest retail expansion will consolidate the centre’s position as New Zealand’s favourite shopping destination.”
$370 million of developments
Chief executive Chris Gudgeon said: “We currently have $370 million of developments in progress that will continue to add significantly to both the income performance & quality of our property portfolio.”
Sylvia Park continued to be a major focus. Highlights included:
- The Grove dining district opened 100% leased in December
- The $80 million office tower development, No 1 Sylvia Park, anchored by insurance company IAG, reached 90% leased this month when ANZ Bank (NZ) Ltd took 6740m² (5 full floors & a part floor)
- Construction of the Galleria retail expansion began – completion is scheduled for mid-2020, introducing 60 new specialty retailers, a flagship Farmers department store, international mini-majors & additional multi-deck parking.
The $9 million Grove precinct opened 100% leased and will deliver an initial yield of 7.8%, growing to 8.2% over the following 2 years, with a projected 10-year internal rate of return of 10%.
In Christchurch, Kiwi began construction of the new dining & entertainment precinct at Northlands, to be known as Langdons Quarter.
The company continued its capital recycling programme with the sale of previously identified non-core properties. It sold the Majestic Centre in Wellington for $123.2 million in December and, post-balance date, secured an agreement to sell North City in Porirua for $100 million.
Kiwi reduced its gearing from 34.5% to 29.7% at balance date.
Its investment portfolio was 99.6% occupied at year end, above its long-term average, with a weighted average lease term of 5.3 years. The portfolio value increased to $3.1 billion ($3 billion).
Overall, rentals achieved through new leasing & rent reviews delivered growth of 3.5%.
$1.6 billion of the $1.8 billion total retail sales were in Kiwi’s portfolio of 7 shopping centres, equating to growth of 3.9% (1.3% like-for-like). Growth was strong in the mini-majors, commercial services and pharmacy & wellbeing categories.
Mr Ford said the company was projecting an increased cash dividend of 6.95c/share for 2019, absent material adverse events or unforeseen circumstances.
“Our key focus in the year ahead will be on progressing our development projects underway at Sylvia Park & Northlands, while also progressing our town centre vision for our development land at Drury, south of Auckland.”
Note: Funds from operations is an alternative non-GAAP performance measure used to assess underlying operating performance and to determine income available for distribution. Kiwi said it’s a measure commonly used by real estate entities to describe their underlying & recurring earnings from operations, but it doesn’t have a standard meaning prescribed by GAAP and therefore might not be comparable to information presented by other entities.
Kiwi uses the Property Council of Australia guidelines. During the financial year, the council amended the method used to derive FFO to include the amortisation of leasing fees, and Kiwi Property has amended its current year FFO calculation to reflect this change.
Attribution: Company release, annual report & presentation.