Record occupancy for Kiwi Property Group

Kiwi Property Group reported portfolio occupancy of 99.6%, an all time high, along with a ``solid result'' for the 2018 financial year, Forsyth Barr broker Lyn Howe said yesterday.

Kiwi reported an operating profit of $172.2million for the period, up 4.4% on the previous corresponding period.

Funds from operations of $111.3million, Kiwi Property's preferred measure of performance, were in line with forecasts and up 8.2% on the previous period, driven by part-period contributions from acquisitions.

Ms Howe said the portfolio occupancy high was driven by improvements at The Base and Centre Place North, as well as the Majestic centre being sold, helping drive the lift.

``We note Kiwi Property has reported Lynn Mall's occupancy at 100% where we understand multiple tenants moved out late last year following seismic concerns.''

Five floors in the Vero Centre became vacant on April 1, 2018, which would have fallen outside of the March 31 returns. Kiwi Property was expected to have had some leasing success across those floors, she said.

The company's assets were performing at two speeds. Its Auckland centres of Sylvia Park and Lynn Mall were generating solid sales growth of 2% to 3% and its regional portfolio was ``broadly flat''.

Looking at categories, commercial services, pharmacy and mini-majors continued to perform well. Home and living and department stores continued to lag. Excluding the recently sold North City, which had soft trading, like-for-like sales lifted to 1.8%.

The mini-major category is defined as a retail outlet of between 600sqm and about 1500sqm.

Earnings per share slipped to 7.84c from 7.95c, reflecting a $157million equity raise in the period.

Reported profit fell to $120.1million from $143million a year earlier, due largely to a 35% fall in the property investor's fair value gains to $26.5million. Kiwi Property's portfolio of 13 buildings and development land was valued at $3.05billion at March 31 compared to $2.97billion a year earlier.

``In the 2018 financial year 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,'' chairman Mark Ford said in a statement.

``We have also improved our conservative gearing position and executed strongly on capital management initiatives.''

Kiwi Property has been reshaping its property portfolio, selling assets to fund new developments in areas such as Drury, south of Auckland, expanding the Sylvia Park mall, and reducing its level of debt to strengthen its balance sheet.

The company's net debt shrank to $902.8million as at March 31 from $1.02billion a year earlier, its gearing ratio falling to 29.7% from 34.5%.

The board declared a final dividend of 3.425c per share payable on June 21, taking the annual payment to 6.85c, meeting guidance and up from 6.75c in 2017. Kiwi Property projected a 6.95c per share dividend would be paid in 2019.

``Our key focus in the year ahead will be on progressing our development projects under way at Sylvia Park and Northlands, while also progressing our town centre vision for our development land at Drury, south of Auckland,'' Mr Ford said.

The shares last traded at $1.39 and have fallen 1.1% so far this year, lagging behind a 3.12% increase in the NZX 50 index over the same period.

The annual result was Chris Gudgeon's last as chief executive. The long-serving head is leaving in September after 10 years in the position. The board had interviewed international and domestic candidates for his replacement, and would make an announcement on the new chief executive soon, the annual report said.


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