Kiwi Property Group takes big hit on its property portfolio

Its property portfolio has dropped in value, but continued revenue growth at Sylvia Park has...
Its property portfolio has dropped in value, but continued revenue growth at Sylvia Park has helped drive Kiwi Property Group's record high net rental income. Photo: RNZ / Marika Khabazi
Kiwi Property Group has reported a hefty half-year loss after the value of its property portfolio was affected by the softening market, but the company saw a record high net rental income.

The group recently sold Northlands Shopping Centre in Christchurch for $151 million, which is due to be settled at the end of this month.


In September, MP Holdings 5 Ltd signed a conditional agreement to purchase Northlands. In a statement to the NZX at the time, Kiwi Property Group said the sale was part of its ongoing strategy to focus on the development of mixed-use town centres.

Kiwi Property Group key numbers for the six months ended September compared with a year ago:

  • [Ll] Property portfolio loss $213.3m vs $93.6m gain
  • Net loss $151.1m vs $143.2m profit
  • Revenue $130.2m vs $122.3m
  • Operating profit $65.1m vs $62.5m
  • Interim dividend 2.85 cents a share vs 2.75 cps

Net rental income hit $100 million, up $6m from the same period a year ago, driven by continued revenue growth at Auckland's Sylvia Park.

Its operating profit also increased 4.2 percent to $65.1m helped by the release of Covid-19 rental abatement money which was not needed.

"While the reduction in the value of our property portfolio and subsequent impact on net profit is disappointing, it's not unexpected given the well-documented challenges facing the global economy," chief executive Clive Mackenzie said.

"By actively managing our properties, tightly managing costs and delivering on our mixed-use strategy, we will help accelerate the recovery of our asset values as the financial climate improves."

Kiwi Property said it made good progress on its targeted development programme in the first half of the 2023 financial year.

Construction of a build-to-rent apartment complex at Sylvia Park was progressing "at pace" and the medical and office development in the area was moving forward with similar momentum, it said.

Kiwi Property recently received approval from the Environment Court for its Drury private plan change application and said stage one earthworks were underway.

"The improvement of our site has delivered substantial valuation gains, with the landholding now worth more than double the purchase price. This places us in a position to unlock additional value, if we choose to subdivide our residential landholding into super-lots, for example," Mackenzie said.

"Drury presents an exciting opportunity, however, we'll be pragmatic about the rate of development there, moving as fast or slow as the economic climate and funding allow," he said.

The company confirmed its full year dividend guidance of 5.7 cents per share.

Kiwi Property chair Mark Ford said it would maintain a "strict focus on costs" amid economic headwinds.

"While we're pleased to have achieved another robust operating performance and strong cashflows, the continued discount of our stock price relative to asset values is disappointing and something we're squarely focussed on," he said.

The company also announced the unconditional sale of 44 The Terrace in Wellington for $48 million, with settlement due on 15 December.

The building is home to a number of government agencies, including the Commerce Commission.

Forsyth Barr senior equities analyst Rohan Koreman-Smit said the company's adjusted funds from operations exceeded expectations to $65.2 million, up 36 per cent thanks to the reversal of Covid-19 rent relief provisions.

"Top line rent growth exceeded our forecast and was partly offset by higher interest and tax. Underlying portfolio metrics remained solid with stable occupancy and strong rent growth driven by leasing reviews lifting rents 4.9 per cent," Koreman-Smit said.