Listed commercial property owner Capital Properties has defended its method of accounting for property.
Chairman Colin Beyer noted at the company's annual meeting in Wellington yesterday that there had been media comment about the way the company presented its information when reporting to the stock exchange.
"The area is a somewhat technical one and all I will say at this stage is that we disagree with the view which the stock exchange takes and believe that the presenting in our annual accounts is consistent with [statement of standard accounting practice] SSAP 17."
The SSAP relates to accounting for investment properties and properties intended for sale. The accounting rules require investment properties to be revalued annually.
"Except in extreme conditions these fluctuations [in valuations] are not something for you as investors to be concerned about," Mr Beyer said.
"We will be making a submission to the market surveillance panel to see whether the reporting form might be changed in an appropriate manner."
Mr Beyer said that in the year to March the company had to write down its property values mostly because of rises in interest rates.
"These increases in interest rates made our interest rates swaps worth a considerable amount and the fact that we have locked ourselves into very favourable rates of financing is reflected in our operating results.
"Had we placed a value on this in our balance sheet this would largely have offset the reduction in property value."
Capital Properties proposed to increase the size of its portfolio when it got the chance to buy good assets.
"We want to keep the risk profile of the company as low as it is at the moment and that means we need to be very particular in the sort of assets we acquire."
The company believed that for the foreseeable future it had the ability to maintain and increase after-tax profit levels.
"But our strategy for retaining good tenants relies on our being prepared to spend money on our buildings to maintain or enhance their value."
A resolution proposing an increase in directors' fees was withdrawn because proxy voting had indicated that it was unlikely to be passed by a substantial majority, Mr Beyer said.
Capital Properties, which took over Shortland Properties last year, made an after-tax profit of $13.1 million for the year to March. Its forecast was $12.8 million.
The higher profit was attributed to the one-off benefit of lease buyouts.
The combined property portfolio, which more than doubled as a result of the merger, had been revalued down 4.9 per cent, or $19.7 million, due to higher interest rates and marginally higher yields.
When reporting this in May, the portfolio was valued at $379.5 million.
Following yesterday's meeting, Capital Properties shares closed unchanged at 87c compared with an issue price in November 1998 of $1.
- NZPA
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