Listed retail landlord Investore Property halves losses, outlook ‘soft’

Woolworths Waimakariri Junction in Kaiapoi. Photo / Investore

A specialist listed retail landlord, which owns 36 Woolworths supermarkets throughout New Zealand, halved bottom-line losses in its latest year but says the outlook for the sector remains soft because of higher interest rates.

Investore Property said its portfolio was valued at $1 billion at March 31.

It reported a $67.1m loss for the year to March 31, 2024, down on its full-year 2023 result with a $150.2m bottom line loss.

Net rental income rose slightly from $60.3m to $61.2m and finance expenses rose from $16.2m to $18m.

But the main cause of the losses have been revaluations which were a negative $185m in the 2023 year and a negative $98.8m in the latest period.

The business was not upbeat about the sector in its current financial year.

“Current macroeconomic conditions remain soft and higher interest rates have impacted property transaction volumes.

“However, valuations are stabilising and interest rate cuts are forecast to start occurring later this financial year which creates opportunities Recent changes to rules surrounding tax depreciation on commercial buildings has resulted in an additional earnings headwind,” the company said in its outlook.

Investors in the company will get a 7.20cps cash dividend for the March 31, 2024 year.

The company has a market capitalisation of $407m and shares are trading around $1.09, down 24 per cent annually.

Investore, headed by chief executive Philip Littlewood, owns a large format retail portfolio which it says serves everyday needs and attracts repeat visits, with distributable profit for FY24 of $31m or 8.39 cents per share, in line with FY23 ($31.0m or 8.44 cents per share).

The business owns properties leased to Woolworths, New World, Pak’nSave, Animates, Bunnings, Mitre 10 Mega, Resene, Briscoes, Rebel Sport, Kitchen Things, Hunting and Fishing, Lighting Direct, Freedom Furniture, McDonald’s, Burger Fuel, Columbus Coffee, Pizza Hut, Domino’s Pizza, Super Liquor, Unichem Pharmacy, Snap Fitness and Affinity Medical Imaging.

It has 45 properties with 144 tenants on a weighted average lease term of 7.4 years.

“The Investore portfolio is valued at $1b as at 31 March 2024, representing a net valuation decrease of $99m or 9.1 per cent from 31 March 2023,” according to the annual report, also out today.

“This decrease is primarily due to the sustained higher interest rate environment which has resulted in the average portfolio capitalisation rate increasing to 6.37 per cent, up 0.67 per cent from 31 March 2023,”

About 35 per cent of its properties by contract rent were in Auckland, under 15 per cent in Canterbury and 17 per cent per cent in Wellington.

The company developed a big new Woolworths at Waimakariri Junction, Kaiapoi, completing work last November. Land and buildings cost around $26.1m and were “delivered within budget and on time”.

The store is leased for 12 years to Woolworths, with rights of renewal for a further 23 years.

The rest of the 1.8ha site is to be developed into more large-format shops, Investore says.

Woolworths leases, which comprise 64 per cent of the Investore portfolio by contract rent have turnover-linked rental mechanisms.

Those entitle the landlord to additional turnover rent when moving annual turnover at a store exceeds a specific threshold.

The company says it benefits from owing so many Woolworths.

Buying and selling remain possibilities.

“The board intends to pursue its strategy for targeted growth if appropriate acquisition and development opportunities present themselves, and will also consider strategic divestments, provided appropriate value can be realised.”

A cash dividend of 6.50cps for FY25 is anticipated.

That is to be near the mid-point of Investore’s revised dividend policy, it said.

Anne Gibson has been the Herald’s property editor for 24 years, has won many awards, written books and covered property extensively here and overseas.