Devaluations push $1.2b retail landlord Investore Property into $27.7m loss

Listed retail landlord Investore Property has declared a $27.7 million net after-tax loss due to $42.7m in devaluations but the company got more rent and other metrics were strong.

The business, managed by Stride Investment Management, owns properties including Bunnings and Countdown stores valued at $1.2b, and today it reported on the six months to September 30, 2022.

The value of its portfolio of large-format shops fell 2.4 per cent for the half year but net rental income of $30.2m was up $2.2m, primarily due to property purchases and rent reviews.

Profit, before tax and other expenses, was $17.7m, up $2.3m or 15 per cent.

“Loss after income tax attributable to shareholders of $27.7m was as a result of a net $42.7m decrease in the fair value of its property portfolio over the six months to 30 September 2022,” the company told the NZX today.

“This decrease is due to a softening of capitalisation rates across the portfolio, driven primarily by the higher interest rate environment. This compares to a profit after income tax for HY22 of $56.9m.”

The company chaired by Mike Allen and headed by CEO Philip Littlewood owns 44 properties, spent $28.1m and completed 41 rent reviews in the latest half year, and owns real estate in the North and South Islands.

It says its properties are tenanted by “everyday needs” businesses like supermarkets and DIY stores which underpin a resilient income stream.

On its outlook, it said it would explore chances to “recycle” or sell some property assets and use the money for higher growth investments and value-add moves.

A share buyback programme remains on pause. By September 30, it had bought and cancelled 632,398 shares for$1.1m, including transaction costs. The share buyback programme was paused on September 8.

“Acknowledging the current heightened market volatility, the board has resolved to keep the share buyback programme on pause.

“The board will continue to monitor market conditions and may recommence the share buyback programme by notice to the market,” it said today.

On its latest deals, the business said it had bought a 12,263sq m site beside its property at 3 Averill St, Papakura, for $18m in August.

“The acquisition provides Investore with control of the landholding, broadening future development options. Consolidation of the entire freehold for the property delivered a $5.25m (15 per cent) net valuation uplift on the 31 March 2022 valuation,” it said.

At Kaiapoi in Canterbury, Investore settled on the previously announced acquisition of 3.3ha of development land at Waimak Junction for $10.1m, reduced from the previously announced price of $10.5m.

Stage one of the development will include a new Countdown supermarket, targeting a 5-star Green Star rating, with the balance of the land held for future retail development.

The first stage is due to be completed in late 2023, targeting a yield on cost of 5.5 per cent, the business said.

Also on the outlook, the company said today: “The Investore board confirms that it is targeting an annual cash dividend of 7.90 cents per share to shareholders for FY23, consistent with Investore’s policy of paying between 90 to 100 per cent of the distributable profit, noting it will continue to monitor market conditions for the remainder of FY23.”

Shares are trading around $1.48, 20 per cent down annually, giving a market capitalisation of $543m.