Argosy Property lifted distributable earnings 4.6 per cent as it continued to lift the quality of its portfolio through the divestment of lower quality, non-core assets and after benefiting from the surrender of a lease agreement.

Distributable profit, the preferred measure for property investors which strips out unrealised movements in the value of their portfolio, rose to $54.3 million, or 6.64 cents per share, in the 12 months ended March 31, from $51.2m, or 6.35 cents, a year earlier, the Auckland-based company said in a statement.

Net property income gained 1.2 per cent to $99.5m. Argosy's occupancy rate eased to 98.6 per cent from 99.4 per cent but the weighted average lease term was 5.59 years versus 5.24 in the prior year. Its portfolio is now valued at $1.44 billion across 64 properties. Argosy's debt levels, excluding capitalised borrowing costs, were 36.3 per cent of total assets versus 36.7 per cent as at March 31, 2016.

"We continue to improve the quality of the portfolio which now presents to a very high standard and remain committed to providing our shareholders with sustainable and attractive returns in the years ahead," said chairman Mike Smith.


Argosy reiterated that its net property income got a boost from the surrender of the lease by New Zealand Post for the top three floors of the building in Wellington.

However, this was partially offset by the loss of rental income following the November 2016 earthquake that damaged the building services of the property and left some of the floors in the building unoccupied.

Independent engineers confirmed that the building remains structurally sound, but significant replacement of fit-out and services is required, it said.

While this loss of income is expected to be recovered from its insurers, the insurance claim has not yet been fully quantified, Argosy said. Insurance proceeds are likely to be received in the 2018 financial year.

Net profit rose 32.3 per cent to $104.4m, including a $42.3m revaluation gain.

The board declared a final quarter dividend of 1.525 cents per share, payable on June 29 with a June 15 record date. That takes the annual payout to 6.1 cents, up 1.2 per cent on the year.

Looking ahead, Argosy was upbeat about the future. "Whilst we live in globally uncertain times, the fundamentals of the New Zealand economy remain strong. Business confidence is high which points towards continued growth and increased inflation," it said. It expects to pay dividends totalling 6.2 cents in the 2018 year.

It underscored that a key strategy of Argosy is to divest vacant land and non-core assets and "we have made further progress in achieving this over the past financial year." It rejigged its investment strategy to take into account tighter conditions at the top of the property cycle.


Among other things, it has extended the permitted range of core properties to between 75 per cent and 90 per cent of the portfolio by value, up from 75 per cent to 85 per cent. A core property is considered to be a well-constructed, well-located asset which is intended to be a long-term investment.

The shares last traded at $1 and have fallen 10 per cent over the past year.