Clive Mackenzie who is the new CEO of NZ's biggest real estate business, Kiwi Property talks to the NZ Herald.
Property revaluation boosts were responsible for one of New Zealand's biggest NZX listed landlords enjoying 205 per cent bottom-line boost and last year's net loss becoming a profit.
Last year, Kiwi Property Group suffered a $289.9m reduction in its property values but this year, that became a $99.8m gain. Sonet profit after turned around hugely from last year's $186.7m loss to a $196.5m profit in the year to March 31, 2021.
But revenue fell slightly for one of the largest listed companies on the NZX: Kiwi made $241.4m revenue last year but $232.5m this year
Kiwi's office assets had a 10.2 per cent fair value gain, while mixed-use was up 1.5 per cent. The company's property portfolio was valued at $3.3b.
Kiwi owns Sylvia Park where it has big expansion plans. Photo / Kiwi Property Group
Despite the growth in net profit, the result was adversely impacted by Covid-19. The cost of asset lockdowns and the associated rent relief measures contributed to a 7.1 per cent reduction in net rental income, which decreased to $173.6m for the year.
Operating profit before tax fell 10.3 per cent to $116.3m.
Clive Mackenzie, chief executive, said: "Like many businesses, Kiwi Property was affected by Covid-19 in the 2021 financial year, with the cost of supporting our tenants, following early lockdowns in particular, causing a drag on operating profit. Despite this, we ended the year in a robust position, with leasing projections and rental abatements tracking better than forecast."
Kiwi has 31 per cent gearing, below the top of its range of 35 per cent.
The company also revealed today it has applied to develop many apartments at Mt Wellington and in New Lynn, in a scheme Mackenzie said some years ago he wanted to implement: high-rise residential apartments specifically built to rent out long-term, to be developed in what is now asphalted flat ground-level car parking areas around two malls.
"Build to rent accommodation remains a potentially exciting opportunity for Kiwi Property. The asset class has a low correlation to office and retail with lower volatility, helping to further diversify the company's earnings. Development schemes are being prepared for build to rent at Sylvia Park and LynnMall, with the consenting process underway for both projects," the company's result said.
Mackenzie said around 500 apartments are planned in four blocks: 300 units in three blocks at Sylvia Park and 200 units in one block at LynnMall. Consenting applications have been made for Sylvia Park and are about to be lodged for LynnMall.
The sale malls at Northlands in Papanui and in Palmerston North, or "down-weight of our retail assets" - was partly to fund the new apartments but Mackenzie said Kiwi's debt was still relatively conservative.
"It's a fantastic opportunity for New Zealand to grow this asset class and for Kiwi Property," Mackenzie said.
He also issued a chipper forecast for the March 31, 2022 financial year.
"Kiwi Property enters the new financial year with good momentum and a clear focus on achieving our strategic priorities. We start FY22 with exciting prospects ahead of us, including Drury, the new office tower at Sylvia Park and potentially build to rent. We are focused on realising these and other opportunities, with a continued commitment to creating value for our stakeholders," Mackenzie said.
Sylvia Park is Kiwi's most profitable mall, having a moving annual turnover or retail sales of $580m for the year. LynnMall had $248m of sales, and The Base in Hamilton had $164m.
"Sylvia Park and LynnMall were closed for approximately 10 weeks of the year due to alert level 3 and 4 lockdowns. Cinemas and travel were particularly hard hit by the impact of Covid-19, causing a negative impact on sales across all centres," Kiwi said.
"In the last six months, the opening of level 1 at Sylvia Park featuring a two-storey Farmers and approximately 50 new stores has driven positive growth in total sales," it said referring to its new Galleria.
But Kiwi will lose Bell Gully as a tenant: Precinct Properties chief executive Scott Pritchard today told the Herald the law firm had agreed to lease more than 4000sq m of space in the One Queen development on the waterfront from his business. Bell Gully has for many years been headquartered in Auckland in Shortland St's Vero Centre.
Shares in Kiwi are trading around $1.21, up 26c in the last year, giving a market capitalisation of $1.8b.
