Kiwi Property says its financial results for the year ended 31 March 2023 (FY23) highlights the strength of its mixed-use property portfolio
Kiwi Property has announced its financial results for the year ended 31 March 2023 (FY23), with robust rental growth and record sales.
More than $1.7 billion in sales were recorded at Sylvia Park, LynnMall and The Base; up 28.5% on 2022 and 34.8% on FY19, marking a return to pre-COVID trading. Sylvia Park’s performance was particularly strong with sales of $889 million across the precinct.
Rental growth was similarly robust, with rent reviews and new leasing up 5.3% and 4.4% respectively despite the challenging economic environment. Kiwi Property’s net rental income rose 13.9% to $203.7 million in FY23, partially assisted by the final release of COVID-19 rental abatement accruals. Operating profit before tax increased 11.3% to $129.6 million, while adjusted funds from operations rose 16.1% to $116.5 million.
Kiwi Property Chief Executive Officer, Clive Mackenzie, says the company’s strong operating result demonstrated the merits of its mixed-use strategy.
“Our evolution from a retail and office landlord to a creator of connected communities continues to gain momentum. While this transition will take time, we achieved a robust operating performance over the past year, while simultaneously reshaping our portfolio and moving the business closer to our goal of becoming a developer, owner and operator of mixed-use assets at metropolitan town centres.”
Despite the company’s strong operational performance, Kiwi Property was not immune to the impact of rising inflation and interest rates. The fair value of the company’s investment portfolio decreased by 4.2% or $139.3 million2 in the second half of FY23 contributing to a full year net loss after tax of $227.7 million.
The Sylvia Park Precinct and The Base proved the most resistant of the company’s assets to the downward macroeconomic pressure, with valuation decreases of just 1.0% and 2.0%, respectively, over the six months ended 31 March 2023. Capitalisation rate softening across commercial assets such as the Vero Centre and ASB North Wharf led to a 6.1% decline in the value of the company’s office portfolio.
Mackenzie says the relative resilience of Kiwi Property’s key mixed-use assets highlights the strength and performance of these flagship properties.
“While the decline in the value of our investment portfolio is disappointing, it is not unexpected given the stage of the property cycle and current economic headwinds. By continuing to drive sales, grow rents and diversify our income streams, we will help mitigate further valuation decreases and encourage a faster recovery.”
Kiwi Property’s large strategic landholding, including more than 125 hectares across its mixed-use assets allows the company to dictate the timing of future activity, based on demand, funding and construction costs.
At Sylvia Park, the six-level medical and office development at 3 Te Kehu Way was completed in March. The previously announced tenants of Tamaki Health, Horizon Radiology and Regus co-working will also be joined by Geneva Finance, Rau Paenga and CLC Consulting.
Also at Sylvia Park, the sale of 3.2 hectares of land to IKEA is now unconditional, while in parallel, work is ongoing on the precinct’s 295 apartment build-to-rent (BTR) complex, with completion due for early FY25. In markets such as Australia, quality BTR apartments attract impressive rental growth with a similar trajectory expected here, positioning BTR to deliver attractive returns over time. Kiwi Property is also moving forward with its Drury development, where stage one earthworks are underway, and the site’s 13 residential super-lots have been formed.
Kiwi Property continued to progress on its capital recycling programme in FY23, executing the sale of Northlands Shopping Centre, 44 The Terrace and post-balance date, the Westgate Lifestyle Shopping Centre for $85.7 million.
“The sale of our non-core properties and recycling of proceeds is a central pillar of our funding strategy,” says Mackenzie.
“Not only do these asset sales provide our lowest cost of capital, they also help create a newer, higher quality and lower risk property portfolio.”
Kiwi Property will pay a cash dividend of 1.425 cents per share for the fourth quarter of FY23 on 21 June 2023, taking the full-year cash dividend payment to 5.70 cents per share. The company will reinstate its dividend reinvestment plan (DRP) for the fourth quarter of FY23, enabling shareholders to acquire Kiwi Property stock at a 2% discount, without transaction costs. In addition, the company today confirmed its dividend guidance at 5.70 cents per share for the 2024 financial year.
“Ensuring strict capital management and a healthy balance sheet will be a priority as we navigate the year ahead,” adds Mackenzie.
“We are clear on our way forward and confident of our ability to turn our strategy into reality. By doing so, we will drive the company’s operational performance and continue our transformation into a leading creator of connected mixed-use communities.”
