Kiwi Property today announced its financial results for the year ended 31 March 2023 (FY23), with robust rental growth and record sales, highlighting the strength of its mixed-use property portfolio.
More than $1.7 billion in sales were recorded at Sylvia Park, LynnMall and The Base; up 28.5 percent on 2022 and 34.8 percent on FY19, marking a return to pre-COVID trading. Sylvia Park’s performance was particularly strong with sales of $889 million across the precinct, reinforcing its standing as New Zealand’s favourite shopping centre.
Rental growth was similarly robust despite the challenging economic environment. Kiwi Property’s net rental income rose 13.9 percent 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 percent to $129.6 million, while adjusted funds from operations rose 16.1 percent to $116.5 million.
Kiwi Property Chief Executive Officer, Clive Mackenzie, said 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 percent or $139.3 million 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. Capitalisation rate softening across commercial assets such as the Vero Centre and ASB North Wharf led to a six percent decline in the value of the company’s office portfolio.
“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,” said Mackenzie.
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 sale of three 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 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,” said 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.
“Ensuring strict capital management and a healthy balance sheet will be a priority as we navigate the year ahead,” added 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.”