Bumper profit for listed landlord
Property For Industry (PFI) has more than doubled its annual profit to $110 million and plans to exit its non-industrial properties.
The listed company said it would begin the sales in 2019 of its $150m worth of non-industrial property, and that process might take about 18 months.
They would be replaced with quality industrial properties, and PFI would invest where it could add value.
Its after-tax profit for the year ended on December 31, 2018, jumped $58.4m to $110.1m, compared with 2017’s profit of $51.7m.
A substantial contributor to the profit jump was the rise in the value of PFI’s property portfolio, which increased $66.4m through independent valuations, taking the total value of its properties to $1.32 billion.
About a third of the value increase was due to rental growth, which reflected in part the successful leasing of its properties, the company said.
PFI chief executive Simon Woodhams said it was in ‘‘excellent shape’’, with low levels of debt and unused bank facilities.
It owned 94 properties that were leased to 148 tenants, with most of its properties in Auckland.
PFI had set its sights on being one of New Zealand’s foremost listed property companies.
‘‘In order to deliver on this vision, in 2019 we plan to begin replacing PFI’s non-industrial assets with quality industrial properties in sought-after areas, either via acquisitions or by valueadd strategies within the existing portfolio,’’ Woodhams said.
The industrial property market was as strong as it had ever been, he said, but PFI would take a cautious approach to buying.
Another key focus was completing the leasing of Carlaw Park, an office and mixed-use property in the Auckland suburb of Parnell that accounted for a third of PFI’s vacancies and expiries.
Carlaw Park was one of four large non-industrial sites that would be sold. Its value was close to $100m, Woodhams said. New leasing had been completed there and needed a bedding-in period.
PFI had done a lot of work this year in leasing more than 100,000 square metres of space, which had contributed to increases in earnings and strong valuation gains.
Average occupancy during 2018 was at the company’s 10-year average of 98 per cent, but that rose to 99 per cent at the end of the year.
Net rental income for the year increased by $6.1m, or 8.4 per cent, to $79.1m.
Shareholders will receive a fourth-quarter dividend of 2.1 cents per share, taking the total dividend for 2018 to 7.55c a share, up 0.1c a share on 2017.
Woodhams said forecasts suggested the New Zealand economy would slow over the next two years, keeping interest rates low. Those conditions would support its property business and values.
He pointed to forecasts by real estate services firm CBRE that ranked secondary industrial property as the top asset class to hold in the next five years. It predicted an 11 per cent return over five years through a mix of rising rental income and capital gain.
Vacancy rates across Auckland for industrial property remained about 2 per cent. With limited industrial developments in the past few years, rents were increasing and that was a good sign for PFI, Woodhams said.