Argosy Property first-half earnings rise 22% on portfolio value lift

The property investor recorded a $35.8 million gain on the value of its properties in the first half.

Argosy Property, the country's fifth-biggest listed property investor by market value, increased first-half earnings 22% as it benefited from the rising value of its portfolio and extra cash from the surrender of a lease agreement.

Profit rose to $56.2 million, or 6.9c a share, in the six months ended September 30, from $46.1 million, or 5.74c, in the year-earlier period, the Auckland-based company said in a statement. Net property income rose 11% to $53.7 million, which included a $5.4 million benefit from NZ Post's move to surrender a lease agreement for three floors of New Zealand Post House in Wellington.

The property investor also recorded a $35.8 million gain on the value of its properties in the first half, ahead of a $27.6 million gain in the year-earlier period.

Argosy has been rejigging its $1.4 billion property portfolio and aims to have core long-term investments make up between 75-85% of the value of the portfolio, with the remaining assets designated as value add. The company has earmarked about $55 million of property for sale which it deems neither 'core' nor 'value add'. In the first half it agreed to sell a Palmerston North property for $3.3 million in December, and an Auckland property for $6 million in June next year. Since balance date, it has agreed to sell another Auckland property for $7.6 million in March next year.

"The first half of the financial year has seen Argosy take further steps towards advancing the quality of the portfolio," chief executive Peter Mence said. "We are making the most of a very buoyant economy and property market."

Argosy's occupancy rate by rental income slipped to 97.9% as at September 30, from 99.4% at March 31, mainly due to the expiry of a lease to Fonterra in Napier. However, the company said outstanding lease expiries for the period ending March 31, 2017 have reduced and enquiry levels from potential tenants are encouraging. Its weighted average lease term remained stable at 5.26 years, from 5.24 years at March 31.

The company will pay a dividend of 1.525c a share on December 21 for the second quarter, consistent with the payment for the first quarter. It reiterated that it expects its annual dividend for the 2017 year to amount to 6.10c a share, up from 6.025c in the 2016 year, and said it expects the dividend will increase "modestly" again in the 2018 year.

Its shares last traded at $1.05.