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Non-cash tax charge delivers Argosy a $93 million loss

Monday 29th November 2010

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Argosy Property Trust posted a $93 million first-half net loss, although that reflected a $103.2 million non-cash charge for government tax changes.

Net distributable income fell 16.3% to $17.5 million as net property income fell 13% to $35.6 million for the six months ended September 30, reflecting asset sales during the last year, while earnings before interest and tax fell 8.7% to $31.4 million.

Before the tax charge, the trust made a $10.2 million profit compared with a $5.6 million loss in the same six months a year earlier, which reflected property devaluations. The trust's board decided it wasn't necessary to revalue the portfolio in the latest six months.

The trust, formerly ING Property Trust, said the tax charge doesn't affect its bank loan covenants.

The trust said it focused on maintaining and improving the quality of its property portfolio during the six months.

It sold the 792 Great South Road retail property in Auckland for $10.5 million, more than $700,000 above its March 31 valuation. It also bought the remaining strata title it didn't already own at the bulk retail centre at Wagener Place, St Lukes for $10.5 million and has a valuation $1 million higher than the price paid.

Both transactions settled after September 30 and will add to the trust's yield and average lease term, it said.

It also has unconditional agreements to sell three properties and some vacant land for about $26.4 million with settlement occurring through to mid 2013 at its Palmerston North joint venture.

The trust negotiated 40 leases in the six months and increased the weighted average lease term to 5.3 years from five years previously. However, occupancy fell to 95.7% at September 30 from 95.7% at March 31.

Debt rose to 41.8% of total assets at September 30 compared with 40.1% at March 31 and management is actively negotiating a number of sales to reduce it, the trust said.

The trust will pay 1.75 cents per unit for the September quarter, which won't carry imputation credits, and it still expects to pay seven cents per unit for the full year.

The trust says post balance-date activity levels in the property market "provide some grounds for greater optimism" although there is still a "need for careful and competent management."

Argosy units are trading at 78 cents, near the top of its 61 cents-to-81-cent trading range over the last 12 months.

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