Monday 25th May 2020
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Kiwi Property today announced its financial result for the year ended 31 March 2020, reporting a solid operating performance. Net rental income increased 3.4% to $186.8 million, contributing to an operating profit before tax1 of $129.7 million, up 4.2% on the year before.
Funds from operations (FFO1), a key measure of the Company’s operating performance, rose 6.3% to $113.6 million, underpinned by income growth across its diversified property portfolio. Kiwi Property’s asset classes all delivered rental income growth through the period, including office (+7.3%), mixed-use (+5.0%) and retail (+0.9%). At year-end, the portfolio was 99.5% occupied, with a healthy weighted average lease expiry of 4.9 years.
While Kiwi Property’s FY20 revenue was largely unaffected by COVID-19, the widespread economic uncertainty caused by the pandemic prompted valuers to soften their assumptions, resulting in a $290 million, or 8.5%, write -down in the fair value of the Company’s property portfolio. The portfolio was valued at $3.1 billion as at 31 March 20202. The revaluation of Kiwi Property’s investment assets caused a drag on the Company’s reported full year financial performance, turning an otherwise healthy operating result into a net loss after tax of $186.7 million3.
Kiwi Property Chief Executive Officer, Clive Mackenzie, said: “While the Company delivered a good operating performance FY20, the onset of the COVID -19 pandemic late in the financial year had a significant impact on our property valuations and net profit. We’re committed to protecting the physical and financial health of Kiwi Property and our stakeholders, and have implemented a number of measures to help us collectively navigate the pandemic, and emerge strongly on the other side.”
Kiwi Property is working with its tenants to share a fair proportion of the financial impact caused by the COVID-19 pandemic. Rent relief measures including rent abatements and deferments have been offered, with a focus on supporting the small and medium sized businesses, and retailers, that were unable to operate during the recent lockdown.
Abatements apply to the first quarter of FY21 and are expected to impact FFO by $20 million ($14 million on an after tax basis), equivalent to around 8% of the gross rental income earned by the company in FY20. This cost will be partially offset by the reintroduction of depreciation allowances for commercial buildings, which is expected to increase Kiwi Property’s after tax earnings by approximately $4.5 million in FY21.
Kiwi Property implemented a number of measures to help offset the financial headwinds caused by the COVID-19 pandemic. Key among these was the introduction of a comprehensive cost control programme, including the suspension of all non-essential capital projects and operating expenditure. The Board of Directors, Chief Executive Officer and Executive Team all agreed to a temporary 20% pay cut, while recruitment and employee salaries were frozen until further notice.
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