DNZ Property posts 8.7 percent rise in 1H earnings, expects dividends to hold for FY14, FY15

Wednesday 13th November 2013

DNZ Property Fund, the worst performing property company on the New Zealand stock exchange in the past six months, said earnings rose 8.7 percent in its first half and it expects dividends won't fall below current levels for the next two years even as it ramps up investment.

Distributable profit, which strips out unrealised movements in the value of the property portfolio, rose to $13.8 million in the six months ended Sept. 30, from $12.7 million a year earlier, the Auckland-based diversified property investor said in a statement. Rental income increased 5 percent to $28.2 million.

DNZ Property raised $69.8 million of equity during the first half to help advance its plans to increase investment in the fast-growing Auckland region. The funds were used to partially fund the $78 million purchase of the retail Silverdale Centre in May and the $25 million purchase of 6.23 hectares of development land as part of the proposed Westgate Town Centre development, as well as provide capacity for any future acquisitions.

"The board expects to be able to provide greater detail on the Westgate development early next year," chairman Tim Storey said in the statement. "We do not anticipate the company's proposed Westgate development, which we believe is being undertaken at the right time in the economic cycle, will reduce dividends for FY14 and FY15 below the current level of 9 cents per share."

The company will pay a second quarter dividend of 2.25 cents per share on Dec. 13.

Shares in DNZ Property gained 3.25 percent to a five-day high of $1.59. The stock has shed 13 percent the past six months.

Earthworks for the Westgate development are expected to begin in January, with construction to start in April and completion slated before October 2015, the company said today. Development, excluding land, is expected to cost $130 million and can be funded within the company's current bank facilities, it said.

The company has refinanced its banking facilities, extending borrowing capacity to $400 million from $300 million, with half fixed until October 2016 and the remainder until October 2018.

Commercial terms are "well advanced" with proposed anchor tenants for Westgate and specialty pre-leasing is "progressing well", the company said.

Independent valuations of 11 properties and the Westgate land during the period boosted the value of its holdings by $5.3 million, taking the value of its total portfolio of 47 commercial office, retail and industrial properties to $770.6 million. Its net tangible asset backing rose to $1.66 per share from $1.62 per share at March 31.

In the first half, distributable profit fell to 4.97 cents per share from 5.15 cents in the year earlier period. The company raised $60 million from a private placement at $1.68 per share and $9.815 million via a share purchase plan at $1.645 per share.

The company's occupancy level at its properties was little changed at 99.4 percent from 99.6 percent and its weighted average lease term extended to 5.6 years from 5.2 years with no major lease expiries for the remainder of the financial year.

BusinessDesk.co.nz

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