Release Date: November 19, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Argosy Property Ltd (NZSE:ARG, Financial) reported a small lift in property valuations, indicating a positive change in market direction.
- The company has seen increased lease inquiries and transactions post balance date, suggesting improved market activity.
- Argosy's focus on sustainability has resulted in better tenant retention, lower vacancy, and lower absentee rates.
- The company received recognition for its green building initiatives, including awards from the Property Council and the World Green Building Council.
- Net profit for the period was $33 million, a significant improvement from a loss of $19.3 million last year.
Negative Points
- The economic environment remains challenging, with sluggish economic conditions impacting the first half of the year.
- Net property income was flat, with increased insurance and rates offsetting gross income gains.
- The portfolio remains nearly 12% under-rented, indicating potential challenges in achieving market rental rates.
- AFFO was lower compared to the previous year, primarily due to higher tax expenses.
- The company anticipates paying out more than 100% of AFFO, indicating potential pressure on dividend sustainability.
Q & A Highlights
Q: Could you share which properties have been moved to non-core and are you actively trying to market and sell all of those at the moment?
A: We have active campaigns for 39 Market Place and 147 Lambton Quay. The others, including a property in Taupo and a cool store in Christchurch, are more future-based. There's also a warehouse property at 4 Henderson Place we're looking at.
Q: Your full-year GPS guidance wasn't changed despite challenging conditions. Are there any other levers you may be looking to pull to achieve flat dividends year on year?
A: We expect to pay out higher than 100% of AFFO this year. We have several rental reviews to complete, which should help minimize the degree of overpayment.
Q: Regarding the Lambton Quay assets, if the sales process doesn't succeed, what's the other option for that property?
A: We have a current leasing campaign with some early inquiry. The building is well-positioned for government overflow or domestic corporates, and we will continue to try and lease it.
Q: What was the driver for the increase in under-renting from FY24 when it was under 9%?
A: The increase is primarily in our industrial portfolio, particularly in Auckland. Part of this is due to gentrification and relative improvements in property locations.
Q: Can you explain the rationale behind the recent acquisition and the expected timeframe for development?
A: We have a nine-month settlement period for the vendor to prepare the building for leasing. We are controlling the leasing process, and early signs are positive. The site is excellent, and we aim to maximize holding income. The redevelopment is expected to take about five years, targeting an initial yield of 5.6% and an IRR of 8.1%.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
