Argosy Property Limited Analysis

Overview

Argosy Property Limited initially joined the NZX in December 2002 as the Paramount Property Trust, following a public offering of 25.3m units at $1 each. Since then Argosy has grown to be one of the largest diversified property investment vehicles listed on the NZX, and undergone a number of changes in its management structure.

Prior to management internalisation in August 2011, Argosy was managed by entities controlled by the Symphony Group, ING and most recently ANZ. In August 2011 Argosy's shareholders voted to buy the management rights, and adopted a company structure in February 2012. These transactions have moved Argosy from an externally managed unit trust structure to its present, simpler, company structure.

After property sales to manage debt levels during the global financial crisis, in December 2012 Argosy announced an institutional placement and share purchase plan which raised $100m of capital to fund the acquisition of two Wellington investment properties. In July 2013 Argosy announced an underwritten renounceable rights issue which raised a further $80m of capital to maintain debt levels within its target range and fund future acquisitions in accordance with its portfolio investment strategy.

Argosy published its portfolio investment strategy in its 31 March 2013 annual report. The strategy identifies key features of properties that Argosy will seek to acquire, and sets target bands for the mix of its diversified retail, industrial and commercial property portfolio.

Performance

The following information was extracted from Argosy Property Limited's full year results, released 22 May 2024:

Key results for the period include:

• Net property income for the period of $116.5 million, up 3.3% on the prior comparable period;
• $111.7 million revaluation loss for the 12 months to 31 March ($50.8 million recognised in the first half), down 5.4% on book value, contributing to a full year net loss after tax of $55.3 million;
• Net distributable income of $55.8 million vs. $64.2 million for the prior comparable period;
• Sound portfolio metrics, with occupancy at 96.7% and WALT of 5.2 years;
• NTA per share of $1.45, from $1.58 at 31 March 2023;
• Portfolio gearing steady at 36.5%, near the middle of the target band of 30-40%;
• Divested four non Core assets for $93.1 million, achieving above book value;
• Successful portfolio leasing and rent review outcomes, including 3.5% annualised rental growth on rents reviewed and 85% tenant retention rate;
• Execution of strategy, including obtaining 6 Green Star Built and 5.5 NABERSNZ certification on 814 Willis Street, commencement of 224 Neilson Street targeting 6 Green Stars and continuing the company’s portfolio transformation and progress to a 50% green portfolio by 2031; and
• FY25 dividend guidance of 6.65 cents per share, in line with the prior year.

Chair Jeff Morrison said, “The Board is satisfied with the way the business, management team and staff have performed despite continued weak operating conditions.

Inflation remains outside the Reserve Bank’s target band, and consequently interest rates remain at a higher level. These high rates have clearly had a negative influence on property values.

As a Board, we are pleased by the progress Argosy continues to make towards our sustainability goals evidenced by the green buildings completed, certifications achieved, and future new developments.

We also maintained or improved NABERSNZ ratings across rated assets and retained our MSCI ESG Green Rating at AA. We are increasing our focus on the potential impacts of climate change on the business.