ING Property Trust annual result release
ING Property Trust annual result release.
ING Property Trust announces unaudited after tax profit of $71.7m
ING Property Trust today announced an unaudited after-tax profit of $71.7 million for the year ended 31 March 2008. The result includes independent property revaluation gains of $43.0 million, driven by increasing rentals. The Trust’s core operating profit before interest was $74.1 million, up from $71.8 million in the prior year.
Last year’s after-tax profit of $102.3 million, higher than this year’s result, was mainly due to the record revaluation gain recorded of $87.2 million. Last year’s gain was largely driven by lower capitalisation rates. The Trust’s market capitalisation rate has been maintained at the same level as the prior year, 8.3%.
Peter Mence, General Manager of ING Property Trust Management Limited, said, “The Manager’s view is that the Trust has had a very good year with rental increases providing backing for a strong revaluation result. The result achieved in this difficult market is due to the successful strategy of adding to unitholder returns through active building and tenant management in a low risk portfolio structure.”
Through the unit buy-back scheme, $40.0 million has been spent acquiring and cancelling 36.3 million units in the Trust. This has had the effect of adding 2 cents per unit to the Trust’s net asset backing.
A gross dividend of 9.85 cents per
unit for the 12 months to 31 March 2008, representing a
normalised 3.5% increase in the distribution from the prior
A strong focus on leasing saw the property portfolio maintain a near 100% occupancy at year-end and record an 85% tenant retention rate.
A weighted average lease term of 4.7 years, providing strong rental security.
The most diversified property vehicle listed on the New Zealand stock exchange with a portfolio of 78 buildings valued at $1.2 billion. The Trust provides for over 30 tenants.
The portfolio is 6.7% under-rented, providing a strong basis for further growth in rental income.
The property revaluation gain of $43 million was driven by solid rental growth, resulting in the adjusted net asset backing per unit increasing to $1.40 at 31 March 2008.
Taking advantage of the continued strength in demand for investment property assets with the sale of five properties for $21.3 million, realising gains of $3.3 million over acquisition price.
During the year properties with a combined value of just over $82 million were unconditionally acquired (a list follows at the end of the release).
Over the year, in excess of $13 million has been invested back into Trust properties to ensure the assets are of the highest possible standard and best able to meet the ongoing needs of tenants.
Building upgrades has been an ongoing project for the Trust to enhance returns and improve building quality. The GE building in Auckland’s Viaduct Basin is being upgraded to incorporate environmentally sustainable design elements and has been re-leased on 12-year lease terms. Lease restructuring, combined with building upgrades, has enabled enhancement to the value of property assets across the portfolio.
“The Trust is actively committed to upgrading buildings as opportunities arise, incorporating environmentally sustainable features where appropriate. We consider producing environmentally responsible developments a fundamental requirement of any project, be it a new development or a retro-fit” Peter Mence said.
For the third year in a row, the portfolio has achieved an occupancy rate in excess of 99%, and the portfolio remains at a high capacity utilisation level. With only 11% of the leases due to expire over the next 12 months, occupancy levels should remain at their current high level. Between 14% and 15% of leases are due to expire in each of the following two years and the Trust is focused on ensuring it maintains a high tenant retention rate.
Due to the strong focus on active tenant and building management, the Trust achieved a tenant retention rate of 85% during the year. In real terms this equates to 22 tenants being retained, representing 32,000 sqm of space and $8.3 million of annual rental.
The weighted-average lease term for the entire portfolio has been maintained at 4.7 years at year-end. The breadth and depth of the portfolio as well as the highly diversified nature of the buildings, tenants and locations, minimises potential risk to income streams and therefore unitholder returns.
Assessments by independent valuers show the portfolio is 6.7% under-rented providing ongoing potential for further rental growth. The continuing success of the Manawatu Business Park joint venture is an example of the type of development that the Trust will target. A critical element of the agreement is the mitigation of development risk with a land return being paid to the Trust until developments are completed.
The Manager considers that the current unit price is undervalued in comparison to other listed property vehicles and remains confident that property sector fundamentals will be positive over the coming 12 months with the property portfolio well-positioned to benefit from the strength in the local market.
While the Trust accepts that the retail sector will face some challenges in the year ahead as discretionary consumer spending is cut back, the majority of the Trust’s exposure in this sector is in bulk retail, a market driven by cheaper priced goods which are less likely to suffer through consumer cut backs.
The Trust’s investment in commercial and industrial properties is positioned for potential future rental growth. Both property types are subject to low vacancies, with little excess capacity also apparent in the industrial portfolio. Well-located assets especially, will experience sound rental growth.
“The ING Property Trust portfolio is well-positioned for the year ahead. Across all sectors, tenants and income streams look solid and reliable,” Michael Smith, Chairman, ING Property Trust, said.