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NZPA

PFI profit benefits from reduced costs

Monday November 2, 10:39 AM

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Listed industrial property investor Property For Industry (PFI) says rentals are down but so are costs, resulting in a 3.3 percent rise in nine-month net operating profit for distribution to $11.89 million.

Rentals for the nine months to the end of September were down 3.7 percent from a year earlier to $23.63m, while interest costs fell $861,000 or 12.6 percent and direct costs dropped $412,000 or 15.1 percent.

In the past 16 months the company sold five properties, including one due to settle this month, for a total of $48.85m, with the proceeds used to repay bank debt.

PFI general manager Ross Blackmore said the company had been able to largely offset the impact of the divestments on earnings, through lower interest costs, new rentals from development projects, rent reviews in 2008 and to date in 2009, and continued high portfolio occupancy.

Third-quarter net dividend was the same as last year at 1.650c per share plus imputation credits of 0.548cps.

That meant shareholders had for the year to date received the same level of net dividends as in 2008, PFI said.

The net result for the nine months under international accounting rules was a net loss after tax and unrealised losses of $11.14m, PFI said.

That took into account the previously announced $20.92m unrealised net reduction in the value of PFI's portfolio as at June 30, along with other non-cash adjustments such as an unrealised gain on the mark to market value of PFI's interest rate swaps.

Despite uncertain market conditions, 16 lease transactions had been completed so far in 2009, PFI said.

Mr Blackmore said 25 of the 32 rent reviews scheduled for 2009 had been completed, adding $398,000 to the company's annual rent roll.

The average increase of 6.56 percent equated to 2.52 percent compounding annually over the average 2.55-year review period.

It was pleasing that so many of 2010's rent reviews were on structured or CPI mechanisms, providing a degree of stability regardless of market rental conditions, Mr Blackmore said.

The industrial leasing market was picking up, and owner-occupier purchasers were starting to re-emerge, particularly for smaller industrial properties. Interesting acquisition opportunities were also starting to appear.

PFI had evaluated several such opportunities in recent months, but none had met its investment criteria, Mr Blackmore said.

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