Asset Plus interim revenue falls 78%, $350m Auckland CBD workplace challenge downsized

Mark Francis, managing director of Augusta Funds Management, which manages Asset Plus, said plans for the office building at 35 Graham Street above Fanshawe Street are now back in effect. Video / Augusta fund management

Listed landlord Asset Plus suffered an interim profit of 78 percent after tax from $ 11.5 million to $ 2.5 million and downsized a $ 350 million CBD office project in Auckland due to the pandemic.

For the six months ended September 30, 2020, investment property revaluation gains of $ 8.87 million were recorded, while the most recent period ended September 30, 2021, recorded devaluations of $ 100,000.

“The profit and the other result after taxes for the period ending on September 30th are 2.52 million.

At 35 Graham Street, the company has scaled back plans significantly: instead of adding three additional floors and significantly more parking spaces to create an asset with a potential final value of $ 350 million, Asset Plus will likely just upgrade the existing building.

Bruce Cotterill, Chairman of Asset Plus.  Photo / suppliedBruce Cotterill, Chairman of Asset Plus. Photo / delivered

This is a major turnaround, and a reversal from the position she recently adopted.

The reason for this is the impact of the pandemic on office workers and the leasing market, which have been more cautious than before when the company’s plans were drawn up.

“Given the market parameters and the recent impact of Covid-19, it is very likely that a modest renovation of the existing building will be pursued. This is likely to be driven forward in some cases independently of any tenant commitments, ”the company announced today.

“The recurrence of Covid-19 has once again dampened rental activity and business confidence; however, management continues to review the short-term impact of the virus, recognizing that real estate is a long-term investment and that the office is an essential part.” in the vast majority of corporate housing strategies, “reads the investor presentation on the Auckland CBD property previously rented by the Auckland Council.

This is what 35 Graham Street should look like with three additional floors.  Photo / deliveredThis is what 35 Graham Street should look like with three additional floors. Photo / delivered

Gross rental income decreased from $ 6.64 million to $ 6.49 million and direct real estate costs increased from $ 1.9 million to $ 2 million.

Adjusted funds from operations decreased from $ 2.65 million to $ 2.57 million.

Management fees were also higher due to management fees charged to the portfolio, mainly due to the development expenses of Munroe Lane in Albany, where Asset Plus has the largest construction project.

The business has two big developments: It started on Munroe Lane in Albany, where it is building the new Northern Auckland Council service center. It’s slated to begin soon at 35 Graham Street in Auckland’s CBD, which was last used as a Covid vaccination center.

It also owns Christchurch’s Eastgate Mall and lots on Stoddard Rd and Kamo.

Mark Francis, CEO of Centuria NZ, which manages Asset Plus.  Photo / suppliedMark Francis, CEO of Centuria NZ, which manages Asset Plus. Photo / supplied

It sold Eastgate unconditionally, but the settlement has been postponed until April 1 next year.

But the company reported pandemic issues with the lease of 35 Graham St.

Resource approval for the development, which adds three additional floors, was granted earlier this year. A modification of this approval was approved for more parking spaces and an increase in floor heights.

Colliers is the master leasing broker and “is actively tracking any tenants with expiration or renewals within the forecast completion window for both the preferred development option and the smaller refurbishment option,” Asset Plus said today.

Net rental income declined after the council left the Graham St offices, which were half what it was before.

Asset Plus granted its tenants rent reductions and easements, which reduced operating income by 2.1 percent.

The company, of which Mark Francis is managing director, expects to provide tenants with a rent reduction and relief of $ 500,000 for the full year 2022. However, it was said that the loss would be partially offset by more income from other activities.

The Albany site's progress is being hampered by lockdowns stopping construction.  Photo / deliveredThe Albany site’s progress is being hampered by lockdowns stopping construction. Photo / delivered

The Munroe Lane project has suffered lockdown delays.

The completion date should be next December, but that has been postponed due to the extension of the deadlines. The practical qualification is not due before March 2023.

No flat-rate compensation is expected.

The impact of the lockdowns from August to September “was [the loss of] 25 working days, back-to-backed as a delay event. The actual cost of the shutdown was $ 372,000 and will be funded from the project contingents.

“Icon Construction and subcontractors are working at around 75 to 80 percent capacity under Level 3 constraints, which will further delay the project. The project is progressing within budget, ”said Asset Plus today.

The company, chaired by Bruce Cotterill, is trading around 29 cents, down 9.4 percent a year and well below its 65 cents last January before the pandemic broke out.

It has a market capitalization of $ 107 million.