Argosy 2018 annual result
Amount NZ$000sPercentage change
100,9900.2%
98,177-5.3%
98,177-5.3%
Amount per security
Imputed amount per
security
NZ$0.0155NZ$0.003744
31 March 2018 (NZ$)31 March 2017 (NZ$)
Net tangible assets per share$1.120$1.060
Basic earnings after tax per share$0.1190$0.1269
Diluted earnings after tax per share$0.1190$0.1269
Basic distributable income after tax per share¹
$0.0662$0.0655
Diluted distributable income after tax per
share¹
$0.0662$0.0655
Argosy Property Limited
Other Financial Information
Previous Reporting Period12 months to 31 March 2017
Audited annual results for announcement to the market
Reporting Period12 months to 31 March 2018
Revenue from ordinary activities
Profit from ordinary activities after tax
attributable to security holders
Record Date13 June 2018
Net profit attributable to security holders
Dividend
Interim Dividend
¹ Profit before tax and distributable income are alternative performance measures used to assist investors in assessing
the Company’s underlying operating performance and to determine income available for distribution to shareholders.
Note 23 of the financial statements released today provides a full reconciliation between the two measures.
Comments:The financial information for this announcement has
been extracted from the audited financial
statements of Argosy Property Limited which has
been released to NZX in conjunction with this
announcement.
Dividend Payment Date27 June 2018
---
MARKET RELEASE
FOR THE 12 MONTHS TO 31 MARCH 2018
Argosy will present the 2018 annual results via a teleconference and webcast at 10am today.
Please visit https://edge.media-server.com/m6/go/argosy-annual-results-2018 or dial 0800 122 360 and
quote the conference ID 321411. It is recommended that you dial in or log in a few minutes before the
start time. A copy of the webcast will be available on Argosy’s website later in the day.
Argosy Property Limited (“Argosy” or the “Company”) has reported its results for the 12 months to 31
March 2018.
Argosy Chief Executive officer Peter Mence said “We have delivered another strong performance for our
shareholders. Underpinned by strong leasing and rent review activity through the year we finished 2018
with occupancy at almost 99% and a weighted average lease term of over 6 years, our highest ever.
It’s pleasing to announce further progress at NZ Post House, at 7 Waterloo Quay. The reinstatement works
are progressing well, including levels 10-12, and we expect them to be completed this financial year. We
expect strong demand for levels 10-12 when they become available, whilst the other floors remain
leased to NZ Post.”
Chairman Mike Smith said “ After a strong start the Board is very pleased to have finished the 2018
financial year very well. We are pleased to have delivered a total shareholder return of 9.8% for the 12
months to 31 March 2018. This result outperformed the property sector index by 2.8%. The management
team have worked hard over the year to resolve key lease expiries and vacancies. They have also
repositioned the portfolio sensibly, with the combination of completed developments, revaluations and
selected divestments resulting in a modest reduction in exposure to the retail sector. Over the next 12-18
months we will continue to divest non Core assets in an attractive vendors market. Generally, after this
period, we expect that Argosy will be positioned towards the lower end of our retail band and at the
higher end of our industrial band.
The Board has amended the debt-to -total assets ratio target band to 30-40% from the previous target of
35-40%. As we continue to divest non Core assets to take advantage of strong investor demand, t he
proceeds will be used to continue our tenant-led development program and/or reduce gearing.
As we begin the 2019 financial year there is greater political visibility over the near term and we continue
to be optimistic around potential opportunities for Argosy. Our diversified investment approach brings
strength and balance to our business. We remain focused on delivering sustainable dividends to our
shareholders and to this end, can guide to a full year 2019 cash dividend of 6.25 cents per share, an
increase of 1% on the prior year.
The increase reflects our wish for shareholders to share in the continued strong results but also allows us to
maintain our momentum towards an Adjusted Funds From Operations (AFFO) based dividend policy in
the medium term. On behalf of the Board I would like to thank shareholders for their continuing support.”
23 May 2018
ARGOSY 2018 ANNUAL RESULT
Highlights:
• Net distributable income of 6.62 cents per share, up 1.1%
• NTA per share growth of 5.5% to $1.12
• Strong portfolio activity with annualised rent review increase of 3.0%
• Excellent portfolio metrics with occupancy at ~99% and a 6.1year WALT
• Annual portfolio revaluation gain of $47.3 million or 3.2% on book value
• Completion of $48.8 million of developments including ~$33.8 million of green developments
• FY19 dividend guidance of 6.25 cents per share
• Financial year total shareholder return of 9.8%, outperforming the sector by 2.8%
Financial Results
Statement of Comprehensive Income
Argosy reported net rental property income of $101 million for the period which includes the impact of
rental loss recoveries from insurers and is in line with the prior period. The prior period was positively
impacted by a lease surrender of $5.5 million recognised in respect of the property at 7 Waterloo Quay in
Wellington.
Administration expenses were up $0.6m on the prior period primarily due to additional resourcing costs
across the business.
Interest expense of $25.5 million was down $0.4 million on the prior period as the interest on higher
average debt was offset by higher capitalised interest on developments. T otal financing costs were $14.8
million higher than the prior period, primarily due to the non-cash impact of derivatives.
Annual Revaluations
An independent revaluation of the portfolio was undertaken as at 31 March 2018 which saw the portfolio
record a full year revaluation gain of $47.3 million, a 3.2% gain on the year end book value. Overall, the
industrial portfolio increased 6.5% ($39 million) above book value, office 1.0% ($5.6 million) and retail 0.9%
($2.7 million). If we adjust the annual revaluation result for NZ Post House, Argosy’s annual revaluation
uplift would have been $61.6m, or a 4.5% increase above book value.
On current market value, Argosy’s portfolio
1
has a passing yield of 6.88% and a 6.98% yield on market
rental. The portfolio is 1.3% under rented excluding market rentals on vacant space.
Distributable Income
For the year ending 31 March gross distributable income
2
was $65.6 million and stable compared to the
prior period. Gross distributable income for the period was 7.95 cents per share, compared to 8.03 cents
per share in the previous period due to the higher weighted average shares for the period.
Net distributable income increased 2. 0% to $54.6 million compared to the prior period, due to slightly
lower current tax expense. Net distributable income per share increased 1.1% to 6.62 cents per share
from 6.55 cents per share in the prior period.
1
Excluding 7 Waterloo Quay and Stewart Dawson Corner
2
Profit before tax and distributable income are alternative performance measures used to assist investors in assessing the Company’s underlying
operating performance and to determine income available for distribution to shareholders. Note 23 of the financial statements released today
provides a full reconciliation between profit before tax and distributable income.
Portfolio Activity
Leasing and Rent Reviews
Underpinned by continued strength in Auckland and Wellington property market fundamentals, Argosy
has delivered strong leasing and rent review results over the second half of the year. During the period,
51 lease transactions were completed on 150,000sqm of net lettable area, including 23 new leases, 20
renewals and 8 extensions.
Material leasing transaction successes over the second half of the financial year include;
• 15-year extension to Amcor Flexibles for 9,178sqm at 9 Ride Way, Albany, Auckland;
• 12-year lease to Eclipx Fleet Holdings for 4,230sqm at 8 Forge Way in Panmure, Auckland;
• 6- year renewal by Te Puni Kokiri for 6,215sqm at 143 Lambton Quay, Wellington;
• 3- year renewal by Tonkin & Taylor for 4,377sqm at 105 Carlton Gore Rd, Newmarket, Auckland;
•
18 months extension by the Ministry of Business, Innovation & Employment for 5,560sqm at 147
Lambton Quay, Wellington;
In addition, Foster Moore is taking an initial 12-year lease on Level 1 of 82 Wyndham St for 1,644sqm. There
is some vacancy remaining at 23 Customs Street where 2,950sqm of space is vacant. However, following
refurbishment, the completion of the Snickel Lane development and continued strength in the Auckland
leasing market, Argosy is experiencing strong tenant interest for the building.
Following strong leasing results over the second half, Argosy’s FY19 lease expiries as at 31 March 2018 was
down to 9.9% from the 16.4% reported in the prior year.
Argosy’s weighted average lease term at year end increased to 6.1 years compared to 5.6 years at the
interim result. The improvement reflects some of the longer leasing results achieved with some of our
larger tenants over the second half of the year.
Argosy has maintained a very high occupancy level over the year and increased this to 98.8% at year-
end compared to 98.6% in the prior year.
During the period, a total of 88 rent reviews on $48.5 million of existing rental income were completed.
Rental growth of 6.1% was achieved or 3.0% on an annualised basis on all rents reviewed. Across the
rental increase, the office portfolio accounted for 50% of the total rental uplift due to a large market
review, with industrial and retail contributing 29% and 21% respectively.
Approximately 50% of all rents reviewed (by income) were market reviews, 27% were fixed reviews and
23% were CPI or CPI+.
Acquisitions and Value Add Developments
Ongoing tightness across the property market continued in 2018. This, coupled with a surplus of capital
and scarcity of quality real estate means few opportunities have emerged during the period to make
acquisitions which would add value.
Despite this, we have continued to progress our development pipeline with four projects totalling $48.8
million now completed. Following the green development works included as part of the Highgate
(Mighty Ape) and 82 Wyndham Street developments, we are currently targeting a 4 Green Star Industrial
Built Rating and 5 Green Star Office Built Rating on these properties respectively. These will add to our
existing 5 Green Star Office Built assets at 143 Lambton Quay and 15 Stout Street, both in Wellington.
NZ Post House at 7 Waterloo Quay
Earthquake Damage and Insurance Claim
Argosy’s 13 storey property at 7 Waterloo Quay in Wellington sustained damage in the 7.5 magnitude
Kaikoura earthquake on 14 November 2016. Independent engineers have confirmed that the building
remains structurally sound, but it suffered damage to fit out and services. Argosy has material damage
insurance and we are working with our insurers to progress a significant insurance claim. Argosy expects
that, as with many earthquake insurance claims, there may be debate with insurers over the extent of
damage, and the appropriate method of reinstatement. Argosy has commissioned a comprehensive
damage survey of 7 Waterloo Quay, and detailed damage assessment reports are now with insurers. We
envisage that the damage reports may be updated, based on our advisors’ experience that additional
earthquake damage may become apparent.
In the meantime, Argosy has proceeded swiftly with its own interim works programme (including levels 10-
12), and it is expected that the affected floors will be ready for reoccupation this financial year. We
expect strong demand for levels 10-12 as they become available. This programme is expected to cost
$41 million to complete, and this amount has been included as a capital deduction in the valuation for 7
Waterloo Quay at 31 March 2018.
Argosy also has business interruption insurance, which is expected to cover loss of rents and certain
additional expenses until mid-November 2018, being a period of two years from the date of the
earthquake. Argosy has made three interim claims under its material damage and business interruption
insurance, and received progress payments from insurers of $11.8 million plus GST (after a $4.8 million
deductible). Of the $11.8 million received from insurers, Argosy has recognised $9.8 million (after
deductible) in its financial reporting for the period to 31 March 2018. Of this amount, $5.7 million has been
allocated by Argosy to loss of rents, $1.8 million has been allocated to expense recoveries and $2.3
million to material damage reinstatement. Further interim claims will be presented for the remainder of
the two-year business interruption indemnity period, and for material damage.
Divestment of non Core Assets
With the continued strength in property markets over the second half of the financial year, Argosy
successfully completed the sale of Tunnel Grove, Wellington for $2.8 million and the unconditional
agreement to sell Wagener Place in Auckland for $31.0 million. This transaction will settle in July 2018. The
Wagener Place sale was an opportunity to reduce Argosy’s retail exposure in an area where there will be
increasing competition. These transactions follow the sale of Pandora Rd in Napier in the first half for $7.7
million.
At year end, Argosy has categorised approximately 7% or $110 million of the portfolio as non Core. As
noted above, Argosy will continue its divestment programme over the next 12-18 months to take
advantage of current market conditions.
Capital Management
Current Leverage
At 31 March 2018, Argosy’s debt-to -total-assets ratio, excluding capitalised borrowing costs, was 35.9%
versus 36.3% at 31 March 2017 year end. The decrease reflects the net impact of developments during
the period offset by divestments and revaluation gains. During the period the Board has decided to
widen the target gearing band to 30-40% (previously 35-40%). This allows Argosy to be more flexible
depending on financial and property market conditions. Argosy currently sits in the middle of the new
target band and remains well within all bank covenants.
Argosy’s weighted average interest rate for the period was 4.98% versus 4.88% at 31 March 2017 year
end. During the period Argosy undertook two restructures to its banking facilities with ANZ Bank New
Zealand Limited, Bank of New Zealand Limited and Hongkong and Shanghai Banking Corporation. The
first restructure can be summarised as follows:
- Tranche A ($275 million) was extended to 31 October 2021;
- Tranche B (also $275 million) remained at 30 September 2020;
- An additional tranche (Tranche C) of $25 million was added to the facility with an expiry date of 31
October 2021.
The second restructure saw an additional facility (Tranche D) of $50 million added with an expiry date of
28 February 2021. Argosy’s total debt facility is now $625 million. At 31 March 2018, the weighted average
facility term was 3. 1 years.
Sustainability
Last year we established our Environmental, Social and Governance Framework to recognise the
importance sustainable business practices have on the environment and long-term value creation for
shareholders. Our environmental policy reflects our ambition to create vibrant and sustainable
workplaces for our tenants and Argosy believes green buildings have potential to provide both
environmental and business benefits.
Dividends
Consistent with the third quarter dividend, a final quarter dividend of 1.55 cents per share with imputation
credits of 0.3744 cents per share attached, has been declared for the March quarter. This dividend
represents an increase of 1.6% on the same period in the year ending 31 March 2017. The dividend will be
paid to shareholders on 27
th
June 2018 and the record date will be 13
th
June 2018.
Argosy starts the 2019 financial year in a very solid financial and portfolio position. Our diversified portfolio
of quality assets across the three main sectors brings real strength and balance to our business. We
remain focused on delivering sustainable dividends to our shareholders. Based on current projections for
the portfolio, the Board is pleased to be able to guide to a full year 2019 cash dividend of 6.25 cents per
share, an increase of 1% on the prior year. The increase reflects our wish for shareholders to share in the
continued strong results but also allow us to maintain our momentum towards an AFFO
3
based dividend
policy in the medium term.
The dividend reinvestment plan remains suspended for the time being.
Governance
At the July 2017 Annual Meeting, Andrew Evans and Mark Cross were re-elected as independent
Directors. However, subsequent to balance date, the Board determined that Mr Cross has ceased to be
an independent director as he is a director of Milford Funds Limited which has subsequently (on 19 April
2018) disclosed that it manages funds with a substantial product holding in Argosy. Looking ahead, the
2018 Annual Meeting of shareholders is scheduled to be held at 2pm on 6 August 2018 at the Royal New
Zealand Yacht Squadron, 101 Curran Street Westhaven Marina, Auckland. Chris Hunter and Jeff Morrison
will retire in accordance with the Company’s constitution and the NZX Listing Rules, and will be eligible for
re-election.
3
AFFO is considered by some investors to represent a measure of dividend sustainability. Our accompanying result presentation provides details of
AFFO.
Strategy
Creating value and delivering sustainable earnings to shareholders remains the key focus for the Board.
Subtle changes to our investment policy made in the prior year were acted upon during the period
where Argosy took opportunities to divest non Core properties and redeploy the capital to its balance
sheet. The Board considers the New Zealand Property market to be near its cyclical peak which makes it
hard to acquire property. We believe ongoing strength in the sector will provide opportunities to divest
non Core assets at attractive prices and either reduce gearing or reinvest the proceeds into tenant led
development opportunities. We will continue to focus on our existing portfolio of value add properties to
create long term value for shareholders and increase the quality and sustainability of our earnings.
Outlook
Argosy continued to deliver excellent results over the back half of 2018 but there is more work to do
through the 2019 financial year and beyond. Argosy achieved excellent leasing success and rent review
growth across the portfolio. As a result, the year-end portfolio metrics are in excellent shape. Reinforced
by their Green Star ratings, a number of redevelopment projects were completed which increased our
portfolio quality and will contribute towards sustainable earnings over time. We will continue to look at
sustainability given the environmental and business benefits that are likely to accrue. Looking ahead to
2019, we are very focused on ensuring we can continue to create value for, and deliver reliable and
attractive risk adjusted returns to, shareholders.
– ENDS –
Enquiries
Peter Mence
Chief Executive Officer
Argosy Property Limited
Telephone: 09 304 3411
Email: pmence@argosy.co.nz
Dave Fraser
Chief Financial Officer
Argosy Property Limited
Telephone: 09 304 3469
Email: dfraser@argosy.co.nz
Stephen Freundlich
Head of Investor Relations
Argosy Property Limited
Telephone: 09 304 3426
Email: sfreundlich@argosy.co.nz
---
2018
Annual Results
Presentation
Argosy Property Limited
23 May 2018
www.argosy.co.nz
AGENDA
2
HighlightsPage 4
FinancialsPage 6
Strategy Page 15
Leasing UpdatePage 29
OutlookPage 33
PRESENTED BY:
Peter Mence CEODave Fraser CFO
Note: This result should be read in conjunction with the NZX stock exchange
release dated 23 May 2018. Due to rounding, numbers presented in this
presentation may not add up exactly to the totals provided and percentages
may not exactly reflect absolute figures.
Our strength lies in the diversity of our
properties across sectors, grades, sizes
and locations allowing us to adapt to
the changing needs of our growing
family of tenants.
Peter Mence
CEO
3
HIGHLIGHTS
4
Change image
HIGHLIGHTS
6.62c
1.55c
$1.12
3.0%
98.8%
6.1
years
Net Distributable Income
per share +1.1%
4
th
Quarter Dividend +1.6%
Occupancy (by rental)
Annualisedrent review
increase
NTA +5.5% on prior year
WALT
$101m
Net property income
5
6.25c
FY19 dividend guidance,
+1%
$48.8m completed,
including $33.8m of
green projects
Value Add Developments
FINANCIALS
6
Change image
Income Reconciliation
7
106.8
1.3
-1.3
2.5
0.4
-0.1
-2.2
107.4
30.0
40.0
50.0
60.0
70.0
80.0
90.0
100.0
110.0
120.0
Gross Property
Income FY17
Acquisitions /
developments
DisposalsRent reviewsVacancy & leasing
up
OtherNet movement re
NZ Post House
Gross Property
Income FY18
Rental income $m
Financial Performance
8
FY18F17
$m$m
Net property income101.0100.8
Administration expenses(9.9)(9.3)
Profit before financial income/(expenses),
other gains/(losses) and tax
91.191.4
Interest expense(25.5)(25.9)
Gain/(loss) on derivatives(4.1)11.0
Revaluation gains47.3 42.3
Realised gains/(losses) on disposal0.3 2.7
Net: Insurance proceeds & earthquake
expense
0.2 (1.2)
Profit before tax109.3120.4
Taxation expense(11.1)(16.8)
Profit after tax98.2103.6
Basic and diluted earnings per share (cents)11.9012.69
Net income stable year on year
Expenses up due to additional
resourcing costs across the
business
Non cash impact of derivatives
Solid year-on-year revaluation
gains largely driven by cap rate
firming
Lower taxation expense primarily
due to deferred tax movements
Note: Due to rounding, numbers presented in this presentation may not add up exactly to the totals provided and percentages may not exactly reflect the
absolute figures.
Distributable Income
9
Current tax lower due to higher
capitalisedinterest,
depreciation and non-
assessable insurance proceeds-
reinstatement
Net distributable income
increased 1.1%
FY18FY17
$m$m
Profit before income tax109.3120.4
Adjusted for:
Revaluations gains(47.3)(42.3)
Realised losses/(gains) on disposal(0.3)(2.7)
Derivative fair value loss/(gain)4.1 (11.0)
Earthquake expense net of recoveries-0.21.2
Gross distributable income65.665.6
Depreciation recovered0.6 1.0
Current tax expense¹(11.6)(13.1)
Net distributable income54.653.5
Weighted average number of ordinary shares (m)825.1816.7
Gross distributable income per share (cents)7.958.03
Net distributable income per share (cents)6.626.55
Investment Properties
10
1,442.2
61.4
-10.1
-27.4
47.3
-0.3
1,513.1
1,200.0
1,250.0
1,300.0
1,350.0
1,400.0
1,450.0
1,500.0
1,550.0
Investment Properties
FY17
Capitalised costsDisposalsTransfer to properties
held for sale
RevaluationsOtherInvestment Properties
FY18
Investment Properties $m
Portfolio growth driven by a combination of developments completed and revaluation gains
Movement in NTA per share
11
* Excluding revaluations
Annual revaluation gain key driver of 5.5% NTA uplift year on year
1.06
0.06
0.05
0.01
(0.06)
1.12
1.00
1.02
1.04
1.06
1.08
1.10
1.12
1.14
1.16
1.18
1.20
NTA at FY17Profit for the year*RevaluationsDRP & otherDividends paidNTA at FY18
$ per share
Gearing
12
Further divestment of non Core assets will see the portfolio repositioned to the lower end of its retail
band (15-25%) and higher end of industrial band (40-50%) over next 12-18 months.
The asset held for sale is 7 Wagener Place (Auckland), sold for $31.0m and which settles in July 2018.
New target policy gearing range of between 30-40% (previously 35-40%).
FY18FY17
$m$m
Investment properties1,513.11,442.2
Assets held for sale27.413.0
Other assets4.33.4
Total assets1,544.81,458.6
Bank debt (excl. capitalised borrowing costs)554.2529.9
Debt-to-total-assets ratio35.9%36.3%
35.9%
Debt-to-total assets ratio
Funding & Interest Rate
Management
13
Argosy maintains strong relationships with its banking partners ANZ Bank New Zealand Limited, Bank
of New Zealand and The Hongkong and Shanghai Banking Corporation Limited, and remains well
within its banking covenants.
Argosy restructured its syndicated bank facility in May 2017 and February 2018.
FY18FY17
Weighted average duration of bank facility3.1 years2.5 years
Weighted average interest rate
1
4.98%4.88%
Interest Cover Ratio3.3x3.4x
% of fixed rate borrowings62%65%
Average fixed interest rate
2
4.56%4.56%
¹ Including margin and line fees
2
Excluding margin and line fees
3.1 years
Weighted avg. bank facility term
Dividends
14
6.25c
FY19 dividend guidance
A final quarter cash dividend of 1.55 cents per share has been declared, with imputation credits of
0.3744 cents per share attached, and will be paid on 27 June 2018
FY19 dividend guidance of 6.25 cents per share is an increase of ~1.0% on the FY18 full year
dividend
The FY19 dividend reflects the Boards wish for shareholders to share in the continued strong results
whilst allowing Argosy to maintain its momentum towards an AFFO based dividend policy over the
medium term
27 June
Final quarter dividend paid
Strategy Overview
15
Strategy
16
Argosy will continue to invest in a diverse range of properties across sectors, grades, sizes and
locations.
Our Investment Strategy consists of Core and Value Add properties.
Core properties between 75-90% of the portfolio by value.
Our Investment Policy sector band parameters (by value) are:
Industrial 40-50%
Office 30-40%
Retail 15-25%
As at 31 March 2018, Argosy was operating within the parameters of its Investment Policy.
Argosy strives to deliver reliable and sustainable returns to shareholders. We take a considered
approach to acquisition, divestment, development, leasing and capital management decisions,
reflecting our proposition to shareholders as a dividend stock, with all the advantages of the
PIE Regime.
Portfolio at a glance
TOTAL PORTFOLIO VALUE
BY SECTOR
TOTAL PORTFOLIO VALUE
BY REGION
PORTFOLIO MIX
BY VALUE
71%
24%
5%
Auckland
Wellington
Regional North Island &
South Island
87%
7%
6%
Core properties
Properties and land to divest
Value Add properties
17
42%
38%
20%
Industrial
Office
Retail
Focus on continuing the divestment programmeof non Core assets
Expect to move towards the higher end of the industrial band and lower end of the retail band
over the medium term
Revaluations
18
Strong revaluation gain 3.2% above
book value
Regionally, Auckland biggest
contributor
Wellington office: Stout Street
recorded $13m increase but overall
result offset by 7 Waterloo Quay
(earthquake) and Stewart Dawson
Corner which is currently under
development
At 83%, the Industrial portfolio
biggest contributor of the total gain
followed by office (12%) and retail
(5%)
Portfolio market yield firmed 33bps
with Auckland firming 39bps and
Industrial 38bps
31 March
18 Book
Value
($m)
31 Mar 18
Valuation
($m)
Δ
$m
Δ
%
Market Yield
1
31 Mar 1731 Mar 18
Auckland1,025.4 1,081.5 56.1 5.5%7.14%6.75%
Wellington367.1 358.1 (9.0)-2.5%7.53%7.60%
North Island Regional & South Island73.3 73.5 0.2 0.3%8.70%7.96%
Total1,465.8 1,513.1 47.3 3.2%7.31%6.98%
31 March
18 Book
Value
($m)
31 Mar 18
Valuation
($m)
Δ
$m
Δ
%
Market Yield
31 Mar 1731 Mar 18
Industrial598.5 637.5 39.0 6.5%7.12%6.74%
Office571.7 577.3 5.6 1.0%7.58%7.37%
Retail295.6 298.3 2.7 0.9%7.27%6.80%
Total1,465.8 1,513.1 47.3 3.2%7.31%6.98%
1
Yields exclude 7 Waterloo Quay and Stewart Dawson Corner
Value Add
19
The following properties have been designated as Value Add,
which make up ~6% of the total portfolio:
¹ At 31 March 2018
PropertySectorLocation
Market Value
1
$m
90 - 104 Springs RoadIndustrialAuckland5.4
80 Springs RoadIndustrialAuckland10.0
211 Albany HighwayIndustrialAuckland20.5
960 Great South RoadIndustrialAuckland6.1
99-107 Khyber Pass RoadOfficeAuckland8.7
8- 14 Willis Street / Stewart Dawson CnrOffice/RetailWellington26.3
180-202 Hutt RoadRetailWellington9.3
TOTAL $m (excl. land)86.3
56 Jamaica DriveLandWellington1.1
15 Unity DriveLandAuckland4.3
246 Puhinui RoadLandAuckland3.2
TOTAL $m94.9
Value Add –Stewart Dawson Corner
20
xxxx
21
xxxx
Value Add –Stewart Dawson Corner
Industrial
NUMBER OF BUILDINGS
36
MARKET VALUE OF ASSETS ($M)
$637.6
OCCUPANCY (BY INCOME)
99.9%
WALT (YEARS)
7.4
PASSING YIELD
6.7%
22
Office
NUMBER OF BUILDINGS
17
MARKET VALUE OF ASSETS ($M)
$577.3
OCCUPANCY (BY INCOME)
97.3%
WALT (YEARS)
5.0
PASSING YIELD
7.0%
23
Retail
NUMBER OF BUILDINGS
8
MARKET VALUE OF ASSETS ($M)
$298.3
OCCUPANCY (BY INCOME)
100%
WALT (YEARS)
5.7
PASSING YIELD
7.1%
24
Completed Developments
25
Argosy completed two green developments totalling $33.8m during the period being Highgate
Business Park (targeting 4 Green Star Industrial Built Rating) and 82 Wyndham Street (targeting 5
Green Star Office Built Rating).
82 Wyndham will be targeting a 4 Star NabersNZ energy efficient rating now the building is fully
occupied.
DevelopmentMajor TenantTypeLocation
Total Cost
$m
Highgate Business ParkMighty ApeINDAKL24.7
82 WyndhamPanukuOFFAKL9.1
Foundry DrivePolarcold Stores LtdINDCHC7.5
Snickel LaneVariousOFFAKL7.5
TOTAL48.8
Green Case Study
26
Valuation
Building rating:
NABERSNZ rating:
Total project capex¹
BEFORE:AFTER:
$29.0m (31 March 2017)$42.3m (31 March 2018)
nilTargeting 5 Star Office Built Rating
nilTargeting 5 Star Office Base Build Rating
$9.1m
82 Wyndham Street, Auckland
Replaced air conditioning system to 100% above building code with CO
2
sensors
LED lighting with intelligent controls (daylight & occupancy)
Material increase in the building’s end of trip facilities
Energy monitoring capability to facilitate NABERSNZ measurement and emission reporting
NEW FEATURES:
1. Including green aspects
27
Air conditioning system to 50% above building code with CO
2
sensors
LED with intelligent controls for daylight and occupancy sensors throughout
Energy metering meets Green Star requirements and separates lighting, air-condition and three
point power
Rain water harvesting, for use in the gardens and toilets with water meters
NEW FEATURES:
1. Excluding land valued at $8.1m, making a total value of $24.7m
HighgateBusiness Park, Auckland
Green Case Study
Valuation
Building rating:
NABERSNZ rating:
Total project capex¹
BEFORE:AFTER:
Nil$28.2m (31 March 2018)
nilTargeting 4 Star Office Built Rating
nilnil
$16.6m
NZ Post House, at 7 Waterloo Quay
28
Damage Assessment
Interim damage assessment reports now with insurers.
Insurance Claim
Three interim claims made under Argosy’s material damage and business interruption insurance.
Total recognised to 31 March was $9.8m (after deductible) and allocated as follows;
Loss of rents: $5.7m, Material damage expense: $2.3m and Expense recoveries: $1.8m.
Reinstatement
Proceeding swiftly with affected floors ready for occupation during FY19.
Reinstatement work on Levels 1-4 & 7 and Levels 10-12.
Programme cost estimated at $41 million to complete.
Leasing
Levels 10-12 are expected to be ready for occupation by March-19.
Very strong market enquiry.
Leasing Update
29
Change image
Leasing Success
30
Excellent leasing results over the back half of the year driving the higher WALT of 6.1 years
During the period Argosy completed 51 leasing transactions totalling ~150,000m² of NLA.
Notable leasing successes include:
Some larger FY19 lease expiries include:
PropertyTenantNLA (sqm)Lease Term
9 Ride Way, Albany Amcor Flexibles (New Zealand) Limited 9,17815 years
8 Forge Way, PanmureEclipx Fleet Holdings 4,23012 years
143 Lambton QuayTe Puni Kokiri 6,2156 years
105 Carlton Gore Rd, NewmarketTonkin & Taylor4,3773 years
147 Lambton QuayMBIE5,5601.5 years
PropertyTenantNLA (sqm)Status
147 Gracefield Rd, Seaview
The Information
Management Group
8,018In discussion with tenant
80 Springs Road, East Tamaki Coda GP Limited 9,675Extension to 31-Aug-18
12-16 Bell Avenue, Mt Wellington Mainfreight Limited 5,046
In discussion with tenant for
extension
9.9%
10.0%
8.6%
9.7%
4.2%
4.7%
10.0%
12.8%
11.3%
2.6%
15.0%
1.2%
29
23
28
21
17
12
9
12
8
4
13
0
5
10
15
20
25
30
35
0%
2%
4%
6%
8%
10%
12%
14%
16%
18%
20%
22%
Percentage of portfolio (by income)
Total ExpiryVacancyLargest Expiry
The number above each bar denotes the total tenant expires per year (excluding monthly carparks and tenants with multiple leaseswithin one property)
Yearending
Lease Maturity
31
Lease maturity profile relatively stable over the medium term, no material single tenant exposure
Market Update
32
Modest economic growth still forecast which will drive steady net absorption.
The mixture of a stable economy and continued technology change is driving demand for
industrial assets.
Growth in Auckland office supply is yet to cause concern, projections for increased vacancy
around 2020 are unchanged.
Wellington office vacancy continues to reduce with rental growth resulting.
Tougher funding environment will continue to impact developers. This will create potential
opportunities for Argosy.
Increasing construction costs and slowing of cap rate compression positives for rental growth if net
absorption continues.
Land values easing.
Focus on green assets, seismic performance and hazard management.
Outlook
33
Change image
Outlook
34
Fundamental real estate drivers remain sound.
Whilst global volatility is still present, the New Zealand economic outlook is still positive with
economic growth forecast and resilient local equity markets.
Argosy’s diversified portfolio provides balance across sectors allowing it to make the most of
market conditions.
Argosy will continue to focus on resolving near term expiries, maintaining high tenant retention
rates and ensuring core portfolio metrics remain strong.
Given the market appears to be firmly valued, divesting non Core assets to reinvest elsewhere or to
the balance sheet is more attractive versus acquiring.
We will continue to focus on our existing portfolio of value add properties in the context of
sustainability given the environmental and business benefits they can bring.
We remain focused on creating value and delivering sustainable and attractive risk adjusted
returns to shareholders.
Rental growth to continue.
Green assets will continue to see increase in demand.
Appendices
35
Adjusted Funds from Operations (AFFO)
36
AFFO is an alternative performance measure used to assist investors in assessing the Company’s underlying performance and to determine income available
for distribution. This reconciliation is based on guidelines for disclosing AFFO as provided by the Property Council of Australia.
FY18FY17
$m$m
Profit before income tax109.3120.4
Revaluation gains(47.3)(42.3)
Derivative fair value (gain)/loss4.1 (11.0)
Realised losses/(gains) on disposal(0.3) (2.7)
Earthquake expense net of recoveries(0.2)1.2
Gross distributable income65.665.6
Depreciation recovered0.6 1.0
Current tax expense(11.6)(13.1)
Net distributable income54.653.5
Amortisation of tenant incentives and leasing costs3.13.8
Funds from operations (FFO)57.757.3
Capitalisation of tenant incentives and leasing costs(2.8) (7.4)
Maintenance capital expenditure(5.3)(4.2)
Tax effected maintenance capital expenditure recovered 0.20.0
Adjusted funds from operations (AFFO)49.745.8
Weighted average number of shares on issue (m)825.1816.7
AFFO per share (cents)6.035.60
Dividends paid in period6.206.10
Dividend payout ratio (to AFFO)103%109%
Note: Due to rounding, numbers presented in this presentation may not add up exactly to the totals provided and percentages may not exactly reflect absolute figures.
Rent Reviews
37
Type#
Previous
Rent
(000's)
New rent
(000's)
$ Increase
(000's)
% Increase
Annualised $
Increase
(000's)
Annualised
% Increase
% of rent
reviewed
Total8848,54351,5102,9676.1%1,4403.0%100.0%
By review
type
Fixed4113,12813,5554273.3%4273.2%27.0%
Market2324,46426,7282,2649.3%7913.2%50.4%
CPI2410,95111,2272762.5%2222.0%22.6%
By sector
Industrial2120,78221,6498674.2%4712.3%42.8%
Office3918,49820,0021,5048.1%6593.6%38.1%
Retail289,2639,8595966.4%3103.4%19.1%
By location
Auckland7533,68235,3331,6514.9%9272.8%69.4%
Wellington89,27110,4221,15112.4%4094.4%19.1%
Other55,5905,7551652.9%1041.9%11.5%
Note: Due to rounding, numbers presented in this presentation may not add up exactly to the totals provided and percentages may not exactly reflect the
absolute figures.
Rent Reviews
38
#
Previous Rent
(000's)
New rent
(000's)
$ Increase
(000's)
% Increase
Annualised $
Increase
(000's)
Annualised %
Increase
% of rent
reviewed
Auckland
Office33
9,87610,248372
3.8%
269
2.7%29.3%
Industrial15
15,26415,962698
4.6%
362
2.4%45.3%
Retail27
8,5429,123581
6.8%
296
3.5%25.4%
75
33,68235,3331,651
4.9%
927
2.7%93.3%
Wellington
Office6
8,6229,7541,132
13.1%
390
4.5%93.0%
Industrial2
64966819
2.9%
19
2.9%7.0%
Retail0
000
0.0%
0
0.0%0.0%
8
9,27110,4221,151
3.1%
409
3.1%6.7%
Note: Due to rounding, numbers presented in this presentation may not add up exactly to the totals provided and percentages may not exactly reflect the
absolute figures.
Portfolio Metrics
39
Note: Data as at 31 March 2018
The strength of our diversified portfolio is in the breadth and depth of our tenant base and sectors
they represent.
Rent Roll by Industry
Government Administration
Retail
Transport and Storage
Manufacturing
Property & Business Services
Wholesale Trade
Finance and Insurance
Top 10 Customers by Rent
MBIE
NZ Post
General Distributors
Cardinal Logistics
The Warehouse
Ezibuy
Ministry of Primary
Industries
Mitre 10
Te Puni Kokiri
Tonkin & Taylor
All other
Portfolio Snapshot
40
Our focus is delivering improved portfolio quality and is reflected in our strong portfolio metrics
0.0
1.0
2.0
3.0
4.0
5.0
6.0
7.0
FY14FY15FY16FY17FY18
WA LT (y ears)
0.0%
5.0%
1 0. 0%
1 5. 0%
2 0. 0%
2 5. 0%
3 0. 0%
3 5. 0%
4 0. 0%
4 5. 0%
FY14FY15FY16FY17FY18
Debt-to-total-assets
8 0. 0%
8 2. 0%
8 4. 0%
8 6. 0%
8 8. 0%
9 0. 0%
9 2. 0%
9 4. 0%
9 6. 0%
9 8. 0%
100.0%
FY14FY15FY16FY17FY18
Occupancy
$ 0. 85
$ 0. 90
$ 0. 95
$ 1. 00
$ 1. 05
$ 1. 10
$ 1. 15
FY14FY15FY16FY17FY18
Net Tangible Assets
Disclaimer
41
This presentation has been prepared by Argosy Property Limited. The details in this presentation
provide general information only. It is not intended as investment or financial advice and must
not be relied upon as such. You should obtain independent professional advice prior to making
any decision relating to your investment or financial needs. This presentation is not an offer or
invitation for subscription or purchase of securities or other financial products. Past performance
is no indication of future performance.
All values are expressed in New Zealand currency unless otherwise stated.
23 May 2018
---
Annual Report 2018
Strength in diversity
Our balanced portfolio is the key to
delivering consistent shareholder returns.
With properties across different sectors,
grades, sizes, styles, locations and tenant
mix, we can be agile, quickly adapting to
meet the diverse and changing needs of
our growing family of tenants. And we can
quickly react to opportunities or cyclical
changes in the market.
Argosy Property Limited | Annual Report 2018
balanced.
$1.51b
Total portfolio value
61
Properties
176
Tenants
98.8%
Consistently high portfolio
occupancy
6.1
weighted average lease term
improved to over 6 years
8
Retail Properties
17
Office Properties
36
Industrial Properties
Our Investment Approach2
Our Strategy4
Financial Summary6
Chairman's Review8
Chief Executive Officer's
Review
12
Focus Areas:
1Our Tenants16
2Our Shareholders18
3Our People20
4Health & Safety26
5Environment & Community28
6Portfolio Positioning32
7Asset Management34
Our Properties38
Consolidated Financial
Statements
45
Corporate Governance76
Investor Statistics84
Directory86
Argosy Property Limited | Annual Report 2018
The balance of our diversified portfolio
is driven by our investment strategy and
policy which clearly set the boundaries
within which we will operate and invest.
Location
Our Investment policy
ensures our portfolio is
concentrated on Auckland
(65% - 75%) and Wellington
(20% - 30%). Regional North
Island or South Island
constitutes less than 10% of
the portfolio and is tenant-
driven.
AKL
71%
WLG
24%
REGIONAL
5%
Sector
Our Investment policy is focused
on high quality office, industrial
and large format retail.
diversity.
Industrial 42%
Office 38%
Retail 20%
All data as at 31 March 2018.
2
Our Investment Approach
Argosy Property Limited | Annual Report 2018
Grades
Core properties are well
constructed, well located
assets which are intended
to be long-term investments
(>10 years). These
properties enjoy strong
long-term demand, a leasing
profile that provides for
rental growth of at least
CPI and good structural
integrity with minimal
maintenance capital
expenditure required.
Value Add properties are
assets which can increase
future earnings and provide
capital growth. Typically,
they will be well located
with the potential for strong
long term tenant demand.
These properties have
potential for near or
medium-term development
with the view of moving
them into the Core category.
Core 87%
Value Add 6%
To divest 7%
Size / Value
The average value across our
portfolio is $24.8 million. Liquid
properties (properties that could
potentially be under contract
within a short time period)
currently account for 26% of the
portfolio. This allows the
company to react quickly to
changing market conditions.
Average value of:
$24.8
million
Tenant Mix
Our tenants range across
sectors and industries and we
actively manage our tenant
relationships.
Government
administration
Retail trade
Transport & storage
Manufacturing
Property &
business services
Wholesale trade
Finance & insurance
Infrastructure
& utilities
Cafés & restaurants
Health & safety
Construction
3
Argosy Property Limited | Annual Report 2018
Industrial 40-50%
Office 30-40%
Retail 15-25%
Focus on good quality
Office, Industrial and
Large Format Retail
No international properties
No Leasehold
Concentrate on
Auckland (65%-75%) and
Wellington (20%-30%).
Regional North Island
or South Island
tenant-driven
only (<10%)
Target “off-market”
acquisitions and avoid
competitive processes
Target Value Add properties
where we can leverage internal
expertise within overall
Core/Value Add targets
Target contiguous
properties
with potential
Value parameters
$10m +
Greater than $10 million
unless strategically imperative
($6 million for Industrial)
10%
No acquisition more than 10%
of overall portfolio value
Due diligence
Apply Argosy’s
due diligence checklist
Structural integrity ≥ 70% of
New Building Standard
(unless this represents
a Value Add opportunity)
Development
Developments only for
tenants who provide
strategic value to Argosy
Joint ventures will be
undertaken only where the
counterparty is of sufficient
financial standing to carry
their share of risk
Other
No third party
management of
external portfolios
Argosy strives to deliver
reliable and attractive
returns to shareholders.
Where will we buy?
AW
4
Our Strategy
Argosy Property Limited | Annual Report 2018
Argosy has a clearly
defined investment
strategy and
acquisition policy
which guides
our commercial
decision making.
We are, and will remain, invested in a
portfolio that is diversified by sector,
grade, location and tenant mix.
Our Investment Strategy and Investment
Policy has remained unchanged this year
following a review and minor
amendments in 2017.
Investment Strategy
Argosy’s portfolio will continue to
consist primarily of Core and Value
Add properties.
Core
Core properties are well constructed,
well located assets which are intended
to be long-term investments (>10 years).
The Core properties target is between
75% to 90% of the portfolio by value.
Core properties enjoy strong long-term
demand (well located and generic), a
leasing profile that provides for rental
growth of at least CPI and good structural
integrity with minimal maintenance
capital expenditure required.
Value
Add
Value Add properties are assets which,
through skilled asset management, can
increase future earnings and provide
capital growth. Value Add properties
will already be well located with the
potential for strong long-term tenant
demand. These properties are available
for near to medium-term repositioning
or development with the view to
moving into the Core category.
Investment Policy
Our Investment Policy clearly defines
what properties we will seek to own by
setting the boundaries within which we
will operate and invest. It delivers a clear
acquisition checklist and every potential
acquisition (and portfolio asset) can be
measured against that checklist.
In some cases, a portfolio of assets
may be considered for acquisition.
The strategy for a potential portfolio
acquisition must be consistent with
the overall Argosy Portfolio Investment
Strategy (i.e. the majority by value of
the properties either are Core or offer
potential to move to Core in the
medium-term).
In certain circumstances, exceptions to
the Investment Policy may be considered
where an acquisition is made to meet the
requirements of a valued tenant.
Our Investment Policy targets an
industrial band of 40-50% of the total
portfolio by value, office 30-40% and
retail 15-25%.
As at 31 March 2018, Argosy was
operating within the parameters of its
Investment Policy.
Our diversified portfolio of quality
properties has an average value of
$24.8 million. This allows the Company
to react quickly to changing economic
or property market conditions. Liquid
properties, which are properties that
could potentially be under contract
within a short period currently represent
26% of the portfolio.
Capital Management
The optimal capital structure for
Argosy should be one that enables the
Company to maximise its earnings yield
through the property cycle within the
following parameters:
—properties can be acquired when they
meet the approved Investment Policy
criteria, or sold when they are
non Core;
—there are no forced sales of properties
or a requirement to issue equity at a
price that is dilutive to shareholders;
—measured dividend growth
is maintained.
The Board has amended the debt-to-total
assets ratio target band to 30-40% from the
previous target of 35-40%. This widening
of the band allows Argosy more flexibility
to react to changing financial and property
market conditions.
Any movement beyond pre-set
parameters requires an action plan and
timeframe to move debt levels to within
the prescribed range.
Risk Management
Argosy strives to deliver reliable and
attractive returns to shareholders.
We take a considered approach to
development, acquisition, divestment,
leasing and capital management
decisions, reflecting our proposition to
shareholders as a yield based investment.
Argosy generally operates within
a medium/low overall risk range.
Argosy has a low risk appetite for
risks associated with managing
developments and Value Add projects
and compliance matters.
Long-term investments:
>
10 years
5
Argosy Property Limited | Annual Report 2018
6
Financial Summary
Net Property Income
$M
82.282.2
90.990.9
98.498.4
100.8100.8
101.0101.0
FY14
FY15
FY16
FY17
FY18
0
30
60
90
120
Gross Distributable Income
CENTS PER SHARE
6.646.64
7.077.07
7.607.60
8.038.03
7.957.95
FY14
FY15
FY16
FY17
FY18
0.0
2.5
5.0
7.5
10.0
Debt-to-total-assets Ratio
36.5%36.5%
37.8%37.8%
36.7%36.7%
36.3%36.3%
35.9%35.9%
FY14
FY15
FY16
FY17
FY18
0%
10%
20%
30%
40%
FINANCIAL SUMMARY
Unit of
measure
FY2014FY2015FY2016FY2017FY2018
Net property income$m82.290.998.4100.8101.0
Profit before financial income/(expenses) and
other gains/(losses) and tax$m74.883.089.491.491.1
Revaluation gains on investment property$m33.538.642.242.347.3
Profit for the year (before taxation)$m98.868.683.6120.4109.3
Profit for the year (after taxation)$m85.664.478.9103.698.2
Earnings per sharecents11.458.089.7912.6911.90
Gross distributable income per sharecents6.647.077.608.037.95
Net distributable income per share
1
cents6.695.976.356.556.62
Total assets$m1,232.41,313.21,374.91,458.61,544.8
Debt-to-total-assets ratio%36.537.836.736.335.9
Net assets backing per sharecents9496100106112
Cash dividend per sharecents6.006.006.036.106.20
Shares on issue at year endm790.9802.6812.6822.9827.0
Total equity$m739.5768.7810.4875.2926.9
1. Tax in FY15-FY16 has been restated based on current tax expense following a recent change in our bank facility document (previously it was based on tax paid
to the Inland Revenue Department). In FY14 no tax was paid due to significant prior tax losses.
PROPERTY METRICS
Unit of
measure
FY2014FY2015FY2016FY2017FY2018
Number of tenants#224192193185176
Number of properties
1
#6668666461
Average property value$m18.5819.2120.7222.5324.81
Net lettable areasqm590,991607,799601,045606,324587,766
Total book value$m1,226.31,306.41,367.61,442.21,513.1
Weighted average lease termyears5.685.545.245.596.08
Occupancy factor by rental%98.799.299.498.698.8
Occupancy factor by area%98.799.399.697.499.4
1. Certain titles have been consolidated and treated as one. The total number of buildings excludes properties held for sale.
Argosy Property Limited | Annual Report 2018
7
15-21 Stout Street, Wellington
Argosy Property Limited | Annual Report 2018
8
Chairman's Review
“The Board is very pleased to have
delivered a strong 2018 financial result.
We are also pleased to have completed
two green developments in the period.”
MICHAEL SMITH
CHAIRMAN
Green is good
Argosy Property Limited | Annual Report 2018
9
INTRODUCTION
On behalf of the Board of Directors, it is
my pleasure to again present Argosy’s
2018 Annual Report.
After a strong start the Board is very
pleased to have finished the 2018 financial
year very well. We are pleased to have
delivered a total shareholder return of
9.8% for the 12 months to 31 March 2018.
This result outperformed the property
sector index by 2.8%. The management
team have worked hard over the year to
resolve key lease expiries and vacancies.
They have also repositioned the portfolio
sensibly, with the combination of
completed developments, revaluations
and selected divestments resulting in a
modest reduction in exposure to the retail
sector. Over the next 12-18 months we will
continue to divest non Core assets in an
attractive vendors market. Generally, after
this period, we expect that Argosy will be
positioned towards the lower end of our
retail band and at the higher end of our
industrial band.
The Board has also amended the debt-to-
total-assets ratio target band to 30-40%
from the previous target of 35-40%. As we
continue to divest non Core assets to take
advantage of strong investor demand, the
proceeds will be used to continue our
tenant-led development program and/or
reduce gearing.
Total Return to 31 March 2018
9.8%
Outperforming the sector by 2.8%
STRATEGY
Creating value and delivering sustainable
earnings to shareholders remains the key
focus for the Board. Subtle changes to our
investment policy made in the prior year
were acted upon during the period and
Argosy took opportunities to reinvest
elsewhere in the portfolio. Board
considers the New Zealand Property
market to be near its cyclical peak which
makes it hard to acquire property. We
believe ongoing strength in the sector will
provide opportunities to divest non Core
assets at attractive prices and either
reduce gearing or reinvest the proceeds
into tenant-led development
opportunities. We will continue to focus
on our existing portfolio of value add
properties to create long term value for
shareholders and increase the quality and
sustainability of our earnings.
GOVERNANCE
Argosy’s Board remains committed to the
highest standards of corporate behaviour
and accountability. We advocate
adherence to corporate best practice in
terms of ethical behaviour and disclosure.
Our website remains the best place to find
all our key policies including Code of
Conduct and Ethics, Diversity and
Continuous Disclosure Policy.
We encourage all shareholders to read
these for themselves.
Lower gearing band
30-40%
Amended from 35-40% previously
We have continued to expand on our
Environmental, Social and Governance
reporting obligations. We have provided
ethnic diversity information on our
business to illustrate the diverse cultures
we embrace and whom we benefit from in
our business.
At the July 2017 Annual Meeting, Andrew
Evans and Mark Cross were re-elected as
independent Directors. However,
subsequent to balance date, the Board
determined that Mr Cross has ceased to be
an independent director as he is a director
of Milford Funds Limited which has
subsequently (on 19 April 2018) disclosed
that it manages funds with a substantial
product holding in Argosy. Looking ahead,
the 2018 Annual Meeting of shareholders
is scheduled to be held at 2pm on 6 August
2018 at the Royal New Zealand Yacht
Squadron, 101 Curran Street Westhaven
Marina, Auckland. Chris Hunter and Jeff
Morrison will retire in accordance with
the Company’s constitution and the NZX
Listing Rules, and will be eligible for re-
election.
DIVIDENDS
Consistent with the third quarter
dividend, a final quarter dividend of 1.55
cents per share with imputation credits of
0.3744 cents per share attached, has been
declared for the March quarter. This
dividend represents an increase of 1.6% on
the same period in the year ending
31 March 2017. The dividend will be paid
to shareholders on 27th June 2018 and the
record date will be 13th June 2018. The
dividend reinvestment plan remains
suspended for the time being.
FY18 Dividend
6.20c
An increase of 1.6% on the prior year
Argosy Property Limited | Annual Report 2018
10
Chairman's Review
Argosy starts the 2019 financial year in a
very solid financial and portfolio position.
Our diversified portfolio of quality assets
across the three main sectors brings real
strength and balance to our business. We
remain focused on delivering sustainable
dividends to our shareholders. Based on
current projections for the portfolio, the
Board is pleased to be able to guide to a full
year 2019 cash dividend of 6.25 cents per
share, an increase of 1% on the prior year.
The increase reflects our wish for
shareholders to share in the continued
strong results but also allows us to
maintain our momentum towards a
dividend policy based on Adjusted Funds
from Operations (AFFO
1
) in the medium
term. Our accompanying result
presentation provides details of AFFO.
OUTLOOK
Argosy continued to deliver excellent
results over the back half of 2018 but there
is more work to do through the 2019
financial year and beyond. As we begin the
2019 financial year, there is greater
political visibility over the near term and
we continue to be optimistic around
potential opportunities for Argosy.
Our diversified investment approach
brings strength and balance to our
business. Argosy has achieved excellent
leasing success and rent review growth
across the portfolio. As a result, the year-
end portfolio metrics are in excellent
shape. Reinforced by their Green Star
ratings, a number of redevelopment
projects were completed which increased
our portfolio quality and will contribute
towards sustainable earnings over time.
We will continue to look at sustainability
given the environmental and business
benefits that are likely to accrue.
Looking ahead to 2019, we are very
focused on ensuring we can continue to
create value for, and deliver sustainable
and attractive risk adjusted returns to,
shareholders. We remain focused on
delivering reliable dividends to our
shareholders .
Thank you all for your continued support
over the year and I look forward to
updating you further at the Annual
Meeting.
P MICHAEL SMITH
Chairman
Highgate Parkway, Silverdale. Auckland.
1
AFFO is considered by some investors to represent a more sustainable basis for dividends than accounting profit.
Argosy Property Limited | Annual Report 2018
11
82 Wyndham Street, Auckland.
Argosy Property Limited | Annual Report 2018
12
Chief Executive Officer's Review
“It’s great to be able to deliver another
strong performance for our
shareholders.”
PETER MENCE
CHIEF EXECUTIVE OFFICER
Staying focused
Argosy Property Limited | Annual Report 2018
13
INTRODUCTION
Underpinned by strong leasing and rent
review activity through the year we
finished 2018 with occupancy at almost
99% and a weighted average lease term of
over 6 years, our highest ever. The positive
revaluation gain of $47.3 million was the
result of strong portfolio activity and cap
rate firming during the year.
It’s pleasing to announce further progress
at NZ Post House, at 7 Waterloo Quay. The
reinstatement works are progressing well,
including levels 10-12, and we expect them
to be completed this financial year. We
expect strong demand for levels 10-12
when they become available, whilst the
other floors remain leased to NZ Post.
HIGHLIGHTS
— Net distributable income of 6.62 cents
per share, up 1.1%
— NTA per share growth of 5.5% to $1.12
— Strong portfolio activity with an
annualised rent review increase of
3.0%
— Excellent portfolio metrics with
occupancy at ~99% and a 6.1 year
WALT
— Annual portfolio revaluation gain of
$47.3 million or 3.2% on book value
— Completion of $48.8 million of
developments including $33.8 million
of green developments
— FY19 dividend guidance of 6.25 cents
per share
— Financial year total shareholder return
of 9.8%, outperforming the sector by
2.8%
Green projects completed
$33.8m
Green means quality
FINANCIAL RESULTS
Statement of Comprehensive Income
Argosy reported net rental property
income of $101 million for the period,
which includes the impact of rental loss
recoveries from insurers and is in line with
the prior period. The prior period was
positively impacted by a lease surrender of
$5.5 million recognised in respect of the
property at 7 Waterloo Quay in
Wellington.
Administration expenses were up $0.6m
on the prior period primarily due to
additional resourcing costs across the
business.
Interest expense of $25.5 million was
down $0.4 million on the prior period, as
the interest on higher average debt was
offset by higher capitalised interest on
developments. Total financing costs were
$14.8 million higher than the prior period,
primarily due to the non-cash impact of
derivatives.
Distributable income
For the year ending 31 March gross
distributable income
2
was $65.6 million
and stable compared to the prior period.
Gross distributable income for the period
was 7.95 cents per share, compared to 8.03
cents per share in the previous period due
to the higher weighted average shares for
the period.
Net distributable income increased 2.0%
to $54.6 million compared to the prior
period, due to slightly lower current tax
expense. Net distributable income per
share increased 1.1% to 6.62 cents per
share from 6.55 cents per share in the prior
period.
Net Distributable Income
6.62c
An increase of 1.1% on the prior period
PORTFOLIO ACTIVITY
Leasing and rent reviews
Underpinned by continued strength in
Auckland and Wellington property
market fundamentals, Argosy has
delivered strong leasing and rent review
results over the second half of the year.
During the period, 51 lease transactions
were completed on 150,000sqm of net
lettable area, including 23 new leases, 20
renewals and 8 extensions.
Material leasing transaction successes
over the second half of the financial year
include;
— 15-year extension to Amcor Flexibles
for 9,178sqm at 9 Ride Way, Albany,
Auckland;
— 12-year lease to Eclipx Fleet Holdings
for 4,230sqm at 8 Forge Way in
Panmure, Auckland;
— 6-year renewal by Te Puni Kokiri for
6,215sqm at 143 Lambton Quay,
Wellington;
— 3-year renewal by Tonkin & Taylor for
4,377sqm at 105 Carlton Gore Rd,
Newmarket, Auckland;
— 18 months extension by the Ministry of
Business, Innovation & Employment
for 5,560sqm at 147 Lambton Quay,
Wellington.
In addition, Foster Moore is taking an
initial 12-year lease on Level 1 of 82
Wyndham St for 1,644sqm. There is some
vacancy remaining at 23 Customs Street
where 2,950sqm of space is vacant.
However, following refurbishment, the
completion of the Snickel Lane
development and continued strength in
the Auckland leasing market, Argosy is
experiencing strong tenant interest for the
building.
Annual Revaluation Gain
$47.3m
An increase of 3.2% on book value
2
Profit before tax and distributable income are alternative performance measures used to assist investors in assessing the Company’s underlying operating
performance and to determine income available for distribution to shareholders. Note 23 of the financial statements released today provides a full reconciliation
between profit before tax and distributable income.
Argosy Property Limited | Annual Report 2018
14
Chief Executive Officer's Review
Following strong leasing results over the
second half, Argosy’s FY19 lease expiries
as at 31 March 2018 was down to 9.9% from
the 16.4% reported in the prior year.
Argosy’s weighted average lease term at
year end increased to 6.1 years compared
to 5.6 years at the interim result. The
improvement reflects some of the longer
leasing results achieved with some of our
larger tenants over the second half of the
year.
Argosy has maintained a very high
occupancy level over the year and
increased this to 98.8% at year-end
compared to 98.6% in the prior year.
During the period, a total of 88 rent
reviews on $48.5 million of existing rental
income were completed. Rental growth of
6.1% was achieved or 3.0% on an
annualised basis on all rents reviewed.
Across the rental increase, the office
portfolio accounted for 50% of the total
rental uplift due to a large market review,
with industrial and retail contributing
29% and 21% respectively.
Approximately 50% of all rents reviewed
(by income) were market reviews, 27%
were fixed reviews and 23%were CPI or
CPI+.
Acquisitions and developments
Ongoing tightness across the property
market continued in 2018. This, coupled
with a surplus of capital and scarcity of
quality real estate means few
opportunities have emerged during the
period to make acquisitions which would
add value.
Despite this, we have continued to
progress our development pipeline with
four projects totalling $48.8 million now
completed. Following the green
development works included as part of the
Highgate (Mighty Ape) and 82 Wyndham
Street developments, we are currently
targeting a 4 Green Star Industrial Built
Rating and 5 Green Star Office Built Rating
on these properties respectively. These
will add to our existing 5 Green Star Office
Built assets at 143 Lambton Quay and 15
Stout Street, both in Wellington.
Valuations
An independent revaluation of the
portfolio was undertaken as at 31 March
2018 which saw the portfolio record a full
year revaluation gain of $47.3 million, a
3.2% gain on the year end book value.
Overall, the industrial portfolio increased
6.5% ($39.0 million) above book value,
office 1.0% ($5.6 million) and retail 0.9%
($2.7 million). If we adjust the annual
revaluation result for NZ Post House,
Argosy’s annual revaluation uplift would
have been $61.6m, or a 4.5% increase above
book value. On current market value,
Argosy’s portfolio
3
has a passing yield of
6.88% and a 6.98% yield on market rental.
The portfolio is 1.3% under rented
excluding market rentals on vacant space.
NZ Post House, at 7 Waterloo Quay
Earthquake Damage and Insurance
Claim
Argosy’s 13 storey property at 7 Waterloo
Quay in Wellington sustained damage in
the 7.5 magnitude Kaikoura earthquake on
14 November 2016. Independent
engineers have confirmed that the
building remains structurally sound, but it
suffered damage to fit out and services.
Argosy has material damage insurance
and we are working with our insurers to
progress a significant insurance claim.
Argosy expects that, as with many
earthquake insurance claims, there may
be debate with insurers over the extent of
damage, and the appropriate method of
reinstatement. Argosy has commissioned
a comprehensive damage survey of 7
Waterloo Quay, and detailed damage
assessment reports are now with insurers.
We envisage that the damage reports may
be updated, based on our advisors’
experience that additional earthquake
damage may become apparent.
Reinstatement & Leasing
In the meantime, Argosy has proceeded
swiftly with its own interim works
programme (including levels 10-12), and it
is expected that the affected floors will be
ready for reoccupation this financial year.
We expect strong demand for levels 10-12
as they become available. This programme
is expected to cost $41 million to
complete, and this amount has been
included as a capital deduction in the
valuation for 7 Waterloo Quay at 31 March
2018.
Insurance claim
Argosy also has business interruption
insurance, which is expected to cover loss
of rents and certain additional expenses
until mid-November 2018, being a period
of two years from the date of the
earthquake. Argosy has made three
interim claims under its material damage
and business interruption insurance, and
received progress payments from insurers
of $11.8 million plus GST (after a
$4.8 million deductible).
Of the $11.8 million received from
insurers, Argosy has recognised
$9.8 million (after deductible) in its
financial reporting for the period to
31 March 2018. Of this amount,
$5.7 million has been allocated by Argosy
to loss of rents, $1.8 million has been
allocated to expense recoveries and
$2.3 million to material damage
reinstatement. Further interim claims will
be presented for the remainder of the two-
year business interruption indemnity
period, and for material damage.
DIVESTMENT OF NON-CORE
ASSETS
With the continued strength in property
markets over the second half of the
financial year, Argosy successfully
completed the sale of Tunnel Grove,
Wellington for $2.8 million and the
unconditional agreement to sell Wagener
Place in Auckland for $31.0 million. This
transaction will settle in July 2018. The
Wagener Place sale was an opportunity to
reduce Argosy’s retail exposure in an area
where there will be increasing
competition. These transactions follow
the sale of Pandora Rd in Napier in the first
half for $7.7 million.
At year end, Argosy has categorised
approximately 7% or $110 million of the
portfolio as non Core. As noted above,
Argosy will continue its divestment
programme over the next 12-18 months to
take advantage of current market
conditions.
Summary Financial Information
FY18FY17
Net property income ($000's)100,990100,752
Administration expenses ($000's)9,9389,328
Operating profit before tax ($000's)91,05291,424
Gross distributable income ($000's)65,58965,592
Net distributable income ($000's)54,60353,521
Net distributable income (cents per share)6.626.55
Dividends (cents per share)6.206.10
Net distributable income payout ratio94%93%
3
Excluding NZ Post House and Stewart Dawson Corner
Argosy Property Limited | Annual Report 2018
15
CAPITAL MANAGEMENT
Current Leverage
At 31 March 2018, Argosy’s debt-to-total-
assets ratio, excluding capitalised
borrowing costs, was 35.9% versus 36.3%
at 31 March 2017 year end. The decrease
reflects the net impact of developments
during the period offset by divestments
and revaluation gains. During the period
the Board has decided to widen the target
gearing band to 30-40% (previously
35-40%). This allows Argosy to be more
flexible depending on financial and
property market conditions. Argosy
currently sits in the middle of the new
target band and remains well within all
bank covenants.
Argosy’s weighted average interest rate
for the period was 4.98% versus 4.88% at
31 March 2017 year end. During the period
Argosy undertook two restructures to its
banking facilities with ANZ Bank New
Zealand Limited, Bank of New Zealand
Limited and Hongkong and Shanghai
Banking Corporation. The first
restructure can be summarised as follows:
— Tranche A ($275 million) was extended
to 31 October 2021;
— Tranche B (also $275 million) expiry
remained at 30 September 2020;
— An additional tranche (Tranche C) of
$25 million was added to the facility
with an expiry date of 31 October 2021.
The second restructure saw an additional
facility (Tranche D) of $50 million added
with an expiry date of 28 February 2021.
Argosy’s total debt facility is now
$625 million. At 31 March 2018, the
weighted average facility term was 3.1
years.
SUSTAINABILITY
Last year we established our
Environmental, Social and Governance
Framework to recognise the importance
sustainable business practices have on the
environment and long-term value
creation for shareholders. Our
environmental policy reflects our
ambition to create vibrant and sustainable
workplaces for our tenants. Argosy
believes green buildings have potential to
provide both environmental and business
benefits including; increased
marketability, lower operating costs,
higher occupancy and improved occupier
productivity and well-being.
OUTLOOK
Looking ahead, we have started the 2019
financial year well and expect to carry last
year's momentum through the remainder
of this year. As always, I would like to
thank the Board for its continued strong
governance and stewardship. To my team,
thank you all for your dedication and hard
work towards upholding our values and
culture over the year.
I look forward to updating all
shareholders further at the Annual
Meeting in August.
PETER MENCE
Chief Executive Officer
Argosy Property Limited | Annual Report 2018
16
We proactively manage
our tenant partnerships.
We aspire to provide
modern, high quality and
safe properties that our
tenants enjoy and are
expertly managed by our
experienced team.
OUR TENANT PHILOSOPHY
Tenant success is our success. If we can
build long term partnerships with our
tenants where both parties feel valued, we
can achieve great things together. Our
buildings need to be modern, comfortable
environments which help support our
tenants' strategic growth aspirations.
Over the last twelve months we have
continued to evolve our thinking from a
landlord perspective. We want to ensure
the buildings don’t just work for our
tenants now, but for the next 20 years.
Making it as easy as possible for our
tenants to work with us remains a focus
area. We have dedicated staff as primary
points of contact. They get to know our
tenants' businesses and their specific
needs. We aim to provide regular
communication that is clear, timely and
relevant, and we pride ourselves on being
responsive. We deal with any issues
quickly and appropriately to make sure
they don’t become big problems for the
tenant, or us.
STRATEGIC PARTNERSHIPS
A key part of our strategy is to work with
our key tenants to add value to the
portfolio.
Through FY18 we have continued to work
closely with our tenants to improve the
quality of our portfolio which ultimately
delivers more modern and efficient
buildings for our tenants to grow their
businesses.
Some examples include:
— the completed $24.7 million project at
the Highgate Business Park in Silverdale,
Albany for Mighty Ape (see case study);
— the completed $7.5 million Snickel Lane
project at 23 Customs Street in Auckland’s
CBD;
— the completed $9.1 million project at 82
Wyndham Street in Auckland’s CBD,
where we are awaiting confirmation of our
5 Green Star Built rating and 4 Star
NABERSNZ rating;
— a redevelopment of the previously
earthquake damaged property at 8
Foundry Drive in Christchurch for
Polarcold Stores Limited;
Focus Area
01
Our Tenants
Argosy Property Limited | Annual Report 2018
17
— the commencement of a $10.5 million
redevelopment at 180 Hutt Road in
Kaiwharawhara, Wellington for Fletcher
Distributions Limited.
We continue to work with both existing
tenants and some potential tenants, to
understand their business and growth
aspirations. By doing so we can identify a
range of potential long term and
environmentally sustainable solutions for
them.
TENANT COMMUNICATIONS
With an experienced and enthusiastic
property team on hand, we do pride
ourselves on our tenant communication.
Every property is allocated an asset and
property manager, providing our tenants
with a dual line of communication. We aim
to address tenant issues swiftly in order to
ensure their working environment
remains safe and fit for purpose to conduct
their daily business.
Our after-hours help desk allows us to
respond to any tenant issues arising
outside of normal business hours. Twice a
year we provide tenant newsletters to
keep our tenant family updated on what's
happening within the portfolio as well as
other areas of interest.
We periodically survey our tenants
allowing us to address any concerns they
may have.
All issues relating to health and safety are
resolved by working closely with our
tenants. We actively encourage our
tenants to strive to achieve excellence in
their own health and safety performance
as we do at Argosy.
“Strong partnerships allow
us to understand how we
can deliver attractive long
term real estate solutions
for our tenants.”
WARREN CATE, ASSET MANAGER
TENANT DIVERSITY
Every single tenant is important to us. Our
family of over 170 members includes a
diverse range of industries. By income the
top 10 tenants account for 40% of income.
We consider this diversity of tenant and
income streams as offering a high degree
of strength to the certainty and stability of
our earnings and cashflows. We are not
exposed to one sector or one large tenant
because our diverse portfolio of properties
are typically highly sought after.
Furthermore, when we have leases
expiring we generally have existing or new
tenants keen to backfill any space. The
largest tenant in the portfolio is the
Ministry of Business, Innovation and
Employment, with 8.1% of gross property
rental income. This tenant diversification
assists us in our goal of providing
sustainable income and investment
returns to our shareholders.
Largest tenants
BY PERCENTAGE OF RENTAL INCOME
8.1%Ministry of Business, Innovation
& Employment
7.5%New Zealand Post Limited
5.8%General Distributors Limited
(Progressive Enterprises)
4.3%Cardinal Logistics Limited
3.4%The Warehouse Limited
2.5%Ezibuy Limited
2.3%Ministry of Primary Industries
1.9%Mitre 10 (New Zealand) LImited
1.9%Te Puni Kōkiri
1.9%Tonkin & Taylor Limited
60.4%Other
“Our top ten tenants reflect
a diverse range of high
quality NZ corporates and
government
departments.”
PETER MENCE, CEO
Our tenants have a variety of
ever-changing requirements which is why
we take the time to really understand their
needs.
We keep our tenants up to date with
Argosy and broader industry news
through our tenant newsletters and
dedicated team of property managers.
We collaborate closely with our tenants on
opportunities to create long term value for
both parties. We want to support the
growth aspirations of our tenants whilst
improving the quality of our portfolio.
Argosy Property Limited | Annual Report 2018
18
We are committed to
fostering open and
transparent
communications with
shareholders, ensuring
we deliver to the highest
standards and comply
with the NZX listing
rules.
Each year we strive to improve our
relationship with all shareholders. We
pride ourselves on our ability to release
accurate, relevant and timely information
to everyone. Our senior management and
Board of Directors make themselves
available to shareholders through one-on-
one meetings, property tours, investor
roadshows, conference calls and result
webcasts.
OUR COMMUNICATIONS STRATEGY
Our communications strategy includes:
— Periodic and continuous disclosure to
NZX in accordance with the NZX listing
rules and Argosy’s Continuous Disclosure
Policy;
— Information and briefings provided to
investors, analysts and media;
— Annual and interim reports, distributed
to shareholders and made available on the
Company’s website;
— Bi-annual Investor Update newsletters;
— The annual shareholders’ meeting and
any other meetings called to obtain
approval for Company actions as
appropriate;
— Notices and explanatory memoranda
for annual and special meetings;
— Annual Retail Investor Roadshows; and
— The Company’s website containing
investor-related information, including
portfolio information, market releases,
annual and interim reports, investor
presentations and webcasts, share price
information, dividend details, notices of
shareholder meetings and Argosy’s
governance policies and charters.
— Market announcements sent to persons
in the investor relations contacts list and
published on our website at
www.argosy.co.nz.
GOVERNANCE
We are committed to operating to the
highest standards of corporate behaviour
and accountability. Our corporate
governance practices comply with the
NZX Corporate Governance Best Practice
Code and the Financial Markets
Authority’s Principles of Corporate
Governance and Guidelines. You can refer
to a full report on our compliance with the
NZX code on our website.
We uphold the highest ethical standards,
acting in good faith and in the best
interests of shareholders at all times. The
ethical and behavioural standards we
expect of Directors, Officers and
employees are set out in our Code of
Conduct and Ethics. This Code includes
policies about conflicts of interest, fair
dealing, compliance with applicable laws
and regulations, maintaining
confidentiality of information, dealing
with company assets and use of company
information.
Our focus is on having a Board whose
members can act independently and have
the combined skills to consistently
improve our financial performance and
returns to shareholders. The Constitution
provides for no fewer than three directors.
All Board members are non-executive
directors. The Board does not impose a
restriction on the tenure of any director as
such a restriction may lead to the loss of
experience and expertise.
The purpose of independent directors is
to reassure shareholders that the Board is
undertaking its role properly and is
diligent in holding management
accountable for its performance. By
‘independent director’ we mean
independent of management and free of
any business or other relationship that
could materially interfere with, or could
reasonably be perceived to materially
interfere with, the exercise of their
unfettered and independent judgement.
Focus Area
02
Our
Shareholders
Argosy Property Limited | Annual Report 2018
19
As required under Listing Rule 3.3.2, the
Board has determined that as at balance
date Peter Brook, Mark Cross, Michael
Smith, Andrew Evans, Chris Hunter and
Jeff Morrison are considered to be
independent directors under the NZX
Listing Rules. Subsequent to the balance
date, and as at the date of this report, the
Board determined that Mr Cross has
ceased to be an independent director as he
is a director of Milford Funds Limited
which has subsequently (on 19 April 2018)
disclosed that it manages funds with a
substantial product holding (5.0%) in
Argosy.
Further information on the Board of
Directors can be found in the Our People
section on page 22 of this report. Our
corporate governance policies have been
made public and can be viewed on our
website.
ANNUAL MEETING
The 2018 Annual Meeting will be held at
the Royal New Zealand Yacht Squadron,
101 Curran Street, Westhaven Marina,
Auckland on Tuesday, 6th August 2018,
commencing at 2pm.
Chris Hunter and Jeff Morrison will retire
in accordance with the Company’s
constitution and the NZX Listing Rules,
and will be eligible for re-election. We
encourage you to attend the meeting
where you will have the opportunity to
listen to and meet the Board of Directors
in person.
OUR WEBSITE
Argosy’s website at www.argosy.co.nz.
provides all relevant public information to
Investors. The website:
—Reflects any information released to
the NZX as soon as practicable after the
event;
— Is a repository for relevant documents,
including annual reports, interim
reports, newsletters, information
releases, Company policies,
Committee charters, corporate
governance related material and
similar documents; and
— Provides information including
registry forms and full texts of notices
of meetings and explanatory notes.
Website information is reviewed regularly
to ensure it is current, and where required,
archived. Investors who have provided the
Company with an email address will be
sent annual and interim reports and other
investor communications electronically,
unless they opt to receive hard copies of
these reports. We certainly encourage the
receipt of information online to receive
information faster, to minimise the impact
on the environment and reduce costs for
the company.
RETAIL ROADSHOW
As usual, we hold an annual Retail
Investor Roadshow each year following
the release of our annual results. The 2018
Roadshow will be held from 28 May to
18 June and senior management will visit
13 locations across the country to present
the 2018 annual financial results and
provide an update on our strategy and
portfolio activities.
Some of our directors will be in attendance
on the roadshow, making themselves
available to answer questions and mingle
with shareholders. We encourage you to
take the opportunity to attend and catch
up with members of the management
team and Board. Further information
about the Roadshow can be found under
the Investors section of our website.
DIVIDEND PAYMENTS
We are committed to delivering
sustainable and attractive returns to our
shareholders. The Board has announced a
full year cash dividend of 6.20 cents per
share, a 1.6% increase on the prior year.
The final quarter dividend of 1.550 cents
per share, with imputation credits of
0.3744 cents per share attached, will be
paid to shareholders on 27th June 2018.
The record date will be 13th June 2018.
The dividend reinvestment plan is
currently suspended.
Our dividend policy is focused on paying
dividends that are less than net
distributable income. For some investors,
Adjusted Funds From Operations (AFFO)
represents an important measure of
dividend sustainability.
Argosy’s Board recognises this view and
intends to transition to a new dividend
policy, based on AFFO earnings, over the
medium term. We remain focused on
delivering sustainable dividends to our
shareholders and to this end, the Board
can guide to a full year 2019 cash dividend
of 6.25 cents per share, an increase of 1%
on the prior year.
The increase reflects our wish for
shareholders to share in the continued
strong results but also allows us to
maintain our momentum towards an
AFFO based dividend policy in the
medium term.
KEY DATES
Dates are indicative and may be subject to
change
23 May 2018
FY18 annual results release
27 June 2018
Final quarter FY18 dividend
payment
6 August 2018
Annual Shareholders Meeting
September 2018
FY19 1
st
quarter dividend payment
November 2018
FY19 interim results release
December 2018
FY19 2
nd
quarter dividend payment
We are committed to delivering
sustainable and attractive returns to our
shareholders.
We are committed to the highest
standards of business behaviour and
accountability.
Our communications strategy aims to
keep all shareholders updated on what is
happening with their investment.
Argosy Property Limited | Annual Report 2018
20
Argosy is committed to
creating and maintaining
an inclusive and
supportive workplace for
all its staff.
DIVERSE AND VIBRANT CULTURE
Our people are a key focus. Our Diversity
Policy (which is available on our website)
sets out our position and includes
measurable objectives to achieve our
diversity goals. We have continued to
expand on our Environmental, Social and
Governance reporting obligations. This
year we have provided ethnic diversity
information on our business to illustrate
the diverse cultures we embrace and
whom we benefit from in our business.
We have zero tolerance for discrimination
and recognise that a talented and diverse
workforce, where each employee brings
their own unique capabilities, experiences
and characteristics to their role, is a key
competitive advantage.
We look to recruit and retain talented
people to support the delivery of our
strategy.
Our Values include treating all people
with respect. We want to create a
supportive and understanding
environment where everyone can realise
their potential within the company,
regardless of their different backgrounds
or beliefs. We are simply committed to
employing the best people to do the best
job possible for Argosy and its
shareholders.
STAFF WELLBEING
We endeavour to provide a healthy and
safe workplace for all our employees and
we have an established workplace Health
and Safety Committee. The purpose of the
committee is to support the health and
wellbeing of Argosy staff and encourage
the safe and early return to work of ill or
injured employees. The Committee is also
responsible for establishing initiatives
that support this purpose such as the
provision of subsidised gym memberships
(physical health) and access to
independent employee assistance
programs (mental health). As well as this,
permanent employees are provided with
health, life and disability insurance cover
as part of their employment.
DEVELOPING OUR TALENT
We invest resources into upskilling our
people to ensure we have the necessary
skills and experience to perform our roles
expertly and professionally. Each
employee has a personal development
plan as part of their Employee
Performance Plan. The plan is developed
Focus Area
03
Our People
Argosy Property Limited | Annual Report 2018
21
with the employee's line manager and
reviewed as part of the annual review
process.
As a listed issuer, Argosy participates in
the Institute of Directors Future Directors
program. This program aims to give
talented people the opportunity to
observe and participate on a company
board for a year. The program creates a
variety of benefits for Argosy including a
fresh perspective over the business, a
different professional skill set, diversity
and assistance in developing talent for
future boards.
OUR VALUES
Our values guide our internal conduct as
well as our relationships with external
parties. We are committed to delivering
top quartile results within the listed
property sector to create value for our
shareholders. However, these results must
also consider the interests of workers,
tenants, the community and others with
whom we do business.
In striving for outstanding performance,
we do not compromise our ethics or
principles. We place great importance on
honesty, integrity, quality and trust.
Our Values
Ethics
Doing the right thing and doing things
right
Culture
Creating a fun environment that
encourages excellence
Respect
Treating all stakeholders with courtesy
and understanding
Accountability
Taking ownership and responsibility
Communication
Promoting responsive, proactive, honest
and appropriate communication with all
stakeholders
Gender Diversity
SENIOR MANAGEMENT AND STAFF
%
7575
5050
2525
5050
Male
Female
Senior ManagementAll Staff
0
25
50
75
100
Gender Diversity
STAFF AGE AND GENDER PROFILES
Number of employees
00
11
33
33
77
11
11
55
33
33
33
Male
Female
< 2525-3435-4445-5455-6465+
0
2
4
6
8
Ethnic Diversity
GroupAll staff
European63%
Asian21%
Mãori8%
Pacific Peoples8%
Middle Eastern, Latin American, Africann/a
Not disclosedn/a
We invest in developing the skills of our
employees.
The health and wellbeing of our staff is
important and underpins our supportive
working environment.
We operate a diverse and inclusive
workplace.
Argosy Property Limited | Annual Report 2018
22
03
Focus Area
Our People
BOARD OF DIRECTORS
Michael Smith Chairman
Director since December 2002
4
Mr Smith was employed by Lion Nathan
Limited for 29 years. During that time, he
held a number of senior executive
positions with the Lion Nathan Group and
was a director of the parent company for
16 years. Mr Smith is a director of a
number of companies, including
Greymouth Petroleum Limited, Maui
Capital Indigo Fund Limited and Maui
Capital Aqua Fund Limited. His previous
directorships/trusteeships include Lion
Nathan Limited, The Lion Foundation,
Fonterra Co-operative Group Limited,
Auckland International Airport Limited,
OnePath Holdings (NZ) Limited and
Fisher & Paykel Healthcare Corporation
Limited.
Mr Smith holds a Master of Commerce
degree from The University of Auckland
and is a Graduate of the Program for
Management at Harvard Business School.
He is also a member of the Institute of
Directors in New Zealand.
Peter Brook
Director since December 2002
4
Mr Brook has 21 years experience in the
investment banking industry, retiring in
2000 to pursue his own business and
consultancy activities. He is presently
Chairman of Burger Fuel Worldwide
Limited, Trust Investments Management
Limited and Generate Investment
Management Limited. Mr Brook is also a
trustee of the Melanesian Mission Trust
Board, a member of the Institute of
Finance Professionals New Zealand Inc.
and a director of several private
companies.
Mr Brook holds a Bachelor of Commerce
degree from The University of Auckland
and is a member of the Chartered
Accountants Australia and New Zealand.
Mark Cross
Director since March 2012
Mr Cross has more than 20 years
executive experience in investment
banking, holding senior positions in New
Zealand, Australia and the United
Kingdom. He is currently chairman of
Milford Asset Management Limited and
MFL Mutual Fund Limited/
Superannuation Investments Limited,
and a director of Genesis Energy Limited,
Z Energy Limited and Chorus Limited.
Mr Cross holds a Bachelor of Business
Studies degree from Massey University.
He is a member of Chartered Accountants
Australia and New Zealand and a
Chartered Member of the Institute of
Directors in New Zealand.
Andrew Evans
Director since August 2003
4
Mr Evans has more than 26 years
experience in commercial real estate and
asset management, previously holding
executive positions in listed and unlisted
real estate investment businesses. He is a
director of NorthWest Healthcare
Properties Management, Holmes Group
Limited, Holmes GP Fire Limited, Trust
Investments Management Limited,
Hughes and Cossar Group Holdings
Limited, Infinity Investment Group
Limited and Westbrooke Capital Partners
Limited. In addition, Mr Evans is a past
national president of the Property Council
of New Zealand, a foundation member of
the Property Institute of New Zealand, a
government appointee to the Land
Valuation Tribunal (Waikato No.1) and is
a trustee of the Marist Brothers Rugby
Charitable Trust.
Mr Evans is a Chartered Fellow of the
Institute of Directors and is on the
Auckland Branch Committee. He has
Bachelor of Business Studies and Master
of Business Administration (with
distinction) degrees from Massey
University and a Graduate Diploma in
Finance from The University of Auckland.
Chris Hunter
Director since June 2013
Mr Hunter has extensive commercial
property experience including more than
26 years in New Zealand’s construction
industry, most recently as the Chief
Executive Officer of Hawkins
Construction and he has recently invested
in NZ Strong Group. Over the past 20 years
he has been associated with more than
$10 billion of developments across
industrial, commercial, retail, residential
and infrastructure sectors. Mr Hunter
currently has a portfolio of business
investments and is active in the property
development sector.
Mr Hunter is a member of the New
Zealand Institute of Quantity Surveyors, a
fellow of the Royal Institute of Chartered
Surveyors and holds a Master of Business
Administration degree from Massey
University.
Jeff Morrison
Director since July 2013
Mr Morrison has 40 years of experience
as a property lawyer, 29 of them as a
commercial property partner at Russell
McVeagh, and now practises on his own
account. Mr Morrison is a trustee of the
Spirit of Adventure and other charitable
trusts and holds a number of private
company directorships.
Mr Morrison is a qualified lawyer with a
Bachelor of Laws degree from The
University of Auckland. He is also a
member of the Institute of Directors in
New Zealand.
4
On 1 March 2012, Argosy Property Trust converted from a unit trust into a company, Argosy Property Limited, through a corporatisation process. On
incorporatisation, the Board of Argosy Property Limited comprised the same directors as the Board of Argosy Property Management Limited, the manager of
Argosy Property Trust. Prior to 1 March 2012, Michael Smith, Peter Brook, and Andrew Evans were directors of the manager of the former Trust and began their
tenures in December 2002, December 2002 and August 2003 respectively.
Argosy Property Limited | Annual Report 2018
23
Argosy Property Limited | Annual Report 2018
24
03
Focus Area
Our People
Argosy Property Limited | Annual Report 2018
25
Argosy Property Limited | Annual Report 2018
26
24% decrease in
reportable incidents
100% of incidents are
investigated
95% improvement close
out rate within the month
reported
The focus around health & safety remains
paramount. The provision of a healthy and
safe workplace for our employees, tenants
and contractors is unchanged.
We continue to have accurate recording
and reporting of workplace incidents,
supporting innovation and fresh ideas to
improve health and safety systems. This
ensures worker participation through
health and safety representatives and
supporting the safe and early return to
work of injured employees.
Underpinning this commitment is our
continued innovation and adoption of
technology to improve our systems –
particularly around recording and
reporting of workplace incidents. We
acknowledge our responsibilities to
tenants, other workers and the public.
To this end, in October 2017 Argosy
introduced SiteSoft, a new contractor
management system, to ensure all work
carried out on a building is completed to
the highest standards and in the safest way
possible. Sitesoft allows real time
notifications of risks, emergency
procedures and building information, to
be passed on to a contractor visiting a
building through smart phone technology.
Contractors undergo a pre-qualification
and induction before work can start.
Workplace incidents continue to reduce
due to a number of health and safety
initiatives introduced, including high risk
pre-start meetings and joint discussions
between contractors, tenants and Argosy.
Argosy continues to meet regularly with
its key contractors to discuss new ways of
creating a safe working environment for
its tenants, contractors and staff.
HEALTH AND SAFETY STRATEGIC
GOALS
We want to create a positive safety culture.
Therefore, it’s critical that we manage
health and safety risks, provide adequate
training and resources and ensure that
managers and individuals are accountable
for their actions or inaction. Our seven key
strategic goals to provide a safer work
environment are;
Focus Area
04
Health
& Safety
Argosy Property Limited | Annual Report 2018
27
1. We will proactively identify risks and
implement actions to eliminate, isolate
or minimise the risk of harm;
2. We will consult and actively engage
with employees and contractors to
ensure they have the training, skills,
knowledge and resources to maintain a
healthy and safe workplace;
3. We will maintain and continually
improve our health and safety system;
4. We will actively encourage our
contractors and tenants to
demonstrate the same commitment to
achieving excellence in health and
safety performance as we do;
5. We will support the health and
wellbeing of staff and encourage the
safe and early return to work of injured
or ill employees;
6. We will comply with relevant
legislation and regulations;
7. We will accurately report our incidents
and investigate root causes, in a timely
manner.
PROGRESS
We have made progress on the health and
safety initiatives introduced in the prior
year:
— We have extended the pre-start project
meetings to include any high risk work
based on the risk matrix;
— We regularly monitor risk mitigation
controls;
— We provide ongoing training and
appropriate equipment to staff;
— We audit every contractor at least once
a year and have reduced the number of
contractors by introducing a ‘pre-
qualification’ process;
— We have maintained a robust health
and safety system;
— We conduct monthly contractor
meetings to discuss key health and
safety points;
— We are now also holding meetings with
tenants to ensure a co-operative
approach is taken regarding health and
safety;
— Argosy’s Compliance Manager (who is
trained in root cause analysis) has
continued to lead our health and safety
program.
ACC ACCREDITATION
TERTIARY STATUS
Argosy’s "Tertiary Status" in ACC's
Workplace Safety Practices remains in
place and is the highest level of
achievement possible. It represents best
practice in health and safety compliance,
according to ACC.
8 Nugent Street, Newmarket.
We are committed to health and safety in
the workplace, striving to create a positive
safety culture.
We are strongly committed to health and
safety and have the aspirational vision of
Zero Harm.
We have seven strategic health and safety
goals designed to provide a safe work
environment.
Argosy Property Limited | Annual Report 2018
28
Being environmentally
conscious and
supporting our
community is important
to us.
THE ENVIRONMENT
Our focus on the environment and the
long-term sustainability of our business
has strengthened further over the year.
Last year we established our
Environmental, Social and Governance
(ESG) Framework to recognise the
importance sustainable business practices
have on the environment and long-term
value creation for shareholders. Our
environmental policy reflects our
ambition to create vibrant and sustainable
workplaces for our tenants and Argosy
believes green buildings have potential to
provide both environmental and business
benefits.
WHAT WE DO
Over the last year we have continued to
work towards providing environments
that support higher productivity levels
whilst minimising the impact on the
environment.
Looking at how we use energy to reduce
carbon emissions and finding smarter and
more efficient ways of doing things is still
top of mind. We are currently reviewing
potential partners to assist us in
measuring energy consumption which is
part of Argosy’s ESG Framework.
“Our continued
development of green
assets reflects our long
term commitment to
sustainability.”
PETER MENCE, CEO
Focus Area
05
Environment
& Community
Argosy Property Limited | Annual Report 2018
29
Investors are becoming more
sustainability focused from an investment
perspective. They are demanding more
disclosure from organisations around
their plans, policies, goals and objectives
with respect to sustainability. Our
environmental policy articulates our
environmental ambitions and principles.
Argosy remains a member of the New
Zealand Green Building Council
(NZGBC), the organisation responsible
for issuing independent ratings under the
NABERSNZ and Green Star standards.
WHAT IS NABERSNZ?
NABERSNZ is an independent system for
rating the energy efficiency of office
buildings, which is backed by the New
Zealand Government. NABERSNZ is a
useful tool for an owner to understand
how energy is used in a building and to be
able to improve its performance. By using
this information, energy management
strategies can be instigated to make
operational improvements and reduce
energy consumption.
WHAT DOES GREEN STAR MEAN?
Green Star rating tools have been
developed by the NZGBC as a way of
predicting the energy use and
environmental impact of a building from
the design phase to completion. To rate a
building’s overall environmental impact,
the tool awards points across nine
categories: energy, water, materials,
indoor environment quality, transport, use
& ecology, management, emissions, and
innovation. A 5 Green Star rating indicates
New Zealand excellence.
“A high Green Star rating
reflects strong
environmental
collaboration between the
building owner and
tenant.”
SAATYESH BHANA, ASSET MANAGER
5 Star
Office Green Built Rating
15-21 Stout Street
15-21 Stout Street,
Wellington
Floor area: 18,750sqm (approx.)
Tenant: Ministry of Business
Innovation and Employment
(MBIE), ~1,800 staff
Green Star Rating: 5 Star Office
Built
Awards: Property Council New
Zealand Industry Awards (2015):
Green Building Property Award
(Best in Category); Heritage and
Adaptive Reuses Property Award
(Excellence); Commercial Office
Property Award (Excellence).
The initial Stout Street design was
completed by the developer and
architect to target a 4 Green Star
Built Rating. Argosy joined the
project during the demolition phase
and had an opportunity to review
the scope of works. Lessons learnt
from 143 Lambton Quay
(Wellington’s first 5 Green Star Built
Rated office building) were
invaluable. After consultation with
the tenant, Argosy made changes
to the scope of works that
improved the sustainability and
energy efficiency features of the
project. The building was
subsequently awarded a 5 Green
Star Built Rating.
We acknowledge that our activities can
have an impact on the natural
environment and are committed to
managing and reducing the consequences
of these activities.
We are committed to actively engaging
with our stakeholders including the
communities we are part of.
We believe that with improved
Environmental, Social and Governance
policies and practices, shareholders and
tenants can make better informed
investment decisions.
5 Star
Whole Building NABERSNZ
15-21 Stout Street
Argosy Property Limited | Annual Report 2018
30
05
Focus Area
Environment & Community
Highgate Business
Park, Mighty Ape
In March 2016, Argosy partnered
with an existing tenant, Mighty Ape,
to build a brand new 10,500sqm
building at the Highgate Business
Park, Albany, Auckland. In January
2018 the practical completion
certificate was issued on the
$24.7m project consisting of
9,000sqm of warehouse with
1,500sqm of office space over two
storeys, plus 116 onsite carparks.
It was only with collaboration
between Argosy and Mighty Ape
that an environmentally sustainable
design package was possible. The
building has a range of green or
sustainable features including
electricity and water metering
systems, to record consumption
and air to air heat recovery on the
fresh air system.
Argosy is currently awaiting the
outcome for its application for a 4
Green Star Industrial Built Rating
from the NZGBC.
OUR ASPIRATIONAL GOALS
Our ESG Framework sets out the
following aspirational environmental
goals;
1. We will strive to obtain NABERSNZ
Energy Ratings on all of our office
buildings by 2022.
We currently have a 4 Star NABERSNZ
rating on 143 Lambton Quay, Wellington
and 5 Green Star rating at 15-21 Stout
Street in Wellington.
2. We will collect energy consumption
data (electricity, water and gas) on all
buildings. This goal remains very much in
place. We continue to identify and source
the most appropriate technology to allow
us to implement this and hope to begin this
in FY19.
3. We will develop a Waste Management
Plan which will be incorporated into all
major projects. Successfully used in
completed projects and continues to be
considered on all major projects.
OUR COMMUNITY
Argosy has a strong social responsibility
commitment to actively engage with the
communities in which we operate.
Shareholders retain high expectations for
Argosy to deliver a wider range of
outcomes over and above financial returns
to them. In fact, we are increasingly seeing
this social responsibility expectation from
our international shareholders.
Argosy continues to recognise and deliver
on these expectations through its support
of four surf life saving organisations and
the Spirit of Adventure Trust. Our four
surf life saving club (SLSC) partners are:
Red Beach SLSC (Auckland), Hot Water
Beach SLSC (Coromandel), Lyall Bay
SLSC (Wellington) and Taylors Mistake
SLSC (Christchurch). They remain
fantastic organisations to partner with
and we acknowledge the huge value they
provide in keeping communities safe in
the water each year. For the year to
31 March 2018 Argosy donated $45,000 to
these organisations.
We are looking forward to working with
these clubs and continue to take pride in
the great work that they do.
Spirit of Adventure Trust
This programme has been building
generations of young Kiwis with
confidence, resilience and self-esteem
since 1972 and over 1,000 Kiwi teenagers
get the opportunity to participate in this
potentially life changing voyage every
year.
An Otago University study done on the
outcomes of students aboard the ship
shows that trainees display increases in
self-esteem and more initiative to take
opportunities that life presents to them.
We are extremely happy to be supporting
this programme with results like this.
Argosy proudly supports the Spirit of
Adventure Trust, based in Auckland and
contributes a total of $5,000 per annum for
this initiative. The sponsorship
contributes towards the cost of two
teenagers, aged 16-18, to participate in the
10-day development voyage on the Spirit
of New Zealand.
Argosy works with the Trust to identify
two recipients who would benefit from the
experience but who would otherwise not
necessarily have the means to be able to
fund it.
Further information about the Trust can
be found at
www.spiritofadventure.org.nz.
“The Spirit of Adventure
has taught me to keep
going and don’t give up.”
BONNIE
Staff Volunteer Days
Argosy encourages its staff to do volunteer
work for a charity of their choice. During
the period Argosy staff undertook
volunteer days to support a variety of well
deserving organisations during the year
including the SPCA, Trees for Survival
and Big Brother. For 2019, Argosy is aiming
for 100% of its staff make the voluntary
commitment towards helping community
organisations achieve their goals.
Argosy Property Limited | Annual Report 2018
31
Taylors Mistake Surf Lifesaving Club
Spirit of Adventure Trust
Argosy Property Limited | Annual Report 2018
32
Argosy has delivered a
higher quality portfolio
year on year,
underpinned by high
occupancy, longer WALT
and strong leasing and
rent review outcomes.
The property market is approaching what
we would consider to be close to its
cyclical peak. As a result, we have taken
opportunities to divest non Core
properties in a vendor friendly market and
redeploy the capital.
Our Investment Policy hasn’t changed.
However, we have taken a slightly cautious
approach to our asset allocation with a
reduction in retail exposure considered
pragmatic given some of the headwinds
facing the sector. We think there will be
better opportunities to reinvest these
proceeds elsewhere over time.
DIVESTMENTS
With the continued strength in property
markets over the second half of the
financial year, Argosy successfully
completed the sale of Tunnel Grove in
Wellington for $2.8 million and the
unconditional agreement to sell Wagener
Place in Auckland for $31.0 million. This
transaction will settle in July 2018.
The Wagener Place sale was an
opportunity to reduce Argosy’s retail
exposure in an area where there will be
increasing competition. These
transactions follow the sale of Pandora Rd
in Napier in the first half of the year for
$7.7 million.
At year end, Argosy has categorised
approximately 7% or $110 million of the
portfolio as non Core. As noted above,
Argosy will continue its divestment
programme over the next 12-18 months to
take advantage of current market
conditions.
NZ POST HOUSE, AT 7 WATERLOO
QUAY
Earthquake Damage and Insurance Claim
Argosy’s 13 storey property at 7 Waterloo
Quay in Wellington sustained damage in
the 7.5 magnitude Kaikoura earthquake on
14 November 2016. Independent
engineers have confirmed that the
building remains structurally sound, but it
suffered damage to fit out and services.
Argosy has material damage insurance
and we are working with our insurers to
progress a significant insurance claim.
Argosy expects that, as with many
earthquake insurance claims, there may
be debate with insurers over the extent of
the damage, and the appropriate method
of reinstatement. Argosy has
commissioned a comprehensive damage
survey of 7 Waterloo Quay, and detailed
damage assessment reports are now with
insurers.
We envisage that the damage reports may
be updated, based on our advisors’
experience that additional earthquake
damage may become apparent.
Reinstatement & Leasing
In the meantime, Argosy has proceeded
swiftly with its own interim works
programme (including levels 10-12), and it
is expected that the affected floors will be
ready for reoccupation this financial year.
We expect strong demand for levels 10-12
as they become available. This programme
is expected to cost $41 million to
complete, and this amount has been
included as a capital deduction in the
valuation for 7 Waterloo Quay at 31 March
2018.
Focus Area
06
Portfolio
Positioning
Argosy Property Limited | Annual Report 2018
33
Insurance Claim
Argosy also has business interruption
insurance, which is expected to cover loss
of rents and certain additional expenses
until mid-November 2018, being a period
of two years from the date of the
earthquake. Argosy has made three
interim claims under its material damage
and business interruption insurance, and
received progress payments from insurers
of $11.8 million plus GST (after a
$4.8 million deductible).
Of the $11.8 million received from
insurers, Argosy has recognised
$9.8 million (after deductible) in its
financial reporting for the period to
31 March 2018. Of this amount,
$5.7 million has been allocated by Argosy
to loss of rents, $1.8 million has been
allocated to expense recoveries and
$2.3 million to material damage expense.
Further interim claims will be presented
for the remainder of the two-year business
interruption indemnity period, and for
material damage expense.
ACQUISITIONS AND MAJOR
PROJECTS
Ongoing tightness across the property
market continued in 2018. This, coupled
with a surplus of capital and scarcity of
quality real estate means few
opportunities have emerged during the
period to make acquisitions which would
add value.
Despite this, we have continued to finish
our development pipeline with four
projects totalling $48.8 million now
completed. As a result of the green
development works included as part of the
Highgate (Mighty Ape) and 82 Wyndham
Street developments, we are currently
targeting a 4 Green Star Industrial Built
Rating and 5 Green Star Office Built Rating
on these properties respectively. These
would add to our existing 5 Green Star
Office Built assets at 143 Lambton Quay
and 15 Stout Street, both in Wellington.
“The real estate market is
certainly looking firmly
valued.”
PETER MENCE, CEO
Foundry Drive,
Christchurch. Value
Add Development
Project cost: $7.5 million
Completion: December 2017
NLA: 7,668sqm
Tenant: Polarcold Stores Limited
Initial Lease: 12 years
The Foundry Drive project is
another example of Argosy's
strategy in action. Polarcold
operates third party, independent
cool and coldstores strategically
located in Dunedin, Timaru and
Christchurch and was undergoing
significant growth. The site has
4,500sqm of land for future
development or expansion. By
working closely with its tenant,
Argosy was able to deliver an
excellent real estate solution to
them as well as shareholders.
We have a clearly defined investment
strategy and acquisition policy which
guides our commercial decision making.
Argosy is, and will remain, invested in a
portfolio that is diversified by sector,
grade, location and tenant mix.
We have a high quality portfolio that
continues to improve through careful
acquisitions, divestments of non Core
assets and adding value to the existing
portfolio.
Argosy Property Limited | Annual Report 2018
34
Argosy has finished the
2018 financial year with
its portfolio in great
shape. It has a very high
occupancy rate at ~99%
and increased its
weighted average lease
term to over 6 years.
MARKET UPDATE
The economic outlook generally looks
sound despite softening medium term
growth expectations. Interest rates
remain at cyclically low levels and
wholesale increases appear some way off.
Bottom up, the property market also looks
sound. Net absorption rates across office
and industrial remain solid and occupier
demand resilient. Auckland office vacancy
levels remain at very low levels. The
industrial sector continues to be one of the
standout performers. Steady economic
activity is underpinning occupier demand
resulting in consistently low vacancy rates
and solid rental growth results.
The impact of the November 2016
earthquakes in Wellington remains well
documented. The office market there
remains under supply pressure to the
extent that vacancy rates for good quality
accommodation are very low. With
ongoing supply & demand imbalance,
there is a need for new office stock with
large floor plates. Owners of well located
properties in the city with good seismic
ratings remain well positioned.
VALUATIONS
An independent revaluation of the
portfolio was undertaken as at 31 March
2018. This saw the portfolio record a full
year revaluation gain of $47.3 million, a
3.2% gain on the year end book value.
Overall, the industrial portfolio increased
6.5% ($39.0 million) above book value,
office 1.0% ($5.6 million) and retail 0.9%
($2.7 million). If we adjust the annual
revaluation result for NZ Post House,
Argosy’s annual revaluation uplift would
have been $61.6m, or a 4.5% increase above
book value.
On current market value, Argosy’s
portfolio
5
has a passing yield of 6.88% and
a 6.98% yield on market rental. The
portfolio is 1.3% under rented excluding
market rentals on vacant space.
LEASING ACTIVITY
Underpinned by continued strength in
Auckland and Wellington property
market fundamentals, Argosy has
delivered strong leasing and rent review
results over the second half of the year.
During the period, 51 lease transactions
were completed on 150,000sqm of net
lettable area, including 23 new leases, 20
renewals and 8 extensions. Material
leasing transaction successes over the
second half of the financial year include;
— 15-year extension to Amcor Flexibles
for 9,178sqm at 9 Ride Way, Albany,
Auckland;
— 12-year lease to Eclipx Fleet Holdings
for 4,230sqm at 8 Forge Way in
Panmure, Auckland;
— 6-year renewal by Te Puni Kokiri for
6,215sqm at 143 Lambton Quay,
Wellington;
— 3-year renewal by Tonkin & Taylor for
4,377sqm at 105 Carlton Gore Rd,
Newmarket, Auckland; and
In addition, Foster Moore is taking an
initial 12-year lease on Level 1 of 82
Wyndham St for 1,644sqm. There is some
vacancy remaining at 23 Customs Street
where 2,950sqm of space is vacant.
However, following refurbishment, the
completion of the Snickel Lane
development and continued strength in
the Auckland leasing market, Argosy is
experiencing strong tenant interest for the
building. Following strong leasing results
over the second half, Argosy’s FY19 lease
expiries as at 31 March 2018 were down to
9.9% from the 16.4% reported in the prior
year. Argosy’s weighted average lease term
at year end increased to 6.1 years
compared to 5.6 years at the interim result.
The improvement reflects some of the
longer leasing results achieved with some
of our larger tenants over the second half
of the year. Argosy has maintained a very
high occupancy level over the year and
increased this to 98.8% at year-end
compared to 98.6% in the prior year.
5
Excluding 7 Waterloo Quay and Stewart Dawson Corner
Focus Area
07
Asset
Management
Argosy Property Limited | Annual Report 2018
35
PORTFOLIO STATISTICS
Unit of measureTOTALIndustrialOfficeRetail
Number of buildings#6136178
Market value of assets$m1,513638577298
Net lettable areasqm587,766359,173127,780100,813
Vacancy factor by rent%1.2%0.1%2.8%0.0%
Weighted average lease termyears6.17.45.05.7
Average value$m24.817.734.037.3
Passing yield
1
%6.88%6.71%6.97%7.12%
1. 7 Waterloo Quay and Stewart Dawson Corner have been excluded from these yield metrics
Net lettable area is used to calculate rentable area in buildings.
The weighted average lease term is very important because portfolio values are fundamentally affected by security of income streams.
Passing yield is net contract income divided by property valuation.
LEASE EXPIRY PROFILE
BY RENT
Percentage of portfolio (by income)
1.21.2
9.99.9
10.010.0
8.68.6
9.79.7
4.24.2
4.74.7
10.010.0
12.812.8
11.311.3
2.62.6
15.015.0
VacantMar-19Mar-20Mar-21Mar-22Mar-23Mar-24Mar-25Mar-26Mar-27Mar-28 Mar-29+
0
3
6
9
12
15
18
Each of our properties is allocated an asset
and property manager which allows us to
optimise opportunities to maximise the
return of our properties.
This focus allows us to minimise vacancy
and maintain a strong weighted average
lease term.
Our lease terms are diversified with fixed,
market, and CPI rental growth.
Argosy Property Limited | Annual Report 2018
36
07
Focus Area
Asset Management
Total Portfolio Value
BY SECTOR
42%Industrial
38%Office
20%Retail
Total Portfolio Value
BY REGION
71%Auckland
24%Wellington
5%North Island regional and South
Island
Portfolio Mix
BY TYPE
87%Core properties
6%Value Add properties
7%Properties and land to divest
“An independent
revaluation of the
portfolio was undertaken
as at 31 March 2018
resulting in a gain of
$47.3 million, a 3.2%
increase on the year end
book value.”
PETER MENCE, CEO
WEIGHTED AVERAGE LEASE TERM
BY RENT
Years
6.086.08
7.357.35
4.994.99
5.695.69
TOTALIndustrialOfficeRetail
0
2
4
6
8
Argosy Property Limited | Annual Report 2018
37
RENT REVIEWS
During the period a total of 88 rent reviews
on $48.5 million of existing rental income
were completed. Rental growth of 6.1%
was achieved or 3.0% on an annualised
basis on all rents reviewed. The office
portfolio accounted for 50% of the total
rental uplift due to a large market review,
with industrial and retail contributing
29% and 21% respectively.
Approximately 50% of all rents reviewed
(by income) were market reviews, 27%
were fixed reviews and 23% were CPI or
CPI+.
New Leases and Lease Extensions
BY SECTOR
Floor Area
(sqm)
Average
Lease
Term
(years)
No. of
Leases
Industrial104,7966.214
Office28,0224.025
Retail16,5275.312
TOTAL149,3455.251
New Leases and Lease Extensions
BY TYPE
Floor Area
(sqm)
Average
Lease
Term
(years)
No. of
Leases
New lease67,6517.023
Right of renewal50,2114.420
Extension31,4833.58
TOTAL149,3455.251
Rent Reviews
BY SECTOR
No. of Reviews
Annualised Rent
Increase
Increase over
Contract ($)
Industrial212.3%867,010
Office393.6%1,504,247
Retail283.4%595,581
TOTAL883.0%2,966,838
15-21 Stout Street, Wellington.
Argosy Property Limited | Annual Report 2018
Number of Buildings
61
Market Value of Buildings $M
1,513.1
Occupancy By Rent
98.8%
WALT Years
6.1
Passing Yield*
6.88%
Argosy is, and will remain,
invested in a portfolio
that is diversified by
sector, grade, location
and tenant mix.
* excluding 7 Waterloo Quay and
Stewart Dawson Corner, Wellington
Strength
in diversity
38
Our Properties
Argosy Property Limited | Annual Report 2018
39
INDUSTRIAL
AUCKLAND
A
90 - 104 Springs Road, East Tamaki
VALUATION
$ 5,400,000
WALT
8.92
NET LETTABLE AREA (SQM)
3,885
VACANT SPACE (SQM)
–
PASSING YIELD
6.48%
8 Forge Way, Panmure
VALUATION
$ 25,225,000
WALT
12.71
NET LETTABLE AREA (SQM)
4,230
VACANT SPACE (SQM)
–
PASSING YIELD
5.95%
10 Transport Place, East Tamaki
VALUATION
$ 28,620,000
WALT
6.00
NET LETTABLE AREA (SQM)
10,641
VACANT SPACE (SQM)
–
PASSING YIELD
6.57%
1 Rothwell Avenue, Albany
VALUATION
$ 27,500,000
WALT
12.25
NET LETTABLE AREA (SQM)
12,936
VACANT SPACE (SQM)
–
PASSING YIELD
5.88%
4 Henderson Place, Onehunga
VALUATION
$ 23,300,000
WALT
13.29
NET LETTABLE AREA (SQM)
10,841
VACANT SPACE (SQM)
–
PASSING YIELD
6.33%
1-3 Unity Drive, Albany
VALUATION
$ 10,700,000
WALT
3.50
NET LETTABLE AREA (SQM)
6,204
VACANT SPACE (SQM)
–
PASSING YIELD
6.81%
5 Unity Drive, Albany
VALUATION
$ 6,475,000
WALT
1.00
NET LETTABLE AREA (SQM)
3,046
VACANT SPACE (SQM)
–
PASSING YIELD
5.64%
80 Springs Road, East Tamaki
VALUATION
$ 10,000,000
WALT
0.42
NET LETTABLE AREA (SQM)
9,675
VACANT SPACE (SQM)
–
PASSING YIELD
8.15%
211 Albany Highway, Albany
VALUATION
$ 20,550,000
WALT
4.84
NET LETTABLE AREA (SQM)
14,589
VACANT SPACE (SQM)
–
PASSING YIELD
6.48%
80-120 Favona Road, Mangere
VALUATION
$ 85,500,000
WALT
6.41
NET LETTABLE AREA (SQM)
59,448
VACANT SPACE (SQM)
–
PASSING YIELD
7.54%
19 Nesdale Avenue, Wiri
VALUATION
$ 48,800,000
WALT
13.67
NET LETTABLE AREA (SQM)
20,677
VACANT SPACE (SQM)
–
PASSING YIELD
6.09%
15 Unity Drive, Albany
VALUATION
$ 4,275,000
WALT
2.07
NET LETTABLE AREA (SQM)
7,002
VACANT SPACE (SQM)
–
PASSING YIELD
5.70%
12-16 Bell Avenue, Mt Wellington
VALUATION
$ 22,550,000
WALT
2.39
NET LETTABLE AREA (SQM)
14,809
VACANT SPACE (SQM)
–
PASSING YIELD
6.45%
18-20 Bell Avenue, Mt Wellington
VALUATION
$ 14,300,000
WALT
3.17
NET LETTABLE AREA (SQM)
8,998
VACANT SPACE (SQM)
–
PASSING YIELD
6.18%
32 Bell Avenue, Mt Wellington
VALUATION
$ 10,800,000
WALT
2.08
NET LETTABLE AREA (SQM)
8,790
VACANT SPACE (SQM)
–
PASSING YIELD
6.83%
9 Ride Way, Albany
VALUATION
$ 22,900,000
WALT
14.48
NET LETTABLE AREA (SQM)
9,178
VACANT SPACE (SQM)
–
PASSING YIELD
6.14%
2 Allens Road, East Tamaki
VALUATION
$ 4,425,000
WALT
1.75
NET LETTABLE AREA (SQM)
2,920
VACANT SPACE (SQM)
–
PASSING YIELD
6.70%
12 Allens Road, East Tamaki
VALUATION
$ 3,770,000
WALT
1.75
NET LETTABLE AREA (SQM)
2,372
VACANT SPACE (SQM)
234
PASSING YIELD
5.56%
106 Springs Road, East Tamaki
VALUATION
$ 5,805,000
WALT
1.75
NET LETTABLE AREA (SQM)
3,846
VACANT SPACE (SQM)
–
PASSING YIELD
6.57%
Argosy Property Limited | Annual Report 2018
40
INDUSTRIAL
5 Allens Road, East Tamaki
VALUATION
$ 4,375,000
WALT
0.67
NET LETTABLE AREA (SQM)
2,663
VACANT SPACE (SQM)
–
PASSING YIELD
5.64%
960 Great South Road, Penrose
VALUATION
$ 6,100,000
WALT
0.86
NET LETTABLE AREA (SQM)
3,677
VACANT SPACE (SQM)
–
PASSING YIELD
6.85%
17 Mayo Road, Wiri
VALUATION
$ 25,700,000
WALT
8.84
NET LETTABLE AREA (SQM)
13,351
VACANT SPACE (SQM)
–
PASSING YIELD
5.89%
Cnr William Pickering Drive & Rothwell
Avenue, Albany
VALUATION
$ 13,900,000
WALT
2.55
NET LETTABLE AREA (SQM)
7,074
VACANT SPACE (SQM)
–
PASSING YIELD
6.00%
240 Puhinui Road, Manukau
VALUATION
$ 31,200,000
WALT
13.67
NET LETTABLE AREA (SQM)
13,273
VACANT SPACE (SQM)
–
PASSING YIELD
5.88%
246 Puhinui Road, Manukau
VALUATION
$ 3,180,000
WALT
–
NET LETTABLE AREA (SQM)
–
VACANT SPACE (SQM)
–
PASSING YIELD
0.00%
Highgate Parkway, Silverdale
VALUATION
$ 28,200,000
WALT
9.85
NET LETTABLE AREA (SQM)
10,581
VACANT SPACE (SQM)
–
PASSING YIELD
5.81%
Argosy Property Limited | Annual Report 2018
41
WELLINGTON
W
Cnr Wakefield, Taranaki & Cable
Streets
VALUATION
$ 22,000,000
WALT
5.49
NET LETTABLE AREA (SQM)
3,307
VACANT SPACE (SQM)
–
PASSING YIELD
4.12%
147 Gracefield Road, Seaview
VALUATION
$ 11,000,000
WALT
0.75
NET LETTABLE AREA (SQM)
8,018
VACANT SPACE (SQM)
–
PASSING YIELD
10.18%
19 Barnes Street, Seaview
VALUATION
$ 12,950,000
WALT
10.42
NET LETTABLE AREA (SQM)
6,857
VACANT SPACE (SQM)
–
PASSING YIELD
7.53%
39 Randwick Road, Seaview
VALUATION
$ 17,650,000
WALT
2.48
NET LETTABLE AREA (SQM)
16,246
VACANT SPACE (SQM)
–
PASSING YIELD
8.92%
68 Jamaica Drive, Grenada North
VALUATION
$ 16,270,000
WALT
3.33
NET LETTABLE AREA (SQM)
9,404
VACANT SPACE (SQM)
–
PASSING YIELD
7.53%
56 Jamaica Drive, Grenada North
VALUATION
$ 1,100,000
WALT
–
NET LETTABLE AREA (SQM)
–
VACANT SPACE (SQM)
–
PASSING YIELD
0.00%
OTHER
O
31 El Prado Drive, Palmerston North
VALUATION
$ 28,200,000
WALT
5.92
NET LETTABLE AREA (SQM)
24,656
PASSING YIELD
8.74%
8 Foundry Drive, Woolston,
Christchurch
VALUATION
$ 13,500,000
WALT
11.83
NET LETTABLE AREA (SQM)
7,668
PASSING YIELD
7.91%
1478 Omahu Road, Hastings
VALUATION
$ 9,150,000
WALT
9.33
NET LETTABLE AREA (SQM)
8,514
PASSING YIELD
7.77%
223 Kioreroa Road, Whangarei
VALUATION
$ 12,200,000
WALT
3.94
NET LETTABLE AREA (SQM)
9,797
PASSING YIELD
9.48%
Argosy Property Limited | Annual Report 2018
42
OFFICE
AUCKLAND
A
99-107 Khyber Pass Road, Grafton
VALUATION
$ 8,700,000
WALT
0.59
NET LETTABLE AREA (SQM)
2,442
VACANT SPACE (SQM)
–
PASSING YIELD
7.48%
101 Carlton Gore Road, Newmarket
VALUATION
$ 26,500,000
WALT
2.59
NET LETTABLE AREA (SQM)
4,821
VACANT SPACE (SQM)
–
PASSING YIELD
6.81%
8 Nugent Street, Grafton
VALUATION
$ 47,900,000
WALT
3.85
NET LETTABLE AREA (SQM)
8,125
VACANT SPACE (SQM)
–
PASSING YIELD
6.54%
39 Market Place, Viaduct Harbour
VALUATION
$ 33,800,000
WALT
4.33
NET LETTABLE AREA (SQM)
10,365
VACANT SPACE (SQM)
–
PASSING YIELD
10.59%
105 Carlton Gore Road, Newmarket
VALUATION
$ 31,300,000
WALT
2.88
NET LETTABLE AREA (SQM)
5,312
VACANT SPACE (SQM)
–
PASSING YIELD
6.72%
302 Great South Road, Greenlane
VALUATION
$ 7,750,000
WALT
1.80
NET LETTABLE AREA (SQM)
1,890
VACANT SPACE (SQM)
–
PASSING YIELD
7.87%
308 Great South Road, Greenlane
VALUATION
$ 6,800,000
WALT
2.38
NET LETTABLE AREA (SQM)
1,568
VACANT SPACE (SQM)
–
PASSING YIELD
6.78%
626 Great South Road, Ellerslie
VALUATION
$ 9,850,000
WALT
3.00
NET LETTABLE AREA (SQM)
2,647
VACANT SPACE (SQM)
–
PASSING YIELD
8.06%
25 Nugent Street, Grafton
VALUATION
$ 12,000,000
WALT
4.63
NET LETTABLE AREA (SQM)
3,028
VACANT SPACE (SQM)
–
PASSING YIELD
6.71%
107 Carlton Gore Road, Newmarket
VALUATION
$ 29,000,000
WALT
1.14
NET LETTABLE AREA (SQM)
6,061
VACANT SPACE (SQM)
–
PASSING YIELD
7.01%
Citibank Centre, 23 Customs Street
East
VALUATION
$ 64,750,000
WALT
4.18
NET LETTABLE AREA (SQM)
9,632
VACANT SPACE (SQM)
2,950
PASSING YIELD
5.20%
82 Wyndham Street
VALUATION
$ 42,300,000
WALT
7.72
NET LETTABLE AREA (SQM)
6,012
VACANT SPACE (SQM)
76
PASSING YIELD
6.28%
WELLINGTON
W
143 Lambton Quay
VALUATION
$ 27,750,000
WALT
7.25
NET LETTABLE AREA (SQM)
6,216
VACANT SPACE (SQM)
–
PASSING YIELD
7.72%
147 Lambton Quay
VALUATION
$ 34,400,000
WALT
1.83
NET LETTABLE AREA (SQM)
8,919
VACANT SPACE (SQM)
155
PASSING YIELD
7.78%
8-14 Willis Street
VALUATION
$ 14,950,000
WALT
1.30
NET LETTABLE AREA (SQM)
5,056
VACANT SPACE (SQM)
–
PASSING YIELD
7.11%
New Zealand Post House, 7-27
Waterloo Quay
VALUATION
$ 72,500,000
WALT
6.20
NET LETTABLE AREA (SQM)
24,977
VACANT SPACE (SQM)
–
PASSING YIELD
10.43%
15-21 Stout Street
VALUATION
$ 107,000,000
WALT
8.31
NET LETTABLE AREA (SQM)
20,709
VACANT SPACE (SQM)
–
PASSING YIELD
6.83%
Argosy Property Limited | Annual Report 2018
43
RETAIL
AUCKLAND
A
Albany Mega Centre, Albany
VALUATION
$ 103,000,000
WALT
4.39
NET LETTABLE AREA (SQM)
25,155
PASSING YIELD
6.97%
320 Ti Rakau Drive, East Tamaki
VALUATION
$ 52,200,000
WALT
4.19
NET LETTABLE AREA (SQM)
28,352
PASSING YIELD
6.87%
Albany Lifestyle Centre, Albany
VALUATION
$ 78,000,000
WALT
7.45
NET LETTABLE AREA (SQM)
25,029
PASSING YIELD
7.53%
50 & 54-62 Cavendish Drive,
Manukau
VALUATION
$ 26,600,000
WALT
7.04
NET LETTABLE AREA (SQM)
9,939
PASSING YIELD
6.41%
252 Dairy Flat Highway, Albany
VALUATION
$ 7,550,000
WALT
2.00
NET LETTABLE AREA (SQM)
2,107
PASSING YIELD
5.51%
WELLINGTON
W
180-202 Hutt Road, Kaiwharawhara
VALUATION
$ 9,300,000
WALT
10.42
NET LETTABLE AREA (SQM)
6,019
PASSING YIELD
10.22%
Stewart Dawsons Corner
VALUATION
$ 11,250,000
WALT
–
NET LETTABLE AREA (SQM)
–
PASSING YIELD
0.00%
OTHER
O
Cnr Taniwha & Paora Hapi Streets,
Taupo
VALUATION
$ 10,400,000
WALT
4.50
NET LETTABLE AREA (SQM)
4,212
PASSING YIELD
7.08%
Argosy Property Limited | Annual Report 2018
44
RETAIL
39 Market Place, Auckland.
Argosy Property Limited | Annual Report 2018
C O N S O L I D A T E D
F I N A N C I A L S T A T E M E N T S
Contents
Consolidated Statement of Financial Position46
Consolidated Statement of Comprehensive Income47
Consolidated Statement of Changes in Equity48
Consolidated Statement of Cash Flows49
Notes to the Consolidated Financial Statements50
Independent Auditor's Report74
45
Argosy Property Limited | Annual Report 2018
46
C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T S
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 31 MARCH 2018
Note
Group
2018
$000s
Group
2017
$000s
Non-current assets
Investment properties
5
1,513,1201,442,155
Other non-current assets
7
469518
Total non-current assets
1,513,5891,442,673
Current assets
Cash and cash equivalents1,274968
Trade and other receivables
8
1,6811,301
Other current assets
9
885568
3,8402,837
Non-current assets classified as held for sale
10
27,40013,043
Total current assets
31,24015,880
Total assets
1,544,8291,458,553
Shareholders' funds
Share capital
11
792,620788,372
Share based payments reserve
12
389194
Retained earnings
13
133,88486,655
Total shareholders' funds
926,893875,221
Non-current liabilities
Borrowings
14
552,800528,795
Derivative financial instruments
6
32,30628,878
Deferred tax
20
12,18312,619
Total non-current liabilities
597,289570,292
Current liabilities
Trade and other payables
15
12,2408,911
Derivative financial instruments
6
697–
Other current liabilities
16
4,8963,272
Deposit received for non-current assets classified as held for sale1,550–
Taxation payable1,264857
Total current liabilities
20,64713,040
Total liabilities
617,936583,332
Total shareholders' funds and liabilities
1,544,8291,458,553
For and on behalf of the Board
P Michael Smith
Director
Mark Cross
Director
Date: 22 May 2018
The notes to the accounts form part of and are to be read in conjunction with these consolidated financial statements.
Argosy Property Limited | Annual Report 2018
47
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 MARCH 2018
Note
Group
2018
$000s
Restated
Group
2017
$000s
Gross property income from rentals101,733106,754
Insurance proceeds - rental loss5,698–
Gross property income from expense recoveries17,93918,175
Property expenses(24,380)(24,177)
Net property income
4
100,990100,752
Administration expenses
17
9,9389,328
Profit before financial income/(expenses), other gains/(losses) and tax
91,05291,424
Financial income/(expenses)
Interest expense
18
(25,511)(25,880)
Gain/(loss) on derivative financial instruments held for trading(4,125)11,031
Interest income4848
(29,588)(14,801)
Other gains/(losses)
Revaluation gains on investment property
5
47,33342,317
Realised gains/(losses) on disposal of investment property
5
2922,712
Insurance proceeds - earthquake expenses1,813–
Insurance proceeds - reinstatement2,282–
Earthquake expenses(3,867)(1,231)
47,85343,798
Profit before income tax attributable to shareholders
109,317120,421
Taxation expense
19
11,14016,780
Profit for the year attributable to shareholders
98,177103,641
Total comprehensive income after tax
98,177103,641
All amounts are from continuing operations
Earnings per share
Basic and diluted earnings per share (cents)
22
11.9012.69
The notes to the accounts form part of and are to be read in conjunction with these consolidated financial statements.
Argosy Property Limited | Annual Report 2018
48
C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T S
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 MARCH 2018
Note
Group
2018
$000s
Restated
Group
2017
$000s
Shareholders' funds at the beginning of the year
875,221810,404
Profit for the year98,177103,641
Total comprehensive income for the year
98,177103,641
Contributions by shareholders
Issue of shares from Dividend Reinvestment Plan
11
4,26310,900
Issue costs of shares
11
(15)(42)
Dividends to shareholders
13
(50,948)(49,811)
Equity settled share based payments
12
195129
Shareholders' funds at the end of the year
926,893875,221
The notes to the accounts form part of and are to be read in conjunction with these consolidated financial statements.
Argosy Property Limited | Annual Report 2018
49
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 31 MARCH 2018
Note
Group
2018
$000s
Group
2017
$000s
Cash flows from operating activities
Cash was provided from:
Property income122,384128,288
Insurance proceeds received11,792–
Interest received4848
Cash was applied to:
Property expenses(22,836)(24,240)
Earthquake expenses(3,867)(1,231)
Interest paid(27,079)(25,326)
Employee benefits(6,041)(5,601)
Taxation paid(10,555)(11,801)
Other expenses(3,734)(3,368)
Net cash from/(used in) operating activities
21
60,11256,769
Cash flows from investing activities
Cash was provided from:
Sale of properties, deposits and deferrals24,83022,881
Purchase price adjustment for New Zealand Post House–6,000
Cash was applied to:
Capital additions on investment properties(58,699)(40,793)
Capitalised interest on investment properties(2,200)(471)
Purchase of properties, deposits and deferrals(6)(30,876)
Net cash from/(used in) investing activities
(36,075)(43,259)
Cash flows from financing activities
Cash was provided from:
Debt drawdown
14
83,99989,488
Cash was applied to:
Repayment of debt
14
(59,725)(63,471)
Dividends paid to shareholders net of reinvestments(47,299)(39,647)
Issue cost of shares(27)(42)
Facility refinancing fee(679)–
Net cash from/(used in) financing activities
(23,731)(13,672)
Net increase/(decrease) in cash and cash equivalents
306(162)
Cash and cash equivalents at the beginning of the year9681,130
Cash and cash equivalents at the end of the year
1,274968
The notes to the accounts form part of and are to be read in conjunction with these consolidated financial statements.
Argosy Property Limited | Annual Report 2018
50
N O T E S T O T H E C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T S
1. REPORTING ENTITY
Argosy Property Limited (APL or the Company) is an FMC
Reporting Entity under the Financial Markets Conduct Act 2013
and the Financial Reporting Act 2013. APL is incorporated under
the Companies Act 1993 and domiciled in New Zealand.
The Company’s principal activity is investment in properties
which include industrial, office and retail properties throughout
New Zealand.
These financial statements are the consolidation of APL and its
subsidiaries (the Group).
2. BASIS OF PREPARATION
Statement of compliance
These financial statements have been prepared in accordance
with Generally Accepted Accounting Practice in New Zealand
(NZ GAAP). The accounting policies applied in these financial
statements comply with New Zealand equivalents to
International Financial Reporting Standards (NZ IFRS) and other
applicable Financial Reporting Standards issued and effective at
the time of preparing these statements as applicable to the
Company as a profit-oriented entity. These Group financial
statements also comply with International Financial Reporting
Standards (IFRS).
These financial statements were approved by the Board of
Directors on 22 May 2018.
Basis of measurement
The financial statements have been prepared on the historical cost
basis except for derivative financial instruments and investment
properties which are measured at fair value.
Use of estimates and judgements
The preparation of financial statements in conformity with NZ
IFRS requires the use of certain critical accounting estimates that
affect the application of policies and reported amount of assets
and liabilities, income and expenses. The area involving a higher
degree of judgement or complexity and where assumptions and
estimates are significant to the financial statements is Note 5 -
Valuation of Investment Property.
Functional and presentation currency
These financial statements are presented in New Zealand dollars
which is the Company’s functional currency and have been
rounded to the nearest thousand dollars ($000).
Basis of consolidation
The Group’s financial statements incorporate the financial
statements of APL and its controlled subsidiaries as set out in Note
24. Control is achieved when the Company has power over the
investee; is exposed, or has rights, to variable returns from its
involvement with the investee, and has the ability to use its power
to affect its returns. The results of the subsidiaries are included
in the consolidated statement of comprehensive income from the
date of acquisition which is the date the Company became entitled
to income from the subsidiaries acquired. All significant
intercompany transactions are eliminated on consolidation.
Statement of cash flows
The statement of cash flows is prepared on a GST exclusive basis,
which is consistent with the statement of comprehensive income.
The following terms are used in the statement of cash flows:
Operating activities are the principal revenue producing
activities of the Group and other activities that are not investing
or financing activities.
Investing activities are the acquisition and disposal of long term
assets and other investments not included in cash equivalents.
Financing activities are activities that result in changes in the
size and composition of the contributed equity and borrowings of
the entity. Termination payments for swap contracts,
establishment fees, extension fees and arranger fees are
considered financing activities as they effect a change in the
company’s borrowing arrangements.
Cash and cash equivalents comprise cash balances and demand
deposits. Bank overdrafts that are repayable on demand and form
an integral part of the Group’s cash management are included as
a component of cash and cash equivalents for the purpose of the
statement of cash flows.
3. SIGNIFICANT ACCOUNTING POLICIES
Insurance income recognition
The company recognises income from insurance proceeds when
it is virtually certain that the claims made in an accounting period
have been accepted by insurers.
Change in accounting policies
Accounting policies and methods of computation have been
applied consistently to all periods and by all group entities.
Supplementary Dividends
To be consistent with NZ IAS 12.61 the Group now takes the tax
credit relating to supplementary dividends through retained
earnings rather than tax expense. This change had a minor impact
on the comparative results which have been restated (basic and
diluted earnings per share were reduced from 12.78 cents per
share to 12.69 cents per share).
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N O T E S T O T H E C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T S ( C O N T I N U E D )
Standards and interpretations in issue not yet effective
At the date of authorisation of these financial statements the
following relevant Standards and Interpretations were in issue
but not yet effective and have not been applied in preparing these
financial statements. These changes are not expected to have a
material impact on the financial statements but may affect
presentation and disclosure:
NZ IFRS 9 Financial instruments (effective for accounting
periods beginning on or after 1 January 2018) applies to the
classification and measurement of financial assets and financial
liabilities. Management’s assessment of NZ IFRS 9 determined
that the main area of potential impact is impairment provisioning
on trade receivables due to the requirement to use a forward-
looking expected credit loss model. Having carried out an
assessment it is considered that the introduction of NZ IFRS 9
will not have a material impact on the company.
NZ IFRS 15 Revenue from Contracts with Customers (effective
for accounting periods beginning on or after 1 January 2018), is
based on the principle that revenue is recognised when control of
a good or service transfers to a customer. This standard does not
apply to rental income which makes up more than 80 per cent of
the total revenue of the Group. The standard is applicable to opex
recovery income and management fees. Argosy has assessed the
effects of applying the new standard on the consolidated financial
statements. The Group concludes that the standard does not have
a material impact on the timing of revenue recognition.
NZ IFRS 16 Leases (effective for accounting periods beginning on
or after 1 January 2019) eliminates the distinction between
operating and finance leases for lessees and will result in lessees
bringing most leases onto their balance sheet, with the exception
of certain short-term leases and leases of low-value assets. There
are minimal changes from the current NZ IAS 17 requirements
for lessors.
The company is currently assessing the impact of this standard.
Other Standards and Interpretations in issue but not yet effective
are not expected to have an impact on the financial statements of
the Group in the period of initial application.
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4. SEGMENT INFORMATION
The principal business activity of the Group is to invest in, and actively manage, properties in New Zealand. NZ IFRS 8 - Operating
Segments requires operating segments to be identified on the basis of internal reports about components of the Group that are regularly
reviewed by the chief operating decision maker, being the Chief Executive Officer, in order to allocate resources to the segments and
to assess their performance.
The information reported to the Group’s Chief Executive Officer includes information by investment property and has been aggregated
based on three business sectors, being Industrial, Office and Retail, based on what occupants actual or intended use is. Segment profit
represents the profit earned by each segment including allocation of identifiable revaluation gains on investment properties and gains/
(losses) on disposal of investment properties. This is the measure reported to the Chief Executive Officer.
The following is an analysis of the Group’s results by reportable segments.
IndustrialOfficeRetailTotal
2018
$000s
2017
$000s
2018
$000s
2017
$000s
2018
$000s
2017
$000s
2018
$000s
Restated
2017
$000s
Segment profit
Net property income
1
39,44136,85239,41141,46722,13822,433100,990100,752
Realised gains/(losses) on
disposal of investment
properties
1001,746(20)(20)2129862922,712
Insurance proceeds - earthquake
expenses
––1,813–––1,813–
Insurance proceeds -
reinstatement
––2,282–––2,282–
Earthquake expense(6)(8)(3,861)(1,214)–(9)(3,867)(1,231)
39,53538,59039,62540,23322,35023,410101,510102,233
Revaluation gains/(losses) on
investment properties39,08044,2175,601(11,971)2,65210,07147,33342,317
Total segment profit
2
78,61582,80745,22628,26225,00233,481148,843144,550
Unallocated:
Administration expenses(9,938)(9,328)
Net interest expense(25,463)(25,832)
Gain/(loss) on derivative financial instruments held for trading(4,125)11,031
Profit before income tax
109,317120,421
Taxation expense(11,140)(16,780)
Profit for the year
98,177103,641
1. Net property income consists of revenue generated from external tenants less property operating expenditure plus insurance proceeds - rental loss.
2. There were no inter-segment sales during the year (31 March 2017: Nil).
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4. SEGMENT INFORMATION (CONTINUED)
IndustrialOfficeRetailTotal
2018
$000s
2017
$000s
2018
$000s
2017
$000s
2018
$000s
2017
$000s
2018
$000s
2017
$000s
Segment assets
Current assets490670848928134831,4721,681
Investment properties637,569583,405577,251547,450298,300311,3001,513,1201,442,155
Non-current assets classified as
held for sale–7,428––27,4005,61527,40013,043
Total segment assets
638,059591,503578,099548,378325,834316,9981,541,9921,456,879
Unallocated assets2,8371,674
Total assets
1,544,8291,458,553
IndustrialOfficeRetailTotal
2018
$000s
2017
$000s
2018
$000s
2017
$000s
2018
$000s
2017
$000s
2018
$000s
2017
$000s
Segment liabilities
Current liabilities2,1521,7436,9463,5064,4372,34213,5357,591
Total segment liabilities
2,1521,7436,9463,5064,4372,34213,5357,591
Unallocated liabilities604,401575,741
Total liabilities
617,936583,332
For the purposes of monitoring segment performance and allocating resources between segments:
— all assets are allocated to reportable segments other than cash and cash equivalents, other non-current assets and other minor
current assets that cannot be allocated to particular segments.
— all liabilities are allocated to reportable segments other than borrowings, derivatives, tax liabilities and other minor current liabilities
that cannot be allocated to particular segments.
5. INVESTMENT PROPERTIES
Accounting policy – Investment properties
Investment property is property held either to earn rental income, for capital appreciation or for both.
Investment property is initially measured at cost and subsequently measured at fair value with any change therein recognised
in profit or loss.
Initial direct costs incurred in negotiating and arranging operating leases and lease incentives granted are added to the carrying
amount of the leased asset.
In accordance with the valuation policy of the Group, complete property valuations are carried out at least annually by
independent registered valuers. The valuation policy stipulates that the same valuer may not value a building for more than
two consecutive years. The fair values are based on market values being the estimated amount for which a property could be
exchanged on the date of the valuation between a willing buyer and a willing seller in an arm’s length transaction after proper
marketing wherein the parties had each acted knowledgeably, prudently and without compulsion.
The valuations are prepared using a combination of the Capitalisation of Contract Income, Capitalisation of Market Income
and Discounted Cash Flow methodologies. Discounted Cash Flow methodology is based on the estimated rental cash flows
expected to be received from the property adjusted by a discount rate that appropriately reflects the risks inherent in the
expected cash flows.
Investment properties are derecognised when they have been disposed of and any gains or losses incurred on disposal are
recognised in profit or loss in the year of derecognition.
Borrowing costs directly attributable to property under development are capitalised as part of the cost of those assets.
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5. INVESTMENT PROPERTIES (CONTINUED)
Industrial
2018
$000s
Office
2018
$000s
Retail
2018
$000s
Group
2018
$000s
Movement in investment properties
Balance at 1 April583,405547,450311,3001,442,155
Acquisition of properties––––
Capitalised costs25,19524,28111,88661,362
Disposals(10,078)––(10,078)
Transfer to properties held for sale––(27,400)(27,400)
Change in fair value39,0805,6012,65247,333
Change in capitalised leasing costs213539(107)645
Change in lease incentives(246)(620)(31)(897)
Investment properties balance at 31 March
637,569577,251298,3001,513,120
Industrial
2017
$000s
Office
2017
$000s
Retail
2017
$000s
Group
2017
$000s
Movement in investment properties
Balance at 1 April507,113548,610311,8281,367,551
Acquisition of properties32,039––32,039
Purchase price adjustment on New Zealand Post House–(6,000)–(6,000)
Capitalised costs11,84417,7204,20833,772
Disposals(7,928)–(9,956)(17,884)
Transfer to properties held for sale(7,599)–(5,615)(13,214)
Change in fair value44,217(11,971)10,07142,317
Change in capitalised leasing costs163160401724
Change in lease incentives3,556(1,069)3632,850
Investment properties balance at 31 March
583,405547,450311,3001,442,155
Investment properties are classified as level 3 (inputs are unobservable for the asset or liability) under the fair value hierarchy on the
basis that adjustments must be made to observable data of similar properties to determine the fair value of an individual property.
The Group holds the freehold to all investment properties other than 39 Market Place, Viaduct Harbour, Auckland and a small part of
19 Barnes Street, Wellington.
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5. INVESTMENT PROPERTY (CONTINUED)
Group
2018
$000s
Group
2017
$000s
Acquisition of properties
240 Puhinui Road, Manukau, Auckland–23,947
Lot 8, Highgate Parkway, Silverdale, Auckland (land only)–8,092
–32,039
Disposal of properties
19 Richard Pearse Drive, Mangere, Auckland7,428–
28-30 Catherine Street, Henderson, Auckland5,615–
1 Pandora Road, Napier7,500–
14 Tunnel Grove, Wellington2,578–
44 Neil Lane, Palmerston North–3,171
258 Oteha Valley Road, Albany, Auckland (land only)–9,956
67 Dalgety Drive, Wiri, Auckland–4,757
23,12117,884
Sale proceeds of properties disposed of24,12521,147
Net gain/(loss) on disposal
1,0043,263
Selling costs(712)(380)
Loss on properties held for sale–(171)
Total gain/(loss) on disposal
2922,712
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5. INVESTMENT PROPERTIES (CONTINUED)
All investment properties were independently valued as at 31 March 2018 in accordance with the Group's accounting policy. The
valuations were prepared by independent registered valuers CBRE Limited, Colliers International New Zealand Limited and Jones
Lang LaSalle. The total value per valuer was as follows:
Group
2018
$000s
Group
2017
$000s
CBRE Limited304,150849,835
Colliers International New Zealand Limited1,111,000591,220
Jones Lang LaSalle97,970–
Not Valued–1,100
1,513,1201,442,155
Investment properties are stated at fair value by independent valuers supported by market evidence of property sale transactions and
leasing activity. These valuations are reviewed by the Asset Management team within Argosy. The major inputs and assumptions that
are used in the valuation that require judgement include forecasts of the current and expected future market rentals and growth,
maintenance and capital expenditure requirements, an assessment of yields, discount rates, occupancy, leasing costs and weighted
average lease terms.
In deriving a market value under each approach, all assumptions are based, where possible, on market based evidence and transactions
for properties with similar locations, conditions and quality of construction and fit out.
Generally as occupancy and weighted average lease terms increase, yields firm, resulting in increased fair values for investment
properties. A movement in any of these assumptions could result in a significant change in fair value.
Investment property metrics for the year ended 31 March 2018 are as follows:
IndustrialOfficeRetailTotal
Contract yield
1
- Average6.71%6.97%7.12%6.88%
- Maximum10.18%10.59%10.22%10.59%
- Minimum0.00%5.20%5.51%0.00%
Market yield
1
- Average6.74%7.37%6.80%6.98%
- Maximum8.79%10.32%10.18%10.32%
- Minimum0.00%6.23%6.16%0.00%
Occupancy (rent)99.90%97.25%100.00%98.75%
Occupancy (net lettable area)99.93%97.51%100.00%99.42%
Weighted average lease term (years)7.354.995.696.08
No. of buildings
2
3617861
Fair value total (000s)
$637,569$577,251$298,300$1,513,120
1. 7 Waterloo Quay and Stewart Dawsons Corner have been excluded from these yield metrics as the rents of both properties included in the valuation reports
were based on the completion of the planned remedial and redevelopment work required to be undertaken.
2. Certain titles have been consolidated and treated as one. The total number of buildings excludes properties held for sale.
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5. INVESTMENT PROPERTIES (CONTINUED)
Investment property metrics for the year ended 31 March 2017 are as follows:
IndustrialOfficeRetailTotal
Contract yield
1
- Average6.93%7.26%7.38%7.15%
- Maximum9.96%10.92%9.03%10.92%
- Minimum0.00%6.35%5.81%0.00%
Market yield
1
- Average7.12%7.58%7.27%7.31%
- Maximum12.15%9.32%9.00%12.15%
- Minimum0.00%6.81%6.29%0.00%
Occupancy (rent)98.29%98.42%99.41%98.58%
Occupancy (net lettable area)96.27%98.64%99.63%97.38%
Weighted average lease term (years)6.404.875.465.59
No. of buildings
2
3817964
Fair value total (000s)
$583,405$547,450$311,300$1,442,155
1. 7 Waterloo Quay has been excluded from these yield metrics as the rents included in the valuation report were based on the completion of the earthquake
remedial works required to be undertaken on this property.
2. Certain titles have been consolidated and treated as one. The total number of buildings excludes properties held for sale.
6. FINANCIAL INSTRUMENTS
Accounting policy - Non-derivative financial instruments
Non-derivative financial instruments comprise investments, trade and other receivables, cash and cash equivalents, borrowings
and trade and other payables.
Non-derivative financial instruments are initially measured at fair value plus directly attributable costs. Subsequently these
instruments are measured at amortised cost using the effective interest method. The carrying values of these financial
instruments are a reasonable approximation of their fair values.
The effective interest method is a method of calculating the amortised cost of a financial asset or financial liability and of
allocating interest income over the relevant period (including all fees and points paid or received between the parties to the
contract that form an integral part of the effective interest rate, transaction costs and other premiums or discounts) through
the expected life of the financial instrument, or, where appropriate, a shorter period to the net carrying amount of the financial
instrument.
Accounting policy - Derivative financial instruments
Interest rate swaps are entered into to manage interest rate exposure. For interest rate swaps, the net differential paid or received
is recognised as a component of interest expense in the profit or loss.
Interest rate swaps are initially recognised at zero at the date a derivative contract is entered into and are remeasured to their
fair value at subsequent reporting dates. The resulting gain or loss is recognised in profit or loss immediately.
Interest rate swaps are presented as a non-current asset or a non-current liability if the remaining maturity of the instrument
is more than 12 months and it is not expected to be realised or settled within 12 months. Other interest rate swaps are presented
as current assets or current liabilities.
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6. FINANCIAL INSTRUMENTS (CONTINUED)
The Group has the following financial instruments:
Group 2018
Derivatives at
fair value
through profit/
loss
$000
Loans and
receivables
$000
Financial
liabilities at
amortised cost
$000
Total
$000
Financial assets
Cash and cash equivalents–1,274–1,274
Trade and other receivables–1,681–1,681
–2,955–2,955
Financial liabilities
Borrowings––(552,800)(552,800)
Trade and other payables––(12,240)(12,240)
Derivative financial instruments (current and term)(33,003)––(33,003)
Other current liabilities––(4,896)(4,896)
(33,003)–(569,936)(602,939)
Group 2017
Derivatives at
fair value
through profit/
loss
$000
Loans and
receivables
$000
Financial
liabilities at
amortised cost
$000
Total
$000
Financial assets
Cash and cash equivalents–968–968
Trade and other receivables–1,301–1,301
–2,269–2,269
Financial liabilities
Borrowings––(528,795)(528,795)
Trade and other payables––(8,911)(8,911)
Derivative financial instruments (current and term)(28,878)––(28,878)
Other current liabilities––(3,272)(3,272)
(28,878)–(540,978)(569,856)
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6. FINANCIAL INSTRUMENTS (CONTINUED)
Risk management
The use of financial instruments exposes the Group to credit,
interest rate and liquidity risks. The Group’s overall risk
management programme focuses on the unpredictability of
financial markets and seeks to minimise potential adverse effects
on the Group’s financial performance.
Credit risk
Credit risk relates to the risk that the counterparty to a financial
instrument may default on its obligations to the Group, resulting
in financial loss.
The Group's main exposure to credit risk arises from trade
receivables and transactions with financial institutions, and is
summarised in the preceding table. There are no significant
concentrations of credit risk in specific receivables due to
receivables mainly comprising a large number of tenants in the
Group’s property portfolio and the Group policy to limit the
amount of credit exposure to any financial institution.
The Group manages its exposure to credit risk from trade
receivables through its credit policy which includes performing
credit evaluations on customers requiring credit. The Group does
not hold any collateral in respect of balances past due. Details of
impairment losses relating to trade receivables together with the
ageing of receivables is provided in Note 8.
The risk from financial institutions is managed by placing cash
and deposits with high credit quality financial institutions only.
Cash deposits are placed with ANZ Bank New Zealand Limited.
Interest rate risk
Interest rate risk arises from long term borrowings (refer Note
14). Variable rate borrowings expose the Group to cash flow
interest rate risk while fixed rate borrowings expose the group to
fair value interest rate risk.
The Group manages its exposure to interest rate risk through
derivatives in the form of floating to fixed interest rate swaps.
These derivatives provide an economic hedge against variability
in cash flows as a result of changes in variable interest rates on
borrowings.
The Group’s policy is to maintain a range of approximately
50%-100% of its borrowings in fixed interest rate instruments
unless otherwise instructed by the Board of Directors. At year end,
62% of borrowings, after the effect of associated swaps, were at
fixed rates (2017: 65%).
Liquidity risk
Liquidity risk is the risk that the Group may encounter difficulty
in meeting its obligations associated with its financial liabilities
that are settled by delivering cash or another financial asset.
Liquidity risk mainly arises from the Group’s obligations in
respect of long term borrowings, derivatives and trade and other
payables. The Group aims to maintain flexibility in funding by
keeping committed credit lines available (refer Note 14).
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6. FINANCIAL INSTRUMENTS (CONTINUED)
The expected undiscounted cash flows of the Group’s financial liabilities by remaining contractual maturity at the balance sheet date
is as follows:
Group 2018
Carrying
Amount
$000
Less than
1 year
$000
1-2 years
$000
2-3 years
$000
3-4 years
$000
4-5 years
$000
5+ years
$000
Financial liabilities
Borrowings¹(552,800)(18,643)(18,643)(302,734)(271,387)––
Trade and other payables(12,240)(12,240)–––––
Derivative financial instruments(33,003)(7,988)(6,958)(6,516)(6,003)(5,250)(4,429)
Other current liabilities(4,896)(4,896)–––––
(602,939)(43,767)(25,601)(309,250)(277,390)(5,250)(4,429)
Group 2017
Carrying
Amount
$000
Less than
1 year
$000
1-2 years
$000
2-3 years
$000
3-4 years
$000
4-5 years
$000
5+ years
$000
Financial liabilities
Borrowings
1
(528,795)(17,157)(287,777)(8,398)(259,133)––
Trade and other payables(8,911)(8,911)–––––
Derivative financial instruments(28,878)(8,566)(7,466)(6,347)(5,849)(5,335)(4,658)
Other current liabilities(3,272)(3,272)–––––
(569,856)(37,906)(295,243)(14,745)(264,982)(5,335)(4,658)
1. The undiscounted cashflows on borrowings includes interest, margin and line fees.
To manage the Group’s exposure to interest rate risk on variable rate instruments, the Group has implemented a hedging strategy that
uses interest rate swaps that have a range of maturities. At 31 March 2018, the Group had active interest rate derivatives with a notional
contract amount of $345 million (2017: $345 million). The active derivatives mature over the next 7 years (2017:8 years) and have fixed
interest rates ranging from 3.87% to 4.90% (2017: 3.87% to 4.90%). There are no contracts entered into but not yet effective at 31 March
2018 (2017: Nil).
Interest rate swaps are measured at present value of future cash flows estimated and discounted based on applicable yield curves
derived from observable market interest rates. Accepted market best practice valuation methodology using mid-market interest rates
at the balance date is used, provided from sources perceived to be reliable and accurate. Interest rate swaps have been classified into
Level 2 of the fair value hierarchy on the basis that the valuation techniques used to determine the values at balance date use observable
inputs.
The net liability for derivative financial instruments as at 31 March 2018 is $33 million (2017: $28.88 million). The mark-to-market
increase in the liability for derivative financial instruments is a result of the movement in the interest rate curve during the financial
year.
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6. FINANCIAL INSTRUMENTS (CONTINUED)
Sensitivity analysis
The sensitivity analysis below details the potential future impact of reasonably possible changes in the observable inputs over the next
financial period. It has been determined based on the exposure to interest rates for both derivative and non-derivative financial
instruments at the reporting date.
2018
Group
2017
Group
Impact on
Profit & Loss
$000s
Impact on
Profit & Loss
$000s
Increase of 100 basis points15,21917,937
Decrease of 100 basis points(16,426)(19,476)
7. OTHER NON-CURRENT ASSETS
Accounting policy - Property, plant and equipment
All property, plant and equipment is stated at historical cost less depreciation and accumulated impairment losses. Historical
cost includes expenditure that is directly attributable to the acquisition of the items.
At the end of each reporting period, the Group reviews the carrying amounts of its assets to determine whether there is any
indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset
is estimated in order to determine the extent of the impairment loss (if any). Where it is not possible to estimate the recoverable
amount of an individual asset, the Group estimates the recoverable amount of the cash-generating unit to which the asset
belongs.
An impairment loss is recognised immediately in profit or loss.
Group
2018
$000s
Group
2017
$000s
Property, plant and equipment and software469518
Total other non-current assets
469518
There was no impairment loss in the current year (2017: Nil).
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N O T E S T O T H E C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T S ( C O N T I N U E D )
8. TRADE AND OTHER RECEIVABLES
Accounting policy - Trade and other receivables
Trade and other receivables are initially recognised at fair value and subsequently measured at amortised cost using the effective
interest method, less provision for impairment. A provision for impairment of trade receivables is established when there is
objective evidence that the Group will not be able to collect all amounts due according to the original terms of the receivables.
The amount of the provision is the difference between the asset's carrying amount and the present value of estimated future
cash flows, discounted at the original effective interest rate.
Group
2018
$000s
Group
2017
$000s
Trade receivables1,7581,399
Allowance for doubtful debts(99)(111)
1,6591,288
Amount receivable from insurance proceeds2213
Total trade and other receivables
1,6811,301
The average credit period on receivables is 3.0 days (2017: 3.4 days). The Group is entitled to charge interest on trade receivables as
determined in each individual lease agreement. Interest is charged on receivables over 90 days on a case by case basis. The Group has
provided for 50% of all receivables over 90 days that are considered doubtful. This amount increases to 100% of any receivable that is
determined as not being recoverable. Trade receivables less than 90 days are provided for based on estimated irrecoverable amounts,
determined by reference to past default experience.
Aged past due but not impaired trade receivables
Group
2018
$000s
Group
2017
$000s
0-30 days past due8873
31-60 days past due613
Beyond 60 days past due12826
222112
Included in the Group's trade receivable balance are debtors with a carrying amount of $221,880 (2017: $122,409) which are past due
at the reporting date, for which the Group has not provided as there has not been a significant change in credit quality and the amounts
are still considered recoverable.
Movement in the allowance for doubtful debts
Group
2018
$000s
Group
2017
$000s
Balance at the beginning of the year11137
Amounts written off as uncollectible(54)(13)
(Decrease) / increase in allowance recognised in profit or loss4287
Balance at the end of the year
99111
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N O T E S T O T H E C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T S ( C O N T I N U E D )
9. OTHER CURRENT ASSETS
Group
2018
$000s
Group
2017
$000s
Accrued Income1011
Prepayments599477
Other27680
Total other current assets
885568
10. PROPERTY HELD FOR SALE
Accounting policy - Non-current assets classified as held for sale
Non-current assets are classified as held for sale if their carrying amount will be recovered principally through a sale transaction
rather than through continuing use. This condition is regarded as met only when the sale is highly probable and the asset is
available for immediate sale in its present condition.
Non-current assets classified as held for sale (principally investment property) are measured at the lower of their previous
carrying amount and fair value.
7 Wagener Place, St Lukes, Auckland ($27,399,618), was subject to unconditional sale and purchase agreements at balance date (2017:
28-30 Catherine Street, Henderson, Auckland ($5,615,000) and 19 Richard Pearse Drive and 26 Ascot Avenue, Mangere ($7,427,875)).
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N O T E S T O T H E C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T S ( C O N T I N U E D )
11. SHARE CAPITAL
Group
2018
$000s
Group
2017
$000s
Balance at the beginning of the year788,372777,514
Issue of shares from Dividend Reinvestment Plan4,26310,900
Issue costs of shares(15)(42)
Total share capital
792,620788,372
The number of shares on issue at 31 March 2018 was 827,030,390 (2017: 822,928,249).
All shares are fully paid and rank equally with one vote attached and carry the right to dividends. All ordinary shares have equal voting
rights.
Reconciliation of number of shares (in thousands of shares)
Group
2018
000s
Group
2017
000s
Balance at the beginning of the year822,928812,616
Issue of shares from Dividend Reinvestment Plan4,10210,312
Total number of shares on issue
827,030822,928
Capital risk management
The Group's capital includes shares, reserves and retained earnings with total shareholders' funds equal to $926.9m (2017: $875.2m).
The Group maintains a strong capital base so as to maintain investor, creditor and market confidence and to sustain the Group's future
on-going activities and development of the business. The impact of the level of capital on equity holder returns is also recognised along
with the need to maintain a balance between the higher returns that might be possible with greater gearing and the advantages and
security afforded by a sound capital position.
The Board's intention is to maintain the debt-to-total-assets ratio between 30-40% in the medium term. The Group's banking covenants
require that the aggregate principal amount of the loan outstanding does not exceed 50% of the fair value of property at all times. All
banking covenants have been met during the year.
The Group manages its capital to ensure that entities in the Group will be able to continue as a going concern while maximising the
return to stakeholders through optimisation of debt and equity. The Group's policies in respect of capital management and allocation
are reviewed regularly by the Board of Directors. There have been no material changes in the Group's overall strategy during the year.
Argosy Property Limited | Annual Report 2018
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N O T E S T O T H E C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T S ( C O N T I N U E D )
12. SHARE BASED PAYMENTS RESERVE
Accounting policy - Share based payments
The fair value of performance share rights (PSRs) are recognised as an expense in the statement of financial performance over
the vesting period of the rights with a corresponding entry to the share based payments reserve.
PSRs were offered to senior executives, commencing 1 April 2015. Under the scheme, PSRs are issued to participants which give them
the right to receive ordinary shares in the Company after a three year period, subject to certain vesting and other conditions being met.
The vesting of the PSRs is subject to the Company achieving a positive total shareholder return (measured against the Company's share
price on the date of the issue of the PSRs, and including dividends) over a three year measurement period. The total number which
actually vest will be dependent on the relative ranking of the Company's total shareholder returns against a comparator group of listed
entities determined by the Board from the S&P/NZX All Real Estate Gross Index.
The total expense recognised in the year to 31 March 2018 in relation to equity settled share based payments was $195,000 (2017:
$129,400). No rights were exercised or forfeited during the period.
Grant dateVesting date
Granted
during the
year
1
Weighted
average
issue price
Balance at
the beginning
of the year
1
Vested
during the
year
Forfeited
during the
year
Balance at
the end of
the year
1
2018
1 April 20171 April 2020321,284$0.99547,873––869,157
2017
1 April 20161 April 2019268,670$1.17279,203––547,873
2016
1 April 20151 April 2018279,203$1.13–––279,203
1. This is the number of PSRs.
13. RETAINED EARNINGS
Group
2018
$000s
Restated
Group
2017
$000s
Balance at the beginning of the year86,65532,825
Profit for the year98,177103,641
Dividends to shareholders(50,948)(49,811)
Total retained earnings
133,88486,655
The annual dividend paid to shareholders was 6.175 cents per share, paid in first quarterly distributions of 1.525 cents per share and
the other three quarterly distributions of 1.550 cents per share. (2017: annual dividend was 6.10 cents per share).
After 31 March 2018, the final dividend was declared. The dividend has not been provided for. Refer to Note 26.
Argosy Property Limited | Annual Report 2018
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N O T E S T O T H E C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T S ( C O N T I N U E D )
14. BORROWINGS
Accounting policy - Bank borrowings
Interest-bearing bank loans and overdrafts are initially measured at fair value net of transaction costs. Subsequent to initial
recognition, borrowings are measured at amortised cost with any difference being recognised in profit or loss over the period
of the borrowing using the effective interest method.
Borrowing costs are the costs incurred in establishing the bank facility. These costs are amortised over the life of the facility at
the effective interest rate.
Group
2018
$000s
Group
2017
$000s
ANZ Bank New Zealand Limited259,370264,967
Bank of New Zealand161,829158,980
The Hongkong and Shanghai Banking Corporation Limited133,010105,987
Borrowing costs(1,409)(1,139)
Total borrowings
552,800528,795
Shown as:
Term552,800528,795
Group
2018
$000s
Group
2017
$000s
Total borrowings at the beginning of the year
528,795502,323
Drawdowns during the year83,99989,488
Repayments during the year(59,725)(63,471)
Additional facility refinancing fee(679)–
Facility refinancing fee amortised during the year410455
Total borrowings at the end of the year
552,800528,795
As at 31 March 2018, the Group had a syndicated revolving facility with ANZ Bank New Zealand Limited, Bank of New Zealand and
The Hongkong and Shanghai Banking Corporation Limited for $625,000,000 (2017: $550,000,000) secured by way of mortgage over
the investment properties of the Group. The facility included a Tranche A limit of $275,000,000, a Tranche B limit of $275,000,000, a
Tranche C limit of $25,000,000 and a Tranche D limit of $50,000,000. Tranche A matures on 31 October 2021, Tranche B on
30 September 2020, Tranche C on 31 October 2021, and Tranche D on 28 February 2021 (2017: Tranche A ($275,000,000) matured on
30 September 2018 and Tranche B ($275,000,000) matured on 30 September 2020).
The weighted average interest rate on borrowings (including margin and line fee and interest rate swaps) as at 31 March 2018 was
4.98% (2017: 4.88%).
15. TRADE AND OTHER PAYABLES
Accounting policy - Trade and other payables
Trade and other payables are initially recognised at fair value and subsequently measured at amortised cost using the effective
interest method.
Group
2018
$000s
Group
2017
$000s
GST payable822691
Other creditors and accruals11,4188,220
Total trade and other payables
12,2408,911
Argosy Property Limited | Annual Report 2018
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N O T E S T O T H E C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T S ( C O N T I N U E D )
16. OTHER CURRENT LIABILITIES
Accounting policy - Employee benefits
A provision is recognised for benefits accruing to employees in respect of annual leave and long service leave when it is probable
that settlement will be required and they are capable of being measured reliably.
Provisions made in respect of employee benefits expected to be settled within 12 months are measured at their nominal values
using the remuneration rate expected to apply at the time of settlement. Provisions made in respect of employee benefits which
are not expected to be settled within 12 months are measured as the present value of the estimated future outflows to be made
by the Group in respect of services provided by employees up to the reporting date.
Group
2018
$000s
Group
2017
$000s
Employee entitlements366344
Other liabilities4,5302,928
Total other current liabilities
4,8963,272
17. ADMINISTRATION EXPENSES
Group
2018
$000s
Group
2017
$000s
Auditor's remuneration:
Audit of the annual financial statements151151
Review of the interim financial statements2828
Annual meeting fees77
Employee benefits6,3295,912
Other expenses3,3813,143
Doubtful debts expense/(recovery)(12)74
Bad debts5413
Total administration expenses
9,9389,328
18. INTEREST EXPENSE
Accounting policy - Financial income and expenses
Finance expenses comprise interest expense on borrowings and gains and losses on hedging instruments that are recognised
in profit or loss. Interest expense on borrowings is recognised using the effective interest method. Finance income comprises
interest income using the effective interest method.
Group
2018
$000s
Group
2017
$000s
Interest expense(27,711)(26,351)
Less amount capitalised to investment properties2,200471
Total interest expense
(25,511)(25,880)
Capitalised interest relates to the Polarcold development at 8 Foundry Drive, Christchurch, the Placemaker development at 180-202
Hutt Road, Kaiwharawhara, the Mighty Ape development at Highgate Parkway, Silverdale, Auckland, the development at 82 Wyndham
Street, Auckland and the development at Stewart Dawsons Corner (2017: capitalised interest relates to the Polarcold development at
8 Foundry Drive, Christchurch and the Mighty Ape development at Highgate Parkway, Silverdale, Auckland ).
Argosy Property Limited | Annual Report 2018
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N O T E S T O T H E C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T S ( C O N T I N U E D )
19. TAXATION
Accounting policy - Taxation
Income tax expense comprises current and deferred tax. Income tax expense is recognised in profit or loss except to the extent
that it relates to items recognised directly in equity, in which case it is recognised in equity.
Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantively enacted at
the reporting date, and any adjustment to tax payable in respect of previous years.
Group
2018
$000s
Restated
Group
2017
$000s
The taxation charge is made up as follows:
Current tax expense11,59613,224
Deferred tax expense(436)3,667
Adjustment recognised in the current year in relation to the current tax of prior years(20)(111)
Total taxation expense recognised in profit/(loss)
11,14016,780
Reconciliation of accounting profit to tax expense
Profit before tax109,317120,421
Current tax expense at 28%30,60933,718
Adjusted for :
Capitalised interest(616)(132)
Fair value movement in derivative financial instruments1,155(3,089)
Fair value movement in investment properties(13,253)(11,849)
Depreciation(6,288)(5,632)
Depreciation recovered on disposal of investment properties503259
Other(514)(51)
Current taxation expense
11,59613,224
Movements in deferred tax assets and liabilities attributable to:
Investment properties747512
Fair value movement in derivative financial instruments(1,155)3,089
Other(28)66
Deferred tax expense/(credit)
(436)3,667
Prior year adjustment(20)(111)
Total tax expense recognised in profit or loss11,14016,780
Imputation credits at 31 March 2018 were Nil (2017: Nil).
Argosy Property Limited | Annual Report 2018
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N O T E S T O T H E C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T S ( C O N T I N U E D )
20. DEFERRED TAX
Accounting policy - Deferred tax
Deferred tax is recognised on temporary differences between the carrying amount of assets and liabilities in the financial
statements and the corresponding tax bases used in the computation of taxable profit, and is accounted for using the balance
sheet liability method. Deferred tax liabilities are generally recognised for all taxable temporary differences and deferred tax
assets are recognised to the extent that it is probable that taxable profits will be available against which deductible temporary
differences can be utilised. Such assets and liabilities are not recognised if the temporary difference arises from goodwill or
from the initial recognition (other than in a business combination) of other assets and liabilities in a transaction that affect
neither the taxable profit nor the accounting profit.
Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset
realised.
Under NZ IAS 12, the measurement of deferred tax liabilities and deferred tax assets depends on whether an entity expects to
recover an asset by using it or by selling it and includes a presumption that an investment property is recovered entirely through
sale unless it will be consumed over its useful life.
The following are the major deferred tax liabilities and (assets) recognised by the Group, and the movements thereon during the current
and prior reporting years:
Interest rate
swaps
$000s
Investment
property
$000s
Other
$000s
Total
$000s
At 1 April 2017(8,086)17,4943,21112,619
Charge/(credit) to deferred taxation expense for the year(1,155)747(28)(436)
At 31 March 2018(9,241)18,2413,18312,183
At 1 April 2016(11,175)16,9823,1458,952
Charge/(credit) to deferred taxation expense for the year3,089512663,667
At 31 March 2017(8,086)17,4943,21112,619
Deferred tax is provided in respect of depreciation expected to be recovered on the sale of property at fair value. Depreciation is claimed
at Inland Revenue Department approved rates.
Investment properties are valued each year by independent valuers (as outlined in Note 5). These values include an allocation of the
valuation between the land and building components. The calculation of deferred tax on depreciation recovered and changes in fair
value relies on the split provided by the valuers.
It is assumed that all fixtures and fittings will be sold at their tax book value.
Argosy Property Limited | Annual Report 2018
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N O T E S T O T H E C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T S ( C O N T I N U E D )
21. RECONCILIATION OF PROFIT FOR THE YEAR AFTER TAXATION WITH CASH FLOWS FROM OPERATING ACTIVITIES
Group
2018
$000s
Restated
Group
2017
$000s
Profit after tax for the year
98,177103,641
Movements in working capital items relating to investing and financing activities916387
Non cash items
Movement in deferred tax liability(436)3,667
Movement in interest rate swaps4,125(11,031)
Fair value change in investment properties(47,333)(42,317)
Movements in working capital items
Trade and other receivables(380)2,980
Taxation payable407575
Trade and other payables3,329(1,519)
Other current assets(317)(295)
Other current liabilities1,624681
Net cash from operating activities60,11256,769
22. EARNINGS PER SHARE
Basic and diluted earnings per share is calculated by dividing the profit attributable to shareholders of the Company by the weighted
average number of ordinary shares on issue during the year.
Group
2018
Restated
Group
2017
Profit attributable to shareholders of the Company ($000s)98,177103,641
Weighted average number of shares on issue (000s)825,101816,693
Basic and undiluted earnings per share (cents)11.9012.69
On 22 May 2018, a final dividend of 1.55 cents per share was approved by the Company. The Dividend Reinvestment Plan programme
has been suspended by the Board until further notice.
Argosy Property Limited | Annual Report 2018
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N O T E S T O T H E C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T S ( C O N T I N U E D )
23. DISTRIBUTABLE INCOME
Group
2018
$000s
Restated
Group
2017
$000s
Profit before income tax109,317120,421
Adjustments:
Revaluation gains on investment property(47,333)(42,317)
Realised (gains)/losses on disposal of investment properties(292)(2,712)
Derivative fair value (gain)/loss4,125(11,031)
Earthquake expenses3,8671,231
Insurance proceeds - earthquake expenses(1,813)–
Insurance proceeds - reinstatement(2,282)–
Gross distributable income65,58965,592
Tax impact of depreciation recovered on disposal of investment properties
and taxable gains on disposal of revenue account properties5901,042
Current tax expense(11,576)(13,113)
Net distributable income54,60353,521
Weighted average number of ordinary shares (000s)825,101816,693
Gross distributable income per share - (cents per share)7.958.03
Net distributable income per share - (cents per share)6.626.55
The Company's dividend policy is based on net distributable income. Net distributable income is determined under the Company's
bank facility agreement.
24. INVESTMENT IN SUBSIDIARIES
The Company has control over the following subsidiaries:
Name of subsidiaryPrincipal activity
Place of
incorporation
and operationHolding 2018Holding 2017
Argosy Property No.1 LimitedProperty investmentNZ100%100%
Argosy No.1 TrustProperty investmentNZ100%100%
Argosy Property Management LimitedManagement companyNZ100%100%
Argosy Property No.3 LimitedProperty investmentNZ100%100%
Argosy Property Unit Holdings LimitedHolding companyNZ100%100%
The subsidiaries have the same reporting date as the Company.
Argosy Property Limited | Annual Report 2018
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N O T E S T O T H E C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T S ( C O N T I N U E D )
25. COMMITMENTS
Accounting policy - Leases
Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of
ownership to the lessee. All other leases are classified as operating leases.
The Company has entered into commercial property leases on its investment properties. The Company has determined that it
retains all significant risks and rewards of ownership of these properties and has thus classified these leases as operating leases.
The Group as a lessor
Rental income from operating leases is recognised in the period to which it relates. Initial direct costs incurred in negotiating
and arranging an operating lease are added to the carrying amount of the leased asset and amortised to property expenses on
a straight-line basis over the lease term.
In the event that lease incentives are paid to enter into the operating leases, such incentives are recognised as an asset. The
aggregate cost of incentives is recognised as a reduction of rental revenue on a straight-line basis.
The Group as lessee
Operating lease payments are recognised as an expense on a straight-line basis over the lease term, except where another
systematic basis is more representative of the time pattern in which economic benefits from the leased asset are consumed.
Ground rent
Ground leases exist over 39 Market Place, Viaduct Harbour, Auckland and a small part of 19 Barnes Street, Wellington. The amount
paid in respect of the Auckland ground lease during the year was $1.0 million (2017: $1.0 million). The annual ground lease commitment
is $1.0 million and is generally recoverable from tenants in proportion to their area of occupancy. The Auckland ground lease is
renewable in perpetuity with the next renewal date in 2019.
Building upgrades and developments
Estimated capital commitments contracted for building projects not yet completed at 31 March 2018 and not provided for were
$64.1 million (2017: $48.8 million).
There were no other commitments as at 31 March 2018 (2017: Nil).
Non-cancellable operating lease receivable
Operating leases relate to the investment properties owned by the Group with the leases expiring between 2018 and 2032. The lessee
does not have an option to purchase the property at the expiry of the period.
Group
2018
$000s
Group
2017
$000s
Within one year107,516105,260
One year or later and not later than five years321,480294,244
Later than five years255,212213,278
684,208612,782
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N O T E S T O T H E C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T S ( C O N T I N U E D )
25. COMMITMENTS (CONTINUED)
Non-cancellable operating lease payable
Operating lease commitments relate mainly to the IT infrastructure and vehicle leases. There are no renewal options or options to
purchase in respect of these leases.
Group
2018
$000s
Group
2017
$000s
Within one year373416
One year or later and not later than five years261492
Later than five years––
634908
There were no contingent rents recognised as income during the year.
The Company has the following guarantee, which is not expected to be called upon:
As a condition of listing on the New Zealand Stock Exchange (NZX), NZX requires all issuers to provide a bank bond to NZX under
NZX Main Board/Debt Market Listing Rule 2.6.2. The bank bond required from APL for listing on the NZX Main Board is $75,000.
26. SUBSEQUENT EVENTS
On 22 May 2018, a final dividend of 1.55 cents per share was approved by the Company. The record date for the final dividend is 13 June
2018 and a payment is scheduled to shareholders on 27 June 2018. Imputation credits of 0.37439 cents per share are attached to the
dividend.
27. RELATED PARTY TRANSACTIONS
Balances and transactions between the Company and its subsidiaries , which are related parties of the Company, have been eliminated
on consolidation and are not disclosed in this note. Details of transactions between the Group and other related parties are disclosed
below.
Group
2018
$000s
Group
2017
$000s
Key management and directors compensation
Salaries and other short term employee benefits1,6851,393
Directors' fees621565
Total2,3061,958
Argosy Property Limited | Annual Report 2018
To the Shareholders of Argosy Property Limited
Opinion We have audited the consolidated financial statements of Argosy Property Limited and its
subsidiaries (the ‘Group’) on pages 46 to 73, which comprise the consolidated statement
of financial position as at 31 March 2018, and the consolidated statement of
comprehensive income, statement of changes in equity and statement of cash flows for
the year then ended, and notes to the consolidated financial statements, including a
summary of significant accounting policies.
In our opinion, the accompanying consolidated financial statements on pages 46 to 73
present fairly, in all material respects, the financial position of the Group as at 31 March
2018, and its financial performance and cash flows for the year then ended in accordance
with New Zealand Equivalents to International Financial Reporting Standards (‘NZ IFRS’)
and International Financial Reporting Standards (‘IFRS’).
Basis for opinion We conducted our audit in accordance with International Standards on Auditing (‘ISAs’)
and International Standards on Auditing (New Zealand) (‘ISAs (NZ)’). Our responsibilities
under those standards are further described in the Auditor’s Responsibilities for the Audit
of the Consolidated Financial Statements section of our report.
We believe that the audit evidence we have obtained is sufficient and appropriate to
provide a basis for our opinion.
We are independent of the Company in accordance with Professional and Ethical Standard
1 (Revised) Code of Ethics for Assurance Practitioners issued by the New Zealand Auditing
and Assurance Standards Board and the International Ethics Standards Board for
Accountants’ Code of Ethics for Professional Accountants, and we have fulfilled our other
ethical responsibilities in accordance with these requirements.
Other than in our capacity as auditor and attending the Annual Meeting, we have no
relationship with, or interests in, Argosy Property Limited or any of its subsidiaries. These
services have not impaired our independence as auditor of the Group.
Audit materiality We consider materiality primarily in terms of the magnitude of misstatement in the
financial statements of the Company that in our judgement would make it probable that
the economic decisions of a reasonably knowledgeable person would be changed or
influenced (the ‘quantitative’ materiality). In addition, we also assess whether other
matters that come to our attention during the audit would in our judgement change or
influence the decisions of such a person (the ‘qualitative’ materiality). We use materiality
both in planning the scope of our audit work and in evaluating the results of our work.
Based on our professional judgement, we determined the quantitative materiality for our
audit of the Group’s financial statements as a whole to be $3.3 million.
Key audit matters
Key audit matters are those matters that, in our professional judgement, were of most
significance in our audit of the financial statements of the current period. These matters
were addressed in the context of our audit of the consolidated financial statements as a
whole, and in forming our opinion thereon, and we do not provide a separate opinion on
these matters.
Key audit matter How our audit addressed the key audit matter and
results
Investment Property Valuations
Investment properties valued at $1,513 million are classified
into three segments being, Industrial, Office, and Retail as
disclosed in note 5 of the financial statements.
The valuation of investment properties is a key audit matter
due to the subjective judgements and assumptions in the
valuation models. Adjustments are made to observable
market data of similar properties to reflect the specific
nature and location of the individual properties.
Fair values are calculated using actual and forecast inputs
including: market rentals, capital expenditure requirements,
yields, occupancy, and weighted average lease terms.
We read the valuation reports for all properties that were
subject to revaluation at year end. We checked for any
limitations of scope in the valuation reports that would impact
the reliability of the valuations. When considered appropriate,
discussions were held with the valuers to confirm the valuation
approach used.
We assessed the valuers’ experience and professional
accreditations. This included having each valuer confirm to us
their independence, qualifications and that the scope of the
work undertaken was in line with professional valuation
standards and accounting standards. In addition we
considered the Group’s process for reviewing and challenging
the valuation reports to ensure they accurately reflect the
individual characteristics of each property.
74
INDEPENDENT AUDITOR'S REPORT
Argosy Property Limited | Annual Report 2018
In the 2017 financial year, NZ Post House sustained damage
due to the Kaikoura earthquake. As a result the building is
valued in the 2018 financial year taking into account the
estimated costs to reinstate the building to its pre-
earthquake condition.
The Group’s policy is to engage external valuers to perform
valuations for each of the properties on at least an annual
basis. The valuation methods used for assessing the fair
value include a combination of the capitalisation of contract
income, capitalisation of market income and discounted cash
flow methodologies.
The key inputs to the valuations were tested across a sample
of properties including those where the fair value had moved
significantly from the previous year. This included
understanding the key drivers of those movements and
challenging the reasonableness of those key drivers.
For the sample selected, key changes in rentals, occupancy,
lease costs and lease terms were agreed to underlying lease
agreements, and market comparatives where applicable.
Yields across the three segments were compared to property
industry publications and other observable market data where
available. In addition, we assessed the Group’s estimated
costs to re-instate NZ Post House to its pre-earthquake
condition.
Our internal valuation specialists were used in assessing the
appropriateness of the valuation methodology.
Other information
The Board of Directors are responsible on behalf of the Group for other information. The
other information comprises the information included in the Annual Report that accompanies
the consolidated financial statements and the audit report.
Our opinion on the consolidated financial statements does not cover the other information
and we do not express any form of assurance conclusion thereon.
Our responsibility is to read the other information and consider whether it is materially
inconsistent with the consolidated financial statements or our knowledge obtained in the
audit or otherwise appears to be materially misstated. If so, we are required to report that
fact. We have nothing to report in this regard.
Directors’ responsibilities
for the consolidated
financial statements
The Board of Directors are responsible on behalf of the Group for the preparation and fair
presentation of the consolidated financial statements in accordance with NZ IFRS and IFRS
and for such internal control as the Board of Directors determines is necessary to enable the
preparation of consolidated financial statements that are free from material misstatement,
whether due to fraud or error.
In preparing the financial statements, the Board of Directors are responsible on behalf of the
Group for assessing the Group’s ability to continue as a going concern, disclosing, as
applicable, matters related to going concern and using the going concern basis of accounting
unless the Board of Directors either intend to liquidate the Group or to cease operations, or
have no realistic alternative but to do so.
Auditor’s responsibilities
for the audit of the
consolidated financial
statements
Our objectives are to obtain reasonable assurance about whether the consolidated financial
statements as a whole are free from material misstatement, whether due to fraud or error,
and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high
level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs
and ISAs (NZ) will always detect a material misstatement when it exists. Misstatements can
arise from fraud or error and are considered material if, individually or in the aggregate, they
could reasonably be expected to influence the economic decisions of users taken on the basis
of these consolidated financial statements.
A further description of our responsibilities for the audit of the consolidated financial
statements is located on the External Reporting Board’s website at:
https://www.xrb.govt.nz/standards-for-assurance-practitioners/auditors-
responsibilities/audit-report-1
This description forms part of our auditor’s report.
Restriction on Use
This report is made solely to the company’s shareholders, as a body. Our audit has been
undertaken so that we might state to the company’s shareholders those matters we are
required to state to them in an auditor’s report and for no other purpose. To the fullest
extent permitted by law, we do not accept or assume responsibility to anyone other than the
company’s shareholders as a body, for our audit work, for this report, or for the opinions we
have formed.
Andrew Boivin, Partner
for Deloitte Limited
Auckland, New Zealand
22 May 2018
75
Argosy Property Limited | Annual Report 2018
76
Corporate Governance
THE COMPANY
Argosy is a limited liability company incorporated under the
Companies Act 1993. Argosy shares are listed on the NZX Main
Board (NZX code: ARG). Argosy’s constitution is available on its
website (www.argosy.co.nz) and the New Zealand Companies
Office website (www.business.govt.nz/companies).
CORPORATE GOVERNANCE PHILOSOPHY
Ultimate responsibility for corporate governance of the Company
resides with the Board of Directors. The Board sees strong
corporate governance and stewardship as fundamental to the
strong performance of the Company and, accordingly, the Board’s
commitment is to the highest standards of business behaviour and
accountability.
Outlined below are the main corporate governance practices in
place throughout the year, which , in the Board’s opinion, comply
with the FMA’S Principles for corporate governance. Argosy also
complies with the NZX Corporate Governance Code 2017, as set
out in the Statement on Reporting Against the NZX Code available
on its web site (www.argosy.co.nz).
ETHICAL STANDARDS
The Board has adopted a Code of Conduct and Ethics, which sets
out the ethical and behavioural standards expected of Argosy’s
Directors, Officers and employees. The purpose of the Code of
Conduct and Ethics is to uphold the highest ethical standards,
acting in good faith and in the best interests of shareholders at all
times. The Code of Conduct and Ethics outlines the Company’s
policies in respect of conflicts of interest, fair dealing, compliance
with applicable laws and regulations, maintaining confidentiality
of information, dealing with company assets and use of company
information.
Procedures for dealing with breaches of these policies are
contained in the Code of Conduct and Ethics, which forms part
of each employee’s conditions of employment. Argosy’s Code of
Conduct and Ethics is available on its website
(www.argosy.co.nz).
COMPOSITION OF THE BOARD
Argosy is committed to having a Board whose members have the
capacity to act independently and have the composite skills to
optimise the financial performance of the Company and returns
to shareholders. The constitution provides for there to be not
fewer than three Directors. All the members of the Board are
nonexecutive Directors. The members of the Board are listed
below and their brief resumés are included in the section headed
'Board of Directors' on page 22.
ATTENDANCE OF DIRECTORS
Board Meetings attended
Michael Smith (Chair)
8 of 8
Peter Brook
8 of 8
Mark Cross
8 of 8
Andrew Evans
8 of 8
Chris Hunter
8 of 8
Jeff Morrison
8 of 8
All of the above persons were Directors as at 31 March 2018.
The Board does not impose a restriction on the tenure of any
Director as it considers that such a restriction may lead to the loss
of experience and expertise from the Board.
INDEPENDENT DIRECTORS
The Company recognises that independent directors are
important in assuring shareholders that the Board is properly
fulfilling its role and is diligent in holding management
accountable for its performance.
In determining whether a Director is independent, the Board
considers whether the Director is independent of management
and free of any business or other relationship that could
materially interfere with, or could reasonably be perceived to
materially interfere with, the exercise of his or her unfettered and
independent judgement. In accordance with Rule 3.3.2 of the
NZX Main Board Listing Rules, the Board has determined that all
of the Directors were, in its view, independent directors as at
balance date as none of them had a disqualifying relationship with
the Company. Subsequent to the balance date, and as at the date
of this report, the Board determined that Mr Cross has ceased to
be an independent director as he is a director of Milford Funds
Limited which has subsequently (on 19 April 2018) disclosed that
it manages funds with a substantial product holding (5.0%) in
Argosy.
BOARD AND DIRECTOR PERFORMANCE
The Board has an annual performance assessment in which the
Board critically evaluates its own performance, and its own
processes and procedures to ensure that they are not unduly
complex and are designed to assist the Board in effectively
fulfilling its role. Individual Directors are evaluated by a process
whereby the Board determines questions to be asked of each
Director about him or herself and about each other including the
Chair, each Director answers the questions in writing, and the
responses are collected and collated by the Chair who then
discusses the results with each Director. The Chair’s own position
is discussed with the Chair of the Audit and Risk Committee and/
or the rest of the Board. These evaluations will be carried out
within three months of year end.
INSIDER TRADING AND RESTRICTED PERSONS
TRADING
Argosy’s Directors, Officers and employees, their families and
related parties must comply with the Insider Trading and
Restricted Persons Trading policy. Amongst other requirements,
the policy identifies two ‘black-out periods’ where trading in the
Company’s shares is prohibited (unless a special circumstances
trading application is granted). The black-out periods are from
the close of trading on 28 February (or 29 February in a leap year)
until the day following the full year announcement date and from
the close of trading on 31 August until the day following the half
year announcement date each year.
Ongoing fixed participation in the Dividend Reinvestment Plan
(DRP) is generally available throughout the year. However, at the
date of this report the DRP has been suspended .
Trading by Directors, Officers and senior employees requires pre-
trade approval (with limited exceptions, such as shares acquired
under the DRP). Officers and employees must obtain approval
from any two Directors or a Director and the Chief Financial
Officer and Directors must obtain pre-trade approval from the
Chairman (or in the case of the Chairman, the Chairman of the
Audit and Risk Committee). The holdings of Directors of shares
in Argosy are disclosed in the section headed 'Directors'
shareholdings' on page 79.
Argosy Property Limited | Annual Report 2018
77
Argosy’s Insider Trading and Restricted Persons Trading Policy
is available on its website (www.argosy.co.nz).
DIRECTORS AND OFFICERS' INDEMNIFICATION AND
INSURANCE
In accordance with section 162 of the Companies Act 1993 and the
constitution of the Company, Argosy has indemnified and insured
its Directors and employees, including Directors and employees
of subsidiaries, in respect of liability incurred for any act or
omission in their capacity as a Director or employee (including
defence costs).The insurer reimburses the company where it has
indemnified the Directors or employees.
BOARD COMMITTEES
Board committees assist with the execution of the Board’s
responsibilities to shareholders. Each committee operates under
a constitution approved by the Board, setting out its role,
responsibilities, authority, relationship with the Board, reporting
requirements, composition, structure and membership. Argosy’s
board committee constitutions are available on its website
(www.argosy.co.nz).
REMUNERATION COMMITTEE
The Board has established a Remuneration Committee which
considers the remuneration of the Directors and senior
executives, and administers the Company’s bonus and incentive
schemes. The members of the Remuneration Committee are
Michael Smith (Chairman), Peter Brook and Jeff Morrison.
ATTENDANCE AT REMUNERATION COMMITTEE
Remuneration Committee Meetings Attended
Michael Smith (Chair)
2 of 2
Peter Brook
2 of 2
Jeff Morrison
2 of 2
NOMINATIONS COMMITTEE
The Board does not maintain a Nominations Committee. As all
Directors participate in nomination decisions a nominations
committee is considered unnecessary.
AUDIT AND RISK COMMITTEE
The Board has established an Audit and Risk Committee, which
is responsible for overseeing the financial, accounting and risk
management responsibilities of the Company. The minimum
number of members on the Audit and Risk Committee is three.
All members must be Directors, the majority must be
Independent Directors and at least one member must have an
accounting or financial background.
The members of the Audit and Risk Committee are Mark Cross
(Chairman), Peter Brook and Michael Smith.
The Audit and Risk Committee assists the Board in fulfilling its
corporate governance and disclosure responsibilities with
particular reference to financial matters, external audit and risk
management, and is specifically responsible for:
— ensuring that processes are in place and monitoring those
processes so that the Board is properly and regularly informed
and updated on corporate financial matters;
— the appointment and removal of the external auditor;
— meeting regularly to monitor and review external audit
practices;
— having direct communication with and unrestricted access to
the external auditors;
— reviewing the financial reports and advising the Board whether
they comply with applicable laws and regulations;
— ensuring the external auditor or lead audit partner is changed
at least every five years;
— reviewing the performance and independence of the external
auditor;
— monitoring compliance with the Financial Markets Conduct
Act 2013, the Financial Reporting Act 2013, the Companies Act
1993 and the NZX Main Board Listing Rules; and
— overseeing the Company’s risk management policy and
framework and monitoring compliance.
ATTENDANCE AT AUDIT AND RISK COMMITTEE
Audit and Risk Committee Meetings Attended
Mark Cross (Chair)
4 of 4
Peter Brook
4 of 4
Michael Smith
4 of 4
DIRECTORS' REMUNERATION
Directors' Fees
The current total Directors’ fee pool approved by ordinary
resolution at the Company’s 2017 Annual Meeting is $746,500 per
annum.
Directors' Remuneration
Remuneration paid to Directors by the Company during the year
is as follows:
Michael Smith (Chair)
$171,841
Peter Brook$97,468
Andrew Evans$81,872
Mark Cross$101,874
Chris Hunter$81,875
Jeff Morrison$86,091
The Company considers it desirable to attract and retain high
performing Directors whose skills and experience are well suited
to the Company’s requirements. To this end, it is important that
the Directors are remunerated appropriately. The Directors’ fees
are presently set as follows:
— each Director (other than the Chairman) is paid $85,000 per
annum.
— the Chairman is paid $160,000 per annum.
— additional amounts are paid to committee members.
The Audit and Risk Committee Chairman receives $20,000 per
annum and its members each receive $12,000 per annum. The
Remuneration Committee Chairman receives $7,500 per annum
and its members each receive $5,000 per annum.
The Remuneration Committee reviews Director remuneration
annually and makes recommendations to the Board. Argosy’s
policy is that Directors’ remuneration should generally be in the
Argosy Property Limited | Annual Report 2018
78
Corporate Governance
upper quartile based on market benchmarks. The Board takes
advice from independent remuneration specialists when
considering any proposal to increase the Directors’ fees.
Additional payments may be made from the approved pool of
$746,500 to Directors who assume additional responsibilities
(including in relation to one-off project work) from time to time
beyond the scope of their usual responsibilities. No payments
were made in the year to 31 March 2018 (2017: Nil).
GENDER BALANCE
As at 31 March 2018 the gender balance statistics for the
Company's Directors, Officers and all employees were as follows:
DirectorsOfficersAll employees
Female0 (2017: 0)3 (2017: 3)15 (2017: 16)
Male6 (2017: 6)9 (2017: 9)15 (2017: 15)
Total6 (2017: 6)12 (2017: 12)30 (2017: 31)
Argosy adopted a Diversity Policy with effect from 1 April 2017,
which is available on its web site (www.argosy.co.nz). The Board
considers that Argosy is achieving its diversity objectives. You can
see further information on diversity on page 21 of the Annual
Report.
REMUNERATION REPORT
Under the guidance of the Remuneration Committee, the Board
has established a remuneration framework which is designed to
attract, retain and reward individual employees to deliver
premium performance aligned to business objectives, strategy,
shareholder interests and investment performance.
Employees Remuneration
An employee’s remuneration is comprised of the following
components:
— fixed remuneration
— variable or ‘at risk’ components
The fixed remuneration component (including salary, KiwiSaver
contributions, health and disability benefits and vehicles) is
designed to reward employees for their skills and experience and
the accountability of their role. The variable component is
comprised of a short-term incentive scheme for all permanent
employees and a long-term incentive scheme for eligible senior
employees.
Fixed Remuneration
Fixed remuneration is the primary basis for remunerating the
Company’s employees. Each employee’s fixed remuneration is
determined based on their responsibilities, capability,
performance and market benchmarks. Fixed remuneration for
permanent employees is comprised of their base salary and
benefits. Benefits may include:
— KiwiSaver employer superannuation contributions
— life and disability insurance
— health insurance
— private use of a company vehicle
Short Term Incentive Scheme (STI)
The STI is a discretionary variable pay scheme for permanent
employees, designed to reward participants for high performance
and the Company’s success over the financial year.
— The STI is based on Company and individual performance
measures with stretch performance goals.
— The Company performance measure is based on specific annual
Company targets, which are linked to the Company’s strategy and
approved by the Board.
— Individual goals and performance measures are agreed
between each manager and their direct reports, to encourage
outstanding performance.
— Measures and stretch performance goals are reviewed each
financial year.
— The value of the STI and its weighting between Company and
individual performance measures each vary depending on the
requirements of each employee’s role.
— The STI for each of the Chief Executive Officer and Chief
Financial Officer is based solely on Company performance.
Long Term Incentive Scheme (LTI)
The Company established an LTI scheme for senior executives
with effect from 1 April 2015. The scheme remunerates senior
executives for sustained performance over the medium term.
Under the LTI scheme, the Company may issue performance
share rights (PSRs) to eligible employees each year (currently the
Chief Executive Officer and Chief Financial Officer).
Each PSR entitles its holder to one share in Argosy on its vesting
date, subject to meeting LTI performance measures. Each PSR
has a vesting date three years after commencement of the
financial year in which it is issued.
The LTI performance measure is a comparison of the Company’s
Total Shareholder Return (TSR) against the TSR of a comparator
group of listed entities determined by the Board.
— Comparator entities are chosen from the S&P/ NZX All Real
Estate Gross Index.
— TSRs of the entities in the comparison group over the
performance period (which is three years) will be ranked from
highest to lowest.
— If Argosy’s TSR over the performance period exceeds the TSR
of the company ranked at the 50th percentile in the comparison
group, 50% of the PSRs will vest.
— If Argosy’s TSR over the performance period exceeds the TSR
of the company ranked at the 75th percentile in the comparison
group, 100% of the PSRs will vest.
— There is a straight line progression and apportionment between
these two points. No shares will vest if the TSR over the
performance period is negative.
No PSRs vested in the year ending 31 March 2018.
Argosy Property Limited | Annual Report 2018
79
REMUNERATION
Chief Executive's Remuneration
The Chief Executive’s remuneration for the year ended 31 March
2018 is outlined below:
Fixed remuneration and other benefits$653,113
Short Term Incentive$240,000
Total$893,113
The Chief Executive’s remuneration does not include the value
of PSRs issued under the Company’s LTI scheme which have been
granted but have not yet vested.
Employee remuneration
All employees of the Group are employed by Argosy Property
Management Limited. The number of employees or former
employees of the Group, not being Directors of Argosy Property
Limited or the Chief Executive who received remuneration and
any other benefits in their capacity as employees of $100,000 per
annum or more, are set out in the table opposite:
Amount of remunerationNumber of employees
$100,001 - $110,0002
$110,001 - $120,0001
$130,001 - $140,0003
$140,001 - $150,0002
$150,001 - $160,0002
$170,001 - $180,0001
$230,001 - $240,0002
$250,001 - $260,0002
$260,001 - $270,0001
$280,001 - $290,0002
$340,001 - $350,0001
$630,001 - $640,0001
Employee remuneration does not include PSRs issued under the
Company’s LTI scheme that have been granted but which have
not vested. (No PSRs vested in the year to 31 March 2018.)
INTERESTS REGISTERS
Directors’ shareholdings
Equity securities in which each Director and associated person of each Director held a relevant interest as at 31 March 2018 are listed
below:
Argosy Property Limited | Annual Report 2018
80
Corporate Governance
DirectorHolderTrusteesInterest
Number
Shares
Michael SmithFNZ Custodians Limited for
trustees of the Mallowdale Trust
Michael Smith and Dale
D’Rose
Non beneficial592,579
Peter BrookPeter BrookN/ABeneficial195,071
Peter BrookFNZ Custodians Limited for
trustees of the Bayview Trust
Peter Brook, Mary Brook,
Samuel Goldwater,
Nicholas Goldwater
Non beneficial360,288
Mark CrossAlpha Investment Partners
Limited
Alpha Investment
Partners Limited
Non beneficial
1
50,000
Andrew EvansTrustees of the Hardwick TrustAndrew Evans & The
Hardwick Trustees
Limited
Non beneficial110,828
Andrew EvansGraeme Horsley #3 TrustGraeme Horsley, Susan
Horsley, Andrew Evans
Non beneficial
18,976
Jeff MorrisonInvestment Custodial Services
for the trustees of the Suzanne
Fisher Trust
Jeff Morrison and Barry
Fisher
Non beneficial435,002
Jeff MorrisonInvestment Custodial Services
for trustees of the LJ Fisher Trust
Jeff Morrison and Andrew
Spencer
Non beneficial
93,000
Jeff MorrisonTurstees of the JM Thompson
Trust
Jeff Morrison, Robyn
Shearer
Non beneficial
372,577
Jeff MorrisonTrustees of the Dalbeth Family
Trust No.2
Audrey Dalbeth, Anthony
Hudson, Bronwyn
Patterson, William
Dalbeth, Jeff Morrison
Non beneficial
80,770
Jeff MorrisonTrustees of the Dalbeth Family
Trust No.3
William Dalbeth, Jeff
Morrison
Non beneficial
161,400
Jeff MorrisonTrustees of the Dalbeth Family
Trust No.4
William Dalbeth and Jeff
Morrison
Non beneficial
238,400
Jeff MorrisonFNZ Custodians Limited for
Stephen Fisher, Virginia Fisher
and Jeff Morrison as trustees of
the Stephen and Virginia Fisher
Trust
Stephen Fisher, Virginia
Fisher and Jeff Morrison
Non beneficial
150,000
Jeff MorrisonInvestment Custodial Services
Limited for the Spirit of
Adventure Trust Board
Non beneficial
69,250
1. Power to exercise, or control the exercise of, the right to vote attached to 20% or more of the voting products of Alpha Investment Partners Limited, as a
shareholder of Alpha Investment Partners Limited
Argosy Property Limited | Annual Report 2018
81
SENIORS MANAGERS' SHAREHOLDINGS
Equity securities in which each Senior Manager and associated person of each Senior Manager held a relevant interest as at 31 March
2018 are listed below:
OfficerHolderTrusteesInterestNo. of sharesPSRs vested
Peter MencePeter MencePSR**548,674N/A
Peter Mence, Stella
McDonald as trustees fo
the Papageno Trust
416,077
Dave FraserDave FraserPSR**320,483N/A
** Performance Share Rights issued under
the Company's Long Term Incentive
Scheme
DIRECTORS AND SENIOR MANAGERS' SHARE DEALINGS
The Directors and Senior Managers entered into the following
share dealings which relate to the acquisition of shares in the
Company during the year:
— — Peter Brook acquired a beneficial interest in 2,023 shares
in the Company on 29 June 2017 for consideration of
$2,095.03 under the Company’s dividend reinvestment
plan.
— Peter Brook acquired a beneficial interest in 50,000 shares
in the Company on 28 July 2017 for consideration of
$52,000 through an on-market acquisition.
— Peter Brook acquired a beneficial interest in 2,837 shares in
the Company on 28 September 2017 for consideration of
$2,935.73 under the Company’s dividend reinvestment
plan.
— Peter Brook acquired a beneficial interest in 2,832 shares in
the Company on 20 December 2017 for consideration of
$2,979.70 under the Company’s dividend reinvestment
plan.
— Mark Cross acquired a non-beneficial (trust) interest in
50,000 shares in the Company on 6 December 2017 for
consideration of $52,500 through an on-market
acquisition.
— Andrew Evans acquired a non-beneficial (trust) interest in
1,561 shares in the Company on 29 June 2017 for
consideration of $1,617.20 under the Company’s dividend
reinvestment plan.
— Andrew Evans acquired a non-beneficial (trust) interest in
1,612 shares in the Company on 28 September 2017 for
consideration of $1,667.91 under the Company’s dividend
reinvestment plan.
— Andrew Evans acquired a non-beneficial (trust) interest in
1,609 shares in the Company on 20 December 2017 for
consideration of $1,692.89 under the Company’s dividend
reinvestment plan.
— Dave Fraser acquired 119,915 PSRs on 26 June 2017 under
the Company’s Long Term Incentive Scheme.
— Peter Mence acquired 201,369 PSRs on 26 June 2017 under
the Company’s Long Term Incentive Scheme.
— Peter Mence acquired a non-beneficial interest in 416,077
shares in the Company on 24 August 2017 for nil
consideration as an executor and trustee of a deceased’s
estate.
—Jeff Morrison acquired a non-beneficial (trust) interest in
69,250 shares in the Company on 3 May 2017 for
consideration of $69,942.50 through an on-market
acquisition.
—Jeff Morrison acquired a non-beneficial (trust) interest in
5,419 shares in the Company on 28 September 2017 for
consideration of $5,607.11 under the Company’s dividend
reinvestment plan.
—Jeff Morrison acquired a non-beneficial (trust) interest in
28,000 shares in the Company on 4 July 2017 for
consideration of $29,416.30 through an on-market
acquisition.
—Jeff Morrison acquired a non-beneficial (trust) interest in
48,000 shares in the Company on 4 July 2017 for
consideration of $50,420.80 through an on-market
acquisition.
—Jeff Morrison acquired a non-beneficial (trust) interest in
5,409 shares in the Company on 20 December 2017 for
consideration of $5,691.10 under the Company’s dividend
reinvestment plan.
—Jeff Morrison acquired a non-beneficial (trust) interest in
5,249 shares in the Company on 29 June 2017 for
consideration of $5,436.63 under the Company’s dividend
reinvestment plan.
Argosy Property Limited | Annual Report 2018
82
Corporate Governance
DIRECTORS' INTERESTS
The Directors have declared interests in the entities listed below.
DirectorPositionCompany/Organisation
Michael SmithDirectorGreymouth Petroleum Limited
DirectorMaui Capital Indigo Fund
DirectorMaui Capital Aqua Fund
Indirect interestPartners Life Limited
Peter BrookTrusteeMelanesia Mission Trust Board
ChairmanTrust Investments Management Limited
ChairmanBurger Fuel Worldwide Limited
ChairmanGenerate Investment Management Limited
Mark CrossDirectorAlpha Investment Partners Limited
DirectorAspect Productivity Technology Limited
DirectorEmcee Squared Limited
ChairmanSuperannuation Investments Limited
ChairmanMFL Mutual Fund Limited
ChairmanMilford Asset Management Limited
DirectorMilford Funds Limited
Board memberTriathlon New Zealand Inc.
DirectorGenesis Energy Limited
DirectorMilford Private Wealth Limited
DirectorVirsae Group Limited
DirectorZ Energy Limited
DirectorChorus Limited
DirectorMilford Capital Investments Limited
DirectorMilford Private Equity Limited
DirectorMPE II GP Limited
Andrew EvansDirectorNorthWest Healthcare Properties Management
DirectorHolmes Group Limited
DirectorHolmes Fire & Safety Limited
DirectorTrust Investments Management Limited
DirectorHolmes GP Fire Limited
DirectorHughes & Cossar Limited
DirectorWestbrooke Capital Partners Limited
DirectorInfinity Investment Group Limited
Chris HunterDirectorNZ Strong Group Limited
DirectorNZ Strong Construction Limited
Jeff MorrisonTrusteeSpirit of Adventure Trust
Peter MenceDirectorArgosy Property No. 3 Limited
DirectorArgosy Property No. 1 Limited
DirectorArgosy Property Unit Holdings Limited
DirectorArgosy Property Management Limited
Dave FraserDirectorArgosy Property No. 3 Limited
DirectorArgosy Property No. 1 Limited
DirectorArgosy Property Unit Holdings Limited
DirectorArgosy Property Management Limited
Argosy Property Limited | Annual Report 2018
83
INFORMATION USED BY DIRECTORS
No Director requested to use information received in his or her
capacity as a director that would not otherwise be available to the
Director.
INDEMNITIES AND INSURANCE
The Company effected indemnities for Directors and employees
for liability (including defence costs) arising in respect of acts or
omissions while acting in the capacity of a director or employee.
The Company effected insurance for Directors and employees for
liability (including defence costs) arising in respect of acts or
omissions while acting in the capacity of a director or employee,
and a policy for defence costs.
EXTERNAL AUDIT FIRM GUIDELINES
In addition to the formal constitution under which the Audit and
Risk Committee operates, the Audit and Risk Committee has
adopted an External Auditor Independence Policy containing
procedures to ensure the independence of the Company’s
external auditor.
The Audit and Risk Committee is responsible for recommending
the appointment of the external auditor and maintaining
procedures for the rotation of the external audit lead partner.
Under the Auditor Independence Policy, the external audit lead
partner must be rotated every five years.
The policy covers provision of non-audit services with the general
principle being that the external auditor should not have any
involvement in the production of financial information or
preparation of financial statements such that they might be
perceived as auditing their own work. It is, however, appropriate
for the external auditor to provide services of due diligence on
proposed transactions and accounting policy advice.
Deloitte has been appointed as the Company’s external auditor.
NZX RULINGS AND WAIVERS
The Company did not apply to NZX for, nor rely on, any rulings
or waivers during the year.
DONATIONS
The Company made the following sponsorship payments during
the 2018 financial year:
— $10,000 Hotwater Beach Surf Life Saving Club Inc.
— $10,000 Taylors Mistake Surf Life Saving Club Inc.
— $10,000 Lyall Bay Surf Life Saving Club Inc.
— $15,000 Red Beach Surf Life Saving
No other member of the Group made donations in the 2018
financial year.
ARGOSY SUBSIDIARIES – DIRECTORS
As at 31 March 2018:
— Michael Smith, Peter Brook, Andrew Evans, Peter Mence and
David Fraser were the directors of Argosy Property No. 1 Limited.
— Michael Smith, Peter Brook, Andrew Evans, Peter Mence and
David Fraser were the directors of Argosy Property No. 3 Limited.
— Michael Smith, Peter Brook, Andrew Evans, Peter Mence and
David Fraser were the directors of Argosy Property Management
Limited.
— Michael Smith, Peter Brook, Peter Mence and David Fraser
were the directors of Argosy Property Unit Holdings Limited.
No director of any Argosy subsidiary received additional
remuneration or benefits in respect of their directorships. The
directors of Argosy’s subsidiaries who are not also directors of the
Company have no interests recorded in the interest registers of
those companies.
Argosy Property Limited | Annual Report 2018
84
Investor Statistics
20 LARGEST REGISTERED FINANCIAL PRODUCT HOLDERS AS AT 31 MARCH 2018
RankHolder NameTotalPercentage
1New Zealand Central Securities Depository Limited331,890,63040.13
2FNZ Custodians Limited55,295,8436.68
3Investment Custodial Services Limited <A/C C>22,786,0812.75
4Forsyth Barr Custodians Limited <1-Custody>18,941,8292.29
5Custodial Services Limited <A/C 3>15,008,7861.81
6Custodial Services Limited <A/C 2>8,433,7691.01
7University Of Otago Foundation Trust6,998,5630.84
8Christine Anne Mansell & Douglas Tony Brown <Harvan A/C>6,956,0240.84
9New Zealand Depository Nominee Limited <A/C 1> Cash Account6,844,3520.82
10PT (Booster Investments) Nominees Limited6,794,9150.82
11
Peter John Whiting & Janet Graham Whiting & Peter Austin Gowing
<Whiting Family A/C>
6,210,1000.75
12Custodial Services Limited <A/C 4>6,008,6330.72
13Southern Capital Limited5,500,0000.66
14JBWere (NZ) Nominees Limited <NZ Resident A/C>4,934,9250.59
15Custodial Services Limited <A/C 18>3,704,7120.44
16Jarden Custodians Limited <A/C 7>3,200,0000.38
17Jarden Custodians Limited <A/C 6>3,000,0000.36
18Custodial Services Limited <A/C 1>2,937,6710.35
19
Barry Winston Jones & Jocelyn Elma Jones & Heritage Trustee
Company Ltd <Winston Investment A/C>
2,713,3440.32
20FNZ Custodians Limited <DRP NZ A/C>2,630,3220.31
5 LARGEST FINANCIAL PRODUCT HOLDERS DISCLOSED BY THE NEW ZEALAND CENTRAL SECURITIES
DEPOSITORY LIMITED AS AT 31 MARCH 2018
RankHolder NameNo of Shares
1HSBC Nominees (New Zealand) Limited - NZCSD58,096,202
2Citibank Nominees (New Zealand) Limited - NZCSD40,967,334
3National Nominees (New Zealand) Limited - NZCSD40,811,624
4Accident Compensation Corporation - NZCSD38,766,438
5BNP Paribas Nominees (NZ) Limited - NZCSD31,252,753
Argosy Property Limited | Annual Report 2018
85
SUBSTANTIAL PRODUCT HOLDERS AS AT 31 MARCH 2018
Date notice filedNo of shares
% of total issued
shares
ANZ New Zealand Investments Limited13-Dec-1741,531,7235.028
Milford Funds Limited19-Apr-1841,366,8665.002
The total number of shares on issue in the Company as at 31 March 2018 was 827,030,390. The only class of shares on issue as at 31 March
2018 was ordinary shares. The number and percentage of shares shown are as advised in the substantial security holder notice to the
Company disclosed by 31 March 2018 and may not be that substantial holder's current relevant interest.
DISTRIBUTION OF FINANCIAL PRODUCT HOLDERS AND FINANCIAL PRODUCT HOLDINGS AS AT 31 MARCH 2018
Holding RangeHolder CountHolder Count %Holding QuantityHolding Quantity %
1 to 9991721.9975,8290.01
1,000 to 1,9992352.73305,3000.04
2,000 to 4,99991710.633,228,1670.39
5,000 to 9,9991,61418.7211,746,9171.42
10,000 to 49,9994,36650.6397,156,46211.75
50,000 to 99,9997698.9251,044,6716.17
100,000 to 499,9994735.4985,945,88210.39
500,000 to 999,999340.3922,606,0682.73
1,000,000 +430.50554,921,09467.10
Total8,623100.00827,030,390100.00
HOLDINGS OF DIRECTORS OF THE COMPANY AS AT 31 MARCH 2018
Director
No of shares non
beneficial
No of shares
beneficial
Michael Smith592,579–
Peter Brook360,288195,071
Mark Cross50,000–
Andrew Evans129,804–
Chris Hunter––
Jeff Morrison1,600,399
DIRECTORS' STATEMENT
The Board is responsible for preparing the Annual Report. This report is dated 22 May 2018 and is signed on behalf of the Board of
Argosy Property Limited by Michael Smith, Chairman and Mark Cross, Director.
P Michael Smith
Director
Mark Cross
Director
Argosy Property Limited | Annual Report 2018
86
Directory
DIRECTORS
Argosy Property Limited
Michael Smith, Auckland (Chair)
Peter Brook, Auckland
Mark Cross, Auckland
Andrew Evans, Auckland
Chris Hunter, Auckland
Jeff Morrison, Auckland
REGISTERED OFFICE
Argosy Property Limited
39 Market Place
Auckland 1010
PO Box 90214
Victoria Street West
Auckland 1142
Telephone: (09) 304 3400
Facsimile: (09) 302 0996
REGISTRAR
Computershare Investor Services Limited
159 Hurstmere Road
Takapuna
Private Bag 92119
Auckland 1142
Telephone: (09) 488 8777
Facsimile: (09) 488 8787
AUDITOR
Deloitte
Deloitte Centre
80 Queen Street
Private Bag 115-003
Auckland 1010
Telephone: (09) 303 0700
Facsimile: (09) 303 0701
LEGAL ADVISORS
Harmos Horton Lusk Limited
Vero Centre
48 Shortland Street
PO Box 28
Auckland 1010
Telephone: (09) 921 4300
Facsimile: (09) 921 4319
Russell McVeagh
Vero Centre
48 Shortland Street
PO Box 8
Auckland 1140
Telephone: (09) 367 8000
Facsimile: (09) 367 8163
BANKERS TO THE COMPANY
ANZ Bank New Zealand Limited
ANZ House
23–29 Albert Street
PO Box 6243
Auckland 1141
Bank of New Zealand Limited
Deloitte Centre
80 Queen Street
Private Bag 99208
Auckland 1142
The Hongkong and Shanghai Banking
Corporation Limited
HSBC House
1 Queen Street
PO Box 5947
Wellesley Street
Auckland 1141
Argosy Property Limited | Annual Report 2018
87
Argosy Property Limited | Annual Report 2018
39 Market Place
Po Box 90214, Victoria Street West, Auckland 1142
P / 09 304 3400
F / 09 302 0996
www.argosy.co.nz
Data sourced from publicly available filings. Our datasets may not be complete. Automated analysis can produce errors. If you believe any data on this page is incorrect, please contact us at hello@nzxplorer.co.nz. For informational purposes only. Not investment advice.
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