Lower costs lift Challenger profits
Sydney Morning Herald
Wednesday February 9, 2011
THE Challenger Diversified Property Fund has set the tone for the 2010-11 interim reporting season with a positive result driven by lower costs and higher revenue.The directors' commentary was cautiously optimistic but asset sales, capital management initiatives and declining rental incentives are all on the agenda for the next six to 12 months.During the half-year the fund sold one property in France as it refocused on Australia. It plans to sell the remaining French properties - collectively valued at $52 million - in the second half of this year.In the six months to December 31, the fund reported profit from operating activities of $25.3 million, up 2.6 per cent on the previous first half.Lower rental income due to the sale of properties and a lower occupancy rate were offset by lower financing costs and annual rent increases. Statutory net profit after tax was $30.1 million, compared with a $13.7 million loss in the first half of 2009-10.The fund's portfolio comprises interests in 29 office, retail and industrial assets in Australia, making up more than 90 per cent of the fund's assets, and property in France.The fund also holds a cumulative 25-year leasehold on Sydney's Domain car park. The reopening of Pitt Street Mall as a retail precinct was said to have increased demand for the car park.Trevor Hardie, the manager of the Challenger fund, confirmed an interim distribution of 2 a unit and reiterated a full-year guidance of 4 a unit.He was pleased to report the modest increase in operating profit during a period of portfolio renewal."Four properties were sold in the half year, with investment properties sold at or above book value," he said. "Demand is rising from overseas investors for these type of high quality assets, with the cash received being used to buy more assets in Australia. One close to completion is at 31 Queen Street, Melbourne."Once we have completed the sale of the French properties we will look at capital management initiatives, such as a share buyback."Deutsche Bank analysts said it was a solid result driven by falling costs and increased revenue, or property income."This occurred despite a decrease in portfolio occupancy to 91.5 per cent from 94.7 per cent as at June 2010," the brokers said.The fund's critical net tangible asset value rose 1.5 per cent over the period to 67 a share.
© 2011 Sydney Morning Herald
