This article is from the Australian Property Journal archive
ASTRO Japan Property Group has taken a battering, yesterday the group delivered a weaker net operating profit after tax result of $47.7 million for the year to June 30, down from $64.9 million in the previous year.
AJA posted a statutory net loss after tax of $A111.9 million for the full year, reflecting non-cash adjustments of approximately $A159.6 million. The non-cash adjustments were primarily downward property revaluations of approximately $A150.7 million for the full year.
A final distribution of 3.50 cents per security was announced bringing the total distribution for the year to 7.00 cents per security, in line with guidance provided at the start of the year. The 2010 distribution was less than the total cash flow generated of 9.61 cents per security as funds were retained and used for capital management purposes.
AJA senior advisor Eric Lucas said the difficult operating environment in Japan has continued to have an impact on performance, particularly across the office segment of the asset portfolio with ongoing pressures on rent levels.
AJA’s property income declined 26.4% from $112 million to $82.4 million.
But Lucas said despite these macroeconomic pressures, the cash flow performance of the portfolio continues to be resilient and occupancy levels remain high at 93% by area.
AJA’s interests in 15 properties were revalued, resulting in a decrease in fair value of the total portfolio of 4.7% to ¥113.9 billion ($A1.5 billion). Net tangible assets fell 23.7% to 71 cents per security from 93 cps.
Lucas said retail assets were only marginally reduced and is showing signs of stabilising. Office assets however, showed continued weakness, with downward revaluations for this segment accounting for just under 80% of the overall downward portfolio revaluation. In particular, sharp downward revaluations occurred for two office assets located in the Osaka market, which is currently considerably weaker than Tokyo.
The total downward revaluation in property fair values over the last twelve months was ¥11.6 billion (9.2%) following fair value adjustments of ¥6.0 billion at December 2009 and ¥5.6 billion at June 2010. The weighted average capitalisation rate used by valuers for the portfolio moved to 5.6% as at 30 June 2010 from 5.5% as at 30 June 2009.
“Whilst we were disappointed to see values fall, the decline was far less than the prior year. The rate of increase in capitalisation appears to have slowed significantly over the 2010 financial year, suggesting the cyclical expansion in capitalisation rates is beginning to conclude,” he added.
Portfolio occupancy by area remains high at 93.0% compared to 94.0% as at 30 June 2009 however, overall rental levels declined, particularly in office assets.
Portfolio gearing was 75.5% as at 30 June 2010, resulting principally from downward property revaluations over the last twelve months. Overall portfolio gearing continues to have no impact on any loan terms or covenants.
Lucas said with Japan and global markets showing signs of stabilisation during the 2010 financial year, there is hope the year ahead will see a stabilisation – and even in places perhaps an improvement – in cap rates in Japan and also that the cyclical pressures of declining rent levels may begin to ease.
Based on current market conditions and the anticipated outcome of the December 2010 refinancing, the board has forecast distribution for FY11 of 4.50 cents per security.
Australian Property Journal
