Great Gatsby comes to the party
Gatsby helped to propel Challenger Diversified Property Group's rise of 9 per cent in net profit to $39.3 million for the 2013 year.
In spite of a deteriorating office market and flat retail for apparel, the group has forecast a 4 per cent rise in "normalised' earnings (before one-off items) and distributions for 2014.
The Baz Luhrmann blockbuster of the fictional US millionaire drew crowds into the group's cinemas, leading to a 6 per cent rise in sales contribution.
A revamp of the Jam Factory mall in Melbourne and low office-leasing expires combined to push the 2013 total distribution up 6 per cent to 17.8¢ with a payout ratio of 85.6 per cent. The final distribution was 8.2¢, payable August 30.
The earnings and distribution guidance for the year to June 30, 2014, was 22.3¢ per unit and 18.5¢ per unit, respectively.
Using the Property Council of Australia's standard, the group's available funds from operations had a payout ratio of 95.2 per cent. More companies are expected to use this standard in the coming reporting season.
Challenger's profit before property valuations and depreciation was 0.6 per cent lower at $44.5 million, which was in line with expectations and also consistent with the group's update issued in June.
The fund's manager, Trevor Hardie, said he was pleased with the results in a time of weaker office markets and flat industrial and retail sales. He said the blockbuster movies such as The Great Gatsby were a major contributor to the retail malls.
Challenger's portfolio comprises interests in 27 properties in Australia and France. This year, all properties have been independently valued. The fair value of properties was relatively unchanged and Challenger's portfolio mix was 59 per cent office, 19 per cent retail - predominantly food - about the same for industrial and the rest in business parks that have been earmarked for sale.
The French assets remain on the market, although the recent decline in the Australian dollar has helped boost the values for prospective European buyers.
"The repositioning of the Jam Factory shopping plaza in Melbourne's Prahran was completed and included refining the tenancy mix, upgrading the car-park facilities and expanding the office space," Mr Hardie said. "The Jam Factory made a significant contribution to growth in net property income during the year."
There was also an extension in the term of the Village Cinema lease at the Jam Factory to 2029.
In Sydney, the group also completed the repositioning of the Domain car park which led to higher fees and improved occupancy. "Car parks tend to track office markets, but it is stable in the medium term," ," Mr Hardie said.
"For office, while we are forecasting a weak outlook, we have a low weighted average leasing expiry of four years and we have renegotiated with Cisco Systems for a lease for 7090 square metres at The Forum, Cisco St, Leonards, to 2019."