Kiwi Property reports 4.3% rental growth and 37.4% gearing in FY26

Robust rental growth and occupancy underpin earnings resilience

Kiwi Property Group (NZX:KPG) delivered a solid operating performance for the year ended 31 March 2026, with net rental income climbing 4.3% to $202.4 million and operating profit before tax up 8.6% to $126.2 million. The company’s portfolio occupancy rose notably to 99.0%, from 96.9% a year earlier, driven by strong leasing momentum across retail-led mixed-use and office assets.

Leasing spreads on new leases averaged 6.3%, with office assets particularly outperforming at 13.4%, reflecting sustained tenant demand for premium space, especially at the Vero Centre where occupancy surged to 99.1%. Retail-led mixed-use assets, including Sylvia Park and The Base, contributed to rental growth of 4.5% across the portfolio.

Strategic asset sales bolster balance sheet and credit rating

Kiwi Property continued its capital recycling programme, completing the sale of The Plaza in Palmerston North for $118.9 million in December 2025 and progressing the conditional sale of ASB North Wharf for $205 million, which received Overseas Investment Office approval post-balance date and is expected to settle in late May 2026. Including this transaction, pro forma gearing is set to fall to a conservative 33.3%, down from 38.4% in FY25.

This deleveraging effort was recognised by S&P Global Ratings, which upgraded Kiwi Property’s credit outlook from Negative to Stable, maintaining an issuer rating of BBB. The improved balance sheet position provides the company with scope to pursue growth opportunities while maintaining financial discipline.

Development progress and portfolio refinement continue

Development at the Drury site advanced materially, with approximately 77% of Stage 1 large-format retail land under contract, including deals with Costco, Harvey Norman, Briscoe Group, and Foodstuffs. Civil works for Stage 1 are underway, and Stage 2 received fast-track consent at the end of 2025, enabling further commercial and retail development.

At Sylvia Park, the opening of a new pedestrian link between IKEA and Level One has boosted foot traffic by nearly 8%, supporting specialty retail sales growth. The southern enhancement project, expanding Kmart’s footprint and adding hospitality options, commenced construction, with Asian grocer STACKS set to open mid-year, reflecting evolving customer preferences.

Sustainability and workforce engagement underpin long-term strategy

Kiwi Property’s sustainability initiatives remain integral to its strategy, with Geneva House achieving a 5.5-star NABERSNZ Energy rating and Vero Centre reducing gas consumption by an estimated 29%. The company continues to invest in energy efficiency and decarbonisation efforts, supported by its $400 million green bond programme fully allocated to certified sustainable projects.

Employee engagement hit a six-year high with an 80% favourable score, reflecting a workplace culture focused on inclusion, development, and wellbeing. The Board refreshed the corporate strategy around four pillars, Assets, Capital, Customer, and Capability, to ensure alignment with long-term objectives and evolving market dynamics.

Dividend growth and leadership transitions

The Board declared a final dividend of 1.4 cents per share, bringing the full-year dividend to 5.60 cents, up 3.7% on FY25. Dividend guidance for FY27 was raised to 5.75 cents per share, targeting the upper end of the 90% to 100% adjusted funds from operations (AFFO) payout ratio. AFFO itself rose 8.0% to $100.2 million.

Leadership changes included the appointment of Shaun Reed as General Manager Capital Transactions and the upcoming arrival of Sarah Theodore as Chief Financial Officer in July, succeeding Steve Penney.

Portfolio valuation and market conditions

Kiwi Property’s total portfolio valuation stood at $3.116 billion at 31 March 2026, reflecting a slight 0.9% decline year-on-year. Retail-led mixed-use assets saw a 1.6% valuation increase, while office valuations softened amid broader market repricing. Development land at Drury recorded a valuation reduction due to higher development costs exceeding valuation uplifts.

Despite macroeconomic volatility, elevated interest rates, and cautious capital markets, Kiwi Property’s high-quality portfolio and disciplined management provide a resilient platform for performance. Retail sales at the company’s centres grew 1.6% to $1.9 billion, with foot traffic up 3.0% to 36.7 million visits.