New Zealand Rural Land Company sees a silver lining in rising interest rates, with short-term pain leading to long-term gains.
The New Zealand Rural Land Company expects rural land values to remain buoyant, with high inflation driving up the value of its portfolio. Photo:
The rural property investor has revised down its full-year profit outlook amid rising interest rates, but expected economic conditions would eventually strengthen its long-term financial position.
It said cash earnings would be under pressure through to the 2024 financial year, with guidance for adjusted funds from operations (AFFO) revised down 23 percent to 5 cents per share (cps) for FY23, from 6.5cps.
It withdrew a forecast of 6.4cps for the 2024 year ending June, with an update expected to be made sometime in FY23.
The company said it was unable to forecast what affect rising interest rates would have on its total debt of $88.5 million, with just 27 percent of its debt hedged.
However, it expected rising inflation to deliver long-term gains in rents and land values.
Based on Reserve Bank inflation forecasts, it expected land rents to rise 14 percent in leases renewing in 2024, which accounted for 65 percent of its portfolio, with increases of 9 percent in 2025.
As well it expected rural land values to remain buoyant with high inflation driving up the value of its portfolio.