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Kiwi Income Property Trust's Value Down But Rent Up

Fuseworks Media
Fuseworks Media

Wellington, March 27 NZPA - Kiwi Income Property Trust has seen $162.2 million shaved off the value of its property portfolio in six months, which it puts down to global economic conditions.

Its total portfolio value for the financial year (ending March 31) has now reduced by $214.2 million, meaning the value of the trust's total portfolio shrank by 10.1 percent to $1.91 billion in the year, it reported to the NZX today.

But solid rental growth has offset the bad news.

Kiwi Income Property Trust owns Sylvia Park Shopping Centre, Vero Centre and National Bank Centre in Auckland, the Majestic Centre and other buildings in Wellington and Christchurch, and shopping centres in Hamilton, Palmerston North, Porirua and Christchurch.

"The decline in the value of our property portfolio over the past year is a reflection of adverse global economic conditions and negative sentiment in financial markets worldwide," said Sean Wareing, chairman of the manager of the trust.

Despite a challenging environment, the underlying operating earnings remained sound as it had a diverse range of retail and office properties and a diverse and high-quality tenant base, he said.

The trust enjoyed 98.6 percent occupancy with a weighted average lease term to expiry of 4.3 years.

At March 31 bank debt was expected to represent about 33 percent of total assets.

The adjusted undiluted net tangible asset backing per unit is expected to reduce to about $1.361.

"Our historical focus on maintaining a strong balance sheet, with a conservative bank debt to total assets ratio, has enabled us to absorb this adjustment in asset values," Mr Wareing said.

The trust's weighted average cost of bank debt as at March 31 was expected to be about 6.4 percent, down from 7.6 percent last year.

The trust had no bank debt that expires before the 2012 financial year and the combined banking facilities will have a weighted average duration of 2.9 years.

Chief executive Chris Gudgeon said solid rental growth had partially offset the effect of softening capitalisation rates.

The weighted average capitalisation rate for the investment portfolio increased 75 basis points from 6.98 percent to 7.73 percent.

"The total investment portfolio has been assessed to be under-rented by an average of 4.1 percent. The trust's office portfolio still offers the prospect of continuing rental growth with rents in our office buildings assessed as being 8.7 percent less than market."

This counters the more subdued outlook for the retail portfolio where prospects for rental growth are constrained by current market conditions.

Kiwi Income Property continued to project a cash distribution for the year of 8 cents per unit, representing an after tax return of 8.25 percent at current unit prices (equivalent to a 12.3 percent pre-tax return for 33 percent tax payers).

Kiwi Income Property Trust's shares were down 1 cent to 97c today.

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