Kiwi Income well placed for retail recovery
Property investor Kiwi Income Property Trust told investors today that it is well positioned to capitalise on New Zealand’s recovery - when it happens.
The trust said at its AGM that it sees early signs of this turnaround already, with property values stemming their losses to 0.5% in the last six months versus 14% over the last two years, and expects the consumer space to lead the charge as unemployment falls.
“This is expected to initially benefit the retail sector as domestic consumption recovers and the trust is well positioned in this regard with 60% of our portfolio sitting in shopping centre assets,” said Kiwi Income chairman Sean Wareing.
The trust had an annual net loss of $12.4 million, after the value of its property portfolio shrank 3.9% or $74.7 million.
The trust is less gung-ho about its prospects in the office market, which accounts for 37% of its portfolio. Auckland and Wellington are expected to see a significant amount of new office development over the next three years, and the trust anticipates that this will steadily weaken rents until 2013.
Auckland’s vacancy rates are at 13.3%, and Wellington’s is 6.1%.Vacancy rates within the trust’s portfolio currently sit at 5%.
Wareing said the year ahead still posed significant challenges, chief amongst these being economic volatility, higher interest rates and tax costs.
The 2011 distribution outlook for shareholders looks weaker after an increase in the number of units on issue subsequent to the conversion of the 2005 mandatory convertible notes.
Cash distribution for the year ending March 31, 2011, is projected to be 7 cents a unit, representing an after tax yield of around 7.5% per an annum for domestic investors at current unit
Shares in Kiwi Income were last trading 1.1% down, at 93 cents.
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