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Kiwi Property takes advantage of equity bull run to raise up to $210m

Wednesday 30th October 2019

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Kiwi Property Group plans to take advantage of a  22.3 percent gain in its share price this year to shore up its balance sheet while the going's good, raising up to $210 million of new equity to repay bank debt. 

The owner of the Sylvia Park mall in Auckland said it would sell $180 million of stock at $1.58 a share in a fully underwritten placement, and a further $20 million to New Zealand retail investors, with the ability to accept $10 million of oversubscriptions. Depending on demand, the retail offering may be scaled, it said. 

The offer price will be a 5.4 percent discount to the $1.67 price the shares closed at yesterday and will expand the shares on issue by 8.8 percent. Trading in the shares was halted for a bookbuild,  or auction, today and will resume tomorrow. 

Mark Lister, head of private wealth research at Craigs Investment Partners, said the rally in share prices across all listed property investors means it's a good time to raise capital to dampen the impact of diluting existing shareholders. 

"It's quite a sensible thing to do - you want to raise equity when prices are high rather than when things are shaky," he said. 

Kiwi Property said it will use the funds to cut bank debt to $917.6 million from $1.1 billion, reflecting a reduction in its loan-to-value ratio from 32.9 percent to 27.4 percent. The company's targeted gearing ratio is 25-35 percent. 

Chair Mark Ford said the extra headroom will give the company more flexibility to press ahead with mixed-use developments at Sylvia Park, LynnMall in New Lynn, The Base in Hamilton and the Drury town centre. It will also give Kiwi Property greater freedom to make any acquisitions if opportunities arise. 

The company had almost $200 million of undrawn banking facilities at Sept. 30. 

Lister said Kiwi Property's development programme needed capital and the placement and retail offering would give it options and flexibility if the economy soured. 

When the sector went through a downturn during the 2008 global financial crisis, Kiwi Property was one of several listed real estate companies that raised equity when the share prices were depressed. 

Kiwi Property also said first-half profit dropped 23.8 percent to $36.8 million in the six months ended Sept. 30, due largely to a $12.9 million fair value loss on interest rate swaps. Its funds from operations - the earnings measure used to set dividend payments - decreased 0.8 percent to $51.9 million with net rental income down 0.3 percent at $89.6 million. The year-earlier period included a $2.7 million contribution from the since-sold North City Plaza in Porirua. 

The company reaffirmed guidance for a full-year dividend of 7.05 cents per share, up from 6.95 cents a year earlier. The interim dividend will likely be 3.525 cents.


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