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ING Property Trust loss narrows, breaches covenant on Manawatu JV

Wednesday 19th May 2010

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ING Property Trust, the Auckland-based property investor, narrowed its full-year loss as a write down on the value of its portfolio put it into a covenant breach over its Manawatu Business Park joint venture.  

The trust made a net loss of $53.7 million in the 12 months ended March 31, from a loss of $63.1 million a year earlier after it wrote down the value of its portfolio by $82.7 million. The company’s preferred core operating profit, which strips out interest, tax and valuation movements, fell 13% to $67.7 million. 

The revaluation put ING Property’s Manawatu Business Park joint venture with North East Industrial beyond its security ratio covenant with bank debt at 53.6%, and forced the trust to pour more funds into the development in a partial repayment of the loan. The development was valued at $9 million as at March 31, down 13% from a year earlier.  

ING Property’s total assets were $950 million as at March 31, and with debt at $381 million, below its trust deed limit of debt-to-assets of 50% and its banking covenant of 45%.

The trust’s board recently confirmed it renewed its banking arrangements for the next three years, using a syndicate of three banks, headed by its ultimate owner, ANZ Banking Group. Its portfolio of 81 buildings was valued at $925.9 million, a 5.2% lower than the same time in 2009.  

The trust will pay a final quarter dividend of 1.875 cents per unit, and it flagged it expects to pay a dividend of 7 cents per unit next financial year. 

ING Property shares sank 1.3% to 75 cents on the NZX today, and have declined 6.2% this year.   

Listed property trusts have continued to struggle since the global financial crisis sapped business’ credit lines and the country’s worst recession in 18 years forced tenants to seek out lower rents.

The NZSE Property Group Index has dropped 5.8% this year and has slumped 40% from its peak in mid 2007.  

General manager of the trust’s manager Peter Mence said the property investor boosted average term of leases to 5 years from 4.2 years and was “well-positioned” when compared to its competitors.  

Mence said the completion of its asset sale programme, which surpassed its $100 million target, “provides demonstrable evidence of the benefits of a portfolio of lower average value properties.”

The trust sold 15 properties valued under $20 million for $102.9 million over the financial year.  

The company predicts market rents in commercial office space will continue to decline, and this could impact of property valuations for the sector.

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