Monday 24th May 2010
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Kermadec Property Fund, the property investor that sold its Berkeley Cinema and Retail Complex in Takapuna last year, posted a smaller full-year loss and flagged 2012 for when the government’s new depreciation rules will start to hit earnings.
The Auckland-based firm had a net loss of $2.6 million in the 12 months ended March 31, compared to a loss of $11.9 million a year earlier. Its preferred profit measure, the distributable earnings, which excludes property revaluations, mark-to-market of interest rate swaps and deferred tax, sank 34% to $3.4 million. The fund’s manager, Augusta Funds Management, said changes to tax depreciation rules will hit its distributable earnings starting in 2012.
“We will be adjusting our distributions to shareholders to match our operating cash earnings, less a reasonable buffer for capital expenditure,” the company said in a statement. “Our expectations are that the distribution level will reduce from 5 cents per share to 4 cents per share from the 2011 financial year.”
Listed property funds have struggled this year as commercial landlords were hit by the fall-out of the country’s worst recession in 18 years, with tenants looking to shift their offices away from central business districts. Commercial property investors will also get hit by new depreciation rules that prevent property owners from claiming depreciation on buildings.
Kermadec’s bottom line was hit by a $5 million write-down in the value of its investment property portfolio, and a $1.5 million loss on the sale of two properties. The company will continue its asset sale programme, and has unconditionally sold a further three properties for some $11.1 million, which will be settled by June 30.
The proceeds from its asset sales have been used to pay down debt, and it expects to cut its net gearing to about 29% in the next two months. It will review its total debt facilities between June and August next year, and expects its “much reduced facility requirements” will be renewed.
Kermadec will end its dividend reinvestment programme immediately, and is proposing to undertake a share buyback from next month.
The shares were unchanged at 48 cents in trading today, and have declined 5.9% this year.
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