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Colonial First State Property Trust (CPT) release annual results

Tuesday 20th May 2003

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Annual Results for the Year Ended 31 March 2003

Colonial First State Property (NZ) Limited, the Manager of the Colonial First State Property Trust (the Trust) is pleased to present a summary of the annual results for the Trust for the year ended 31 March 2003.

The year has been one of consolidation for the Trust as the Manager has concentrated on the sale of non-core assets and actively managing the core properties within the portfolio. The assets sold were identified for disposal primarily due to their limited growth profile over the medium term. As a result the lease expiry profile of the portfolio has improved, while the reduction in debt provides more flexibility for the Trust going forward.

Trust Financial Performance

The Trust recorded a net operating surplus of $15.9 million before tax and revaluations. This compares with a net operating surplus of $16.8 million for the year ended 31 March 2002. The primary factor influencing the fall in surplus has been the sale and settlement of two properties that have consequently decreased the rental revenue from the Trust's portfolio.

Net property income was $25.0 million, compared with $25.3 million recorded in the previous corresponding period. Total operating expenses were $2.3 million compared to last year's total of $2.5 million whilst interest and finance charges were $6.6 million, above the $6.2 million incurred in the previous period. The reason for this increase was higher interest rate costs, specifically relating to the debt raised for the Millennium Centre acquisition. This debt incurred its first full year of interest over the period, and more than offset the reduction in interest costs associated with asset sales.

Unitholders will receive a final quarterly gross dividend of 2.63 cents per unit, comprising 2.33 cents in cash and imputation credits of 0.30 cents. This brings total gross distributions for the year to 10.52 cents per unit, comprising 9.32 cents in cash and 1.20 cents of imputation credits. The record date for this distribution is 6 June 2003 and dividends will be distributed to unitholders on 20 June 2003.

With the impending settlement of two further properties sold by the Trust and timing issues associated with the refurbishment and re-leasing of some assets, the Directors are forecasting a fall in distributions over the year ended 31 March 2004. The Directors' expectations are for gross distributions in the range of 9.0 - 9.5 cents per unit, inclusive of cash, imputation credits and an element of retained earnings.

Market Performance

Property Trusts remained in favour with the market over the period with investors continuing to support defensive stocks. Within this environment the Trust recorded a total pre-tax return (income and capital) of 13.4%, in excess of the JB Were Property Index which recorded a total return of 11.2% and the NZSE40 gross index which fell 2.8% over the year.

Capital Management

The Trust's total borrowings as at 31 March 2003 were $85.5m, representing 37.6% of gross assets. This compares with borrowings of $106.6 million as at 31 March 2002 (42% of gross assets) with the reduction attributable to asset sales. The settlement of the Sovereign Centre and Trimble Navigation Building have reduced debt by $21.1 million. Unconditional contracts are also in place for the sale of Greenpark and BNZ Vincent Street with settlement of these during 2003 further reducing debt by $14.2 million resulting in an expected debt level of 34.0%.

Net Tangible Asset Backing

Net tangible asset backing (NTA) was 95.88 cents per unit as at 31 March 2003, a fall of 3.4% from 99.29 cents as at 31 March 2002. This decrease has primarily been driven by downward revaluations within the portfolio.

Revaluations

The property portfolio was valued at $225.4 million at the end of the period, down from $250.0 million as at 31 March 2002. The difference is accounted for through asset sales of $21.4 million, an addition of $2.2 million for capital expenditure with the balance attributable to downward revaluations in the portfolio of 2.3% ($5.4 million).

Factors creating the fall in the value are asset specific but include situations where there is over-renting, uncertainty around major lease expiries and significant capital expenditure requirements.

This year the Trust has moved to a policy of rotating valuers with regard to the annual valuation of its assets.

Occupancy

The Manager has been active during the year in maintaining high occupancy rates within the portfolio. At year end occupancy was 98.74% compared with the 98.41% at 31 March 2002.

During the year new leasing transactions were concluded on 12,902 square metres of space across the portfolio, with a balance between new and existing tenants. This represents 11.45% of the total floor area of the portfolio and 12.59% of the total net rental generated by the Trust.

Outlook

Expectations are for a slowing economy in 2003 and therefore a more competitive environment within which to secure tenants. However the low interest rate environment coupled with a sound balance between supply and demand in most property markets is likely to see continuing support for investment real estate.

Whilst there is some caution regarding the year ahead the Trust's assets are well placed to continue attracting quality tenants that support our goal of delivering a reliable revenue stream for investors.

Bond Offer: Infratil Ltd, 7.2 year & 10.2 year unsecured unsubordinated bond


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