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Portfolio gain, rental income growth delivers record annual profit for Kiwi Property

Monday 16th May 2016

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Kiwi Property Group, the country's biggest listed property investor by market value, reported a 118 percent jump in full-year profit reflecting an increase in its portfolio value, higher rental returns, and lower costs including interest charges.

Net profit rose to $250.8 million in the year ended March 31, from $115 million a year earlier, the Auckland-based company said in a statement. Total come grew 126 percent to $391 million and included a 2.3 percent gain in property revenue and a $176 million gain in the value of investment properties.

Kiwi lifted its cash dividend to 6.6 cents per share, in line with guidance and up from 6.5 cents a year earlier. It forecast an increase to 6.75 cents for the 2017 year. The company has been "recycling" its capital, selling assets such as the Hamilton Centre Place South and targeting properties with greater growth potential, such as a 50 percent stake in The Base , which it has agreed to buy for $192.5 million, and Westgate Lifestyle, acquired for $82.5 million.

"As we look forward to the year ahead, Kiwi Property is well positioned relative to our shareholder goals, chairman Mark Ford said. "The New Zealand economy continues to grow positively and investment property fundamentals remain supportive, particularly in Auckland.”

Rental income from its biggest retail property, Sylvia Park, rose 1 percent to $36.4 million, while income from its biggest office property, the Vero Centre, gained 5.2 percent to $20 million. Overall rental income from its retail portfolio rose 5.9 percent to $104.9 million and income from its office portfolio fell 7.9 percent to $38.2 million, mainly reflecting a drop in the Aurora Centre, which has been vacant since November 2014 for refurbishment, and the loss of income from 205 Queen, which was sold in June 2014. Property management fees rose 3.6 percent to $8.6 million.

Total expenses dropped 21 percent to $119.3 million, including a 1.1 percent decline in direct property expenses to $51.6 million and a 19 percent decline in interest and finance charges to $33.5 million, the company said. Its net fair value loss on interest rate derivatives widened to $17.6 million from $13.1 million.

The reduction in its interest expense reflected a 26 percent drop in bank interest to $31.1 million after it used proceeds of a one-for-nine entitlement to repay debt, while the conversion of its mandatory convertible notes in December 2014 meant it didn't incur interest on the notes, compared to $8.4 million a year earlier. Interest on bonds rose 48 percent to $8 million representing a full year of interest on bonds issued in August 2014.

Kiwi's weighted average lease term or WALT, rose to 5.1 years from 4.5 years while the occupancy rate across both retail and office properties increased to 98.7 percent from 98.4 percent.

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