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Revaluations buoy steady Kiwi

By Chris Hutching

Friday 30th May 2003

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Kiwi Income Property Trust enjoyed upward revaluations on its property portfolio but the $90 million redevelopment of Northlands Shopping Centre in Christ-church and the effects of a rights issue and conversion of B class shares means its total dividend payout for the year will be lower at 8.5c a unit than last year's 10.15c a unit.

The after-tax result for the year ending March, while 3.2% higher at $44.7 million on turnover of $71 million, was in the mid-range of most analysts. It was achieved from improved leasing and lower interest costs due to the repayment of debt with proceeds from the $69.3 million rights issue for Northlands.

Chairman Jim Syme said the result showed the defensive characteristics of the trust placed it in a good position to weather uncertainty in financial markets and take advantage of an upswing in investor confidence when it occurs.

Positive highlights during the year included the $2.3 million increase in the value of the Royal & SunAlliance Centre to $204.5 million, with all areas fully leased, upward revaluation in the trust's portfolio by $6.1 million, and completing refurbishment of The Plaza's Foodcourt in Palmerston North, yielding 15% on the $1.5 million in capital expenditure.

With the exception of Northlands, the commercial and retail portfolio is 98% leased.

KIP is doubling the size of Northlands to 40,700sq m, which it says will become one of the largest enclosed malls in New Zealand. It has leased 54 of the new specialty store spaces. Chief executive Angus McNaughton said 37 new retailers had signed up to the first or second stage. A total of 120 stores are planned, with the first 54 opening in July.

A concern of analysts is the proliferation of new retail spaces in Christchurch as National Property Trust completes its Eastgate expansion, with a similar revamp at The Palms in Shirley and plans by Westfield to redevelop Riccarton. The city is also well supplied with other smaller malls.

Five major retailers are confirmed as anchor tenants for the centre ­ Farmers, Pak 'N Save, The Warehouse, Hoyts Cinemas, and Countdown Supermarket.

The trust's ratio of debt to total assets improved from 29.2% to 22.4%, largely due to the rights-issue proceeds repaying debt. Total assets grew $31.6 million to $911.6 million, while investors' funds stood at $665.9 million compared with $585.9 million last year.

The share price was trading at $1.10, higher than the $1.07 net tangible asset backing, indicating that the shares are fully valued. Market capitalisation increased by $131.2 million to $663.6 million.

The trust has just completed a $25 million placement to fund the acquisition of the 31-store Downtown Plaza in Hamilton, where it is undertaking due diligence and has a conditional purchase contract. Proceeds from the placement of 23,584,906 units at $1.06 per unit will repay debt if the purchase of the Downtown Plaza doesn't go ahead.

The new issued units rank equally with ordinary units and will participate in the dividend for the year to March 31, 2003, payable in June 2003. Mr McNaughton said the participation of the new shares in the dividend payout would only have an effect of a "fraction of a cent."

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