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Kiwi Income Property sees smaller payout in 2014 as annual earnings fall 15 percent

Monday 13th May 2013

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Kiwi Income Property Trust, the owner of Auckland's Sylvia Park Shopping Centre, reported a 15 percent fall in annual earnings due to a drop in rental income and expects to pay a smaller return to investors in 2014.

Distributable earnings, the favoured profit measure for property investors which strips out unrealised movements in the value of the portfolio, fell to $61.2 million in the 12 months ended March 31 from $71.7 million a year earlier, the manager of the Auckland-based trust said in a statement. Net profit rose 23 percent to $109.8 million as revenue declined 4.3 percent to $198.7 million. The increase in net profit was primarily attributed to fair value change from negative $2.3 million to $11.7 million in interest rate derivatives in 2013. Similary the fair value change in property revaluation changed from negative $9.6 million to $21 million mainly based on the increase in value of  KIP's retail properties such as Sylvia Park and New Lynn shopping centres. Together these two items in the income statement contribute 27.8 percent towards that 23 percent increase.    

The fall in operating earnings came from the smaller revenue stream after the sale of Beca House in Auckland, higher interest costs and a bigger fee paid to the trust's manager, Kiwi Income Properties.

The manager, a unit of Australia's Colonial First State Property, reaped a $3 million performance fee in the year, having exceeded the "total return performance fee of 10 percent per annum" in both halves.

"From an operational perspective, we have focused on enhancing the security of future rental income streams through an active leasing programme and by making solid progress on developments and projects underway at ASB North Wharf, Centre Place Shopping Centre, the Majestic Centre, and Northlands Shopping Centre," chief executive of the trust's manager Chris Gudgeon said.

The board declared an imputed final cash distribution of 3.3 cents per unit, taking the total payment to 6.6 cents, in line with forecasts. The payment's record date is May 28, with a payment date of June 17.

Kiwi Income's manager expects to make a total return of 6.4 cents per unit in the 2014 financial year, due to the moderate recovery in New Zealand and the ongoing costs of earthquake strengthening.

The units rose 0.8 percent to $1.22 on Friday, and have gained 6.1 percent this year. The stock is rated an average 'underperform' based on six analyst recommendations compiled by Reuters, with a median target price of $1.13.

The trust's investment property portfolio was valued at $2.08 billion as at March 31, up $21 million from a year earlier. Occupancy improved 1 percentage point to 97.2 percent, with an increase in weighted average lease term by 0.4 years to 4.3 years.

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