Friday 22nd August 2014
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Kiwi Income Property Trust (KIP .NZX) is New Zealand’s largest listed diversified property trust with $2.13 billion (as at 31 March 2014) invested in a diversified portfolio of retail and office assets located throughout New Zealand. The Trust was founded in 1992, and a year later became New Zealand’s first listed property trust. KIP invests only in New Zealand real estate, a mandate which it has followed since inception.
The Trust listed on the NZX in December 1993, following an issue of 45 million units at $1.03. Proceeds from the public issue were used to acquire the North City Plaza, near Wellington, and subsequent expansion saw a series of acquisitions and developments in the retail, commercial and industrial sectors. 1998 saw commencement of the 38-level Royal SunAlliance Centre in Auckland, through a new listed vehicle Kiwi Development Trust, which became wholly owned in 2001 following a successful share exchange offer for the balance of units on issue. In November 2004 it acquired a 19.9% stake in Capital Properties NZ Ltd at $1.15 per share. In October 2007 the Trust confirmed it had registered as a Portfolio Investment Entity (PIE).
At 31 March 2014 the Trust’s portfolio comprises 12 assets located across New Zealand. Some of its iconic retail portfolio consist of Sylvia Park and Lynn Mall in Auckland, Centre Place in Hamilton, The Plaza in Palmerston North and Northlands in Christchurch. KIP’s Office portfolio consists of Vero centre and the newly built ASB North Wharf in Auckland and The Majestic Centre, 44 The terrace and Unisys House in Wellington. In January 2014, Kiwi Income Property Trust settled the sale of the first 50% interest in its office complex at 205 Queen Street, Auckland. In June 2014, the Trust settled the sale of its remaining 50% interest in its office complex at 205 Queen Street, Auckland.
Kiwi Income Property Trust posted a 7.8 percent drop in annual profit as costs from exiting its management contract with Commonwealth Bank of Australia outweighed valuation gains and insurance payments. Net income fell to $101.3 million in the year ended March 31, from $109.8 million a year earlier although revenue rose 5 percent to $208.7 million.
Kiwi Income paid $74.5 million to exit its management contract with CBA, taking the management inhouse, and plans to put a proposal to investors later this year to move to a company structure which it says will reap savings and greater protections under the Takeovers Code and Companies Act.
In the past year, the trust increased its after-tax distributable income by 25 percent to $76.3 million. Net rental income rose 9.7 percent to $148.7 million as it benefited from new and refurbished properties. The trust paid a final distribution of 3.2 cents per unit, taking the annual payment to 6.4 cents
The value of the trust's property holdings increased by $8.5 million over the past year, taking the total value to $2.13 billion. The value of its interest rate derivatives rose by $29.1 million and it gained $52.9 million from insurance and litigation settlement.
Kiwi Income expects its distribution reserve and the financial benefits from taking its management contract inhouse will enable it to forego 21 months without rent from its building at 56 The Terrace in Wellington from November as the property undergoes a $67 million refurbishment ahead of a new 18-year lease with the Ministry of Social Development. It expects that to increase to about 6.5 cents in the coming year as it benefits from a strengthening economy.
DISCLAIMER: To the extent that any of the content above constitutes advice, it is general advice that has been prepared without reference to investor’s objectives, financial situation or needs. Before acting on any advice, investors should consider the appropriateness of the advice and IRG recommend that investors should obtain appropriate financial, legal and taxation advice before making any financial investment decision. The report is based on information compiled from public information and private research. IRG have completed the report on a best endeavours basis and do not accept any liability of loss or damage. IRG suggest that clients use this as part of a decision making process and check key data before making any investment decisions.
Employees may have an interest in the securities discussed in this report.
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