Retail turn-around boosts Kiwi trust's portfolio

Sylvia Park's value rose by $27.4 million to $500 million during the year. Photo / Supplied

Kiwi Income Property Trust's manager said the value of its property portfolio rose $58.7 million, or 3 per cent, to $2 billion in the six months ended March 31, reflecting a turn-around in sales through its shopping centres.

However, it is expecting distributable income for the current financial year will fall slightly due to earthquake-related impacts

Taking into account the $92.3 million of devaluations and property impairments booked in the six months ended September 30, 2011, the net fall in value for the year ended March was $33.5 million, or a 1.6 per cent decline.

The annual outcome reflected a $23.4 million increase to $1.3 billion in the trust's retail assets, particularly its Silvia Park shopping centre in Auckland, and a $67.5 million fall to $567 million in its office portfolio.

That included the $26.8 million write-off of its investment in the quake hit PricewaterhouseCoopers centre in Christchurch and a $34.6 million write-down in the value of the Majestic Centre in Wellington due to a required $35 million earthquake strengthening program.

The trust will receive $69.3 million insurance proceeds for the PricewaterhouseCoopers centre.

"It is pleasing to note the positive valuation outcomes recorded for the trust's retail portfolio which, in combination with a satisfactory settlement of our insurance claim have put us in a positive position at year end where we can record an increase in underlying net assets per unit," said Mark Ford, chairman of the trust's manager.

The recovery in retail sales through its shopping centres, helped by the positive performance of the rural sector and the sound outlook for exports which is beginning to feed through into the general economy, is encouraging, Ford said.

"We do, however, see the need to remain cautious in the current environment and take into account the cost and income impacts of our earthquake strengthening requirements," he said.

"Based upon the outlook for the trust and subject to a continuation of reasonable economic conditions, we are projecting the distributable profit after tax, and distributions to unit holders, for the year ending March 31, 2013 to be approximately 6.6 cents per unit," Ford said.

Net tangible assets per unit rose to $1.10 from $1.07 a year earlier. The trust's gearing of 34 per cent at March 31 would have been about 32 per cent if the insurance proceeds had been received by then.

Sylvia Park's value rose by $27.4 million to $500 million during the year and LynnMall, bought by the trust in December 2010 for $174 million is now valued at $184.5 million. These rises offset a $19.7 million fall to $98.8 million in the value of its competition-affected Centre Place shopping centre in Hamilton which is currently undergoing a $39.9 million redevelopment.

The manager said distributable net profit for the year, excluding the insurance proceeds, is expected to be slightly higher than previous guidance of 7 cents per unit. The final cash distribution of 3.5 cents per unit will take the year's payout to 7 cents.

KIP units are steady at $1.065, up from January's low at 99 cents but down from last November's $1.11 high.