KEY POINTS:
Rapidly falling property values have forced the biggest listed real estate entity into the red, with Kiwi Income Property Trust this week announcing a $31.3 million after-tax loss.
The trust, floated in 1993, has never made a loss before, according to one senior executive.
Buildings owned by the giant office block and mall landlord were devalued by $52 million, resulting in the "paper" or unrealised loss for the half year to September 30.
Kiwi released its result at the close of trade on Wednesday, showing how a blue chip portfolio previously valued at $2.09 billion was now worth just $2.05 billion and projected to be worth less soon.
Kiwi owns Vero, the country's most sophisticated and biggest office block on Shortland St in Auckland. That 40-level tower was devalued by $6.3 million in the half-year, appraised at $328 million at the end of September.
A $6.8 million drop in the value of the National Bank Centre on Queen St saw it valued at $117.8 million by September.
But Kiwi's mall in Porirua took the biggest hit, devalued by $14.8 million to $113 million.
Kiwi's giant Papanui mall in Christchurch lost $7.6 million in value and was worth $250 million at September and the trust's Hamilton mall dropped by $6.4 million to $122 million.
Sylvia Park, Kiwi's new Mt Wellington mall, bucked the trend, adding $2 million in value to hit $479.2 million but spare land surrounding that centre was written down by $5.4 million to $18.4 million. Kiwi has big plans to build a series of stage office blocks surrounding Sylvia Park.
Overall, the trust's retail properties saw $28.1 million of value wiped out and the properties were worth $1.1 billion at the end of September. The office portfolio was worth $841.7 million, down $15.6 million in the six months.
Kiwi's presentation, posted on its website, flagged more write-downs. But the valuation outlook got even grimmer when it mourned "lack of transactional evidence", a reference to so few property deals being made in the depressed market.
"Further value reductions anticipated, however these are likely to be reasonably contained, given the quality of the trust's portfolio," Kiwi's presentation said.
Sean Waring, chairman of Kiwi's manager, dismissed the devaluations saying the $52 million was only 2.5 per cent of the portfolio and such a small reduction was "testimony to the trust's defensive qualities."
ABN-Amro Craigs ranks Kiwi a "buy", praising it as the largest of the listed entities, having significant diversity and modest gearing of 28 per cent.
"While KIP has a high level of retail exposure, we take comfort that vacancy rates are at record lows, and that portfolio and tenant quality is high, so there is a lower likelihood of tenants exiting unexpectedly," ABN said last month.
Rob Foster and David Oxley of ABN issued a note this week after Kiwi flagged an 11 per cent drop in distributions to 8 cents a unit for the full year.
Kiwi was limiting its payout ratio to match underlying operating earnings, they said, praising this as a prudent move in the challenging property environment.
Mark Lister of ABN-Amro Craigs said listed property trusts like Kiwi paid out all their earnings so reducing distributions was effectively withholding earnings.
"Why do you withhold earnings, if you are confident about the next 12 months? Kiwi is right on the coalface of what New Zealand consumers are doing, how they are spending their money so to me it says 'we are being prudent and conservative; second we are taking a negative view of the economy and third Chris [Gudgeon], the new chief executive, doesn't want to be in a position where he's too optimistic and he will err on the side of caution."
