One-off gains skew Kiwi Property's outstanding result

The country's largest listed property investor has forecast continued growth, after yesterday producing a record $72.1 million annual profit.

But Angus McNaughton, chief executive of Kiwi Income Property Trust's manager, said the outstanding result was skewed by two one-off gains - a big share deal and a property sale.

He predicted investor payouts next year would be at least as good as this year, even though the retail sales sector was forecast to soften.

Kiwi, trading yesterday at an all-time high of $1.35, has significant shopping centre assets, including the new $388 million Sylvia Park in Mt Wellington. Its first stage is due to open next month and the second of four stages will open later this year.

Kiwi's unitholders will get a payout of 9.10c a unit and McNaughton projected a gross distribution next year of no less than that.

Kiwi's property assets grew from $1.26 billion to $1.45 billion, its after-tax profit was 37 per cent up and it booked revaluation gains of $103.2 million.

Predictions of continued employment growth would help Kiwi to keep its office occupancy levels up, and property sector fundamentals were expected to remain sound, McNaughton said.

Sean Wareing, chairman of Kiwi's manager, said the good result was due to robust real estate market conditions, leasing success, expansion of the real estate portfolio, redevelopment of the trust's assets and divestment.

McNaughton said 70 per cent of revaluation gains were from office investments, including Auckland's Vero Centre, which rose in value almost $30 million, and Wellington's Majestic Centre, up $11.2 million.

Mark Lister, an analyst with ABN Amro Craigs, praised the result but said a $13 million one-off gain from Kiwi's sale of its Capital Properties' stake and the $29 million sale of the AUT Building in Auckland were included in the result. These factors somewhat skewed the figures and made the result hard to compare with last year. McNaughton said that excluding these two one-off gains, net profit was up 9.3 per cent.

Lister said the result was still impressive.

"Rents were up about 3.5 per cent on the previous year, the revaluation gains are great and highlight the strength of the underlying property market, particularly for high-quality assets," he said.

"The portfolio looks in good shape, with occupancy up at 99.5 per cent. The progress on Sylvia Park is the most pleasing of all the news. The fact that leasing demand is strong and that the development is progressing on budget and on time is great," Lister said.

* Kiwi's annual report is due out on June 16. Its annual meeting is on August 18.