KEY POINTS:
Kiwi Income Property Trust is reporting a net reduction of about $51 million in the value of its portfolio of office and retail properties.
The reduction for the six months to the end of September decreases the value of the trust's total portfolio by 2.5 per cent to $2.03 billion.
Sean Wareing, chairman of trust manager Kiwi Income Properties, said the "softening trend" in property values was expected to continue.
But he expected any such movement to be "reasonably contained", given the quality of the trust's portfolio, he said.
Distributions to unit holders were not expected to be adversely affected by the fall in portfolio value, or by any further devaluation, Mr Wareing said.
It was necessary to remain cautious in the current economic environment, but on the basis that there would not be any further major deterioration in economic conditions, a cash distribution for the year to the end of March 2009 of 9 cents per unit was being projected.
The reduction in portfolio value decreases the undiluted net tangible asset backing per trust unit by about 7c, before adjusting for deferred tax. At March 31 this year, the trust's adjusted undiluted net tangible asset backing per unit was $1.751.
Mr Wareing said the trust was well positioned to continue to perform strongly in the more challenging environment being faced with uncertainties in global financial markets.
It had a diversified high quality property investment portfolio with more than 850 tenants and had a 99 per cent occupancy level and prospects for rental growth.
The trust's property valuations are usually updated annually but the manager's board decided that in the current environment a half year valuation would be prudent, and commissioned the September independent external valuation.
Chief executive Chris Gudgeon said solid rental growth had partially offset the effect of softening capitalisation rates.
The weighted average cap rate increased from 7 per cent as at March 31 to 7.3 per cent as at September 30, with the portfolio under-rented by an average of 5 per cent.
"Stronger than expected rental growth led to increases in value for Sylvia Park, the trust's flagship retail asset, and the Majestic Centre and Unisys House in Wellington," Mr Gudgeon said.
- NZPA
