NZX RELEASE
11 November 2013
Kiwi Income Property Trust – Internalisation Recommendation
Subject to Unit Holder approval, the Independent Directors of Kiwi Income Properties Limited, the Manager of Kiwi Income
Property Trust, and Commonwealth Bank of Australia (“CBA”) have reached agreement to internalise the management of Kiwi
Income Property Trust (“Trust”) for a net payment of approximately $70.6 million.1
1 All amounts described in this announcement are excluding GST (if any).
2 Based on 31 March 2013 financial information as a guide and excluding the impact of the Manager’s performance fee
(including any performance fees payable would increase the expenditure savings).
Mark Ford, Independent Director and Chairman, said: “The Independent Directors provide their unanimous support to the
internalisation proposal. We firmly believe it is in the best interests of Unit Holders.”
Internalisation of management is expected to result in pre-tax net expenditure savings of approximately $8 million per
annum (after funding costs)2. It will remove the need to fund the current Manager’s base remuneration and performance
fees, realising significant on-going future savings.
Based on 31 March 2013 financial information, the net payment equates to a revenue multiple of approximately 2.8x and an
earnings before interest and tax (EBIT) multiple of approximately 6.6x. These multiples are in line with New Zealand
comparable transactions.
Further, if approved by Unit Holders, the internalisation will:
- establish a New Manager which will be controlled by Unit Holders;
- enable the smooth transition of management and staff, and the retention of management capability, institutional
knowledge, systems and business infrastructure;
- lead to all Directors being appointed at the direction of Unit Holders;
- remove the option of CBA selling its fund and property management rights in the Trust to a third party;
- provide an expected increase in profit before tax equivalent to approximately 0.81 cents per unit as a result of the
net expenditure savings to the Trust, based on 31 March 2013 financial information; and
- provide further alignment of interests between management and Unit Holders, with the New Manager to operate on a
break-even basis.
Financial consideration, financed by the Trust through existing debt facilities, would involve a net payment of
approximately $70.6 million to CBA resulting from:
- a Termination Payment of $72.5 million to CBA for the relinquishment of its fund and property management arrangements;
and
- the acquisition by the New Manager of the business assets of Kiwi Income Properties Limited (“Manager”) and Kiwi
Property Management Limited (“Property Manager”) for approximately $0.65 million reduced by the assumption of
approximately $2.6 million of employee liabilities of the Manager and Property Manager.
The Termination Payment of $72.5 million should be deductible for tax purposes meaning that the net cost of the
internalisation should equate to approximately $50.3 million.
The Trust otherwise continues as a trust established under the Unit Trusts Act, with a corporatisation proposal to be
put forward to Unit Holders in due course.
Unit Holders will be invited to vote upon the recommendation to internalise management at a special meeting which has
been scheduled for 12 December 2013.
A Notice of Special Meeting, including an Explanatory Memorandum and an Independent Appraisal Report from Deloitte, is
expected to be released to NZX on or about 20 November 2013 and sent to Unit Holders around 26 November 2013.
ENDS