Kiwi Income Property Trust Announces Annual Result

Full release: 140516_NZX_Result_Announcement_FINAL.pdf

NZX RELEASE

20 May 2014

KIWI INCOME PROPERTY TRUST ANNOUNCES ANNUAL RESULT

FOR THE YEAR ENDED 31 MARCH 2014

Kiwi Income Property Trust today announced its annual result for the year ended 31 March 2014, delivering an operating profit before other income/(expenses) and tax1 of $78.7 million, up $9.3 million or 13.4% on the previous year. After taking into account property and interest rate derivative revaluations, insurance income and the cost of terminating the previous management arrangements, the Trust reported an after tax profit2 of $101.3 million. This result is after $74.5 million of internalisation costs and compares with an after tax profit of $109.8 million in the prior year.

1 Operating profit before other income/(expenses) and tax and distributable income are alternative performance measures used by the Trust to assist investors in assessing the Trust’s underlying operating performance and to determine income available for distribution. Refer to the summary financial results in Attachment 1 for full details of how these measures are calculated.

2 The reported profit has been prepared in accordance with New Zealand generally accepted accounting practice and complies with New Zealand Equivalents to International Financial Reporting Standards. The reported profit information has been extracted from the annual financial statements which have been the subject of an audit pursuant to New Zealand Auditing Standards issued by the External Reporting Board. Refer to the summary financial results in Attachment 1 for further information.

With the Trust in a nil tax paying position, distributable income after tax1 was $76.3 million, up $15.1 million or 24.7% on the previous year. Unit Holders will receive a final cash distribution of 3.20 cents per unit, taking the full-year cash distribution to 6.40 cents per unit, in line with guidance.

Mark Ford, Chairman of the Manager of the Trust, said: “As we mark the Trust’s 20th year since listing on the New Zealand Stock Exchange, we can look back with some satisfaction at a long history of delivering consistent, sustainable returns to Unit Holders, with an average total return of 9.7% per annum since inception.

“Our anniversary year also delivered a new era of independence, with Unit Holders voting overwhelmingly in favour of a proposal to internalise the Trust’s management to create New Zealand’s largest internally managed, diversified property trust.

“This is an exciting time for the Trust. The internalisation reduces operating costs and provides investors with greater control and superior alignment of interests,” Mr Ford added.

Chris Gudgeon, Chief Executive of the Manager of the Trust, said: “From an operational perspective, net rental income of $148.7 million was up $13.2 million or 9.7% on the previous year, driven by the inclusion of the new ASB North Wharf building into the portfolio, the completion of the Centre Place Shopping Centre redevelopment, the reinstatement of 11 stores at Northlands Shopping Centre and solid rental growth at Sylvia Park Shopping Centre.”

Strategy review

Following internalisation, the opportunity has been taken to reconfirm the Trust’s objective, set strategic goals and review strategy. Mr Ford said: “The Trust’s objective, which has served investors well for the past two decades, has not changed. We remain committed to providing investors with a secure, reliable investment in New Zealand property, and will continue to target superior risk-adjusted returns over time through the ownership and active management of a diversified, high-quality portfolio.

“For our investors, our goal is to deliver long-term total returns greater than 9% per annum, underpinned by pre-tax distributable earnings growth per unit of at least 2% per annum.”

Mr Gudgeon said: “The strategy we deploy to deliver on our goals continues to have three core pillars. We will maintain a strong balance sheet with conservative gearing. We will intensively manage our property assets to optimise income and investment performance, and will always look to add value through our investment decisions.

“A new framework for employee remuneration is being developed to support and drive the achievement of business objectives and to focus our team on delivering superior investor returns in line with strategic intent,” Mr Gudgeon added.

Corporatisation

Mr Ford said: “In the year ahead, we will continue our preparations to corporatise the Trust.

“Corporatisation involves moving from a trust to a company structure. Investors benefit from a streamlined corporate structure, cost savings, and greater protections under the Takeovers Code and Companies Act. We expect to be able to put a corporatisation proposal to investors for their approval towards the end of this year with an expectation that it will take effect following the conversion of our Mandatory Convertible Notes on 20 December 2014,” Mr Ford said.

Highlights

Highlights of the financial year include:

Net rental income of $148.7m, up $13.2m (+9.7%)

Like-for-like net rental of $110.2m, up $2.4m (+2.2%)

Profit after tax of $101.3m, down $8.5m (-7.7%)

Distributable income after tax of $76.3m, up $15.1, (+24.7%)

Cash distribution of 6.40 cents per unit, in line with guidance

Bank debt gearing ratio of 35.2%, up 3.2 basis points

Property portfolio revaluation gain of $8.5m, (+0.4%) lifting property portfolio value to $2.13b

Unit Holder funds of $1.19b, up $56.4m (+5.0%)

Net tangible assets per unit $1.17, up from $1.14

Progress against FY14 priorities

During the year, the Manager executed upon its FY14 priorities, achieving:

the on-budget, on-programme delivery of ASB North Wharf

the completion of the Centre Place Shopping Centre redevelopment, repositioning the centre as Hamilton’s CBD focus for food, fashion and entertainment

the reinstatement of 11 stores at Northlands Shopping Centre following a seismic upgrade

a steady progression of seismic strengthening works at The Majestic Centre

high portfolio occupancy of 97.1%

an extension of the weighted average lease term to 4.7 years (+0.4 years)

the sale of a 50% interest in 205 Queen for $47.5 million with confirmation, post balance date, that the purchaser will acquire the remaining 50% interest in June 2014 for $56.3 million

the conclusion of 764 new leases and rent reviews over 196,000 sqm, equivalent to 53% of total portfolio area, and

the renewal and extension of $465 million in bank debt facilities on favourable terms.

Focus for FY15

The focus for the Trust during the 2015 financial year will be to:

develop a corporatisation proposal for Unit Holder approval to move from a trust to a company structure

actively manage the cost, term and sources of the Trust’s funding

maintain active retail and office leasing programmes to minimise vacancy

complete seismic strengthening works at The Majestic Centre

commence refurbishment works at 56 The Terrace (Unisys House)

finalise plans for the development of an entertainment and leisure precinct at LynnMall Shopping Centre, and

seek opportunities to undertake value-added acquisitions or divestments consistent with the Trust’s strategy.

Full release: 140516_NZX_Result_Announcement_FINAL.pdf

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