Kiwi Income join property investors posting losses

Friday 15th May 2009

Kiwi Income Property Group posted a full-year loss after recognizing a decline in the value of its portfolio, joining property investors such as Goodman Property Trust and Kermadec Property Fund in reporting a deteriorating bottom line amid ongoing weakness in the sector.

Kiwi Income’s net income turned to a loss of NZ$168.9 million in the 12 months ended March 31, from a profit of $123 million a year earlier. The trust’s portfolio fell by 10%, or $215 million, to $1.91 billion as weakening market capitalisation rates offset a pickup in rental income.

“Prospects for rental growth in the retail portfolio are inevitably constrained by current market conditions,” said Sean Wareing, chairman of the trust’s manager. “Subdued economic and investment activity and potentially higher unemployment will likely bring an end to the significant rental growth enjoyed by the office sector. Vacancy rates are expected to increase over the next two years, putting pressure on rental rates,” he said.

Goodman Property Trust yesterday posted an annual net loss of $74.1 million after writing down the value of property. Still, like Kiwi Income, it reported more robust distributable profit – the amount available to make payments to investors, allowing it to lift cash distributions.

Kiwi Income’s distributable profit slipped 1.8% to $$61 million. Unit Holders will receive a final cash distribution of 4 cents per unit, bringing full-year payments to 8 cents.

Kermadec reported a full-year net loss of $11.93 million, from a year-earlier profit of $6.18 million. The property investor recognized a $12.93 million unrealized loss on the revaluation of its property and a $5 million loss on mark-to-market of interest rate swaps.

Distributable profit fell to $5.1 million from $5.5 million.

Kiwi Income’s Wareing said the trust’s cash distribution for the year ending March 31, 2010, is forecast at 7.5 cents a unit.

The Trust’s net rental income rose 6.9% to $133.7 million in the latest year. Kiwi Income raised $50 million in a placement to institutions, will raise additional funds through a share purchase plan and has earmarked $38 million of assets for sale, allowing the trust to repay debt.

The Trust’s total assets were $1.92 billion at March 31, with secured bank debt of $634 million representing 33.1% of total assets, it said.

Kiwi Income has $800 million of committed bank debt facilities with a weighted average cost of bank debt of 6.45%. No bank debt expires before the 2012 financial year.Units of Kiwi Income rose 1.1% to 94 cents and are down 11% this year.

Kermadec last traded at 43 cents.

Businesswire.co.nz

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