NZX RELEASE

29 November 2013

Kiwi Income Property Trust secures 18-year Crown lease agreement at 56 The Terrace, Wellington

Kiwi Income Properties Limited, as Manager of Kiwi Income Property Trust, is pleased to advise that a Development Agreement was executed today providing for a new 18-year New Zealand Government lease commitment at 56 The Terrace (Unisys House), Wellington, as part of a comprehensive $67 million refurbishment of the 45-year-old office complex.

Chris Gudgeon, Chief Executive of Kiwi Income Properties Limited, said: “Through the Government Property Management Centre of Expertise, agreement has been reached with the Ministry of Social Development to take an 18-year lease over 24,255 sqm of office space at 56 The Terrace, commencing in August 2016.

“This lease, along with the Trust’s commitment to the building’s comprehensive refurbishment, serves to position 56 The Terrace as part of the Government’s long-term Wellington office accommodation.”

The building will be thoroughly modernised to an A-Grade standard, with building systems upgraded, new window systems fitted and office floors refurbished. The building complex, which includes Aurora House, will be extended to increase the net lettable area of the building by approximately 10% to 24,696 sqm, providing large efficient floor plates of up to 1,839 sqm. The ground floor lobby will be reconfigured to accommodate three retail tenancies and a new reception area. The building will also be seismically strengthened to 90% of New Building Standard (NBS) from its current 70% NBS rating.

Construction is programmed to commence in October 2014, once all office floors have been vacated, and is scheduled to complete in July 2016. As part of the new Government lease arrangement, incumbent tenant Unisys New Zealand has agreed to surrender its existing tenancy over 2,403 sqm.The new 18-year gross lease with the Ministry of Social Development (MSD) provides rights of renewal for a further 12 years and includes three-yearly fixed rental increases of 5.34% and market rent reviews every six years, with a cap and collar arrangement.

As a result of the new lease, the weighted average lease term of the Trust’s portfolio would increase by approximately 0.7 years.

56 The Terrace was acquired by the Trust in April 2004 for $44 million and had a 30 September 2013 book value of $51.2 million.

On commencement of the Government’s new lease in August 2016, it is projected the building’s value will be approximately $120 million, growing to over $130 million by 2018 once the initial one-year rent-free period, granted as a tenant incentive, has elapsed. The anticipated yield1 on total investment is expected to be approximately 7.5%.

Mr Gudgeon said: “The Government’s intention is to reduce the office floor space it leases in Wellington by 25%, or 130,000 sqm, with a strong emphasis on cost effective space balanced by a longer-term perspective on tenure and relationships with key landlords. This agreement with MSD positions 56 The Terrace as an important Government building, and our investment in its modernisation ensures its attractiveness and competitiveness long into the future whilst providing the Trust with the security of a long-term Government rental stream.”

About Unisys House

Unisys House comprises two adjoining properties: a 19-storey office tower constructed in 1968; and Aurora Chambers, an eight-storey tower constructed in 1975. The property is ideal for Government tenants, being within a short walking distance from Parliament. It enjoys a high profile position at the northern end of the CBD. The property currently offers large, efficient floor plates of around 1,200 sqm.

1 Net income yield after amortisation of leasing fees and incentives on ingoing asset value plus capitalised development cost.

ENDS

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