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Kiwi Income Property Trust Announces Profit

22 November 2005

Kiwi Income Property Trust Announces Record Interim Profit And Dividend Upgrade

Kiwi Income Property Trust today announced a record net profit after tax of $29.1 million for the six months to 30 September 2005, an increase of 15.2% over the same period last year.

The Trust will pay a gross interim dividend of 4.55 cents per unit for the half year, comprising 3.85 cents per unit in cash and 0.70 cents per unit in imputation credits. The record date for this dividend will be 7 December 2005, and the payment date is 16 December 2005.

Chairman of the Manager of the Trust, Sean Wareing, said “This was another excellent result for the Trust. The record result reflected the strength of the property market, the quality and diversity of the Trust’s portfolio, and the effectiveness of its management strategy”.

Post the half year result, the Trust agreed to accept the takeover offer made by AMP Property Portfolio Investments Limited (APPIL) in respect of the Trust’s 19.2% stake in Capital Properties New Zealand Limited (CNZ), realising a profit of approximately $13 million after costs.

Mr Wareing said “This was an excellent outcome for the Trust. The Manager was confident that there was unrecognised value in the CNZ portfolio when the stake was acquired at a price of $1.15 per share. While the Trust had a long term view on its investment in CNZ, APPIL provided an opportunity to crystallise excellent value for this strategic stake within a short time period”. The sale proceeds of $69 million will initially be utilised to repay debt.

DIVIDEND PROJECTION

A gross dividend of between 8.50 and 8.70 cents per unit was projected in May 2005 for the year ending 31 March 2006. With the strong underlying performance of the Trust’s property portfolio, and the $13 million profit from the sale of the CNZ stake (which is intended to be distributed over the next three years), the Manager has upgraded the full year dividend projection.

Subject to a continuation of reasonable economic conditions, a gross dividend of 9.10 cents per unit is now projected for the year ending 31 March 2006, 5.2% ahead of the previous year’s dividend. The level of earnings over the period should also allow for the retention of up to 5% of net earnings to assist with the ongoing financing of the Trust.

Mr Wareing commented that with the Trust’s Sylvia Park project well underway, the Directors of the Manager believe that it is prudent to provide a projection for the next financial year ending 31 March 2007. Again, subject to a continuation of reasonable economic conditions, a gross dividend of no less than 9.10 cents per unit is projected for the next financial year.

HALF YEAR FINANCIAL HIGHLIGHTS

- Net profit after tax increased by 15.2% (over the same period last year) to $29.1 million. After excluding gains on realisation of investments, net profit after tax increased by 9.9%.
- Net rental revenue increased by 6.2% to $44.3 million.
- Total assets at 30 September 2005 were $1,291.9 million, an increase of $30.0 million on the 31 March 2005 position.
- Secured borrowings at 30 September 2005 amounted to $222.5 million, representing 17.2% of assets.
- Investors’ funds were $898.4 million as at 30 September 2005, up $6.0 million on the 31 March 2005 position.
- In July 2005 $142.3 million was raised through a Mandatory Convertible Notes issue. The issue was fully subscribed.

Commenting on the Trust’s property performance, Chief Executive of the Manager of the Trust, Mr McNaughton, said that both the retail and office portfolios had continued to perform well, and that despite a more subdued outlook for the domestic economy, the strong positioning of the Trust’s portfolio had continued to support solid rental growth and high occupancy levels.

RETAIL PORTFOLIO

The Trust’s retail portfolio recorded comparable retail sales growth of 6.0% (moving annual turnover), with an occupancy level of 98.9% as at 30 September 2005.

The Trust’s Sylvia Park project was progressing well, with construction of The Warehouse, Foodtown, PAK’nSAVE, and main mall taking shape quickly. Mr McNaughton said that leasing progress had been very pleasing, with Stage One leasing close to completion (91% leased by net lettable area, 80% leased by net rental), and leasing of Stage Two, which is primarily a fashion precinct plus PAK’nSAVE, was well advanced.

As previously reported in August 2005, the leasing success of Stage One as well as tenancies leased in the balance of the Centre, takes the total level of leasing at Sylvia Park to 58% of net lettable area, and 40% by net rental. Mr McNaughton commented that “this was a strong result given that the later stages of the project do not open until 2007. The leasing success continues to confirm the desirability of Sylvia Park as a retail destination”.

Stage One, which includes flagship stores for The Warehouse and Foodtown and approximately 50 specialty stores, is on target to open as projected in mid 2006. Stage Two is targeted to open in late 2006. The specialty leasing to date incorporates a strong mix of retail brands and offerings. The tenancy mix also includes a number of new entrants to the shopping centre arena and the NZ retail market. The Manager intends to make a further positive announcement on leasing progress at the end of November.

OFFICE PORTFOLIO
Mr McNaughton said that the office market fundamentals across the Auckland, Wellington and Christchurch markets have remained strong, with both firming yields and robust rental growth. He said low vacancy levels, particularly at the quality end of the market, continued to support rental and value growth. The Trust’s portfolio has continued to benefit from the positive market conditions. At 30 September 2005 the Trust’s office portfolio had an occupancy level of 98.5%.

A key leasing transaction over the past half year has been a new nine year lease to existing tenant ABN Amro for 1,800m2 in the Vero Centre. Mr McNaughton said that negotiations for the only key vacancy in the Trust’s office portfolio, being 1,450m2 on the top floor in 21 Pitt Street, were well advanced, and an announcement was expected to be made shortly.

During the half year the sale of the AUT Faculty of Arts Building was completed. Net proceeds from the sale were $29.0 million, $1.8 million ahead of book value.

SPECIAL MEETING

As previously announced, a special meeting of Unit Holders will be held on 9 December 2005. The purpose of this meeting is to consider proposed amendments to the Trust’s Deed of Trust concerning the process for putting motions to, and calling of, meetings. Two changes are proposed.

The first seeks to lower the threshold for Unit Holder requisitioned meetings from 10% to 5%, as well as establishing time limits for convening such meetings. The second makes it easier for Unit Holders to propose matters for discussion and/or put forward resolutions at annual meetings.

Commenting on the changes, Mr Wareing said the proposed amendments to the Trust Deed will provide a more comprehensive set of rules for meetings of Unit Holders. We support proposals that improve good corporate governance. We therefore welcome and endorse the proposed changes and encourage all Unit Holders to vote in favour of them.

OUTLOOK

Mr Wareing said the first half had been a period of solid achievement for the Trust, and notwithstanding the prediction of a general slowdown in economic activity, the outlook for the Trust remains positive with property sector fundamentals expected to remain resilient, underpinning solid rental and leasing activity across the Trust’s retail and office portfolios.

A summary of the interim result follows:

Name of Listed Issuer: KIWI INCOME PROPERTY TRUST
For the Half Year Ended: 30 SEPTEMBER 2005
This report has been prepared in a manner which complies with generally accepted accounting practice and gives a true and fair view of the matters to which the report relates and is based on unaudited financial statements.

CONSOLIDATED STATEMENT OF FINANCIAL PERFORMANCE - NZ$000
OPERATING REVENUE:
Trading revenue: $44,305 (30/9/04: $41,720), up 6.2%
Other revenue: $2,188 (30/9/04: $255), up 758.0%
Total operating revenue: $46,493 (30/9/04: $41,975), up 10.8%
OPERATING SURPLUS BEFORE TAXATION: $34,454 (30/9/04: $30,900), up 11.5%
Taxation on operating result: $5,374 (30/9/04: $5,665), down 5.1%
OPERATING SURPLUS AFTER TAX: $29,080 (30/9/04: $25,235), up 15.2%
Extraordinary Items: $Nil (30/9/04: $Nil)
NET SURPLUS FOR THE PERIOD: $29,080 (30/9/04: $25,235), up 15.2%
Net Surplus attributable to minority interests: $Nil (30/9/04: $Nil)
NET SURPLUS ATTRIBUTABLE TO MEMBERS: $29,080 (30/9/04: $25,235), up 15.2%
Earnings per share: Basic: 4.12 cpu; Diluted: 4.08 cpu
Interim Dividend: 3.85 cpu
Record Date: 7 December 2005
Date Payable: 16 December 2005
Imputation tax credit on latest dividend: 0.70 cpu

ENDS

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