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Kiwi Income Property Trust announces interim result


14 November 2012

Kiwi Income Property Trust announces interim result

for the six months ended 30 September 2012

Kiwi Income Property Trust today announced its interim result for the six months ended 30 September 2012, delivering an after tax profit of $26.6 million1, up from $1.5 million in the prior comparable period. Unit Holders will receive an interim cash distribution of 3.30 cents per unit, in line with previous guidance.

1 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 interim financial statements which have been the subject of a review by Independent Accountants pursuant to New Zealand Institute of Chartered Accountants Review Engagement Standard RS-1. Refer to the table on page 4 for further information.

2 Operating profit before 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 table on page 4 for full details of how these measures are calculated.

In another active period for the Trust, over $100 million of bank debt was repaid from insurance proceeds and the sale of Beca House, with the Trust’s bank debt gearing ratio reducing to 32.3% as at 30 September 2012.

Mark Ford, Chairman of the Manager of the Trust said, “In April we sold Beca House in Auckland for $55 million, which was consistent with our strategy of recycling capital out of mature assets to maintain balance sheet flexibility and a strong financial position. The majority of these sale proceeds, together with insurance proceeds received for the PricewaterhouseCoopers Centre (PwC Centre) in Christchurch, have been applied to repay bank debt. Whilst positive from a balance sheet perspective, the absence of rental income from Beca House and the PwC Centre has contributed to a lower operating result.”

Operating profit before tax2 reduced $6.5 million to $34.7 million and distributable income2 was $30.2 million, down $5.8 million on the prior comparable period. This was predominantly due to the Beca House sale, an increase in net interest expense, the recognition of a performance fee payable to the Manager and the inclusion of business interruption insurance proceeds in distributable income in the prior comparable period.

Chris Gudgeon, Chief Executive of the Manager of the Trust said, “At an operational level, active asset management has led to an improvement in occupancy and weighted average lease term across the Trust’s portfolio of shopping centres and office buildings. Page 2 of 13


Good progress has also been made on value-adding and defensive investments including construction of the ASB Bank head office in Wynyard Quarter, Auckland, the redevelopment of Centre Place Shopping Centre, Hamilton and the seismic strengthening project at The Majestic Centre, Wellington.”

Progress against 2013 priorities

The Trust has made significant progress on its 2013 priorities, including:

the renewal and extension of $227.5 million of bank debt facilities on favourable terms, increasing the weighted average term to expiry to 4.3 years

the divestment of Beca House for $55 million

solid office leasing activity including the execution of a new 12-year lease to law firm Bell Gully for 6,514 sqm at the Vero Centre and a 10-year lease extension to Unisys for 2,403 sqm at Unisys House

continuing improvements to the quality of the retail experience at LynnMall Shopping Centre, including completion of an expanded and refurbished Farmers department store in October, supported by a new 15-year lease commitment

a new 10-year lease to Kmart at North City Shopping Centre in readiness for a comprehensive store refurbishment to be completed by mid 2013

substantial progress with the specialty retail re-leasing and re-mixing program at Sylvia Park Shopping Centre, with new retailers and shop fitouts adding to the excitement of the shopping experience at New Zealand’s largest shopping centre

the completion of new premises for Rebel Sport as part of the $39.9 million redevelopment of Centre Place, allowing construction works to commence on the new Farmers department store

on program construction and fitout works for ASB Bank’s new head office with the building making an increasingly impressive architectural statement in its prime waterfront position as it nears completion, and

the commencement of seismic strengthening works at The Majestic Centre, Wellington.


The Trust is also pleased to announce today that agreement has been reached with Hoyts Cinemas for a new 15-year lease over the multi-screen cinema complex at Centre Place3. The re-establishment of a compelling main-stream multiplex cinema anchor at Centre Place is an important element in the competitive repositioning of this CBD specialty centre, with a focus on fashion, food and entertainment. The multiplex cinema is to be comprehensively modernised and refurbished at a cost of $7.1 million and is scheduled to open concurrently with the new 7,000 sqm Farmers department store in the fourth quarter of 2013.

3 The consent of Tainui Corporation Limited, as the freehold owner of the land, has been sought. Page 3 of 13


Outlook and distribution guidance

Mr Ford said, “The Trust’s outlook is governed by the current moderate pace of economic recovery in New Zealand and we continue to see the need to remain cautious.”

“The repayment of over $100 million of bank debt has been positive from a balance sheet perspective, but the absence of rental income from Beca House and the PwC Centre has contributed to a lower operating result. Given our strong financial position, we are drawing on our distribution reserve to offset this. Subject to a continuation of reasonable economic conditions, we continue to project distributions to Unit Holders for the year ending 31 March 2013 to be approximately 6.60 cents per unit.” Page 4 of 13


Summary financial results Financial performance [$m]

For the six months ended 30-Sep-12 30-Sep-11
Gross rental income 98.2 100.7
Property operating expenditure (30.2) (28.7)
Net rental income 68.0 72.0
Net interest expense1 (25.1) (23.8)
Manager’s fees (6.7) (5.4)
Other expenses (1.5) (1.6)
Operating expenditure (33.3) (30.8)
Operating profit before tax2 34.7 41.2
Interest rate derivatives [fair value change] (0.2) (8.8)
Property revaluations [fair value change] (1.2) (65.0)
Impairment of investment properties - (27.3)
Insurance proceeds - 71.2
Other non-operating items (1.3) (0.4)
Profit before tax 32.0 10.9
Tax expense (5.4) (9.4)
Profit after tax3 26.6 1.5
Distributable income2 [$m]

For the six months ended 30-Sep-12 30-Sep-11
Operating profit before tax 34.7 41.2
Business interruption insurance proceeds - 2.1
Non-cash rental adjustments4 0.3 0.5
Distributable income before tax 35.0 43.8
Current tax expense5 (4.8) (7.8)
Distributable income after tax 30.2 36.0
Transfer from/(to) distribution reserve 2.4 (2.0)
Cash distribution 32.6 34.0
Distributions [cpu]

For the six months ended 30-Sep-12 30-Sep-11
Cash distribution 3.30 3.50
Imputation credits 0.49 0.65
Gross distribution 3.79 4.15
Financial position [$m]

As at 30-Sep-12 31-Mar-12
Property assets 2,007 2,009
Total assets 2,066 2,160
Unit Holder funds 1,073 1,073
Bank debt gearing ratio6 32.3% 35.6%
Net bank debt gearing ratio7 31.3% 33.8%
Net asset backing per unit $1.08 $1.09

ends


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