Kiwi Income Property Trust Portfolio Value Drop

NZX & MEDIA RELEASE
2 October 2009

Kiwi Income Property Trust Records 3.5% Reduction In Portfolio Value

Kiwi Income Property Trust today reported a net reduction of approximately $66 million (pre tax) in the value of its portfolio of prime office and retail assets for the six months ended 30 September 2009.

After allowing for asset sales and capital expenditure, the reduction decreases the value of the Trust’s total portfolio by 3.5% to $1.83 billion and reduces the adjusted undiluted net tangible asset backing per unit by approximately 6 cents to approximately $1.24¹ at 30 September 2009.

The valuations were determined by independent valuers, are subject to final review by the auditors and will be confirmed in the Trust’s interim result for the six months to 30 September 2009.

Sean Wareing, Chairman of the Manager of the Trust said, “Further softening in commercial property values since March this year has been widely anticipated by the market. In the current environment, the Board considered it prudent to keep Unit Holders fully informed by undertaking an additional round of valuations at the half year. It is pleasing to note these latest valuations indicate that the rate of decline in values appears to be slowing and expectations are that recent improvements in global economic conditions will help to stabilise property values going forward.” “The Trust continues to benefit from the strength of its premium assets, its sector diversification in both retail and office properties and its diverse and high-quality tenant base. Underlying operating earnings remain sound and this movement in portfolio value will not adversely affect distributions to Unit Holders,” Mr Wareing said.

As at 30 September 2009, occupancy within the Trust’s core portfolio remains high at 98.5% with a weighted average lease term to expiry of 4.2 years.

¹The adjusted undiluted net tangible asset backing per unit calculation excludes deferred tax on items which will not crystallise.

The Trust’s weighted average cost of bank debt as at 30 September 2009 is 6.6%, up from 6.5% as at 31 March 2009. The Trust has no bank debt that expires before the 2012 financial year and the combined banking facilities have a weighted average duration of 2.4 years. Bank debt represents 30.4% of the property portfolio.

“Strong balance sheet fundamentals supplemented by a number of capital management initiatives have enabled the Trust to maintain a robust financial position throughout the current economic downturn,” Mr Wareing said.

Chris Gudgeon, Chief Executive of the Manager, observed that the downward value movement in the Trust’s retail portfolio was approximately 2.5%. This decline was largely attributable to softening in capitalisation rates and the impact was lessened by income growth. In comparison, the decrease in the office portfolio value was approximately 5.0% and was caused mainly by the softer outlook for office rents going forward. Overall, the weighted average capitalisation rate for the core portfolio increased 18 bps from 7.70% as at 31 March 2009 to 7.88% at 30 September 2009.

“Our retail portfolio should benefit from a recovery in consumer spending as we move out of recession. With close to 60% of portfolio income coming from our shopping centre assets, our retail sector exposure should assist in countering the softer outlook anticipated for office markets,” Mr Gudgeon said.

ENDS

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