Kiwi Income Property Trust, the country's second-biggest listed property investor, posted a 7.8 per cent drop in annual profit as costs from exiting its management contract with Commonwealth Bank of Australia outweighed valuation gains and insurance payments.
Net income fell to $101.3 million in the year ended March 31, from $109.8 million a year earlier, Auckland-based Kiwi Income said in a statement. Revenue rose 5 per cent to $208.7 million.
Kiwi Income paid $74.5 million to exit its management contract with CBA, taking the management inhouse, and plans to put a proposal to investors later this year to move to a company structure which it says will reap savings and greater protections under the Takeovers Code and Companies Act.
In the past year, the trust increased its after-tax distributable income by 25 per cent to $76.3 million. Net rental income rose 9.7 per cent to $148.7 million as it benefited from new and refurbished properties.
The trust will pay a final distribution of 3.2 cents per unit, taking the annual payment to 6.4 cents. It expects that to increase to about 6.5 cents in the coming year as it benefits from a strengthening economy.
Units in the trust last traded at 1.155 cents apiece and have gained 7 per cent this year.
Kiwi Income expects its distribution reserve and the financial benefits from taking its management contract inhouse will enable it to forego 21 months without rent from its building at 56 The Terrace in Wellington from November as the property undergoes a $67 million refurbishment ahead of a new 18-year lease with the Ministry of Social Development.
The value of the trust's property holdings increased by $8.5 million over the past year, taking the total value to $2.13 billion. The value of its interest rate derivatives rose by $29.1 million and it gained $52.9 million from insurance and litigation settlement.
Kiwi Income's bank debt gearing ratio rose to 35.2 per cent from 32 per cent a year earlier, reflecting the cost of bringing management inhouse and development of its properties at Centre Place, Northlands, and the Majestic Centre in Wellington.
The costs were partly offset by the sale of a 50 per cent interest in 205 Queen St, Auckland, for $47.5 million, which was used to pay debt. Since balance debt, the buyer had exercised its right to buy the remaining half share for $56.3 million on June 3, the Trust said.