Institutional investors are praising the annual result of Kiwi Income Property Trust, saying it reflects the management shakeup which saw the exit of Commonwealth Bank of Australia.

The giant NZX-listed landlord, with $2.1 billion gross assets split 65 per cent in retail and 35 per cent in office, posted a 7.8 per cent drop in annual profit as costs from exiting that management outweighed valuation gains and insurance payments.

After-tax profit fell to $101.3 million, compared with $109.8 million the previous year, but revenue rose 5 per cent to $208.7 million

Carlie Eve of Mint Asset Management dismissed that bottom line change.


"It is, after all, the one-off adjustments like insurance and litigation settlement income and changes to value of properties and also this year there is no tax paid as they get the tax benefit from the internalisation," Eve said.

"It's good to see the benefits of the internalisation beginning to flow through and the trust has reiterated that it is on track to achieve the savings anticipated."

Completion of the $162.2 million ASB North Wharf and redevelopment of Hamilton's $122.5 million Centre Place mall boosted rental income, Eve said. Stores in Christchurch's $205.3 million Northlands Shopping Centre, shut after earthquakes, had reopened and the $564 million Sylvia Park continued to trade extremely well, she said.

"All contributed to a strong increase in rental income for the portfolio," Eve said, noting that retail was the growth engine.

"The growth in distributable profit after tax was distorted by the tax deductibility of the internalisation payment. The increase in earnings at the pre-tax level is a better barometer of underlying performance," she said, saying dividend guidance for this year was as expected with the loss of rent during the 56 The Terrace redevelopment for the Crown hurting earnings over the next two years.

"It was great to see some recent leasing success at Vero which is now nearly fully leased," Eve said of that 40-level Shortland St giant.

Shane Solly of Harbour Asset Management said the result was tidy, despite this being a very active point in Kiwi's corporate life.

"The modest rental growth reflects improved market rental conditions. It's nice to see a small dividend increase for next year. The majority of [the] first steps of internalisation are completed," Solly said.

Morningstar has a hold rating on Kiwi, saying improving economic conditions will benefit the business. Positive indicators include a buoyant property market, rising prices for export commodities and high net immigration.

Kiwi was a relatively low-risk exposure to New Zealand's office and retail sectors, Morningstar said. Its biggest strengthening job is the $54 million work being carried out to Wellington's Majestic Centre, expected to be finished later this year.

Kiwi now owns properties valued at $2.13 billion, up from last year's $2.07 billion. Kiwi Income closed up half a cent yesterday at $1.16.

Read its latest financial results presentation here: