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Kiwi Income Property manager silent on internalisation proposal

The manager of Kiwi Income Property Trust did not give investors any more clues on a proposal to bring its contract inhouse, but did share growing optimism about state of retail and Auckland office space.

Kiwi Income Properties Ltd chairman Mark Ford told today's annual meeting the proposal by Commonwealth Bank of Australia to internalise the management of the property trust was still in its "infancy" and that he could not provide any detail on the bid.

The manager's board has set up a sub-committee made up of himself, Joanna Perry and Robert Narev to consider the proposal.

"We have requested further information from the bank and have appointed independent advisers to assist us on behalf of you, our investors," he says. "Should the proposal progress, the independent directors will keep the market informed when we are in a position to do so."

Last week, Kiwi Income said it received a proposal from CBA-subsidiary Colonial First State Property to internalise the management. The manager reaped a $3 million performance fee from Kiwi Income Property Trust last year.

Chief executive Chris Gudgeon told investors property values are recovering and an improving economy should underpin the retail sector, which accounts for about two-thirds of the $2.08 billion portfolio. Similarly, the Auckland office sector was positive with a lack of supply pushing up occupancy and rentals.

"Put these two sectors together and we can be reasonably encouraged that over 93 percent of the trust's investment portfolio is positioned either in the recovering retail sector of in the Auckland office market," he says.

Wellington had a more subdued outlook as seismic activity since the Canterbury quakes lifted insurance costs.

The trust's manager affirmed guidance of an annual cash distribution of 6.4 cents per unit in the year ending March 31, 2014. That is down from a year earlier because of the cost of earthquake strengthening and the slow economic recovery.

Units in the property investor rose 0.4 percent to $1.135 and have slipped 1.7 percent this year.


Comments and questions

KIP are "all talk" about recovery this and improvement that but returns to unit holders have steadily declined over many years from 9 cents per unit to a forecast of 6.4 cents per unit.

Who is really benefitting from their acquisitions?