Kiwi Income Property Trust, owner of Auckland's Sylvia Park Shopping Centre, reports a 16% drop in pre-tax operating earnings in the first half as rental income falls, interest costs rise and it pays a performance fee to its manager.
Operating earnings fell to $34.7 million in the six months ended September 30, from $41.2 million a year earlier. Net rental income declined to $68 million from $72 million.
Net profit in the period was $26.6 million from $1.5 million a year earlier, when it took charges for property revaluations and impairments.
Kiwi Income is managed by Kiwi Income Properties, a unit of Australia's Colonial First State Property. In the first half the manager reaped a $1.4 million "total return performance fee" because the trust's performance exceeded a 10% hurdle. At the same time, the net interest expense rose by $1.3 million.
Units of Kiwi Income fell 0.9% to $1.165 on the NZX today and have gained 18% this year. It is rated a "hold" based on the consensus of six recommendations compiled by Reuters.
During the period the trust sold Beca House in Auckland for $55 million and received insurance proceeds for the quake-damaged PricewaterhouseCoopers Centre in Christchurch, using the proceeds of both to repay some $100 million of bank debt and reducing its bank debt gearing ratio to 32.3%.
"While 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," the trust says.
Mark Ford, chairman of the management company, says the outlook "is governed by the current moderate pace of economic recovery in New Zealand and we continue to see the need to remain cautious".
Subject to a continuation of reasonable economic conditions, the projected year-end distribution to unit holders was affirmed at 6.6 cents a unit.