KIPT plans to change
Shareholders of listed property fund Kiwi Income Property Trust have been told that plans to corporatise the trust should be put to them for approval by the end of the year.
The move follows the trust's decision to bring its management in-house, costing the company more than $74 million for ending its management contract with ASB.
At the company's annual meeting today, KIPT's chairman Mark Ford said internalisation had been a positive move which would save the trust $8m in management fees a year.
Corporatisation - changing the company structure from a trust to a corporation - was next on the agenda.
"With corporatisation, investors will benefit from a streamlined corporate structure, cost savings, and greater protections under the Takeovers Code and Companies Act," he said.
If approved, he expected the corporatisation would take effect on December 20.
Ford said the trust was forecasting a cash distribution of 6.5 cents per unit for the year to March next year, up from 6.4 cents per unit this year.
Chief executive Chris Gudgeon confirmed the trust's $2.2 billion portfolio, heavily weighted towards retail and office assets, was set to benefit doubly from a lift in consumer spending and a shortage of office space and employment growth in Auckland's CBD.
"Put these two sectors together, and we can be reasonably encouraged that close to 90 per cent of the trust's investment portfolio is positioned in the sectors which are expected to perform well," he said.
The demand outlook for Wellington was more subdued with the government sector, which occupied about 40 per cent of all office space, continuing to consolidate.
Rising consumer confidence was filtering down into its retail stores, which make up about 60 per cent of KIPT's gross rental income and 67 per cent of its assets. Total retail sales to March 31 improved 2.1 per cent to $1.42b. Excluding redevelopment work, sales were up 0.8 per cent.
"What is interesting to note is the lift in discretionary spending which was led by increases in department store sales, which rose 4.5 per cent and specialty sales, which were up 2.7 per cent," Gudgeon said.
The year's achievements included the opening of its award-winning ASB Wharf office building, which has risen in value to $162m, delivering a development margin of some $28m.
Its cornerstone investments, Sylvia Park and the Vero Centre, had increased in value by $21m to $564m, and by $25m to $299m respectively, and now represent more than over 40 per cent of the trust's portfolio.
Strong rental growth at KIPT's Sylvia Park mall in Auckland had helped propel like-for-like net rental income up 2.2 per cent on the prior year.
Despite the one-off costs of internalisation, the trust recorded a "respectable" profit after tax of $101.3m for the year, Gudgeon said.
As the trust marked its 20th year as a listed company, Ford said it was also looking to leverage its experience as a fund and property manager by seeking opportunities to joint venture with "capital partners".
"This will enable us to diversify our investments over a greater number of assets while generating additional property management fees for the trust," he said.