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NPT Interim Result

25th November 2009

The National Property Trust (NPT, the ‘Trust’) today announced a distributable profit of $4.85 million for the six month period ended 30 September 2009, an increase of 1.5 per cent on the $4.78 million distributable profit for the corresponding period to 30 September 2008. The result was achieved despite higher costs on the Trust’s recently extended banking facility, its smaller portfolio following recent successful property sales and the economic environment remaining challenging. Contributing to the positive result were lower interest and administration expenses for the period.

After allowing for the previously announced $4.4 million unrealised loss in property valuations and a $4.4 million loss on sale of Investment Properties, NPT’s net loss after tax and asset revaluations was $9.08 million ($9.30 million for the period to 30 September 2008). The result was adversely impacted by a $6.3 million deferred tax expense due to the sale of Investment Properties during the period as opposed to a deferred tax benefit of $3.9 million for the same period last year. This is a notional tax expense and results from the reversal of deferred tax assets recognised previously under the New Zealand Equivalent of International Financial Reporting Standards.

The net asset backing per unit has dropped, as the result of property sales and revaluations, to 71.78 cents at the end of the period from 79.8 cents as at 31 March 2009.

John Crone, General Manager of The National Property Trust Limited (NPTL), the Trust’s Manager says, “The result is satisfactory given the current economic environment. It is pleasing to see that the Trust was able to increase its distributable earnings as market conditions have remained difficult. It is also pleasing to see that property values appear to have stabilised over the last six months. While we believe that the office rental market will be under pressure over the coming twelve to eighteen months we also consider that the Trust can continue to deliver further rental growth as the portfolio is currently under rented by an estimated 9.84 per cent.”

Second Quarter Dividend Distribution

As previously forecast the Manager has recommended a 1.125 cents per unit dividend distribution for the quarter ended 30 September 2009 be paid on 11 January 2009. Although the distributable earnings for the six months to 30 September 2009 equate to 2.51 cents per unit, this payment will bring the 2009 financial year to date distributions to 2.25 cents per unit, which is in line with the targeted distribution for the full financial year of 4.5 cents per unit. Given the Manager’s belief that trading conditions will remain difficult the Manager considers it prudent to retain excess earnings to build equity. No imputation credits will be attached to this distribution. Under the Portfolio Investment Entity (PIE) regime Unit Holders who reside in New Zealand for tax purposes should have no further tax to pay.

Capital Management

In line with the Trust’s Capital Management strategy, which entails reducing debt and rebalancing the property portfolio, NPT successfully sold retail properties in Auckland and Tauranga. Proceeds from the settlement of Auckland’s Rialto/Carlton DFK properties and Tauranga’s Goddards/Dumbarton properties, namely $62.05 million, the latter shortly after the end of the period, have been applied to reducing the BNZ term loan resulting in a conservative gearing ratio of 22.5%.

While interest rates over the coming twelve months are expected to rise the impact on the Trust should be minimal due to the swap cover in place which currently covers 92% of bank debt.

Mr Crone says “The strategic focus on debt reduction and rebalancing the portfolio by reducing the Trust’s retail exposure has not only strengthened the portfolio it has also improved the balance sheet considerably over the last two and a half years. A further successful initiative was completing the renegotiation of the Trust’s debt facility ahead of its scheduled expiry on 3 November 2009. The Trust’s prudent capital management is apparent in the improved distributable income result and is testament to the Trust’s strategy of investing in a well diversified and liquid property portfolio. NPT is now well positioned to take advantage of future opportunities that may arise in the current environment.”

The Property Portfolio

The adjusted gross rental income (adjusted for the sale of the Gill Street property which settled at the end of the previous period) remains stable despite softening market rents and increased vacancy rates in the office sector. Direct property operating expenses increased by $71,000 largely due to higher than forecast repairs and maintenance costs.

The portfolio’s occupancy rate as at 30 September 2009 was 95.83 per cent, a 0.77 percent decrease compared to 96.60 per cent at the beginning of the financial year. The Trust continues to proactively work with existing tenants in order to ensure optimal occupancy levels are maintained. This includes providing retail tenants with marketing assistance and access to the Trust’s purchasing power where appropriate.

Outlook

Whilst there are indications that the economic climate may improve the expectation is that trading conditions in the property sector will remain difficult for some time. Throughout 2009 the Trust has focused on enhancing value in the portfolio, reducing debt and rebalancing the property portfolio. This focus together with a strong emphasis on basic property management such as filling vacancies, controlling costs and proactive rent collection has proved to be beneficial in the current climate.

NPTL’s Chairman Kevin Podmore says, “We are pleased to have successfully met many of our strategy objectives. Reducing the Trust’s retail sector weighting has strengthened the property portfolio and the repayment of the debt from property sales has strengthened the balance sheet. Both these initiatives have placed the Trust in a strong position. The Manager will continue to focus on the underlying fundamentals while still seeking to make improvements to the property portfolio which will enable the Trust to effectively meet the challenges of the market.”

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