By Chris Hutching
Friday 30th May 2003
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Executive chairman Paul Dallimore this week hosted journalists and other guests to view the completed $45 million expansion of Eastgate in the eastern suburb of Linwood.
The redevelopment has increased leasable space from 9750sq m to 30,500sq m.
Part of the cost included $9.1 million for an adjacent property for a new The Warehouse store. Other anchors include the largest Farmers in the South Island and the country's largest Countdown, plus 70 speciality stores.
The expansion is forecast to lift net rental income from $2.2 million to $7 million and turnover of the shopping centre close to $150 million.
Eastgate is the first of Christchurch's four main shopping centres to complete its refurbishment.
The Palms at Shirley is nearly complete, with a similar-sized expansion, but larger expansions at Northlands (owned by Kiwi Income property Trust) and Riccarton (Westfield's) have begun more recently.
Northlands and Riccarton both share the risk of shopper substitution they are within 10 minutes' drive of each other and other smaller malls, so shoppers may frequently change their venues, making a nebulous catchment.
By contrast, Eastgate on the eastern side of the city has no near rivals.
The Eastgate revamp will have a major effect on the value of the National Property portfolio, which is expected to rise from $116 million a year ago to about $200 million to $215 million, in contrast to the $27 million portfolio it had when it listed in 1996.
The valuations will be released to the market in the next few weeks before the annual result.
The $1.8 million Rialto development is also significant for the profile it gives the trust in Newmarket's golden mile and in Auckland generally because the region will be the likely focus of new ventures.
The next development for National Property Trust will be the Goddard building in central Tauranga where National Property Trust expects to spend about $3 million, increasing the number of shops from 20 to 30, and taking the end value to about $13 million, according to Mr Dallimore.
The development at Eastgate is a significant milestone for the National Property Trust, which faced scepticism in the market about its ability to make Eastgate work. There was a period under the previous owners when it looked doubtful, Mr Dallimore acknowledged.
National Property Trust's gearing is relatively high but may be offset by the successful sale of the AA Centre in Auckland estimated to fetch around $20 million.
Its sharemarket price is at 90c (market capitalisation is around $86 million), a significant discount to asset backing of 98c. Some analysts believe this makes it an attractive investment proposition that will outperform in the long term (one analyst values the shares at $1).
Earnings for the full year are forecast to be about $5 million, rising to $8.2 million in 2004 as the benefits of increased rentals kicks in.
The management team is headed by Mr Dallimore and includes directors Brian Kreft, Peter Rae, Barrie Downey and Michael Nidd.
National Property Trust's portfolio also includes commercial properties (38%, industrial (4%), as well as retail (58%).
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