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Tough retailing conditions translate into falling Kiwi retail property values

Wednesday 3rd April 2019

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Tough times for retailers, including disruption from online retailing, is translating into falling retail property values.

Kiwi Property Group says that although its overall portfolio’s value has increased by $47 million, or 1.5 percent, to $3.2 billion at March 31 compared with a year ago, the value of its retail portfolio - its traditional retail centres - has fallen by $28 million, or 4.5 percent, to $598 million.

Retail New Zealand acting chief executive Greg Harford says retailing in New Zealand generally is “really, really tough. It’s hugely competitive, not just from online competitors but also just from other businesses operating in New Zealand.

“One of the biggest issues in retail land is that foreign online competitors are not paying their fair share of tax to the New Zealand government and that’s at least a 15 percent price disadvantage that retailers have,” Harford says.

“The government is moving to rectify that from October, which is really good.”

Kiwi's mega-malls, which fall in the mixed-use portfolio, fared better than the smaller shopping centres. Sylvia Park, LynnMall, both in Auckland, and The Base in Hamilton collectively gained $20 million, or 1.3 percent, in value to $1.53 billion.

The remainder of the company’s assets, Kiwi’s office portfolio, rose in value by $53 million, or 6.3 percent, to $893 million.

“Our property portfolio has benefited from a strong investment market with robust international capital inflows contributing to a firming in the weighted average investment portfolio capitalisation rate,” says chief executive Clive Mackenzie.

“This year, we have made an important change to our asset classifications, recognising the evolution of our strategy, which increases our focus on intensifying some of our holdings to create mixed-use communities,” Mackenzie says.

The weighted average capitalisation rate – the higher the capitalisation rate, the lower a building’s value – on its mixed-use portfolio held steady at 5.71 percent and on its office portfolio fell 31 basis points to 5.45 percent.

However, the cap rate of its retail portfolio rose 23 basis points to a significantly higher 7.53 percent.

The net impact is to increase per-share net tangible asset backing to $1.43 from $1.40 previously.

Kiwi's shares last traded at $1.51, and are up 10.6 percent so far this year. 


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