Kirkcaldie to net $21.65m from Harbour City Centre sale

Kirkcaldie & Stains [NZX: KRK], the upmarket Wellington department store, will net $21.65 million from the sale of its Harbour City Centre on the city's premier Lambton Quay location.

The company agreed to sell the iconic, recently upgraded inner city building to a Wellington property investor, Chao Zheng, for $45.85 million, according to its notice of special meeting for shareholders to vote on the deal. Kirkcaldie estimates the deal will generate $16.9 million of net proceeds immediately after the sale, with the buyer to pay a further $4.75 million on the anniversary of the settlement date. Shareholders will vote on the transaction on Sept. 23 in Wellington.

"In the short term the sale proceeds will provide funds to apply to the retail business but the quantum of the proceeds provides an opportunity to consider a return of capital to shareholders," the company said. "This will be kept under active consideration and reviewed in particular in light of the Christmas/New Year retailing performance."

The Harbour City Tower is a historically significant structure on Wellington's retail "golden mile" Lambton Quay, and formerly housed Kirkcaldie's long-defunct competitor DIC. The refurbishment and earthquake strengthening has allowed NZX-listed Contact Energy to take most of the building as its corporate headquarters. It accounted for most of the $50 million valuation for the property, which includes a second site on Brandon St.

Once the deal is completed, Kirkcaldie expects to have assets worth $38 million and liabilities of $5 million, down from assets of $65.8 million and liabilities of $28.7 million as at Aug. 31, 2013.

The company said retail business still holds "considerable uncertainty" and that the board and management are reviewing other actions to lift its performance.

"If the performance of the retail business does not improve, alternatives will be considered," it said.

Shares of Kirkcaldie fell 5.5 percent to $1.90 today, valuing the retailer at $19.5 million.

(BusinessDesk)