Kiwi Property rakes in $100m on sale of Porirua shopping centre to Aussie group

Kiwi Property Group, the biggest property company listed on the NZX has sold Porirua’s North City Shopping Centre for $100 million to family-owned Australian property business, Angaet Group.

North City had been identified by Kiwi Property for sale some time ago as part of the company’s capital recycling programme to fund investment priorities.

Money from the North City sale, due to settle at the end of July, will be used to pay down bank debt and provide further balance sheet flexibility, says chief executive Chris Gudgeon.

The carrying value of North City will be adjusted in the company’s March 31, 2018 financial statements to reflect its net sale price.

The sale follows Kiwi Property’s December sale of Wellington’s Majestic Centre office tower for $123.2 million to Investec Property – which manages property funds in Australia, South Africa and the UK.

That was $3.8 million over the building’s valuation to March last year but, essentially, Kiwi also kissed goodbye the nearly $88 million it spent on earthquake strengthening and renovating the building up to 100% of the new building standard, which was effectively sunk costs.

Mr Gudgeon told NBR at the time of the sale one of the reasons for it offloading the centre was Kiwi Property doesn’t want to rely solely on raising capital from shareholders to fund new acquisitions and developments.

“If we need capital, we can’t be going to our investors constantly for capital,” Mr Gudgeon says.

That’s notwithstanding the $161 million the company raised from a rights issue in June last year to help fund its Sylvia Park expansion in Auckland.

Kiwi still owns two office towers on The Terrace in Wellington, the Aurora Centre and 44 The Terrace, with lettable space approaching 35,000sq m.

Retail dominance
North City was considered by the company a non-core asset as the company moves to own just its top-performing retail centres, mainly in Auckland.

It is increasingly concentrating on dominant suburban centres where there is scale, free parking and other amenities.

One of Kiwi’s biggest opportunities has been the flood of international retail brands wanting to get a foothold in New Zealand.

It has H&M and Zara as two of its main fashion brands at Sylvia Park and expects to attract others, with its $233 million Galleria expansion just about to get under way.

The expansion will add about 60 new retailers and 18,000sq m of retail space to the centre, including a new two-level 8100sq m flagship Farmers store, new international brands and concept stores from selected retailers on the waiting list of specialty tenants. 

Once it is finished in mid-2020, the country’s biggest shopping centre will have retail floor space of more than 90,000sq m and a total worth of $1.12 billion.

However, while Kiwi Property is in expansion mode, particularly with positive population growth forecasts for Hamilton, where it owns half of The Base with Tainui Group Holdings, and Auckland.

Mr Gudgeon says when retail sales that track nominal GDP growth are taken into account along with population growth there could be a sales increase of 2-4% over time.

That allows Kiwi Property to generate modest rental growth over the medium term at a rate that’s affordable for retailers, who regard affordability as a key issue.