ionally, but generally tends to lease its premises. “The driver for retailers developing stores for their own use is that they are constantly looking for new site opportunities, and they have the benefit of this knowledge in advance of developers. It’s a matter of charting their own course,” says Keane. “However, it is also apparent that once the stores are created, they often do not remain on the retailer’s balance sheet for long. In the main, newly developed stores are sold off to the highest bidder with the retailer retaining a lease, and negotiating a rental that benefits them long term. So why is this? “Isn’t it a good time to own your own property?” He explains that it is an interesting debate. “All your eggs in one basket is not necessarily an appropriate strategy. “Kirkcaldie and Stains in Wellington is a good example of a struggling retailer which was able to hold on for longer thanks to profits from its property business. It has now sold its property (the Harbour City Centre), used the proceeds to pay off debt, and will shut up shop next year, with David Jones taking over its premises. Property owners are entitled to a market rent, and as an owner/retailer, that is not always the result; poor retail performance may be masked by cheap or no rent.” Keane points out that retail businesses are under pressure to pay commercial rents, to give the landlord a realistic return on their investment. Shopping centre developers prefer major retail  tenants with long leases. These major tenants like long leases too, but want cheap start-up rental and miserable rent review provisions, and no automatic rental growth. Major retailers therefore have the benefit of calling the shots. A typical agreement is a 10 or 12-year lease with three-year rent reviews, all of which are tied to a CPI growth factor. “Not a great return for the landlord, but at least the landlord knows that the major tenant will remain in business over the term of the lease and will pay the rent on time, etc. That deal is bankable with a financial funder.” Keane goes on to highlight that in the next few years some retailers will have leases expire which they negotiated, and commenced, back in the late 1960s. It was appropriate then to negotiate a lease with a major anchor tenant for 50 years. The purpose for this was to ensure that the tenant remained in the leased premises, hence the term “anchor”. When these leases expire from now until 2020 there will be some interesting tenant/landlord leases renegotiated, or the tenants will exit. “Also of course, traditional relationships will be forgotten as new people on each side of the table will be negotiating the new terms,” says Keane. “On balance, despite some very good trading results by certain retailers such as Briscoe Group, trading has been more challenging for others. This was reflected in the six-month trading results by The Warehouse Group, which saw The Warehouse and Warehouse Stationery trading well, but the rest of the group in  decline. The risk therefore of a joint business and property ownership regime really does not have much appeal. The ability to concentrate and achieve good results in one specific discipline is certainly preferred over any joint ownership/retailer option, which puts pressure on the leasing party to perform at all times, thus ensuring a return on investment to the owner. We suspect that the leasing of premises to retailers will generally remain independent into the future which really is a benefit to both parties.”