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Shopping centre owner’s focus on lifestyle centres paying off

Sylvia Park shopping centre

The value of Kiwi Property’s traditional retail portfolio decreased in the year to March 31, 2019, though the company’s mixed-use portfolio, which includes such ‘lifestyle centres’ as The Brickworks and Sylvia Park, increased in value by 1.3 per cent to $1.53 billion.

The company’s total portfolio, which also includes an office segment, is now worth $3.2 billion, 1.5 per cent more than the previous corresponding period.

Kiwi Property recently changed the way it classifies its assets to better reflect its strategic focus on creating mixed-use communities. The company now has three asset class classifications: mixed-use, retail and office.

The retail portfolio is worth $598 million, and represents less than 20 per cent of the company’s overall holdings. However, some retail properties, including Auckland’s Sylvia Park, are classified as mixed-use properties. And the value of this portfolio segment grew 1.3 per cent in the year to March 31, 2019.

“Our mixed-use portfolio includes those assets that are strategically located in centres of higher population growth, close to town centres or key transport linkages and have existing or longer-term potential to develop a variety of uses on site including retail, commercial, entertainment, hotel, residential or civic uses,” said Kiwi Property CEO Clive Mackenzie.

The company’s mixed-use assets are collectively valued at $1.53 billion, representing 48 per cent of its overall holdings, and provide a weighted average capitalisation rate of 5.71 per cent, in line with March 2018.

Kiwi Property said its evolution to focus on these assets is borne out in this year’s valuation result, where mixed-use assets have performed better than traditional retail centres.

Softening capitalisation rates for property assets and increased spending related to earthquakes shaved $28 million off the value of the company’s retail portfolio, representing a 4.5 per cent drop.

The company said the revaluation result, which was determined by independent valuers and will be confirmed in the audited full-year financial results, to be announced on May 20, 2019, has firmed up its investment portfolio capitalisation rate by 12 basis points, from 6.11 per cent to 5.99 per cent, and will increase its net tangible asset backing from $1.40 per share to approximately $1.43 per share.

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