Archive | Kiwi Property Group

Kiwi Property profit down – focus on the long term

Kiwi Property Group Ltd posted an after-tax profit of $120.1 million ($143 million in 2017), driven by another record operating result as measured by funds from operations (FFO – see note at foot).

The company said funds from operations grew by 8.2% to $111.3 million ($102.8 million), reflecting a 5.2% lift in rental income to $192.1 million, largely due to contributions from developments & strategic acquisitions completed the previous year.

While after-tax profit for the year was down, the company focuses in its annual report on long-term growth. Its target is 9%/year long-term total returns, last year it achieved 9.7%, this year it slipped to 9.3%.

Funds from operations/share slipped to 7.84c (7.95c). Net tangible assets/share were up a cent to 140c (139c).

Specialty retail sales rose 7.1% to $10,600/m² ($9900/m²).

A full-year dividend of 6.85c/share (6.75c) will be paid.

Chair Mark Ford said: “We continued to grow revenues while improving the quality of our investment portfolio through the sale of non-core assets, strategic acquisitions and the commencement of new development projects. We have also improved our conservative gearing position and executed strongly on capital management initiatives…

“In February, we were delighted to give the green light to the previously foreshadowed $223 million Galleria retail expansion at Sylvia Park, following 11 years of outstanding performance & growth at the centre. Our vision for Sylvia Park is the creation of a world-class town centre offering our customers exceptional retail, dining, entertainment & workplace experiences. This latest retail expansion will consolidate the centre’s position as New Zealand’s favourite shopping destination.”

$370 million of developments

Chief executive Chris Gudgeon said: “We currently have $370 million of developments in progress that will continue to add significantly to both the income performance & quality of our property portfolio.”

Sylvia Park continued to be a major focus. Highlights included:

  • The Grove dining district opened 100% leased in December
  • The $80 million office tower development, No 1 Sylvia Park, anchored by insurance company IAG, reached 90% leased this month when ANZ Bank (NZ) Ltd took 6740m² (5 full floors & a part floor)
  • Construction of the Galleria retail expansion began – completion is scheduled for mid-2020, introducing 60 new specialty retailers, a flagship Farmers department store, international mini-majors & additional multi-deck parking.

The $9 million Grove precinct opened 100% leased and will deliver an initial yield of 7.8%, growing to 8.2% over the following 2 years, with a projected 10-year internal rate of return of 10%.

In Christchurch, Kiwi began construction of the new dining & entertainment precinct at Northlands, to be known as Langdons Quarter.

The company continued its capital recycling programme with the sale of previously identified non-core properties. It sold the Majestic Centre in Wellington for $123.2 million in December and, post-balance date, secured an agreement to sell North City in Porirua for $100 million.

Kiwi reduced its gearing from 34.5% to 29.7% at balance date.

Its investment portfolio was 99.6% occupied at year end, above its long-term average, with a weighted average lease term of 5.3 years. The portfolio value increased to $3.1 billion ($3 billion).

Overall, rentals achieved through new leasing & rent reviews delivered growth of 3.5%.

$1.6 billion of the $1.8 billion total retail sales were in Kiwi’s portfolio of 7 shopping centres, equating to growth of 3.9% (1.3% like-for-like). Growth was strong in the mini-majors, commercial services and pharmacy & wellbeing categories.

The outlook

Mr Ford said the company was projecting an increased cash dividend of 6.95c/share for 2019, absent material adverse events or unforeseen circumstances.

“Our key focus in the year ahead will be on progressing our development projects underway at Sylvia Park & Northlands, while also progressing our town centre vision for our development land at Drury, south of Auckland.”

Note: Funds from operations is an alternative non-GAAP performance measure used to assess underlying operating performance and to determine income available for distribution. Kiwi said it’s a measure commonly used by real estate entities to describe their underlying & recurring earnings from operations, but it doesn’t have a standard meaning prescribed by GAAP and therefore might not be comparable to information presented by other entities.

Kiwi uses the Property Council of Australia guidelines. During the financial year, the council amended the method used to derive FFO to include the amortisation of leasing fees, and Kiwi Property has amended its current year FFO calculation to reflect this change.

Annual report
Company website, annual result pages

Attribution: Company release, annual report & presentation.

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ANZ commits to 5-plus floors at No 1 Sylvia Park

ANZ Bank NZ Ltd has agreed to lease about 6740m² of Kiwi Property Group Ltd’s No 1 Sylvia Park office development (pictured), now under construction.

Kiwi Property described Sylvia Park as the Sylvia Park town centre, which was the intention from the time the company bought the initial 24ha site beside the Southern Motorway at Mt Wellington in 1995 (back when the NZX-listed entity was a trust) and secured a plan change in 2001 that allowed for a business centre with a gross floor area of 148,000m², including a maximum 75,000m² for retail premises, entertainment facilities, taverns, cafés, restaurants & other eating places.

Kiwi’s plans then also included residential development, completing the town centre concept. In the intervening 17 years, however, it’s become New Zealand’s pre-eminent shopping mall.

ANZ, through subsidiary Arawata Assets Ltd, will take a 9-year lease over 5 whole floors & a partial floor, starting in 2 stages between June & December 2019 to suit the progressive relocation of bank staff into the building from a number of locations. ANZ has also secured exclusive naming & signage rights.

Kiwi Property chief executive Chris Gudgeon said yesterday: “Our vision for Sylvia Park is the creation of a world-class town centre, offering our customers exceptional retail, dining, entertainment & workplace experiences.

“ANZ taking this significant space in No 1 Sylvia Park reflects this transition to a town centre. Our ability to successfully lease over 10,000m² of office space in the building to major corporates such as ANZ & [insurance company] IAG NZ Ltd shows that the market is looking for such an offering. Our vision is now becoming reality.”

Mr Gudgeon said the new office building was being constructed to integrate seamlessly with the mall & The Grove Dining District, which opened last December.

“With a dedicated entrance, it offers businesses a truly unique & high quality working environment in an easily accessible location with excellent rail & bus transport links, allowing staff to take advantage of the extensive range of amenities & services at the centre.”

“ANZ & IAG, together with the ground-floor retailers, will occupy around 90% of the office building and, following ANZ’s full occupation in 2019, the project is expected to yield 7.4%, with a projected 10-year internal rate of return in excess of 9%.

“We look forward to welcoming ANZ to the building, joining approximately 350 IAG staff who will move into their new 3324m² office premises following completion of No 1 Sylvia Park in the middle of this year.”

“By year end, we will complete our new roughly 600-space shopper carpark building and the excitement will continue right through to mid-2020, when we complete our $223 million Galleria retail expansion project. This will take Sylvia Park to another level, featuring new international brands & concept stores, selected retailers from Sylvia Park’s current waiting list of specialty tenants, a 2-storey Farmers department store and a sophisticated new-generation, sophisticated dining precinct.”

Attribution: Kiwi Property release.

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Adelaide family makes Porirua mall its second NZ purchase

Kiwi Property Group Ltd has agreed to sell the North City Shopping Centre in Porirua to the Angaet Group of Adelaide for $100 million – $12.4 million short of book value. The transaction is due to settle in July.

It’s Angaet’s second New Zealand purchase following its acquisition of the WestCity mall in Henderson from the manager of Westfield Group’s New Zealand malls, Scentre (NZ) Ltd, settled last July.

In both cases, mall management has moved from the big portfolio owners and into the hands of real estate company Colliers.

Kiwi chief executive Chris Gudgeon said on Wednesday: “North City had been identified for sale as part of our capital recycling programme designed to fund current investment priorities. Proceeds from the sale will be used to pay down bank debt and provide further balance sheet flexibility.”

North City was on Kiwi’s books (at September 2017) at $112.4 million, with a cap rate of 7.63%. Kiwi has owned it since 1993, the year the company’s forerunner, the Kiwi Income Property Trust, was floated on the NZX.

The DiMauro family, under the leadership of Nick DiMauro & his son Michael, owns the whole of Angaet’s portfolio, which includes 25 shopping centres around Australia.

Nick DiMauro said yesterday New Zealand was an attractive investment location, and North City was a vibrant asset. The 3-level regional shopping centre has 98 tenants in a net lettable area of 25,439m² and 1102 parking spaces, and is anchored by Kmart, Farmers & a Reading Cinemas complex. It has 68 specialty retail tenants, 11 kiosks, 11 foodcourt tenants, and 8 office suites on the third floor.

The mall at 2 Titahi Bay Rd, Porirua, was built in 1990 and refurbished & extended in 1997 & 2004.

Attribution: Kiwi & Colliers releases.

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Kiwi Property gets 1.1% portfolio rise

Kiwi Property Group Ltd has reported a 1.1% ($34 million) net fair value gain on its portfolio of shopping centres and office buildings for the March year, lifting the total portfolio value to $3.1 billion.

The company’s biggest asset, the Sylvia Park retail centre (now having an office component added) is worth $835 million – $3.8 million more than the whole office portfolio. It also carries the strongest cap rate, which tightened by 50 basis points to 5.38%.

The Vero Centre on Shortland St in Auckland firmed 25 points to 5.5% and ASB North Wharf in the Wynyard Quarter firmed 13 points to 5.63%.

Chief executive Chris Gudgeon said on Thursday: “Kiwi Property’s portfolio has benefited from generally positive property market conditions, with the investment portfolio weighted average capitalisation rate firming to a record low. New leasing deals, strategic development works, strong sales at our key Auckland retail centres and strong tenant demand for our office properties have assisted value growth.

“This has been partially offset by the cost of seismic strengthening activities, predominantly at assets in regions with higher seismic risk, and related increases in insurance costs.”

Mr Gudgeon said the weighted average cap rate for the investment portfolio firmed 27 basis points to a record low of 6.10%, and the valuations indicated that, overall, the portfolio rental levels were essentially at market.

The company will confirm the valuations when it announces its annual results on 21 May.

Summary of portfolio valuations:

Attribution: Company release.

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BlackRock buys stake in Kiwi Property

US fund manager BlackRock Inc has taken a 5% stake in NZX-listed retail & office property investor Kiwi Property Group Ltd.

BlackRock acquired 71.15 million shares in Kiwi starting last Thursday, declared in a substantial securityholder notice this morning. It’s also been a 5% shareholder in SkyCity Entertainment Group Ltd since 2014.

BlackRock manages about $US6.3 trillion of assets.

Attribution: Company release.

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Sylvia Park’s Galleria set to go

Kiwi Property Group Ltd gave the green light on Wednesday to its $223 million Galleria retail expansion at Sylvia Park.

The Galleria retail expansion will add about 60 retailers & 18,000m² of retail space to the centre, including:

  • a 2-level, 8100m² flagship Farmers department store
  • new international brands & concept stores, “including selected retailers from Sylvia Park’s current waiting list of specialty tenants”
  • a new generation, café dining precinct, and
  • a 900-space multi-deck carpark with direct access to the Galleria, taking the total number of parking spaces at the centre to about 5000.

Sylvia Park is New Zealand’s largest shopping centre and on completion of the expansion project will have total retail floor space of over 90,000m².

The projected value of Sylvia Park on completion of the Galleria project has been assessed by CBRE at $1.12 billion.

Link: Green light for Sylvia Park Galleria expansion – presentation

Attribution: Company release.

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Kiwi Property sets bond rate, settles Majestic sale

Kiwi Property Group Ltd has set the interest rate for its $125 million issue of 7-year fixed-rate senior secured bonds at 4.33%/year.

The offer closed yesterday and trading in the bonds will open on Wednesday 20 December.

S&P Global Ratings has assigned an issue credit rating of BBB+ to the bonds.

Majestic sale settled

Kiwi Property said on Monday it had settled the $123.2 million sale of the Majestic Centre in Wellington to Investec Property Ltd, as the responsible entity for the Investec Australia Property Fund. Kiwi Property will continue to manage the building for Investec.

Earlier story:
15 November 2017: Kiwi Property sells Majestic to Investec fund

Attribution: Company releases.

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Kiwi Property sells Majestic to Investec fund

Kiwi Property Group Ltd has secured an agreement to sell the Majestic Centre in Wellington for $123.2 million to Investec Property Ltd, as the responsible entity for the Investec Australia Property Fund.

As part of the sale arrangement, Investec will appoint Kiwi Property to manage the office tower, which has undergone one of New Zealand’s largest seismic upgrades. It’s Investec’s first New Zealand purchase.

Kiwi Property chief executive Chris Gudgeon said yesterday: “We are immensely proud of what we have achieved for the tenants of the Majestic Centre, raising the seismic performance rating of the office tower to 100% of new building standard.

“Notwithstanding, the Majestic Centre was identified for sale as part of our capital recycling programme. Proceeds from the sale, which is due to settle in December, will be used to pay down bank debt, providing further flexibility for Kiwi Property to invest in line with our strategy.”

In the company’s annual accounts to March 2017, the value of the 21-storey Majestic Centre increased to $119.4 million, but a net value loss of $5 million was recorded after allowing for capex on the seismic upgrade programme completed in January. The building, at 100 Willis St, has a net lettable area of 24,469m² (2322m² retail, 22147m² office) & 240 parking spaces and typical floorplates of 1000m².

Kiwi Property is due to release its result for the September half-year next Monday, 20 November. At the moment it’s showing the Majestic Centre has 92.1% occupancy, a weighted average lease term of 6.8 years & net rental income of $7.1 million.

The buyer, Investec, said it was acquiring the property on an initial yield of 7.1% and with average annual contractual rental escalations of about 2.75%. It said the property was 98% occupied and had a long weighted average lease expiry of 6.6 years.

Investec is a South African investment bank which has a dual listing in Johannesburg & London. It floated the Investec Australia Property Fund on the Johannesburg Stock Exchange in 2013, launching with an $A130 million portfolio of 8 industrial & office properties.

That portfolio now comprises 25 properties worth $A942 million, and fund chief executive Graeme Katz said yesterday that was a scale at which management believed an ASX listing could be considered.

He added: “We continue to believe in the case for investing in good quality investment properties in Australia & New Zealand. The fund’s current equity yield of 8.2% is attractive for South African investors, especially as it is underpinned by the region’s favourable macro-economic conditions, property yield spread over historically low funding costs locked in and income returns in hard currency.”

14 November 2017: IAPF portfolio value approaches $A1.0bn mark through acquisition & value uplift

Attribution: Kiwi & Investec releases.

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Kiwi acquires more expansion land at Sylvia Park

Kiwi Property Group Ltd has secured an agreement to acquire a 3.2ha property at 79 Carbine Rd & 10 Clemow Drive in Mt Wellington for $27.1 million.

Chief executive Chris Gudgeon said on Friday: “When combined with our existing landholdings on Carbine Rd & Clemow Drive, this acquisition enables us to consolidate a strategic 7.7ha landholding with a road bridge connection to Sylvia Park over the railway line.

“We have no immediate plans to redevelop the land. However, given our world-class town centre vision for Sylvia Park and Mt Wellington’s status as a metropolitan centre, it makes good sense for us as a long-term investor to increase our landholdings in this strategic location. Kiwi Property’s landholdings in Mt Wellington now total over 30ha, including the main 20.4ha Sylvia Park Shopping Centre site.”

Improvements on the newly acquired property comprise a coolstore, industrial buildings, a truck fuel stop and temporary structures for office & storage. The property is leased to 8 tenants, including Fonterra & VINZ, with current passing income of about $1 million/year and a weighted average lease term of 4.77 years.

Mr Gudgeon said Kiwi would fund the acquisition from existing debt facilities. It’s due to settle this Friday, 13 October.

Kiwi already has 3 expansion projects underway at Sylvia Park – a new dining lane, an office building & a multi-level carpark. A fourth development project, comprising a retail galleria expansion & carpark, is in an advanced planning stage.

Attribution: Company release.

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Kiwi Property settles second Drury site purchase

Kiwi Property Group Ltd settled its acquisition of 30.6ha at Drury on Wednesday, after receiving approval from the Overseas Investment Office a week ago to proceed.

The company intends to create a new town centre next to Stevenson Group Ltd’s mostly industrial 360ha development site.

Kiwi’s 3 greenfield sites are next to the junction of the Southern Motorway, Great South Rd and the North Island main trunk railway line, 35km south of Auckland’s city centre.

Chief executive Chris Gudgeon said: “This brings our total landholdings to 42.7ha, at a purchase price of $39.8 million. A third land parcel of 8.6ha has been secured via a right of first refusal, with the purchase price to be determined with reference to the market when the right is exercised.

Earlier stories:
13 September 2017: Kiwi Property’s Drury buy approved
10 September 2017: Second round for Auranga precinct confirms Drury as major growth centre
7 April 2017: Kiwi Property plans new town centre next to Stevenson’s Drury development
30 August 2013: Drury South industrial area plan change & MUL extension approved

Attribution: Company release.

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