Kiwi Property has spent $20m supporting its shopping centre tenants with rent reduction and deferrals because of their loss of trade during Covid-19 lockdowns.
Big shopping centre owner Kiwi Property has spent almost $20 million on rent relief for tenants.
That was revealed in its half-year result where it posted a 47 per cent lift in profit to $54.2m thanks to a rise in the value of its office properties.
The company is also pushing ahead with plans for the construction of two office buildings and apartments at the Sylvia Park shopping centre.
The $20m rent relief contributed to a 5.3 per cent fall in net rental income to $84.9m for the six months to September 30, 2020.
* The value of Kiwi Property’s $3.2b portfolio stabilises after falling six months ago
* Sylvia Park bets on the strength of the middle class as it expands with the Galleria
* Sylvia Park’s $277 million The Galleria to open next month
* Building apartments for rent is becoming increasingly attractive for Kiwi Property
* Foot traffic at Kiwi Property’s malls has rebounded to pre-Covid levels
Kiwi chief executive Clive Mackenzie said by supporting its retailers it retained productive shopping centres. Its portfolio was 99.1 per cent leased.
The rent relief costs would be partially offset by the reintroduction of depreciation allowances for commercial buildings, expected to increase Kiwi’s full year after-tax earnings by approximately $4.5m.
Kiwi has a long-term strategy to reduce its reliance on shopping malls through more “mixed-use” development of other buildings and facilities on four of its large shopping centre sites in Auckland and Hamilton.
The mixed-use properties are Sylvia Park, Sylvia Park Lifestyle, LynnMall and The Base in Hamilton.
The company is pushing ahead with the strategy, announcing the second office building at Sylvia Park had resource consent and design was progressing for the 15-floor development.
Planning was also underway for a third office development, a smaller six-floor office and medical building at Sylvia Park, as well as for a build-to-rent residential development at Sylvia Park, Mackenzie said.
Kiwi’s office properties have been the most resilient to the economic impact of Covid. They increased in value in the half-year by 4.3 per cent to $950m.
However, its mixed-used properties and retail properties declined in value, by almost 1 per cent to $1.55 billion for mixed used, and by 3.3 per cent to $469m for its shopping centres.
Its total portfolio was worth $3.2b at September 30, 2020.
“While the uncertainty caused by Covid-19 continues to impact property values, it’s encouraging to see a firming of capitalisation rates and a general stabilisation of asset pricing across our portfolio,” Mackenzie said.
Kiwi has put The Plaza shopping centre in Palmerston North up for sale. The funds will be used for its mixed-use developments. It was valued at $170m on its books at March 31, 2020.
Dividends for shareholders have been reinstated, reflecting a stabilisation of trading.
The half-year dividend would be 2.2 cents a share to be paid on December 18. It had been set at 95 per cent of adjusted funds from operations. For the full-year the company expected adjusted funds from operations to be 4.9c to 5.15 cents a share.
Last month Kiwi opened the 20,000 square metre Sylvia Park Level 1 expansion which cost $277m. The expansion features about 60 local and international brands, including a two-level Farmers flagship store and ‘The Terrace at Sylvia Park’ dining precinct.
Sylvia Park now has more than 250 stores and over 5000 free carparks, the most of any shopping centre in the country.