Shopping centres plummet in value
Covid-19 has slashed the value of four shopping centres by a combined $70.5 million, including Queensgate and Johnsonville shopping centres in Wellington.
The beginnings of a potential redevelopment plan for Johnsonville Shopping Centre – which has been talked about for 20 years – has been put on hold while the owners wait for retailing to settle after the Covid-19 shock.
The four shopping centres’ values fell because more than 90 per cent of the tenants had to stop trading for two months during alert levels 4 and 3.
Johnsonville’s value dropped to $50m from $60.12m the year before. The information was revealed by Stride Property Group, which manages the shopping centre and other retail, industrial and office properties and also owns properties.
Three of the four shopping centres are owned by an Australian trust and managed by Stride, and Johnsonville is half owned by the trust and half by Stride.
The four had been valued at $485m in March last year and have dropped to $414m at the end of March this year, Stride revealed in its annual result for the year to March 2020.
Other property companies have seen the value of their retail properties decline, including Kiwi Property and Argosy.
Besides Queensgate and Johnsonville, the two other shopping centres are the Remarkables Park Town Centre in Queenstown and Chartwell
Shopping Centre in Hamilton.
‘‘As a result of Covid-19, the valuations of the four shopping centres owned by Diversified [Diversified NZ Property Trust] have declined by $70.5m or 14.5 per cent on a gross basis for FY20 [financial year 2020],’’ Stride said.
Diversified and Stride have spent $4m assessing development options and designs for Johnsonville, Stride chief executive Philip Littlewood said. But that project was on hold until the economic and particularly the fortunes of retail market became clearer.
‘‘We remain committed to Johnsonville and we know people are desperate to see something there. We are as desperate as anyone to deliver something, but it has to be done with the right financial returns and these are pretty uncertain financial times.’’
Stride did not reveal how much Queensgate, Chartwell or Remarkables Park Town centre shopping centres had each declined in value, but other information shows the three have dropped a combined $60m.
Littlewood said the information on the three was market sensitive. They are largely owned by the Australian trust and only 2 per cent by Stride. Littlewood said all three had reduced in value.
Stride bought Queensgate and Chartwell from Westfield, now Scentre Group, in 2016 for $445m.
But now the four shopping centres are worth significantly less, $414m at March 2020, and that includes the $50m value of Johnsonville.
The $110m Queensgate redevelopment, following the Kaiko¯ura earthquake, was well underway. The car park is scheduled to open early next year and the new cinema the complex in early 2022, Stride said.
Stride’s other retail properties include the Silverdale Centre, 30 kilometres north of Auckland, which fell 5 per cent from $100.5m to $95m, and the NorthWest Shopping Centre, including NorthWest Two in Auckland, which fell 12.5 per cent to $182m.
Foot traffic in retail had bounced back ‘‘pretty much’’ to where it was last year, and other retailers were saying the same, which was a positive sign, Littlewood said.
Because New Zealand did not have Covid-19 it did not have that continued anxiety around social separation, which had a high impact on discretionary spending.
Other retail landlords had similar falls in value ranging from 10 per cent to 20 per cent, Littlewood said.
Stride expects rental relief for its tenants to cost between $8m and $11m.
It posted a $25.3m profit for the March 2020 year, about one-third of the profit of $76.2m in the previous year. The drop was largely due to the fall in property values.
While retail property values fell, office building values held steady and industrial property values rose by $42.7m, 14.3 per cent up on the year before.