On the shopping block: Mall sells for $87m less than 2019 valuation
Kiwi Property Group owns a Christchurch mall valued three years ago at $247 million but is selling it now for only $160m. But Kiwi said the Papanui mall’s $247m valuation was old and from 2019.
After the Weekend Herald questioned that figure being on the NZX-listed company’s website, it would be removed.
“To avoid confusion though we’ll make a change to the website,” a spokesman said.
Kiwi had not had the mall valued for three years because it was for sale, the spokesman said. But the value decreased since 2019 when Christchurch retail trade had returned to the CBD in the post-earthquake recovery.
“Northlands’ valuation has decreased from its peak towards the figure the centre has now conditionally sold at,” Kiwi’s spokesman said yesterday.
A privately-owned Queenstownheadquartered property syndicator and manager is buying the mall.
Buyer Mackersy Property’s chief executive Hamish Wilton said his company already issued its information memorandum, forecasting a 10 per cent annual return to wholesale investors who put money into Northlands shopping centre.
Kiwi said this week it planned to sell its big centre to the real estate investment and management business in a deal settling in November.
Kiwi said Northlands had 121 tenants, 1663 car parks, produced net operating income of $19.1m and made annual sales of $286.5m.
The mall at 43 Langdons Rd is planned to be sold to MP Holdings 5, managed by the private syndicator which manages $2.15 billion of real estate.
Only wholesale investors can buy into its private investment fund. Those need to be professional investors who cannot put in less than $100,000.
An agreement has been struck for Kiwi to put $9m of the $160m proceeds it gets from the sale into a solicitor’s trust account to pay for finishing seismic works at the Hoyts cinemas.
Kiwi said it had about $32m from the Northlands seismic insurance proceeds that remain unspent at the asset.
The sale is subject to two conditions: the landlord’s consent to transfer a ground lease over part of the carpark, and Kiwi’s board approval. The ground lease is owned by a private landlord.
The sale is expected to settle on or before November 30.
Kiwi will continue to manage the centre for Mackersy and has also agreed to provide vendor finance of up to $75m to settle the purchase if needed.
Wilton said the Christchurch asset would not be the largest the business had bought.
That was Spark Central in Wellington, bought in 2019 for $197.5m. Mackersy Property had assembled an investment group to buy that office building, Wilton said.
On the Northlands purchase, Mackersy already has the funds to settle and Wilton said it planned to.
“We’ve raised the capital from our private investment group already to buy this centre.”
Asked about the discounted sale price to book valuation, Wilton said that was a result of successful negotiations.
An information memorandum had been issued to investors. That was dated August 24.
It projected a rate of return of 10 per cent but additional funds would be held for capital expenditure and reserve, Wilton said.
The Kiwi spokesman said after the Canterbury earthquakes, Christchurch’s retail trade shifted from the heavily damaged CBD to suburban shopping centres, including Northlands.
“In parallel, a substantial proportion of the city’s population moved outwards, resulting in an increase in the catchment immediately surrounding the centre. These trends saw a spike in the value of Northlands during FY19.
“Since then a lot has changed, including the resurgence of Christchurch’s CBD and a global softening of capitalisation rates for retail property assets. As a result of these factors, as well as the valuers making a significant allowance for future seismic strengthening costs, Northlands’ valuation has decreased from its peak towards the figure the centre has now conditionally sold at,” the spokesman said.
That Christchurch retail trade shift highlighted the importance of Kiwi’s mixed-use strategy and its focus on retaining strong, high-quality retail centres in strategic locations, like Sylvia Park, LynnMall, The Base and ultimately Drury, he said.
“We believe these assets will continue to perform well over time and benefit from the flight to quality we’re seeing in the retail sector.”
The sale was transacted by Colliers’ Richard Kirke and Mark Macauley, he said.
The largest group of investors in the Mackersy Property business own a portfolio of 32 buildings in Tauranga and Hamilton, predominantly industrial but some bulk retail and some offices, Wilton said.
Mackersy announced on September 2 it had appointed Wilton, a former commercial property and construction lawyer, as its new chief executive.
But that announcement was well behind the times. The appointment was actually made on April 1. Asked about the five-month gap, Wilton said the business was private and had no obligations to disclose information to the public about such appointments.
Wilton had worked at Mackersy for 10 years, six of those as a director. Andy Evans is Mackersy’s chairman.
Mackersy has 120 syndicates which manage commercial, retail and industrial real estate including Waikato Regional Council’s building in Hamilton, the new Countdown distribution centre under construction at Rolleston and around 12 other supermarkets, predominantly Countdowns, Wilton said.
Colliers’ Kirke said of the sale price: “That may have been the valuation in 2019 but whether it was ever able to be realised, I would question that. The whole retail sector has been challenged globally. That’s reflected in the low number of sales of shopping centres in New Zealand. There’s been nothing over $100m that I can think of.
“Changing seismic legislation has had an impact too. But ultimately the price achieved was in my view quite a good outcome for Kiwi. It’s going to facilitate a lot of development plans they have at Sylvia Park and elsewhere and it’s also a good investment for the buyers,” Kirke said.
Kiwi had wanted to sell it for some time “and ultimately the pricing got to a level where investors were motivated. In the end, there were other parties pursuing the property”, Kirke said.
Kiwi shares closed trading yesterday at $1.01, giving a market capitalisation of $1.59b.