malls

Westfield Group has reassured investors it won't be burnt by the sub-prime mortgage meltdown, saying global demand for retail space is strong and sales still are up.

The world's largest shopping mall owner reported, in an investor briefing yesterday on its third quarter update, that its strategy of targeting affluent shoppers through its A$10 billion ($11.9 billion) future development programme, equipping malls for a higher quality shopping experience, should offer protection.

"Of course, we are probably not immune to fluctuation, but the reality is you have got to come back to what our business is - we are really focused on having the best shopping centres in the best markets," Westfield's joint managing director Steven Lowy said yesterday.  "These centres penetrate much more powerfully. You can see, out of the Australian and New Zealand business and with many US assets, where we have done that, we have been able to build centres that are a lot more immune to fluctuations.

"In slower times, they [retailers] keep the shops in the best centres and get rid of the more marginal shops. That is really what we have seen in the 47-year history of the company."

Westfield released figures yesterday showing occupancy levels at its malls across the globe remained above a tight 93 per cent in the third quarter and that leisure shops were doing the best in the weeks the credit crunch has taken hold, with retail growth levels of more than 14 per cent in both Australia and the United States.  Lowy said investors would have seen Westfield shift "not so suddenly" to developing and owning the best centres in the best markets.  "We have shifted our business in the United States to better quality assets," he said.

In Australia, Westfield's quarterly retail sales were up 5.6 per cent, in the UK, up 2.1 per cent, up 1.9 per cent in the US, and up 2.2 per cent in New Zealand.  Specialty store sales in the US had grown at 1.9 per cent in the three months, while in Australia, specialty store sales had grown at 7 per cent.  They were flat for the quarter in New Zealand, reflecting growing competition in Auckland.

"For the broader economic data coming out of the US, obviously, there are mixed signals regarding the strength of the economy," Lowy said. "[But] retail sales in the US and retail demand for space remains solid. Overall, on a sales per square foot basis, sales increased 4.4 per cent, from the same period last year."  Lowy said that, for the company's own portfolio, on a comparable basis, sales for the third quarter from the West Coast of the US were up 3.6 per cent, while the Mid-West and East Coast portfolios were flat.

"[In Australia], our shopping centre in Bondi Junction continues to power ahead from development completions, achieving current annual sales in excess of A$870 million at the end of September, with specialty store growth of 11.7 per cent for the nine months and 12.2 per cent for the quarter.  "The development of the mall in Chirnside, Brisbane, sees the centre now rank as the second highest grossing Westfield centre in the Australian portfolio for the September quarter.

Lowy said the retail sales slowdown was often not seen in retail rentals until nearly two years later.  "You need a long slowdown for it to affect rents," he said.  "We don't see any downward pressure on rents and would need a sustained slowdown to see one.

The world's largest shopping centre owner, Westfield, wants to expand here by developing more shops and adding to its $3 billion asset base. 

So says Stephen Lowy, 44, joint managing director of Westfield Group, here from Sydney yesterday for the opening of the $210 million Albany centre after a partial opening two months ago.  That new mall has 5.2ha of indoor floor space and although Prime Minister Helen Clark opened it yesterday, the 1800-seat cinemas will not open until next year.

Lowy said that in the last seven years, Westfield had spent an annual average $175 million and it planned to continue.  "We've got 12 centres here with a value in excess of $3 billion so on that alone, we'd be in the top 10 New Zealand companies if we were listed [here]."

Lowy is one of Australia's richest men, with his family's fortune estimated to be at least A$5 billion ($6 billion), second only to Australian publisher James Packer with A$7 billion.  Lowy, a son of Westfield founder and holocaust survivor Frank Lowy, is also a member of Prime Minister John Howard's Business-Government Advisory Group which consults on anti-terrorism strategies and national security issues.

The former US investment banker is president of Art Gallery of New South Wales, a director of the Victor Chang Cardiac Research Institute and a director of the Lowy Institute for International Policy. Westfield's annual report showed he earned A$8.4 million last year, up from A$4.9 million in 2005.

Lowy yesterday emphasised his company's expansion plans here, particularly at Albany where surplus land will allow far more shops to be built soon.  "It's endless. What limits us is only demand of the population," Lowy said.

Westfield is expanding its Newmarket centre, adding a multiplex cinema and further shops, he said. At Riccarton in Christchurch, it is developing a second level and the expansion of Manukau is being completed. 

But the growth here is being far outstripped by a global drive, with Westfield opening five new malls in the last month.  Four weeks ago, it opened the £340 million ($917 million) centre in Britain's Derby, followed by two new centres in Australia at Newcastle and Brisbane. Yesterday was New Zealand's turn with Albany and tomorrow Westfield will open a new centre in Annapolis, Maryland in the US.  "So that's about A$1.5 billion of shopping centres opened in four weeks."

To cater for that rapid expansion, Westfield was drawing many executives from New Zealand, Lowy said.  For example, John Widdup, director of Westfield New Zealand since 2001, has just been appointed to run Westfield America, in charge of 9000 shops in 59 centres worth US$18.7 billion ($24.2 billion). Widdup left Parnell for Sydney about two years ago but has now shifted to the US.  And Justin Lynch, an Australian at Westfield in Auckland for the last seven years, has stepped into Widdup's role. Lynch was this week appointed director of Westfield New Zealand.  Lowy said Jason James, a former leasing manager at Glenfield, had shifted to Britain to run the new Derby centre.

But Lowy baulked at the suggestion that Westfield developed formula-style malls which were much the same throughout New Zealand.  "I would strongly disagree with that. I don't think Albany's the same as any other centre. Every product we do, we challenge ourselves to make it better than the last one," he said.

Mall giant

• Westfield is the world's largest listed retail property group.
• Manages assets worth $73.1 billion.
• Malls in Europe, United States and Australasia.
• Owns 12 malls in NZ worth $3 billion.

Australian-based shopping centre operator Westfield Group reported a 7.4 percent rise in first-half operating profit on Wednesday, and said it was ready to start $A10 ($NZ11.83) billion worth of new projects.

Westfield, which has interests in over 121 shopping centres in Australia, New Zealand, Britain and the United States, said profit from operations, excluding property revaluations, rose to $A844 ($NZ998.69) million for the six months to June on constant currency basis.  "The key features of this result were a solid operational performance across the global portfolio," Managing Directors Peter Lowy and Steven Lowy said in a statement. 

Westfield, which has total assets worth $A49.76 ($NZ58.88) billion, said it expected to complete about $A1.9 ($NZ2.24) billion of major development projects during 2007.  The developer was currently involved in 16 major projects with a forecast investment of $A7.2 billion, and was due to start another $A10 billion of projects over the next three years.  The world's largest retail property group by market capitalisation, Westfield maintained its full-year distribution forecast at A106.5 cents per share.  About half of Westfield's shopping centres are in the United States, where about 40 percent of retail outlets are also based.

Last month the company completed a $A3 billion capital raising, which it has earmarked for new and existing shopping centre developments around the world.

Westfield shares closed at $A20.99 on Tuesday. The stock hit record highs in February but have since eased, and is up 0.3 percent in 2007 so far, compared with a 0.5 percent drop in the S&P/ASX 200 property index .  Analysts say through recent asset sales and equity raisings Westfield has accrued around $A8 billion, reducing its gearing and giving it an armoury to pursue acquisitions.  Its biggest development projects include a £1.6 billion ($NZ4.65 billion) shopping mall in west London and a mall in Stratford City near London's 2012 Olympic site.

The Warehouse Group Limited ("WHS") today announced that it has reached an unconditional agreement to sell its 50% interest in "The Base" retail complex at Te Rapa to Tainui Group Holdings Limited ("TGH") for a gross consideration of NZ$37.4million.

The Warehouse entered into a 50/50 joint venture in 2003 with TGH, the commercial arm of Waikato- Tainui, to develop "The Base", a 60,000 square metre retail complex, north of Hamilton.

Commenting on the acquisition by Tainui Group Holdings, Mike Pohio, Chief Executive said "we would like to take this opportunity to thank The Warehouse Group for the very positive and constructive relationship we have had with their board and management team over the past four years".

In commenting on the sale, Ian Morrice, Managing Director of The Warehouse Group said "The Base development has been a successful venture for The Warehouse, and is the site for development of our existing store into the third Warehouse Extra. We thank Tainui Group Holdings for their professionalism and support in successfully establishing The Base as a significant retail destination in the Waikato area".

The settlement is scheduled to take place in July 2007. The Warehouse Group will report an after tax surplus on divestment of between NZ$11.8 and NZ$12.4 million in the 2007 financial year.

BRW Rich 200 members have offloaded assets valued at more than $15 billion in the past year. So why have they done it and what does it mean for the economy?

Australia's super wealthy have engaged in an unprecedented level of selling over the past 12 months, disposing of more than $15 billion worth of assets. Enormous fortunes have been made, empires have been liquidated overnight, careers have ended and new businesses have been born. The economy is awash with money and private equity firms, property developers and public companies are desperate for new assets to boost returns. BRW Rich 200 members such as James Packer, Kerry Stokes, Solomon Lew and Lang Walker have been presented with deals that were simply too good to refuse.

But there are other reasons behind the great sell-off. Some Rich 200 members are selling up to expedite the transfer of wealth to their children. Some just want to retire. Others are seizing the opportunity to enter new businesses or rebalance their investment portfolios. And in what should be a warning for the business community, the Rich 200 - who are legendary for their ability to spot trends - are also selling up because they see trouble ahead.

Queensland billionaire John Van Lieshout was one of the first Rich 200 members to sell up last year. In May 2006, Van Lieshout offloaded his Super A-Mart furniture business to the private equity group Ironbridge Capital for $500 million. Van Lieshout, a Dutch migrant who arrived in Brisbane as a teenager in the 1960s and owned his first furniture store by the age of 23, built Super A-Mart into a 21-store chain with revenue of more than $350 million. The business was his life's work, but Van Lieshout knew it was time to sell up. "I got 13 times earnings," he says. "I think only once in a lifetime someone comes along and offers you that sort of money."

Greg Will, a PricewaterhouseCoopers partner who looks after a number of moneyed clients, says it is a common refrain among the legion of wealthy sellers. "There are some prices for businesses out there that are just too good to refuse. We've never seen anything like the past 12 to 24 months."

Market observers have been regularly surprised by the magnitude of many deals involving Rich 200 members. Property commentators were stunned when the Besen family received $621 million for a half-share in its Highpoint Shopping Centre and surprised at the $270 million David Burger received for the Mid City Centre building in Sydney. Media industry insiders were amazed when James Packer got $4.5 billion for a half-share in Publishing & Broadcasting Ltd's media business and when Kerry Stokes sold a half-share in his Seven Network for about $4 billion.

The $130 million Solomon Lew received for his Witchery women's fashion chain was more than most pundits predicted. Harvey Norman executive chairman Gerry Harvey thought Archer Capital's offer for the company's stake in Rebel Sport was overly generous, so he sold up and took a $150 million profit. The founder of the RAMS Home Loans business, John Kinghorn, is selling that business. Some analysts value the company at $500 million, but offers are flooding in about the $1 billion mark.

There is an old saying in the business world: when the rich start selling, the market is about to turn down. Will says many of his clients are worried about when Australia's decade-long period of prosperity will end. "It is definitely a concern for them. Waiting for the downturn is really top of mind, because that's how they have made their investment decisions in the past."

The senior vice-president of Merrill Lynch's private wealth services division, Dara Minbashian, agrees. "If you are a seasoned investor you always get worried when there is so much money around." Van Lieshout has clearly made a judgement that the prosperous times the company has enjoyed thanks to the Queensland population boom could be about to end. "The furniture business is wonderful when there is a housing boom. But it is tough when the housing market isn't going so well."

Indeed, Van Lieshout seems genuinely confused about the state of the Australian economy. As part of the Super A-Mart sale, Van Lieshout retained the property Super A-Mart sits on, including its stores, warehouses and offices (the portfolio is believed to be worth about $400 million). He had planned to plough some of the proceeds from his sale into more property investments but he is struggling to pick the market. Prices have skyrocketed in recent months to levels Van Lieshout cannot understand. "There must be so much money in the market that people are willing to pay anything. I don't want to sit on the sidelines for too long because maybe the market will stay like this. It makes me a little bit worried. Whenever I see that it's too good for too long I get concerned. It is certainly different to what I have seen in the past 40 years."

Some property-industry moguls are also wondering whether the market is near its peak. In November 2006, Lang Walker sold a $1.1 billion chunk of his property portfolio to listed property group Mirvac. Included in the deal were shopping centres and a slew of retail, commercial and industrial property. Walker started the sale process in March 2006, but most potential suitors baulked at the price he was asking. In the end, Mirvac picked through the assets individually and Walker sold only those he felt were priced correctly. West Australian investor and Rich 200 member Stan Perron also purchased some of Walker's assets. What makes the sale particularly significant is that it is the second time

Walker has sold the bulk of his portfolio. In 2000, he sold the listed Walker Corporation to Australand for $110 million, brilliantly picking the top of the cycle. Bill Bowness sold the Australian portfolio of his Wilbow Corporation to listed property company FKP for $330 million in September 2006. The sale was partly driven by Bowness's desire to step away from what he calls the "property coalface" and diversify into areas such as mezzanine financing.
Last year, however, he said he was shocked at the prices being paid for property assets. "There is so much money around and there are fund managers who are wanting to do all sorts of things," he says. "There will be tears."

But it is not all bad news. The managing director of Goldman Sachs JBWere's private wealth management division, Paul Heath, believes there are other reasons for the great sell-off besides big prices and concerns about the business cycle.

He points to succession as a big motivator. Australia's wealthy entrepreneurs are ready to hand over to their children, but are finding the next generation unwilling to grab the reins. "The younger generation see other opportunities that don't involve the family business," Heath says. Many rich entrepreneurs are finding that selling their business and splitting the proceeds is a lot easier than trying to persuade unwilling family members to take over.

Goldman Sachs JBWere's head of investment banking, Clark Perkins, says the spate of sell-offs also has much to do with the rapid growth of the private equity industry in the past 12 to 18 months. While wealthy business people have always had the option of selling their business through a public float or a private trade sale, the extremely flexible nature of private equity deals gives them a range of new options. They can sell a business in its entirety, or just sell a chunk. They can arrange to stay in the business for five years or stop work immediately. They might, like Van Lieshout, sell the operating business and keep the property.

"Private equity is providing ... a very real alternative that just didn't exist five years ago," Perkins says. He adds that a private equity deal is also often more palatable for a wealthy entrepreneur than selling out to a bitter rival through a trade sale or facing the public scrutiny a float brings. "Private equity provides a discreet, more confidential exit compared to the public market."

Of course, not every sell-off was motivated by a desire to exit. Perkins says many wealthy business people are also looking to do private equity deals to take their business to the next phase of its life. "They are looking for some fresh thinking and a drive to push the business to grow again." That is exactly why James Packer and Kerry Stokes did private equity deals.

By selling half of their media businesses for $4.5 billion and $4 billion respectively, Packer and Stokes have built massive war chests with which to make other acquisitions and expand their businesses. Packer has already made several acquisitions in the gaming sector while Stokes appears poised to play a big part in the coming shake-up of the Australian media sector.

So will the great sell-off continue? Almost certainly. Private equity funds are swollen with cash and must find ways to spend it if they are to earn the returns their investors demand. This means Rich 200 members will continue to be courted and tempted with huge prices for their businesses.

Rich 200 members are also likely to court private equity firms. Perkins says wealthy individuals and families now understand the private equity model and are more confident it can deliver them a profitable exit or capital to grow.

The sell-off will also continue as the members of the Rich 200 age. Merrill Lynch's Minbashian says: "The next 10 years will see a lot of people selling up simply because they are getting old. These guys are getting to 70 and 80 and 90 and they don't want to run a business any more."

OFFLOADING
Rich 200 members who have sold assets in the past yearBill Bowness Sold the Australian assets of his Wilbow Corporation to FKP Property Group for $330 million in September 2006. He is pessimistic about the Australian property industry and was keen to cash out while the price he could get for his portfolio was sky-high.
David Burger The Sydney property developer sold the Mid City Centre in Sydney for $270 million in May last year.

John Gandel The shopping centre magnate cashed up last year by selling his management stake in the $4.8 billion CFS Retail Property Trust to Commonwealth Bank for about $400 million. In December 2006, Gandel also sold his portfolio of upmarket retirement villages to a consortium of Macquarie Bank and property group FKP for about $105 million.

Tony Haggarty and Chris Ellis In October 2006, Haggarty, Ellis and their fellow directors of Excel Coal agreed to sell the company for $1.8 billion to Peabody Energy, the world's largest private sector coal producer.

Gerry Harvey The veteran retailer sold Harvey Norman's $185 million stake in Rebel Sport to private equity firm Archer Capital. Harvey Norman made $150 million on the deal. John Kinghorn The jewel in John Kinghorn's investment portfolio, RAMS Home Loans, is on the sale block. There have already been a few offers about the $1 billion mark from suitors including National Australia Bank. Private equity firms are ready to pounce, but a float has not been ruled out.

Solomon Lew Veteran retailer Solomon Lew agreed to sell his stake in Coles Myer to Wesfarmers for about $1.14 billion in April this year, severing his ties with the retail giant after a 20-year relationship. In July 2006, Lew sold the Witchery women's fashion chain to private equity firm Gresham Private Equity for $130 million, about $15 million more than its original offer.

James Packer In October 2006, Publishing & Broadcasting Ltd sold 50 per cent of its media business to private equity group CVC Asia Pacific for $4.5 billion. Packer got the best of both worlds: PBL retains control of the new media company and also gets a pile of cash to pay down debt and sink into expanding gaming assets.

Ralph Sarich Ralph Sarich's property company, Cape Bouvard, sold $500 million of assets to United States conglomerate GE in January. The portfolio includes office buildings in Perth, Sydney and Melbourne. While the portfolio was not officially for sale, Sarich says he had many unsolicited approaches during the previous year. GE paid cash for the assets. Peter Scanlon When Peter Scanlon agreed to sell his stake in ports company Patrick Corporation to logistics company Toll Holdings, the takeover battle for Patrick was effectively over. Scanlon took
$405 million worth of cash and shares from the deal.

Kevin Seymour He put a $250 million portfolio of properties on the market in early 2006 and sold an office building in Brisbane in February for $28 million. He is good at picking market cycles and regularly trades properties to lock in profits.

Kerry Stokes He followed the lead of James Packer by selling a 50 per cent stake in Seven Network to private equity company Kohlberg Kravis Roberts for about $4 billion. Ken Talbot The coalmining veteran, who owns a majority stake in Macarthur Coal, sold his chain of six hotels to Cairns pub baron Tom Hedley in October 2006 for $110 million. Talbot plans to invest the proceeds of this sale in a private mining group. Talbot Group Holdings recently invested $26.4 million in Timor Sea explorer Karoon Gas Australia.

Lang Walker In November 2006, Lang Walker sold a $1.1 billion chunk of his property portfolio to listed property group Mirvac. West Australian investor and Rich 200 member Stan Perron also purchased some assets.

Besen family In March 2006, the Besen family sold a half share and the management rights to its Highpoint Shopping Centre for a mammoth $621 million.

Hannan family After an emotional sale process, the Hannan family sold the newspaper, magazine and online assets of its Federal Publishing Company to News Corporation for an undisclosed sum, believed to be about $340 million.

Knowles family The Knowles family company, Australian Retirement Communities, sold a portfolio of 17 existing retirement villages (home to nearly 4000 residents), three villages under development and six villages in the planning stages to listed property company Stockland in February for $329 million.

Smorgon family In June 2006, the Smorgon family agreed to sell its $550 million stake in steel company Smorgon Steel into the $1.6 billion takeover by rival OneSteel. Smorgon Steel chairman Graham Smorgon said the decision was an emotional one. "But it was a business judgement that needed to be made."

The business of living
What next? That is the question that has confronted many Rich 200 members who have sold their businesses in the past year.

Greg Will, a partner at PricewaterhouseCoopers who works with wealthy clients, says it can be a difficult question for prosperous people who leave their business. "Having a large bank balance is great, but what are you going to do the next day?"

John Van Lieshout, who sold his Super A-Mart furniture for $500 million last year, is representative of many Rich 200 members who say that selling their business allows them to indulge passions such as sailing and golf. "It's a good life. I should have done this years ago really," he jokes.

Will says retirement sounds easy, but it can be very hard for men and women used to the intense lifestyle associated with running a business. Many struggle to find something to fill in their spare time. In most cases, the only thing that helps is finding another company to channel their energies into. "They get some little business interest that soon takes over and the cycle starts again," Will says.

Van Lieshout has plenty to keep him busy. He has retained the properties Super A-Mart sits on, a portfolio believed to be worth about $400 million. He has a small property development firm called Unison and he has established a small office with five staff to examine other investment opportunities. "I'm doing an apprenticeship in trying to learn about money markets and shares and investments," Van Lieshout says. "It is complex and I don't have a lot of education so it takes me a while to understand, but I am enjoying the learning process. He keeps an eye on the Super A-Mart business - it is, after all, his biggest tenant - but says he does not want to interfere with the new owners, the private equity firm Ironbridge Capital.

Van Lieshout, who prided himself on running a very tight ship at Super A-Mart, has caught up with one bit of scuttlebutt that makes him chuckle. "I have heard them say that it is one of the few businesses they haven't been able to trim any costs from."

Leila Harre's piece in defence of shop workers seemed to overlook a couple of critical factors.

Unfortunately, some occupations are going to be closer to the minimum wage than others, and without some form of job evaluation and ranking, this argument is always going to surface. Some unionists shout louder and have a greater ability to inconvenience the general public than others.

Pay rates ideally should be within a range dictated by many factors, including the amount of time spent getting qualified (and competent), the inherent danger of the job, antisocial hours, responsibility for the safety of others, the ability to generate extra income by bonuses or extra hours, supply and demand, integrity and the handling of cash. Or the physical demands of strength and agility, and the number of hours required per week. The list goes on.

Mostly, brain surgeons, police, prison staff, dentists, and so on are going to outrank shop assistants, road sweepers and office cleaners. That does not in any way decry the necessity or value of these jobs, but there is a hierarchy, whether we like it or not.

Opening hours should ideally be dictated by the business owner. But in shopping malls, the demands are set by the mall owners, not the shop or business owners, and this is an area that so far has escaped unscathed. It may well be one of the root causes for the loss of jobs in the clothing and footwear industries, for example.

Let's be realistic. Long working hours in New Zealand and productivity are not related. Long working hours are demanded by the shopping malls, and if a business is required to be open from 9am to midnight, then it has to pay wages for all staff for this time, regardless of the takings.

Any analysis of daily shop turnover over a year, particularly in the clothing or footwear industries, will show that on some days, it wasn't worth opening at all, and therefore the business would have made a substantial loss. Those losses can only be made up by some good trading days.

Using that analysis, shop owners could make the decision to close on Mondays for example, like many restaurants, except on the approach to Christmas or holiday times.

But can they close? The malls say "no". Can they close at 6pm if their figures show that opening until midnight is a waste of money? The malls say "no".

The malls also often have ratchet rent clauses linked to turnover (not profit), and having ratcheted them up, the mall owners then develop a mall further up the road and take much of the trade with them. Add to that compulsory six-figure refits after six years, and the shop owner is on a hiding to nothing, having to bank perhaps $300 a week just to pay for a refit that they probably don't want anyway.

What can the shopkeeper do? Probably dump all New Zealand-made goods - where manufacturers are also forced to pay for ACC levies, maternity leave, sick pay, over the top Occupational Safety and Health requirements and for an extra week's holiday. Not to mention a culture that virtually denies the employer the right to dismiss useless, unreliable staff.

So, the shopkeeper imports from low-cost countries and in many cases, the goods for sale to the consumer are no cheaper and no better than the New Zealand-made goods were. The difference is that the shopkeeper has a margin to pay the costs of running the business.

The cutters, pattern makers, sewing machinists and other technical staff leave the clothing trade for good. Many no doubt end up on some form of benefit.

When it comes to productivity, particularly in manufacturing, the majority of local businesses are totally untrained in the techniques of real productivity improvement. Accountants and advisers abound, but few really understand true product costing and production planning. And virtually none understand labour and management cost control, material utilisation and performance training - probably because tertiary institutes no longer offer adequate training in these areas.

They prefer to specialise in the popular bums-on-seats courses, catering for the dreams of wannabe designers instead of offering the technical and managerial skills required to survive in business.

Opening at Easter is not a major problem. Let the shop owners decide when to open and then maybe they will have extra money to pay their staff. But if people can't get all their shopping done between 9am and 7pm, then there is something wrong somewhere, and everyone deserves at least one day off a week. Even the owner of a small business.

* Ray Green is a former head of management services at Bendon and operations manager for Specialty Brands (Rodd & Gunn/Logan). He is also a qualified productivity specialist for the sewn products trades - with 30 years experience, including several years tutoring AIT/AUT fashion technology courses.

Kiwi Income Property Trust will focus on developing its existing portfolio this year rather than looking at major acquisitions.

Angus McNaughton, chief executive of the manager of the trust, said continued demand from overseas and New Zealand investors was making it harder to acquire assets.

Kiwi reported a $59.2 million after-tax profit for the year ending March 31, compared with $72.1 million the previous year. Excluding a $15 million one-off gain from selling the AUT building and its Capital Properties stake in the March 2006 year, after-tax profit was up 3.7 per cent.

The trust will pay a final dividend of 4.85 cents per unit, bringing the total dividend for the year to 9.6c.

During the year, Kiwi opened the first three stages of its Sylvia Park Mall, New Zealand's largest, in Auckland. Stage four, 40 more stores and a rail connection, is due to open late next month.

Kiwi also owns a mix of shopping centres and office buildings, including the Vero Centre in Auckland, the Majestic Centre and Unisys House in Wellington, and the Plaza Shopping Centre in Palmerston North.

Early this year the trust recorded a revaluation gain of $219.8 million, bringing the total value of its portfolio to $1.9 billion.

This year the trust's New Zealand unit-holders will benefit from a new tax regime for portfolio investment entities such as the trust. The regime takes effect from October 1 and will apply to both of the trust's dividends in the March 2008 year.

New Zealand's biggest property company says high demand from offshore investors is making it difficult to acquire new assets.

Kiwi Income Property Trust [ NZX : KIP ] reported revenue of $59.2 million for the year to March 2007.

Profits rose by four per cent over the previous year after the removal of a $15 million gain from the previous year is taken out.   A $220 million revaluation on its portfolio earlier this year lifted its total value to $1.9 billion.

Chief executive Angus MacNaughton, says New Zealand property is particularly popular among foreign investors at the moment.  Mr MacNaughton says completion of the Sylvia Park shopping centre in Auckland has been the company's main focus over the past year.

The Centre has now been valued as an investment property worth $422.7 million, giving it a current year revaluation gain of $47.6 million- ahead of the projected revaluation gain of $6.0 million.

Westfield is selling two large Auckland malls for more than $300 million as it concentrates on newer development opportunities nearby.

Justin Lynch, Westfield's deputy director, said the Pakuranga and Glenfield shopping centres were for sale.  "It's our normal business practice to review our properties for opportunities to generate higher returns for shareholders," Lynch said.

But Westfield has rarely sold in New Zealand. After taking over St Lukes Group last decade, it embarked on a plan to spend $1 billion in 10 years, vastly increasing its power and presence here.

Westfield has spent about $200 million expanding the two malls in the past decade.  Competitors said yesterday Westfield was selling to quit small malls with no further development potential.

The new Albany mall it was building would threaten Glenfield's primary and secondary retail catchments, one said.

Westfield also said this week it would spend $70 million expanding Manukau, adding a new SkyCity cinema complex, 35 new shops and more parking and the competitor said it was now even more obvious why Pakuranga was on the block.

"Westfield would be shooting themselves in the foot if they kept Pakuranga, because Manukau will eat into its catchment."

Westfield is the world's largest mall owner, with 121 centres worth $67.8 billion in Britain, the United States, Australia and New Zealand.

Lynch said yesterday that the firm had already spent $700 million here and would spend a further $600 million in the next five years.

Westfield had conducted a secretive marketing campaign for the two malls, forcing prospective bidders to sign gagging agreements.  One prospective bidder said he was able to look closely at the malls only after signing a confidentiality agreement drawn up by Westfield's lawyers Russell McVeagh.

Colliers International's top agent John Goddard is handling the deals and large Australian and European institutional or superannuation investors may bid. Wholesale AMP funds, Australia's Centro Properties or German investment funds are also said to be interested.

The price AMP Shopping Centre Fund is paying for The Palms Shopping Centre in Christchurch was a tightly held secret this week but NBR’s reliable sources suggest it was more than $200 million.

Before heading overseas for a well-earned break, Colliers agent Bill Leckie who brokered the deal winged his way into Christchurch to tidy up some details with The Palms owners. He also met The Palms property manager and leasing agent, Evan Harris of HG Livingstone, with whom he is understood to be negotiating another significant deal.

Mr Leckie and others involved in the deal said they had signed confidentiality agreements while the purchase was being scrutinised by the Overseas Investment Office (the AMP Shopping Centre Fund is managed by Sydney-based AMP Capital Investors). The acquisition will also see management company AMP Capital Shopping Centres assume the role of property and asset manager for The Palms.

Settlement is expected in late May.

The sale marks the maturity of The Palms as an investment for developers Max and Glen Percasky who secured the site and began seeking resource consents in 1992 ahead of its opening in 1996.

Since that time the propety has been refurbished and enlarged but it may have further development potential on upper levels.

It has become popular with shoppers from the north-eastern side of the city, which has seen some of the strongest growth in residential subdivisions recently.

The Percasky brothers played a hands-on role at the outset, even assisting on crowded days directing traffic.

Subsequently, they sold a half share to Tim Glasson and Warren Bell, and oversaw the enlargement of the mall and construction of a two-level car park. Glen Percasky told NBR this week that he had “loved every moment of it” and enjoyed being recognised by staff and customers.

He is focusing on his next project about a kilometre along Marshlands Rd from The Palms – a $30 million home base where a new Bunnings warehouse will be the anchor tenant (the centre will be leased and managed by Livingstones).

Meanwhile, The Palms will be the second shopping centre purchased by the AMP Shopping Centre Fund. Last September it bought a half share of the Bayfair shopping centre in Mt Maunganui from Tower Asset Management for $121.5 million, on a yield just under 5%. Bayfair is a regional shopping centre of 32,000sq m with turnover of more than $160 million.

By comparison, The Palms has a lettable area of 35,448sq m, 100 retail outlets, a cinema complex, 1450 car parking spaces, and a similar annual turnover.

The AMP Shopping Centre Fund has $1.8 billion in assets under management and comprises 10 properties including a half share of Bayfair in Tauranga and 25% of one of Australia’s largest shopping centres, Warringah Mall.