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Warehouse reaps pre-tax gain of $14m-$15m on Silverdale sale

Warehouse Group, New Zealand's biggest listed retailer, will reap a pre-tax gain of $14 million to $15 million from the sale of Silverdale Centre in Auckland after developing the shopping complex on land it had owned for almost two decades.

Listed property investor DNZ Property Fund agreed to buy the fully-leased property for $78 million in a move that lifts its exposure to both retailing and Auckland. The centre stands to benefit from the nearby Millwater residential development of more than 3000 dwellings.

"We publicly said 18 months to two years ago we were going to develop it but it was not necessarily a long-term hold for us," Warehouse chief financial officer Stephen Small told BusinessDesk. "We thought many, many years ago there was a need for a Warehouse in that centre as the population grew."

Warehouse Group remains a cornerstone tenant, with Warehouse, Warehouse Stationery and Noel Leeming stores on the 7ha site. Among the 36 bulk and specialty retailers are Number One Shoes, Supercheap Auto, Postie, Lighting Plus, Beds R Us, OPSM, ANZ and BNZ and a Countdown supermarket.

DNZ chief executive Paul Duffy says the property has a forecast initial yield of 7.2 percent and a weighted average lease term (WALT) of about 10 years.

The acquisition lifts DNZ's retail properties to 44 percent of its portfolio from 39 percent, while its exposure to Auckland rises to 53 percent from 49 percent.

Settlement is expected on July 1. If DNZ was to fully bank fund the deal, its loan-to-value ratio would rise to 42.6 percent from 36.9 percent as at March 31.

Shares of DNZ were unchanged at $1.795 and have gained 13 percent this year. Warehouse rose 1 percent to $3.92 and has jumped 30 percent so far in 2013.


Comments and questions

Is this a gain on book value or on actual cost? The latter is obviously the more relevant number.