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Investors offered NZ's only "pure retail" fund

Fri, 03 Sep 2004

Investors offered NZ's only "pure retail" fund

Wellington's Johnsonville shopping centre will be the core asset in New Zealand's only fund offering investors a "pure play" exposure to the booming retail property sector.

While other funds cover offices, industrial and commercial property in addition to retail, it has been some years since a fund focused entirely on the retail sector. This is despite property investment statistics showing retail has a higher return and lower volatility than other sectors.

A study by Atchison Consultants comparing average returns between 1994 and 2003 shows retail property at 12.5 per cent ahead of industrial and composite property, and well ahead of bonds, shares, and office property. The volatility of all property sectors was less than 3 per cent during the period, compared to almost 16% for New Zealand shares.

Dominion Funds chief executive Paul Duffy says this makes retail property a prized sector.

"The annualised average return for the retail property sector to 31 March was 18 per cent, comprising income and capital appreciation."

"Dominion Retail Fund will have the Johnsonville centre as the foundation property and we have other retail properties available to be included in the fund.

"This fund will be solely in retail. We're not going to diversify into office or industrial. There's no other pure play retail fund in New Zealand."

"It's a strong sector and I don't see it abating."

"A shopping centre's success depends on the number of shoppers it can attract who spend money with their retailers. In the 12 months to June 2004, the pedestrian count at Johnsonville was 5.05 million. For the same 12-month period, shoppers spent more than $37 million, a seven per cent increase on the previous 12 months.

"Capital appreciation of shopping centres is also driven by the scarcity of suitable sites. Land is very tightly zoned and it is very difficult to build a new regional or sub-regional shopping centre. It is virtually impossible to get land rezoned."

Mr Duffy said the Johnsonville centre would benefit from this factor because Wellington's geographical constraints isolated its primary catchment from competing centres and there was only limited potential for the development of competition within the area.

The centre is bounded by three major arterial routes and dominates the retail precinct, drawing shoppers from residential areas with income and education levels significantly above national averages.

Mr Duffy said the centre had a diversified income with largest tenant representing less than nine per cent of total rents and an even spread of lease dates. Tenants include leading national retail chains.

The 20,000 square metre site has potential for redevelopment and with the purchase by the fund, the centre will be owned by a single entity for the first time.

Dominion Retail Fund will be managed by Dominion Funds, one of the country's largest property developers, syndicators and managers with a portfolio of more than $500 million.

Minimum investment is $10,000 comprising 2000 $1 shares and 8000 $1 convertible notes. The investment is being exclusively marketed by Money Managers Ltd. An investment statement and application form is available online at www.moneymanagers.co.nz/invest/commercial/dominion/dominion_retail_fund.ht m

ENDS

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