Kiwi Property in trading halt, $200m offer launched to repay debt and expand

Kiwi Property chief executive Clive Mackenzie. Photo / Dean Purcell

New Zealand's largest listed landlord Kiwi Property has gone into a trading halt and launched a $200 million equity raising offer to repay its bankers and give it more capacity to expand.

In an NZX announcement just out, the business with a $3.3b property portfolio said it wanted the money "to pay down debt and create additional balance sheet headroom."

An investor presentation accompanying the announcement outlined Kiwi's plans. It has $258m of development activity underway at the Sylvia park galleria and carpark development in Mt Wellington, due to be finished next year.

Longer term, it wants to develop its ambitious 51ha site at Drury where it might bring an Ikea, as well as LynnMall in Auckland and Hamilton's The base.

"Kiwi Property intends to use the net proceeds of the placement and retail offer to pay down bank debt and reduce gearing, providing the financial flexibility to progress developments at locations including Sylvia Park, LynnMall, The Base and in the longer term at Drury, and to respond to new acquisition opportunities as they arise," a statement said.

"The approximately $200 million of new equity being sought through the placement and retail offer will reduce gearing at 30 September 2019 to 27.4 per cent on a proforma basis, which is comfortably within Kiwi Property's target gearing range of 25 per cent to 35 per cent," it said.

The placement today is fully underwritten by UBS New Zealand.

The price of the shares for the placement is $1.58 a share. The new shares will be allotted on November 4and will rank equally with existing shares, Kiwi said.

Mark Lister, head of private wealth research at Craigs Investment Partners, said the rally in share prices across all listed property investors meant now was a good time to raise capital to dampen the impact of diluting existing shareholders.

"It's quite a sensible thing to do - you want to raise equity when prices are high rather than when things are shaky," he said.

Kiwi said it would use the funds to cut bank debt from $1.1b to $917.6m, reflecting a reduction in its loan-to-value ratio from 32.9 per cent to 27.4 per cent. The company's targeted gearing ratio is 25-35 per cent.

Chair Mark Ford said the extra headroom would give the company more flexibility to press ahead with mixed-use developments at Sylvia Park, LynnMall in New Lynn, The Base and Drury. It wwould also give Kiwi Property greater freedom to make any acquisitions if opportunities arise.