This article is from the Australian Property Journal archive
CFS Retail Property Trust ASX: CFX) has suffered a $20.7 million or 0.4% decrease to the value of its portfolio following to a $59.4 million write down to the value of Emporium Melbourne, due to delays.
The trust independently revalued 19 of 30 assets at $4.80 billion. As a result, the weighted average capitalisation rate tightened slightly to 6.43% at 30 June 2013 from 6.44% at 31 December 2012. CFX’s total assets are estimated to be $8.6 billion at 30 June 2013, up from $8.5 billion as at 31 December 2012, predominantly reflecting development expenditure.
Net Tangible Asset backing per stapled security is expected to decrease slightly to $2.04 at 30 June 2013 from $2.05 at 31 December 2012. Gearing is expected to be around 28.9% at 30 June 2013, up from 27.9% at 31 December 2012, largely as a result of development expenditure.
Fund manager Michael Gorman said despite good progress been made on the construction of the Emporium Melbourne project, the trust has not been able to recover all the previously-advised lost time.
“Consequently we are now aiming to complete the redevelopment around the end of the first quarter of calendar year 2014. The delay has resulted in a $15 million increase in forecast project costs, largely reflecting the additional interest costs to be incurred, bringing the revised total forecast project cost to $590 million,” he added.
The Emporium Melbourne project is at the heart of a dispute between builder Daniel Grollo’s Grocon and the Construction, Forestry, Mining and Energy Union (CFMEU). In August last year, the CFMEU held a “stop work” on site, which was declared illegal last month by the Supreme Court of Victoria. Grocon is suing the union for damages over the blockade.
So far Japanese fashion brand Uniqlo has come aboard, securing 3,000 sqm of space over four levels, joining lululemon, Marcs, Saba, M.J. Bale, Coach, Topshop, Salvatore Ferragamo, Scanlan & Theodore, sass & bide, Zimmerman, Oroton, Mulberry, Carla Zampatti, Georg Jensen, Alannah Hill and MAX&Co.
Australian fashion label Lisa Ho also signed up, but her company went into administration earlier this year.
Gorman said leasing has progressed significantly in recent months, with approximately 75% of income now secured. However, in light of the subdued retail leasing market, the trust has revised down income forecasts. The combination of lower income and increased costs has resulted in a revised target year-one yield on costs of approximately 5%.
“Notwithstanding the tough leasing environment, we remain excited about the world class retail destination that we are creating in the heart of Melbourne, widely regarded as Australia’s most fashion conscious city. The project will incorporate a range of concept and large flagship stores housing some of the world’s best international and luxury brands. We are focused on having the project fully leased on opening,” Gorman said.
Excluding the impact of the Emporium Melbourne, the portfolio had a modest uptick in asset values. Key assets Chatswood Chase Sydney and Queens Plaza showed solid increases driven by income growth, and Rockingham Shopping Centre was driven by a combination of income growth and a tightening in the capitalisation rate.
Partially offsetting these gains were decreases at Forest Hill Chase and Elizabeth shopping centre driven by softer income assumptions, and Broadmeadows shopping centre driven by a softening in the capitalisation rate.
Gorman said generally the Victorian assets were negatively impacted by more conservative outgoings assumptions based on the impending Victorian Fire Services Levy and changes in land tax calculations.
Property Review
