New Zealand-based real estate investment trust, Kiwi Property, announced a 2.4% decrease in the value of its real estate portfolio for the six months ending in September. A recent independent assessment has revealed a NZ$77.1 million drop in the fair value of the portfolio.
Despite this decline, Kiwi Property has managed to offset the reduction in property values by experiencing strong rental growth across its assets. The softening capitalization rates have been counteracted by this rental growth. Kiwi Property expects its property portfolio to still be worth NZ$3.1 billion by the end of the six-month period.
In commercial real estate, the value is typically determined using the capitalization rate. This involves dividing the annual net income produced by a property by the purchase price. Falling capitalization rates suggest rising values, while increasing rates indicate a decline in value.
Chief Executive Officer Clive Mackenzie addressed the wider decline in property values, stating that New Zealand’s high inflation and interest rate environment have contributed to this trend. Despite this setback, Kiwi Property remains focused on delivering a strong operational performance, particularly through its mixed-use centers like Sylvia Park, LynnMall, and The Base.