The owner of Hamilton's Centre Place shopping precinct expects its value, which has dipped by $20 million as a result of competition, to bounce up to $140m after current redevelopment.

Listed property trust Kiwi Income Properties said in its annual report for the year ended March 31 that while Centre Place was its only retail asset to post a negative valuation outcome, declining 16.8 per cent to $98.8m, an independent valuer had assessed the projected value on redevelopment completion to be $140m.

The trust's $39.9m redevelopment of Centre Place is under way, with Rebel Sport due to open on July 11 and a new 7000 square metre Farmers store scheduled to open in time for Christmas next year.

These openings are listed among KIPT's four strategic priorities for the 2013 financial year.

Centre Place's value fall was a sour note in an otherwise improved 2012 year for KIPT, which saw it achieve profit after tax of $89.2m compared with an after-tax loss of $26.4m for 2011.

Operating profit before tax was $81.3m, up nearly $5m or 6.4 per cent on the previous year. This was driven by a 4.5 per cent increase in net rental income across KIPT's retail and office assets.

Net rental income from Centre Place was $4.89m. The redevelopment of Centre Place will include new specialty retailers and is being undertaken concurrently with Hamilton's "city heart revitalisation" programme, aimed at improving parking, signage, traffic circulation and the urban environment in the CBD to encourage more shoppers.

The redevelopment will include a covered link across Ward St West, to bring the two parts of the centre – the original Centre Place and the mall formerly known as Downtown – under a single roof. A new foodcourt and alfresco dining lane opened late last year.

Centre Place had a 72 per cent occupancy rate during the year.

Chain stores made up 58.3 per cent of its tenants by gross income, with Australian and international chains representation at 34.2 per cent. Independents were 6 per cent. Event Cinemas, which closed late last year, was 1.5 per cent. Centre Place management yesterday said cinema was still its preferred use for the area and negotiations with a company were continuing.

Centre Place has a net lettable area of 21,130sqm and 604 car parks.

KIPT's total shopping centre portfolio saw sales growth of 8.4 per cent for the year. The trust's portfolio includes Auckland's Sylvia Park and Northlands in Christchurch.

Drawn bank debt as at March 31 was $769.5m, representing a bank debt to total assets ratio of 35.6 per cent. The trust also had $58.5m of mandatory convertible notes on deposit. After allowing for this cash, the net bank debt gearing ratio was 33.8 per cent.

KIPT's property portfolio was valued at $2.01 billion.

The annual report said online sales in New Zealand and Australia were estimated to account for around 5 per cent of total retail sales. Statistics NZ indicated that about a third of these sales were made through New Zealand internet sites.

"Research from Australia indicates that internet sales may grow over the next 10 years to peak at around 15 per cent of total retail sales.

"If New Zealand internet sales growth rates are similar to those in Australia, online retailing may reduce the rate of retail sales growth within shopping centres by around 50 to 100 basis points a year over the next 10 years."

KIPT said it was already responding to the consumer trend by enhancing the range and presentation of individual shops and the overall retail mix, as well as improving dining and entertainment.

- KIPT's profit after tax in 2012 was $89.2m, up from a $26.4m after-tax loss in 2011.

- © Fairfax NZ News