Landlords having to offer more free rent

Tenants have become more stroppy and doubled their demands for free rent, according to a property boss.

Paul Duffy, chief executive of the $746 million DNZ Property Fund, told shareholders in Auckland at the inaugural annual meeting of the revamped business yesterday, that leasing incentives on investment properties were rising.

Rents would continue to soften, he said, and landlords negotiating lease terms of six to 12 years were having to provide more lures.

"Tenants are looking for between two and 2 months per year of incentives, and it's affecting growth," Duffy told shareholders.

DNZ owns 61 properties leased to 274 tenants. Its 447,563sq m of buildings are 98 per cent leased.

The business, previously Dominion Funds, established in 1996, had invested $20 million in the past five years upgrading buildings, he said, and had big plans for the Johnsonville Shopping Centre.

Duffy expected resource consent issues over it to be argued in the Environment Court.

DNZ was New Zealand's fifth-largest property entity, Duffy said, and he compared it to AMP NZ Office Trust, Goodman Property Trust and Kiwi Income Property Trust.

However, he also acknowledged DNZ had much higher gearing levels than NZX-listed property trusts or companies, and this was why Goldman Sachs JBWere had been retained "to review capital management initiatives".

Duffy wanted DNZ listed on NZX so more shares are traded and to raise interest in the business. "The volume of trades is minimal," he said.

One shareholder complained yesterday that $10,000 invested in 1996 was today worth just $8000 and asked why the business kept buying more properties, which meant investors got less money.

Duffy said the business had held properties valued at $900 million and had sold large portions of its portfolio.