DNZ Property Fund Ltd chief executive Peter Alexander told the annual meeting on Wednesday the company was looking for opportunities to grow its investment management business, as it restructures its Diversified NZ Property Fund to bring in new investors.
Meanwhile, its Westgate shopping centre is scheduled to open on 1 October, the company is working on plans for a stage 2 development and continues to assess redevelopment at Johnsonville in Wellington.
Mr Alexander said the retail space in the NorthWest Shopping Centre at Westgate was almost completely leased, with only 2 retail tenancies yet to be confirmed and 7 office suites available. The 2 anchor tenants are Farmers’ department store and a Countdown supermarket.
Mr Alexander said the project was on target to meet or better its anticipated return on cost: “The net operating income yield on development cost on completion of all leasing is expected to slightly exceed the 7.75% forecast given when the project was announced. As at 31 March 2015, the value on completion was appraised at $170 million, ahead of the $160 million originally forecast. The project is being funded through the company’s debt capacity & the sale of non-core assets.”
He said the success of the NorthWest centre provided a platform to proceed with the second stage of the Westgate development, and DNZ had almost completed design on this. Westgate stage 2 will comprise a further 7500m² of retail, dining & office space on land opposite the NorthWest centre.
“Westgate stage 2 is expected to cost about $35 million and provide an initial minimum yield of over 7%. The exact timing of the project is yet to be finalised, but completion is targeted for late in 2016. We will fund the development through the sale of non-core assets.”
However, a dispute over the stage 2 site, between DNZ & Westgate developer Westgate Town Centre Ltd remains unresolved. Mr Alexander said: “Our work on Westgate stage 2 is being undertaken as a result of a right contained in our original agreement to acquire the NorthWest Shopping Centre land from Westgate Town Centre Ltd. That company has disputed the terms of this right. However we disagree on this point and consider that the terms of the agreement are clear. DNZ & Westgate Town Centre Ltd are currently engaged in dispute resolution, and we look forward to a positive outcome to this.”
In Wellington, DNZ is also reviewing plans to turn the Johnsonville Shopping Centre into a contemporary retail centre. He said DNZ hoped to have the review completed by late 2015.
In a separate stream of activity, DNZ is pursuing opportunities in real estate investment management: “It is quite clear to us that this area holds appeal for investors, and that there is global interest in investing in the New Zealand economy.
“DNZ already manages Diversified NZ Property Fund Ltd, a wholesale property fund, and receives management fee income for managing its assets. We are in the process of restructuring Diversified NZ Property Fund with its existing investors, to enable easier access for new investors. Expansion of our real estate investment management business may include the growth of Diversified, or the establishment of new funds & investment structures.”