Precinct Properties NZ Ltd said on Friday it had the finance in place, 52% office precommitment and would proceed with its $681 million Commercial Bay redevelopment of the Downtown shopping centre site in the Auckland cbd.
Commercial Bay was the name given to Auckland’s trading hub in the 1800s.
Accountancy firm Pricewaterhouse Coopers will move from its 33-storey waterfront tower on Quay St, which Precinct owns, and take naming rights on the 39-storey tower Precinct will build across Lower Albert St, on the corner of Customs St West.
Precinct chief executive Scott Pritchard said the new tower had achieved 52% precommitment, but that includes at least some cannibalising, starting with the shift of prime tenant PWC. Mr Pritchard said 4 businesses new to its portfolio had committed to the tower.
Retail leasing started recently and Mr Pritchard said negotiations were advancing with a range of mini-major retailers for the flagship stores. Still to come, though, is approval of Precinct’s private plan change 79 to rezone Queen Elizabeth Square, enabling most of the square to be redesignated from public space to commercial use so the prime lower Queen St retail strip can be created, leading into internal lanes. The hearing panel expected to release its decision before Christmas.
Precinct will fund the development through newly established 5-year bank facilities. Its current gearing is an extremely low 12.5%, which had enabled the company to fully fund the project on commitment. Following the commitments to Wynyard Quarter stage 1 and to Commercial Bay, Precinct’s committed gearing is around 35%.
The company acquired the Downtown site for $91.3 million and has spent $16.3 million in design & consultancy fees. Its forecast is to spend $573.4 million more to complete the development, which is projected to generate a yield on cost of 7.5% once fully leased.
The development will have 3 retail levels, including lower level of the HSBC Building on the corner of Quay & lower Queen Sts, and Zurich House at 21 Queen, on the corner of Customs St West. Retail net lettable area will total 18,000m², occupied by about 100 stores with frontages to Queen, Albert, Quay & Customs Sts.
The tower will have net lettable area of 39,000m², a sky lobby positioned above retail and 30 office floors above that. Floorplates will range from 1324-1375m². The tower will have mid-level plant at levels 22-23, basement parking for 278 cars and 3 parking levels with direct access to the new PwC Tower, Zurich House & HSBC Building.
The city rail link’s 2 tunnels will run through basement levels 2 & 3.
Precinct has entered into a construction contract for the development with the Fletcher Construction Co Ltd and expects to start work in June 2016 with demolition of the Downtown Shopping Centre, and to open the Commercial Bay retail centre by October 2018. The office tower would be completed in mid-2019.
Reflecting its development agreement with Auckland Council, construction will also include works to complete the tunnels under Commercial Bay for the city rail link.
Commercial Bay will integrate the adjoining Precinct-owned PwC Tower, AMP Centre, HSBC Building & Zurich House to create a new central business, entertainment & retail destination. On completion, Precinct estimates 10,000 workers will occupy space within these 5 towers, each of which will have direct access to the retail centre.
Mr Pritchard said the Commercial Bay project was consistent with the company’s long-term strategy of maximising value through concentrated ownership of prime assets in strategic locations.
On completion of the development, Precinct’s total investment in Commercial Bay is expected to be worth about $1.5 billion, representing 63% of the value of its portfolio at that time.
Rail link works also set to go
Precinct & Auckland transport have concluded negotiations for the first stage of the city rail link project to be constructed as part of the Commercial Bay development.
Mayor Len Brown said the Government was committed the project: “The only remaining issue is the timing of government funding.” He said discussions with Prime Minister John Key and the ministers of finance & transport were going well.
“The private sector is demonstrating its confidence in Auckland’s future by investing billions in our city centre. Central Auckland is New Zealand’s most productive, largest & fastest growing commercial & employment centre. It has long been said Auckland is the powerhouse of the New Zealand economy. That is now a reality.
“Growth is the reason we are backing private sector investment with better public transport. We simply cannot meet that growth by moving more people into the cbd by car. The city rail link will more than double the number of people we can bring in by our new electric trains.”
Link: Commercial Bay
8 November 2015: Urban designer says fix the surrounds before selling square
26 February 2015: Elation at Downtown rail, tower & square deal
Attribution: Company & mayoral releases.