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Kiwi Property profit down – focus on the long term

Kiwi Property Group Ltd posted an after-tax profit of $120.1 million ($143 million in 2017), driven by another record operating result as measured by funds from operations (FFO – see note at foot).

The company said funds from operations grew by 8.2% to $111.3 million ($102.8 million), reflecting a 5.2% lift in rental income to $192.1 million, largely due to contributions from developments & strategic acquisitions completed the previous year.

While after-tax profit for the year was down, the company focuses in its annual report on long-term growth. Its target is 9%/year long-term total returns, last year it achieved 9.7%, this year it slipped to 9.3%.

Funds from operations/share slipped to 7.84c (7.95c). Net tangible assets/share were up a cent to 140c (139c).

Specialty retail sales rose 7.1% to $10,600/m² ($9900/m²).

A full-year dividend of 6.85c/share (6.75c) will be paid.

Chair Mark Ford said: “We continued to grow revenues while improving the quality of our investment portfolio through the sale of non-core assets, strategic acquisitions and the commencement of new development projects. We have also improved our conservative gearing position and executed strongly on capital management initiatives…

“In February, we were delighted to give the green light to the previously foreshadowed $223 million Galleria retail expansion at Sylvia Park, following 11 years of outstanding performance & growth at the centre. Our vision for Sylvia Park is the creation of a world-class town centre offering our customers exceptional retail, dining, entertainment & workplace experiences. This latest retail expansion will consolidate the centre’s position as New Zealand’s favourite shopping destination.”

$370 million of developments

Chief executive Chris Gudgeon said: “We currently have $370 million of developments in progress that will continue to add significantly to both the income performance & quality of our property portfolio.”

Sylvia Park continued to be a major focus. Highlights included:

  • The Grove dining district opened 100% leased in December
  • The $80 million office tower development, No 1 Sylvia Park, anchored by insurance company IAG, reached 90% leased this month when ANZ Bank (NZ) Ltd took 6740m² (5 full floors & a part floor)
  • Construction of the Galleria retail expansion began – completion is scheduled for mid-2020, introducing 60 new specialty retailers, a flagship Farmers department store, international mini-majors & additional multi-deck parking.

The $9 million Grove precinct opened 100% leased and will deliver an initial yield of 7.8%, growing to 8.2% over the following 2 years, with a projected 10-year internal rate of return of 10%.

In Christchurch, Kiwi began construction of the new dining & entertainment precinct at Northlands, to be known as Langdons Quarter.

The company continued its capital recycling programme with the sale of previously identified non-core properties. It sold the Majestic Centre in Wellington for $123.2 million in December and, post-balance date, secured an agreement to sell North City in Porirua for $100 million.

Kiwi reduced its gearing from 34.5% to 29.7% at balance date.

Its investment portfolio was 99.6% occupied at year end, above its long-term average, with a weighted average lease term of 5.3 years. The portfolio value increased to $3.1 billion ($3 billion).

Overall, rentals achieved through new leasing & rent reviews delivered growth of 3.5%.

$1.6 billion of the $1.8 billion total retail sales were in Kiwi’s portfolio of 7 shopping centres, equating to growth of 3.9% (1.3% like-for-like). Growth was strong in the mini-majors, commercial services and pharmacy & wellbeing categories.

The outlook

Mr Ford said the company was projecting an increased cash dividend of 6.95c/share for 2019, absent material adverse events or unforeseen circumstances.

“Our key focus in the year ahead will be on progressing our development projects underway at Sylvia Park & Northlands, while also progressing our town centre vision for our development land at Drury, south of Auckland.”

Note: Funds from operations is an alternative non-GAAP performance measure used to assess underlying operating performance and to determine income available for distribution. Kiwi said it’s a measure commonly used by real estate entities to describe their underlying & recurring earnings from operations, but it doesn’t have a standard meaning prescribed by GAAP and therefore might not be comparable to information presented by other entities.

Kiwi uses the Property Council of Australia guidelines. During the financial year, the council amended the method used to derive FFO to include the amortisation of leasing fees, and Kiwi Property has amended its current year FFO calculation to reflect this change.

Links:
Annual report
Company website, annual result pages

Attribution: Company release, annual report & presentation.

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10 commercial auction sales south of Auckland for Bayleys

10 of the 14 commercial properties south of Auckland up for auction in Bayleys’ third Total Property series were sold under the hammer over the last fortnight.

5 were in Wellington and the others in Hamilton, Morrinsville, Rotorua (at Whakarewarewa, pictured above), Thames & Whitianga.

South of the Bombays

Bay of Plenty

Rotorua – Whakarewarewa

21 Sala St:
Features: 1012m² corner site, 312m² childcare centre developed in 2006 & licensed for 50 children; Evolve Group Ltd exercised the first of 2 6-year rights of renewal in March
Rent: $78,643/year net + gst
Outcome: sold for $1.155 million at a 6.8% yield
Agents: Mark Slade & Brei Gudsell

Coromandel

Thames

612 Pollen St:
Features: 126m² site in main street, rear access via a service lane; 170m² retail outlet, longstanding butcher tenancy on a 5-year lease from April 2017 with 3 3-year rights of renewal
Rent: $25,000/year net + gst
Outcome: sold for $372,500 at a 6.71% yield
Agent: Josh Smith

Whitianga

135 Albert St:
Features: 1.4373ha Harbourside Holiday Park, adjacent to the harbour, range of visitor accommodation plus 3-bedroom manager/owner’s dwelling, communal amenities, other facilities including powered & unpowered camping sites, swimming pool & adventure playground; potential for further development
Outcome: sold as freehold going concern for $2.85 million
Agents: Josh Smith & Belinda Sammons

Waikato

Hamilton – Frankton

28-30 Lake Rd:
Features: 919m²  corner site in 2 titles, 259m² 6-bay car wash & dog wash complex; leased for 5 years from March 2018 plus 4 5-year rights of renewal
Rent: $77,026/year net + gst, increases fixed to CPI plus reviews to market on renewal dates
Outcome: sold for $1.41 million at a 5.46% yield
Agents: Alex ten Hove & Mike Swanson

Morrinsville

51 Anderson St:
Features: 4442m² industrial site, 680m² warehouse & office building, drive-through access, previously occupied by Morrrinsville Transport for many decades
Outcome: sold vacant for $1.34 million
Agent: Josh Smith

Wellington

Naenae

10 Horlor St:
Features: 554m² corner site, also adjoining service lane, 288m² workshop
Outcome: sold with vacant possession for $450,000 at a land & building rate of $1562/m²
Rent: estimated potential income of $36,000/year net + gst
Agents: Andrew Smith & Paul Cudby

Petone

25 Fitzherbert St:
Features: 430m² warehouse & showroom, new 4-year lease to tenant which has relocated from the interconnected 4 Union St
Rent: $67,000/year net + gst
Outcome: sold for $1.02 million at a 6.57% yield
Agents: Paul Cudby & James Higgie

13 & 15 Gear St, Petone.

13 & 15 Gear St:
Features: 824m² site, 2 interconnected medium stud warehouses totalling 672m²; 13 Gear St vacant, 15 Gear St leased until 30 October at $2475/month gross + gst
Outcome: sold for $1.45 million at a land & building rate of $2157/m²
Rent: estimated potential income for both warehouses $85,000/year net + gst
Agents: Andrew Smith & Fraser Press

4 Union St:
Features: 389m² warehouse & office unit
Outcome: sold vacant for $880,000 at a land & building rate of $2262/m²
Agents: Paul Cudby & James Higgie

Te Aro

22 Allen St, unit 17:
Features: 214m² ground floor unit, storage, parking space, part of refurbished 2-level early-1900s building; leased to Ethiopian Restaurant for 5 years from June 2014, one 5-year right of renewal
Outcome: sold for $550,000 at a 10.5% yield
Agent: Mark Sherlock

Attribution: Agency release.

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Robertson introduces the new rules of play on economy

Finance Minister Grant Robertson laid out, in his first Budget, the new set of platitudes that will set the framework this government will work under.

He’d already done that in his December mini-budget, and the Labour Party had made clear in its election campaign that it wanted a change in emphases. The annual numbers game puts it in place.

The Opposition appeared to be still thinking under the old set, which amounted to exceedingly unbalanced largesse on one hand, extending to denial on the other.

In this brief summary on the Budget, I’ve ignored most of the numbers, emphasised the platitudes – you might call them the rules the new government will stand by – and pointed to 2 important economic factors for the property sector, migration & housing. At the foot, you can link to Treasury & Budget pages for more of the numbers detail.

Mr Robertson:

“We must make our economy more sustainable for future generations. This means caring for our environment as a core value, not as an after-thought. It means transitioning in a just & deliberate manner towards a low carbon economy.

“To transform the economy we have to be more productive. We have to work smarter, build our skills & resilience, explore new innovations and adapt to change. We cannot continue to rely on merely increasing our population, exporting raw commodities and an overheated housing market to drive economic growth.

“Our economy must be more inclusive, too. This means a society where everyone has an equal chance to fulfil their potential, to contribute, and to live meaningful, connected, healthy & fulfilling lives….”

Next, the how

“Our plan will grow & share our prosperity, so that our whole society is lifted up, and everyone has access to good quality healthcare, education, housing & other social services.

“That is why, in this Budget, the Government is prioritising those investments that will rebuild the critical social & physical infrastructure in New Zealand, and address the long-term challenges we face.

“At the same time, we are committed to living within our means, and having a buffer to deal with the risks & shocks that can come upon a small country sitting on the faultlines of the Pacific….

“We must manage the country’s finances responsibly for the sake of future generations. This Budget delivers an operating surplus for 2017/18 of $3.1 billion, rising in 2018/19 to $3.7 billion, with surpluses reaching an estimated $7.3 billion by 2022.

“These surpluses allow us to reduce debt. The Budget responsibility rules commit us to reducing the level of net core Crown debt to 20% of GDP within 5 years of taking office….

“We are also delivering on our Budget responsibility rules by keeping government expenditure below 30% of GDP. Core Crown expenses are expected to track at about 28% of GDP each year through to 2022….

The funding switch

“Altogether, this means that over the next 4 years we have about $24 billion more than the previous government had planned to invest in infrastructure & social services, so we can repair the deficits that are undermining our economy & communities. This will lay the foundations for our economic & social transformation.”

Housing

“This government is determined to take action on the housing crisis & the scourge of homelessness which has emerged in this country.

“In December’s mini-Budget we allocated $2.1 billion for our ambitious KiwiBuild programme to deliver 100,000 long-overdue affordable houses built across the country, including 50,000 in Auckland over the next 10 years.

“Budget 2018 commits more than $1 billion in new funding to go towards housing, including $369 million in new capital funding.

The different priorities of this government are never clearer than in housing. One of our first actions was to stop the state house sell-off.

“Today, I am announcing that this government is taking serious action to increase the supply of public housing by investing $234.4 million in operating funding for Housing NZ & community housing providers. This will provide more than 6000 homes over the next 4 years.

“We are working with councils to deliver more houses. For instance, the Tamaki Regeneration Co, which is jointly owned by the Government & Auckland Council, will be given another $300 million to provide about 700 state houses, as well as another 1400 houses in Tamaki for the open market.

“These will be new, warm & dry houses. Too many of our homes are cold & damp, leading to preventable diseases. A new programme to make Kiwi homes healthier will provide $143 million to go towards grants for those on lower incomes to insulate & heat their homes. Investing in warmer homes simply makes sense….”

The homeless

“In this Budget, our government will support more than 1400 of New Zealand’s most vulnerable homeless people & families through the Housing First programme over the next 4 years.

“Housing First supports people who have been homeless for a long time or who face multiple & complex issues. We recognise it is much easier for people to address issues like mental health, or drug addiction, once they are housed.

“This programme aims to end homelessness for people, not just manage it.

All these plans announced today, as well as the Families Package, will help to lift children out of poverty.”

Sustainable economic development

“We are focused on playing our part to support generating prosperity & sustainable economic development.

“To that end, we are prioritising infrastructure….

“This Budget formally establishes the $1 billion/year Provincial Growth Fund to support growth in the regions, as outlined in the coalition agreement between Labour & NZ First.

“This fund represents the single biggest investment in the regions of New Zealand in our lifetimes. It aims to enhance economic development opportunities, create sustainable jobs, contribute to community wellbeing, lift the productivity potential of regions and help meet New Zealand’s climate change targets.

“This year the Provincial Growth Fund will be made up of $684.2 million of operating expenditure & $315.8 million of capital expenditure. This includes significant investment in the One Billion Trees programme and support for regional rail projects.

“The Budget also sets aside funding for the establishment of the NZ Forestry Service. Our investment in forestry will help us to deal with climate change, lift our economy and provide employment….

“It is possible & necessary for New Zealand to transition to our goal of a net zero emissions economy by 2050. This will require some major changes, but we can do this if we work together.

The new economy

“This Government also sees the opportunity that this transition provides. Budget 2018 sets aside $100 million of new capital funding for the Green Investment Fund to kickstart investment in assets & technology to reduce carbon emissions.

“This fund, which is the result of the confidence & supply agreement between Labour & the Green Party, will help a just transition to a more sustainable economy that will ultimately create jobs in new, clean industries….

The regional equation

“Work is underway on developing lists of regional skills & labour shortages. We want an immigration system that really works for New Zealand. We want to match migrant skills to the regions & industries where they are needed most. We want to ensure that any genuine skill shortages are filled, with immigration levels that are sustainable….”

Understand the differentiation: Wellbeing to replace GDP focus

“Next year we will be the first nation in the world to deliver a Wellbeing Budget reporting our annual progress against a range of measures that highlight the health & wellbeing of our people, our environment & our communities. We will use the living standards framework developed by the NZ Treasury to help develop our Budget, and to measure our success.”

  • That’s the end of my excerpts from Mr Robertson’s speech to Parliament yesterday. Below, some points on the key issues of migration & housing.

Migration:

One key figure in Treasury’s economic & fiscal update is the migration projection, which previously showed a steep decline from a net inflow of 70,000/year now to 15,000/year in 3 years. The projected decline in yesterday’s update would reduce the net inflow to 25,000/year at June 2021.

Housing:

Look at this statement to see how distorted economic measurements can be. Along with graphs showing its forecasts, Treasury provided a pithy statement of position for the Budget release. For housing, debt & gross domestic product (GDP), it said: “The growth in the housing market has seen household debt increase. In 2017, household debt reached 168% of household disposable income. If incomes don’t rise or interest rates rise sharply, then paying off mortgages could be difficult for some. If this happens, then people may spend less, or buy or build fewer houses, reducing GDP.”

The bottom line is GDP; acting rationally can reduce it.

It’s almost with surprise that the Treasury note reports that household debt has increased, even though interest rates have been at all-time lows. Why? Because buyers of houses buy to the limit of their outgoings and, as the debt component is lower, they can buy a more expensive house.

Those facts are factors of politics & misgovernance. The misgovernance has come in allowing – promoting – record immigration without creating a receiving economy that encourages dispersal of new arrivals. Hence, avoidable Auckland traffic congestion and pressure that forced house prices to spiral upward.

The new government has stated policies to grow regional development and reduce immigration – which another Treasury note says will plummet in a natural cyclical change anyway.

The Treasury note on housing also comments that there’s a shortage of skilled labour to build houses. Migration to Australia topped 53,000/year in 2012 (net outflow to Australia then was about 40,000/year) but has since slid to zero.

Assuming cyclical norms, the outflow will resume and rise steeply. In that case, a clamp on immigration will cause economic disruption. The better course is to provide a welcoming environment that’s spread around the country instead of being singularly focused on Auckland, encouraging immigrants to look at more options for a new life, and encouraging prospective emigrants to reconsider.

Links:
Treasury, 17 May 2018: Budget economic & fiscal update 2018 (BEFU)
Budget at a glance 2018
Fiscal strategy report

Attribution: Budget speech & documents.

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4 apartments out of 6 sell at Ray White auction

4 of the 6 apartments auctioned at Ray White City Apartments today were sold, one of them moments after the auction had closed.

That unit was one of 2 on offer in the Century on Anzac (pictured), which is entering a remediation period. The other unit was passed in.

Units in the Victopia & Volt in the cbd, and Spencer on Byron in Takapuna were also sold.

CBD

Learning Quarter

Century on Anzac, 100 Anzac Avenue, unit 2H:
Features: 31m² studio
Outgoings: rates $942/year including gst; body corp levy $2686/year + remediation investigation levies of $6086
Income assessment: $360/week fixed until 24 November, appraisal $350-375/week
Outcome: passed in at $160,000, sold immediately after auction for $165,000
Agent: Krister Samuel

Century on Anzac, 100 Anzac Avenue, unit 7F:
Features: 38m², one bedroom
Outgoings: rates $1058/year including gst; body corp levy $3680/year
Income assessment: $400/week current
Outcome: passed in at $165,000
Agents: Dominic Worthington & Ady Huang

Uptown

Volt, 430 Queen St, unit 1111:
Features: 41m² including balcony, 2 bedrooms
Outgoings: rates $1214/year including gst; body corp levy $4458/year
Outcome: sold for $395,000
Agent: Victor Liu

Victoria Quarter

Aura, 53 Cook St, unit 304:
Features: 49m², 2 bedrooms
Outgoings: rates $1175/year including gst; body corp levy $4303/year
Income assessment: $530-560/week furnished
Outcome: passed in at $370,000
Agents: May Ma & Mark Li

Victopia, 135 Victoria St West, unit 2L:
Features: 38m², furnished one bedroom
Outgoings: rates $1071/year including gst; body corp levy $1456/year
Income assessment: $400/week, fixed until 22 October
Outcome: sold for $215,000
Agents: James Mairs & Gillian Gibson

North-east

Takapuna

Spencer on Byron, 9-17 Byron Avenue, unit 311:
Features: 59m², one bedroom, parking space; work on remediation has started
Outgoings: rates $1191/year including gst; body corp levy $3074/year
Outcome: sold for $330,000
Agents: James Mairs & Gillian Gibson

Attribution: Auction.

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On a quiet day in the auctionroom

On a quiet day, 2 apartments on the auction list, there’s only one bidder in the room and nobody on the phone… Barfoot & Thompson chief auctioneer Murray Smith tried: “$200,000?” he asked for the first lot up, a 63m² leasehold one-bedroom apartment on the western side of Princes Wharf (arrowed). The bidder thought half that was a better starting point.

Mr Smith suggested $130,000, $135,000, “What about $150,000?” A bidder standing outside the room got him past that lowered starting point, $5000 more and the unit was passed in.

Next up, the repurposed 121 Newton Rd (it was once a motel, now all apartments & renovated). No bidders available, no bid.

Property markets go through this kind of cyclical downturn, but that doesn’t mean the whole market heads uniformly in the same direction. For example, in a separate item today, I wrote about the 377 bids on a commercial property up for auction yesterday, bidding that took the price 33% above the figure the property went on the market at.

Early last year there was a resurgence of Chinese interest in Auckland property after some clamps were placed on overseas investment, but then new restrictions came into force on Chinese exporting of funds and, in New Zealand, restrictions on overseas investors.

So far, the impacts have been a reduction in stock going to market, evidence of price cuts but not drastic ones. But when the auctioneer is the only person available to bid, well, downward seems the most likely market direction – or an investor will see the opportunity among the sad faces and collect a bargain.

CBD

Waterfront

Princes Wharf, 147 Quay St, shed 22, unit 1:
Features: leasehold, 63m², one bedroom, balcony
Outgoings: body corp levy $8940/year, ground lease $17,000/year, increases now capped at the greater of CPI or 3%/year
Outcome: passed in at $160,000
Agents: Stephen Shin & David Lee

Isthmus west

Eden Terrace

Newton Rise, 121 Newton Rd, unit 5C:
Features: furnished one bedroom, study, balcony, basement parking space
Outgoings: body corp levy $4108/year
Outcome: no bid
Agent: Casey Chen

Attribution: Auction.

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Long auction takes K Rd corner property’s value to 4.1% yield

It took 40 minutes and 377 bids for the first property to be sold yesterday at Bayleys’ third Total Property auction for the year.

That property, a small unusually designed bank branch at the corner of Karangahape Rd & Upper Queen St, at the top of Auckland’s cbd (and foot of the picture), was eventually bought by a neighbour after competition initially from 4 other bidders.

The final battle between 2 K Rd owners took the price in small steps from $3 million, when it went on the market, up another $1 million. The sale was at a 4.12% yield on current rent.

In contrast, and in keeping with the way many commercial auctions have gone over the last year, the next property on the list, a service station, attracted no bid and was passed in on the vendor’s indicative bid.

5 of the 9 properties auctioned were sold under the hammer and another was sold prior.

While auctioneers have struggled to attract bidders on many properties in recent times, where there is interest yields have remained strong.

At this auction, the sub-3% yield on a Meadowbank retail property may reflect development potential more than existing quality, and a bank branch at Kaikohe in Northland sold for a yield just over 7.5%.

But retail & hospitality offerings remain attractive – 4.7% on a St Lukes café, 5.4% on a Rosedale café.

CBD

O’Connell St

12-14 O’Connell St, units A, B & C:
Features: 3 retail units of 63.43m², 56.25m² & 238.57m² (total 358.25m²), occupied by a café, a florist & the best chocolate shop in New Zealand, Bohemein
Rent: $333,490.11/year net + gst
Outcome: withdrawn from auction
Agents: Nicolas Ching, Beterly Pan & James Chan

Queen St

Mid-City arcade, 239 Queen St, unit 2E:
Features: vacant 80m² retail unit
Outcome: auction postponed
Agent: Oscar Kuang

Uptown

122-130 Karangahape Rd:
Features: 357.41m² floor area on Upper Queen St corner, seismic rating 100% of new building standard, ANZ Bank a longstanding tenant, 6 parking spaces
Rent: $164,958/year net + gst
Outcome: sold for $4.005 million at a 4.12% yield
Agents: Matt Lee, James Chan & Quinn Ngo

Isthmus east

Meadowbank

2-4 Dorchester St:
Features: 339m² site, 190m² floor area, 2 refurbished retail tenancies, A grade seismic rating, neighbourhood centre zoning gives development upside
Rent: $64,496/year net + gst from 2 8-year leases starting February 2016
Outcome: sold for $2.25 million at a 2.87% yield
Agents: James Were & Scott Kirk

Isthmus west

Kingsland

388 New North Rd:
Features: 288.5m² shop, 636.6m² canopy, unit title share of 5385m², Gull service station next to Kingsland Village, in automotive-based complex
Rent: Gull Petroleum (NZ) Ltd on 15-year lease from August 1999, renewals to 2039, 2-year CPI-based reviews, current rent $283,197.51/year net + gst
Outcome: passed in on sole bid from vendor at $4.8 million, pricing the property on a 5.9% yield
Agents: Stuart Bode & Mike Bradshaw

Mt Albert

Sainsbury retail centre in St Lukes business park, 55 Sainsbury Rd, unit 1:
Features: 84m² floor area, 90m² outdoor floor area, café on new 5-year lease
Rent: $52,000/year net + gst
Outcome: sold for $1.114 million at a 4.67% yield
Agents: Phil Haydock & Ken Hu

Sainsbury retail centre in St Lukes business park, 55 Sainsbury Rd, unit 7:
Features: 104m² floor area, foodmarket on 5-year lease from June 2017, 2 5-year rights of renewal
Rent: $45,000/year net + gst + outgoings
Outcome: no bid
Agents: James Darji, Amy Weng & Nicolas Ching

North

Kaikohe

109-111 Broadway:
Features: 459m² site, 230m² floor area, ASB Bank Ltd on 6-year lease from September 2016, one 6-year right of renewal, seismic rating 67% of new building standard, parking at rear
Rent: $33,000/year net + gst
Outcome: sold for $437,000 at a 7.55% yield
Agents: Nicolas Ching, James Chan & Neil Campbell

North-east

Rosedale

4 Arrenway Drive, unit G:
Features: 82m² Korean restaurant, 2 dedicated parking spaces + common parking
Rent: $36,750/year net + gst + outgoings, 4-year lease from April 2017, 3 4-year rights of renewal
Outcome: no bid
Agents: Mustan Bagasra & Terry Kim

Rosedale retail centre, 96 Rosedale Rd, unit 15:
Features: restaurant with 144m² retail floor area, 85m² covered terrace
Rent: $89,500/year net + gst + outgoings from 8-year lease
Outcome: sold prior for $1.65 million at a 5.4% yield
Agents: Eddie Zhong & Steven Liu

North-west

New Lynn

3026 Great North Rd:
Features: 956m² car sales yard, dual frontage through to Veronica St
Rent: $48,000/year net + gst
Outcome: passed in at $1.15 million
Agents: Kate Kirby & Stephen Scott

South

Papatoetoe

45 St George St:
Features: 228m² site, 200m² floor area, in heart of Old Papatoetoe Mall/New World redevelopment
Rent: $44,869/year net + gst from 2 tenants on renewed leases from 1 April
Outcome: sold for $745,000 at a 6% yield
Agents: Quinn Ngo, Matt Lee & Janak Darji

Attribution: Auction.

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ANZ commits to 5-plus floors at No 1 Sylvia Park

ANZ Bank NZ Ltd has agreed to lease about 6740m² of Kiwi Property Group Ltd’s No 1 Sylvia Park office development (pictured), now under construction.

Kiwi Property described Sylvia Park as the Sylvia Park town centre, which was the intention from the time the company bought the initial 24ha site beside the Southern Motorway at Mt Wellington in 1995 (back when the NZX-listed entity was a trust) and secured a plan change in 2001 that allowed for a business centre with a gross floor area of 148,000m², including a maximum 75,000m² for retail premises, entertainment facilities, taverns, cafés, restaurants & other eating places.

Kiwi’s plans then also included residential development, completing the town centre concept. In the intervening 17 years, however, it’s become New Zealand’s pre-eminent shopping mall.

ANZ, through subsidiary Arawata Assets Ltd, will take a 9-year lease over 5 whole floors & a partial floor, starting in 2 stages between June & December 2019 to suit the progressive relocation of bank staff into the building from a number of locations. ANZ has also secured exclusive naming & signage rights.

Kiwi Property chief executive Chris Gudgeon said yesterday: “Our vision for Sylvia Park is the creation of a world-class town centre, offering our customers exceptional retail, dining, entertainment & workplace experiences.

“ANZ taking this significant space in No 1 Sylvia Park reflects this transition to a town centre. Our ability to successfully lease over 10,000m² of office space in the building to major corporates such as ANZ & [insurance company] IAG NZ Ltd shows that the market is looking for such an offering. Our vision is now becoming reality.”

Mr Gudgeon said the new office building was being constructed to integrate seamlessly with the mall & The Grove Dining District, which opened last December.

“With a dedicated entrance, it offers businesses a truly unique & high quality working environment in an easily accessible location with excellent rail & bus transport links, allowing staff to take advantage of the extensive range of amenities & services at the centre.”

“ANZ & IAG, together with the ground-floor retailers, will occupy around 90% of the office building and, following ANZ’s full occupation in 2019, the project is expected to yield 7.4%, with a projected 10-year internal rate of return in excess of 9%.

“We look forward to welcoming ANZ to the building, joining approximately 350 IAG staff who will move into their new 3324m² office premises following completion of No 1 Sylvia Park in the middle of this year.”

“By year end, we will complete our new roughly 600-space shopper carpark building and the excitement will continue right through to mid-2020, when we complete our $223 million Galleria retail expansion project. This will take Sylvia Park to another level, featuring new international brands & concept stores, selected retailers from Sylvia Park’s current waiting list of specialty tenants, a 2-storey Farmers department store and a sophisticated new-generation, sophisticated dining precinct.”

Attribution: Kiwi Property release.

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Docks & Scotia Place units sell

A leasehold Docks apartment with remedial issues and a townhouse (building pictured) off the top of Queen St were both sold at Ray White City Apartments’ auction today.

CBD

Quay Park

The Docks, 4 Dockside Lane, unit 215:
Features: leasehold, 30m², one-bedroom apartment, secure covered parking space; building has remedial issues and vendor won’t be liable for further levies
Outgoings: rates $1162/year including gst; body corp levy $5533/year, including $2379/year ground rent, next 7-yearly ground rent review this November
Income assessment: $440/week current
Outcome: sold for $128,500
Agents: Dominic Worthington & Ady Huang

Uptown

6D Scotia Place:
Features: 119m², 4-storey 3-bedroom townhouse, 2 bathrooms, internal-access garage
Outgoings: rates $1965/year including gst; body corp levy $3572/year
Income assessment: $740-780/week furnished
Outcome: sold for $660,000
Agents: May Ma & Mark Li

Attribution: Auction.

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Multi-tenanted Rosedale property sells at 5.2% yield

A 5% yield beckoned, but the final 2-way bidding battle for a multi-tenanted commercial building in the North Harbour business precinct stopped $127,000 short at Colliers’ auction today, with a sale at 5.19% on current rent.

The building, erected by Kea Property Group Ltd in 2001, has 4 separate units & 6 individual leases (including a cellphone tower). It backs on to the Harbour Hockey fields, and is 4 doors from the North Harbour Business Centre at the corner of Upper Harbour Highway.

The owners, 2 family trusts, declared the property on the market with the yield at 5.34%. Most of the leases are within 2 years of expiry.

North-east

Rosedale

68 Paul Matthews Rd:
Features: 1801m² site, 849m² net lettable area, 4 titles sold as one, seismic rating 100% of new building standard
Rent: $174,376/year current
Outcome: sold for $3.36 million at a 5.19% yield
Agents: Matt Prentice & Mike Ryan

Attribution: Auction.

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Augusta single-asset fund to buy new Mansons Parnell building

An Augusta single-asset fund will syndicate ownership of a new office building which Mansons TCLM Ltd is 2 months from completing at 96 St Georges Bay Rd, at the foot of Parnell.

Augusta Capital Ltd said on Friday its subsidiary, Augusta Funds Management Ltd, had entered into an unconditional agreement to acquire the 5-level A grade office building. Under the agreement, an Augusta fund will ultimately acquire the 11,083m² property for $116 million, which represents a 6.47% initial yield based on a 10.89-year weighted average lease expiry.

Mansons expects to reach practical completion in July and has signed up Xero Ltd for 2 floors, and Independent Liquor (NZ) Ltd & Harrison Grierson Group Ltd for one floor each. A small amount of level 1 & the ground-floor retail, which have no tenant signed, will be leased by Mansons for a 9-year term.

Augusta Funds Management intends to raise the required $68.5 million of investor equity in $50,000 units through the new fund before the forecast 30 August settlement date, subject to practical completion having occurred. Augusta Capital will underwrite $24.5 million of the equity-raising and will also receive offeror fees. The balance has been underwritten by third parties.

Augusta expects to open the offer at the end of June.

Attribution: Company release.

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