Leading property developer announces a new luxury hotel for Auckland but delays to key project

Thursday, 16 August 2018

An illustration of One Queen Street which will include a luxury hotel, offices and food and beverage retail proposed by Precinct Properties

Leading property developer Precinct Properties will build a new luxury hotel in Auckland and has announced a six month delay to its big Commercial Bay waterfront project.

The luxury hotel will be run by global operator InterContinental Hotels Group.

The completion of the Commercial Bay development is delayed six months, its owner Precinct Properties has announced.

It will be part of a new $300 million commercial and retail development, called One Queen Street, currently the HSBC building, announced by Precinct as the company reported a strong profit for the June 2018 year of $254.9m.

The development will include the hotel, offices on seven levels and a variety of unique food and beverages on a rooftop and will be fully integrated into Commercial Bay,

Precinct chief executive Scott Pritchard says the delay will not increase the cost of the Commercial Bay project for Precinct.

Precinct Properties is spending $685 million on the Commercial Bay office and retail development.

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The hotel will operate on 11 levels, have 244 guest rooms and suites, and provide an all-day dining restaurant, meeting rooms, health club and club lounge facilities.

Construction of the One Queen Street development would start in the first half of 2020 with the hotel scheduled to open in early 2022 and office and rooftop food and beverage in mid-2022.

Precinct has also announced delays of about six months to the completion of Commercial Bay's retail development and the PwC office tower, after new dates were provided by main contractor Fletcher Construction.

Chief executive Scott Pritchard said the delays were 'disappointing'.

He said the company had until now estimated the completion programme using independent advice because 'we felt like we were getting a more accurate answer from our independent advisers.'

'Following considerable engagement' with Fletcher Construction, Precinct received a revised completion programme.

Fletcher has been hit by hundreds of millions of dollars of losses on construction projects in the past two years, and announced in February it was pulling out of 'vertical construction'.

Pritchard said the revised completion programme had been reviewed by its expert, RCP, which had confirmed the dates were achievable, subject to Fletcher's performance.

The new date for the completion of Commercial Bay's retail was September 2019 and for the new PwC office tower was December 2019.

When the Commercial Bay development was unveiled in late 2015, the retail completion date was October 2018 and the PwC tower mid-2019.

In February this year Precinct revised the dates for opening to July 2019 for the tower and the end of March 2019 for most of the retail.

Pritchard confirmed the first phase of retail was H&M opening its flagship store on August 30.

He said the company believed Fletchers were maintaining a very high standard of quality during a very challenging period in the construction industry.

The industry was facing 'a perfect storm' with a shortage of construction workers.

Precinct was confident with the provisions of its construction contract, which protected it from losses due to contractor delay.

'Liquidated damages will effectively mitigate the impact on Precinct from any loss of income and other costs over the delayed period.'

Pritchard said Fletcher had missed 'a lot' of milestones in the programme and typically that incurred penalties which were deducted from monthly payments.

Precinct's Commercial Bay project cost was $685m and it would not increase as a result of the delays, Pritchard said.

The company's 2018 profit is 57 per cent higher than the year before. It also booked a revaluation gain of $208.7m on its properties.