Sylvia Park mall set to get hotel, apartments and office building

Monday, 18 November 2019

Big retail and office landlord and developer Kiwi Property is pushing ahead with its mixed-use strategy, planning development of another office tower, an hotel and maybe also apartments for rent at its Sylvia Park mixed-use development.

Traditionally an office and retail landlord, Kiwi Property has adopted the new strategy to lift income by intensifying development of existing assets and properties.

Kiwi Property said it was progressing concepts for more mixed-use development at Sylvia Park, following the completion of its first office building there, ANZ Raranga, which was fully tenanted with good demand signalled for a second office tower.

There was potential for a 15,000 square metre office and a 140-room hotel. It had received strong interest from office tenants and international hotel operators and was targeting construction from late 2020.

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Kiwi Property said analysis suggested strong potential demand for build to-rent (BTR) accommodation. Initial design was underway for a 150-250 residential apartment complex.

The company has reported its half-year profit of $36.8 million, a drop of 24 per cent from $59.6m in the previous half-year, due to a $12.9m loss in the value of its interest rate swaps, following interest rate falls.

By the same token interest rate falls were having a favourable impact on the company's average cost of debt, Kiwi Property chief executive Clive Mackenzie said.

In the six months to September 30 2019 the company's total rental growth had been a solid 4.6 per cent, maintaining the momentum from the previous period.

'The demand for space at leading mixed-use and retail locations, as well as premium-grade office buildings, is driving solid rental growth. New leases and renewals were particularly pleasing, with mixed-use up 14.1 per cent, office up 8.5 per cent and retail up 0.8 per cent,' Mackenzie said.

Net rental income was down marginally from last year to $89.6m because of the sale of North City, Porirua, in the previous first half. But on a like-for-like basis net rental income rose $1.8m or 2.1 per cent. ​Like-for-like net rental income excluded the sale of North City, the impact of Sylvia Park's Galleria and new rental income from ANZ Raranga.

Retail sales at its properties rose 2.1 per cent to $1.71 billion, including traditional shopping centre sales rising 2.3 per cent to $1.54b. Specialty sales productivity improved to $11,400 sqm up from $11,000 in March.

At the half-year its property portfolio was 99.4 per cent occupied with a weighted lease expiry of 5.1 years. The value of its portfolio rose $100m to $3.3b.

Mackenzie said the company had bought 51-53 Carbine Road and 7-10 Arthur Brown Place, Auckland, for $25.5m, a 20,745 sqm combined land holding. The properties were adjacent to the Sylvia Park train station, giving Kiwi property access to both sides of the railway line and creating significant scope for future mixed-use development.

Construction of the Galleria and south car park at Sylvia Park was on track. Retailers had committed to two thirds of space at the 60-store Galleria, and the company was finalising negotiations with key international and national retailers.

Stores at the Galleria were set to open from August 2020.

A year ago it said it had almost completed rebalancing its property portfolio to Auckland and was ready for more developments and 'considered' acquisitions.

It has earmarked Sylvia Park, The Base in Hamilton, LynnMall, Auckland, and its future Drury development for mixed-use developments.