‘Perfect time’ for Precinct Properties’ residential move

Thursday, 6 June 2024

Precinct Properties is upping its commitment to residential development in Auckland, with two large-scale apartment and student accommodation projects, the company’s chief executive says.

The NZX listed company is best known as a commercial property developer, responsible for landmark projects such as Commercial Bay in Auckland and Bowen Campus in Wellington.

But it started to move into the residential market about 18 months ago when it entered into a joint venture with housing developer Lamont & Co, and late last year it bought Auckland’s Downtown Carpark to redevelop the site.

Now, Precinct’s chief executive, Scott Pritchard, has announced it is buying a site in Auckland’s CBD and another in one of Auckland’s inner city fringe suburbs to build student accommodation and apartments.

The company had purchased 256 Queen St for $9 million, and would develop 500 self-contained studio units for students on it.

It had also struck a conditional deal with Eke Panuku to buy a 5250 sqm site at the junction of Dominion Rd and Valley Rd in Mount Eden for a build-to-sell apartment development.

Precinct was also moving to 100% ownership of Precinct Properties Residential Limited, the joint venture it established with Lamont & Co.

Pritchard said the three announcements demonstrated the company’s commitment to further growth in the residential sector, and that it saw value in the move.

“The multi-unit residential development market is a natural extension of Precinct’s core business, which is focused on high quality mixed-use precincts, and complements our overall strategic direction.”

The residential construction sector is in the midst of a downturn, but it was the “perfect time” for Precinct to expand its presence in it, he said.

“When you have a residential market which is soft it offers opportunities to secure sites that in five to 10 years we can develop to provide high quality housing.

“We are a long-term business, so we are not looking to buy now and sell next year. We acquire, work on design proposals and specifications, and when the time is right we will build and sell.”

The company would “never say never” to a build-to-rent development, but research showed it was hard to make such developments stack up financially, so its focus would remain on building to sell, he said.

“Demand is there, particularly with ongoing high immigration, and there is a relatively permissive planning regime in Auckland, so we want to tap into that demand.”

While the student accommodation project qualified as build-to-rent, the move into that market was the result of extensive research which showed strong demand and limited new supply, Pritchard said.

“If you talk to any of the universities, they will tell you there is simply not enough supply, and they would like to see five to seven thousand more beds in that space.

“With international students still not back to pre-pandemic levels, and New Zealand considered a great place to come, we need to accommodate that demand.”

The research also showed growth in the student accommodation sector had delivered strong investment returns in cities with similar market dynamics globally, he said.

Precinct expected to settle its purchase of the Queen St site by the end of this month, while its purchase of the Mt Eden site for $13.25m was expected to take place late next year.

The Queen St redevelopment would include the restoration of the historic Auckland Savings Bank as a separate retail and commercial component, and would contribute to the regeneration of Auckland’s midtown precinct.

Pritchard said there was strong demand from funders and potential capital partners to participate in high quality investment opportunities in the residential sector.

Such partnerships were better for the balance sheet, and allowed the company to be more nimble in the way it worked, he said.

The company would be working in partnership with Eke Panuku on the $160m plus redevelopment of the Mt Eden site.

It was partnering with Ngāti Whātua Ōrākei on the redevelopment of the Downtown Carpark site, which would include Precinct’s largest residential development.

It would also feature two high-rise towers, retail, hospitality, and new public spaces, but construction was not expected to start until 2026.

Pritchard said the company was excited to be growing the platforms it had created, and to participate in a market where it saw significant opportunity over the long term.