Mixed use strategy pays off for Kiwi Property

Monday, 26 May 2025

Kiwi Property has seen solid rental income growth across its portfolio, which includes Auckland’s Sylvia Park.

Kiwi Property Group has weathered tough economic times to report a big turnaround in after tax profit over the year to the end of March, and it believes conditions will continue to improve.

The NZX-listed commercial property giant’s after tax profit was $57 million, up 2814% from a net loss of $2.1m in the previous year.

The improvement was driven by a stablisation in property valuations, with the value of its portfolio down just 0.3% from the previous year to $3.3 billion, Kiwi Property chief executive Clive Mackenzie said.

“We're coming through a turn in the economic cycle, and the stabilisation of valuations is positive, and it spins out that impressive percentage growth there.”

But solid growth in rental income across the company’s portfolio, which includes Sylvia Park and LynnMall in Auckland and The Base in Hamilton, also contributed. Net rental income was up 5% to $194.1m.

Kiwi Property’s after tax profit was driven by a stablisation in property valuations, chief executive Clive Mackenzie says.

Mackenzie said the company had some high quality assets within its portfolio, and had been able to capitalise on the strength of the demand behind that, especially in its mixed use properties.

But it also focussed on minimising costs to get the best results possible for its shareholders, and tight cost management had resulted in a 23% reduction in employment and administration expenses, he said.

“Another focus is growing rental income, and we are driving that with our mixed-use strategy. We’ve invested in Sylvia Park, The Base, and so on and we'll continue that focus as we move forward.

“You can see the results of that work coming through now, and it gives us satisfaction that we have the right strategy in place.”

A significant part of Kiwi Property’s investment in recent years has been in the development of Resido, its 295 build-to-rent development at Sylvia Park which opened last June.

Build-to-rent developments are large scale, multi-unit residential buildings which offer long-term rental agreements, are professionally managed and do not offer apartments for sale to individual owners.

Resido opened into a competitive Auckland rental market where rental supply was outpacing demand, but despite that the pace of leasing had been at the faster end of the expected 12 to 18 month range, Mackenzie said.

Kiwi Property’s first build-to-rent development, Resido, is now 88% leased.

“Eighty-five percent of the apartments were leased within a year, and as of this morning, we're at 88% leased. We’ve also achieved rentals at around 26% higher than the median Auckland apartment rent.”

It proved that high-quality residential living close to premium retail and good transport connectivity was an attractive proposition for tenants, he said.

While Kiwi Property has previously noted it has scope to build up to 1000 build-to-rent units in total at Sylvia Park, and up to 600 at Lynn Mall, it does not have any such plans underway.

Mackenzie said the company was happy with the community it had built at Resido, but planned to focus on making sure the model worked before it looked at its next venture in that space.

But he did have an announcement on the company’s Drury East development in South Auckland where foundational work is underway.

Kiwi Property has completed its first sale of large-format retail land at Drury in April.

The sale was to Foodstuffs, which would be building a New World on it, and the company was also in advanced discussions with other parties on another three sales, he said.

A parcel of large-format retail land at Drury has been sold to Foodstuffs to develop a supermarket on.

“It will give us that critical mass, and it starts to put Drury on the map from a retail perspective as we build a town center for the community.

“If you drive down the Southern motorway you can see there's a huge amount of infrastructure that the government and council have been putting into Drury, and it is really starting to take shape.”

The Drury development would be a fantastic addition to Auckland in the years ahead, and Kiwi Property had scope for residential development there too, he said.

“But the residential market is subdued at the moment, so we're focusing on large form of retail, rather than residential land sales right now.”

Going forward, the company had identified a number of properties in its portfolio which it considered non-strategic assets, and it would look to sell them when the time was right, he said.

Those properties included some of its CBD office properties, and some of its smaller regional assets such as Centre Place North.

Last year, Kiwi Property looked at selling the Vero Centre in Auckland, but the sale fell through. The company was now in advanced discussions to lease the unoccupied space in the building, investors at the results presentation were told.

Mackenzie said operating conditions had been tough, but there were now some green shoots coming through in the market.

Inflation appeared to be under control, interest rates had come down, and recent retail statistics suggested that consumers were starting to open up their wallets again, he said.

“We are encouraged by the future possibilities for Kiwi Property, and will continue to target strong rental growth through active lease management and through investment in quality amenities.

“The opening of IKEA next to Sylvia Park, later this year, is expected to drive retail tourism and a significant boost in foot traffic for our centre, attracting new customers from across the country to visit.”