“We wanted it to be a little playful,” says Kiwi Property Group boss Clive Mackenzie, referring to the angular roof lines planned for the central pavilion gym, movie theatre and community lounge at the company’s big new project, now rising in Mt Wellington.
He is standing at New Zealand’s biggest build-to-rent [BTR] development. The scheme is more than halfway up, two tower cranes swinging above us on the Naylor Love construction company site between Mt Wellington Highway and Lynton Rd at the Pak’nSave end of Sylvia Park.
In about a year’s time, the $200 million Auckland housing scheme is scheduled to deliver 295 new residential tenancies, rented in perpetuity, providing what Mackenzie describes as “a place to set roots”, and where he wants people to live long-term, bucking the instability that is often a feature of our residential rental market.
How long people will actually stay is governed by law. Usually, tenants need to give only 28 days’ notice and landlords 90 days under non-fixed term, or periodic, tenancies, but Tenancy Services says a BTR tenant with a 10-year term must give 56 days’ notice to terminate.
Mackenzie thinks people will put down sticks for a long time at Kiwi’s new towers. “We want people to stay,” he says, referring to overseas studies showing that if you make a friend in BTR housing, your chances of staying increase exponentially. “We’ll offer furnished places too.”
Build-to-rent is a relatively new concept to New Zealand but is popular with institutional investors in Australia and the United States, and New Zealand’s Property Council has focused on it lately as larger investors eye up the concept.
Build-to-rent is where professional or corporate investors develop and then hold residential property, in return for a stable income stream from long-term tenancies.
It’s not been mainstream here before. But that is changing fast.
Mackenzie is keen to help solve our housing crisis. Leonie Freeman, chief executive of the Property Council, has described housing as one of this country’s biggest issues, citing the need to solve blockages and barriers to delivering more places.
It’s not just Kiwi Property that is into BTR: NZ Living’s Shane and Anna Brealey and default KiwiSaver manager Simplicity plan 10,000 new BTR places worth $5 billion in the next decade in Auckland, Tauranga and Wellington.
And Greg and Helen Reidy’s Reidy & Co and Kim Barrett’s Haydn & Rollett have launched Resident Properties to develop BTR apartments in Auckland, projecting the development of $210m worth of units.
New Ground Capital, founded in 2014, has pioneered BTR here, developing more than 600 new places.
Some politicians also love the idea of build-to-rent. National plans to address housing shortages with a multi-pronged strategy that includes a big BTR push. Chris Bishop, National’s housing spokesman, spoke at this year’s Property Council residential conference where he announced details of a proposed move to encourage more BTR development.
And last month, council-controlled organisation Eke Panuku, Cedar Pacific and McConnell Property announced a big new BTR scheme in central Takapuna.
At Sylvia Park, Kiwi’s BTR target completion date is next year, “but it will take 12 to 18 months to fully rent the buildings”.
On this blustery May day, with completion still well in the future, puddles have formed on the exposed floor slabs and the wind is gusting as we ride the builder’s lift, designed to haul heavy plasterboard up to the many levels.
Mackenzie, accompanied by project director Greg Tolley, took the Herald on the first media tour. Not even the all-powerful institutional investors have been inside.
The buildings were designed by New Zealand’s Ashton Mitchell with Australia’s i2C.
The Australian architects said: “The project will be one of the first true BTR developments in New Zealand and carries with it an exciting future for multi-residential dwellings. i2C | Ryder is proud to be working on the design of this benchmark project.”
The architects acknowledged Sylvia Park’s former industrial use in their design and said the site is beside an adjoining greenspace and stream to give residents a connection with the natural environment.
In that green area, a bridge is planned beneath poplars, carved into an ivy-covered bund or giant mound of earth. That pedestrian bridge will provide access between the new apartments and the 250-shop retail centre. It won’t be a long trip to dash in for milk at the Pak’nSave.
The poplars provide a soft screen between the units and the mall. Why was that site chosen for BTR? Because it was at the residential, not motorway, end of the mall and office site and the site adjoins other housing, including a tall new block from state housing provider Kāinga Ora, Mackenzie says.
He is pleased with progress on the scheme and shows how each floor is a mirror of the one above and beneath - “for efficiencies of scale, layout and design”.
This is the largest residential project by any NZX-listed developer, bucking the trend for the big businesses listed on the sharemarket to invest only in commercial, industrial and retail properties. Housing has previously been out of their orbit.
Arie Dekker, managing director and research head at sharebroker Jarden, said Sylvia Park’s mixed-use strategy was playing out, with office development well progressed, two of those buildings already up while the more ambitious BTR scheme rises.
“This isn’t without risk and there is a lot riding on a successful launch of this as construction completes, with Kiwi needing to execute well on tenanting it up and operating the asset to ensure it delivers on a stand-alone basis,” said Dekker. “If successful, there should be positive ramifications for the value of the core retail asset over time, given success would pave the way for a lot more development intensity of the site, with Kiwi seeing a number of follow-on build-to-rent opportunities at Sylvia Park.”
Although Kiwi is not forecasting how much rents will be, speculation is that one-bedroom, 56sq m places could be $650-$700 a week and two-bedroom units $800-$900 a week in the popular area with its own train station beside New Zealand’s biggest shopping centre. Some three-bedroom places are also being developed.
And Kiwi isn’t stopping at these three towers: “Eventually there will be 1200 apartments here,” says Mackenzie, indicating a nearby site also at the Mt Wellington end of Sylvia Park.
Construction of the central tower, Building B, has reached level seven but it will be 12 levels tall by the time it is complete. Buildings A and C, flanking the central block, will both be nine levels and are now at levels five and four respectively.
Two years ago, Kiwi said it would develop new build-to-rent apartments in Mt Wellington as well as its new LynnMall in schemes worth $442m, although work at LynnMall is yet to start.
The company wants to capitalise on what is now flat, asphalted carparking or older housing sites in both suburbs and Mackenzie said in 2021 that each project would cost about $221m.
Tenants at both sites are to get access to private gyms, co-working spaces, rooftop terraces, barbecues and on-site maintenance. They will be allowed pets as of right, and can hang pictures or change interior colour schemes.
What do tenants think about such schemes - does it mean giving in to never owning, or creating a new standard of living?
Geordie Rogers, president of Renters United, welcomed the extra accommodation and said it was good that it was owned by a single landlord. That would give tenants more power to deal with one party, organise and uphold their rights.
“There are obviously tax benefits for landlords providing BTR properties and no doubt they’ll be very happy to see that income increase their profit margins.
“An increase in housing supply helps, but it doesn’t mean we can stop building rights for renters. There’s still inherently a power imbalance between the renter and the owner. The state needs to be building more to remove the margin of profit,” Rogers said.
Mackenzie said five old homes beside Sylvia Park were demolished for the project. Access to the apartments will be off Lynton Rd, “so residents won’t have to come into Sylvia Park to access the new development but there will be pedestrian access through to the shopping centre”.
“Today, more than half of Aucklanders over the age of 15 are living in rental accommodation. Our aim is to make that experience as good as, if not better, than owning your own home. Kiwi Property’s build-to-rent developments will feature quality amenities, a range of resident services and specially curated events, all designed to promote a vibrant community. We’re creating a new way of living that’s custom-designed for the modern Kiwi lifestyle,” Mackenzie said in announcing BTR in 2021.
“It’s going to take just over two years to build them, but we will rent them at market or a slight premium to market to reflect the quality of build and amenity,” Mackenzie said then.
So now, standing in Building B, he is enthusiastic about seeing the vision fulfilled.
“One of the things that really attracted us to build-to-rent is that a lot of rental accommodation in New Zealand - you’re at the whim of the landlord in terms of what they want to do with that, and a lot of people aren’t able to get long tenure,” he said this month.
BTR aims to eliminate that by encouraging people to put down roots and become permanent building tenants, he says.
“We allow people to do decorating of their apartments. You’re allowed to bring your pets. As your circumstances change, if you want to move from maybe a one-bedroom apartment to a two- or three-bedroom, you can move within the complex as well.”
Views of the Waitematā and Manukau will be available to those on the blocks’ higher levels.
“We want to create a community that really feels like they’ve got a home that they can stay in as long as they want to,” Mackenzie says. For Kiwi, there is also the attraction of a constant revenue flow from tenants paying their rent.
The three-building complex will have 119 carparks tucked beneath in basements, but Mackenzie points out that Sylvia Park has many buses daily, a train station and is between two motorways: SH1 and the south eastern arterial.
So what’s next for Sylvia Park? Mackenzie cites a multi-level hotel and postgraduate tertiary education space.
More retail has also long been planned at the 5000-carpark centre. Back when Kiwi built the mall, the mainly single-level structure was made strong enough to take a second floor of shops along its entire 1km length. The $277m Galleria, opened in 2020, is a start on going up.
Mackenzie is not ruling out further expansion, but indicates that it could be further off.
Sylvia Park and the Sylvia Park Lifestyle Centre across the highway have 12ha or 120,600sq m of indoor floor space, Hamilton’s The Base has 81,000sq m and Christchurch’s Westfield Riccarton has 54,000sq m - though all pale in comparison with Melbourne’s regional Chadstone shopping centre, with 22ha or 220,000sq m of floorspace.
And for any potential new tenants, Mackenzie notes that the new Ikea will be rising not that far from their new homes, on land Kiwi sold to the Swedish homeware business - perfectly sited for anyone needing a new bookcase or other furnishings.
Some people without existing consent won’t get a wastewater connection for years.