Kiwi Property eyes residential development for mixed-use centres

Kiwi Property chief executive Clive Mackenzie. Photo / File

Kiwi Property Group is considering adding residential property to its mixed-use centres, although no decisions have been made about how to go about it, chair Mark Ford told the annual shareholders' meeting.

"It's certainly something we see as part of our mixed-use development," Ford said, adding that apartment buildings in centres such as Kiwi's flagship property, Sylvia Park, are common overseas.

"We're still going through the process of determining how we do that," he said. Kiwi could develop apartments itself or it could do it in association with another property developer.

Kiwi has four existing and potential mixed-use centres, the 33 hectare Sylvia Park site, the seven-hectare Lynn Mall centre, also in Auckland, The Base on 30 hectares in Hamilton and the greenfields 51-hectare site at Drury south of Auckland.

Chief executive Clive Mackenzie told BusinessDesk after the meeting that consideration of adding residential property to these sites is "still at a very high level as to whether we want to do that" and said he couldn't provide any timeframe for when decisions might be made.

The company hasn't even considered whether it might become part of the government's KiwiBuild programme, Mackenzie said.

"All we're doing is calling it out that it's something of interest."

Kiwi is also looking at extending its operations into funds management, essentially by managing property for third parties that lack the skills Kiwi has.

Ford told the meeting the company sees it as an opportunity to expand its capital base, giving it the ability to acquire assets that "we can't make work for Kiwi Property."

"We would more often than not want an element of ownership" and this would provide the company with an opportunity to generate fee income from managing other assets. Such management rights would become a company asset with the potential to be sold.

"It's not necessarily easy to implement but is a sound strategy," Ford said.

Kiwi spent $140 million on developments in the year ended March, including the first office building at Sylvia Park, the $80.2m ANZ Raranga building, which will bring about 1,000 workers onto the site, providing a captive group of potential customers for the shopping centre and entertainment properties within the site.

The company has $269m of development in progress, $258m of it at Sylvia Park earmarked for building a second office building and/or hotel, a third office building and adding a Kmart store, extending the Galleria boutiques area and extending car parking facilities.

Sylvia Park will have about 5,000 car parks once the planned developments have been completed.

In answer to a question from a shareholder about whether it was wise to provide so much car parking, Ford acknowledged that "parking and shopping centres is catch 22."

While there may come a time in the future where such extensive parking isn't needed, currently customers are still complaining about the difficulty in finding a park, Ford said.

"Perhaps in 30 years' time, we won't need them at all but we do today." The company does take account of the costs and benefits and in future those car parking spaces could be turned into other uses, he said.

Mackenzie said that as Kiwi increases the intensity on the Sylvia Park site, a considerable amount of complementary use of facilities such as the car parks is developing.

For example, during weekdays, when fewer people are shopping, the workers in the office building will be using the car parks. At weekends, when the workers aren't working, there are more people shopping and using the car parks.

If residential property is added, there will be more demand for parking overnight, he said.

Kiwi will also be adding to the other two existing mixed-use centres and working on changing the zoning of its Drury site and then designing and gaining consents.

Kiwi lifted net profit 15 per cent to $138.1m in the year ended March, mainly reflecting the rising value of its properties.

Kiwi shares are steady at $1.60 and have risen 10.7 per cent in the past 12 months compared with the benchmark S&P/NZX 50 Index's 8.1 per cent gain.