City hall wants more cash to fund Auckland infrastructure and cope with population pressure but a developer says his sector is in the vice grips. Down at the waterfront, piling is underway for the new Northbrook Wynyard Quarter and The Villard luxury apartments. Where to for property valuations as interest
Property Insider: Fletcher residential boss v Auckland Council on 289% fee hike; Winton Land contractor piling in Wynyard Quarter; half-year results and revaluations
Fletcher Living's residential development at former Winstone Three King's Quarry, Mt Eden. 13 November 2024 NZME photographs by Jason Dorday
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The council fees could make building homes uneconomic, right at a time when the Government wants more homes built here.
In the northwest, this is a 289% proposed increase, at Tāmaki a 282% increase and overall for Auckland the average proposed increase is from $21,000 to $50,000/house, Evans says.
“Developers are a good target for a council under financial pressure,” said Evans, who heads the division with 23 development sites in Auckland and Christchurch.
The council says it has assessed investment requirements and found $8.9 billion needed in the next 30 years. Auckland’s population is expected to grow by a further 200,000 by 2034 and by another 409,000 by 2054.
Because the council will need to pay for infrastructure to cope with this, fees must rise.
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But Evans points to Fletcher Living’s ex-Winstone Three Kings quarry where the stormwater, footpaths, roads and reserves, a playground and new soccer field were developed by the company he works for. Amenity and public areas will be vested in the territorial authority once completed.
He disputes claims the new fees won’t impact house prices “but development being planned won’t get developed which means fewer new houses which forces up house prices”, Evans says.
“We believe the contributions policy will cause significant implications throughout the industry that have not been given reasonable consideration. This is especially given that development contributions are proposed to increase by up to 289% in specific areas,” Fletcher’s submission on the new policy said.
But the council says without this funding the burden of providing infrastructure and risk of undesirable outcomes will fall on the remainder of the city’s ratepayers and the future residents.
Fletcher Living’s submission complained about the 30-year nature of the plan, saying it “does not believe it is equitable that a developer must pay the same amount of DC’s in 2025 with limited to no benefit derived from the infrastructure proposed, as another developer would in 2054 who benefits from all of the infrastructure being in place”.
The Urban Development Institute’s submission said it recognised the infrastructure shortfall needed to be funded and beneficiaries should pay their fair share.
Yet it wasn’t clear how costs had been arrived at.
“Our members fundamentally disagree, based on their collective experience, with the economic analysis suggesting that higher DCs do not generally lead to higher house prices, at least in the short term,” the institute said.
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“Mt Roskill is identified as an area that DCs will go up dramatically, so much so that it would make it near impossible to commit to buying land there,” one member said.
Pile-driving at Winton Land’s sites
Piling work is underway for apartments at Winton Land’s Northbrook Wynyard Quarter retirement village and neighbouring The Villard apartment sites across the road from Orams Marine on Beaumont St.
Contractors are on the fenced land where the first blocks are being planned: 12-level 152-unit village building and luxury apartments near Auckland’s waterfront.
But first, works go underground.
Icon has won the contract to build the blocks.
Soiltek was working there now. That business says it services included large diameter bored piling, creating secant pile wall service shafts, soil mixing and civil works.
An image taken last Monday showed the contractor on the Pakenham St West/ Beaumont St/Daldy, a white crawler crane in position and site offices established.
“The main focus is piling at the moment. Perimeter piles are being inserted in preparation for basement excavations,” the spokeswoman said.
At Winton’s annual meeting last month, shareholders heard of progress.
Winton plans Cracker Bay in the Wynyard Quarter. Resource consent had been finalised on Northbrook Wynyard Quarter, the company said in October.
The main works contract negotiations are well progressed and early works were complete, it announced.
But not all has gone according to plan.
“Due to industry-wide issues and consenting processes, Northbrook changed its structural engineer to Robert Bird Group. Basement construction will commence in H1 FY25, with practical completion remaining on schedule for FY28. The show apartment and flagship sales suite launched in June 2023. Strong interest continues,” the presentation last month said.
Winton is continuing to work on consenting for the wider site including The Villard upmarket apartments.
Elements of the Cracker Bay on the two blocks dissected by Beaumont St are:
- Selling occupation rights agreements to the retirement village apartments where piling is occurring. This is part of a freehold site bought from Mansons TCLM which is developing a much larger portion of the block behind Air New Zealand’s global HQ. A 30 per cent deferred management fee applies to those rights;
- Developing a 50-bed hospital offering higher-level care for village residents;
- 220 car parks beneath the new village;
- Refurbishing the waterfront 11 Westhaven Dr, the white multi-level offices, originally Mantells On the Water at Pier 21. Peter Gordon’s Homeland restaurant and cooking school has vacated that building;
- Refurbishing Pier 21’s Drystack Boatpark, with double-stacking for 190 craft, at 15 Westhaven Dr, continuing the same use for those premises;
- Building a new 200-seat events/wedding venue beside Oram’s Marine;
- Demolishing piers at the existing Pier 21 marina, where 34 vessels are moored. Piers must be renewed and will be replaced by 31 berths for much bigger vessels;
- Dredging the marina basin area in front of Pier 21 from 2.5m low-tide depth to 3.5m. Retirement village residents will get first dibs on those berths, most leased to Northbrook Wynyard Quarter retirement village residents;
- Converting the old existing double-height paint shed beside Oram’s Marine into a 250-seat waterfront “boathouse” dining/bar venue, directly facing the water.
- Developing what is now the bare flat land between 11 Westhaven Dr and the old paint shed into a resort-style outdoor recreation area for the exclusive use of village residents, with 25m pool, gardens, lounge areas and pergola.
- Demolishing most of the shops on the Westhaven Dr/Beaumont St corner around Johnny Wray’s Coffee. These are not up to seismic standards. New bodega (retail) and maritime retail buildings are planned for this area;
- Extending Westhaven waterfront walkway from where it finishes now at Swashbucklers to around the Winton properties to end at the new boathouse restaurant;
- Creating a new public laneway/promenade from Beaumont St down to the waterfront, with a new pedestrian crossing to be developed on Beaumont St to connect to that.
At the end of last month, Winton said it had newly registered offices: level two, 11 Westhaven Dr, Wynyard Quarter.
Those new HQ are in the same building where celebrated chef Peter Gordon once had his popular restaurant and cooking school Homeland on the ground level. He has now left.
In an email to customers, Homeland said: “We didn’t expect our landlord selling the site to a property developer that doesn’t see Homeland in its vision. It is renovating our building, beginning huge construction works around us and won’t renew our lease.”
Winton Land has suspended dividend payments, citing the need for financial discipline in softer market conditions while the company executes its growth plans.
Where to now for revaluations?
Half-year results are out or about to be issued by a number of NZX-listed property and retirement village investment businesses with valuations a focus of change.
Last week, industrial and warehouse specialist Goodman Property Trust and retail specialist Investore Property were out.
Tomorrow, Argosy Property tells how it has done in the last six months, followed by Oceania Healthcare on Friday, Kiwi Property on November 25 and Ryman Healthcare on November 28.
Goodman’s revenue was up 11% from $100.1m to $111.4m in the September 30, 2024 half-year. That business is now exclusively invested in Auckland and owns $4.6b of what it calls a logistics portfolio.
Net profit after tax was $45.5m in 1HY25, a turnaround on the previous corresponding $163.2m loss. Valuations aren’t being hammered like they were. The change was largely due to writedowns of $226.5m in the value of the portfolio in 1HY24, which turned to a rise of $3.6m in 1HY25.
“The resilience of the portfolio and strength of our interim financial performance gives us the confidence to reaffirm our full-year cash earnings guidance of 7.5 cents per unit. Distributions of 6.5 cents per unit are also reaffirmed for the year,” said chief executive James Spence.
Asked by the Herald for further comment on valuations, Spence said property valuations could have a significant impact on reported statutory profit “so we tend to focus on underlying operating performance. Cash earnings is our preferred measure, with the fair value gains or losses attributable to valuation movements being one of the main items it strips out”.
With property market fundamentals strong for Auckland industrial property - low vacancy and significant growth in market rents during the last couple of years - it has been the movements in interest rates that have been the main driver of valuation outcomes for Goodman, he said.
After a sustained period of interest rate rises, the recent cuts to interest rates have seen property values stabilise. Stable industrial property values over the last six months were reflected in a stronger interim profit result for Goodman, Spence said.
“For context Goodman recorded a 13.5% decline in property values in the two years to March 31, 2024. These were the first devaluations since 2012. Over the last five years, a net $670m of fair value gains from property valuations have been recognised in Goodman’s statutory results and almost $1.3b of fair value gains over the last 10 years which is a 24% gain,” he added.
Investore owns $916m of retail t real estate via its 43 properties rented to 145 tenants including Woolworths, Mitre 10, McDonald’s, BurgerFuel, Unichem Pharmacy, Briscoes, Rebel Sport and Bunnings.
Its result was out last week and that showed its bottom line was also in turnaround mode, with the net profit after tax being $9.7m after 1H24’s being a $66.5m loss.
Investore’s result was a similar story to Goodman’s.
The change in fair value of investment properties was included in “other expenses” which had been an $82.7m loss but that reduced to a $3.6m loss in the latest period.
So, let’s see what happens to revals in the next round of results coming.
Anne Gibson has been the Herald’s property editor for 24 years, written books and covered property extensively here and overseas.
