Big mall owner doubles down on apartments

One of the country’s largest shopping centre owners has stressed that building apartments for rent is becoming a lot more attractive as Covid-19 makes it harder to save a deposit for a property in Auckland.

Kiwi Property chief executive Clive Mackenzie told shareholders at the company’s first virtual annual meeting that it was still committed to its ‘‘mixed-use’’ strategy, where it diversified its assets away from retail and intensified development of its sites with other commercial buildings, such as offices, hotels and apartments to rent.

In March, Kiwi Property received ‘‘standing consent’’ from the Overseas Investment Office (OIO) to buy 6 hectares of residential land in 19 transactions over a term of three years in the Auckland area for the construction of dwellings for rental or lease.

‘‘More than half of Aucklanders are already renting and it’s taking longer for people to save for a house deposit,’’ Mackenzie told the virtual annual meeting.

‘‘Covid-19 is likely to compound these trends, reinforcing build-to-rent’s attractiveness as an asset class in New Zealand,’’ Mackenzie said.

Build-to-rent apartments are a new development. Most developers build apartment blocks to sell the apartments individually.

Overseas where life-long renting is common, build-to-rent is well established in the United States and has taken off in Britain.

‘‘In parallel, we continue to see significant opportunities in office, especially suburban hub and bespoke offices, such as ANZ Raranga,’’ Mackenzie said.

‘‘As a result, we are continuing planning of a second commercial building at Sylvia Park, which currently includes approximately 15,000 square metres of office space and potentially a 140-room hotel,’’ Mackenzie said.

But the company would only begin construction of a second office tower at Sylvia Park when market conditions allowed. It had $291 million of undrawn credit available.

‘‘Given the high degree of uncertainty in the market, it’s vital we’re highly disciplined about the opportunities we pursue. That means being smart with our capital, making strategic investments and only going after opportunities as market conditions support them.’’

At the same time, Mackenzie said Kiwi Property’s expansion of Sylvia Park was nearing completion and the new 19,000sqm Galleria would open progressively starting about October. It will have about 60 new retailers.

Kiwi Property’s focus would be on stabilising the business, strict cost control, strengthening the balance sheet and ensuring the resilience of its tenant portfolio.

It would continue to diversify its property portfolio, by expanding the types of properties it owned and creating mixed-use communities at its significant landholdings. It would grow the business through targeted development.