Kiwi Property Group gives greenlight to $223M expansion of Sylvia Park
By Rebecca Howard
Feb. 28 (BusinessDesk) - Kiwi Property Group has given a green light to a $223 million expansion of Auckland's Sylvia Park shopping centre that it says will see the site's value jump to $1.1 billion.
The planned expansion, which will kick off in March and is expected to be completed by mid-2020, will add approximately 60 new retailers, 18,000 square meters of retail space, and a new multi-deck carpark, with approximately 900 car parks, the Auckland-based company said in a statement. Upon completion, the centre will have 90,000 square meters of retail space and around 5,000 car parks, it said.
The project will be debt funded from existing facilities and is expected to provide an initial net incremental income yield on capital expenditure of 5.7 percent, growing to 6.2 percent by year three and an incremental internal rate of return in excess of 10 percent, it said.
Chief executive Chris Gudgeon said construction cost certainty had been secured by working through an early contractor involvement process with its builder, Naylor Love.
“By working collaboratively through critical design, planning and programming elements we have been able to negotiate a fixed price lump sum contract,” said Gudgeon. In addition to the expansion project, other general remedial works costing approximately $11 million will be carried out.
Kiwi Property's focus on cost certainty comes during a period of rising construction costs, which caught out Fletcher Building with the country's biggest construction firm facing losses of $952 million in its Buildings + Interiors division from blowouts in several major construction projects.
The projected value of Sylvia Park on completion has been assessed by independent valuer CBRE at $1.12 billion. Its projected March 2018 valuation is $835 million.
Since the 2009 financial year, annual retail sales at Sylvia Park have grown by more than $185 million to $547 million, said Gudgeon. "Our retailers have seen customer numbers grow to more than 14 million visitors every year, with speciality sales productivity increasing from $7,200 per sqm in 2009 to current levels greater than $12,400 per sqm,” he said.
There are currently more than 200 retailers in the centre.
The stock recently traded at $1.33 and is down 6.6 percent over the past 12 months.