He’d do it differently next time
Retail leasing in the Eden Quarter development on Dominion Rd, Mt Eden, averaged $425/mÂ² net, Landplan Pacific director Doug Osborne told the Property Council’s property review breakfast this week.
The second element of the development, to sell down specialty spaces on strata title, achieved yields of 8.9-9.5%.
The development was an extension of the old 3 Guys supermarket site on Valley Rd, running through to Dominion Rd, with a new 3400mÂ² Foodtown supermarket built for Progressive Enterprises while the old store still traded.
The whole site covers 15,000mÂ² and the development cost was $15 million. Specialty tenancies covered 2200mÂ² on the ground floor (including a 2.5mÂ² ATM machine on its own title), with just under 700mÂ² in five first-floor office tenancies.
Landplan took a year to negotiate a non-notified resource consent and nine months to negotiate a lease with Progressive.
On the way through, Mr Osborne noted plenty of pitfalls for young players:
Large-format retail, especially the new generation with specialty departments, has reduced the opportunity to carry out this sort of development, which is an extension behind a shopping strip, open to the elements, not a mall. “They [large-format retail developers] work on lower margins.”
It’s not a surprise to see companies in the building industry getting into trouble. The fact that Hartner Construction did this job, completed last year, was not his point, but the attention to detail necessary to complete a job to the satisfaction of the developer reduced the margin for error.
Eden Quarter is 92% leased, 93% by value sold, but the whole concept wasn’t finished because of a new council levy. “We did plan for residential behind the supermarket, but after the introduction by the council of a new levy on residential on commercial-zoned land, we have to withdraw that during the project.”
We’re on budget for about 15% developer’s margin. We were able to retire our debt, paid back primary debt and bonds three months ago.”
“Selling to one institutional investor would have made the price difference not worthwhile. Going forward, I’d probably negotiate a better land price and probably pre-sell it to an institution.”