DNZ Property Fund Ltd has started construction of its $155 million Westgate shopping centre.
The mall will have about 90 specialty stores, a Farmers department store and a Countdown supermarket, and is scheduled to open in October 2015.
Chief executive Peter Alexander said yesterday DNZ had exceeded its pre-leasing target of over 40%, including the 2 majors. It’s appointed The Fletcher Construction Co Ltd to build the centre, which has been designed by Buchan Group.
Mr Alexander said the value on completion was estimated at $160 million, which represented a yield on cost of about 7.75%, assuming the centre opens fully leased.
The mall is in the new 56ha Westgate regional town centre at the top of the North-western Motorway, which is being extended as part of a strategy to transform the whole North-west.
Mr Alexander said the large existing catchment was one of the least developed in terms of retail facilities.
The mall will complement Auckland Council’s $325 million investment in the North-west transformation project.
DNZ will fund its project from current bank facilities: “The company does not anticipate raising equity to fund the project, following potential divestment activity of non-core assets undertaken over the duration of the project.
“The company’s loan:value ratio is not expected to exceed 40% during the project, allowing for potential divestment activity. It is anticipated that the dividends during the development phase will at least be maintained at the current level of 9c/share.”
DNZ’s investment strategy has, as a general guiding principle, an intention not to have more than 15% of the value of its property portfolio, as measured by aggregate completion cost, held as investment properties under development at any one time. This measure is forecast to peak at under 25% during execution of the Westgate project.
DNZ chairman Tim Storey said: “Westgate provides the opportunity to enhance the age, quality & growth orientation of the DNZ portfolio. This, combined with the experience & capability of the company’s management team, a fixe-price construction contract and pre-leasing already achieved, has given the board confidence to approve an exception to the guideline.”
Attribution: Company release.