DNZ Property Fund Ltd said yesterday it planned to develop a further 7000m² of retail, dining & office space on land opposite its $155 million Westgate Mall development, in a project known as Westgate stage 2, but added that its right to develop the site is disputed.
Chief executive Peter Alexander said: “Westgate stage 2 will be a purpose-built mainstreet retail environment, opposite the Westgate Mall & surrounding the town square. Westgate stage 2 is also located adjacent to Auckland Council’s multi-purpose library & community facility, which is planned for completion in 2016.
“Westgate stage 2 will be a complementary offer to our Westgate Mall development. It will provide greater critical mass, increased visitation and a broader range of categories for our customers, delivering higher total retail sales at Westgate.
“Additionally, the Westgate stage 2 project enables DNZ to curate the retail offer around the town square and provide further dining options, which are an important part of a comprehensive retail offer.”
Mr Alexander said the momentum & market knowledge DNZ had gained through leasing its Westgate Mall would help it to complete Westgate stage 2: “Our Westgate Mall project is over 80% leased by budgeted income, which reflects the strong confidence retailers have in the location & offer.”
He said DNZ had a right to undertake Westgate stage 2 as part of its original agreement to acquire the Westgate Mall land from Westgate Town Centre Ltd (an NZ Retail Property Group Ltd company, director Mark Gunton) in 2013.
Under that agreement, he said:
- DNZ can request the grant of an initial 35-year ground lease from landowner Westgate Town Centre Ltd at no cost and there is no annual ground rental payable
- Westgate Town Centre Ltd can acquire the development within 3 years of DNZ taking the ground lease, at a price equal to 115% of DNZ’s total development cost, including holding costs
- If Westgate Town Centre Ltd does not acquire the development within the 3-year period, DNZ can obtain freehold title to the land at no cost.
“Westgate Town Centre Ltd has indicated that it disputes that DNZ is entitled to exercise this right to undertake the Westgate stage 2 development under the agreement. DNZ believes the terms of the agreement are clear and does not agree that there is any matter capable of dispute. It may, however, need to take steps in order to enforce its rights in respect of Westgate stage 2 under the agreement.
“The Westgate stage 2 project is at a preliminary planning phase. It is expected to cost about $30 million and provide a minimum initial yield of over 7%. The exact timing of the project is yet to be finalised, but completion is anticipated before October 2016. DNZ will fund the development through the sale of non-core assets.
“The addition of Westgate stage 2 will increase the net lettable area of DNZ’s combined investment at Westgate to 34,000m².”
Attribution: Company release.