NZX-listed property company adds five-building Wynyard Quarter development to Downtown tower project.
Precinct Properties is planning a $200 million five-building Wynyard Quarter campus as well as the $300 million 32-level Downtown tower.
Chief executive Scott Pritchard said plans for the Innovation Precinct on a 1.1ha Wynyard block bounded by Halsey St and Beaumont St were to build 46,000sq m of commercial space. At around $200 million, it would be a significant investment for the NZX-listed business.
Most of the block would be devoted to the development but part of it would be for residential development, he said.
Development of the innovation project would be staged but large floor plates were planned on the leasehold site where Pritchard said lease payments for about a century would be made in advance to remove that uncertainty from the investment.
The Wynyard Quarter project would widen the company's tenant base, he said, and the buildings were designed by Warren and Mahoney's Blair Johnston, working with Andrew Barclay and John Coop.
But Forsyth Barr senior equity analyst Jeremy Simpson raised issues with the Innovation Precinct, saying the company was swerving into new territory, away from its core investment philosophy and could be shooting itself in the foot.
"While we can see the rationale for Precinct being involved - especially as this was going to happen regardless of whether Precinct was involved - it is a move away from its specialist CBD office focus which is what we like about the company.
"This development, plus further development adjacent to Goodman Property Trust's Fonterra new-build, will have an impact on diluting the demand for pure CBD property and could limit the extent of the cyclical upswing in demand and rents," Simpson said.
But Precinct still remains one of Simpson's most preferred NZX-listed property businesses.
Pritchard gave more details about the biggest scheme. The company will demolish the Downtown Centre straddling Albert St, Customs St and Queen Elizabeth II Square by 2016 at the earliest, then dig down four to six levels for carparking and the new Central Rail Link.
"To do the CRL, you'll need to remove Downtown. The tunnel is going to sit at levels two to three below ground. We could dig down further but it depends on parking levels," he said.
Precinct already owned 750 carparks in the area including 450 in its neighbouring PwC Tower and 120 beneath HSBC Tower at 1 Queen St.
"The question is whether we need 200 carparks or 400. It might be that we put some carparks in the structure above ground."
Westfield NZ, which sold the site to Precinct, initially applied to develop the tower and Pritchard said Precinct's scheme was different, designed by Warren and Mahoney, Woods Bagot and James Lord's Surface Design in the US.
"The building looks much better. The work we're doing is more focused on what goes where and dealing with the constraints of the site. It's an island so it doesn't have any back to it. You can't hide any of it anywhere," he said of its street exposure.
"It's quite a lot bigger than HSBC so dealing with the constraints are how you service it, where you enter carparks, how people flow through the site. We will be putting a lot more retail in. We'll probably double what's there," Pritchard said.
"We have had conversations with tenants. Master planning will finishin three to four months and wewill have a concept design thatwe are happy with and we maylook to engage other occupiers."
Precinct's half-year result briefing said a pre-commitment of about 50 per cent of the tower would be sought, balancing risk against value maximisation.
Pritchard said the company would initially raise capital for its two big new projects by selling buildings in its portfolio for more than $200 million, beginning in the next few months.
"We want to recycle assets and use the proceeds," he said, adding that the company was enjoying particularly good times and he had no qualms about the $500 million of development work.
Only about 600sq m of the company's 150,000sq m is vacant.
"It's tiny. It's remarkable. When I started, we had 30,000sq m vacant, Zurich [House] was empty."
CBD growth fuels plans
* Auckland CBD workers rose from 60,000 to 70,000 in the past three years.
* * Precinct Properties' portfolio occupancy close to 100 per cent.
* Extra 20,000 Auckland CBD workers forecast in the next eight years.
* $500 million Auckland waterfront plans by Precinct Properties.
* $300 million Downtown Centre and $200m Innovation Precinct.