KiwiRail has defended an almost threefold Onehunga ground rent hike, saying it must take a commercial approach to its massive land holdings.

Gordon Munro, the state-owned enterprise's property revenue manager, said the rent rise on an Alfred St property was part of a wider change across the real estate portfolio.

Harley Haynes and Brent Hubbard of Oceanic Palms went on TV3's Story this week, complaining of rent rocketing from $37,000/year to $100,000/year for the property where they live and sell palms from.

But Munro indicated his organisation had commercial imperatives to obey.

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"KiwiRail is in the process of reviewing its existing property leases and identifying sub-market rates, as part of a wider commercial review of its property portfolio. This approach will result in some changes to businesses and organisations who are already using our land.

"This is particularly the case in the Auckland region, where everyone is aware of rocketing land values and there has been no rent increase for some tenants for several years. KiwiRail is adopting an open and proactive approach to ensure tenants are aware of the changes.

"We believe we have balanced fairness to our tenants with fairness to taxpayers who are putting money in to KiwiRail every year. They are entitled to expect us to set a market price on our commercial tenancies. We understand our tenants' disappointment but our rents are established using professional external valuations. Additionally, for KiwiRail to be a good landlord, it is important for us to ensure that our tenants meet their contractual obligations and meet legislative requirements — we are satisfied that we have acted fairly and appropriately," Munro said.

Haynes and Hubbard complained.

"We have been sub-tenants and tenants of Kiwirail in Onehunga since 2000. The land we occupy had been vacant for decades and we had to do a huge amount of work to make it usable. KiwiRail has thousands of tenancies all over New Zealand. There would doubtless be dozens if not hundreds of tenants similarly affected," they complained.

But Munro said his organisation had to act commercially.

"We can confirm we have been in discussion with Oceanic Palm regarding their lease agreement. KiwiRail is a state owned enterprise and is required to act in a commercial manner and we are working to strengthen our financial performance. KiwiRail manages more than 18,000 hectares of land.

"Improving the management of our property and adopting a more commercial approach, particularly with those parties undertaking commercial activity on leased land, is one of several strategies we are using to achieve a more financially sustainable enterprise. That includes making better use of the land that the company owns outside the rail corridor. This may mean selling surplus land where that is appropriate, increasing rents to market levels, and leasing land for transport hubs adjacent to rail yards," Munro said.

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Walking the line

• KiwiRail owns 18,000ha of NZ land
• Reviewing existing property leases
• In Onehunga, rent shoots up nearly threefold
• Tenants there cry 'unfair'


See the Alfred Street property here: