NZX-listed landlord Precinct Properties plans to bring global hotel brand InterContinental to Auckland in a $298 million expansion of its now-$1 billion Commercial Bay city's waterfront project.

Precinct chief executive Scott Pritchard and InterContinental Hotel Group Australasian senior development director Abhijay Sandilya have just jointly announced the unexpected deal this morning for 1 Queen St, the site of an existing office building facing Quay St opposite the ferry terminal.

Plans for Commercial Bay with the revamped HSBC Building as One Queen behind the ferry terminal.
Plans for Commercial Bay with the revamped HSBC Building as One Queen behind the ferry terminal.

That 19-level HSBC block will be retained, its facade removed and replaced, all fittings stripped back to the bare structure, then revamped in a design by Warren and Mahoney converting it into a hotel/office block.

Commercial Bay was previously announced at more than $850m but today Precinct referred to it for the first time as a $1b scheme.

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LT McGuinness has won the main contract to develop the new hotel within the lower levels of the existing structure and the top seven levels will be a refurbished 8700sq metre office area. Pritchard said 75 per cent of that office space was pre-committed with a signed heads of agreement for 3700sq m.

The hotel would have 244 rooms, a meeting room suite, club lounge, gym, restaurants and bars, he said, with an outdoor, open rooftop hospitality venue which will be open to the public, spanning around 500sq m. An operator is yet to be chosen.

"The 244 rooms will be a presidential suite and a number of king suites, all with remarkable views," Pritchard said of changes for the building developed by AMP and which was former Air New Zealand offices.

"We've owned the building for five or six years and we recognised when we bought it that it had amazing redevelopment potential," Pritchard said.

"We think, looking at the market right now, there's a significant shortage of rooms. The Ministry of Business, Innovation and Employment has said we need another 4000 rooms.

"There's a lot of positive trends for Auckland and a 244-room luxury-brand hotel, fully integrated into Commercial Bay, is a unique opportunity. There's nowhere in New Zealand so far where a hotel has been fully integrated into a commercial and retail centre, where you can walk out the front door on to the waterfront or on to Queen St. You do see examples of this in places like Hong Kong where hotels are fully integrated into retail centres, but nothing like this here," he said.

Plans for Commercial Bay and One Queen (centre) with Quay St to the right.
Plans for Commercial Bay and One Queen (centre) with Quay St to the right.

Up to 12,000 people would work on Precinct's four towers on two blocks once Commercial Bay was finished, he said: the new PwC Tower rising in Commercial Bay, the existing PwC Tower on Quay St, to be re-named HSBC Tower, the existing Zurich House on the Customs St/Queen St corner and AMP centre on the Lower Albert St/Fanshawe St corner.

Precinct had signed a 15-year management agreement with InterContinental, Pritchard said. Construction is planned to start early 2020, hamstrung by Commercial Bay "because we have nowhere to relocate our existing HSBC tenants to until we finish PwC Tower".

Completion is due in 2022. HSBC has around 1200 officer workers or tenants, including HSBC, the NZ Transport Agency and lawyers McVeagh Fleming.

Money for One Queen was coming from Precinct's sale of a half stake in the ANZ Centre on Albert St and Pritchard said gearing would stand at 34 per cent, well within banking covenant arrangements.