Shot in the arm for Sylvia Park

ANNE GIBSON looks into a corporate manoeuvre that gives Australians an even bigger share of our real estate scene.

The $500 million development of Sylvia Park in Auckland came a step closer on Valentine's Day when a giant Australian funds management firm announced it had bought into part of the Kiwi property conglomerate.

Colonial First State Property bought Kiwi Income Properties, the management company of the listed Kiwi Income Property Trust, substituting itself for Lend Lease, another Australian-based property conglomerate.

At the same time it bought out two Kiwi bosses - joint managing directors Richard Didsbury and Ross Green - along with Canadian interests.

The sweethearts at Colonial and Kiwi seem delighted with each other. One has a large piece of land but little spare cash, while the other has the money and pulling power to get lots more.

But the deal is yet another takeover by Australians of the property business here, with big players like AMP and Westfield now dominant forces in New Zealand.

The change of ownership of Kiwi's management business seems to signal good news for the largest redevelopment planned in New Zealand and the creation of a new town centre.

Kiwi wants to build a large shopping/leisure/office/housing project on its Mt Wellington site, which is alongside the Southern Motorway and strewn with Second World War storage sheds.

With $A13 billion ($16 billion) worth of property under Colonial's management, the firm, with headquarters in Sydney, has more than enough financial clout to reduce Kiwi's potential exposure to a large development such as Sylvia Park and structure the deal in a way that benefits everyone.

Kiwi has been working on Sylvia Park for years and although it won an Environment Court case late last year which allowed it to go ahead, its joint managing director, Richard Didsbury, has been silent since.

The reason, he says, is because he has been busy working on a master plan with the Los Angeles branch of award-winning American architecture, design and planning practice Gensler.

He hopes to unveil the broad concept in the next few weeks. He won't be tied to any definite time frame but predicts a distinctive New Zealand look to the project.

Local architect Noel Lane is in the front running for the work. Mr Lane won an award for designing the Didsburys' house at Brick Bay, north of Auckland, and designed the lobby of Kiwi's 41-level Royal & SunAlliance tower, the tallest office block in New Zealand.

In December the Environment Court ruled against Kiwi's rivals, turning down appeals by two shopping mall owners, Westfield and Two Double Five Broadway, who had argued against the Auckland City Council's decision of March 9, 2000, to approve a rezoning of the 21ha Sylvia Park site.

Now, with Colonial's involvement, Kiwi has the ability to move on Sylvia Park and the riddle of how it will be financed looks as if it has been solved.

"Kiwi might not be able to do a project like this on its own," says Geoff McWilliam, general manager of Colonial First State Property. "The biggest change for Kiwi will be an increased financial capacity."

And Mr Didsbury says: "It's too big for Kiwi's balance sheet, but Kiwi would like to have a significant shareholder in tow, so if there are Australian investors these guys can bring to the table, it's a good outcome."

So where will the $500 million that is needed come from?

Neither will say right now, except that Mr McWilliam expects Colonial will be able to bring some large Australian institutional power in on the deal.

As for the first deal between the two, Colonial has scored a secure means of ongoing income from Kiwi. Kiwi Income Property Trust's annual report for last year lists as an associated party transaction the payment of $5.9 million to the management company, Kiwi Income Properties Ltd.

This was up on the $5.4 million it paid the previous year.

It was the close association between Kiwi Income Property Trust and Kiwi Income Properties Ltd that raised some eyebrows in the past.

Mr Green and Mr Didsbury were taking money from the trust to effectively pay themselves, along with other owners of the management company.

Mr Didsbury justifies an annual payment of $5.9 million by saying that the management company has 38 staff, not including shopping centre managers at various Kiwi malls such as Northlands in Christchurch and Centre Place in Hamilton.

Now the issue has gone away, with Colonial buying the management company and Mr Green and Mr Didsbury stepping back to concentrate solely on the trust, although Mr McWilliam says the management company will retain the two men.

Colonial has fingers in two other local listed property trusts - Colonial First State Property Trust, run by Lloyd Cundy, and the management of the Newmarket Property Trust, run by David Keys.

New Zealand's former Property Council chief, John Dakin, now based in Sydney as manager business development for Colonial First State Property, is working closely on the Kiwi deal.

He admitted to a strong sense of deja vu as he strode up the steps of the Ferry Building on Auckland's waterfront to Kiwi's offices and says he expects to be back more often now that Colonial has stronger ties here.

Colonial First State Property

Gensler