DNZ gets underway with Westgate Regional Mall

DNZ Property Fund Limited ("DNZ") has confirmed construction of its new enclosed shopping centre ("Mall") at Westgate has started. The mall, which is scheduled to open in October 2015, is part of a new regional town centre at Westgate ("Westgate Town Centre") and a strategy to transform the whole North West area. The Mall will feature around 90 specialty stores, a Farmers department store and Countdown supermarket.

"This is a much needed modern, high quality retail facility for the local community." says DNZ Property Fund’s Chief Executive, Peter Alexander. "The large existing catchment is one of the least developed in terms of retail facilities1. The new Mall, together with the surrounding facilities, will serve not only the existing community but also an incredibly fast growing part of Auckland."

"We have exceeded our pre-leasing target, allowing us to commence the development with confidence." adds Mr Alexander. "We have built a great team with extensive experience of delivering prominent and successful retail projects in New Zealand and internationally. We expect this to be a top quality growth asset and a solid investment opportunity for DNZ and its shareholders."

Farmers owner David Norman says "The DNZ Westgate project presents a significant opportunity for Farmers to open a flagship store. Our proposed footprint of 8,000m2 will be one of the largest in our Group and demonstrates our confidence in Westgate as a retailing location."

Countdown’s General Manager Property, Adrian Walker, says the supermarket company is pleased to be working with DNZ to bring a new Countdown store to Auckland’s North West. "It’s great to be part of this vibrant retail environment. We see real value in supporting the new development and providing a modern store with an expanded product range that will really compliment this growing community."

Located adjacent to the North Western Motorway and the newly completed upper Harbour Motorway, the Westgate Town Centre (of which the Mall will form part) will also feature an extensive network of parks and walkways and include areas for outdoor dining and the large civic space will be pedestrian friendly. The Council is partnering with the private sector to create the centre’s civic heart, including a state-of-the-art new library and a town square as well as a skate park.

The Mall will complement Auckland Council’s $325 million investment in the North West Transformation Project that the 56 hectare Westgate Town Centre forms part of.

"This Mall and the exciting new town centre will be an important hub for high quality retail and commercial activity and the development incorporates excellent new community facilities which will not only benefit the people of the north west but people all over the Auckland region - and that’s incredibly exciting for the north west and indeed the region." says Deputy Mayor Penny Hulse.

"The Council’s collaboration with the NZ Retail Property Group to create this new town centre for Auckland, has underpinned the achievement of this milestone for DNZ and I am delighted the Mall development is now underway."

The total development cost of the Mall is just over $155 million, including land at cost, with the value on completion estimated at $160 million. This represents a yield on cost of circa 7.75 per cent, assuming the centre opens fully leased. The initial pre-leasing target of over 40%, including the two majors, has been exceeded.

The project will be funded from DNZ’s current bank facilities. The Company does not anticipate raising equity to fund the project following potential divestment activity of non-core assets undertaken over the duration of the project. The Company’s loan to value ratio is not expected to exceed 40% during the project, allowing for potential divestment activity. It is anticipated that the dividends during the development phase will at least be maintained at the current level of 9.0 cents per share.

DNZ’s investment strategy has, as a general guiding principle, an intention not to have more than 15 per cent of the value of its property portfolio, as measured by aggregate completion cost, held as investment properties under development, at any one time. This measure is forecast to peak at under 25 per cent during execution of the Westgate project.

DNZ Chairman, Tim Storey, said "Westgate provides the opportunity to enhance the age, quality and growth orientation of the DNZ portfolio. This, combined with the experience and capability of the Company’s management team, a fixed price construction contract and pre-leasing already achieved, has given the Board confidence to approve an exception to the guideline."

[1] Source MacroPlan Dimasi