Kiwi Property Group has given a green light to a $223-million expansion of Auckland's Sylvia Park shopping centre that it says will see the site's value jump to $1.1 billion.
Sylvia Park mall
Source: 1 NEWS
The planned expansion, which will kick off in March and is expected to be completed by mid-2020, will add approximately 60 new retailers, 18,000 square metres of retail space, and a new multi-deck carpark, with about 900 car parks, the company said today.
Upon completion, the centre will have 90,000 square meters of retail space and around 5000 car parks, it said.
The project will be debt funded from existing facilities and is expected to provide an initial net incremental income yield on capital expenditure of 5.7 per cent, growing to 6.2 per cent by year three and an incremental internal rate of return in excess of 10 per cent, it said.
Chief executive Chris Gudgeon says construction cost certainty had been secured by working through an early contractor involvement process with its builder, Naylor Love.
"By working collaboratively through critical design, planning and programming elements we have been able to negotiate a fixed price lump sum contract," he said.
In addition to the expansion project, other general remedial works costing approximately $11m will be carried out.
Kiwi Property's focus on cost certainty comes during a period of rising construction costs, which caught out Fletcher Building with the country's biggest construction firm facing losses of $952m in its Buildings + Interiors division from blowouts in several major construction projects.
The projected value of Sylvia Park on completion has been assessed by independent valuer CBRE at $1.12b. Its projected March 2018 valuation is $835m.
There are currently more than 200 retailers in the centre.
The stock recently traded at $1.33 and is down 6.6 per cent over the past 12 months.