NZ's first large-scale build-to-rent development

[donna]

Just got this in my inbox today.....

Kia ora Donna,

Today, Kiwi Property announced its plans to build Aotearoa’s first large-scale build-to-rent development - a 295-unit complex at Sylvia Park, Auckland.

Specifically designed for long-term tenancy, BTR is set to change what it means to rent here in New Zealand – offering residents the flexibility and convenience of renting, coupled with the security of tenure usually associated with home ownership.

With the median house price in Auckland now around $1.2million, BTR has the potential to help ease the housing crisis, with the site in Sylvia Park able to accommodate around 600 apartments.

For more information please refer to the media release attached /below, along with a video that can be downloaded here. A selection of images is also available here.

If you would like any further information, or would like to speak with Clive MacKenzie, Kiwi Property Chief Executive, for an interview later this week please let me know.

Kiwi Property delivers new way of living, with New Zealand’s first major build-to-rent housing development

September 2021 | In a move that will offer a new way of living and help ease New Zealand’s housing shortage, Kiwi Property today announced plans to build the country’s first large-scale build-to-rent development.

Located at Sylvia Park, Auckland, the 295-unit apartment complex is set to change what it means to rent in New Zealand. Construction of the $221 million development is scheduled to begin later this year, offering a mix of studio, one, two and three-bedroom apartments that are built for sustainable living.

Build-to-rent properties are owned and managed by an institutional landlord – Kiwi Property in this case – and are specifically designed for long term tenancy. The model offers residents the flexibility and convenience of renting, coupled with the security of tenure usually associated with home ownership.

This means that in addition to a raft of facilities and services such as a private gym, co-working spaces, rooftop terrace and on-site maintenance, residents are welcome to have pets, hang pictures, or add their own personal touch to the colour scheme.

Kiwi Property chief executive, Clive Mackenzie, says build-to-rent also has the potential to help alleviate New Zealand’s significant housing shortfall.

“It’s never been tougher or more expensive for Kiwis to get on the property ladder. The median Auckland price is now around $1.2 million and as a result, it now takes the average first home buyer 14 years to save a house deposit.

“Today, more than half of Aucklanders over the age of 15 are living in rental accommodation. Our aim is to make that experience as good as, if not better, than owning your own home. Kiwi Property’s build-to-rent developments will feature quality amenities, a range of resident services and specially curated events, all designed to promote a vibrant community. We’re creating a new way of living that’s custom designed for the modern Kiwi lifestyle.”

Today’s announcement signals the start of an exciting build-to-rent journey for Kiwi Property, with additional developments expected to follow over time. Approximately 1,200 apartments could potentially be built across Sylvia Park in the medium term, transforming the location into a major residential hub. Resource consent is also being sought for a 245-unit build-to-rent tower at Auckland’s LynnMall, with the potential for the site to one day accommodate more than 600 apartments.

“This is a pivotal moment in Kiwi Property’s history, as we take a major step forward in the delivery of our mixed-use strategy. Build-to-rent is set to become a significant part of our portfolio, helping to diversify our asset base and unlock growth. Today’s announcement signals an important strategic shift for the company and demonstrates our commitment to delivery, for our shareholders, our community and the residents who will soon call Sylvia Park home,” Mackenzie says.


--ENDS--

Is this the first of many such developments to come?

Kiwi Property must also be confident they'll get resource consent for the first 245 unit tower at LynnMall (again there's room for up to 600 units here). So all up 1800 units.

regards,

Donna

[Hound]

Interesting. I know a guy who is involved in managing Body Corporates in some new Auckland apartment buildings. Problems can arise when "The Ministry" or some other Govt department leases a few floors. The quality and prospects of a new investment can start to go downhill pretty quickly. I'd first want to know what Kiwi properties intentions are about such situations, or if they remain exclusive managers.

[donna]

Hard to say right now but I wonder what the yield would be. For shareholder returns wouldn't this BTR be filled with professional tenants - for max rental income?

cheers,

Donna

[Perry]

I do wonder about this.The demographic aspect. The societal / cultural changes perhaps implied? I.e. Gone shall be the days of 'owning' a piece of the half-gallon, quarter-acre, pavlova paradise.

[flyernzl]

Build-to-Rent proposals are being promoted as the solution to the lack of rental housing at the very same time as private investors are being forcefully expelled from the market.

However, I can see many problems with these proposals. The bottom line is that residential landlording in New Zealand, despite popular belief, is and remains a low-return high-workload activity. Over many years I have seen a number of corporates grow enthusiastic about the idea of building a large portfolio of rentals, but then they have faded quietly away once the harsh light of economic reality sets in.

As residential landlords, these Build-to-Rent entities will always be subject to the restrictions of the Residential Tenancies Act. It is all very well for New Ground Capital to state that “tenants are given a seven year lease” but they haven’t, really. What they have actually been given is a RTA-mandated fixed term tenancy where, under recently introduced legislation, the tenant can extend indefinitely if they choose to do so and with the property owner having absolutely no say in the matter. Residential tenancies are not commercial tenancies and very different rules apply.

Sure, the concept works in some overseas jurisdictions where the laws and customs around renting are quite different from those in place here. Transferring this concept into New Zealand, how will these property ownership companies feel about:
- tenants being able to freely damage the property, and then have no responsibility for the resultant, often substantial, repair costs as long as the tenants claim that the damage was 'accidental';
- handling the risk of the few tenants who, by become socially disruptive and obnoxious, proceed to drive out many good tenants but themselves being almost impossible to expel from their own tenancy;
- being obligated to act as an unwilling guarantor and unpaid debt collector for Watercare;
- being bound to keep housing their tenants until the expiry of any fixed-term tenancy and beyond, but the tenant in reality being able to leave at any time they wish;
- being legally barred from imposing any financial penalty for unpaid rent;
- having to give a tenant the exclusive possession and occupation of a property worth many hundreds of thousands of dollars but only being able to legally extract a security bond of a maximum of four weeks rent – probably somewhere around 0.003% of the property value?

These companies are already asking for changes around the taxation system to suit their own business model, and it would appear highly likely that this will be followed by requests for changes to the Residential Tenancies Act once the full impact of the current restrictions sink in. If these changes are then applied to all residential landlords then this could possibly be beneficial to our industry as a whole, but I can see the danger that, once again, these changes would be set to benefit only the big boys while citizens who own just one or two rentals will be left out in the cold.

The reality is that these ownership companies will only enter and remain in the market if they can make and continue to make a profit. They will need to set their rents at a level to allow for the cost of professional management and administration, trade costs on all maintenance, and still have enough left over for a dividend for the shareholders. Thus by necessity their rents will either be well above current levels or there will be demands for the substantial taxpayer subsidies that will be required to make the project fly.

So once again the dreamers and the schemers in the halls of power seem to be courting the fantasy of Build-to-Rent while at the same time ignoring any advice from those of us out there in the real world, those of us who have survived for years in the heat and dust of the market, those of us who already own around 540,000 homes housing some one and a half million of our fellow citizens. We could be the solution to the problem but are never asked. We are at best ignored and at worst abused, oppressed and blamed.

[Sanya]

Hard to say right now but I wonder what the yield would be. For shareholder returns wouldn't this BTR be filled with professional tenants - for max rental income?

cheers,

Donna

I saw a recent article (see https://www.qv.co.nz/news/kiwi-prope...tial-landlord/) that suggested the net yield for this development would be 4.5% and that does not include any allowance for the value of the land on which they are being built as they own the land already.

This yield is significantly lower than their yields on shopping mall complexes which the above article cites are 5.5 - 6.6%.

The reason for the pivot?

1. Kiwi Property expects rental growth on residential properties to outstrip rental growth on commercial properties over the next few years, making residential a more attractive option down the line.

2. Auckland residential rental and housing shortage.

3. Building large scale residential complexes on sites where they own shopping malls potentially increases foot traffic and by extension revenue for the malls.

4. Diversification of revenue streams. Foot traffic is down at shopping malls.

5. Possible Government subsidy(s) or incentives for the project.

[Hound]

Late, large, unwieldly and cumbersome. I get where Kiwi Property are coming from, but to me it's a ten foot pole investment.

[flyernzl]

5. Possible Government subsidy(s) or incentives for the project.

Possible taxpayer subsidy(s) or incentives for the project.

[Sanya]

Possible taxpayer subsidy(s) or incentives for the project.

Yes. Don't be surprised to find some form of taxpayer funded subsidy for private developers in the near future. Perhaps along the lines of the subsidies the Gov. applies to their own social housing programs. The Government is desperate to scale new house builds.

Don't expect such subsidies to be made available to “those of us who have survived for years in the heat and dust of the market.”

[Engineer]

Often wondered if we should join forces with other investors and build something like this. The appartments at SP are pretty small, but overall a fantastic money making machine.

[artemis]

Build-to-Rent proposals are being promoted as the solution to the lack of rental housing at the very same time as private investors are being forcefully expelled from the market.

However, I can see many problems with these proposals. ......

Excellent post, and on the money IMO.

I would add - apparently there are more properties consented than in NZ history with many being medium to high density and targeted at investors. Building cost increases and other costs lead to higher rents and if the supply of very good tenants who want to live in such close proximity falls investors will do the sums and walk. Already issues with Auckland apartment vacancies.

If investors, including but not only rent-to-buy, need to drop tenant standards to fill apartments that becomes a vicious cycle of high management, high maintenance and high turnover. Add leasing of some for social or transitional housing and it quickly becomes worse. And worse.

Social / transitional housing is where the housing crisis now is and the government is panicking. Transitional housing places up 180% in the last 4 years for example. Many of these households are not desirable tenants.

Bottom line, no way will I be investing in BtR companies.

[Perry]

Social / transitional housing is where the housing crisis now is and the government is panicking. Transitional housing places up 180% in the last 4 years for example. Many of these households are not desirable tenants.

I recall moteliers being unrepentant about charging twice the normal rate and unabashed about giving the reason.

Housing the un-housable. (The 'entitlement' generation.)

I wonder how many of those on the waiting list are capable home / house-managers and how many are simply beyond it - for whatever reason?