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Speaker 1: I think you'll see in the next twenty years that

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Speaker 1: Sylvia Park will be a satellite city of Auckland. We

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Speaker 1: started talking to our care probably five years before they opened.

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Speaker 1: They had been looking in the news in the market

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Speaker 1: for many many years but couldn't find the right location.

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Speaker 2: Is the more dead like, what is the future of retail.

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Speaker 1: It's really a survival of the fittest and survival of

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Speaker 1: the strongest, and we want to be in those fortress

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Speaker 1: type locations.

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Speaker 2: Hi, and welcome to Shared Lunch brought to you by Shares.

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Speaker 2: My name is Susanna Battley and I'm at Sylvia Park

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Speaker 2: here in Auckland. You get such a sense of the

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Speaker 2: scale being here. We've got retail shops, there's restaurants, there's

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Speaker 2: apartments and now there's even a ka. Shortly i'll be

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Speaker 2: sitting down with Clive McKenzie, CEO of Q Property Group,

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Speaker 2: where we'll be talking about what it means to be

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Speaker 2: in retail in an increasingly e commerce world.

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Speaker 3: Investing involves the risk you might lose the money you

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Speaker 3: start with. We recommend talking to a licensed financial advisor.

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Speaker 3: We also recommend reading product disclosure documents before decided to invest.

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Speaker 3: Everything you're about to see and here is current at

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Speaker 3: the time of recording.

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Speaker 2: Thanks so much, Clive for taking the time to show

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Speaker 2: us a bit more of an asset like this one.

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Speaker 2: I'm so great for our investors to be able to

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Speaker 2: see behind the scenes.

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Speaker 1: Fantastic. Well, we're looking forward to showing you around today.

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Speaker 2: Can you tell us a bit about this space.

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Speaker 1: So this is the Cone as we like to call it,

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Speaker 1: and so it's got this is really the heart of

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Speaker 1: Sylvia Park. So we've got the cinemas up behind us, Yeah,

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Speaker 1: the Woyds Cinemas. We've got the one and only Culture

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Speaker 1: Kings right behind you here which is a great retailer,

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Speaker 1: international retailer. You can see our first office building games Rahunga,

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Speaker 1: and then below we've also got our dining lane that's

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Speaker 1: got rest of great restaurant offer going through to another

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Speaker 1: office building just over there as well, and then down

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Speaker 1: as way we've got our pack and Sage supermarket. So

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Speaker 1: it's a sort of focal point if we do a

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Speaker 1: lot of promotions in this location. It's just and on

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Speaker 1: ours life today. Get a bit of fun chine as well.

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Speaker 2: What a beautiful, eerie light spaces is.

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Speaker 1: We've got over to two hundred stores here. And when

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Speaker 1: we do this development, we wanted to create space that

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Speaker 1: people could hang out and enjoy, and we put in

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Speaker 1: a few elements of surprise and de lightin. We've used

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Speaker 1: local artists and ready want to celebrate some of their work.

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Speaker 2: What does it take to maintain a space like this

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Speaker 2: just given the sheer size of it.

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Speaker 1: We've got a significant team on the ground here and

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Speaker 1: they do an absolutely phenomenal job. If you think we've

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Speaker 1: got over sixteen million people that visit this asset every year,

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Speaker 1: that's a lot of people that need to be looked

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Speaker 1: after and making sure that everything looks prestine for the

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Speaker 1: next visit.

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Speaker 2: And now we're on the footbridge that connects Sylvia Park too.

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Speaker 2: I care.

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Speaker 1: It's fantastic and our customers are loving it. We've had

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Speaker 1: almost tur hundred thousand people across this footbridge since it

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Speaker 1: opened in December. Just over there is also the train station,

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Speaker 1: so it's easy access for people either to come into

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Speaker 1: the center, catch a train or visit.

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Speaker 2: Ikre so great to be here and be on site

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Speaker 2: at a place like Sylvia Park where you get a

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Speaker 2: real sense of the company. Q Property Group is listed

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Speaker 2: on the Intertex and there are other listed property funds

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Speaker 2: as well. Could you talk us through what is a

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Speaker 2: listed property fund and then perhaps why Kiwi Property Group

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Speaker 2: is different to the others.

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Speaker 1: We've got about three billion dollars worth of assets on

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Speaker 1: the New Zealand. Stock has change and historically our asset

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Speaker 1: portfolio has been on traditional shopping centers and office portfolio

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Speaker 1: and more recently we sort of have pivoting our portfolio

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Speaker 1: to really focus on those key retail destinations and we

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Speaker 1: think that's an area where we can get the best

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Speaker 1: growth for our shoulders.

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Speaker 2: Yeah, it's interesting talking about that sort of multi use

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Speaker 2: or mixed use metropolitan areas rather than say just a mall.

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Speaker 2: Is the more dead like what is the future of retail?

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Speaker 1: And this is true for all property sectors, to be honest.

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Speaker 1: There's a move towards the best in class assets and

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Speaker 1: the best in class locations and that's happening globally and

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Speaker 1: that's true for retail. And I think what you're seeing

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Speaker 1: here at Sylvia Park, for example, is we've a fantastic site.

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Speaker 1: We've got over thirty hectares of land, it's got great

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Speaker 1: transport connections and there's an opportunity to have so much

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Speaker 1: more than just a traditional shopping center. So we've lent

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Speaker 1: into residential. We've got office buildings, we've got medical, and

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Speaker 1: we've got entertainment. We've got all these uses around here,

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Speaker 1: which just acts as a giant magnet for the consumer

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Speaker 1: to come and enjoy the place and hopefully spend some dollars,

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Speaker 1: which helps our retailers thrive and be successful.

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Speaker 2: There's been quite an evolution in the company of the

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Speaker 2: last well, what's Q Property Group over thirty years old? Now,

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Speaker 2: for an investor that is new to Q Property Group,

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Speaker 2: can you talk us through how Q Property is different

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Speaker 2: to say, fifteen years ago, talk us through that evolution.

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Speaker 2: There's obviously been more consolidation, maybe bigger and fewer assets,

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Speaker 2: and any decisions around how you really decide to focus

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Speaker 2: on particular assets and then which ones to sell.

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Speaker 1: Going back to the original philosophy, it was owning those

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Speaker 1: shopping centers across New Zealand or so it's a geographic

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Speaker 1: spread across New Zealand as well as office buildings as

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Speaker 1: well in key sort of cities. You can't be everything

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Speaker 1: to everybody, and we were really wanted to focus on

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Speaker 1: those high growth areas which is predominantly the Golden Triangle

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Speaker 1: of Auckland, Hamilton, Tarrona. But also we only wanted to

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Speaker 1: own the very best assets in those locations. So we've

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Speaker 1: made a concerted effort to actually realign our portfolio and

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Speaker 1: we've had a couple of asset sales at the end

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Speaker 1: of last year we had the Plaza in Palmersan North

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Speaker 1: and more recently asb here and when you're quarter they're

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Speaker 1: good assets, but they mature in their life cycle and

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Speaker 1: we want to be really putting our money where we

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Speaker 1: can see growth opportunities to drive our shoulder returns.

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Speaker 2: And that move towards maybe a more focused portfolio clearly

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Speaker 2: a lot of benefits to that. How does that play

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Speaker 2: out in terms of how you think about risk though

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Speaker 2: as well, because clearly there will be some more I

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Speaker 2: guess consolidation risks.

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Speaker 1: You could argue, well, we may have fewer assets and

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Speaker 1: there's consolidation risk around that. I believe we're offsetting that

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Speaker 1: with diversification risk at the actual assets. So you know,

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Speaker 1: as we introduce office, as we introduce residential or medical

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Speaker 1: or other uses, or gyms or entertainment, we start to

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Speaker 1: diversify the risk at those individual assets as well.

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Speaker 2: Yeah, how do you think about building optionality into those

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Speaker 2: assets so that yes you might have a thesis about

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Speaker 2: what the future looks like, but also needing to be

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Speaker 2: able to respond and react as different events play out

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Speaker 2: or as preferences evolve.

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Speaker 1: Yeah. Look, everything we do is demand driven. We make

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Speaker 1: sure we get the data behind us to before we

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Speaker 1: actually proceed, so we're not in a rush. The demand

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Speaker 1: will grow and we fortunate, you know, not just here

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Speaker 1: at Sylvia Park, but at the base Armond Hamilton and

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Speaker 1: the development we undertaking a jury as well. We waiting

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Speaker 1: for the demand to actually build so we can move

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Speaker 1: forward and start to develop. And basically we always sort

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Speaker 1: of one step behind the demand bringing supply on. And

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Speaker 1: you know, we've built two office buildings for example here

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Speaker 1: at Sylvia Park, and we have mind for the third,

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Speaker 1: so you know, in the foreseeable future we'll have a

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Speaker 1: third office building under construction that and we won't build

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Speaker 1: the fourth until we've got enough demand to go to

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Speaker 1: the fourth building.

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Speaker 2: Just on that demand and the data. I'm curious what

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Speaker 2: is the sort of data you look for that would

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Speaker 2: make a site good? You know, is it foot traffic?

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Speaker 2: Is it something else? And then what are the metrics

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Speaker 2: that you continually monitor to understand is the site performing

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Speaker 2: as we expected? Has this got a lot of leaks

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Speaker 2: for the future.

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Speaker 1: Each property use has a different set of data that

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Speaker 1: we analyze. But if we focus in on retail in particular,

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Speaker 1: because that's where our core is, you know, we look

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Speaker 1: at total sales, and we look at custom account and

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Speaker 1: we look at sales per square meter across the center,

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Speaker 1: So how productive is the asset as well? So Sylvia

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Speaker 1: Park does almost nine hundred million dollars of sales and

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Speaker 1: that's before IK came to the site, and we have

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Speaker 1: over sixteen million visits to the site. So if you

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Speaker 1: think about Auckland, there's probably one point six million people here.

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Speaker 1: So effectively everybody in Auckland comes to Silvia Park ten

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Speaker 1: times a year. And so when we are trying to

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Speaker 1: attract new retailers into the asset, were able to use

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Speaker 1: that sort of data to show them how successful this

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Speaker 1: asset is and help grow that demand for them to

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Speaker 1: want to be here.

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Speaker 2: I'd love to jump to the numbers. And when we

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Speaker 2: look at other listed companies, we often look at metrics

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Speaker 2: like profit margins, we look at toplane growth, bottom line growth,

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Speaker 2: and then for valuation, we look at market multiples like

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Speaker 2: place earnings ratios and EBIT and EBIT multiples. Property works

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Speaker 2: a little bit differently. What are the metrics that you

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Speaker 2: think investors should be really looking at and what trends

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Speaker 2: investors should be focused on to assess the value and

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Speaker 2: performance of QB property over time.

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Speaker 1: So it's about rental growth. So how productive are the

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Speaker 1: assets you have and can you have sustained rental growth

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Speaker 1: over time? Were very fortunate that we've been able to

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Speaker 1: build sustained rental growth over time. And one of the

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Speaker 1: things that you know, we strive to do for our

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Speaker 1: investors is to continue to grow their dividend. And you know,

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Speaker 1: we've made it a commitment to try and grow over

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Speaker 1: time our dividends by at least three percent per anum.

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Speaker 1: And to do that, we need to make sure that

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Speaker 1: our income's growing faster than any of our costs. The

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Speaker 1: other thing that investors should be looking at is obviously

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Speaker 1: the value of the portfolio. You know, what's happening to

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Speaker 1: those assets? Are they growing in value over time? So

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Speaker 1: those are probably the key metrics in the property area.

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Speaker 2: Property is such a physical thing and I think it

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Speaker 2: must be sometimes tempting to almost empire, build or build

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Speaker 2: or the biggest and the best thing, even if maybe

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Speaker 2: from a shahold of return or the economics are not

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Speaker 2: as good. How do you decide what not to do

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Speaker 2: and how do you keep that real discipline of making

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Speaker 2: sure that anything that you are building and developing really

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Speaker 2: does meet the economics and does make sense from a

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Speaker 2: shareholder point of view.

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Speaker 1: Yeah, there's probably two things that I call out there.

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Speaker 1: The one is, and we've spoken about this already, is

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Speaker 1: around demand. So you don't want to get in front

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Speaker 1: of demand, otherwise you end up with a whole lot

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Speaker 1: of empty space and waiting for demand to build. And

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Speaker 1: you know that's not the right way of doing it,

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Speaker 1: so we try to be on the other side of

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Speaker 1: that curve. The other thing is, you know, New Zealand's

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Speaker 1: a small country, so we need to we need to

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Speaker 1: travel and understand what's happening in other markets and pick

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Speaker 1: up those learnings from other markets and bring them back

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Speaker 1: to New Zealand where appropriate. So at the end of

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Speaker 1: last year I was in the US and on the

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Speaker 1: East Coast looking at the best in class in terms

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Speaker 1: of retail. What's happening there. We've had a team recently

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Speaker 1: tour around Australia again looking at those best in class

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Speaker 1: retail assets and seeing what are the Australians doing to

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Speaker 1: drive those assets ford and what learnings can we bring

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Speaker 1: back to New Zealand.

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Speaker 2: Here, Where are trends overseas where we might expect that

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Speaker 2: to come to New Zealand and where are their differences

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Speaker 2: where we go out. So New Zealand's quite a different

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Speaker 2: market from.

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Speaker 1: A market perspective. Australias are closest comparison, which is no

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Speaker 1: surprise to anybody. Most retailers, in fact, just about all

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Speaker 1: retailers won't come to New Zealand first before going to Australia.

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Speaker 1: That's just the size of the population, stars of the market.

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Speaker 1: So we'll travel around Asia, we'll travel on Europe and

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Speaker 1: the US to see what the future trends are looking like.

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Speaker 1: So that's why we spend a lot of time going

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Speaker 1: to Australia to see what's really on our doorstep and

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Speaker 1: what's likely to come. So we get lots of requests

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Speaker 1: from from customers for new brands to be in the market.

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Speaker 1: You know, are probably our most asked for brand is Uniglow,

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Speaker 1: and we'd love to have Uniglow here, but they're just

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Speaker 1: not ready to come to us. In they will come

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Speaker 1: at some point, but just not yet.

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Speaker 2: I would love Uniclo here too, great brand, great brand.

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Speaker 2: If you look really right back over the last let's

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Speaker 2: say forty years, over nineteen eighty to twenty twenty, we

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Speaker 2: had really a very slow decline in interst rates and

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Speaker 2: then ultra low interest rates for a while as well.

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Speaker 2: We're now in a new paradigm or a new interstrate cycle.

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Speaker 2: Does it get Could you talk us through how you

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Speaker 2: avoid overbuilding, particularly at the end of very low interest

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Speaker 2: rate cycle where it might feel like interest rates are

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Speaker 2: going to remain really low forever, and then just how

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Speaker 2: you think about interstrate management.

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Speaker 1: More generally, as interest rates move, the property prices go

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Speaker 1: in the opposite direction. So as interest rates rise, property

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Speaker 1: pricesses go down, et cetera. So you know, we've already

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Speaker 1: started to see even though interest rates are still going down,

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Speaker 1: they might have hit the bottom now, the early signals

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Speaker 1: that interest rates are starting to pick up at the

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Speaker 1: end of the year has already put a bit of

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Speaker 1: a dampner on share process in the property sector. Coming

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Speaker 1: back to your question there is, you know, you never

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Speaker 1: quite know what the next cycle is going to look like.

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Speaker 1: And I think the property sector in New Zealand was

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Speaker 1: caught out by the severity of the interest rate climb

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Speaker 1: that happened to counterinflation, and you know, most of most

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Speaker 1: of the property sector's gearing levels were all elevated. We've

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Speaker 1: obviously worked hard and have to bring that down and

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Speaker 1: so you know, we're around that low thirty percent now,

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Speaker 1: which puts us in the right sort of range to

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Speaker 1: be able to look at opportunities going forward as well.

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Speaker 2: Yeah, so on thosset gearing levels, do you have now

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Speaker 2: maybe a different view than you would have had, let's

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Speaker 2: say five years ago around what an optimum or appropriate

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Speaker 2: gearing level looks like. Have you changed your views on

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Speaker 2: that just given that we have now sort of in

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Speaker 2: a different paradigm.

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Speaker 1: You know, property goes through cycles, just like the economy

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Speaker 1: goes through cycles. So you just got to I think

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Speaker 1: you've just got to look at it over long term.

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Speaker 1: It's what point of the cycle are we in. So

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Speaker 1: at the moment, you know, most property investors are probably

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Speaker 1: at the top end of their gearing, but they're starting

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Speaker 1: to moderate as the valuations go up or their recycle

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Speaker 1: capital to bring down their gearing. As economy improves and

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Speaker 1: hopefully it continues on its current trajectory, there'll be opportunities

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Speaker 1: with valuation side to rise and we'll be able to

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Speaker 1: redeploy capital.

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Speaker 2: So do you think about having a long term view

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Speaker 2: on WESA medium interest rate levels are or do you

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Speaker 2: actually really try and play to the cycle a lot more?

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Speaker 1: We played to the cycle, so we try to manage

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Speaker 1: where our gearing is. So we like to be in

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Speaker 1: that twenty five to thirty five percent range of gearing.

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Speaker 1: And if you think about that, that is actually relatively

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Speaker 1: low compared to where private investors may borrow. You know,

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Speaker 1: a lot of them will be at sixty percent fifty

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Speaker 1: to sixty percent for their gearing. So the listed corporate

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Speaker 1: property sector actually has very low gearing. And generally we

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Speaker 1: have the best in class assets in the market as well,

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Speaker 1: So the risk for our investors is actually very low.

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Speaker 2: And it is so important to think about gearing as risk.

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Speaker 2: I often think about debt as you know, it doesn't

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Speaker 2: make an investment good or bad, It just amplifies a return.

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Speaker 2: So yes, on the good side, you get you know,

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Speaker 2: you can get greater upside with more gearing, but obviously

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Speaker 2: to your point on the downside the risk it can

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Speaker 2: go the other way as well. If we think about

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Speaker 2: qu property group as our capital allocation vehicle, what are

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Speaker 2: the tour three principles that you always want to stay

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Speaker 2: true to as you're thinking about allocating that capital.

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Speaker 1: The vast majority of our capital is what we call

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Speaker 1: needs to be invested in core assets, so this is

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Speaker 1: a core asset. The base is a core asset, But

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Speaker 1: then we'll have more opportunistic capital, which is something like

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Speaker 1: Jewey where we're looking for a higher return and it's

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Speaker 1: in a higher return bucket, but it's a relatively small

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Speaker 1: component of our portfolio. So the blended return is what

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Speaker 1: we're looking to give to be able to drive our

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Speaker 1: share price going forward. So we don't want too much

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Speaker 1: in the risky bucket because we relisted vehicle and people

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Speaker 1: come to us for consistent returns over time, so we

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Speaker 1: want to make sure we get that balance right now.

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Speaker 2: I do want to come to Ikea. It obviously was

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Speaker 2: a massive moment when it came to New Zealand, really

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Speaker 2: really big deal for Sylvia Park, for Auckland, for New Zealand,

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Speaker 2: can you talk about even attracting Ikea to the site

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Speaker 2: and just the whole process.

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Speaker 1: These big international retailers, they move slowly and they they're

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Speaker 1: very deliberate in their process. So we started talking to

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Speaker 1: our Care probably five years before they opened, and they

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Speaker 1: had been looking in the New Zealand market for many,

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Speaker 1: many years but couldn't find the right site and right location.

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Speaker 1: We saw an opportunity to have them located adjacent to us.

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Speaker 1: We had land which was very precious for us, but

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Speaker 1: we thought the benefit of having our Care located immediately

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Speaker 1: to the center was outweigh the benefit of actually continue

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Speaker 1: to own that land. So we sold them a pass

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Speaker 1: of land and it really was a partnership from that

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Speaker 1: point on, and it took five years to bring it

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Speaker 1: to fruition. There were a lot of hurdles to jump through,

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Speaker 1: but they've worked alongside us as partners and we both

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Speaker 1: want to see this location be a really fantastic location.

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Speaker 1: They identified it as a prime location for them, that

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Speaker 1: love the public transport, that love the proximity to the

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Speaker 1: existing shopping center and the sixteen million visitors, and you know,

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Speaker 1: I think it's been a great ad for Sylvia Park,

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Speaker 1: but also a great ad for New Zealand.

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Speaker 2: And how much does it change the economics of Sylvia

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Speaker 2: Park obviously a high value use of that land. What

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Speaker 2: has that done to increasing the foot traffic to Sylvia

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Speaker 2: Park and to the wider economics of the Sylvia Park precinct.

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Speaker 1: Opened in December and we saw an eight percent increase

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Speaker 1: in foot traffic in December. In January, we've seen a

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Speaker 1: thirteen percent increase in foot traffic for Sylvia Park, so

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Speaker 1: that cross shop people are coming across. We've built a

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Speaker 1: fantastic pedestrian linkway the links two assets together so people

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Speaker 1: can easily traverse between the two destinations. One of the

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Speaker 1: things that we wanted to see was we built a

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Speaker 1: level a level two on what we call the Gallery

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Speaker 1: expansion on the southern end of the center, and we've

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Speaker 1: seen a thirty eight percent increase in January on foot

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Speaker 1: traffic to that upper level and we suttenly see that

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Speaker 1: flow through the whole center in terms of increased sales

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Speaker 1: as well. So that was always the rational behind the

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Speaker 1: investment we were making that they adding them to the

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Speaker 1: pie would make it a big and better pie.

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Speaker 2: A decade ago, the dominant narrative was that e commerce

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Speaker 2: would really kill physical retail. We've seen probably an increase

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Speaker 2: now and people wanting to be able to go out

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Speaker 2: into shops and really value that experience. You took us

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Speaker 2: through some of those dynamics.

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Speaker 1: Ten years ago. Everybody was worried that nobody would ever

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Speaker 1: go shopping in a physical sense anymore. Everything would be

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Speaker 1: delivered to you. That hasn't played out. New Zealand has

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Speaker 1: a online penetration of about thirteen percent. If you looked

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Speaker 1: at the it's around twenty percent. So even in the

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Speaker 1: US there still means eighty percent of retail spend is

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Speaker 1: still done in the physical retail stores. And if you

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Speaker 1: talk to most successful retailers, they talk about omnichannel and

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Speaker 1: what that means is how you best service the consumer

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Speaker 1: both from a physical point of view in the store,

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Speaker 1: but also digitally as well, so the customer has choice.

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Speaker 1: I think what is really important what we lean into

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Speaker 1: is that we want to be in the best locations

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Speaker 1: and where we can do those things at scale. So

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Speaker 1: from a retailer's perspective, that allows them to have their

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Speaker 1: flagship locations, their flagship stores where the full range of

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Speaker 1: product with the best customer service and they're really showcasing

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Speaker 1: their brand and it's really hard to showcase that brand online.

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Speaker 1: And even what we're traditionally only online stores have actually

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Speaker 1: now started rolling out physical stores as well to complement

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Speaker 1: their online stores.

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Speaker 2: So online clearly hastor increased quite a bit. But as

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Speaker 2: about those channels working together, as you say that it,

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Speaker 2: experience are still very important for a lot of customers.

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Speaker 2: Are there sort of particular types of goods or particular

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Speaker 2: products that it's really important to have that experience factor.

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Speaker 1: I'd say of our current retail mix, probably half of

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Speaker 1: the stores we have you can only experience in person,

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Speaker 1: so we sort of differentiating ourselves from that online off

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Speaker 1: in a way. So we've got a fantastic dining precinct,

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Speaker 1: ranging from food coret to cafes to full on restaurants.

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Speaker 1: We've got a lot of entertainment. But some of the

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Speaker 1: areas that are really growing at the moments around health

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Speaker 1: and wellness and gyms, so we're working very hard to

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Speaker 1: have a full scale gym here, and you know, we're

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Speaker 1: also looking around that food space. How do we build

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Speaker 1: out that food space. We've got an Asian growth so

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Speaker 1: that we currently have under construction at the moment, so

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Speaker 1: you can really know hone in on a particular demographic

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Speaker 1: and provide them with what they're looking for rather than

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Speaker 1: the traditional supermarket office. So those type of areas is

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Speaker 1: where we sort of try to differentiate ourselves and really

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Speaker 1: try to expand that physical presence.

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Speaker 2: And you talked about zoning on that flagship store and

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Speaker 2: maybe we'll see companies have fewer stores but really invest

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Speaker 2: in them and make them really really good. Companies responding

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Speaker 2: in that way, like are they really sort of thinking

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Speaker 2: about what is that install experience that they want their

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Speaker 2: customers to get.

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Speaker 1: We've got a couple of examples here. So Zia when

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Speaker 1: they came to New Zealand sort of twelve years ago,

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Speaker 1: they decided that be at Sylvia Park and they would

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Speaker 1: only have one store. Because we've got such a big site,

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Speaker 1: we were able to also help them with a big

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Speaker 1: back of house area where they service the whole of

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Speaker 1: New Zealand from an online perspective as well. So from

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Speaker 1: a consumer perspective, you come to Sylvia Park, you get

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Speaker 1: the flagship Zira experience, you've got the great customer service,

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Speaker 1: but you can also get everything online as well, so

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Speaker 1: they're able to do both from the same location. So

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Speaker 1: I think you're going to see more and more of

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Speaker 1: that happening across the retail market as well. So I

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Speaker 1: think the way forward and what you're going to see

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Speaker 1: in the future it's really a survival of the fittest

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Speaker 1: and the survival of the strongest, and we want to

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Speaker 1: be in those clearly, those fortress type locations which have scale,

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Speaker 1: They have great locations, and people are attracted at them

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Speaker 1: because you have a great range of offer and you

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Speaker 1: have those flagship locations and flagship stores.

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Speaker 2: And you can see that also play out in office

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Speaker 2: space as well, isn't it where really companies want their

440
00:21:16,480 --> 00:21:19,959
Speaker 2: premium location, even if it's a bit less of the space.

441
00:21:21,200 --> 00:21:25,399
Speaker 1: There's a global flight to quality in property, not just

442
00:21:25,440 --> 00:21:29,520
Speaker 1: retail or office industrials the same as well. So those

443
00:21:29,680 --> 00:21:33,320
Speaker 1: very best locations with high growth opportunities are the ones

444
00:21:33,320 --> 00:21:36,639
Speaker 1: that are really attracting the most interest from you know,

445
00:21:37,680 --> 00:21:41,280
Speaker 1: potential buyers, but also from tenants as well, whether it's

446
00:21:41,280 --> 00:21:42,320
Speaker 1: office or whether it's.

447
00:21:42,240 --> 00:21:45,280
Speaker 2: Retail, and tenants are still competing hard for that space

448
00:21:45,359 --> 00:21:46,560
Speaker 2: absolutely absolutely.

449
00:21:46,640 --> 00:21:48,720
Speaker 1: You know, we still see significant mind at the Base,

450
00:21:48,760 --> 00:21:52,360
Speaker 1: which is a fantastic acid down on Hamilton likewise here

451
00:21:52,400 --> 00:21:54,720
Speaker 1: at Sylvia Park and Atland Mall as well. And you know,

452
00:21:55,520 --> 00:21:58,680
Speaker 1: just even with Drury, which is a greenfield land development,

453
00:21:58,720 --> 00:22:01,480
Speaker 1: we've got some fantastic new large format of retailers that

454
00:22:01,520 --> 00:22:03,119
Speaker 1: are leading the way in terms of wanting to be

455
00:22:03,119 --> 00:22:05,639
Speaker 1: positioned there because they can see the opportunity for the future.

456
00:22:05,720 --> 00:22:09,520
Speaker 2: We'll lease talk about Drury clearly some massive plans for

457
00:22:09,560 --> 00:22:13,320
Speaker 2: that space and the scale is just enormous and a

458
00:22:13,400 --> 00:22:17,720
Speaker 2: really sort of a big example of that multi use precinct.

459
00:22:18,040 --> 00:22:20,720
Speaker 2: Can you talk us through that site and really lay

460
00:22:20,720 --> 00:22:22,440
Speaker 2: out the vision for what that will become.

461
00:22:22,840 --> 00:22:24,880
Speaker 1: You know, Auckland has two areas where you can grow

462
00:22:24,920 --> 00:22:27,280
Speaker 1: can even grow north, or can grow south, and to

463
00:22:27,320 --> 00:22:29,160
Speaker 1: be honest, most of the growth is probably heading south

464
00:22:29,200 --> 00:22:31,280
Speaker 1: because that's where a lot of the population is in

465
00:22:31,320 --> 00:22:33,280
Speaker 1: the Golden Triangle and most of the growth around it is.

466
00:22:34,160 --> 00:22:37,160
Speaker 1: We have a fantastic site there of almost fifty hectares

467
00:22:37,200 --> 00:22:40,120
Speaker 1: of land which has been demarcated as the next town

468
00:22:40,200 --> 00:22:43,960
Speaker 1: center or the town for Drury, and you know, the

469
00:22:44,040 --> 00:22:46,560
Speaker 1: projections are that over time there will be almost sixty

470
00:22:46,600 --> 00:22:49,919
Speaker 1: thousand people living there and it's a unique opportunity to

471
00:22:49,960 --> 00:22:52,040
Speaker 1: actually build a town from scratch. I mean, how often

472
00:22:52,040 --> 00:22:53,760
Speaker 1: do we get a chance to build a town from scratch.

473
00:22:53,880 --> 00:22:55,240
Speaker 1: So we want to make sure you do it right,

474
00:22:55,280 --> 00:22:56,720
Speaker 1: and we want to do a really good job, and

475
00:22:56,760 --> 00:22:59,840
Speaker 1: we want to make sure it has all the environmental considerations,

476
00:23:00,119 --> 00:23:03,639
Speaker 1: really well connected and really walkable for the people that

477
00:23:03,720 --> 00:23:06,119
Speaker 1: choose to live there. And so we've got this unique

478
00:23:06,160 --> 00:23:10,040
Speaker 1: opportunity where we're kicking off with large format retail. We've

479
00:23:10,040 --> 00:23:12,520
Speaker 1: got conditional deals that have been signed with Costco, but

480
00:23:12,560 --> 00:23:15,920
Speaker 1: also we've got Harvey Norman, Rebel, Brisco and New World

481
00:23:16,000 --> 00:23:18,560
Speaker 1: Supermarket leading the charge. And then we've got an opportunity

482
00:23:18,600 --> 00:23:20,960
Speaker 1: over time to actually build out the full town center,

483
00:23:21,280 --> 00:23:23,800
Speaker 1: which will obviously be heavily retail focused, but there were

484
00:23:23,880 --> 00:23:27,400
Speaker 1: other uses offers a residential etc. That will sit alongside

485
00:23:27,440 --> 00:23:28,320
Speaker 1: that in medical as well.

486
00:23:28,320 --> 00:23:33,120
Speaker 2: Here in terms of working with local council, also transport,

487
00:23:33,280 --> 00:23:35,720
Speaker 2: really thinking about all of those other pieces, how do

488
00:23:35,800 --> 00:23:37,800
Speaker 2: you go about doing all of that and how early

489
00:23:37,840 --> 00:23:39,720
Speaker 2: in the peace are you sort of thinking about those

490
00:23:39,800 --> 00:23:42,560
Speaker 2: dynamics as well as where the future population is going

491
00:23:42,600 --> 00:23:42,800
Speaker 2: to be.

492
00:23:43,440 --> 00:23:45,560
Speaker 1: So we bought that land almost ten years ago. When

493
00:23:45,600 --> 00:23:47,320
Speaker 1: we bought it was just farmland, so there was a

494
00:23:47,400 --> 00:23:54,159
Speaker 1: long zoning process, both with government and local government. To

495
00:23:54,200 --> 00:23:56,480
Speaker 1: their credit, they've all been really supportive of it. This

496
00:23:56,560 --> 00:23:59,520
Speaker 1: is one of those few developments where the infrastructure has

497
00:23:59,520 --> 00:24:02,560
Speaker 1: actually been put in place ahead of the development happening.

498
00:24:03,160 --> 00:24:06,440
Speaker 1: Central government has been amazing. They've built a train station

499
00:24:06,480 --> 00:24:10,320
Speaker 1: which is almost complete immediately adjacent to our site, upgrading

500
00:24:10,320 --> 00:24:13,480
Speaker 1: the motorway a Drury. The surrounding roads are being upgraded,

501
00:24:13,600 --> 00:24:16,760
Speaker 1: which we're also contributing to to really make sure that

502
00:24:16,800 --> 00:24:19,639
Speaker 1: people can easily get around Drury and really start to

503
00:24:19,680 --> 00:24:21,960
Speaker 1: develop it ahead of time. So we spend a lot

504
00:24:22,000 --> 00:24:24,359
Speaker 1: of time and dialogue with government and local government to

505
00:24:24,400 --> 00:24:27,720
Speaker 1: do that. You know, it's no secret that the government's

506
00:24:27,720 --> 00:24:31,320
Speaker 1: looking for a new hospital, regional hospital location at Drury.

507
00:24:31,680 --> 00:24:33,720
Speaker 1: We'd love to be a part of that discussion as well,

508
00:24:33,800 --> 00:24:35,959
Speaker 1: but you know that's clearly a sort of public private

509
00:24:36,040 --> 00:24:39,880
Speaker 1: type partnership where you know, we may have the land

510
00:24:39,880 --> 00:24:42,760
Speaker 1: which is appropriate for a hospital, but they will have

511
00:24:42,800 --> 00:24:44,920
Speaker 1: to work in alongside us and we'll have to work

512
00:24:44,960 --> 00:24:48,720
Speaker 1: collaboratively to deliver that. Likewise, for council, you know they

513
00:24:48,840 --> 00:24:55,200
Speaker 1: want libraries, community facilities, sports areas, etc. We can help

514
00:24:55,240 --> 00:24:58,320
Speaker 1: facilitate that. Sometimes they can be quite interesting discussions as

515
00:24:58,320 --> 00:25:00,960
Speaker 1: you can imagine how you apportion everything. But you know,

516
00:25:01,040 --> 00:25:03,159
Speaker 1: I think if everybody's got the same focus, how do

517
00:25:03,200 --> 00:25:05,879
Speaker 1: we create something that's fantastic, then you're going to get

518
00:25:05,920 --> 00:25:06,520
Speaker 1: a great outcome.

519
00:25:06,560 --> 00:25:09,840
Speaker 2: Here I want to talk about residential. You mentioned that

520
00:25:09,880 --> 00:25:13,000
Speaker 2: at Drury You've also got apartments here at Sylvia Park

521
00:25:13,040 --> 00:25:16,920
Speaker 2: as well. Do they meaningfully change economics or are they

522
00:25:16,960 --> 00:25:19,760
Speaker 2: more about our diversification and resilience play.

523
00:25:21,359 --> 00:25:25,600
Speaker 1: So we've built three hundred apartments at Sylvia Park builtering

524
00:25:25,720 --> 00:25:28,280
Speaker 1: so they're all one hundred percent four rent. It was

525
00:25:28,520 --> 00:25:30,560
Speaker 1: for us. It was a test case to test a

526
00:25:30,560 --> 00:25:34,080
Speaker 1: couple of things. Can we make residential work adjacent to

527
00:25:35,160 --> 00:25:39,280
Speaker 1: our major retailed assets as it does work in other

528
00:25:39,320 --> 00:25:43,760
Speaker 1: locations internationally. The second was to see whether there was

529
00:25:43,760 --> 00:25:45,840
Speaker 1: an opening for builterin to be able to be done

530
00:25:45,840 --> 00:25:48,119
Speaker 1: at scale in the New Zealand market. What I can

531
00:25:48,160 --> 00:25:50,680
Speaker 1: tell you is that the residents that we have, they

532
00:25:50,720 --> 00:25:54,760
Speaker 1: love being there. It's got a great amenity. There's a

533
00:25:54,760 --> 00:26:00,720
Speaker 1: concierge desk, there's a gym, there's a working lounge, there's areas,

534
00:26:01,160 --> 00:26:03,680
Speaker 1: pets are welcome. It's right right next to the center,

535
00:26:03,720 --> 00:26:05,680
Speaker 1: so they can cross shop that's close to all the transports.

536
00:26:05,720 --> 00:26:08,439
Speaker 1: So what's more challenging is getting the right capital to

537
00:26:08,480 --> 00:26:11,400
Speaker 1: be able to make that product work. We always knew

538
00:26:11,400 --> 00:26:13,320
Speaker 1: we weren't the right capital source and we wanted to

539
00:26:13,359 --> 00:26:15,399
Speaker 1: test it. So before we do any more of that,

540
00:26:15,480 --> 00:26:18,199
Speaker 1: we will need to find a right capitalist alongside us.

541
00:26:18,200 --> 00:26:20,240
Speaker 1: And what do I mean by that as more patient capital.

542
00:26:20,600 --> 00:26:23,040
Speaker 1: So it's an asset that is a sort of ten

543
00:26:23,160 --> 00:26:26,120
Speaker 1: twenty thirty year product and it's about the rental growth

544
00:26:26,119 --> 00:26:28,520
Speaker 1: that you get over a period of time. And you know,

545
00:26:28,560 --> 00:26:31,119
Speaker 1: obviously our sheld is looking for returns right now, not

546
00:26:31,440 --> 00:26:34,080
Speaker 1: necessarily inten or twenty years time. So we will be

547
00:26:34,119 --> 00:26:36,359
Speaker 1: the catalyst for that type of development in the future

548
00:26:36,440 --> 00:26:38,600
Speaker 1: rather than being the capital provider for it.

549
00:26:38,680 --> 00:26:40,320
Speaker 2: And who are these capital providers?

550
00:26:40,400 --> 00:26:42,560
Speaker 1: Yeah, traditionally there are pension funds. Would like a lot

551
00:26:42,600 --> 00:26:44,040
Speaker 1: more of it to be New Zealand based, and I

552
00:26:44,080 --> 00:26:47,119
Speaker 1: think as Kiwisaver grows, you'll see more of that simplicity

553
00:26:47,160 --> 00:26:50,040
Speaker 1: is leaning into that space where they're actually rolling out

554
00:26:50,080 --> 00:26:52,960
Speaker 1: builtery directly themselves, and I hope over time that we'll

555
00:26:53,000 --> 00:26:55,679
Speaker 1: see more of our key saver providers or doing that

556
00:26:55,720 --> 00:26:59,520
Speaker 1: same thing otherwise you tapping into offshore capital, but I'd

557
00:26:59,560 --> 00:27:00,919
Speaker 1: much rather use local capital.

558
00:27:01,560 --> 00:27:05,399
Speaker 2: I've often heard of CEOs of big global companies talk about,

559
00:27:05,720 --> 00:27:08,639
Speaker 2: you know, yes, very busy day to day, but actually

560
00:27:08,680 --> 00:27:11,960
Speaker 2: when they step back, their job every year is to

561
00:27:12,040 --> 00:27:14,280
Speaker 2: make the right call on sort of two to three

562
00:27:14,680 --> 00:27:18,960
Speaker 2: really pivotal decisions. I can't help but think with a

563
00:27:19,040 --> 00:27:22,040
Speaker 2: company like q Property Group, where you're making really big

564
00:27:22,080 --> 00:27:26,280
Speaker 2: calls on huge amounts of capital that are really very

565
00:27:26,320 --> 00:27:29,200
Speaker 2: long term decisions, would you say that that's the case

566
00:27:29,240 --> 00:27:29,840
Speaker 2: for your job.

567
00:27:30,359 --> 00:27:33,040
Speaker 1: One of the critical things is staying current with the market.

568
00:27:33,560 --> 00:27:37,000
Speaker 1: So you know, I travel a lot, and even when

569
00:27:37,040 --> 00:27:40,120
Speaker 1: I'm on holiday, it's all about looking at retail, looking

570
00:27:40,119 --> 00:27:43,000
Speaker 1: at trends, looking at things through different lenses and then

571
00:27:43,000 --> 00:27:45,840
Speaker 1: seeing what's transferable back to New Zealand. So you've got

572
00:27:45,880 --> 00:27:47,880
Speaker 1: to stay current, and you've got to stay really close

573
00:27:47,920 --> 00:27:50,040
Speaker 1: to the market to see what's driving the market and

574
00:27:50,160 --> 00:27:51,879
Speaker 1: understand your customer at the end of the day, So

575
00:27:52,119 --> 00:27:54,880
Speaker 1: what are the preferences they're looking for. I think if

576
00:27:54,880 --> 00:27:57,160
Speaker 1: you take your eye off the balls, that's when things

577
00:27:57,200 --> 00:28:00,240
Speaker 1: go wrong. So just staying really focused on the big

578
00:28:00,280 --> 00:28:01,960
Speaker 1: fundamentals and what's driving.

579
00:28:01,640 --> 00:28:04,760
Speaker 2: It Let's say you're on holiday, You're going into a

580
00:28:05,040 --> 00:28:08,359
Speaker 2: shopping center with your family. What are you looking at

581
00:28:08,640 --> 00:28:10,040
Speaker 2: versus what maybe they will see?

582
00:28:10,200 --> 00:28:13,440
Speaker 1: What are the differences, how's it running? Just all the

583
00:28:13,480 --> 00:28:15,600
Speaker 1: little small things, like even going into the bathrooms, how

584
00:28:15,640 --> 00:28:20,120
Speaker 1: they laid out their bathrooms, you know, just the touch points,

585
00:28:20,320 --> 00:28:23,760
Speaker 1: the cleanliness, how they've organized all the stores, the retailers.

586
00:28:23,920 --> 00:28:27,199
Speaker 1: What other uses are they putting alongside it. There's so

587
00:28:27,240 --> 00:28:30,119
Speaker 1: many learnings and every property's got different things that you

588
00:28:30,160 --> 00:28:32,720
Speaker 1: can learn from. Nobody knows the future for retail, nobody

589
00:28:32,720 --> 00:28:36,280
Speaker 1: knows the future for property. So you using your best

590
00:28:36,320 --> 00:28:38,920
Speaker 1: instincts to navigate a really complex environment.

591
00:28:39,440 --> 00:28:42,360
Speaker 2: Well, speaking of that future, if we think about what

592
00:28:42,480 --> 00:28:45,240
Speaker 2: quproperty group might look like in five years or ten

593
00:28:45,280 --> 00:28:47,600
Speaker 2: years time, what is the vision I.

594
00:28:47,520 --> 00:28:50,360
Speaker 1: Think you'll see in the next twenty years at Sylvia

595
00:28:50,400 --> 00:28:53,200
Speaker 1: Park will be a satellite city of Auckland, and so

596
00:28:53,320 --> 00:28:55,360
Speaker 1: too will be Drury will be starting to form in

597
00:28:55,400 --> 00:28:58,120
Speaker 1: that's similar way as well. So what I mean by

598
00:28:58,160 --> 00:29:00,560
Speaker 1: that is there'll be multiple office building, there'll be plenty

599
00:29:00,600 --> 00:29:03,239
Speaker 1: of residential around it, There'll be a you know, there

600
00:29:03,280 --> 00:29:06,600
Speaker 1: were a lot of density happening at this location, and

601
00:29:06,800 --> 00:29:08,760
Speaker 1: you can already see that playing out as you walk

602
00:29:08,800 --> 00:29:11,640
Speaker 1: around the site. And that's happened in a relatively short

603
00:29:11,640 --> 00:29:13,800
Speaker 1: period of time. In eight years, in twenty years time,

604
00:29:13,880 --> 00:29:17,840
Speaker 1: this will be a major urban development node.

605
00:29:18,520 --> 00:29:21,880
Speaker 2: And that was Clive McKinsey, CEO of Q Property Group.

606
00:29:22,200 --> 00:29:24,600
Speaker 2: If you liked that, would love to know who you'd

607
00:29:24,600 --> 00:29:27,120
Speaker 2: like to hear from next. You can do that by

608
00:29:27,160 --> 00:29:30,320
Speaker 2: telling us in the comments or emailing us shared lunch

609
00:29:30,480 --> 00:29:31,920
Speaker 2: at zs dot co door in z