The owner of one of New Zealand's most successful retail parks is considering building rental apartment blocks in Auckland and Hamilton that would be owned long-term by big New Zealand investors.
Clive Mackenzie, new chief executive of Kiwi Property, said Auckland's Sylvia Park and LynnMall, the company's new Drury development site, and its joint venture with Waikato Tainui at Hamilton's The Base all offered opportunities for the new scheme.
Kiwi, New Zealand's biggest listed landlord with a market capitalisation of $1.9 billion, has long held ambitions for residential development at Sylvia Park and this year finished its first $80 million commercial block there, with plans for a second in quick succession.
But the permanent apartment rental model - widely used in the United States - would be new to this country where apartments are all usually sold, not held by a developer.
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"We were looking at residential via multi-family - the US term for a build-to-rent model," the Zimbabwe-born Mackenzie explained from Kiwi's Vero Centre offices in downtown Auckland.
"It would be bringing institutional funds to solve the housing crisis. Many malls in the US are multi-family," he said, citing luxury condo high-rise in places like Tysons Corner in Virginia.
Mackenzie's concept has piqued the interest of local institutional investors.
Shane Solly of Harbour Asset Management said: "Multi-family or build-to-rent is a large sector in the US listed real estate market. It is a real estate sector which provides some great long-term growth and risk diversifying factors for investors relative to other investment sectors. It's a sector we would like to see evolve in a New Zealand context."
Mackenzie, 53, said the concept had significant advantages.
"These multi-family projects have shopping centres, offices, hotels, apartments, restaurants, bars, full-service gyms," he said.
Although he only started at Kiwi in July, Mackenzie has a long pedigree here, having spent his working life from the age of 26 living in New Zealand, apart from his recent seven-year stint in the US.
The son of an engineer who specialised in working in the mining industry, Mackenzie has a BCom and post-grad in management from University of KwaZulu-Natal in South Africa.
He moved to New Zealand in his mid-20s "just wanting to explore the world and this is as far as I got", initially working for giant mall owner St Lukes Group with Paul Preston and David Kennedy, starting at Manukau as an assistant centre manager, then moving to Hamilton's Chartwell and Christchurch's giant Riccarton mall — all centres which Westfield, now Scentre, bought.
"I worked in leasing for many years and ended up general manager of leasing for Westfield and had three to four years as general manager of development for Westfield NZ. Kiwi was our biggest competitor in the market so I spent a lot of time watching them."
In 2011, Westfield shifted him to Washington, working on east coast development. He lived in the suburb of Bethesda and credits now-retired ex-Westfield NZ chief John Widdup with moving him to the US where he was based at Westfield Wheaton, Maryland.
"I looked after development from Chicago to Florida. Westfield has 16 centres there, including some big ones like the Westfield World Trade Centre in New York."
Mackenzie worked on around 20 developments and expansions while in the US, mostly $US30m-$US50m range.
"A lot of my work was re-purposing department stores and the boxes like JCPenney, Sears, even Macy's, all giving back boxes." That meant Westfield buying the department store in a centre where it already owned shops and carparks and converting large-format stores into the likes of gyms and cinemas.
"The department store business models had come under stress, so it was then a matter of how much we paid them."
In July, he returned from Washington to head Kiwi, partly for family reasons: one daughter is studying at an Australian university and another has just finished secondary school and is about to start tertiary studies.
Mackenzie would like to bring other US concepts here too, particularly diversifying the types of properties at shopping centres.
"It's called mixed-use here and it doesn't work for everywhere. It needs to be around transport and infrastructure. Sylvia Park and LynnMall have railway stations. There's talk of The Base getting a station and we are pushing hard to get a station at Drury. We're doing master-planning. There's interest from local and central government because they see this as an opportunity to resolve issues of housing, particularly in Auckland."
Kiwi is also planning more commercial development.
"Our first office building at Sylvia Park has gone off fantastically and there's a lot of reverse demand from other prospective tenants to be there so we'll look to roll out the second one, hopefully in short order.
"Potentially, you could look at hotels and also residential and in our minds, there's two parts to that: the build-to-own or your typical-type apartment, and the built-to-rent where the institutional investor or Kiwi Property would own the whole building and all the units and rent them. So they're really sophisticated in the American market.
"They normally have concierge services 24 hours a day, parcel collection, laundry, cleaning services, pools, gyms and they range from den-type or studio apartments through to two and three bedrooms, pet friendly, and a huge market in the States and really an opportunity in the New Zealand context — where we don't have much institutional corporate involvement in the residential market— for that to be grown as an asset class."
Some see Mackenzie as a visionary while others say his scheme wouldn't get off the ground for at least a decade.
"Clive is over playing this," said one expert, who spoke on the condition of anonymity.
Tax structures with local and central government and diversity of property risks were key problems to be resolved in multi-family funds, the critic said.
The Government's move to re-weight the landlord-tenant power balance could be another issue, with some investors fearing a tenancy law overhaul would seriously disadvantage landlords.
Mackenzie says he has an eye to the future with Kiwi's big investment holdings and wants to examine the possibilities of change.
And he says investors have been well-informed of Kiwi's intention to investigate the possibility of residential plans which might involve partnerships with institutions.
