CBD supermarket planned without carparks

In what could be seen another sign of Auckland’s transformation into a “world class city” coming to fruition, a supermarket is soon to open in the middle of the CBD.

Listed Kermadec Property Fund has secured Progressive Supermarkets as a tenant in its $44.6 million Durham Lane property, the once controversial Finance Centre, where a Countdown supermarket is expected to open in August.

While there is a New World at Victoria Park and another Countdown on Quay St, this will be the only large supermarket on the direct route of most CBD workers to stop in on their lunch breaks or on their way home. The large apartment-dwelling population of the CBD will also make use of it.

Kermadec director Mark Francis told NBR NZ Property Investor the 2100m2 tenancy on a 12-year lease was big news for its $100 million portfolio, increasing occupancy from 86% to 92%.
“It’s a pretty significant deal for us. The quality of that tenant, the size of the tenancy in our largest asset and what it will do for our portfolio overall is really quite exciting,” Mr Francis said.

“We think and [Progressive] thinks the thing is going to go extremely well. The spinoff and flowon effects for the rest of the property and those around it is that there are lots of other brand-name tenants who want to be located near Countdown.”Early discussions are under way for fast food and convenience retailers that feed off the supermarket traffic flow to take up tenancies nearby.

“Obviously Countdown is going to generate a huge pedestrian count. It’s a good opportunity for these other retailers to be next door,” Mr Francis said.

The tenancy’s finer points are that Progressive will pay a base annual rent with an additional turnover rent. Mr Francis did not want to reveal the exact amount of the base rent and anticipated turnover rent but said it was a “significant” number.

“It’s a pretty big tenancy at 2100sq m right in middle of the CBD. With the turnover rent we effectively share in the success of the supermarket so the better they do, the more rent they pay. There are various thresholds put in place and, as they hit those thresholds, they pay additional rent over and above the base rent,” Mr Francis explained of the rental structure that is common for supermarkets, adding that Kermadec felt positive about it.

“We think it is going to go extremely well, being the only one in the CBD. It is likely to stay the only one in the CBD because it’s very hard to find a site that big with loading access. That was one of the key things we were able to offer them: one level with really good loading zone access.”

Kermadec is funding some base build redevelopment of the property including relocating existing escalators but Progressive is fully funding the fitout of the supermarket.

One unusual thing about the site for a supermarket is that it does not having any free parking spaces.

Progressive has a handful of carparks in the building for management staff but customers are assumed to be mostly foot traffic – people who live and/or work locally. A Wilsons public pay-carpark with 110 spaces is also in the building.

Previously the site was home to Servilles Hair Academy, which moved to new premises after 20 years’ tenancy at the Finance Centre and an appliance retailer. “It was a blessing in disguise they both vacated at a similar time and gave us space big enough to house Countdown,” Mr Francis said.

Progressive said it had been working towards a new store in the city for some time, “due to its growing residential population and to bring value to city workers,” spokesman Luke Schepen said.

Consent has been lodged for Kermadec to perform the necessary base build works, with the supermarket expected to open in August.
“That makes it in time for the Rugby World Cup,” Mr Francis said.
Finance Centre has been through a variety of controversies over the years. It was originally developed by Chase Corp, which collapsed in 1989 with what was then the biggest loss in New Zealand corporate history.

The Finance Centre complex fronts on to Queen, Victoria and Albert Sts and Durham St West (where Countdown will appear).

Since Chase’s collapse, the centre has been through several ownerships, finally ending up with Kermadec, which, ironically, is run by the sons of one of the original Chase executives.