Asset Plus Ltd shareholders voted overwhelmingly today to approve the $58 million acquisition of the Auckland Council property at 35 Graham St, above Fanshawe St and overlooking the Viaduct in central Auckland.
That made the acquisition unconditional and it will settle on Friday 28 June. 99.76% of the 102.3 million votes were in favour.
The council has a 2-year tenancy from settlement with no right of renewal, fixed at $3.975 million + gst/year, slightly above the assessed market rent of $3.96 million, putting the initial yield at 6.85% and equivalent market yield at 5.99%.
The refurbished building has a net lettable area of 9990m², floorplates of 3000-3500m².
Asset Plus’s 19.9% shareholder & manager, Augusta Capital Ltd, put 3 development proposals before Asset Plus shareholders today:
- The existing structure would be stripped back to a shell and, subject to resource consent approval, extended by up to 3 floors, increasing gross floor area by about 6400m² to about 19,400m², within the permitted height & maximum floor:area ratio
- Asset Plus would spend $15-20 million over a year on development for refurbishment to an “upper B grade” standard, but that would be less likely to offer the same potential for value increase
- The third option, light refurbishment, would only proceed if market conditions didn’t allow any form of redevelopment or extensive refurbishment.
Under the first option, construction would take 18 months-2 years and development would cost $90-100 million, with a target development margin of 15% & target yield on cost of about 6.6%.
Asset Plus expects to have $6 million of undrawn debt facility & working capital available to fund preconstruction spending for the design & consenting phase.
Development funding would likely come from disposal of other assets, more debt & raising of capital.
1 May 2019: Council agrees Graham St sale with Asset Plus
22 August 2018: Asset Plus (ex-NPT) slashes debt, poised to invest
Attribution: Company presentation & release.