Published 22 December 2010
Robt Jones Holdings Ltd settled its purchase of the Axa building at 41 Shortland St in Auckland on Monday.
The $45 million transaction was at just under $2600/m² – Robt Jones Holdings doesn’t focus on yield in its calculations.
In this case a price calculation by either method becomes somewhat irrelevant, because major tenant Ernst & Young will move out next year and the new owner plans some additions in the forecourt.
The office building was owned by Axa’s Wholesale Australian Property Fund, in which its Australian Property Fund was the major investor. The property was on the books at 30 September (the 31 May balance date valuation) at $A37.3 million ($NZ59.9 million today).
Robt Jones Holdings’ Auckland manager, Greg Loveridge, said: “There is a discount in the market if you are prepared to take on leasing risk. We’ll take it on where we think we can add value.”
He said Ernst & Young would move to Britomart by 31 May next year, releasing 6300m² of office space in the 19-storey building. Robt Jones Holdings intended to put that space into suites for smaller occupiers and to put it on the leasing market in the second half of 2011.
The building has 17,357m² net lettable area in its 19 tower floors plus 4-level annex. Mr Loveridge said Robt Jones Holdings would add an outdoor restaurant & bar in the courtyard and another lift in the tower. The perimeter air-conditioning will be replaced by a chilled-beam system in the ceilings, enabling floor-ceiling windows. Axa spent $25 million revamping the Shortland St building in 1999, but left the air-conditioning alone.
“I love the building – love the way it looks,” Mr Loveridge said yesterday. “And the outdoor restaurant? There’s nothing like it in town. I know I’d like to have a lunch in a place like that that’s not down at the Viaduct.”
After Ernst & Young exits from 8 floors, the building will be left with Fonterra on 4½ floors and law firm Hesketh Henry on 3 floors as major tenants.
The other New Zealand assets in the Axa wholesale fund’s $A876 million portfolio at 30 September were the Plaza shopping centre at Whangaparaoa ($A30.6 million), the ANZ Tower at 215 Lambton Quay in Wellington ($A22.9 million) and the Westpac Building at 318 Lambton Quay ($A23.2 million, also just sold). The New Zealand assets fell 9% in value over the year in local money (by $NZ14.4 million to $148.8 million). The Axa portfolio’s direct property investments are managed by Dexus Property Group.
The fund had a 0.1% positive capital return for the September quarter but has shown negative capital returns of 2.8% for one year, 10.9%/year for 3 years, 4.3% for 5 years, 1.7% for 7 years. Total returns were saved by distributions, except for the return over 3 years (minus 4.8%/year).
Axa closed its Australian Property Fund to withdrawals in 2008 but has continued making quarterly payments. Meanwhile, Robt Jones Holdings has been expanding its portfolio – it has 6 buildings in the Auckland cbd plus the Takapuna Finance Centre on the North Shore, a total of 70,000m² which, Mr Loveridge calculated, made it the third-largest owner of Auckland office space behind the AMP NZ Office Trust & Kiwi Income Property Trust.
Robt Jones Holdings is headed by Sir Bob Jones, with Mr Loveridge & Sam Cooper, Christchurch, as directors.
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Attribution: Interview, story written by Bob Dey for the Bob Dey Property Report.