Tag Archives | Precinct

JLL researchers see city office opportunities for tenants over next 2 years

JLL researchers made 2 suggestions this week for tenants of office buildings in the Auckland cbd, and landlords of secondary space.

For occupiers & tenants, research analyst Daniel Longmire & senior consultant Chris McCashin said in JLL’s third quarter Pulse report: “Look to the influx of new-build options incoming in the second half of 2019 & first half of 2020. These will provide opportunities to move up the grade scale or secure better lease terms in existing space.”

For landlords, they said: “Landlords of secondary space should consider refurbishment. Demand remains skewed toward the top end of the market, and an increase in available options in the next 12-24 months will make secondary space less tenantable over the medium term.”

Their research showed vacancy dived from 8% to just below 5% in 2015, rose to 7% over the next 2 years and declined to 6.1% in the year to June 2018. They anticipate a rise of about half a percent over the next 12 months.

“A decline in vacancy was primarily driven by uptake in space within the Viaduct Harbour precinct, which fell by 167 basis points to 6.4% over the first half of 2018. Some 2500m² on the top floor of Datacom House was removed from the pool of available space, pushing office occupancy in the recently completed building to 100%.

“A number of factors have continued to aid overall demand for cbd office space, including sustained expansion of the white collar workforce, which increased by 7.3% from 506,900 in March 2017 to 544,100 in March 2018.”

The researchers attributed a slight rise in prime vacancy, to 5.3%, to some tenant retrenchment & reshuffling: “Limited options within the top end of the market continue to filter occupiers further down the grade spectrum, often refurbishing secondary stock to meet their office accommodation requirements.” That helped reduce secondary vacancy by 84 points to 6.7%.

The development pipeline

Mr Longmire & Mr McCashin said 2 new buildings in the Viaduct Harbour precinct, AA Insurance House & Vocus House, added 16,890m² of A grade space, and total cbd office space increased to 1.243 million m².

3 large developments will add 63,690m² over the next 2 years:

  • Commercial Bay, by Precinct Properties NZ Ltd on the block surrounded by Albert, Customs West, Quay & Queen Sts, 39,000m² in the second half of 2019
  • One55 Fanshawe, by Mansons TCLM Ltd on the Victoria Park end of the Wynyard Quarter, 16,830m²
  • 10 Madden St, by Precinct in the Innovation Precinct, 7860m² in the second half of 2020

The researchers said rental growth had stagnated this year, leaving the average for prime space at $490/m², though the limited options available were at higher rents. The secondary average was $290/m².

The JLL team expects the prime average to rise to $501/m², secondary to $296/m², by the first quarter of 2019.

The average prime yield was 5.6%, while the secondary firmed from 7% in the first quarter to 6.6%.

Attribution: JLL Pulse.

Continue Reading

Precinct confirms sale of quake-damaged Wellington building

Precinct Properties NZ Ltd confirmed on Tuesday that its sale of the former Deloitte House at 10 Brandon St in Wellington, for $10.2 million, has settled.

The 7.8 magnitude earthquake that hit Wellington in November 2016 badly damaged building services & fitouts in the 16-storey building.

Precinct took the property out of its investment portfolio last year, when its value had already plummeted, and called it a development property. Then it abandoned the idea of fixing the building up itself and looked for a buyer, which it found in April.

Deloitte House was valued at $62 million in 2008 but had dropped to $49.3 million, with a carrying value of $45 million, in 2015.

Following the November 2016 Kaikoura earthquake, the building needed to be remediated & seismically improved, and the valuation (and carrying value) dropped in 2017 from $49 million to $26.1 million, and then some more.

In Precinct’s report in March on the December 2017 half-year, the company said it had written the valuation down from $20.2 million in June to just $7 million in December.

Earlier stories:
23 April 2018: Precinct working on ANZ Centre deal, has conditional Wellington sale
19 March 2007: AMP trust buys Deloitte House in Wellington at 6.75% initial yield

Attribution: Company release.

Continue Reading

All 4 sell at apartments auction

All 4 apartments auctioned at Ray White City Apartments in Auckland today were sold under the hammer, including 2 in the Columbia (pictured) under long-term leases and a leasehold unit at Quay Park.

The leasehold apartment, in the recently remediated The Landings, went to 38 bids before being sold. Following that, a studio in the Precinct got down to a series of $100 bids before the hammer fell.

CBD

Learning Quarter

Columbia, 15 Whitaker Place, unit 3D:
Features: 42m², 3 bedrooms, managed by Iota Management Ltd (John Chen) under lease until 2024
Outgoings: rates $936/year including gst; body corp levy $5860/year
Outcome: sold for $180,000 + gst
Agents: Mitch Agnew & Ryan Bridgman

Columbia, 15 Whitaker Place, unit 8A:
Features: 42m², 3 bedrooms, managed by Iota Management Ltd (John Chen) under lease until 2024
Outgoings: rates $994/year including gst; body corp levy $6015/year
Outcome: sold for $180,000 + gst
Agents: Damian Piggin

Lorne St

Precinct, 6 Lorne St, unit 914:
Features: 20m² furnished studio + balcony
Outgoings: rates $1091/year including gst; body corp levy $1732/year
Income assessment: vacant, appraisal $400-420/week furnished
Outcome: sold for $266,400
Agents: Judi & Michelle Yurak

Quay Park

The Landings, 8 Ronayne St, unit 407:
Features: 62m², 3 bedrooms, 2 bathrooms; remediation completed
Outgoings: rates $1149/year including gst; body corp levy $6982/year including $3177/year ground rent
Income assessment: $570/week
Outcome: had asking price of $299,000, sold for $235,000
Agents: James Mairs & Lucia Gao

Attribution: Auction.

Continue Reading

Strong price on studio as 2 apartments sell

Both apartments auctioned at Ray White City Apartments today were sold under the hammer.

One is under hotel management at the Quadrant, where some building performance issues are being investigated. The other, a small studio in the Precinct on Lorne St, took 35 bids to get a result and sold at $14,550/m².

CBD

Learning Quarter

The Quadrant, 10 Waterloo Quadrant, unit 1904:
Features: 32m², fully furnished one-bedroom corner unit, double balconies; some building performance issues being investigated
Outgoings: rates $4714/year including gst; body corp levy $4309/year to be confirmed
Income assessment: in hotel pool
Outcome: sold for $310,000 + gst
Agents: Damian Piggin

Lorne St

Precinct, 6 Lorne St, unit 1301:
Features: 20m² studio, balcony
Outgoings: rates $1149/year including gst; body corp levy $2031/year
Income assessment: $380/week fixed until September; appraisal $400-420/week
Outcome: sold for $291,000
Agents: Josh Muriwai & Adam Gurr

Attribution: Auction.

Continue Reading

Expectations margin wide as 2 out of 7 apartments sell

The margin between vendor expectations & buyer estimates of where the market has moved looked wide again at Ray White City Apartments’ auction yesterday, as just 2 of the 7 properties sold.

The first property listed, in the Siena Terraces in Grey Lynn, sold on a 5.2% gross yield on current rent after a contest between 4 bidders.

After bidding slowed on the second apartment, in Zest, up the street from the NZ International Convention Centre under construction, auctioneer Ted Ingram couldn’t budge bidders who’d stopped $10,000 short of the figure he said would buy the unit.

The third property up, in the Endean Building on Quay St & the foot of Queen St, showed how wide apart expectations can be. Offers rose from a start at $1 million to $1.4 million – “That’s where I thought we’d be starting,” Mr Ingram said. Another bid took the offers to $1.425 million, and the auctioneer closed with a vendor indicator bid at $1.6 million.

On another one-bedroom unit, in the Hobson Oaks – which Mr Ingram “thought would have gone past $200,000 easily” – he placed a vendor bid to lift bidding from $130,000 to $180,000. When the sale was agreed at $187,500, Mr Ingram commented to the 2 men making that offer: “Gentlemen, this look it’s Christmas time, early.”

On my observation, one couple buying yesterday were occupiers, and the rest of the bidders on all 7 apartments were investors or traders (one longer-term, the other lifting the property for short-term resale).

While investors have frequently been accused of keeping first-homebuyers out of purchases, in fact investors are far cagier, know their limits on rent & do-up costs and are far harder to budge.

That leaves an opening in the current market for owner-occupiers to enter the fray and take advantage of some vendor uncertainty – often, a need to sell rather than considering it just as an option. But buyers looking for their own home have been largely absent from this market for months, which you can put down to the inability to secure a mortgage.

CBD

Lorne St

Precinct, 6 Lorne St, unit 1607:
Features: 44m² + balcony, one bedroom
Outgoings: rates $1474/year including gst; body corp levy $4277/year
Income assessment: $550-580/week furnished
Outcome: passed in at $535,000
Agents: Josh Muriwai & Adam Gurr

Quay Park

16 Cotesmore Way:
Features: leasehold, 115m² including garage, 3-bedroom terrace, 2 bathrooms, tandem garage, recladding completed & code compliance certificate issued
Outgoings: rates $1851/year including gst; body corp levy $3131/year, ground rent $7667/year
Outcome: passed in after bid at $140,000, vendor bid at $200,000
Agent: Andrew Bond

Queen St

Endean Building, 2 Queen St, unit 4C:
Features: 130m², one bedroom, 2 bathrooms, parking space
Outgoings: rates $2562/year including gst for apartment, $759/year for parking; body corp levy $8527/year apartment, $606/year parking
Outcome: passed in after bid at $1.25 million, vendor indicator bid at $1.6 million
Agent: Damian Piggin

Victoria Quarter

Hobson Oaks, 188 Hobson St, unit 808:
Features: 32m², fully furnished one bedroom in hotel lease
Outgoings: rates $4309/year including gst; body corp levy $5701/year
Income assessment: $1325/month
Outcome: sold for $187,500
Agent: Damian Piggin

Zest, 72 Nelson St, unit 1306:
Features: 37m², 2 bedrooms, secure parking space
Outgoings: rates $1188/year including gst; body corp levy $4723/year
Income assessment: $420/week current, appraisal $460-480/week for apartment, $50-60/week for parking space
Outcome: passed in at $370,000
Agents: Judi & Michelle Yurak

Victoria Residences, 75 Victoria St West, unit 305:
Features: 40m², one bedroom, 8m² balcony, opposite Sky Tower
Outgoings: body corp levy $2601/year
Outcome: passed in at $420,000
Agents: Lisa Zhang & Ron Yang

Isthmus west

Grey Lynn

Siena Terrace, 6 Burgoyne St, unit 1M:
Features: 60m² including patio, one bedroom, tandem garage
Outgoings: rates $1220/year including gst; body corp levy $3615/year
Income assessment: $495/week, fixed until yesterday
Outcome: sold for $495,000
Agent: Keisha Gutierrez

Attribution: Auction.

Continue Reading

Precinct working on ANZ Centre deal, has conditional Wellington sale

Precinct Properties NZ Ltd says it’s working with one party on the sale of a 50% interest in the 39-storey ANZ Centre in Auckland and has an agreement to sell the quake-damaged former Deloitte House in Wellington (pictured) at a huge markdown.

Precinct chief executive Scott Pritchard said yesterday: “The half-share interest in the ANZ Centre has received very strong interest and we look forward to forming a long-term relationship with the preferred bidder.

“With several options for 10 Brandon St having been assessed to date, we believe the sale of this asset represents the best option for Precinct. Progressing these asset sales will enable Precinct to focus on and recycle capital into its future development opportunities.”

The company sought expressions of interest this year in a 50% interest in the ANZ Centre on Albert St in Auckland. The campaign has closed, and Mr Pritchard said pricing indications were at a premium to the June 2017 valuation of $324 million.

Precinct spent $76 million refurbishing the whole of the ANZ Centre after the bank committed to a new long-term lease in 2011. The building has a net lettable area of 33,520 m² and a weighted average lease term of 8.6 years.

Mr Pritchard said there’d been strong interest in the opportunity to take a 50% interest in the building. “Precinct has agreed to a period of exclusivity for one party to complete due diligence and enter into a binding sale & purchase agreement. At this stage there is no binding agreement for the sale & purchase of the property.”

Changing fortunes on Brandon St

Precinct took the former Deloitte House at 10 Brandon St, Wellington, out of its investment portfolio last year, when its value had already plummeted, and called it a development property. Then the company abandoned the idea of fixing it up itself and looked for a buyer.

It’s found one at $10.2 million, conditional on ground lessor approvals, and the sale is due to settle in August.

Deloitte House was valued at $62 million in 2008 but had dropped to $49.3 million, with a carrying value of $45 million, in 2015.

Following the November 2016 Kaikoura earthquake, the building needed to be remediated & seismically improved, and the valuation (and carrying value) dropped in 2017 from $49 million to $26.1 million, and the some more.

In Precinct’s report in March on the December 2017 half-year, the company said it had written the valuation down from $20.2 million in June to just $7 million in December.

The building had 14 storeys when it was constructed in 1983 and had 2½ new floors added during a retrofit in 2005-06. It also now has 34 basement parking spaces & ground-floor retail, and a total lettable area of 12,972m².

Attribution: Company release.

Continue Reading

Ex-BNZ & State Tower takes on third name

The former BNZ Tower in Wellington, more recently known as the State Insurance Tower, will become the Aon Centre on Sunday.

Its construction for the Bank of NZ began in 1973, but a demarcation dispute over who should weld its structural steel not only stopped work on this tower but tilted highrise developers heavily in favour of structural concrete.

A second construction contract was needed to complete it, in 1984. The BNZ moved its head office to Auckland in 1998 and State Insurance took on naming rights.

Insurance brokerage Aon has been a tenant since 2013.

Precinct Properties NZ Ltd owns & manages the building, which fronts Lambton & Customhouse Quays as well as Willis St. It has 22 office floors, 3 parking levels, underground & ground level retail arcades and a foodcourt.

Attribution: Precinct release.

Continue Reading

Revaluation cuts Precinct bottom line

Precinct Properties NZ Ltd’s net operating income was steady in the December half, but the bottom line shrank by 55% after a reassessment of fair value on its Brandon St property in Wellington.

The company said the fall in the New Zealand interest rate swap curve during the period was the primary reason for the fair value loss in financial instruments of $6.9 million. This loss compared with a $15.3 million gain for the same period last year.

The NZX-listed company’s biggest project, Commercial Bay on the downtown block between Queen & Albert Sts in Auckland, now has 60% of its retail space committed, 66% of space in the office tower, and negotiations underway on another 15% of the tower.

While Commercial Bay’s construction continues, Precinct has put a 50% stake in the ANZ Centre, further up Albert St, on the market.

Financial summary:

  • Pretax net operating income up 3.8% to $40.9 million ($39.4 million in the December 2016 half), driven by 3.7% lift in net property income
  • Net operating income steady at $38.2 million ($38.8 million)
  • Net profit after tax down 55% to $17.7 million ($39.1 million) following fair value movement for 10 Brandon St in Wellington
  • Earnings guidance for the 2018 financial year unchanged at 6.3c/share, dividend guidance maintained at 5.8c/share
  • Gearing 23% (25.1% at 30 June 2017)

Investment portfolio:

  • Occupancy of 99% (100% at 30 June 2017) and a weighted average lease term across the portfolio of 8.8 years (8.7 years at 30 June)
  • 19 leasing transactions totalling 8170m²
  • like-for-like rental growth of 12.4% in Wellington corporate assets and 3.1% across the portfolio
  • Post-balance date, Precinct has begun a marketing campaign to divest a 50% interest in the ANZ Centre, Auckland.

Development update – Commercial Bay:

  • Project remains on budget with yield on cost maintained at 7.5%, supported by strong leasing outcomes
  • Increased leasing of retail space with commitments of 60% (30 June 2017: 46%).
  • Total tower office commitments maintained at 66%, another 15% (6000m²) under negotiation
  • Advancing the second stage of Commercial Bay with the integration & redevelopment of 1 Queen St into a mixed hotel/office use. Negotiations with a preferred hotel operator are advanced and commitment to this project is targeted for later this year.

Bowen Campus stage 2, in Wellington: Design continues and site preparation works are underway.

Link: Interim report & results presentation

Attribution: Company release.

Continue Reading

Precinct bond issue fully subscribed

The margin for Precinct Properties NZ Ltd’s new $100 million of bonds has been set at 1.50%/year over the 7-year swap rate, and the interest rate has been set at 4.42%/year.

Precinct offered $75 million of secured unsubordinated fixed-rate bonds plus $25 million in oversubscriptions, which were all taken up.

All the bonds have been allocated to intermediaries for distribution to their clients. No public pool is available. The bonds will be issued on 27 November.

Earlier story:
13 November 2017: Precinct launches bond issue

Attribution: Company release.

Continue Reading

Precinct launches bond issue

Precinct Properties NZ Ltd launched its $100 million bond issue today – up to $75 million of secured unsubordinated fixed-rate 7-year bonds, with the ability to accept $25 million more – to institutional & New Zealand retail investors. There’s no public pool.

The indicative margin range above the 7-year swap rate is 1.5-1.6%/year, subject to a minimum interest rate of 4.4%/year. The margin & interest rate will be set on Friday 17 November following a bookbuild process.

Link: Indicative terms sheet

Earlier story:
10 November 2017: Precinct expects to open bond offer next week

Attribution: Company release.

Continue Reading