This article is from the Australian Property Journal archive
THE Johannesburg Stock Exchange-listed Investec Australia Property Fund has diversified its portfolio by acquiring The Majestic Centre in Wellington for $NZ123.175 million, its first investment in New Zealand.
The office property is located at 100 Willis St, in the heart of the Wellington CBD’s ‘Golden Mile’ and was sold by Kiwi Property, which will continue to provide property management services.
The property will be acquired on an initial yield of 7.1% with average annual contractual rental escalations of approximately 2.75%.
The property comprises 2,322 sqm of ground floor retail space and 21 levels of office accommodation totalling 22,147 sqm, with large average floor plates of approximately 1,000 sqm.
It has recently undergone a NZD 87,500,000 seismic upgrade program which has resulted in the office tower component of the property achieving a 100% New Building Standards (NBS) rating. This makes the property highly attractive to large corporate and government occupiers who require an NBS rating of at least 80%.
The property is 98% occupied with a long weighted average lease expiry of 6.6 years and 40% of the income is underpinned by New Zealand Government tenants including the NZ Trade and Enterprise; Opus International; Ernst & Young; and Cigna Life Insurance.
The acquisition will increase the fund’s total portfolio value to approximately $AU910 million.
“This is the fund’s first acquisition in New Zealand, although we have been actively looking at the market there for some time,” IAPF CEO Graeme Katz said.
“We believe the yields achievable for quality prime grade office assets in Wellington are compelling when compared to the equivalent yields on similar assets in Australia, and the acquisition rate per square metre of the property of approximately NZD5,000 is significantly below the rates per square metre of similar quality properties in key Australian CBD markets.
“In addition, the property has a replacement value almost 30% greater than the purchase price and we think the acquisition demonstrates management’s commitment to seeking out opportunities that represent relative value,” Katz said.
“The fundamentals of the prime grade Wellington office market make this a very attractive acquisition for the fund. Current vacancy in prime grade office assets sits at around 0.4%, tenant incentives are typically between 7% – 8% and are falling and there is no meaningful uncommitted new supply on the horizon.
“In addition, a significant amount of the Wellington office market has been either permanently withdrawn or requires significant structural engineering strengthening due to recent seismic activity, which will likely place upwards pressure on rents and help maintain strong tenant retention rates,” Katz concluded.
Australian Property Journal
