Kiwi in line for big payout on quake-damaged office tower

The PwC building at 119 Armagh St is Christchurch's tallest office tower. Photo / Supplied

Christchurch's tallest office tower - the PricewaterhouseCoopers building - will be demolished and its landlord Kiwi Income Property Trust will get a big insurance payout to compensate it, pleasing analysts who follow the stock.

Kiwi chief executive Chris Gudgeon said yesterday that an accord was reached between the trust's manager and the asset's lead insurer, Vero Specialist Risks.

The parties had now agreed on the extent of structural and other damage incurred as a result of earthquakes in September, February and June.

"Given the building cannot be economically repaired, it will have to be demolished. Arrangements will be made with the Canterbury Earthquake Recovery Authority and our insurers to enable this to happen in due course," Gudgeon said.

The building is insured for earthquake damage, including demolition, and consequential loss. The trust's insurance claim was lodged with Vero in August and is now being processed, Gudgeon said.

Craig Tyson, equity investment manager for OnePath, said the insurance settlement would create a value-adding outcome for Kiwi.

He cited the large devaluation of around 40 per cent from the PwC Centre's March 2010 valuation of $51.8 million which fell to $32 million after the February earthquake.

"Assuming Kiwi gets full value from Vero, it could be worth a 2 cent per unit uplift in net tangible asset backing. We're still waiting to see if there will be a recovery in the value of Northlands Shopping Centre in Christchurch, which was also written down post the earthquake [-$31.3 million] but has performed strongly since despite minor damage," Tyson said.

Jeremy Simpson, research director of Forsyth Barr, said the full replacement insurance payout would give Kiwi a better result than a repaired building which could take a long time to lease and could also be difficult to sell. Kiwi had tried to sell the block before the earthquakes, he noted.

Buffy Gill of Goldman Sachs said if Kiwi got a full payout from Vero, it could result in a net tangible asset backing lift of 2c a unit from $1.07.

Prominent real estate consultancy, agency and manager Colliers International had offices on level nine of the PwC building where 38.9 per cent of tenants were in the legal field, 38.4 per cent were in the consultancy business, 6.7 per cent were in IT/communications, 4.4 per cent were in government, 1.5 per cent were in financial services and 10.1 per cent were in other fields.

Duns Ltd had a 16th floor boardroom in PwC overlooking the city but had to shift after the building was deemed unsafe.

The PwC building has 860sq m floor plates and 360 degree views of the city to the Southern Alps. It was classed as an A Grade building when bought by Kiwi in December 1997.

Many leases were not due to expire until 2015 and beyond, Kiwi's annual report showed.

COMING DOWN

PricewaterhouseCoopers building, Christchurch.
* Finished in 1990.
* 21-level block.
* 18 levels of offices.
* Ground-floor retail.
* $52.2m valuation pre-quake.
* 158 carparks.
* 16,082sq m floorspace.