Value of port land could double

Ports of Auckland is seeking to rezone its investment land between Viaduct Harbour and the harbour bridge. Picture / Herald on Sunday

The value of Ports of Auckland's blue-chip waterfront investment land, on the western reclamation, could nearly double overnight when it is rezoned from industrial to commercial and residential.

In a report valuing Auckland Regional Holdings' $8 a share offer for the 20 per cent of the port company it does not already own, valuer Grant Samuel said the company's investment land could be worth between $170 million and $197.25 million.

It said this non-operational land was worth $102 million on December 31 last year. And it was confident the port company would get the green light for the rezoning from the Auckland City Council.

An analyst said the valuation could be $100 million less than some property watchers anticipated.

But the 17ha chunk of land would take many years to fill up and would not be the "next Macau". It would not be occupied by money-spinning casinos and nightclubs but by passive users, so its prospective value was discounted.

Grant Samuel concluded the full underlying value of a port company share was between $7.68 and $8.55.

The offer, which values the company at $848 million, was therefore fair. The port's independent directors, however, have decided it may not be reasonable because potential benefits to Auckland Regional Holdings had not been adequately provided for. They have not made a recommendation to shareholders.

Most of the company's investment land is in the western reclamation, between the Viaduct Harbour and the Auckland Harbour Bridge.

If the city council does not notify a plan change by May 31 next year, the port company has said it will proceed with a private plan change.

Grant Samuel said the rezoning and development would be a long, complex process. With 100 per cent ownership, Auckland Regional Holdings, a subsidiary of the Auckland Regional Council, could expect to better manage the development.

The process could be better achieved with city council support, which would be more forthcoming if the land was publicly owned. The city council wanted to buy the western reclamation last year, but was rebuffed by the port company.

The two councils and the port company are now working on a redevelopment project for the Auckland waterfront from the Harbour Bridge to Mechanics Bay.

Ports of Auckland is developing a master plan for the western reclamation, with initial work due to be finished by the end of July.

Grant Samuel said its value range reflected the value of the land if rezoning was achieved in a "timely manner".

The range was based on a March 31 property valuation by two companies with strong knowledge of the area. They estimated the property on an "as is" basis at $99.4 million and on a rezoned basis at between $173.6 million and $205.4 million.

If zoning was deferred five years, the value was $156.5 million. Rezoned but without a leasehold premium, the land's value was $173.6 million. Rezoned, and with a 25 per cent leasehold premium applied, the value was $205.4 million. The valuers assumed resource consents would be in place by 2008 with the port company's four-stage master plan completed by 2025.

Grant Samuel said its value range took account of different value outcomes calculated by the valuers, and after allowing for resource consent and asset management costs.

The range also recognised the uncertainty associated with the process of seeking a rezoning.

Grant Samuel said the port company would be under pressure to convert vehicle storage area on Queens Wharf to property development.

Auckland Regional Holdings' offer closes on June 3.

On the waterfront

* The valuation could be $100 million less than anticipated.

* The 17ha chunk of land would take many years to fill up.

* It would not be the "next Macau", occupied not by casinos and nightclubs but by passive users.

* Such use would discount its prospective value.