Fuji Xerox head office will be hard to copy

Artist's impression of Fuji Xerox House following its redevelopment in October.

Fuji Xerox House, a two level office building undergoing a complete makeover and overlooking the Auckland Domain in Newmarket, is being offered for sale on behalf of developer Mansons TCLM Ltd.

"This building at 79 Carlton Gore Road will be considered a trophy holding by investors in a market characterised by a scarcity of prime, well-leased commercial assets," says Jonathan Ogg, a senior director with CBRE who, with Brent McGregor, the agency's senior managing director, is marketing the property for sale via an international deadline private treaty campaign closing on May 6.

"The building is undergoing a complete refurbishment and upgrade and will be presented to the market as a state of the art, new head office facility when it is completed in October," Ogg says.

Fuji Xerox celebrated 50 years of business in New Zealand last year and will relocate its headquarters to Newmarket following a quarter of a century at its current location in Freemans Bay.

"With extremely competitive debt finance packages on offer, buyers will view the timing as excellent to secure this building as a cornerstone portfolio holding for a price of $32,850,000," Ogg says.

"Within this asset class and price bracket, we consider the investment qualities of this property along with its tenant covenant, quality of construction and prominent location to be unmatched in the New Zealand market."

McGregor says Fuji Xerox has committed to a new 12 year head lease over the entire 3438 sq m building, with rights of renewal and fixed rental growth. "Along with the property's location and construction quality, this long term commitment by a global corporate heavyweight makes the property a superb passive investment," says McGregor.

Mansons, which bought the building last year, is redeveloping into a modern, Four Star Green Star facility with the latest energy-efficient features.

"The company's reputation for constructing top-quality office assets in Auckland will be a further draw for investors," McGregor says.

The building is located on a 1914 sq m freehold mixed-use site and will encompass 3438 sq m of lettable space across the two levels of office accommodation. Two levels of secure basement car parking and street-level parking will provide 100 vehicle spaces.
The property will include a glazed central atrium and a public café at ground level, facing Carlton Gore Rd and the Domain.

"This is a building of the future," McGregor says. "It will have a New Zealand Green Building Council Four Green Star Rating standard and offer the highest quality, modern office accommodation."

Brent McGregor, senior managing director for CBRE.

He says Fuji Xerox house will be one of few in the Newmarket area to achieve a four star green level of certified sustainability and it also being redeveloped to an A-grade seismic standard.

"Fuji Xerox House will be a new-generation office development for Auckland. Natural light will stream through a modern, double-glazed curtain wall facade, with coated glass controlling the light transmission.

"A high-specification ventilation system will be installed with chilled water fan coil air conditioning system distributing tempered filtered fresh air to the office spaces. The chillers have been selected for high efficiency, and the whole system will be controlled and monitored by a state of the art building management system."
He says the building will feature views over the Auckland Domain across the road from its top-quality office and meeting spaces.

Ogg says a top attraction of the property for both local and offshore buyers will be the strong covenant provided by Fuji Xerox.

"Fuji Xerox is a global tech brand with revenue in the order of $11 billion plus a year and over 40,000 employees worldwide. As far as tenant covenant goes, it simply doesn't get much better than this for investors.

"The strength of a global brand-name tenant, combined with a long lease, growing income stream, new building and top location make this property an absolute prime investment offering," says Ogg.

Jonathan Ogg, senior director with CBRE.

McGregor expects strong demand for 79 Carlton Gore Rd from New Zealand-domiciled and offshore private investors.

"The property's long lease, strong covenant and scarcity in a market where funding rates are some of the lowest on record will place this asset firmly on the radars of both local and international buyers. For offshore buyers, the property's fundamentals make it extremely desirable at a time when the investment spotlight is broadening its focus from Asia and Australia to include New Zealand," McGregor says.

"In addition Mansons TCLM is renowned for delivering high specification and high value office buildings. Since 2010, the company has developed 38 per cent of the new CBD, city fringe and Newmarket office accommodation in Auckland - a significant achievement," he says. "Mansons' success in delivering these new buildings, which have been in demand from tenants, is owing to the company's foresight in courageously pressing ahead during the global financial crisis with construction of uncommitted developments based on expected future demand."

Notable projects Mansons has delivered since 2010 include Watercare House in Newmarket, Oracle NZ's headquarters on Victoria St and the GHD headquarters on Napier St, Freemans Bay.

Ogg says Carlton Gore Rd is recognised as one of the best city fringe business locations in Auckland.

"Many other national and international corporations are in residence on Carlton Gore Rd including Vector, Roche and Tegel."

As well as being located among a number of other corporate headquarters, the property is set to benefit from Newmarket's urban renewal, which is gathering pace with the construction of the University of Auckland's Newmarket campus on the 5.2 ha former Lion Brewery site.

"The University of Auckland has committed to spending some $1 billion to redevelop the site over the next decade and this will be a significant catalyst to further improvement in the Newmarket area," Ogg says. "As the University of Auckland's new campus begins to take shape, the positive impacts on surrounding properties are already being felt."
Even before the university purchased the Lion Nathan site, lower Carlton Gore Rd had already developed into an attractive boutique retail and café precinct, alongside the ongoing popularity of Newmarket as a shopping destination and the development of new apartments and office buildings in the area, he says.

The development of Teed Street and Nuffield Street into attractive precincts was a further example of the area's ongoing positive dynamics which were giving developers and tenants confidence.

"We expect Newmarket and its smaller precincts such as Carlton Gore Road to benefit significantly from the university development, with occupiers including accommodation providers, educational and research facilities to have extensive positive impacts for owners of property in the entire area."

McGregor says New Zealand stable democracy, independent regulatory authorities and lack of corruption have created an attractive investment environment that is well recognised internationally.

"New Zealand is one of best performing developed countries in the world right now - attracting a broad range of investment capital into various sectors including agribusiness and tourism alongside traditional commercial property."

"In 2013 a World Bank report ranked New Zealand first in the world for investor protection and starting a business compared to 183 other countries, based on our world-class regulatory environment which facilitates positive business activity and growth."
Other key advantages New Zealand offers offshore investors include a stable, open and competitive economy, a business-friendly government, competitive cost structures, low inflation and low corporate tax rates.

Aerial view depicts 79 Carlton Gore Rd at far left overlooking Auckland Domain.

McGregor says Newmarket itself has also long been regarded as one of Auckland's premier retail destinations because of its combination of boutique shops, department stores and mall; cafes, bars, movie theatres, hotels and leisure facilities.
"Newmarket also has plenty of parking, easy access to Auckland's State Highway One motorway system and efficient rail and bus services - in a location only 2.5 kilometres to the Auckland CBD."

McGregor says CBRE recently surveyed 160 office tenants in the Auckland market and came to the conclusion that the future viability of high-quality office investment stock looked very sound.

"Vacancy is falling across the Auckland market and occupiers are operating at elevated levels of capacity utilisation," he says. The survey identified 'business growth' as the major driver of office tenants' real estate strategy over the next two years, with over half of the occupiers planning to increase employee numbers by more than 5 per cent.
"This comes at a time when there is little spare capacity to accommodate extra headcount, particularly within quality office accommodation," says McGregor.

"These trends fuelled a record transaction market in Auckland commercial property over the second half of 2014. As a result, Auckland continues to be the dominant force in the country for commercial property investment. Demand for strongly tenanted, modern office assets like Fuji Xerox House is likely to continue unabated."

McGregor says CBRE records show that 119 New Zealand properties of over $5 million in value changed ownership over the period - the strongest result ever shown in CBRE's records.

The volume of transactions for the six months was more than twice that recorded for the previous market peak in the second half of 2007.