Half a billion dollars in sales

Four Victoria St office buildings within Spark's head office complex fetched nearly $250 million.

A cluster of 10 big-ticket commercial properties has been snapped up by a mixture of local and overseas buyers, writes Colin Taylor

Ten large commercial properties valued at over half a billion dollars have recently been sold by Bayleys Real Estate.

"And there's more in the pipeline, with a number of other big land transactions close to being concluded," says Mike Bayley, managing director of Bayleys.

The multimillion-dollar sales include all four office buildings in the head office complex of Spark New Zealand (formerly Telecom New Zealand) on Victoria St in central Auckland which sold for a total of just under $250 million; and an office and retail building in Takapuna occupied by Auckland Council which fetched $70 million.

Other big ticket properties to sell included the Pakuranga Plaza shopping centre for $96 million, three substantial Auckland land transactions totalling $117 million, and Kirkcaldie & Stains' Harbour City Centre property in Wellington for $45.85 million.

"We've had a phenomenal run over the last few months. This would be the biggest cluster of large commercial property sales within our 42-year history that Bayleys has concluded in such a short space of time," says Bayley.

He says the purchasers have been a mixture of local and overseas buyers from Singapore, Indonesia and China. "There's no doubt that offshore investment activity has stepped up a level this year on the back of the country's good economic performance. We would expect that to continue into 2015, particularly now that a stable coalition Government welcoming foreign investment has been re-elected and our dollar seems to be heading back towards more realistic levels.

"However, foreign investors have fairly specific requirements - they mostly want large holdings which are well located and either have a very strong tenancy profile or offer the opportunity to add value, and there's a limited supply of this type of offering. The majority of commercial and property purchasers, particularly at the lower value of the market where most sales occur, continue to be New Zealanders."

The historic Harbour City Centre building at 197 Lambton Quay in Wellington.

Individual prices of the four Spark buildings ranged from just under $50 million to close to $70 million.

Paul Hain of Bayleys Auckland negotiated three of the sales and the other was concluded by Hain in conjunction with Paul Dixon, also of Bayleys' Auckland office. Hain says three of the buildings that have new 10-year leases to Spark sold at yields of 7.25 to 7.45 per cent and the fourth building sold at an 8.5 per cent yield reflecting the relatively short-term nature of its lease to TVNZ with only 18 months to run.

"The way that the owner and developer of the buildings, Mansons TCLM, structured the leases to Telecom made them very appealing to investors," says Hain.

"There are built-in annual rent increases of 3 per cent which amount to a significant lift in the rental income over the period of the lease. They also provide a 10-year defects and capital expenditure warranty meaning the new owners face no irrecoverable outgoings until at least 2024."

The four 5 Green Star rated buildings range in size from 6316sq m to 7944sq m and share 300 basement car parks between them.

They are linked by a spectacular central atrium, the biggest of its kind in New Zealand.

Hain, in conjunction with Simon Aldridge of Bayleys North Shore Commercial, also sold a 15,000sq m office and retail building at 1-7 The Strand in Takapuna for $70 million.

Aldridge says the property, in which Auckland Council is the anchor tenant, has been purchased by a New Zealand-based private investor at an 8.4 per cent yield

The building, on a 7862sq m high-profile corner site at the junction of The Strand, Hurstmere Rd and Lake Rd, is a short walk from Takapuna Beach and has expansive sea views from its upper floors and decks. It comprises two adjoining structures: a five-level office building with ground-floor retailing and basement parking opened in mid-1991 as the former North Shore City Council's administrative headquarters; and a seven-level building with three levels of parking and four levels of office accommodation that was completed in 2009. At that stage the council entered into a 12-year lease over 86 per cent of the net lettable area.

The balance comprising 2039sq m of retail space is occupied by 12 tenants.

The original building has recently undergone a comprehensive $1 million refurbishment and the property contains 312 car parks.

Hain says the vendor commissioned engineering reports and preliminary plans to potentially add a further level over part of the original building which would provide about 1000sq m of additional accommodation. Because of its location and extensive views and decking, the building could also lend itself to either residential or hotel conversion at some stage in the future.

A longstanding client who made his first investment in New Zealand through Bayleys more than 20 years ago was the purchaser of Pakuranga Plaza for $96 million. It was bought by Singaporean investors Stanley Tan and Pang Yoke Min. Tan and the Tang family of Singapore established Dynasty Pacific Ltd, which introduced the Heritage hotel chain to New Zealand in the 1990s with Bayleys managing the subsequent selldown of hotel rooms and apartments.

The Pakuranga Plaza shopping centre was sold for $96 million to Singaporean investors.

The Pakuranga Plaza sale was negotiated by Bayleys' principals, John and David Bayley, in conjunction with James Chan, Bayleys' Asian sales director.

David Bayley says the new owners will be exploring a multitude of opportunities for further developing the four-hectare site on which Pakuranga Plaza is situated, including the possibility of residential accommodation, hotels, office blocks and on-site entertainment.

He says they are also interested in purchasing more shopping centres in New Zealand. Bayleys Property Services has been appointed to manage the plaza and will be retaining the existing experienced on-site management team.

John Church, Bayleys' national director commercial, says confidentiality clauses in the three land sales agreements prevent specific details from being disclosed but they include a CBD development site and substantial landholdings in Westgate and East Tamaki.

Church says a big uplift in large land sales is also contributing to the increase in higher value sales. "There's been a noticeable increase in the amount of land for sale as a number of longstanding owners have looked to take advantage of greater demand for development sites and the growth in values which has resulted from that.

"There's also quite a bit of jockeying for position going on among land bankers ahead of the new zonings being proposed under the new Auckland Unitary Plan, which is contributing to increased activity in this sector of the market."

In Wellington, NZX-listed retailer Kirkcaldie & Stains sold the historic seven-level Harbour City Centre building at 197 Lambton Quay, adjacent to its iconic Wellington department store, for $45,850,000 through Mark Hourigan, Bayleys' Wellington director and Mark Sherlock, also of Bayleys Wellington.

The 9303sq m building was constructed in the late 1920s and has undergone various upgrades and remodelling over the years before a significant strengthening and refurbishment, completed recently, that brought the building's seismic rating to 100 per cent of New Building Standard (NBS). Most of the substantially renovated and reconfigured office space is occupied by Contact Energy on a nine-year lease until 2022. The modernised ground-floor retail space is anchored by Country Road on a 10-year lease until 2021.

The property, which has been purchased by Wellington investor Charlie Zheng, also included an adjoining redevelopment site of 1355sq m. Kirkcaldie & Stains acquired the property in 2001 for $29 million with an eye to expanding the company's retail business. However, changes in the industry, particularly relating to online sales growth, reduced the need for additional retail space in Wellington's CBD.

Hourigan says the transaction is one of a number of substantial sales concluded in Wellington this year and reflects a positive change in the capital city.

"Wellington has a fairly conservative investment environment and it generally takes longer for things to turn around than in Auckland.

"But there's definitely been an improvement in the mood of the property market here and some pent-up demand is now coming to the surface.

"We are getting multiple tenders on larger properties and our most recent auction portfolio drew very good bidding, with seven out of the eight properties offered selling under the hammer."