ASB's huge office complex offers projected 9 per cent return.
The building housing ASB bank's national support centre at 360 Dominion Rd, Mt Eden, is being syndicated for sale with a projected initial annual return of nine per cent by property development and management company Augusta Funds Management Limited.
The huge low-rise commercial office complex in the Auckland suburb of Mt Eden sits on 8090sq m of land with three street frontages, including on to the main arterial route of Dominion Rd. The entire property is leased to ASB Bank Limited.
About 340 individual units in the property are being offered for sale at $50,000 each through Augusta.
Applications for units in the 360 Dominion syndicate close on August 10, with settlement of the property scheduled for August 20.
Augusta Funds Management is the wholly-owned subsidiary of NZX-listed Augusta Capital Limited (formerly Kermadec Property Fund Limited),which has a market capitalisation of approximately $57 million. It manages or owns more than $275 million of investment property in New Zealand.
Augusta's managing director Mark Francis says the syndication, entitled "360 Dominion", would be structured in the same format as previous company projects - as a proportionate ownership scheme where investors had the opportunity to purchase a proportion of the registered freehold title in land and buildings.
"The total purchase price of the property is $26.73 million plus GST, and will be funded by a bank debt facility of $11.27 million, with the balance through the proportionate investors' equity of $17 million," Francis says. "The purchase price includes a lease incentive payable to ASB. A further sum of up to $800,000 may be payable as the vendor seeks to secure additional car parks adjacent to the ASB complex.
"ASB Bank Ltd has agreed to an annual rent roll of $2.162 million, with annual rent increases of 2.5 per cent annually through to 2024 - starting in July next year.
"We have also negotiated an extension of the original ASB lease. This essentially creates a new 12-year term with ASB Bank Limited from July 2012, with a further six-year right of renewal - thereby extending the remaining lease term up to 18 years, expiring in 2030."
Francis says the scheme was projected to provide a cash return of nine per cent per annum for the first year and the property had been valued at $28.5 million by Colliers International New Zealand.
Augusta Funds Management parent company Augusta Capital Limited has agreed to fully underwrite the offer - in effect guaranteeing a complete sell-down of the offering. The sale is being marketed by Bayleys Real Estate, and allows for multiple units to be purchased by individual buyers.
Under the lease terms, ASB is responsible for managing the day to day operation of all property services - including security and traffic, car parking, cleaning, lift maintenance, landscaping, and staff amenities.
ASB is also responsible for insurance premiums and Auckland City rates.
Bayleys Auckland city sales person Mike Houlker said the solidly-built property at 360 Dominion Road was constructed in various stages between 1967 and 1981.
The building underwent a significant and award-winning refurbishment in 1996 when ASB bank first moved in, and houses 630 bank staff in a variety of banking and credit card support service functions. The syndication offering excludes retail tenancies along the Dominion Road frontage of the building.
"The building has reinforced concrete foundations, concrete footings and column pads. Each floor is finished in concrete, and the exterior includes a combination of red brick, concrete block and panel glass and steel or aluminium joinery," Houlker says.
"The building essentially forms an 'H' shape having two wings which run in a north to south direction, and is served by 141 car parks. A sky bridge on the first floor links the two buildings. A second link is provided near the centre of the building and features an open atrium and landscaped gardens. The ground floor staff area opens to the internal atrium and garden area."
Houlker says the property is located within a "mixed use zone" defined in the Auckland City Council District Plan.
Mixed use zones have an emphasis toward residential, commercial and retail activities - supporting the scope of potential re-development opportunities and uses over the long term for the building.