Work and Income NZ office sale

Media Release

3.10.2016

Property investors set to benefit from Work and Income NZ office sale

The land and buildings housing Australasia’s biggest TV and online marketing company and Work and Income New Zealand’s offices in the heart of Auckland’s North Shore have been placed on the market for sale.

The property at 519 – 521 Lake Road in Takapuna’s central business district is an L-shaped 2587 m2 section with a four-storey building containing 4882 m2 of office space. Proposed new Auckland Council building guidelines allow for the creation of an 18-storey apartment tower on the predominantly flat site.

Combined, the dual tenancy schedule for the four storey block delivers annual net rental revenue of $1,405,781. Sitting directly across from the Shore City shopping mall, the building’s open plan ground floor encompasses 1589 m2 of retail space.

The Government’s social welfare and befits payment agency, Work and Income New Zealand (WINZ), leases the entire ground floor – generating a net effective annual rental of $390,361 plus GST. WINZ has a lease expiring early next year, but has two further three-year rights of renewal on its occupancy.

Meanwhile, the remaining three upper levels, each housing approximately 1097 m2 of office premises, are occupied by Australasia’s biggest TV and online marketing company, Brand Developers.

Anchor tenant Brand Developers is on a 12-year lease expiring in 2026 with a further six-year right of renewal, delivering annual rental of $1,015,600. There is an option upon a three year notice period for the new owner to yield vacant possession for the Brand Developer’s premise.

The three levels of offices house several hundred Brand Developers personnel – including the company’s administration and management teams, and the 24/7 national call centre.

The freehold land and building are being marketed for sale by Bayleys North Shore salespeople Simon Aldridge and Michael Nees through a tender process closing on 27 October, 2016. The property features in Bayleys’ latest Total Property magazine.

The property has 31.7 metres of street frontage onto Lake Road - with an additional 20.1 metres of street frontage onto Huron Street - and comes with 74 off-street car parks, of which 69 are secured in the basement of the building.

Mr Aldridge said the Proposed Auckland Unitary Plan currently being finalised had zoned the site Metropolitan Town Centre – allowing for a much taller structure to be built above the existing footprint.

“The Metropolitan Town Centre zoning permits a wide range of business activities – encompassing retail, supermarket premises, and offices. The plan’s town centre and mixed use zones are expected to accommodate an increase in the density and diversity of housing for Auckland – providing any new building does not preclude opportunities for business development,” Mr Aldridge said.

“This classification is consistent with the more general approach to housing opportunities in the greater city - for which there is considerable political support, and means that apartment-styled developments located above retail frontages are expected to be built in greater numbers in the future.

“The Proposed Auckland Unitary Plan height for 519 – 521 Lake Road is 72.5 metres. This increased upper height limit creates far more potential for the development of an apartment structure than the current operative plan.

“While the broader provisions of the Proposed Auckland Unitary Plan may not be adopted for a year or so, an independent review of the building and its future potential use and development opportunities, has indicated that any provision for apartments on the upper levels would survive any objection process.”

The Fletcher-designed building was constructed in 1986 on steel-reinforced concrete foundations, and has an earthquake rating of 80 percent of New Build Standards. The floors are pre-stressed beams with timber shuttering, while the frame is reinforced steel encased in concrete.

Mr Aldridge said Takapuna was currently undergoing a commercial property renaissance, with:

· A new three to four level premises being built in Byron Avenue delivering some 2000 m2 of office space to the market

· A new hospitality precinct linking The Strand with Takapuna Beach

· A similar hospitality hub being created in Hurstmere Road transforming a two level character building into a laneway-style venue

and

· Reinvigorating retail activity around a village type shopping experience with Hurstmere Road as the ‘spine’.

“The current office net rental rate of 519 lake Road is $231 per square metre, which is substantially less than market rates at other comparable office complexes in the vicinity. While the leasing rates for good quality offices in Takapuna show a fairly wide range, they are typically between $250 and $350,” Mr Aldridge said.

He added that any new architectural or refurbishment designs for the site could substantially improve the current lay out of the ground floor retail premises.

“The ground floor space is somewhat unique in its size and use – being surrounded by properties which comprise mainly of retail space and small floor areas. Independent assessment of the property has concluded that its highest yielding use would be reconfiguring into smaller tenancies. There are retail leases being concluded in Takapuna in excess of $1000 per square metre,” he said.

“Conversely, the high foot traffic volumes delivered by the bus interchange immediately outside the front of the building are enhanced by the site’s immediate proximity to Shore City. As a consequence, there is a huge opportunity with the right reconfiguration to add a whole new retail focus to a somewhat dated ground level floor plan.

“And, of course, the proximity of both those social infrastructure services - along with three separate hospitality precincts just a few hundred metres away - would underpin the development of a mid-rise apartment tower.

“While there are several low-rise apartment developments emerging on Takapuna’s fringes, there is nothing immediately planned for the town centre which could compete with the monopolistic residential offerings at The Sentinel.”

The property at 519 Lake Road has a current rating valuation of $13 million – broken down into $8,675,000 for the building and $4,325,000 for the land. Floors one to three are serviced by two passenger lifts and a separate single goods lift accessible to and from the basement carpark. Internal stairwells are adjacent to each lift shaft.

A new diesel backup generator and electrical switchboard upgrade have recently been installed at the building, which is serviced throughout by externally-housed air-conditioning units.

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