Kermadec hopes to get more rent out of its new 16-level building on City Rd
Kermadec hopes to get more rent out of its new 16-level building on City Rd
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Listed landlord Kermadec Property Fund hopes to squeeze more income from a large Auckland office block it bought yesterday for $20.5 million.
Chris Francis, director of Augusta Funds Management and director and brother of Kermadec managing director Mark Francis, said rental growth and the arrival of new tenantscould lead to the company increasing returns from the 16-level office block at 7 City Rd on the fringe of the CBD.
Kermadec bought the 6606sq m office block from Andrea Steffensen's Clifton Pacific, he said.
Kermadec, the newest property company to list on NZX, is managed by Augusta.
It has raised part of the money to pay for the building but is hoping to get a further $7 million from its shareholders in an offer due to close next month.
Francis said a 600sq m portion of the building, comprising half of levels six and seven, were vacant.
But he believes tenants will be found soon and said the building was being rented at around $200 per square metre when market rates were closer to $230/sq m to $240/sq m.
"There's some scope for rental growth," Francis said.
Kermadec had a two-year underwriting agreement from Clifton which meant it would get money for the empty areas, Francis said.
A Colliers International valuation estimated the building to be worth $20.8 million, Francis said, so Kermadec had bought well.
This month Kermadec raised $9.8 million in an institutional placement through Forsyth Barr, selling shares to funds and habitual investors at $1.07 each.
Now, shareholders are being asked to contribute most of the rest of the cash.
Kermadec shareholders have been offered a $7 million share purchase plan in a deal also underwritten by Forsyth Barr.
The company will mail offer documents to shareholders today and the purchase plan will open on Thursday.
Shareholders have until June 11 to participate and will get their shares by June 15.
But Kermadec will still need a further $3.7 million to pay for the building. Francis said this money was coming from lenders ASB.
