Big plans boost for Capital

The prospect of undertaking two large development projects in Wellington worth $200 million has pushed up the value of takeover target Capital Properties, says an independent report released this week.

The evaluation from Deloitte Corporate Finance pointed to the landlord's prospects being lifted even further if it goes ahead with the projects.

If both deals are completed, Wellington will get an extra 7.4ha of office space, mainly for the rapidly expanding Government sector which pays 47 per cent of Capital's rent take.

Deloitte's evaluation valued Capital at $1.48 to $1.73 a share, but AMP Property Portfolio is offering only $1.42. Capital's independent directors told shareholders on Monday to reject AMP's offer.

Capital chief executive Chris Gudgeon yesterday backed Deloitte's findings about the development deals, saying the company was in a strong position to create even more value for shareholders.

"We will continue to meet demand in new and existing buildings for our tenants, which bodes well for the company's future," he said.

The largest development on Capital's books is the planned $100 million-plus Bowen Integrated Campus, which will bring 4.2ha of office space adjacent to the existing Charles Fergusson and Bowen State buildings, both of which would be refurbished as part of the plans.

Capital has released few details on this project and Gudgeon refused to put a dollar figure on it, but said it was the largest being planned.

Deloitte noted that Capital already owns the land for the Bowen campus, which is in a block bounded by Bowen St and Ballantrae Place.

It also noted that Capital was negotiating with "a major Government tenant" to create an integrated office complex on the site but said the project was only at the conceptual development stage.

The second big project planned is the $100 million Vogel Integrated Campus in a block bounded by Aitken St, Mulgrave St & Kate Sheppard Place.

Capital has already snared the Ministry of Justice as a tenant on this project, although this will leave it with other space to fill because the ministry occupies two other Capital buildings.

Capital is well advanced on plans to build this 3.2ha office development between next March and February 2010.

"Capital has a development proposal for a new building adjacent to and integrated with the Vogel Building, which is to be refurbished as part of this proposal," Deloitte said.

"Capital has been picked as the preferred supplier of the Ministry of Justice's national office requirements and is in the process of negotiating a binding agreement with the ministry for a new headquarters on this site.

"It is also in discussion with several other Government agencies who could potentially commit to taking the new space in the office complex.

"Costs have been established for the development but binding commitments in terms of leases and construction contracts have not yet been formalised or entered into."

The ministry rents space from Capital in the Charles Fergusson Building and Vogel Building and occupies a number of other buildings in central Wellington.

The two proposed projects follow one development which Capital already has under way and another which is due to begin soon.

By December, Capital will have the roof on its third development project. The $72.5 million Defence Headquarters building, on the corner of Aitken and Mulgrave Sts, will leave Capital with a fourth development opportunity - refurbishing the old Defence Headquarters building on Stout St.