High-class mix in gateway to fashion central

The four-level office block for sale in Newmarket is near to planned areas of intensive development. Photo / Supplied

One of the few freehold, A-grade city fringe office properties to come up for sale this year is being sold by Goodman Property Trust with offers due to close on July 16.

The four-storey commercial building is in a prime location at 139 Carlton Gore Rd at the Newmarket end of an established office district, close to Broadway and the Lion Breweries redevelopment site.

Built in 2004 on a 3107sq m freehold site, it offers prominent ground floor retail space below three levels of offices and comes with 230 carparks.

"It's a modern building sitting on a prominent street corner that links the office precinct with Newmarket's retail and commercial area," says Jason Seymour of Colliers International, who is marketing the property with colleague Peter Herdson, Colliers' national sales director.

"It has a good mix of quality office space, retail area and carparking for tenants, and will provide a purchaser with a sustainable and diversified cash flow," Seymour says.

"The building has large floor plates of 1575sq m on the three office floors and a 2.7m high stud on every office floor. Its net lettable area is 5929sq m and it is occupied by a number of investment grade tenants on staggered leases providing an average weighted lease term of around five years."

The principal tenant is Aurecon, formerly Connell Wagner, which has occupied the building since 2004 on an 11-year lease. Other office tenants include HWI and Farrow Jamieson plus retail tenancies providing a variety of services to the area. Net income from tenants is about $2.368 million.

Tournament Parking, New Zealand's largest privately-owned car parking company, operates several parks on site with monthly options for commuters to the Newmarket area. The carparking area ratio of 1:26sq m is significantly more than required by the council's regulations and provides the tenants with easy parking access.

"This is a solid tenant mix," Seymour says. "Not only are there investment-grade tenants in the offices, but the street-level retail tenants provide local services. There are carparks on every level, which is useful from an occupier's point of view. In addition, the lease expiry dates range from 2011 to 2017, with a high proportion of income committed through to 2015."

Herdson says the building is within "probably the best office location outside of Auckland's central business district".

"It's a prime spot in a growing commercial zone that's a first choice for tenants," he says.

"The Carlton Gore Rd office precinct has proved to be highly successful - going from start-up to completely developed and filled within 10 years."

Scott Pritchard, fund manager for Goodman Property Trust, says the location is the key reason why the trust invested in the building. The trust is New Zealand's largest listed industrial landlord with assets valued at around $1.5 billion.

"Usually the strategy is to bring facilities and amenities to a business park. Here it was the other way around," Pritchard says.

"This building is the closest major office building to Broadway. Surrounding properties comprise a mix of high-quality office and service-oriented occupiers, including Vector, Tonkin & Taylor, ANZ and the Lion Nathan head office."

Herdson points out the Newmarket commercial area is a focus for nearby, affluent neighbourhoods such as Parnell, Remuera and Epsom and is regarded as a fashion retail hub for the wider Auckland area. Additionally, it has a good mix of transport services ideal for shoppers and commuters with its own railway stations, excellent bus links to the city and suburbs and good access to State Highway 1.

"Newmarket has been the constant growth story over the last 15 years and because of this, the location is surrounded by possibilities," Herdson says.

Echoing the same view, the Newmarket Business Association promotes the area is "one of Auckland city's fastest growing communities".

Cameron Brewer, general manager of the association, says the precinct is quickly becoming Auckland City's second CBD.

Brewer says "greater" Newmarket is home to about 6000 residents and 19,100 employees working within 3116 businesses.

Since the release of the 1999 Auckland Regional Growth Strategy that was adopted by all councils in the Auckland region in 1999 and which sets out a 50-year vision for managing growth, Newmarket has been viewed as an area well suited for intensification, given its proximity to Auckland's CBD, good transport links, number of secondary schools, and its strength as an employment centre.

"We actively promote Newmarket as the fashion capital of New Zealand given its obvious strength in apparel retail. However, our fashion capital status also drives Newmarket as a sexy address for commercial businesses," Brewer says.

Last year Brewer led the charge to successfully expand the business association's boundaries, including extending its territory up Khyber Pass Rd and Carlton Gore Rd.

"Carlton Gore Rd is a blue chip address for commercial businesses," Brewer says. "We're thrilled that as from July 1 this road and many other streets will be covered by our association. Picking up the Lion Brewery site as a new member will also be useful as this undergoes a redevelopment programme over the next decade."

Corporate headquarters in the area include Ericsson Communications, Vector, Watercare, Fidelity Life, Lion Nathan, Merck Sharp & Dohme, Westfield NZ, and Sony BMG. The association also says that Newmarket is home to cutting edge businesses such as Woosh Wireless and Commonwealth Games sponsors Orca, makers of high-tech wetsuits and sportswear.

"We have driven the Newmarket area hard in recent years because it was obvious to us that there was a gap in the market for a top-end retail and commercial district in the Auckland region. We're now filling that gap but we've still got a lot of work to do," Brewer says, noting that Newmarket has been voted "Auckland's best shopping precinct" by Metro magazine readers for several years.

Development under way includes a number of major projects, including one close to 139 Carlton Gore Rd - AMP Capital Investor's reputed $1 billion redevelopment of the Lion Brewery site - one of the biggest urban renewal projects in Auckland. The site's 5.2 ha will be transformed by the Australian insurance giant and the Abu Dhabi Investment Authority from a factory to a "mini-village", a high-end mixed-use development which will include new streets, large commercial buildings and pockets of retail outlets and residential areas.

"Over time, the AMP development, alongside Carlton Gore Rd, will become a major new commercial centre - a new Newmarket CBD," says Herdson.

Nearby, Westfield is poised to expand its 277 shopping mall when market confidence returns, almost doubling its size. In addition, an eight-storey apartment development has been constructed between Broadway and the railway track, which will accommodate 1000 residents, 1200 cars and about 40 shops.

Newmarket is also developing its transport links in a major way. With hundreds of buses going through the area every day, including Link buses, a dedicated "Central Connector" bus corridor is under construction which is due to run from Britomart, over Grafton Bridge and on to Khyber Pass Rd. Work is also under way on the $70 million Dart Newmarket rail upgrade that will include a $25 million central railway station for Newmarket and also a junction upgrade, the construction of a new station on the corner of Park Rd and Khyber Pass Rd, plus the installation of double rail tracking.

Herdson says that given the potential of the location and the quality of the building the question arises as to why the Carlton Gore Rd property is up for sale?

"The sale is a part of a signalled and ongoing strategy by Goodman Property Trust," he says.

Last month Goodman published its results for the year to March 31 and updated the market on the asset sale programme it is running to maintain conservative debt levels and fund its development pipeline - reducing debt by selling properties, rather than issuing new equity. The planned sales also meet a distribution target of 10 cents per unit.

John Dakin, Goodman's chief executive, said assets sales had been completed of $50.6 million and there were conditional contracts on sales for a further $57 million. Part of the $50.6 million of sales included the sale through Colliers of Hawkins House and the neighbouring Ricoh Building, both in Stanley St, Parnell, and adjoining the former Carlaw Park, to a local investor for $22.95 million.

"For us, that's the best source of capital right now," Dakin said. Pritchard says the Goodman Property Trust is fortunate to have a liquid portfolio of assets.

"Properties like this have shown that they are saleable, so we have been active in refining our portfolio. We are looking to recycle the capital into our development pipeline as well as lower debt levels, which will give us a better long-term growth profile."

Seymour believes there will be plenty of interest in the Carlton Gore Rd property. "The Carlton Gore building offers growth opportunities through its tenant mix, improved car parking income and through potential rent growth in Newmarket as the AMP Lion Brewery site development and local infrastructure improvements come on stream."

Seymour says likely buyers could range from private, high-net worth groups or individuals around New Zealand, but overseas buyers may also be interested.

He says market conditions show that a flight to high-quality properties is taking place.

The recent depth of interest in the sale of a portfolio of New Zealand Post properties, as well as the recent sale of 17 Brookfield Multiplex supermarkets, continue to underline that high-quality, well-tenanted properties in prime locations are continuing to attract buyers and command strong prices.