KEY POINTS:
Australian capital looking for a home is expected to contribute to strong interest in Colliers International's newly launched national portfolio of 38 properties worth more than $250 million.
Peter Herdson, Colliers International's commercial sales director, says investor funds for property remain well in excess of supply and values
for quality properties continue to be strong, despite interest rate rises.
Strong interest is fuelled not only by local investment capital, but by the amassing of equity generated by Australia's compulsory superannuation funds. Billions of dollars annually are allocated to property and New Zealand assets are on the radar.
Herdson says motivation for the continuing investment in New Zealand property is the sheer weight of money. "For example, Australian Property Funds total assets have grown about 20 per cent a year from 2000 to now stand at $275 billion. The Australian Pension and Retirement Association estimates these funds will be $500 billion by 2010."
Listed property trusts have also shown similar growth, says Herdson. They have increased from $40 billion to $140 billion in six years and 36 are listed on the Australian Stock Exchange.
And it's the same story in the unlisted wholesale funds sector. "They have come from nowhere in 2003 to about $40 billion. All of that growth is purely from the A$810 billion of Australian superannuation funds, expected to exceed $2000 billion by 2020," says Herdson.
However, it's not only Australians who are looking at New Zealand property. "Ten years ago it was unthinkable that major European funds would even contemplate New Zealand. It was illiquid, but the Europeans have the same weight of money issues the Australians do."
Attracting some of the Australian and European investment in New Zealand are properties such as the bigger investments featured in the Colliers national portfolio - James Smith's and Blackmore House in Wellington, a landmark Parnell development opportunity and WEL Energy's headquarters in Hamilton.
The Parnell leasehold development site, which has street frontages to The Strand and Augustus Terrace, is being sold by Strand Developments, an arm of North Shore based development company Jonmer.
Strand Developments has already developed Stage One of the planned three stage sophisticated office development, building a new Vehicle Testing New Zealand (VTNZ) station. The roof of the station is the platform for Stage Two, a four level 1603 sq m office building and a separate 78 space, four level car parking building with access from Augustus Terrace.
The top floor of the car park will form the floor of the potential Stage Three, comprising a further five levels of office on the Augustus Terrace frontage. Jonmer envisaged the middle part of the development as an attractive landscaped area with a cafe, reflection pool, outdoor seating and expansive views.
A new owner will have to apply separately for resource consent for Stage Three. With consent for the final stage granted, the development would have a total gross floor area of 3103 sq m, says Colliers International metro sales broker James Thorburn.
"A new owner would be buying an interest in a 1405 sq m leasehold site owned by the Melanesian Trust, the VTNZ premises with 20 years to run on the lease and a 21 year right of renewal, and Auckland City Council resource consent for Stage Two."
VTNZ pays rent of $90,745 a year and is tied to three yearly rent reviews. The site's ground lease is set for the next 21 years with a perpetual renewal clause.
Jonmer has decided to sell to concentrate on larger projects, such as bulk retail, industrial and residential opportunities and land subdivision.
Thorburn says the site will appeal to developers who can start Stage Two immediately while resource consent is lodged for Stage Three, or an owner occupier who can take all or part of the new development, leaving room for expansion at a later date.
"Developers can expect the new office development to appeal to boutique companies. There is huge demand to be in this part of the city and because the 280-440 sq m floor plates are small, the offices will suit smaller professional companies interested in leasing."
Further south, Hamilton-based Wel Networks is selling its eight-level, head office on the corner of Victoria St and London St, but will remain as a tenant.
Colliers International Hamilton director Mark Brunton says the building is one of the city's top investment properties and will attract interest throughout Australasia. Offers close on May 10 and the property, which has a GV of $11.25 million, is expected to sell in the $12-$14 million range.
Kevin Palmer, Wel Networks general manager corporate services, says the combination of alternative uses for the funds and a buoyant commercial property market, make it the right time to sell. Wel will remain in the building as a tenant for the next three years. The building also houses blue chip and professional tenants such as the services firms of Norris Ward McKinnon and Staples Rodway.
In the capital, James Smith's, a decades-old landmark building that is part of the city's history, and Blackmore House are for sale.
James Smith's building was erected in 1907 for draper James Smith and added to over the next 60 years to create the famous corner etched in the minds of thousands of Wellingtonians who have traditionally met at the James Smith's Corner. The art deco facade, which has a heritage classification, was built in the 1930s.
James Smith's closed down in the 1980s and the building now houses 49 retail and office tenants. Rebel Sport has one of its best trading New Zealand stores in the building.
Next door, Blackmore House was developed by Chase Corporation in the 1980s as an office building and tenants Gubbs Shoes, City Stop, Cosy Cakes and IRD occupy the property.
The properties, over five buildings in seven titles, sit on a 4751 sq m site and bring in a net rental of $3.146 million a year, representing one of the capital's best development opportunities. They have a CV of $31.5 million.
Colliers International Wellington director Rosemary Bradford says the large properties are in a high-profile area of Wellington that is changing. On one side is the entertainment precinct of Courtenay Place and on the other side Cuba St, which is becoming youth oriented.
"The properties are in a prime position for residential redevelopment as there is a chronic shortage of apartments in Wellington."
The buildings can be bought separately or together and offers close on May 3.
