The score is one-nil to AMP, as a rival giant developer bows out of the race to put up a new office tower in Auckland. Property editor ANNE GIBSON keeps the score card.
Defeat was conceded graciously because it was a hard call for proud chief executive Don Fletcher, who came across from Sydney to break the bad news in Auckland this week.
The much-vaunted 30-storey $100 million Trans Tasman tower planned for Auckland is canned.
Aucklanders might consider towers passe. Do we really need another inner-city skyscraper casting shadows over the city, bringing wind sheers down on our streets and creating all the associated mess that goes with big-time construction?
But for the property industry and the economy, it was yet another nail in its coffin - a sign of sinking confidence, declining economic fortunes and a grim outlook mid-winter.
The victory goes to the Australians this time round. All the cards are now with AMP, which this week saw Fletcher Construction hoist its tower crane, with the distinctive lion emblazoned on the side, on its prominent waterfront site.
The property industry has looked on with gob-smacked amazement and great interest all this year, as the two giants of real estate have battled it out.
Each company has assets worth more than $1 billion, so seeing the titans of an industry in a race against each other was one of the best shows in town.
The race was to build a tower - a monument to financial success and an on-going revenue generator, a stake in the future to provide returns to shareholders and floors for office workers.
The quarry was tenants who can afford to pay millions every year in rents for offices with views to die for and state-of-the-art technology.
The battle was being fought on two sites: AMP with its prized block on the corner of Albert and Quay Sts, versus Trans Tasman with its central-city site spanning Fort and Shortland Sts, on the old Auckland Star site.
AMP's blitzkrieg approach knocked Trans Tasman for six. With the largest floor span ever built in an office block in New Zealand and rising 31 levels, AMP's PricewaterhouseCoopers tower simply mopped up most of the tenants out in the market for new office space. It certainly gave those tenants the upper hand when it came to talking about the amount of rent they were prepared to pay.
Fletcher quietly shakes his head in amazement at AMP's plans. His barbed comment to his rival is that perhaps AMP has slightly lower expectations of return than Trans Tasman.
But he has less sarcastic observations to make on Auckland's office scene, even though none is particularly complimentary.
He cites a mixture of reasons for his hard call, but they principally amount to a simple lack of confidence in Auckland's property market, particularly the need for giant skyscrapers. Fletcher's view is that the city would do well with more low-rise buildings like the Maritime Square office blocks built around the Viaduct Basin.
No coincidence then that Trans Tasman has just bought a large tract of land there, ear-marked for development when Auckland City re-zones the blocks.
The decision to shelve the skyscraper comes down to simple economics: "The cost of capital for property companies, depending on who they are, ranges from 9 per cent to 11 per cent. But the cost of borrowing money to build is also between 9 per cent and 11 per cent, so if you're lucky, you will break even," admits Fletcher.
Add to that the fact that Trans Tasman has suspended dividend payouts to its shareholders and the fact that it wiped $35 million off its portfolios because of devaluations in the past two years, and an even darker picture emerges. Especially when there's a softening rental market and a declining economy.
Trans Tasman's boardroom at the top of the Citibank Centre on Customs St looks directly across to New Zealand's tallest new skyscraper: the 39-level Royal & SunAlliance Centre. Kiwi Income Property Trust is yet to make any announcements about renting the top floors, levels 34 to 39, which it has held back deliberately. At $600,000 a floor, the offices have proved too pricey, although American data storage company EMC Corp leased a quarter of level 34 recently.
Fletcher gestures over to unlit floors in the new tower as evidence of his argument.
Will the last one out please shut off the lights.
Tower and the glory
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