A distinctively designed Newmarket building which was Lion Breweries head office for many years is up for sale fully leased and offering a big opportunity to add value, according to its marketing agent.
Located on an 1191 sq m site at 5 Kingdon St, just off Khyber Pass, the 4712 sq m building comprises ground floor retail accommodation, parking for 72 cars over three levels and six levels of offices.
The property is leased to seven tenants and four sub tenants and is generating annual net passing income of $1,485,570 plus GST, with a mix of fixed and market related rent reviews.
Featured among 108 properties in Bayleys’ final and largest Total Property portfolio for 2018, the offering is for sale by deadline private treaty, closing 4pm December 6, unless sold prior. It is being marketed by Bayleys’ director of capital markets Layne Harwood.
“While the property is currently 100 per cent leased, the many options to enhance value through building renovation and repositioning is a key feature of this opportunity,” says Harwood.
“While currently offering good quality B Grade accommodation, the building is ready for refurbishment and modernisation. It is likely a new owner will continue upgrading office floors as they become available. They are easily sub divisible while a substantial pending tenancy expiry could appeal to a larger occupant.
“There are also opportunities around street level retail repositioning façade remodeling and services and amenities upgrades which would enhance the building’s image and investment profile considerably.”
Longer term conversion options under the property’s flexible Metropolitan Centre zoning could include apartment, serviced apartment, hotel, aged care or education uses, says Harwood.
“Increasing the appeal for residential or hotel conversion is the building’s largely unobstructed north facing aspect and extensive outdoor decks. The largest of these wraps around the top two levels providing a great recreation and function area with panoramic views.”
Another attractive feature for potential residential or hotel conversion – as well as its current use as office premises – is the building’s 72 car parks, Harwood says. “There is a much higher ratio of car parks per sq m of building than is allowed in the development of new office buildings under the current planning regulations.”
The property currently has a Weighted Average Lease term of close to three years. The short term nature of its tenancy profile will be reflected in the circa 7.5 per cent yield the property is expected to sell for, says Harwood.
Giant multinational Bupa Care Services, one of New Zealand’s largest healthcare providers, is the building’s largest tenant, generating approximately 35 per cent of the total rental income.
“Because of its relocation to another building on nearby Carlton Gore Rd, Bupa will not be renewing its lease, opening up a good chunk of space as well as naming rights to the building,” says Harwood. “This could be attractive to a larger occupier and there could also be flexibility to gain access to those spaces prior to the end of the Bupa leases.”
The property’s next biggest tenant is chartered accountancy firm Ecovis KGA which occupies 508 sq m with the Palazzo Italia restaurant leasing 350 sq m of ground floor space on the Kingdon St frontage.
The building is located on a level rectangular site with approximately 21m of frontage to Kingdon St and a similar frontage to Suiter St which provides vehicle access into the building. Harwood says better use could be made of the Suiter St frontage which is opposite an entranceway to a large landholding of 5.2 hectares owned by the University of Auckland.
The university is in the early stages of creating a new inner city campus on this site in a long-term development spanning a 30-year timeframe and encompassing purpose-built teaching and research facilities, student accommodation and other facilities.
The 5 Kingdon St building was constructed in the mid 1980s and an Initial Evaluation Procedure (IEP) seismic assessment undertaken in 2013 indicates it meets 79.95% New Building Standard (NBS).
Harwood says the building has been well maintained and is in as excellent condition for its age with recent improvements completed this year, involving over $500,000 of expenditure, including chiller, air conditioning and lift upgrades.
“However in order to secure new professional and commercial tenants and increase rental levels, floors will need refurbishment of their foyers and office space. This would include an upgrade of amenities, such as new bathrooms and kitchenettes, as well as modernised lighting, flooring, wall and ceiling panels.”
Harwood says Newmarket is undergoing considerable infrastructure investment and commercial and residential redevelopment led by Scentre Group’s massive $790 million redevelopment and expansion of the Westfield Newmarket shopping centre and Mansons TCLM’s development of Mercury NZ’s new head office building at 33 Broadway.
“Over time, there is also expected to be continued redevelopment of obsolete buildings to higher
and better uses including apartments, hotels, entertainment and education uses. The new City Rail Link, once completed, will also enhance the value of the location considerably with a revamped Newmarket station being an integral part of this.”