Kiwi Property Group Ltd has secured an agreement to sell the Majestic Centre in Wellington for $123.2 million to Investec Property Ltd, as the responsible entity for the Investec Australia Property Fund.
As part of the sale arrangement, Investec will appoint Kiwi Property to manage the office tower, which has undergone one of New Zealand’s largest seismic upgrades. It’s Investec’s first New Zealand purchase.
Kiwi Property chief executive Chris Gudgeon said yesterday: “We are immensely proud of what we have achieved for the tenants of the Majestic Centre, raising the seismic performance rating of the office tower to 100% of new building standard.
“Notwithstanding, the Majestic Centre was identified for sale as part of our capital recycling programme. Proceeds from the sale, which is due to settle in December, will be used to pay down bank debt, providing further flexibility for Kiwi Property to invest in line with our strategy.”
In the company’s annual accounts to March 2017, the value of the 21-storey Majestic Centre increased to $119.4 million, but a net value loss of $5 million was recorded after allowing for capex on the seismic upgrade programme completed in January. The building, at 100 Willis St, has a net lettable area of 24,469m² (2322m² retail, 22147m² office) & 240 parking spaces and typical floorplates of 1000m².
Kiwi Property is due to release its result for the September half-year next Monday, 20 November. At the moment it’s showing the Majestic Centre has 92.1% occupancy, a weighted average lease term of 6.8 years & net rental income of $7.1 million.
The buyer, Investec, said it was acquiring the property on an initial yield of 7.1% and with average annual contractual rental escalations of about 2.75%. It said the property was 98% occupied and had a long weighted average lease expiry of 6.6 years.
Investec is a South African investment bank which has a dual listing in Johannesburg & London. It floated the Investec Australia Property Fund on the Johannesburg Stock Exchange in 2013, launching with an $A130 million portfolio of 8 industrial & office properties.
That portfolio now comprises 25 properties worth $A942 million, and fund chief executive Graeme Katz said yesterday that was a scale at which management believed an ASX listing could be considered.
He added: “We continue to believe in the case for investing in good quality investment properties in Australia & New Zealand. The fund’s current equity yield of 8.2% is attractive for South African investors, especially as it is underpinned by the region’s favourable macro-economic conditions, property yield spread over historically low funding costs locked in and income returns in hard currency.”
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Attribution: Kiwi & Investec releases.