Archive | Market

“Hip apartment team” the new Kelland’s marketing look

Young urban specialists get involved in projects early

Changing times dictate new approaches, and Deborah Kelland (left) has done that in various ways. The new offices of her firm, Kelland’s Realty, on Gladstone Rd in Parnell make a statement and the creation of a “hip apartment team” makes another.

Kelland’s has specialised in city apartment work, competing there with Bayleys for a time, but is now off Princes Wharf, is tying up some of last year’s projects and thinking ahead on how to make things work for the next cycle.

The firm has become even more firmly project-orientated, rejecting the take-all model of traditional real estate agency.

Very precise customer targets

“Our target? Affluents who want desirable, creative and substantial properties.

“We have some niche markets: coastal subdivisions and individual coastal properties; designer houses, including penthouses; creative commercial projects; quality investments such as UniLodge (just started on Anzac Ave), Sebel, Metropolis, major projects,” Ms Kelland said.

Ross Hawkins has been specialising in the coastal developments, particularly the Omaha South project which will double the size of the settlement on the Omaha peninsula.

Meanwhile, back in the city, Myles Green, Matt Baird and Blair Watson (left to right) are members of the “hip apartment team”.

Axis projects went well

Kelland’s put through some successful projects for Greg Wilkinson’s Axis Group last year — revivals of old Whitcoulls space, which was turned into the Met and Soho apartments off High and Queen Sts.

“We’ve sold 83 of 87 of these, in three refurbished historic buildings, Whitcombe & Tombs, Lewis Eady and the Securities building. They have studs up to 3.4m high, exposed concrete beams and sprinklers, with designer fitout.

“The Met was much smaller, but the second stage included lofts up to 126m², industrial New York in their style, very popular.”

Mr Green said there was a broader range of buyer for the Met, which he believed would show good returns. Settlement is occurring at the moment.

“We’ve found the whole High St area has gone ahead and there still seems to be good rental demand there. Tenants are typically taking apartments from six months to a year.”

An interesting feature of these apartments is that, with no parking provided, some tenants are able to leave their car in employer-provided parking.

Aero features industrial look, high lofts

The next project is again a refurbishment, this one the Aero apartments by architect Colin Leuschke and Chris Morton, in the former Jean Jones building on Cheshire St, 22 apartments featuring an industrial look with high-stud ceilings, and mezzanine floors on upper units.

Two were sold before last September’s launch, all are now sold and work has begun for an end-June completion. These apartments were priced from $118,000 (gst included) for a street-facing 35m² studio to $245,000 for 69m², containing one bedroom, a study, a mezzanine level and a balcony with views across the steam locomotive sheds to the Domain, a short distance up from Carlaw Park.

“The high loft space was a major selling point. It was a quiet market towards the end of last year and it’s flown out the door.”

About six of the buyers are investors, with projections of 10% gross returns on studios, 8.5-9% net from $285-315/week rent on prices of about $150,000.

Similar Parnell project out soon

The Kelland’s team expect to have another Parnell project out soon, in similar industrial-look vein, probably pitched at a higher market. “We’ll release a few in the next three months, a lot over the next six months,” he said.

One of the interesting inquiries has come from developers — wanting to know why Aero has worked. Part of the secret, in marketing terms, may have been that the marketing team has been involved with the project from an early stage.

“People like the smaller boutique developments. Of course, they’re also the harder ones to stack up.”

He expects future projects to refine the ideas of the recent batch, and for there to be a move away from “the absolute shoebox. A studio at 2.4m stud height doesn’t work, but 3.5m opens up a whole new space.”

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Krukziener defaults, compromise due in two days

1700 bondholders waiting for extra 7% which is unlikely to come

Andrew Krukziener has defaulted on his $21 million of Metropolis bonds but is working on a compromise scheme for the 1700 bondholders.

The trustee for the Pacific Properties (Metropolis) Ltd bonds, Glenn Clark of Tower Trust, served the demand on the issuer today.

The issuer, a Krukziener company, has 48 hours’ grace to make payment, which was due on Monday, the first business day after the bonds’ maturity date of 20 May.

14 days’ notice for meeting

Mr Clark said he didn’t expect payment to be made in that period. Once that time is up, he will give the required 14 days’ notice of a bondholders’ meeting, which is expected to have a finalised compromise to consider.

“We received a draft proposal on Friday and we expect to see a finalised proposal in the next two days,” he said.

He would not disclose the detail of the proposal, which is expected to be for an extension of the bonds’ term at lower interest rates.

Mr Krukziener is working on the proposal with Money Managers’ founder, Doug Somers-Edgar, whose clients took a large proportion of the bonds when they were issued in 1998.

The $21 million was the final drop of debt — falling in behind first and second-tier bank loans — for the 370-apartment (plus four top floors held by Mr Krukziener) Metropolis tower built between High St and Auckland’s old magistrates’ court on Kitchener St.

$4.4 million interest owed, and rising

The bonds replaced $14.6 million of higher-interest debt, and were offered at a 14% interest rate, half of that paid quarterly until June 2000 and the rest capitalised for payment in a lump sum on maturity.

Mr Krukziener now owes $4.4 million of interest on the bonds, and the default has triggered a penalty interest rate of 19%.

Bondholders could reject a rollover and a proposal of lower interest, but would gain nothing in doing so. That is likely to be the argument from Messrs Krukziener and Somers-Edgar in favour of a compromise.

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Backpacker segment continues strong growth

Auckland occupancy rises 9.7% to 57.2% in September

Backpacker accommodation continued its strong growth in September. More upmarket premises still made gains. Regionally, Auckland was strong and Northland improved markedly, though its occupancy level is well below Auckland’s.

Figures released by Statistics NZ today show total guest nights of 1.95 million for an occupancy rate of 31.4% across all sectors, including camping grounds. Excluding camping grounds, the occupancy rate was 47.3%, a 2.7% improvement on September 2001.

Hotel guest nights rose 3% on a 2.4% capacity rise, for a 1.7% gain in occupancy to 51.5%. Motel/apartment guest nights rose 3.2% on a 1.2% capacity gain for a 2.3% increase in occupancy to 50.8%.

The backpacker segment of the industry had no more establishment than a year ago but showed an 11.5% increase in guest nights on a 4.3% rise in capacity. The occupancy rate rose 6.4% to 40.2%.

In Auckland, occupancy was 57.2%, an increase of 5 percentage points or 9.7%. The rise in Northland was 8%, to 31.7% occupancy.

Wellington occupancy was a decimal point above Auckland’s at 57.3%, but was 3.7% down on 2001, while Otago’s (including Queenstown) was 53.3%, up 1.2%. Bay of Plenty (including Rotorua) fell1.8% to 47.5%.

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Penrose industrial nudges into positive capital returns

Industrial income returns all firm

Industrial property in Penrose showed a slight lift in value in the September half but the industrial market overall remains slightly capital negative, the Property Council’s latest investment performance index shows.

Income returns from the industrial market are in a range of 4.5-5%.

The Property Council’s research manager, Nicole Humphries, said industrial property consistently recorded strong total returns, outperforming the office & retail sectors. She said 10% of the property in the industrial index was revalued in the September quarter.

Capital returns for the September half were a positive 0.64% for Penrose and negative 0.16% for industrial nationally, 0.11% over the whole of Auckland, 0.67% in East Tamaki, 0.49% in Mt Wellington and 0.56% in Christchurch.

The Penrose income return was 4.95%, giving a total 5.61%. The total return nationally was 4.9%, Auckland 4.97%, East Tamaki 4.2%, Mt Wellington 4.55% and Christchurch 3.98%.

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Barfoot says house & rental markets stabilised in May

Increased listings cut rental average

Barfoot & Thompson said its latest monthly figures indicated house prices had stabilised.

The average house price fell $45,000 from April to May, from $398,650 to $353,403. Director Peter Thompson attributed the high April average to a disproportionate number of high-value sales.

“During April 39% of the properties we sold were over the $500,000 mark, which drove the figures up to an unrealistic average house price. The sales figures from May saw the average price return to a more realistic figure in line with the previous 3 months.” 33% of unconditional sales in May were for more than $500,000.

Mr Thompson said the rental market has also stabilised, as the average weekly rental fell from $340 to $328.

“The key factor in the stabilisation of the average rental price is the number of houses & units we have available to let to tenants. In May the figure returned to 719 properties, up from 617 in April.”

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Valuers told they face big risk of being left behind

Valuers challenged on their future

Valuers must identify the long-run demand for their profession’s services and set entry standards accordingly or risk being merely time-paid artisans, keynote speaker Christopher Jonas told the Pan Pacific valuers’ congress in Auckland today.

Mr Jonas is a past president of Britain’s surveyors’ institute. Five years ago he set up his own boutique practice, where he consults on real estate strategy, independent directorships, private equity investment in non-property businesses, and unpaid work for the public good.

In his address he ran through the consequences of various points — the entry basis, fee structures, definitions of valuation and the huge impact he believes electronic commerce will have on property.

An important factor, he found, was that merchant banks had discovered property was respectable. “Now each one has a dedicated property team and, more often than not, a discretionary property investment fund. Banks are winning an increasing share of the large deals market.

“They and the deal-driven large commercial property firms are leaving the professionals to collect the time-based valuation or structural survey fees.

“Thus I see an increasing divide between very well paid deal makers for large profitable transactions and the journeyman professional, forced back to carrying out the more basic, almost artisan, functions.”

Mr Jonas said that as this developed, “no bright young graduate who can get into a Goldman Sachs will want to join even the best exclusively professional firms.”

On the issue of definition, Mr Jonas believes there should be one, not an ever-increasing list bound to cause confusion. He said valuers worked in total contrast to the old truism of buying from the frightened and selling to the greedy, by sticking to the c concept of open market value, “the notion that a certain price is the right one for both parties.”

By this method, freezing the moment of valuation, “he gives us no insight on where the value has come from, or the scope for the value moving in the future — and if so, in which direction.”

Mr Jonas says valuers need to apply more research to the relationship of property risk and return to the capital markets, and how property markets link to their surrounding economy.

But he believes e-commerce will give valuers their greatest fright, because it will bring huge shifts in occupier demand. He likes the prospect for warehouses (and this is apparent in Auckland, too, with strong growth in that sector).

“I would expect shopping streets to be the biggest losers as trade is siphoned away, with many units reverting to leisure, showroom or even residential uses.”

The enigma is the downtown office sector. “It is hard to see many wanting to work from home permanently, but there is similarly little need for office workers to travel into the major city centres just to do a job that can be done anywhere… One thing appears clear already. E-business is going to put pressure on the overheads of doing business the traditional way. Head offices will be in the firing line.”

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Recent sales by Bayleys Real Estate offices

New industrial portfolio out, new top-end residential strategy out soon

Newmarket, 9-15 Davis Crescent, a 3878m² retail & office building occupying almost an entire Newmarket block with frontage also onto Carlton Gore Rd and Alma St was sold for $3.997 million. It produces net income of $438,000 from a variety of tenants, with Gardale’s Stationery City the largest. Sales agents David O’Connell & Robert Platt.

Albany, unit D, 24 William Pickering Drive, sold by Amanda Holdings Ltd (Arthur Young & Peter Wilson) to an Auckland family trust for $1.085 million at a 9.6% yield, with a five-year lease to a golfing wholesaler associated with Greg Norman. Sales agents Stuart Bode & David Gubb.

Mt Wellington, 8 Hotunui Drive, a 2121m² high-stud warehouse, office & showroom building sold by Far North Holdings Ltd (Richard Dimmock & Malcolm Nicolson) for $1.7 million at an 11.3% yield, with a six-year lease to Nu Skin New Zealand until 2003. Sales agents Sunil Bhana & Mike Houlker.

Grey Lynn, 623 Great North Rd, liquor store & vacant service station on a 1379m² corner site in two titles, sold for $900,000. The liquor store is producing net income of $52,000/year on a lease until 2005. Sold post-auction by John Urlich & Stuart Bode.

East Tamaki, unit 1A, 22 Harris Rd, showroom & warehouse unit sold for $445,000 to a Waiheke-based investor at a 10.3% yield, with a new six-year lease from November 2001 to Pope Industries Ltd (Dennis & Sandra Pope, trading as Rylock Home Plus).

Quay Park, 30-38 The Strand, a 3691m² leasehold Quay Park site previously operated as car sales yard has been sold for redevelopment for $2.2 million. It has 260m² of office & workshop space. Sales agent John Hennah.

Penrose, 168 Hugo Johnston Drive, a 1.6ha flat development site in the heart of Penrose, sold for $1.08 million. Sales agents Kathryn Robinson & David Gubb.

City western fringe, 34 Sale St, four-level 6667m² office & warehouse building with 139 parking spaces, leased to Telecom until October 2003 at $831,000/year, sold for an undisclosed sum to an offshore buyer. Sales agent Michael Block.

Latest industrial directory

Bayleys has released its latest industrial leasing publication, showcasing a wide range of industrial premises throughout Auckland and Manukau cities.

Viewpoint launch

The real estate company has also revamped the way it markets top-end residential property, now that everybody else also has glossy quarto brochures.

Bayleys has created Viewpoint, “a new property portfolio for trophy New Zealand homes,” with a larger magazine format and introducing the opportunity for people to showcase their homes on a four-page foldout colour spread.

“Viewpoint’s innovative photo essay and oversized design format will create a significant point of difference in the marketplace and will position it as the premium publication for the marketing of exquisite homes,” Bayleys Residential sales manager Sue Stanaway said. The magazine will include lifestyle-focused editorial.

Bayleys marketing manager Mark Macky said distribution would be tightly targeted to ensure cost-effective marketing. The Viewpoint portfolio will also have its own dedicated internet site, www.bayleys.co.nz/viewpoint.
Mr Macky said every property would have an individually tailored and targeted marketing campaign to accompany the Viewpont exposure.

The first Viewpoint portfolio will be launched in November.

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Backpacker segment leads accommodation gains

Auckland has 13.6% December lift

Hotel occupancy rose 6% in December, but the backpacker segment was again the outstanding performer of the short-term accommodation market.

Backpacker occupancy rose 11.6% to 56.9%, a higher occupancy rate than both the hotel and motel sectors had. It usually trails both sectors, sometimes by a considerable margin.

Backpacker capacity has been rising steadily — 5.2% over the past year to 552,000 stay/unit nights, compared to a 1.5% rise in hotel capacity to 857,000 nights and 1.7% rise in motel capacity to 749,000 nights.

While hotel and motel guest night tallies were stronger than a year ago at a 7.2% rise for hotels and 3.5% rise for motels, the backpacker tally rose 12.6%.

Hotel occupancy rose 3.1 percentage points to 54.9%, higher than a year ago but a big drop from the November surge to 67.9% occupancy.

Motel occupancy rose 2.6% to 53.8%.

Hosted accommodation also had its turn in the sun, with a 9.2% rise in occupancy rate to 32.8%, on a 1.6% decline in capacity and 12.6% rise in guest nights.

Statistics NZ’s figures showed occupancy grew most strongly in Auckland, with a 13.6% gain in January to 64%, followed by Southland, with a 9.6% gain to 55.7%, Canterbury with a 7.8% gain to 56.1%, Hawke’s Bay/Gisborne 7% to 48.6% and Northland 5.7% to 50%.

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