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Remuera development site tops Total Property auction

Viaduct auction sites at under 10%

A Remuera development site, at 115 Remuera Rd, fetched the top price at Bayleys’ Total Property Easter auction in Auckland.

The 1821m² freehold site attracted fierce bidding before selling for $2.05 million, giving a hefty premium over its $1.1 million capital valuation. A dwelling on the site was not part of the sale and is being removed.

Bayleys marketing agent Richard Laery said the property had been bought for development. Its residential 7B zoning allows 1 dwelling:200m², which means it has potential for 9 units.

Other properties to sell the Total Property auction included:

Wairau Park, 6 Link Drive, near-new 404m² showroom & office building leased to Northern Bay Motors, which has a Lexus agency, sold for $775,000 at a 7.7% yield.

Te Atatu North, 543 Te Atatu Road, with a new 5-year lease to BP Oil NZ Ltd, which started last December, sold for $1,125,000 at a 9.3% yield.

Viaduct Harbour, Unit G, The Quays, 63m² unit leased to Mikuni Restaurant until 2012, sold for $333,000 at a 9.52 % yield on the rental income of $31,714 (net of body corporate & ground lease rental expenses).

Viaduct Harbour, Unit J, The Quays, 181m² unit leased to Tagore Restaurant, also until 2012, sold for $883,000 at a 9.51 % yield.

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Kellands joins Christie’s network

3 multi-million listings for openers

Kellands Real Estate has become an affiliate of Christie’s Great Estates, an exclusive international network, which principal Deborah Kelland said highlighted New Zealand’s status as a hot destination for both local & international investors.

“As a company that has for years been offering a uniquely tailored service to both local & offshore buyers, we are pleased to be in the position to extend our services to some of the most discerning purchasers of real estate in the world,” Ms Kelland said.

“Being chosen to be the sole North Island, New Zealand agent for Christie’s Great Estates, a subsidiary of Christie’s, the world’s oldest fine art auctioneer, is a privilege.

“Admittance to the Christie’s Great Estates affiliate network means a firm has earned a reputation for meticulous service to clients buying & selling important properties — something that we have been doing for our New Zealand clients for over 9 years.”

Kellands Real Estate specialises in marketing luxury homes & penthouses, quality apartments, creative commercial spaces & the booming coastal market. Ms Kelland said her firm was selected on the merits of its passion for contemporary architecture & design, a sound knowledge of people & property combined with an obsession for providing superior individualised service.

Kellands will list 3 New Zealand properties in the August issue of Christie’s Great Estates Magazine, 1 in Takapuna asking $10 million, another in Milford valued at more than $5 million, and a Parnell apartment complex, each unit valued at several million dollars.

Websites: Christie’s Great Estates
Kellands

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New Bayleys exhibition in Singapore

Showcase is response to rekindled interest, says director

Bayleys will take an exhibition to Singapore in a month, in response to rekindled interest in the New Zealand market among Asian investors.

Executive director David Bayley said most interest was still coming from Singapore, but there had also been increased attention to New Zealand possibilities from Taiwan, Korea and Brunei.

The latest transaction involving an Asian buyer saw 242 Queen St, Auckland, sold by Japanese company PRM Corporation to Grand Central of Singapore for $9.75 million at a yield of 10.9%%.

Grand Central also bought Greenock House on The Terrace in Wellington last year for $7.25 million, and another Singapore-based investor bought Affco House in Auckland through Bayleys last year for $10 million.

Grand Central has a New Zealand portfolio of commercial buildings and hotels worth more than $100 million, and Mr Bayley said it was typical of investors wanting to spread their risk across a number of markets.

“They see New Zealand as a relatively low-risk destination which offers much higher income returns than Asian markets. For example, income yields on Singapore property are less than half what Grand Central will be receiving from 242 Queen St.”

Mr Bayley said the 23-25 June Singapore exhibition, in conjunction with Bayleys’ local partner DTZ Debenham Tie Leung, would showcase properties across the spectrum — commercial, industrial, tourism, apartment, rural and lifestyle.

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Which category?

Sales by locality — and a sub-homepage to link them

One of the confusions from categorising everything is that, often, where an item lands is very much a toss-up.

Bayleys’ auctioneers roamed the country last week, achieving a moderately good sales tally, while in Hamilton the firm’s agents also finally tied up a deal on the WestpacTrust building which involved putting together what is effectively a syndicate.

Research done by Bayleys Research a short time before tied in with the sales.

These stories all fall naturally enough into a Bayleys category. But as time goes by and I get on to compiling more sales and research information relating to specific areas, you’re more likely to want to know how the area’s getting on.

Breaking out sales & leasing details relating to specific areas/districts/precincts is part of the plan on this website, it just happens to be taking longer than envisaged.

So, for long-term categorisation — in my mind and yours — it makes sense for these auction/sale/research stories to appear under Locality headings. It could also make sense for them to appear under Sector, as in office/retail etc, but for the moment Locality wins.

For this (and last) week’s batch of Bayleys stories, then, you need to traipse round Locality/Auckland/Sales, Locality/Wellington/Sales & Locality/Waikato/Hamilton sales.

To make navigation easier, however, I figure it’s sensible to build up sub-homepages which should be useful if you want to refer back to the site some time later than the story was written. So in this case, you can have a Bayleys homepage (this page) with links to related stories.

Every so often I try to do this for the development industry, too, but so far the attempts have failed. Unfortunately the timeslot for that task is 2-3am, and as you will have become aware, that slot has been taken by the newsletter-writing bunch of fingers.

Bayleys stories, August 2001:

Which category? Sales by locality — and a sub-homepage to link them

Bayleys tots up $500 million in commercial sales this year

Fierce bidding as Wellington auction pulls in $2.4 million for nine lots

Hamilton’s WestpacTrust House sold for $9.2 million

Sub-story: City ripe for rent rises, say researchers

Bayleys sells 80% of Waikato offering

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CBRE valuer feeling expansive

Valuation growth expected

Mike Steur (right) sees a flat local market for some time but expects growth in valuation work arising from the merger of the American and worldwide firms that formed CB Richard Ellis last year.

He has a new role in charge of valuation for CB Richard Ellis across Australia and New Zealand, and wants to expand the valuation side of the consultancy in New Zealand, where he says it is already the leader on numbers. The firm has nine property valuers in Auckland, seven in Wellington, three in Christchurch, and a plant and machinery valuer in each city — more in total than all the international-firm competition combined, he believes.

“A team of 10 to 12 would be as much as you want, to be efficient and profitable. We’re not into mass residential and we’re not getting into that — we had a residential business in Sydney and sold it off last year [after the merger].”

That said, CB Richard Ellis couldn’t leave the Auckland inner-city apartment market alone, starting with them as entire project valuations and continuing with individual unit valuations. “We made the decision, we need to be apartment valuers because we have a database now of city and city fringe — anything that’s got a city influence.”

The consultancy has moved into some more unusual valuation work, such as specialist and infrastructure assets. “For the Auckland City Council we did the gas pipes, which overlaps with plant & machinery valuation. We don’t value the pipes, we value the land the pipes run through. The pipe owners are rated on them, a source of income the council never had before.”

Since last year’s merger of CB and Richard Ellis, Michelle McKellar has moved from Auckland to Hong Kong to focus on Chinese sales, Jon Chomley has taken her place in Auckland and Mike Steur has become director of valuation and advisory services for the whole of Australia and New Zealand, still based in Auckland.

That change in Mr Steur’s role comes with a general increase in technological supply of information and expertise through the CB connection. His counterparts in Australia, Charles Long in Sydney and John Hatcher in Melbourne, share overall national responsibility for the consultancy in Australia but have also taken on different roles to meet the changes.

Mr Long has been made managing director of a new financial services division, dealing with a rise in US-derived consultancy work on portfolios, lease analysis and acquisitions. “Financial services was an add-on to valuation before. We’ll be appointing someone to direct it here too, once the division’s firmly established in Sydney.

“John Hatcher has become the director of corporate services in Melbourne, which is an area we weren’t well represented in.”

Richard Ellis was a string of agency offices across the globe, with a strength in valuation work that drew Mr Steur to it 12 years ago, just after it was set up in New Zealand. But even five years ago, nobody in the firm would have contemplated that its business lines would be totally integrated, as they’re becoming. Communication alone was too difficult and expensive, and the idea of picking up on good ideas used in other parts of the firm was scorned.

“With e-mail, you can do it and it doesn’t become a huge cost burden. You can roll out services on a consistent basis and gain efficiencies. You used to say, ‘That’s the way we do it here, that’s the local market.’ Now you feed the ideas back up and se best practices.

“We’re getting software out of the US that cost seven figures [$US] to develop and we’re spending $40-50,000 here to modify it. One’s an internet-based package which allows delivery of reports and includes operational requirements, job logs, links through to your accounting system. The other package is production software which makes the valuer’s job quicker and easier, reduces the error rate and speeds up the process.”

If that does away with the old-style typing-pool job, which is happening in many offices, Mr Steur says “the dicta-typist becomes an assistant, more valuable in the process.”

More global influences

Mr Steur says the changes within the firm make its members more aware of global influences, not just in their own business, but among clients. “When you look at where things are heading, they’re merging, not fragmenting.”

After 12 years of making frequent visits to Australia, he has found more instructions are coming directly from there and gives the banking industry as an example. National Australia Bank controls the BNZ, Westpac has WestpacTrust , ANZ has a regional credit unit based in Melbourne and the Commonwealth Bank controls ASB.

HSBC has grown in importance here and Citibank, also important in corporate business, has a base in Singapore. Through all of them, he says, there is an expectation of consistent standards. That means that “every decent company is getting international involvement,” and choosing to be just a local player is likely to lose you business.

He met the parochial attitude when CB Richard Ellis set up shop in Christchurch: “We were told, ‘You won’t get any business here.’ But the forces are there, and that sort of attitude doesn’t go down well with your financiers.”

Second opinions have become common practice because that should lower the risk on a security. “We do quite a lot of work in Hamilton and Tauranga because the banks need fresh blood to challenge established opinions — we might come up with the same answers.”

Market drivers

Mr Steur expects listed vehicles to provide some of the valuation work in the next 12 months, though he says he knows of no rationalisation plans in the wind. “A lot of commodity stocks worldwide are low in value. They’re out of favour because they’re not producing the growth. In a low-inflation environment, you can’t expect much growth out of property.

“The market drivers for growth in property really are fairly low in New Zealand at the moment — low inflation, we’re coming out of a recession,
so the first two years of gdp growth are just catch-up.

“Property’s much stronger in Australia. They’ve had a good couple of years of gdp growth, but most of it is focused in New South Wales. In the UK, property stocks are below nta. In the US, the reits are out of favour because of the technology stocks.”

All this leads to rationalisation. But in Hong Kong the stock exchange is soaring and property stocks are rebounding. “There’s a lot of corporate real estate work coming through Asia, which is on the back of the global-business philosophy companies have nowadays.

“Indonesia, Korea, the secondary market are improving. Japan is still languishing and China is a difficult market. Let’s hope they continue to recover, it’s bound to reflect on our economy.”

If that Asian activity all seems faraway and not much to do with small property investments way down in New Zealand, “We’re heavily influenced by Asia, so you have to be aware of what’s going on. We have a lot of investors from Asia, a lot of trade with Asia,” Mr Steur says.

Americans have been touted for several years as potential big investors, because they come with big chequebooks and this is a small market, but for the most part their arrival is always pending. “Americans have looked here for a while but they don’t have the hands-on feel. They typically look for the big yield plays, but locals will better them on most deals.”

Their arrival will remain pending because US yields of about 8% on office, shopping centres a bit lower and industrials at 9-11% are relatively attractive. “So why invest down here for 8-9%? The internal rates of return in the US are projecting around the 12% mark and we’re in the 11-13% range, down to 10% at the very prime end of the office market.”

Superannuation funds, particularly the compulsory schemes of Australia, Singapore and Germany, are big investors, increasingly outside their own territories because the local markets can’t cope with them. The retail market in Australia and New Zealand, and the Sydney office market, are two recipients of this kind of global investment.”

Again, what is in this for the small New Zealand investor? “Unless you are aware of the broader picture you can miss the probability of what’s going to happen,” Mr Steur says.

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Tough in the provinces

NZ cbds at bottom of international costs chart, and provinces below that

Bayleys has taken an interesting look at the challenges of the provincial office market in its latest research report — the rent trend is mostly falling and market conditions mostly marked by oversupply.

An international perspective is also given in the report, with a comparison of total office occupancy costs around the world by Bayleys’ international associate, DTZ Research. This study defines its subject as the average total cost in leasing new office space in modern, well specified office buildings in a prime central business district location, with a net lettable area of about 1000m². All costs are in US dollars.

The DTZ study showed Tokyo Central at the top, as usual, with a cost of $US1415/m², the City of London next on $1143, Hong Kong on $770, Midtown New York on $646 and Singapore on $472.

The strength of the Sydney market is emphasised by its $318 cost compared to $204 in Melbourne and $191 in Brisbane. In New Zealand, Auckland is on $181, Wellington on $153 and Christchurch is at the bottom of the field on $US102/m².

Top NZ market static

Back in New Zealand dollars, and talking net rents not total occupancy costs, Bayleys’ own research shows the top of the market, prime Auckland cbd space, ranges from $250-320/m², the market is static, in equilibrium and showing yields between 7.5-9%.

Down a grade, the next best level of Auckland office space ranges from $180-240/m², the trend is downward, the market is oversupplied and yields range from 8-10%. B grade Auckland space ranges from $100-170, the trend is again for falling rents and oversupply, and yields are 10-12%.

The only place in the whole country to buck the static-falling trends is East Tamaki, where rents are $90-130 and rising, and the market is shown as being in equilibrium with yields 9.5-11%. Manukau is similar, with $20 more for the better space but the rental picture shown as static.

Down in Wellington, the trend is downward for all grades in a market oversupplied in all grades, rents $170-180 and yields 7.5-9% for A grade, $110-120 and 10-11.5% for B grade, and $85-90 and 12.5% upward for C grade.

In two areas the oversupply is said to be diminishing — North Shore and Hamilton. The rental trend in both is static, with Shore rents in the range of $130-220 and yields 9.5-9.8%, Hamilton’s $30-155 and 9.5-11%.

And now for some provincial figures: Whangarei $50-130, oversupply and a yield range of 10-15%, Rotorua $100-110 and 10-11.5%, Tauranga $60-140 and 9-11%, Napier/Hastings $100-110 and 12-13%, Gisborne $50-130 and 11-15%, Palmerston North $70-180 and 11-15%, Nelson $100-110 and 10-11% on limited demand, Christchurch $50 for the worst, $120 the best, yields 9.5% up to 16%, and Dunedin $70-115 and 11-15%.

While the lack of demand seems nationwide, Bayleys Research says that if investors do find a suitable investment property, “the yields are very attractive compared with bank term deposit rates, even with the rising interest rates and yields being achieved in Auckland and Wellington.”

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KFC auction reaps $31.3 million at average 8.34% yield

Update, 6 December: A deal was struck one hour before the Auckland KFC auction for the sale of all 10 outlets in the South Island to an undisclosed buyer. The price & yield have also not yet been disclosed. Colliers Jardine will go ahead with the auction of 15 southern North Island KFC outlets in Wellington on Friday morning.

Taupo outlet the strongest sale at first of Colliers auction series

Colliers Jardine completed the first half of a 51-outlet auction of KFC restaurants with all 26 properties sold under the hammer for a total $31.3 million at an average 8.34% yield.

Best of the Auckland offerings was the KFC outlet in Ponsonby, first up for the day & sold on a 7.12% yield, but it was pipped by the Taupo outlet, sold on a 6.86% yield. Top price of $2.005 million, with a 7.44% yield, was achieved for the New Lynn outlet.

The auction in the Crowne Plaza hotel in Auckland attracted more than 200 people and heavy bidding. The other 25 properties being sold for Restaurant Brands NZ Ltd will be offered in Christchurch on Thursday and Wellington on Friday. All are being offered on a 12-year leaseback basis.

Auction results:

Auckland region

Balmoral, $1.41 million, 7.92%.

Glen Innes, $1.235 million, 8.71%.

Mangere Central, $1.195 million, 9%.

Manurewa, $1.16 million, 8.92%.

Massey, $980,000, 8.68%.

New Lynn, $2.005 million, 7.44%.

Pakuranga, $1.745 million, 7.89%.

Papakura, $1.315 million, 8.66%.

Papatoetoe, $1.435 million, 8.92%.

Ponsonby, $1.445 million, 7.12%.

Pukekohe, $860,000, 8.65%.

Royal Oak, $1.895 million, 7.75%.

Takapuna, $1.36 million, 7.84%.

Windsor Park, $1.085 million, 8.95%.

Provincial

Gisborne, $995,000, 9.1%.

Hamilton, Frankton, $1.16 million, 8.88%.

Kaitaia, $606,000, 9%.

Matamata, $825,000, 8.82%.

Rotorua, Fairy Springs, $830,000, 8.3%.

Taupo, $1.735 million, 6.86%.

Tauranga, $1.51 million, 8.09%.

Te Awamutu, $780,000, 8.84%.

Thames, $650,000, 8.53%.

Tokoroa, $730,000, 9.37%.

Whakatane, $1.02 million, 8.66%.

Whangarei, $1.38 million, 9.49%.

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