Hon James Shaw, Minister of Statistics - Stats NZ
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Hon James Shaw, Minister of Statistics
Statistics New Zealand and Ministry for the Environment Long Term
Accommodation: Approval to Lease
April 2019
These documents have been proactively released:
• 14 March 2019, Statistics New Zealand and Ministry for the Environment Long Term
Accommodation – Approval to Lease, Hon James Shaw
• 21 March 2019, DEV-19-MIN-0050, Cabinet Office
These documents have been released in full.
© Crown Copyright, Creative Commons Attribution 4.0 International (CC BY 4.0)In Confidence
Office of the Minister of Statistics
Chair, Cabinet Government Administration and Expenditure Review Committee (GOV)
STATS NZ AND MINISTRY FOR THE ENVIRONMENT LONG TERM
ACCOMMODATION – APPROVAL TO LEASE
Proposal
1. Cabinet approval is required for all investments with Whole of life costs over $25
million, even if funded from baselines and balance sheets. CO (15) 5: Investment
Management and Asset Performance in the State Services defines investments to
include “any new lease arrangements, or renewals of lease arrangements (for
example, property rentals)”.
2. This paper seeks delegation for the Chief Executive of Stats NZ to execute the
Agreement to Lease on a new building that will accommodate Stats NZ and the
Ministry for the Environment in a co-located Government site. The procurement
process was led by Stats NZ, working closely with the Government Property Group.
Executive Summary
3. Stats NZ was displaced following the 2016 earthquake which caused significant
damage to Statistics House (which was consequently demolished). Stats NZ are
currently in temporary accommodation with leases expiring in early 2021.
4. Stats NZ has worked with the Government Property Group (GPG) to approach the
market and seek a building that can provide Stats NZ with a long-term
accommodation solution. An innovative procurement process helped determine the
best approach to achieving Government property outcomes within the context of a
new long-term building for Stats NZ (and potentially other agencies).
5. Eight Willis Street has been selected as the preferred building and is a partial
redevelopment / partial new build. The site will be ready just prior to the expiry of
Stats NZ current temporary leases, minimising lease tails and the cost for
Government.
6. Alongside this process, the GPG has been considering the needs of other
Government agencies. Ministry for the Environment (MfE) are in a similar position,
with a pending expiry of the lease on Environment House in June 2020.
7. The proposed building provides the ability to establish a co-located Government site
with Stats NZ and MfE, and to deliver on broader Government property objectives
such as modern working practices and density targets.
8. Stats NZ have led the negotiation for 8 Willis Street supported by independent legal,
structural engineering, architectural and property valuation experts.
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8h1uwatje8 2019-03-21 10:35:099. The key points from the Agreement to Lease and Deed of Lease are as follows:
Landlord Argosy Property No.1 Limited
Lease Terms Gross lease with an initial term of 15 years, with one right
of renewal of six years.
The target lease commencement date is 1 April 2021.
Space Occupied 11,284m2
Gross Rent $539/m2. This equates to $6.08 million per annum
for Year 1 (as at 1 April 2021).
Rent Review 2% increase per annum. Reset to market on renewal.
Seismic 130% New Building Standard (NBS)
Green Star Contracted to 5 Star – New Zealand Excellence
Aiming for 6 Star – World Leadership
NABERS Rating Contracted to 5 Star as built rating aiming for 6 Star with
integration of tenant fitout
10. No additional capital or operational funding is required for either agency at this time.
Stats NZ will fund the capital requirements from the insurance proceeds associated
with the total loss of Statistics House.
11. There are commercial imperatives (being both construction timeframes and interest
from other tenants) in having the lease signed by 31 March 2019.
Background
12. Stats NZ was displaced following significant damage to their building, Statistics
House (which was consequently demolished). Stats NZ relocated to temporary
premises shortly after the November 2016 event and has been operating across 3-4
buildings during the intervening period. The leases in place have been extended
short term, most of which expire in May 2021 with no right of renewal.
13. Prior to the earthquake the MfE was planning a move to Charles Ferguson Tower
(CFT). The Wellington Accommodation Project 2 (WAP2) realignment saw Ministry
for Primary Industries take the lead on CFT and the MfE remain in Environment
House. The current Environment House lease is due to expire June 2020.
14. The GPG have confirmed they do not have current options to house Stats NZ or MfE
following the expiry of existing leases. As such, both agencies have been working
over the last year to secure long-term accommodation solutions that support their
respective workplace strategies.
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8h1uwatje8 2019-03-21 10:35:0915. In September 2018, with the support of GPG, Stats NZ posted on the Government
Electronic Tenders Service (GETS) a Call for Registrations of Interest (ROI) from
building owners in providing Stats with accommodation from March 2021, with
options for space for additional Government agencies to co-locate if appropriate.
16. An innovative procurement process helped determine the best approach to achieving
Government property outcomes within the context of a new long-term building for
Stats NZ (and potentially other agencies). Eight Willis Street has been selected as
the preferred building and is a partial redevelopment /partial new build.
17. During discussions and negotiations, Stats NZ worked with GPG to identify other
agencies with pending lease expiries and similar workplace strategies. This enables
the establishment of a co-located site that meets long term property objectives for
Government, supports modern ways of working (activity based with agile/flexible
work practices) and enhances co-design opportunities with key stakeholders
including Māori.
18. This process has resulted in Stats NZ negotiating a lease on the entire building
(office space) and planning a co-location with MfE.
Key Commercial Terms and Financial Implications
19. To determine the cost-benefit of the proposed solution, a comparison has been
prepared against MfE’s current site (being Environment House) and Stats NZ’s head
office prior to the earthquake (being Statistics House). Stats NZ current premises are
temporary in nature and are not a suitable comparison point. The negotiated lease
provides for improved efficiency of space and lower cost for Government. The
square metres per person would be one of the lowest in the Government property
portfolio.
Table 1: Comparison of “current” to negotiated solution (Consolidated MfE and Stats
NZ position)
Statistics
Appraisal Period House / Negotiated
Difference
15 yrs - 2021/22 – 2035/36 Environment Solution
House
Planning Headcount 1,000 1,000 0 0.0%
24.2%
Planning Density m2/pp 14.9 11.3 (3.6)
↓
24.3%
Area Leased m2 14,901 11,284 (3,617)
↓
Capital costs ($ million) 13.411 13.542 0.13 1%↑
Whole of life costs (Nominal)
128.35 118.72 (9.63) 7.5%↓
($m)
Net Present Value (NPV @
76.72 75.66 (1.06) 1.4%↓
6%) ($m)
1 Assumes a refurbishment of both buildings at a discounted rate of $900 per square metre factoring in decant costs.
2 Assumes a new fitout at a rate of $1200 per square metre
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8h1uwatje8 2019-03-21 10:35:09The key points from the Agreement to Lease and Deed of Lease are as follows:
Landlord Argosy Property No.1 Limited
Lease Terms Gross lease with an initial term of 15 years, with one right
of renewal of six years.
The target lease commencement date is 1 April 2021.
Space Occupied 11,284m2
Gross Rent $539/m2. This equates to $6.08 million per annum
for Year 1 (as at 1 April 2021).
Rent Review 2% increase per annum. Reset to market on renewal.
Seismic 130% New Building Standard (NBS)
Green Star Contracted to 5 Star – New Zealand Excellence
Aiming for 6 Star – World Leadership
NABERS Rating Contracted to 5 Star as built rating aiming for 6 Star with
integration of tenant fitout
20. Argosy has committed to 100% NBS through any foreseeable changes to the rating
calculation. This commitment requires them to build to 125% of current code, as a
change of z factor for Wellington from 0.4 to 0.5, has already been signalled by
MBIE. (Buildings currently at 100% will drop to 80%, buildings currently at 80% will
drop to 64%).
21. Argosy have also added this development to their Green Asset Portfolio. One million
dollars of Argosy Green Bonds proceeds have been allocated to the development for
the support of green initiatives.
22. Specialist expertise was used to support the negotiation process in order to achieve
the most favourable terms and conditions for the Crown. This has included the
Crown’s legal services provider used during the negotiation (Simpson Grierson) has
certified that the Deed of Lease reflect the agreements reached between the parties
during the negotiations, and accordingly, is in order for execution.
23. Results of a market scan undertaken prior to posting the ROI on GETS, the ROI
responses from landlords and advice provided by independent property valuers
support the negotiated gross rental rate for A Grade office accommodation with a an
NBS rating of 100% or higher.
24. There are commercial imperatives (being both construction timeframes and interest
from other tenants) in having the lease signed by 31 March 2019.
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8h1uwatje8 2019-03-21 10:35:09Consultation
25. The Ministry for the Environment, the Treasury and the Ministry of Business,
Innovation and Employment (Government Property Group) were consulted on this
Cabinet paper and have indicated their support.
Financial Implications
26. The lease results in a 15 year rental commitment totalling approximately $105
million.
27. Stats NZ and MfE are confident that the move to 8 Willis Street can be managed
within their existing baselines. This is subject to not being able to predict potential
future baseline reductions or unforeseen cost pressures.
28. Stats NZ will fund the capital requirements from the insurance proceeds associated
with the total loss of Statistics House. Stats NZ will seek approval to retain the
surplus arising from insurance proceeds.
29. The expected capital cost of the preferred solution is $13.54 million based on a fit-out
rate consistent with other conservative Government fit outs of $1200 per square
metre.
Legislative Implications
30. The recommendations in this paper have no legislative implications.
Human Rights
31. There are no human rights implications associated with the recommendations in this
paper.
Gender Implications
32. Eight Willis Street will be the first Government site with non-gender specific
bathrooms on every floor (which has been negotiated as part of the lease).
Proactive Release
33. This paper will be proactively released as per standard practice.
Recommendations
The Minister of Statistics recommends that the Committee:
1. note that, following an open market procurement process, Stats NZ as lead agency
(supported by the Government Property Group), has negotiated an Agreement to
Lease for its Wellington head office accommodation solution.
2. note the negotiated accommodation solution will be a co-location with the Ministry
for the Environment.
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8h1uwatje8 2019-03-21 10:35:093. note that the Crown’s legal services provider has certified that the Deed of Lease
reflects the agreements reached between the parties during the negotiations and
accordingly, are in order for execution.
4. delegate to the Chief Executive of Stats the authority to execute the final agreement
to lease including commercial terms of the Deed of Lease negotiated for Stats
Wellington head office accommodation solution.
5. note that Stats NZ will seek approval from the Minister of Finance to retain the
surplus arising from earthquake insurance proceeds, to be used to fund the expected
$13.54 million capital cost of the preferred solution.
Authorised for lodgement
Hon James Shaw
Minister of Statistics
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