MARKET VALUATION WALTON PLAZA 4 ALBERT STREET WHANGAREI WHANGAREI DISTRICT VALUATION DATE: 31 MAY 2019 TELFERYOUNG (NORTHLAND) LIMITED - CLIENT: ...
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Market Valuation
Walton Plaza 4 Albert Street
Whangarei
Whangarei District
Client: Walton Plaza Investments Limited
Valuation Date: 31 May 2019
TelferYoung (Northland) Limited
++ Local Knowledge, National Coverage telferyoung.com
Table of Contents
1.0 Executive Summary .......................................................................................................................3
2.0 Scope of Work................................................................................................................................5
3.0 Legal Description............................................................................................................................8
4.0 Rating Valuation and Statutory Charges ........................................................................................9
5.0 Location........................................................................................................................................10
6.0 Land .............................................................................................................................................11
7.0 Resource Management ................................................................................................................12
8.0 Environmental Issues ...................................................................................................................13
9.0 Improvements...............................................................................................................................14
10.0 Tenancy Details............................................................................................................................18
11.0 Operating Expenses.....................................................................................................................27
12.0 Valuation Approaches and Methods ............................................................................................28
13.0 Market Commentary.....................................................................................................................30
14.0 Valuation Considerations .............................................................................................................32
15.0 Market Rent Assessment .............................................................................................................33
16.0 Sales Evidence.............................................................................................................................41
17.0 Valuation Rationale ......................................................................................................................55
18.0 Risk Analysis ................................................................................................................................60
19.0 Valuation ......................................................................................................................................61
20.0 Significant Assumptions and Special Assumptions......................................................................61
21.0 Statement of Limiting Conditions and Valuation Policy ................................................................62
Appendix A: Record of Title
Appendix B: HAIL Register Information
Appendix C: Additional photos
Appendix D: Valuation Calculations
Appendix E: Tenancy Information
TelferYoung (Northland) Limited
17 Hatea Drive, PO Box 1093, Whangarei 0140, NEW ZEALAND
Phone : 09 438 9599
email : northland@telferyoung.com website : www.telferyoung.com
1.0 Executive Summary
Asset Valued: Walton Plaza 4 Albert Street, Whangarei, Whangarei District
This is a large, relatively modern, three storey office building located to the
south of the original Whangarei CBD. The building is the largest office
building in the City and is predominantly occupied by central and local
government tenants.
The Whangarei District Council have indicated that they intend to vacate
the building however their renewals are imminent and renewals for a further
term have been assumed.
Purpose of Valuation: Market Value for financial reporting purposes
Instructing Party: Neil Tuffin
Client: Walton Plaza Investments Limited
Report Prepared For: Walton Plaza Investments Limited
P O Box 301848
Albany
Auckland 0752
Attention: Neil Tuffin
Date of Inspection: 15 February 2019
Date of Valuation: 31 May 2019
Interest Valued: Fee Simple NA104D/626
Basis of Valuation: Market Value - with existing tenancies
Land Area: 6589m² (more or less)
Rentable Floor Area: 8489m²
Tenancy Summary:
Tenancy Summary
Tenant Current Lease Term Final Lease Passing Income
Commencement Expiry Type
Jenny Craig 15-Mar-18 3 Years 14-Mar-21 Net $35,727
WINZ - Area 1 1-May-16 3 Years 30-Apr-28 Gross $311,720
WINZ - Area 2 1-May-16 3 Years 30-Apr-28 Gross $138,280
WDC - Area 1 30-Jun-18 1 Years 29-Jun-22 Gross $68,000
WDC - Area 2 30-Jun-16 3 Years 29-Jun-22 Gross $601,884
CYPS - Area 2 30-Apr-16 3 Years 29-Apr-28 Gross $78,000
WDC - Area 3 1-Jul-16 3 Years 30-Jun-28 Gross $160,000
CYPS - Area 1 1-May-16 3 Years 30-Apr-28 Gross $243,910
CYPS Carparks 31-Mar-18 1 Years 30-Mar-22 Gross $3,120
NZTA Carparks 15-Feb-19 1 Years 14-Feb-21 Gross $5,460
Total Passing Income $1,646,101
The Executive Summary must be read in conjunction with the formal valuation report and with TelferYoung (Northland) Limited's Statement of Limiting Conditions and Valuation Policy.
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Net Contract Rent: $1,272,359 per annum plus GST
Net Market Rent: $1,530,010 per annum plus GST
Weighted Average Lease Term: Nominal
Valuation Methodology: The Market Value has been established by:
+ Income Approach
+ Cost Approach
Valuation: Fifteen Million Four Hundred Thousand Dollars ($15,400,000) plus GST
(if any).
Indicating:
Yield on Passing Income: 8.26%
Yield on Market Income: 9.94%
Equivalent Yield: 9.82%
Resultant IRR: 9.50%
$/m² of Rentable Floor Area: $1,814
Contract for Sale: We are not aware of any sale and purchase agreement in place for the
subject property.
Last Sale: The property last sold some 9 years ago since when the building has
undergone continuous upgrading and refurbishment.
Property Risk Profile: The extent of government security to income would normally indicate a low
risk property, however, the size of the investment relative to the local
market will limit saleability. Until there are substantial changes to the lease
terms it is unlikely that the property will ever achieve a satisfactory WALT
and as such it will remain a high risk investment. Although there is a high
probability that Whangarei District Council will vacate it is doubtful that a
new building can be completed prior to the end of a further renewal term.
Significant Assumptions and The information provided by Maat Consulting in respect of the current
Special Assumptions: and proposed tenancies and outgoings to be a true and accurate
indication of income and expenditure.
This valuation has been prepared on the basis that no contamination
exists within the site. If this is found not to be the case there may be
value implications for the subject property and we would reserve the
right to amend this valuation accordingly.
Confirmation that the property has an IEP in excess of 67% NBS.
The building to be free from Asbestos.
This report assumes that all exterior works are completed and that
there is no further financial liability.
The further lease to Ministry of Social Welfare to be completed in due
course
Report Issue Date: 15 April 2019
Valuer: Nigel Kenny - Dip Surv (CEM) FNZIV FPINZ ANZIOB FRICS
Chartered Surveyor and Registered Valuer
TelferYoung policy requires that reports cannot be reassigned for any purpose beyond 90 days from the date of
valuation. This policy has been set to meet professional indemnity insurance requirements. It is a condition of this
report that any valuation needing to be reassigned beyond 90 days may require re-inspection by the valuer with
an update fee charged.
The Executive Summary must be read in conjunction with the formal valuation report and with TelferYoung (Northland) Limited's Statement of Limiting Conditions and Valuation Policy.
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2.0 Scope of Work
2.1 The Valuer
The valuation has been undertaken by Nigel Kenny who provides this objective and unbiased
valuation. The valuer has no material connection with the instructing party or interest in the property
and has the appropriate qualifications and experience to undertake the valuation.
2.2 Our Client
Walton Plaza Investments Limited.
Other than the client or addressee, the report may not be relied upon by any third party. We accept no
liability to third parties. Written consent is required for any third party wishing to rely on this report. We
reserve the right to withhold that consent, or to review the contents of the report if consent for third
party use is sought.
2.3 Other Intended Users
Nil.
2.4 Purpose of the Valuation
Market Value for financial reporting purposes.
2.5 Asset Valued
Walton Plaza, 4 Albert Street, Whangarei, Whangarei District.
2.6 Valuation Currency
All dollars quoted in this report are NZD.
2.7 Basis of Valuation
We are to provide our opinion of Market Value which is defined in International Valuation Standards
2017 as:
The estimated amount for which an asset or liability should exchange on the valuation date between a
willing buyer and a willing seller in an arm’s length transaction, after proper marketing and where the
parties have each acted knowledgeably, prudently and without compulsion.
2.8 Relevant Dates
Inspection Date: 15 February 2019
Valuation Date: 31 May 2019
2.9 Extent of Investigations
We have carried out an inspection of exposed and readily accessible areas of the improvements.
However, the valuer is not a building construction or structural expert and is therefore unable to certify
the structural soundness of the improvements. Readers of this report should make their own enquiries.
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This report has been prepared for valuation purposes only and is not a geotechnical or environmental
survey. If any defect is found, including structural defects, this information could impact on the value
of the property.
No allowances are made in our valuations for any expenses of realisation, or to reflect the balance of
any outstanding mortgages either in respect of capital or interest accrued thereon.
We have not been provided with an environmental audit of the property and we are not aware of any
potential environmental concerns. Our valuation and report assume that the land and buildings are
unaffected by harmful contaminants or noxious materials which may impact on value. We refer you to
our Statement of Limiting Conditions and Valuation Policy on matters relating to potential
contamination.
We have not conducted a land survey of the subject property and assume all improvements lie within
the title boundaries.
We have not sighted a current Land Information Memorandum for the subject property during the
course of this valuation. Our report is subject to there being no outstanding requisitions or adverse
information affecting the property.
2.10 Nature and Source of Information Relied Upon
Information used to prepare the valuation has been obtained from our property inspection and public
records. Additional information relied on includes:
Name of Document Source of Document
Tenancy Schedule Maat Consulting
Service Charge Information Maat Consulting
Hail Register Information Northland Regional Council
2.11 Assumptions and Special Assumptions
Standard valuation assumptions made in completing the report are stated in 'Extent of Investigations'
and 'Statement of Limiting Conditions and Valuation Policy'.
Significant Assumptions and Special Assumptions made within the valuation are as follows:
The information provided by Maat Consulting in respect of the current and proposed tenancies and
outgoings to be a true and accurate indication of income and expenditure.
This valuation has been prepared on the basis that no contamination exists within the site. If this
is found not to be the case there may be value implications for the subject property and we would
reserve the right to amend this valuation accordingly.
Confirmation that the property has an IEP in excess of 67% NBS.
The building to be free from Asbestos.
This report assumes that all exterior works are completed and that there is no further financial
liability.
The further lease to Ministry of Social Welfare to be completed in due course
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2.12 Reporting Format
We have provided a formal valuation report meeting all appropriate valuation and professional
standards.
This report must be read in conjunction with TelferYoung (Northland) Limited's Statement of Limiting
Conditions and Valuation Policy.
2.13 Valuation Standards
Our valuation has been prepared in accordance with International Valuation Standards 2017 and
Australia and New Zealand Valuation Guidance Notes and Technical Information Papers including:
+ IVS - Framework
+ IVS 101 - Scope of Work
+ IVS 102 - Investigations and Compliance
+ IVS 103 - Reporting
+ IVS 104 - Bases of Value
+ IVS 105 - Valuation Approaches and Methods
+ IVS 30 - Valuation for Financial Reporting
+ IVS 400 - Real Property Interests
+ ANZVGN 1 - Valuation Procedures - Real Property
+ ANZVGN 9 - Assessing Rental Value
+ ANZRPGN 1 - Disclaimer Clauses and Qualification Statements
+ ANZRPGN 4 - Methods of Measurement
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3.0 Legal Description
Identifier: NA104D/626
Land Registration District: North Auckland
Legal Description: Lot 1 DP 171562 and Lot 2 DP 145507
Estate: Fee Simple
Area: 6,589 m² (more or less)
Registered Owner/s: Walton Plaza Investments Limited
Interests: Appurtenant hereto is a right of way (affects part formerly CT
NA18D/863) and a drainage right (affects Lot 2 DP 145507)
created by Transfer 364530
Subject to rights of way over parts marked B, G, H, I, J, K and M
on DP 145507 created by Transfer 364530 (affects Lot 2 DP
145507)
The right of way created by Transfer 364530 is subject to the
Council's conditions of consent
Subject to a drainage and sewage rights (in gross) over parts
marked I, J and K on DP 145507 and over part marked G on DP
171562 in favour of Her Majesty the Queen created by Transfer
236596
Subject to Section 241(2) and Sections 242(1) and (2) Resource
Management Act 1991
Subject to an electricity right over parts marked C and D and to
stormwater drainage rights over parts marked D, E, F, S, J and L
on DP 145507 specified in Easement Certificate C341412.3
(affects Lot 2 DP 145507)
The easements specified in Easement Certificate C341412.3 are
subject to Section 309 (1) (a) Local Government Act 1974
Appurtenant hereto is a right to drain water specified in Easement
Certificate D045263.10
Subject to a right to drain sewage over part marked A on DP
171562 specified in Easement Certificate D045263.10
The easements specified in Easement Certificate D045263.10 are
subject to Section 243 (a) Resource Management Act 1991
8666787.1 Transfer to Walton Plaza Investments Limited
8666787.2 Mortgage to Bank of New Zealand
Comments: The above notations are considered to be typical of a large urban site
and are not considered to be detrimental. Any impact has been
taken into consideration in our assessment.
Appendix: Copy of the Record of Title is included as Appendix A
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4.0 Rating Valuation and Statutory Charges
4.1 Rating Valuation
As at 1 August 2018
Component Value
Land Value $1,822,000
Improvements $12,853,000
Capital Value $14,675,000
Rating Valuations are conducted on a mass appraisal basis, generally once every three years, in order
to provide a basis to assist territorial authorities to collect revenue through rates. Individual properties
are not inspected on a regular basis and changes in the improvements may not be recorded. The
rating values are expressed on a Freehold Estate basis, even when the property might be leasehold.
4.2 Statutory Charges
As at the date of valuation, the rates per annum (inclusive of GST) are as follows:
Council Value
Territorial Authority $48,730.97
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5.0 Location
The property is located on the west side of Albert Street running south west through to Railway Road.
The land is separated from Walton Street by a large Mobil Service Station. Although formally
addressed as 4 Albert Street, the property is generally referred to as being on Walton Street which
address is adopted within this report where convenient. The land holding is just to the south of the
traditional Whangarei CBD, however, the CBD area has been extended in recent years to reflect the
spread of the commercial centre.
The original Whangarei CBD was relatively compact and centred on the Cameron Street Mall which is
to the north of the subject holding. Although there has been some office development in this area this
was mainly within Lower Cameron Street and Commerce Street. Further office development is about
to commence in Kaka Street with fresh hopes of a substantially new office building being built on Dent
Street.
Whangarei City is the principal urban settlement of the Whangarei District, being home to most of the
districts’ population of 80,000. It is the largest settlement in the Northland region and the seat of both
the Whangarei District and Northland Regional Councils. The geography of the Whangarei area has
dictated development of a relatively compact CBD given the number of hills which surround the town
and the influence of the Hatea River/Whangarei Harbour which forms the eastern boundary of the
main city area.
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Area: 6589 m² (more or less)
Frontage: 65.33 metres (approximate)
Depth: 92.00 metres (approximate)
Shape: The property is of an irregular shape being generally rectangular but
with a number of disjointed boundaries and splays to the various
frontages
Contour: A more or less level site with a slight west to east fall
Services: The following services are available at the site;
+ Telephone
+ Electricity
+ Local water supply scheme
+ Mains sewerage reticulation
+ Gas
+ Fibre Optic Internet
Comments: The existing building occupies the majority of the site with an area of
carparking to the front, a further area of parking between the building
and the main rear boundary and with the additional section to the
south providing a dedicated carpark.
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7.1 Zoning
Territorial Authority: Whangarei District
Plan Status: Operative
Zone: Business 1
Zone Description: This zone covers the greater Central Business area.
Development Controls: Activities are generally permitted if:
a. It does not involve factory farming, mineral extraction, animal
boarding, panel beating, metal working, spray painting, motor
vehicle manufacturing or dismantling, fibre glassing or
laminating.
b. It is not an activity involving any of the following on a commercial
basis: Bone boiling or crushing; collection and storage of used
glass bottles; fish cleaning, curing and processing; flax pulping;
flock manufacturing or teasing of textiles; refuge accumulation;
sewage collection and disposal; storage; drying or preserving
of bones, hides, hooves or skins; tallow melting; tanning; wood
pulping; wool scouring.
c. It is not an activity that is classified as an offensive trade in the
Health Act 1956.
d. This zone places no requirement for carparking the onus to
provide this is on Council.
Comments: The planning data maps (District Scheme) indicate that this site is
predominantly in a Low Stability Sensitive area with a smaller portion
in a Medium Stability Sensitive area, where special attention to
factors affecting the stability of the land is required in respect of any
future development, including felling trees or contouring the land.
Some areas are merely sloping ground requiring special care with
such things as stormwater disposal, but also included may be areas
subject to actual, suspected or potential slope instability.
We note under the Operative Plan that the land is defined as being
Flood Susceptible. Such areas are identified on the planning maps
and cover flooding from river systems, potential overland flow and
low lying areas which have experienced or could be subject to
flooding under conditions such as poor drainage. The designation
introduces controls within the plan which are intended to reduce the
risk from flooding by requiring the flood risk to be assessed when
undertaking any activity such as building or building alterations.
We understand that if an application is made for a building consent,
it may be subject to Section 72 of The Building Act 2004. The
Council will require from a Registered Engineer, certification that the
proposed improvements, and/or alterations to the existing
improvements are suitable for the land. If it can be demonstrated
that the hazard or hazards identified can be mitigated by engineering
work then Section 72 will not apply and the building consent will be
granted in the normal manner.
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8.1 Contamination
As part of our investigation we have made enquiry to Northland Regional Council and confirmed the
property is not on the Northland Regional Council Contamination Register/Hazardous Activities and
Industries List (HAIL). We refer you to Appendix B where a copy of our enquiry is attached.
However, the following comments have been made:
The property that you have enquired about is not currently listed on the NRC Selected Land-use
Register (SLR) for any current or historical Hazardous Activities and Industries List (HAIL) activities.
There is one environmental incident recorded on the property;
REQ.415126 – 12/6/2007 – Diesel spill in carpark.
We have not attempted to verify any contamination, which may or may not exist in the site. We have
not undertaken a geotechnical survey of the property, and therefore cannot comment as to the subsoil
condition of the land. This valuation has been prepared on the basis that no contamination exists
within the site. If this is found not to be the case there may be value implications for the subject
property and we would reserve the right to amend this valuation accordingly.
8.2 Land Information Memorandum
We have not obtained a Land Information Memorandum (LIM) report for this property.
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9.1 Overview
Walton Plaza is the largest office development in Whangarei. The building was originally erected in
1988 and extended in 1990. It now provides some 9350 m2 of gross floor area over three stories. In
addition, the site provides almost 100 carparks with further garaging.
Front elevation Southern elevation Rear elevation
See Appendix C for additional photographs.
9.2 Walton Plaza
9.2.1 Rentable Floor Areas
The floor areas are based on the ‘The Guide for the Measurement of Rentable Areas’ (revised June
2013) published jointly by the Property Council of New Zealand (PCNZ) and the Property Institute of
New Zealand (PINZ), and also as summarised in Australia and New Zealand Real Property Guidance
Notes (ANZRPGN) 4 – Methods of Measurement. The rentable floor areas are as follows:
Rentable Areas
Ground floor offices 2,790.0 m²
First floor offices 2,793.0 m²
Second floor offices 2,905.0 m²
Gross area:
Total: 8,489.0 m²
9.2.2 Construction
Foundations: Reinforced concrete over concrete piles
Flooring: Pre-stressed reinforced concrete
Exterior Walls: Concrete
Framing: Reinforced concrete pier and beam
Roofing: Steel/G-Iron
Stud Height: 2.60 m
Joinery: Aluminium
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Natural Lighting: Generally good however with the ground floor average
Artificial Lighting: Generally excellent
Services: The building is provided with two passenger lift s and a goods lift.
9.2.3 Description
The building presents a continuous façade to the Walton Street elevation, however, was constructed
as two towers, one to the east and one to the west. The floor plates are eccentric with the larger floor
plates being provided within the eastern portion of the building. The main entrance lobby provides the
division between the two sections emphasised by a light well at the rear of the building.
The main access to the building is via a substantial portico to the front carparking area which leads
directly to a marble tiled entrance lobby. The two principal passenger lifts are accessed from this
lobby with further access provided to a service lobby and lift at the rear of the building. The lobbies to
the first and second floor are of a similar specification to the main entrance.
9.2.4 Lessee Fitout/Improvements
The majority of the accommodation was originally leased with some fitout being mainly carpeting and
partitioning. Each tenancy has added to the partitioning with some tenants having replaced carpeting.
MSD tenancies are understood to specifically reserve carpeting to the tenants.
9.2.5 Lessor Fitout
Where not identified as being lessee improvements, all other improvements on the site are assumed
to be the property of the lessor.
9.2.6 Building Condition
At inspection the building was presented to a good standard throughout. All of the tenancies are now fully
fitted, partitioned, and generally decorated to a good modern standard, some parts are of a well above
average quality reflecting significant tenant investment. A nominal allowance has been made for
refurbishment of the vacant suite .
We are aware that the property was subject to a full structural survey prior to acquisition by the present
owner and our previous reports have confirmed that no significant structural defects were noted. Deferred
maintenance identified at the time has now been substantially rectified and we note that over the past 9
years the building has had lifts upgraded, air conditioning plant upgraded, air-conditioning water pipes
replaced, carparking seal re-laid, window seals replaced and parapet cover flashings installed. The
exterior is in the process of being redecorated with these works assumed to have been completed without
further financial liability to the property owner.
9.3 Earthquake Categorisation
The Building (Earthquake-prone Buildings) Amendment Bill Act 2016 came into full effect as from 1
July 2017.
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+ The threshold for defining an earthquake-prone building remains, with amendments to clarify
certain aspects (including that it applies to parts of buildings). In practice, an earthquake-prone
building is often referred to as one that is less than 34% of the New Building Standard (NBS).
+ New Zealand is to be categorised into areas of high, medium and low seismic risk (with timeframes
for identifying potentially earthquake-prone buildings of 5, 10 and 15 years, and timeframes for
strengthening earthquake-prone buildings of 15, 25 and 35 years, dependent on the seismic risk of
the area).
The legislation provides:
+ Excludes certain buildings (including most residential buildings). The methodology for identifying
earthquake-prone buildings, will further target buildings that pose the greatest risk.
+ Prioritises earthquake-prone education buildings, emergency service facilities and certain hospital
buildings and buildings located on strategic routes, by requiring medium to high risk areas that are
identified to be remediated in half the standard time.
+ Introduces new requirement to remediate earthquake-prone buildings when substantial alterations
are undertaken.
+ Provides for an opt-in extension of up to 10 years to remediate Category 1 listed heritage buildings
and those buildings on the National Historic Landmarks List.
+ Provides for opt-in exemptions from the requirement to remediate for some buildings.
+ Provides for a publicly available national register of earthquake-prone buildings.
Territorial Authorities are required to carry out an assessment of all buildings to identify if they might
be earthquake prone. The territorial authority has 10 years to complete this and then notify owners
who will then have 12 months to get an assessment from an engineer to either confirm that the
building is or is not earthquake prone. After supplying this information to Council, Council have 5 years
to confirm the earthquake prone status of the building and if confirmed as being earthquake prone the
building will be placed on a national register. From this point the owner has the specified times to
undertake the remedial repairs.
Northland is categorised as a low risk area and owners have 35 years to undertake remediation in the
event that a building is earthquake-prone. High priority buildings are required to be strengthened in
half these times, in the medium and high risk areas. It is noted that the region has recently suffered a
swarm of minor earthquakes however Geonet do not consider these to have altered their assessment
of the risk.
9.4 Asbestos Regulations
The Health and Safety at Work (Asbestos) Regulations 2016 came into effect on 4 April 2018. The
regulations require workplaces to be surveyed for asbestos, and, an Asbestos Register and Asbestos
Management Plan be prepared for buildings. A copy of the Asbestos Management Plan must be
accessible on site.
Where Asbestos is present it can be left undisturbed if there is no risk to people, or it can be
encapsulated, isolated or removed. If left undisturbed, future refurbishment or demolition requires
further survey and works planning (including safe removal of Asbestos by competent persons).
We have requested copies of the Asbestos Register and Management Plan for the property and are
advised that these have not yet been completed.
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The Building Act 2004 requires that all buildings which include certain specified systems must have a
Compliance Schedule and a Building Warrant of Fitness (BWOF). The Act requires the various
services and other facilities as set out in the Compliance Schedule to be inspected on a regular basis,
and the Warrant of Fitness to be renewed annually.
A Building Warrant of Fitness has been issued for the subject property and this expires on 1 August
2019. It refers to Compliance Schedule No WF945496
9.6 Other Improvements
Where not occupied by the main building the site provides a large number of carparks. This includes
the immediate building surrounds as well as a fenced compound to the rear.
Our valuation has been prepared on the basis of the improvements being located within the site
boundaries and constructed strictly in accordance with the recommended practices, and free from any
defect; unless otherwise stated within this report.
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10.1 Introduction
The property is subject to a number of leases with two of the tenants holding their accommodation on
multiple agreements.
The leases are generally consistent with the Public Sector Lease Standard, the exception being in
respect of the lease to the Jenny Craig organisation which is on standard Auckland District Law
Society terms. We have not been provided with any information in respect of casual parking and have
assumed this to be vacant and available to lease on monthly terms.
10.2 Tenancy Summary
10.2.1 Jenny Craig
Landlord: Walton Plaza Investments Limited
Tenant: Jenny Craig Weight Loss Centre (NZ) Limited
The Premises: Ground Floor with 3 car parks
Commencement Date: 15 March 2018
Term: 3 years
Rights of Renewal: None
Contract Rent: $35,727 per annum plus outgoings and GST
Rent Reviews: On renewal
Rent Review Basis: Market
Ratchet Clause: No ratchet clause
Business Use: Offices
Outgoings: Outgoings recoverable from the tenant include:
Local Authority Rates
Utility charges
Fire Service charges
Rubbish collection charges
Insurance premiums
Internal and external maintenance
Costs associated with the building warrant of fitness
Service contract charges
Management
Unrecovered outgoings include:
Structural maintenance
Special Conditions: Not Applicable
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Our Ref: NOR-149078
++ Local Knowledge, National Coverage Walton Plaza 4 Albert Street, Whangarei, Whangarei District telferyoung.com10.2.2 WINZ - Area 1
Landlord: Walton Plaza Investments limited
Tenant: Ministry of Social Development (MSD)
The Premises: Ground floor central unit with 10 open carparks
Commencement Date: 1 May 2016
Term: 3 years
Rights of Renewal: One of three years
Contract Rent: $311,720 per annum plus GST
Rent Reviews: Three yearly
Rent Review Basis: Market
Ratchet Clause: No ratchet clause
Business Use: Offices
Outgoings: Outgoings recoverable from the tenant include:
Utility charges
Unrecovered outgoings include:
Structural maintenance
Local Authority Rates
Fire Service charges
Rubbish collection charges
Insurance premiums
Internal and external maintenance
Maintenance of the carpark
Costs associated with the building warrant of fitness
Management
Special Conditions: Not Applicable
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Our Ref: NOR-149078
++ Local Knowledge, National Coverage Walton Plaza 4 Albert Street, Whangarei, Whangarei District telferyoung.com10.2.3 WINZ - Area 2
Landlord: Walton Plaza Investments Limited
Tenant: Ministry of Social Development
The Premises: Ground floor western suite and 5 open carparks
Commencement Date: 1 May 2016
Term: 3 years
Rights of Renewal: None
Contract Rent: $138,280 per annum plus GST
Rent Reviews: Three yearly
Rent Review Basis: Market
Ratchet Clause: No ratchet clause
Business Use: Offices
Outgoings: Outgoings recoverable from the tenant include:
Utility charges
Unrecovered outgoings include:
Structural maintenance
Local Authority Rates
Fire Service charges
Rubbish collection charges
Insurance premiums
Internal and external maintenance
Maintenance of the carpark
Costs associated with the building warrant of fitness
Management
Special Conditions: Not Applicable
20
Our Ref: NOR-149078
++ Local Knowledge, National Coverage Walton Plaza 4 Albert Street, Whangarei, Whangarei District telferyoung.com10.2.4 CYFS - Area 1
Landlord: Walton Plaza Investments limited
Tenant: Ministry of Social Development (MSD)
The Premises: Part second floor with 18 carparks
Commencement Date: 1 May 2016
Term: 3 years
Rights of Renewal: None
Contract Rent: $243,910 per annum plus GST
Rent Reviews: Three yearly
Rent Review Basis: Market
Ratchet Clause: No ratchet clause
Business Use: Offices
Outgoings: Outgoings recoverable from the tenant include:
Utility charges
Unrecovered outgoings include:
Structural maintenance
Local Authority Rates
Fire Service charges
Rubbish collection charges
Insurance premiums
Internal and external maintenance
Maintenance of the carpark
Costs associated with the building warrant of fitness
Management
Special Conditions: Not Applicable
21
Our Ref: NOR-149078
++ Local Knowledge, National Coverage Walton Plaza 4 Albert Street, Whangarei, Whangarei District telferyoung.com10.2.5 CYFS - Area 2
Landlord: Walton Plaza Investments limited
Tenant: Ministry of Social Development (MSD)
The Premises: Part second floor
Commencement Date: 30 April 2018
Term: 1 years
Rights of Renewal: Two of three years
Contract Rent: $78,000 per annum plus GST
Rent Reviews: Three yearly
Rent Review Basis: Market
Ratchet Clause: No ratchet clause
Business Use: Offices
Outgoings: Outgoings recoverable from the tenant include:
Utility charges
Unrecovered outgoings include:
Structural maintenance
Local Authority Rates
Fire Service charges
Rubbish collection charges
Insurance premiums
Internal and external maintenance
Maintenance of the carpark
Costs associated with the building warrant of fitness
Management
Special Conditions: Not Applicable
22
Our Ref: NOR-149078
++ Local Knowledge, National Coverage Walton Plaza 4 Albert Street, Whangarei, Whangarei District telferyoung.com10.2.6 Whangarei District Council – Area 1
Landlord: Walton Plaza Investments Limited
Tenant: Whangarei District Council
The Premises: Offices Ground Floor
Commencement Date: 1 July 2016
Term: 3 years
Rights of Renewal: None
Contract Rent: $68,000 per annum plus GST
Rent Reviews: Annual
Rent Review Basis: CPI
Ratchet Clause: No ratchet clause
Business Use: Offices
Outgoings: Outgoings recoverable from the tenant include:
Utility charges
Unrecovered outgoings include:
Structural maintenance
Local Authority Rates
Fire Service charges
Rubbish collection
Insurance premiums
External maintenance
Maintenance of the carpark
Management
Special Conditions: Not Applicable
23
Our Ref: NOR-149078
++ Local Knowledge, National Coverage Walton Plaza 4 Albert Street, Whangarei, Whangarei District telferyoung.com10.2.7 Whangarei District Council – Area 2
Landlord: Walton Plaza Investments Limited
Tenant: Whangarei District Council
The Premises: Part first floor with 24 open and 12 secure carparks
Commencement Date: 1 July 2016
Term: 3 years
Rights of Renewal: One of 3 years
Contract Rent: $601,884 per annum plus GST
Rent Reviews: 2 years
Rent Review Basis: CPI
Ratchet Clause: N/A
Business Use: Offices
Outgoings: Outgoings recoverable from the tenant include:
Utility charges;
Unrecovered outgoings include:
Rates or levies to any local or territorial authority;
Insurance premiums, excess and related valuation fees;
Cleaning, maintenance and repair charges (excluding
structural);
Costs associated with the building warrant of fitness;
Fire Service charges;
Ground maintenance;
Management expenses;
Rubbish collection charges;
Service contract charges;
Utility charges;
Yard and carpark area maintenance and repair charges;
Structural maintenance
Special Conditions: Not Applicable
24
Our Ref: NOR-149078
++ Local Knowledge, National Coverage Walton Plaza 4 Albert Street, Whangarei, Whangarei District telferyoung.com10.2.8 Whangarei District Council – Area 3
Landlord: Walton Plaza Investments Limited
Tenant: Whangarei District Council
The Premises: Part second floor
Commencement Date: Not known
Term: Expires 1/7/2019
Rights of Renewal: None
Contract Rent: $160,000 per annum plus GST
Rent Reviews: None
Rent Review Basis: None
Ratchet Clause: None
Business Use: Offices
Outgoings: Outgoings recoverable from the tenant include:
Utility charges;
Unrecovered outgoings include:
Rates or levies to any local or territorial authority;
Insurance premiums, excess and related valuation fees;
Cleaning, maintenance and repair charges (excluding
structural);
Costs associated with the building warrant of fitness;
Fire Service charges;
Ground maintenance;
Management expenses;
Rubbish collection charges;
Service contract charges;
Yard and carpark area maintenance and repair charges;
Structural maintenance
Special Conditions: Not Applicable
In addition to the above agreements there are two formalised agreements in respect of car parking
with the balance undocumented and therefore assumed to be available for lease. The remaining
533.3m2 suite on the second floor is understood to be in the process of being leased to the Ministry of
Social Development as an addition to the adjoining premises. Further details have not been provided
and we have made our own assumptions in this respect.
25
Our Ref: NOR-149078
++ Local Knowledge, National Coverage Walton Plaza 4 Albert Street, Whangarei, Whangarei District telferyoung.com10.3 Weighted Average Lease Term
The current lease profile provides a very limited lease term as the majority of the leases expire within
the next few months. However the Mistry of Social Development have confirmed their intention to
remain and are in the process of consolidating accommodation on the second floor.
Whangarei District Council have confirmed that they intend to relocate to a purpose built civic centre to
accommodate all staff on a single site. Given that there is no existing accommodation which meets
their criteria there is virtually no likelihood of them not renewing their leases at expiry. Given the likely
gestation period and construction time for a development of this size there is potential that they will not
have completed new premises before the expiry of their renewed term. Our report has however
assumed no renewals beyond a 3 year period.
26
Our Ref: NOR-149078
++ Local Knowledge, National Coverage Walton Plaza 4 Albert Street, Whangarei, Whangarei District telferyoung.com11.0 Operating Expenses
The management of the property is understood to be on a semi-in house basis. Although requested
we have not been provided with a detailed breakdown of current outgoings but have been advised by
Mr Neil Tuffin of MAAT Consulting that annual service charge is currently estimated to be $50/m2 pa.
Previous analysis of the running cost have disclosed an above average accounting allowance due to
the nature of the building ownership. As such we have made our own estimate of outgoings
benchmarked to other large office buildings in the City.
Operating Expenses (OPEX)
2
Budgeted $/m of Rentable
Item % of Total
Amount Area
Total Rates $42,375 $4.99 11.1%
Building Insurance $75,000 $8.83 19.6%
Repairs And Maintenance $120,000 $14.14 31.4%
Management Expenses $44,584 $5.25 11.7%
Cleaning Charges $25,000 $2.94 6.5%
Lift Maintenance Charges $30,000 $3.53 7.9%
Compliance Costs $2,500 $0.29 0.7%
Fire protection $3,000 $0.35 0.8%
Security $7,500 $0.88 2.0%
Electricity $20,000 $2.36 5.2%
Water $7,000 $0.82 1.8%
Sundry $5,000 $0.59 1.3%
Total $381,958 $44.99 100.0%
For comparison we are aware that the Whangarei District Council and Northland Regional Council
rates equate to $42,375 per annum plus GST, which analyses to circa $4.99/m². This is reasonably
low for the City and reflects the intensive development of the site and the slightly off pitch location.
Including other outgoings, such as insurance the adopted operating expense budget equates to circa
$44.99/m² in total over the building area or $381,958 per annum in total.
Based on our involvement with the valuation of other larger office buildings this is within an acceptable
range of established service charge costs. We consider this allowance for operating expenses to be
fair and reasonable and not out of context with the market level.
27
Our Ref: NOR-149078
++ Local Knowledge, National Coverage Walton Plaza 4 Albert Street, Whangarei, Whangarei District telferyoung.com12.0 Valuation Approaches and Methods
12.1 Highest and Best Use
The Market Value of an asset will reflect its ‘highest and best use’. The highest and best use is the use
of an asset that maximises its potential and that is physically possible, legally permissible and
financially feasible. The highest and best use may be for continuation of an asset’s existing use or for
some alternative use. This is determined by the use that a market participant would have in mind for
the asset when formulating the price that it would be willing to bid.
The property comprises a purpose built office investment. Whilst there is considered to be a slight
over provision of parking, current management strategy appears to have been to avoid entering into
longer term arrangements until a tenant has been found for the vacant unit. Now that there is a strong
likelihood that the vacant suite will be taken up by the Ministry of Social Development the parking
situation can be properly enforced
To establish Market Value we have utilised the following recognised valuation methods:
12.2 Income Approach
The Income Approach is predicated on the conversion of net actual or market income, which either is
or could be generated by an owner of the interest, to value. The approach encompasses various
methods to indicate value. Methods adopted in this instance include:
Income Capitalisation
This method encompasses the conversion of net income (actual, market or notional) to value via the
application of a capitalisation rate or yield (investment return). The basic premise of income
capitalisation is that a property investor expects a pre-determined rate of return on their investment.
The yield varies according to a number of factors including: risk, type & scale of investment, location,
residual lease term and expected income and capital value growth. The two main variables, namely
income and yield, are analysed from available rental and sales evidence.
Implicit adjustments are made when determining an appropriate yield to apply, however, in instances
where the contract rent varies from market rent, the present value of the variation is adjusted against
the capitalised value. The capitalised value may also be adjusted for costs associated with vacancy if
existing or imminent, refurbishment/incentives and capital expenditure.
Discounted Cash Flow
The Discounted Cash Flow (DCF) method is a variation of the Income Capitalisation Method whereby
cash flows are explicitly forecast over a ten-year investment horizon. Allowances are made within the
cash flow projection to account for the market’s expectation of rental growth, or where appropriate,
structured rental adjustments in accordance with the leases. Deductions for costs associated with
property ownership are then made to establish the net annual cash flow. Costs of ownership may
include; unrecovered outgoings, vacancy (actual or potential) and capital expenditure.
Having determined the net annual income, we then establish the terminal value of the property based
on a hypothetical sale at the beginning of year 11 of the investment horizon, and discount the cash
flows at a market based discount rate, as analysed from sales, reflecting the cost of capital, risk and
28
Our Ref: NOR-149078
++ Local Knowledge, National Coverage Walton Plaza 4 Albert Street, Whangarei, Whangarei District telferyoung.comrequired return. The aggregate of the present value of each cash flow establishes market value via
this method.
The method is of particular relevance where cash flows or costs associated with ownership are
irregular.
12.3 Cost Approach
The cost approach estimates value using the economic principle that a buyer will pay no more for an
asset than the cost to obtain an asset of equal utility, whether by purchase or by construction. It is
based on the principle of substitution, i.e. that unless undue time, inconvenience, risk or other factors
are involved, the price that a buyer in the market would pay for the asset being valued would not be
more than the cost to assemble or construct an equivalent asset.
Under this approach we began by establishing the cost to replace the improvements with their modern
equivalent having regard to current building costings (including fees). We then deduct an allowance for
market based depreciation, encompassing physical deterioration, functional obsolescence and
economic obsolescence. To the value of improvements we add our estimate of the market value of the
land as analysed from sales.
29
Our Ref: NOR-149078
++ Local Knowledge, National Coverage Walton Plaza 4 Albert Street, Whangarei, Whangarei District telferyoung.com13.0 Market Commentary
13.1 Economic Overview
National Outlook - recent Statistics NZ figures indicate real economic growth of 2.7% for the June
2017 year. Strongest industry growth over the year was recorded by the accommodation/food
services, construction, forestry/logging, metal products manufacturing and health care/social
assistance services industries. Permanent/long-term net population migration gain at 70,986 for the
September 2017 year, was up 1.5% on the previous September year and at its highest-ever recorded
level. Retail sales rose by 4.6% in real terms over the same year. The national median house price
rose by 3.9%. Total employment increased by 4.7% whilst unemployment increased by 1.6%.
Overseas visitor arrivals rose by 8.7%. Total export receipts rose 2.4% over the June 2017 year with
strongest commodity growth being recorded by dairying, forestry and horticulture. Latest NZIER
Consensus Economic Forecasts indicate noticeably stronger economic growth of 3.4% in NZ over the
coming year, along with lower employment growth of 2%, higher inflation and interest rates, and
slightly reduced unemployment.
13.2 Regional Property Market
For the year ended June 2018, the Northland economy grew by 2.8%, compared to an estimated 2.9%
growth for the previous June year and the national growth figure for the June 2018 year of 2.8%.
Economic activity in the region (and nationally too) has generally fluctuated considerably over the
longer-term. However, the region has recorded positive growth during much of the trend monitoring
period. Northland is currently ranked 10th out of 16 regions. Since 2013 the Northland economy has
grown at a rate of 3% with only five regions growing faster.
The total value of retail sales in the region for the year (estimated at $2.8 million in real terms) was up
an estimated 1.78% on the previous year. Since 2013, retail spending in Northland has increased by
28%, the same growth rate as the national increase during the same period. Northland ranks 5th out
30
Our Ref: NOR-149078
++ Local Knowledge, National Coverage Walton Plaza 4 Albert Street, Whangarei, Whangarei District telferyoung.comof 16 regions in terms of growth rates. Net international migration into Northland for the year ending
June 2018 was 612. Net migration plateaued in 2016 and has declined slightly since. Between 2016
and 2017 Total Whangarei Port international exports rose by 1.33%, however to October 2018 there
has been $630 million exports ($62 million per month) which would indicate an annual average of
$756 million. Domestic visitor spending has steadily increased at 3.8% - 4% to $512 million for the
year ending June 2018, with approximately 60% of this being from Auckland. International spending is
up 9% on the previous 12 months and now sits at $269 million. Guests nights in Northland have
increased by 2.5% in the past 12 months to just under 2,000,000. Approximately 65% of those are
domestic travellers, with approximately 35% representing international visitors. Northlands share of
the domestic tourism market has remained stable at 5.7%.
The largest broad economic sectors in the region are public/community services, business services,
manufacturing and primary manufacturing. Northland industries that have grown the most over the
five-year period since 2010 in nominal GDP terms are utility services, manufacturing, financial and
insurance services, transport/storage, health care & social assistance services and education/training
services. The Northland industries that have most grown their employment bases overall during the
2010-2017 period are administrative & support services, public administration, primary production,
wholesaling, health care & social assistance, construction and transport/storage. The largest
employment declines during the period have occurred in mining, financial/insurance services and
information media & telecommunications.
The average wage and salary in Northland was 52,420 in June 2017 and data is yet to be released for
2018. Between 2013 and 2016 the average wage increase was between 2.5% and 3.5%, however it
decreased to just over a 1.5% increase to the year ending June 2017. Whangarei’s average wage is
approximately 11% below the national average and ranks 9th out of 16 regions. Unemployment has
generally decreased since mid 2016 and now sits at 5.7% as at June 2018, which is 1.8% lower than
the June 2017. This is the first time that Northland unemployment has fallen below 6% since 2008. As
at June 2018 there is an estimated 84,100 people employed in Northland, which is 6% higher than one
year ago and 22% higher than 2013. Only Otago and Waikato have increased a greater increase in
the number of employed people.
2018 was a mixed year. During the first half there was a lack of good quality investment properties
being offered and yields had remained relatively stable. In the last half of 2018 there was an increase
in the number of transactions and prime yields have lowered further with some showing yields as low
as 6.0%. This is likely due to the recent reassurances from the Reserve Bank that the OCR is likely to
remain stable for longer than initially expected. Properties in fringe and secondary locations have
remained relatively static where they are being offered with vacant possession or have short term
leases. There has been recent properties being listed by way of auction and there have been multiple
bidders, which indicates there is strong demand for well leased investments. Buyers are completing
full due diligence to confirm issues of compliance including Building Consents, Code Compliance,
contamination and Earthquake Prone Status which are generally required by lenders. There is now
considered a shortage of land within most main centres and we are aware of a number of
developments which are underway.
Owner occupiers continue to be active in the commercial market taking advantage of static market
conditions and stable low interest rates.
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Our Ref: NOR-149078
++ Local Knowledge, National Coverage Walton Plaza 4 Albert Street, Whangarei, Whangarei District telferyoung.com13.3 Rental Market
Office Market Comments - There has been a limited number of office investment sales in the past few
years after a number of sales of large multi-level offices in 2016. There is one large recent sale
however it struggled to sell over an extended period due to high levels of vacancies. Smaller offices
are highly sought after by owner occupiers and tenants are finding it increasingly difficult to find vacant
freestanding offices out of the CBD. Office vacancies are isolated to fringe locations where there is
limited exposure and that have limited carparking in the vicinity.
14.0 Valuation Considerations
14.1 Highest and Best Use
We consider that the highest and best use of the asset will remain as an income earning investment in
the present developed form. The asset will be priced by the market primarily on the basis of its present
and future maintainable income earning capacity, in conjunction the prime determinant being an
investment rate of return determined by competing property investment options and reflecting the
particular attributes of this property and associated investment risk.
32
Our Ref: NOR-149078
++ Local Knowledge, National Coverage Walton Plaza 4 Albert Street, Whangarei, Whangarei District telferyoung.com15.0 Market Rent Assessment
15.1 Introduction
Income-based valuation assessments consider the cash flow that could be, or is, generated from the
property. Part of the process is a review of the potential rental earning capacity, or Market Rent.
Market Rent is defined in International Valuation Standard 104 as:
‘The estimated amount for which an interest in real property should be leased on the valuation date
between a willing lessor and a willing lessee on appropriate lease terms in an arm’s length transaction,
after proper marketing and where the parties had each acted knowledgeably, prudently and without
compulsion.’
To establish a market rental for the premise we have made comparison with recent rental settlements
for comparable accommodation in the wider location.
The best evidence is that of new leasing agreements of comparable premises in the same or similar
locations with the date of the transaction being as close as possible to the subject rent review date.
Regard can also be had to lease renewals and rent reviews where these are consistent with the new
lease evidence, however, carry less weight.
The rental evidence has been analysed on a Net basis (excluding operating expenses).
Adjustments made for variation in factors such as the size and quality of accommodation, location and
where the lease terms are varied.
15.2 Rental Evidence
Rental settlements that assist in establishing a market rent include the following:
+ Port Road, Port Whangarei, Whangarei District
Date: 1 April 2020
Type: New Lease
Analysis: Offices 414.60m² @ $179.35/m²
Staff shed 78.40m² @ $100.00/m²
Carparks 10 @ $15.00/Wk
Comments: A new lease to a prominent local accounting firm for purpose built offices with a
staff gym and shed to the rear. The premises will essentially be provided on a turn
key basis, including all partitioning, ablution and kitchen fixtures and fittings,
ceilings, floor coverings and air-conditioning. From the plans it appears the tenant
will have the use of seven carparks to the frontage and three to the rear, however
carparks were not specifically mentioned in the agreement to lease.
33
Our Ref: NOR-149078
++ Local Knowledge, National Coverage Walton Plaza 4 Albert Street, Whangarei, Whangarei District telferyoung.comYou can also read
