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Valuation Information: 1 Grey Street, Wellington About this document CBRE Limited (CBRE) prepared and issued a valuation report in respect of the property at 1 Grey Street, Wellington as at 31 July 2021 (Valuation Report). This document comprises: Part A: a letter as at 31 August 2021 issued by CBRE in respect of the Valuation Report; and Part B: a summary of the Valuation Report prepared by CBRE. The information contained in this document has been prepared by CBRE and should be read in conjunction with Fabric Property Limited’s Product Disclosure Statement dated 13 September 2021 (PDS) and other information included on the Offer Register. References to "Stride Office Property Limited" are references to "Fabric Property Limited" (which changed its name from Stride Office Property Limited on 3 September 2021).
Part A: Letter as at 31 August 2021 issued by CBRE in respect of the
Valuation Report
Part B: Summary of the Valuation Report prepared by CBRE
CBRE VALUATION & ADVISORY SERVICES VALUATION REPORT 1 GREY STREET W E L L I N GTO N C E N T R A L W E L L I N GTO N C L I E N T: STRIDE OFFICE PROPERTY LIMITED VA LUAT I O N DAT E : 3 1 J U LY 2 0 2 1 © CBRE LIMITED | VALUATION REPORT | PAGE 1 of 58
1 GREY STREET, WELLINGTON CENTRAL, WELLINGTON
31 JULY 2021
CONTENTS
1 INTRODUCTION .................................7 5.7 Subject Rental Evidence ................................ 36
1.1 Instructions ................................................... 7 5.8 Rental Evidence Commentary – Office .......... 36
1.2 Market Value Definition ................................. 7 5.9 Rental Evidence – Retail................................ 39
1.3 Industry Practice ............................................ 7 5.10 Subject Retail Evidence ................................. 40
1.4 Fair Value Definition ..................................... 7 5.11 Other Retail Evidence Commentary .............. 40
1.5 Financial Reporting Standard ......................... 8 5.12 Carpark Rental Analysis ............................... 41
1.6 Reliance ....................................................... 8 5.13 Rental Evidence Conclusions ........................ 41
1.7 Information Provided ..................................... 9 5.14 Market Rent Assessment ............................... 42
1.8 Special Assumptions ...................................... 9 5.15 Sales Evidence ............................................. 43
5.18 Sales Evidence Conclusion ........................... 50
2 LAND ................................................11
6 VALUATION ...................................... 51
2.1 Location ..................................................... 11
2.2 Resource Management ................................ 11 6.1 Valuation Approaches .................................. 51
2.3 Site Description ........................................... 13 6.2 Capitalisation Approach .............................. 51
2.4 Legal Description ........................................ 14 6.3 Discounted Cashflow Approach .................... 53
2.5 Seismic ....................................................... 15 6.4 Valuation Reconciliation ............................... 55
6.5 Additional Requirements .............................. 55
3 IMPROVEMENTS ................................17
7 DISCLAIMERS .................................... 56
3.1 Overview .................................................... 17
3.2 Accommodation.......................................... 18 8 APPENDICES ..................................... 59
3.3 Floor Plans ................................................. 20 Record of Title
3.4 Floor Areas ................................................. 22 Valuation Definitions and Terminology
3.5 Construction Details .................................... 23 Major Tenant Lease Summaries
3.6 Services ...................................................... 23
3.7 Capital Expenditure ..................................... 23
4 OCCUPANCY ....................................25
4.1 Tenancy Schedule ....................................... 25
4.2 Lease Commentary ..................................... 25
4.3 Lease Expiry Analysis ................................... 26
4.4 Outgoings .................................................. 27
4.5 Net Income Summary .................................. 28
5 MARKET.............................................29
5.1 COVID-19 Market Comment ....................... 29
5.2 CBD Office Dynamics (Vacancy – Supply –
Absorption) ................................................. 29
5.3 CBD Office Rents ........................................ 32
5.4 CBD Office Rents H2 2021 .......................... 33
5.5 Yields ......................................................... 35
5.6 Office Rental Evidence ................................. 36
© CBRE LIMITED | VALUATION REPORT | PAGE 2 of 58
1 GREY STREET, WELLINGTON CENTRAL, WELLINGTON 31 JULY 2021 © CBRE LIMITED | VALUATION REPORT | PAGE 3 of 58
1 GREY STREET, WELLINGTON CENTRAL, WELLINGTON
31 JULY 2021
VALUATION SUMMARY
This report has been prepared for inclusion within a Product Disclosure Statement and will be uploaded to the
Companies Office Disclosure Register. Accordingly, in the interests of privacy and confidentiality, we have
abbreviated or redacted the following report sections:
• Rental Evidence (Sections 5.6 and 5.9): We have not included full details of the rental evidence considered
in order to protect the privacy requirements of the Lessors and Lessees involved. Notwithstanding, we have
summarised the key comparables and provided market rental ranges.
• Major Tenant Lease Summaries (Appendices): At the request of Stride Office Property Limited, this section
has been redacted to protect the privacy of lessees. Key lease details are summarised in the Tenancy
Schedule on page 25.
Market Value (plus GST if any)
$65,650,000
(Sixty Five Million, Six Hundred and Fifty Thousand Dollars)
The above valuation is subject to the Special Assumptions and Disclaimers within this Report.
Key Valuation Metrics
Initial Yield: 6.27% Net Passing Income: $4,107,750 pa
Rate $psm (Excl. Cars): $6,016 psm Net Passing Income (Fully Leased): $4,125,461 pa
Adopted Cap Rate: 6.125% Net Market Income (Effective): $4,178,737 pa
Adopted Target IRR: 7.125% % Under Rented (On Occupied): 1.28%
Adopted Terminal Yield: 6.125% No. of Tenants: 21
Area (NLA): 10,443.4 sqm WALT (Income): 2.98 years
Car Bays: 29 Vacancy Rate: Nil
Key Valuation Assumptions
CPI: 1.92% (10 Yr Avg) Total Adopted Capex (10 yrs): $6,529,258
Office Mkt Rent Growth: 1.90% (10 Yr Avg) Office New Lease Term: 6 years
Retail Mkt Rent Growth: 1.55% (10 Yr Avg) Retail New Lease Term: 6 years
Outgoing Growth: 3.20% (10 Yr Avg) Renewal Probability: 50%
Tenancy Profile by Income Property Risk Profile
$8,000,000 Location Quality
$7,000,000
$6,000,000
$5,000,000
$4,000,000
Liquidity Asset Quality
$3,000,000
$2,000,000
$1,000,000
$0
Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10
Lettability Tenant Covenant
Renewal Rent Secured Rent Gross Market Rent (fully leased)
© CBRE LIMITED | VALUATION REPORT | PAGE 4 of 58
1 GREY STREET, WELLINGTON CENTRAL, WELLINGTON
31 JULY 2021
Income Breakdown Lease Expiry (by rent)
Jacobs NZ 100%
Ltd 90%
16%
80%
70%
Maritime New 60%
Zealand
50%
Other 13%
40%
47%
30%
Financial
20%
Markets
Authority 10%
8% 0%
Westpac (NZ)
Independent Police Conduct Authority Inv. Ltd Vacancy Renewals Initial Expiries
8% 8%
Property Description
1 Grey Street is a 13-storey office/retail building. It was developed in the 1970s and comprises 11 storeys of
podium and tower office accommodation with a 2-storey annex to the eastern side. The ground floor of the
building comprises a number of retail tenancies whilst the office floors above are regular rectangular shape floors
with 3 lifts and male and female amenities to each floor. The basement comprises 29 carparks. Although the
building was developed in the 1970s it has been subject to ongoing refurbishment programmes and the building
is in very good condition reflective of this.
The location of the building spans a prime central CBD core site with views over the Wellington waterfront and
harbour from Customhouse Quay. The site has a dual corner exposure to the corners of Grey Street and
Customhouse Quay and Featherston Street respectively.
The previous seismic report prepared in 2012 indicated that the building had a seismic strength rating of 100%
NBS. A Detailed Seismic Assessment (DSA) has recently been undertaken by Becca with consideration of Appendix
C5E of the C5 Technical Proposal to revise the Engineering Assessment Guidelines dated 30 November 2018.
Initial findings indicate that the building will require minor seismic strengthening works to achieve a seismic rating
of 80-85% NBS (IL2).
Prepared by CBRE Limited
Duncan Watts, B.Com (VAPM), MPINZ Joel Harden, BLPM (VPM)
Registered Valuer Assistant Valuer
Director – Valuation & Advisory Services Valuation & Advisory Services
Principal Valuer Full Valuation & Analysis
Property Inspected: Yes Property Inspected: Yes
© CBRE LIMITED | VALUATION REPORT | PAGE 5 of 581 GREY STREET, WELLINGTON CENTRAL, WELLINGTON
31 JULY 2021
SWOT & RISK ANALYSIS
Strengths & Opportunities
◼ Seismic rating of 80% NBS (IL2) under C5 guidelines on completion of minor works.
◼ Well-maintained good quality building which is fully occupied.
◼ Leased to a number of strong private and public related tenancies.
◼ Diversity of income with retail tenancies which also support office occupation within this locality.
◼ The majority of leases within the office component are net.
◼ Good outlook from existing elevation over Post Office Square with some harbour views to upper floors.
Weaknesses & Threats
◼ The weighted average lease term of the building is reasonably short at 2.98 years.
◼ Competition from large backfill vacant spaces produced by tenant relocations in the next 2-3 years.
◼ Changes to the guidelines for the assessment of seismic resilience to buildings.
◼ Uncertainty as to how high insurance premiums will rise following the seismic activity in November 2016 and,
in particular, where insurance premiums will level out.
◼ We refer you to the Market Risk Comment below.
Market Risk Comment
Commercial property value growth has been strong in many sectors in recent years, even with the disruption
caused by COVID-19 through 2020. This growth is largely due to historically low interest rates, alternative
investment markets demonstrating more risk and volatility and low vacancy rates in some sectors (particularly
industrial). Prime quality strongly leased property transactions continue to show some yields at historical lows.
Notwithstanding currently buoyant conditions in many parts of the property market, the ongoing impact of
COVID-19 upon the global economy means that values and incomes may change more rapidly and significantly
than during standard market conditions.
Should economic and property market conditions deteriorate in the future, then the market value of this asset
may decline. This inherent risk factor should be considered in any lending or investment decisions.
© CBRE LIMITED | VALUATION REPORT | PAGE 6 of 581 GREY STREET, WELLINGTON CENTRAL, WELLINGTON
31 JULY 2021
Introduction
1 INTRODUCTION
1.1 INSTRUCTIONS
Instructing Party: Jessica Rod on behalf of Stride Office Property Limited.
Purpose of Valuation: Inclusion within a Public Disclosure Statement.
Land
Basis of Valuation: Market Value ‘As Is’.
Date of Inspection: 4 February 2011 (full) and 11 June 2021 (part).
Date of Valuation: 31 July 2021.
1.2 MARKET VALUE DEFINITION
Improvements
In accordance with the International Valuation Standards (IVS), the definition of market value is: "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 had
each acted knowledgeably, prudently and without compulsion."
1.3 INDUSTRY PRACTICE
Occupancy
Subject to the assumptions and qualifications detailed within, this valuation report is issued in accordance
with the ‘Guidance Papers for Valuers & Property Professionals' effective 1 July 2021 and International
Valuation Standards (IVS) effective 31 January 2020. Where these are at variance, the assumptions and
qualifications included within this valuation report will prevail generally, and the International Valuations
Standards will prevail over the ‘Guidance Papers for Valuers & Property Professionals'.
We hereby certify that the Principal Valuer is suitably qualified and authorised to practise as a valuer; does
Market
not have a pecuniary interest, financial or otherwise, that could conflict with the proper valuation of the
property; and accepts instructions to value the property only from the Responsible Entity/Instructing Party.
1.4 FAIR VALUE DEFINITION
We have also had regard to the requirements of the New Zealand Equivalent to International Financial
Reporting Standard 13 (NZ IFRS 13). In particular, we have considered NZ IFRS 13 Fair Value Measurement,
Valuation
which adopts the following definition of Fair Value:
"Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly
transaction between market participants at the measurement date."
Fair Value under NZ IFRS 13 is generally synonymous with the concept of Market Value under IVS.
Under IVS, the date of valuation is the date at which our opinion of value applies, which in this case is 31
Disclaimers
July 2021. This is different to the date of inspection which is 11 June 2021. Our valuation is on the basis
that there are no material changes between the Inspection Date and Date of Valuation.
Appendices
© CBRE LIMITED | VALUATION REPORT | PAGE 7 of 581 GREY STREET, WELLINGTON CENTRAL, WELLINGTON
31 JULY 2021
Introduction
1.5 FINANCIAL REPORTING STANDARD
The valuation is undertaken in accordance with the requirements of PINZ Valuation and Property Standards
– NZVTIP 2 Valuations for Use in New Zealand Financial Reports. The property is an investment property
and the valuer in conducting this report has also observed the requirements of New Zealand International
Accounting Standard 40 – Investment Property (NZ IAS 40).
1.6 RELIANCE
Land
Reliance: This valuation is strictly and only for the use of the following Reliant Parties and
Purposes:
◼ Stride Office Property Limited for inclusion within a Product disclosure Statement
only.
Improvements
◼ Due diligence committees established for the purpose of the proposed initial public
offer of shares in SOPL and listing of SOPL on the NZX Main Board (the offer).
For clarity, reliance is not extended to investors in Stride Office Property Limited.
The Client acknowledges and agrees that all material or documents created by CBRE
in providing the Services are provided for its benefit and the purposes set out in the
Report and may not be relied on by anyone other than the Reliant Parties. We do not
Occupancy
assume any responsibility or accept any liability in circumstances where this valuation
is relied upon by any Reliant Party after the expiration of 90 days from the date of
valuation, or such earlier date if the Reliant Parties become aware of any factors that
have any effect on the valuation.
Confidentiality: Any valuation service is confidential as between CBRE and the Reliant Party as
specifically stated in the valuation advice/report. Neither the whole of the report, nor
any part of it, may be published in any document, statement, circular or otherwise by
Market
any party other than CBRE, nor in any communication with any third parties, without
the prior written approval of CBRE of the form and context in which it is to appear,
which may be conditional on relevant third parties first executing (i) a reliance letter
on terms approved by CBRE where the third party wishes to use and/or rely on the
relevant information; or (ii) a non-reliance letter where the third party wishes to use
the report for information purposes only. Valuation
Transmission: Only an original valuation report (hard and/or soft copy) received by the Reliant Parties
directly from CBRE without any third party intervention can be relied upon.
Restricted: No responsibility is accepted or assumed to any third party who may use or rely on
the whole or any part of the content of this valuation.
Copyright: As between CBRE, the Instructing Party and the Reliant Parties, all intellectual property
Disclaimers
rights in this Valuation Report are owned by CBRE. Neither the whole nor any part of
the content of this valuation may be published in any document, statement, circular or
otherwise by any party other than CBRE, nor in any communication with any third
party, without the prior written approval from CBRE, and subject to any conditions
determined by CBRE, including the form and context in which it is to appear.
Appendices
© CBRE LIMITED | VALUATION REPORT | PAGE 8 of 581 GREY STREET, WELLINGTON CENTRAL, WELLINGTON
31 JULY 2021
Introduction
1.7 INFORMATION PROVIDED
We have been provided with the following key information which has been relied upon within our report:
◼ Tenancy Schedule/Lease Documentation provided by Stride Property Limited. Our assessment of value
is provided on the assumption that all leases are executed and that individual lease provisions are in
accordance with the tenancy information provided.
◼ Outgoings budget for year 2021/2022.
Land
◼ 10 year Capital expenditure budget.
◼ Seismic Strength Documentation prepared by Beca & Holmes Consulting Engineers.
◼ Technical Due Diligence report prepared by Cedar Tree Building Consultants Ltd dated 28 May 2021.
Our valuation is undertaken on the basis that provided information is accurate. Should this not be the case,
Improvements
we reserve the right to amend our valuation.
1.8 SPECIAL ASSUMPTIONS
Assumptions are a necessary part of undertaking valuations. CBRE adopts assumptions for the purpose of
providing valuation advice because some matters are not capable of accurate calculation or fall outside the
scope of our expertise, or our instructions. Assumptions adopted by CBRE will be formulated on the basis
Occupancy
that they could reasonably be expected from a professional and experienced valuer. The Reliant Parties
accept that the valuation contains certain specific assumptions, and acknowledges and accepts the risk that
if any of the assumptions adopted in the valuation are incorrect, then this may have an effect on the
valuation. Refer to the Disclaimers, Limitations and Qualifications Section, which is pertinent to this valuation
report.
Particularly critical to our valuation are the following assumptions:
Market
Insurance In light of global events and the associated claims/payouts in recent years it appears
Premium: increasingly unlikely insurance premiums will return to the same levels as they were
prior to the November 2016 earthquakes; this is in contrast to what occurred following
the re-insurance cycles after the 2013 earthquakes.
It remains uncertain as to what long term insurance premiums will be and when a
change in the next market cycle might be on the horizon (typically cycles are 3-yearly Valuation
without significant payouts/events). In consideration of this, and the variation of
premiums for different buildings and owners, we would ordinarily adopt an average
long-term premium where the current premium paid for the subject building falls
outside the indicated average range. We would then deduct the Present Value (PV)
difference between the actual and the average long term adopted premium over a 3-
year period. This would be set out as a “below the line” deduction in both the
Disclaimers
Capitalisation Approach and Discounted Cashflow (DCF).
We have indexed the insurance premiums for a sample of 50 buildings in the
Wellington CBD which, although indicating a wide range in insurance premiums, show
reasonably consistent trends. Based on this data we have incrementally increased our
adopted insurance premiums year on year. We have maintained the 3-year period to
apply the variation in premium until any change in market cycles appears.
Appendices
© CBRE LIMITED | VALUATION REPORT | PAGE 9 of 581 GREY STREET, WELLINGTON CENTRAL, WELLINGTON
31 JULY 2021
Introduction
Our observed average premiums have recently been adjusted upwards to now fall
between $40 psm and $50 psm for typical Wellington CBD high-rise commercial
buildings. We are adopting these rates for both our sales analysis and valuations. Our
sales have been analysed on the same basis which is reflected in our adopted
investment parameters.
Given the current premium is $59.87 psm we have adopted $50.00 psm and made
an adjustment below the line as outlined above.
Land
Seismic: We have been provided with documentation from Beca & Holmes Consulting
Engineers. In a letter dated 3 July 2012 it is concluded that the main structure of the
building has a seismic strength of slightly below 100% NBS whilst a second document
provided by Beca Engineers confirms that the podium structure has a seismic strength
of 100% NBS.
Improvements
More recently, a Detailed Seismic Assessment (DSA) been undertaken by Becca for this
building with consideration of Appendix C5E of the C5 Technical Proposal to revise
the Engineering Assessment Guidelines dated 30 November 2018.
The report indicates that some seismic strengthening works are required to achieve a
seismic rating of 80% NBS (IL2) with consideration of the above guidelines.
The scheme includes:
Occupancy
• Strengthening of the four plant room columns at the top of the Podium Building.
• Addition of steel restraint brackets to two precast concrete cladding panels at the
top of the Tower Building.
• Addition of a seismic gap in the street canopy.
Further to this we have been provided with costs estimates to address these minor
Market
seismic strengthening works. The costs are $418,000 plus GST including a 20%
contingency and once complete the building will have a seismic rating of 80% NBS
(IL2) under the above mentioned guidelines.
Financial Financial Markets Authority have renewed their lease for 4 years 1 month from 1 July
Markets 2021 and are subject to a market rent review from this date. We have been advised
Valuation
Authority: by the property manager that they will initiate a notice to review the rent on receiving
our rental certificate. Our market assessment is $455 psm gross and the current
contract rent is $405 psm gross. Given the rent has not yet been agreed we have
adopted a midpoint ($430 psm gross) between the 2 rents in interim.
Disclaimers
Appendices
© CBRE LIMITED | VALUATION REPORT | PAGE 10 of 581 GREY STREET, WELLINGTON CENTRAL, WELLINGTON
31 JULY 2021
Introduction
2 LAND
2.1 LOCATION
Location Map:
Land
Improvements
Occupancy
View the subject property in Google Maps.
Location: Central Wellington CBD – waterfront.
Situation: Occupying a double corner position fronting Customhouse Quay, Grey Street and
Featherston Street, the subject building occupies a prominent high profile site with
good outlook over the surrounding area.
Market
Surrounds: This is a prime location within the CBD core, set back partially from the waterfront
section of Customhouse Quay. The site is in close proximity to the Lambton Quay
retail precinct, a short distance to the west.
Within the vicinity of the building we note a number of high rise office towers of
varying ages including the HSBC Tower, 125 The Terrace, Todd Tower and Harbour Valuation
Tower. Directly opposite the entry to the subject is 171 Featherston Street, a premium
grade office tower which is integrated with the Intercontinental Hotel. Post Office
Square is also located directly opposite the building on Customhouse Quay.
Transport Links: The building is well connected to the motorway network with the building almost
directly linking onto the waterfront quays which in turn link to State Highway 1. Good
bus transportation is located along Lambton Quay.
Disclaimers
2.2 RESOURCE MANAGEMENT
Local Authority: Wellington City Council.
District Plan Wellington City Operative District Plan 2000.
Zone: Central Area.
Appendices
© CBRE LIMITED | VALUATION REPORT | PAGE 11 of 581 GREY STREET, WELLINGTON CENTRAL, WELLINGTON
31 JULY 2021
Introduction
Post Office Square Heritage Area – Absolute maximum height 60 metres. This
affects the 2-storey annex to the eastern side.
BNZ/Head Office Heritage Area – To the southern boundary.
Overlays: None noted.
Objectives of The Central Area seeks to encourage a wide range of activities and uses while
Zoning: maintaining and enhancing the existing character and streetscape of the city, with
Land
a focus on containment within the city’s boundaries; accessibility, especially for
pedestrians; protection of the "golden mile" shopping precinct; and integration
between the city and harbour.
Permitted Uses: The District Plan encourages a wide range of permitted activities within the Central
Area by allowing most uses or activities provided that the conditions specified in the
Improvements
District Plan are satisfied. The Plan outlines that “a flexible approach to the location
of land uses or activities will encourage efficiencies in the Central Area by enabling
owners or developers to respond appropriately to meet market needs or other
economic or technological changes”.
Height Limit: 80 metres (above sea level) – Main Tower
60 metres (above sea level) - 2-storey annex to the eastern side. See appendices.
Occupancy
Other Standards for building construction and alteration include specific height controls
Development for sites adjoining residential areas, view protection, sunlight protection, provision
Controls: of verandas and display windows, and wind rules. Standards for activities are set
for noise, parking, signage, pollution and hazardous substances, among others.
Plant Change 48: Plan Change 48 amended the provisions relating to the Central Area, including the
design guide. In particular, it focuses on the public environment, urban design,
mass of buildings, creation of additional heritage areas, creation of a new precinct
Market
(Pipitea Precinct) to cover the port and rail land to the north of the city centre, and
amendments to the existing Port Redevelopment Precinct and the Te Aro Corridor
area.
The building mass percentage changed from 100% “as of right” to 75%. However,
depending on the site characteristics and architectural merits of the design, we are
Valuation
advised by Wellington City Council that it is possible to exceed 100% under Plan
Change 48.
Existing Use: Appears to conform.
Heritage: None known. The subject is relatively modern and is not expected to be subject to
Heritage issues.
Disclaimers
Planning It is assumed that information provided to us by the relevant Local Authority Town
Information: Planning Department is accurate. In the event that a Land Information
Memorandum (LIM) is obtained and the information is found to be different to the
town planning information in this report, this valuation must not be relied upon
before first consulting CBRE to reassess any effect on the valuation.
Appendices
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31 JULY 2021
Introduction
2.3 SITE DESCRIPTION
Land
Improvements
Aerial View Indicative Title Boundaries
Land Area: 1,706 sqm (more or less).
Shape: Slightly irregular.
Topography: Level.
Occupancy
Street Frontage: Featherston Street: 30.66 metres
Grey Street: 60.19 metres
Customhouse Quay: 21.18 metres
Services: All typical municipal services appear to be connected to the site.
Accessibility: Pedestrian from Grey Street, vehicle from Customhouse Quay.
Market
Potential Flooding: Our online investigation of Wellington Regional Council's records indicates the
boundaries surrounding the property at street level are within a 2% AEP potential
flood hazard area. However, the property does not appear to be significantly
affected by this.
Contamination: We have undertaken online search of the Wellington Regional Council's Selected
Land Use Register, which revealed verified history of hazardous activity or industry Valuation
under the Hazardous Activities & Industries List (Hail).
Based on our enquiries and limited inspection, the following issues were identified:
◼ Wellington City Council dangerous goods records (DG Licence no. 9800131)
show that approximately 2,250 litres of hydrocarbons are stored in an
underground tank at the site.
Disclaimers
The adjoining site to the south also appears on SLUR as a contaminated site.
Appendices
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31 JULY 2021
Introduction
2.4 LEGAL DESCRIPTION
Identifier Lot Plan Area Registered Owner Tenure
(sqm)
WN48A/752 Lot 3 DP 81539 1,706 Stride Property Limited Freehold
Land
Registered Registrations include:
Interests:
◼ Subject to a right to convey gas over part marked A on DP 307331 and a right
of way over part marked A on DP 310165 created by Transfer 5566959.1 -
29.4.2003
Improvements
◼ 9639205.2 Variation of the conditions of the easement created by Transfer
5566959.1 - 14.2.2014
Transfer 5566959.1 relates to the right to convey gas over part of the site as well
as a right of way. This relates to the adjoining 80 Customhouse Quay. Savica
Investments Ltd pays an annual rental of $15,779 which effectively is on a month
to month basis. The terms of the lease provided for CPI based rent reviews however
Occupancy
there is also an ability to review the rental to market. We have allowed for this
within the sundry income within our valuation and have assumed a 12 month
period.
We do not consider there to be any registrations which materially impact on market
value or saleability.
Title Search: We refer you to the Appendix for copies of the relevant title documentation.
Market
Valuation
Disclaimers
Appendices
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31 JULY 2021
Introduction
2.5 SEISMIC
The introduction of The Building Act 2004 increased the scope and number of buildings that were to be
considered earthquake prone and required that all councils adopt a policy regarding earthquake prone
buildings. As a result of inconsistencies and non-compliance by some Councils, the Building (Earthquake-
prone Buildings) Amendment Act 2016 was enacted by Parliament taking effect from 1 July 2017. The Act
is administered by Councils and a publicly available national register of earthquake-prone buildings
administered by MBIE was created.
Land
The threshold for defining an earthquake-prone building remained unchanged, i.e. less than 34% of the
New Building Standard (NBS).
Once a building is classified as earthquake prone it will need to be strengthened or, if appropriate,
demolished. The objective is to improve safety and increase the likelihood of existing buildings withstanding
Improvements
earthquakes.
The new legislation defined risk areas throughout the country and dictated specific timings for earthquake
strengthening processes. For example, Wellington is categorised as a high seismic risk area, with
timeframes of 5 years for assessment, 15 years to upgrade, totalling 20 years.
The responsibility to ensure compliance with both the Building Act and the Council’s Earthquake Prone
Buildings Policy is placed with the building owner.
Occupancy
The legislation also required early remediation of earthquake-prone buildings when substantial alterations
are undertaken and provided for exemptions from the requirement to remediate for some buildings, for
example farm buildings and single residential buildings and others on a case-by-case basis. Some
timeframes are able to be stretched, for example heritage buildings.
CBRE has also observed considerable increasing market resistance to buildings that sit below 67% of NBS
which is typically considered the minimum market acceptable level of seismic strength, although this
Market
requirement does vary across different asset classes. In general, these buildings are more difficult to lease
and sell compared to buildings above this level.
We have been provided with documentation from Beca & Holmes Consulting Engineers. In a letter dated
3 July 2012 it is concluded that the main structure of the building has a seismic strength of slightly below
100% NBS whilst a second document provided by Beca Engineers confirms that the podium structure has a
Valuation
seismic strength of 100% NBS.
More recently, a Detailed Seismic Assessment (DSA) been undertaken by Becca for this building with
consideration of Appendix C5E of the C5 Technical Proposal to revise the Engineering Assessment
Guidelines dated 30 November 2018.
The report indicates that some seismic strengthening works are required to achieve a seismic rating of 80%
Disclaimers
NBS (IL2) with consideration of the above guidelines.
The scheme includes:
• Strengthening of the four plant room columns at the top of the Podium Building.
• Addition of steel restraint brackets to two precast concrete cladding panels at the top of the Tower
Building.
Appendices
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31 JULY 2021
Introduction
• Addition of a seismic gap in the street canopy.
Further to this we have been provided with costs estimates to address these minor seismic strengthening
works. The costs are $418,000 plus GST including a 20% contingency and once complete the building will
have a seismic rating of 80% NBS (IL2) under the above mentioned guidelines.
Land
Improvements
Occupancy
Market
Valuation
Disclaimers
Appendices
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31 JULY 2021
Introduction
3 IMPROVEMENTS
3.1 OVERVIEW
Brief Description: 1 Grey Street is a 13-storey office/retail building. It was developed in the 1970s
and comprises 11 storeys of podium and tower office accommodation with a 2-
storey annex to the eastern side. The ground floor of the building comprises a
number of retail tenancies whilst the office floors above are regular rectangular
Land
shape floors with 3 lifts and male and female amenities to each floor. The
basement comprises 29 carparks. Although the building was developed in the
1970s it has been subject to ongoing refurbishment programmes and the building
is in very good condition reflective of this.
Age: Circa 1970s.
Improvements
Condition and Generally good having regard to its age and use.
Repair:
BWOF: Expiry date 14 June 2021.
Asbestos: Although we have not been provided with the following reports:
◼ Accurate Consulting: Asbestos Management Survey dated 17 April 2018.
Occupancy
◼ Stride Property Limited: Site Specific Asbestos Management Plan dated 28
April 2018.
We note the Technical Due Diligence report dated 28 May 2021 refers to both
reports and lists key findings that asbestos is potentially contained within the
following areas with the following risk levels:
Medium Risk: Asbestos woven rope packer to various floors and levels.
Market
◼
◼ Medium Risk: Bituminous wrap to pipework in the basement.
◼ Low Risk: Gaskets, reinforced plastics and cement in various locations.
A range of inaccessible areas were listed, including:
◼ Ground floor toilets.
Valuation
◼ Substation.
◼ Lift shaft.
◼ Corner voids.
Control measures advised are: “Remove, Reinspection and Label”.
We have undertaken our assessment assuming the above has no adverse effect on
Disclaimers
the property’s market value or marketability.
Appendices
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31 JULY 2021
Introduction
3.2 ACCOMMODATION
Lift Lobby & Foyer: The main entrance to the building is from Grey Street and is accessed via automatic
bi-parting glass doors that open into a modern decorated entry foyer with tiled
floors, feature lighting and a feature rock garden.
Land
Improvements
Retail Currently the building has 8 separate retail tenancies. These span all road
Accommodation: frontages. All the retail tenancies have an attractive glazed frontage. The café
tenancy fronting onto Grey Street benefits from good levels of foot traffic linking
the waterfront to Lambton Quay whilst this is also further enhanced by its outlook
over the entry to the InterContinental Hotel and out to Post Office Square.
Occupancy
Market
Office Typically the office floors provide for high “B” grade office accommodation with
Accommodation: most of the floors enjoying attractive localised outlooks with the eastern portion
overlooking Post Office Square and towards the harbour. Below Level 7
surrounding buildings begin to slightly limit outlook to the harbour. The 2 lower
Valuation
floors are podiums and provide for efficient rectangular floor plates. Floor to
ceiling height is approximately 2.5 metres. Typically the floors are provided as
modern office shells with suspended ceilings, modern lighting systems and
commercial direct stick carpet or carpet tiles. In general the floors are open plan
although there is some column interruptions. These do not appear to overly
interfere with the space.
Disclaimers
Contained within the service core are several well-appointed male and female
amenities. These are attractively fitted out with modern bathroom fixtures. Separate
shower facilities are also provided within the building.
Appendices
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31 JULY 2021
Introduction
Land
Improvements
Occupancy
Carparking: Within the basement of the building are 29 bays which are accessed from
Customhouse Quay.
Market
Valuation
Disclaimers
Appendices
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31 JULY 2021
Introduction
3.3 FLOOR PLANS
Lobby plus eastern
retail tenancies
floor plan:
Land
Improvements
Occupancy
Typical Podium
floor plan:
Market
Valuation
Disclaimers
Appendices
© CBRE LIMITED | VALUATION REPORT | PAGE 20 of 581 GREY STREET, WELLINGTON CENTRAL, WELLINGTON
31 JULY 2021
Introduction
Typical Tower floor
plan:
Land
Improvements
Occupancy
Market
Valuation
Disclaimers
Appendices
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31 JULY 2021
Introduction
3.4 FLOOR AREAS
Area Car
Level/Suite Tenant (sqm) Bays
Office Tenants
Level 11 Maritime New Zealand 801.0 -
Level 10 Independent Police Conduct Authority 803.2 -
Level 9 Gibsons TP Limited 789.3 -
Level 8 Jacobs NZ Ltd 792.0 -
Land
Level 7 Jacobs NZ Ltd 792.3 -
Level 6 Nokia NZ Ltd 792.7 -
Level 5 Maritime New Zealand 793.2 -
Level 4 PowerCo Limited 793.2 -
Level 3 Maritime New Zealand 796.3 -
Level 2 Financial Markets Authority 1,106.2 -
Level 1 Westpac (NZ) Inv. Ltd 1,095.8 -
Improvements
9,355.2 -
Retail Tenants
Ground, 1 Miele NZ Ltd 280.9 -
Ground, 3A Gentlemans Approach 54.6 -
Ground, 3B Perdana Holdings 263.4 -
Ground, 4 AVP Ventures NZ Ltd 201.4 -
Ground, 5 Badaro Limited 55.0 -
Ground, 6 Badaro Limited 61.6 -
Occupancy
Ground, 7 Tea Pea Limited 102.6 -
Ground, 8 Dyrberg Kern Wellington Ltd 67.7 -
1,087.2 -
Signage Tenants
Gibsons TP Limited - -
Shout Media Ltd 1.0 -
1.0 -
Storage Tenants
Badaro Limited - -
Market
Maritime New Zealand - -
Jacobs NZ Ltd - -
Dyrberg Kern Wellington Ltd - -
Vacant - -
Easement Savica Investments Ltd - -
- -
Car Parking Tenants Valuation
Gibsons TP Limited - 3
Financial Markets Authority - 3
PowerCo Limited - 3
Maritime New Zealand - 4
Badaro Limited - 1
Independent Police Conduct Authority - 5
Carol Wong - 1
Jacobs NZ Ltd - 4
Disclaimers
Westpac (NZ) Inv. Ltd - 2
Vacant - 2
Nokia NZ Ltd - 1
- 29
Total 10,443.4 29
Source: Provided tenancy schedule / Lease Documentation.
Appendices
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31 JULY 2021
Introduction
3.5 CONSTRUCTION DETAILS
Structure: Reinforced column and beams.
Floors: Reinforced concrete.
External Walls: Coloured aggregate concrete.
Windows/Doors: Bronze aluminium window joinery.
Land
3.6 SERVICES
Air-Conditioning: The building is fully ducted with constant air volume air-conditioning system with
some floors benefiting from additional fan coil units.
Fire Prevention: The building is fully sprinklered whilst it also has dry risers, manual fire hose heels
Improvements
and manual call points and the premises also have a diesel generator for
emergency power.
Security/Access A proximity card access system is installed to control access to the building, entry
Control: lobbies and lifts.
Lifts: Three lifts service the building.
Occupancy
3.7 CAPITAL EXPENDITURE
Capital Major assets require continual expenditure to maintain the aesthetic appeal,
Expenditure structural integrity, and hence their capital value. We have incorporated a specific
Adopted: capital expenditure allowance throughout the term of our cash flow analysis in
recognition of the requirement for an ongoing refurbishment program.
We have been provided with budgeted capital expenditure details for the next 10
Market
years as advised in the Technical Due Diligence Report prepared by Cedar Tree,
which are summarised below:
In addition to the budgeted capital expenditure items provided, we have allowed:
◼ Capex escalation based on CPI.
◼ An allowance of $150 psm on each office lease expiry / $75 psm on each Valuation
retail lease expiry as a general lessor make good allowance, weighted by the
adopted probability of renewal in that year.
Where a capital expenditure budgets are minimal or not provided we would
ordinarily allow for a sinking fund at 1.50% of gross income however, given the is
extensive nature of the 10 year capital expenditure program we have excluded it.
Disclaimers
Appendices
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31 JULY 2021
Introduction
Our adopted Capital Expenditure is summarised as follows:
Capital Expenditure Summary Years 1 to 3 Years 4 to 6 Years 7 to 11* Total
Client Advised Programmed General Capital Expenditure
Structure & Fabric $250,367 $51,162 $258,364 $559,893
Mechanical Services $23,255 $579,066 $1,547,973 $2,150,294
Electrical Services $2,537 $237,442 $96,990 $336,970
Fire Services $13,752 $139,136 $150,835 $303,722
Hydraulic Services $3,552 - $135,540 $139,092
Land
Vertical Transport Services $457,266 - $94,855 $552,121
Environmental $5,000 - - $5,000
NZ Building Code $32,500 - $402,226 $434,726
Seismic Remedial Works (Incl. Contingency) $418,000 - - $418,000
- - - - -
Total Client Advised Capital Expenditure $1,206,229 $1,006,806 $2,686,782 $4,899,817
Refurbishment (on expiring leases) $435,588 $338,025 $855,828 $1,629,441
General Capital Expenditure Allowance - - - -
Improvements
Budgeted CAPEX (incl. Refurb Allowance) $1,206,229 $1,006,806 $2,686,782 $4,899,817
Total CAPEX (Adopted Overall) $1,641,817 $1,344,830 $3,542,611 $6,529,258
Total CAPEX $psm $157.21 $128.77 $339.22 $625.20
% of Adopted Value 2.50% 2.05% 5.40% 9.95%
Note: Year 11 represents values included in terminal valuation
Occupancy
Market
Valuation
Disclaimers
Appendices
© CBRE LIMITED | VALUATION REPORT | PAGE 24 of 581 GREY STREET, WELLINGTON CENTRAL, WELLINGTON
31 JULY 2021
Introduction
4 OCCUPANCY
4.1 TENANCY SCHEDULE
Area Car Base Rent Outgoings Lease Term Start Expiry Review Review
Level/Suite Tenant (sqm) Bays $pa $psm $pa $psm Term (yrs) Date Date Options Date Structure
Office Tenants
Level 11 Maritime New Zealand 801.0 - 286,358 358 116,578 146 9.5 1-May-13 31-Oct-22 6 1-May-22 3 Yearly to Market
Level 10 Independent Police Conduct Authority 803.2 - 286,438 357 116,898 146 9.0 1-Sep-14 31-Aug-23 6 31-Aug-23 3 Yearly to CPI
Level 9 Gibsons TP Limited 789.3 - 343,346 435 3,358 4 9.5 1-Aug-12 31-Jan-22 6 31-Jan-22 Expiry
Level 8 Jacobs NZ Ltd 792.0 - 302,904 382 115,268 146 7.0 1-Aug-18 31-Jul-25 6 1-Aug-22 Fixed 3%
Level 7 Jacobs NZ Ltd 792.3 - 298,690 377 115,312 146 7.0 1-Aug-18 31-Jul-25 6 1-Aug-22 Fixed 3%
Land
Level 6 Nokia NZ Ltd 792.7 - 356,715 450 3,372 4 4.0 22-Aug-18 21-Aug-22 6 22-Aug-21 3 Yearly to Market
Level 5 Maritime New Zealand 793.2 - 265,722 335 115,443 146 3.5 1-May-19 31-Oct-22 6 1-May-22 3 Yearly to Market
Level 4 PowerCo Limited 793.2 - 263,739 333 115,443 146 4.0 1-May-20 30-Apr-24 3 1-May-23 3 Yearly to Market
Level 3 Maritime New Zealand 796.3 - 258,798 325 115,894 146 9.5 1-May-13 31-Oct-22 6 1-May-22 3 Yearly to Market
Level 2 Financial Markets Authority 1,106.2 - 475,666 430 4,706 4 13.1 1-Jul-12 31-Jul-25 3 1-Jul-24 3 Yearly to Market
Level 1 Westpac (NZ) Inv. Ltd 1,095.8 - 326,237 298 159,483 146 9.0 1-May-18 30-Apr-27 6 1-May-22 2 Yearly to Market
9,355.2 - 3,464,611 370 981,755 105
Retail Tenants
Ground, 1 Miele NZ Ltd 280.9 - 265,225 944 40,882 146 6.0 2-May-19 1-May-25 3 2-May-22 Fixed 3%
Ground, 3A Gentlemans Approach 54.6 - 49,140 900 7,947 146 8.0 15-Aug-15 14-Aug-23 6 15-Aug-21 2 Yearly to Market
Ground, 3B Perdana Holdings 263.4 - 178,808 679 2,558 10 10.6 4-Apr-16 31-Oct-26 - 4-Apr-22 Fixed 2.5%
Ground, 4 AVP Ventures NZ Ltd 201.4 - 139,973 695 857 4 21.5 1-Nov-05 11-May-27 - 1-Nov-23 3 Yearly to Market
Ground, 5 Badaro Limited 55.0 - 49,528 901 534 10 13.5 1-Oct-18 31-Mar-32 6 1-Oct-21 3 Yearly to Market
Improvements
Ground, 6 Badaro Limited 61.6 - 55,471 901 598 10 13.5 1-Oct-18 31-Mar-32 6 1-Oct-21 3 Yearly to Market
Ground, 7 Tea Pea Limited 102.6 - 95,688 933 997 10 2.0 26-Apr-20 25-Apr-22 - 25-Apr-22 Fixed 3% Annually
Ground, 8 Dyrberg Kern Wellington Ltd 67.7 - 86,405 1,276 658 10 12.0 1-Dec-09 30-Nov-21 - 30-Nov-21 2 Yearly Market
1,087.2 - 920,238 846 55,030 51
Signage Tenants
Gibsons TP Limited - - 15,000 - - - 9.5 1-Aug-12 31-Jan-22 6 31-Jan-22 Expiry
Shout Media Ltd 1.0 - 3,587 3,587 - - 5.0 11-Dec-16 10-Dec-21 - 10-Dec-21 Expiry
1.0 - 18,587 18,587 - -
Storage Tenants
Badaro Limited - - 2,080 - - - 3.5 14-Jan-19 31-Jul-22 - 31-Jul-22 Expiry
Maritime New Zealand - - 7,800 - - - 4.1 1-Jul-18 31-Jul-22 - 31-Jul-22 Expiry
Jacobs NZ Ltd - - 4,371 - - - 7.0 1-Aug-18 31-Jul-25 6 1-Aug-22 Fixed 3% Annually
Dyrberg Kern Wellington Ltd - - - - - - 12.0 1-Dec-09 30-Nov-21 - 30-Nov-21 Expiry
Vacant - - - - - - - - - Vacant
Easement Savica Investments Ltd - - 16,006 - - - 20.4 22-Feb-02 31-Jul-22 - 31-Jul-22 Expiry
- - 30,257 - - -
Car Parking Tenants
Occupancy
Gibsons TP Limited - 3 16,380 105 - - 9.5 1-Aug-12 31-Jan-22 6 31-Jan-22 Expiry
Financial Markets Authority - 3 17,160 110 - - 13.1 1-Jul-12 31-Jul-25 3 1-Jul-24 3 Yearly to Market
PowerCo Limited - 3 17,940 115 - - 4.0 1-May-20 30-Apr-24 3 1-May-23 3 Yearly to Market
Maritime New Zealand - 4 23,920 115 - - 3.5 1-May-19 31-Oct-22 6 1-May-22 3 Yearly to Market
Badaro Limited - 1 5,980 115 - - 3.5 14-Jan-19 31-Jul-22 - 31-Jul-22 Expiry
Independent Police Conduct Authority - 5 28,487 110 - - 9.0 1-Sep-14 31-Aug-23 6 31-Aug-23 3 Yearly to Market
Carol Wong - 1 3,640 70 - - 4.0 14-Aug-18 31-Jul-22 - 31-Jul-22 Expiry
Jacobs NZ Ltd - 4 26,138 126 - - 7.0 1-Aug-18 31-Jul-25 6 1-Aug-22 Fixed 3%
Westpac (NZ) Inv. Ltd - 2 11,440 110 - - 9.0 1-May-18 30-Apr-27 6 1-May-22 2 Yearly to Market
Vacant - 2 - - - - - - - Vacant
Nokia NZ Ltd - 1 5,980 115 - - 4.9 22-Aug-18 1-Aug-23 - 22-Aug-21 3 Yearly to Market
- 29 157,065 104 - -
Total 10,443.4 29 4,590,758 440 1,036,785 99
Market
4.2 LEASE COMMENTARY
Lease Format: Historically the leases have been drafted on behalf of DNZ (now Stride) by Bell
Gully. The latest leases within the building have been drafted in ADLS 5th Edition
2008(2) Deeds of Lease and some using the Property Council of NZ format. A
number of Agreements have been drafted within a proprietary Bell Gully format.
Notable Issues: Leases to Gibsons TP Limited, Tea Pea Ltd and Dyrberg Kern Wellington Ltd both Valuation
expire within 12 months.
Monthly The storage associated with Badaro Limited and Maritime New Zealand, plus the
Tenancies: carparks leased to Badaro Limited and Carol Wong are all on monthly tenancies.
We have assumed 1 year terms for each.
Outstanding Financial Markets Authority have a 2 month rent free period beginning 1 July 2021.
Disclaimers
Incentives:
Outgoings Typically net leases with some on a gross basis with minor recoveries.
Recoveries:
Sundry Income: Storage, telecommunications, sundry and other income is summarised in the
tenancy schedule.
Appendices
© CBRE LIMITED | VALUATION REPORT | PAGE 25 of 581 GREY STREET, WELLINGTON CENTRAL, WELLINGTON
31 JULY 2021
Introduction
Review Typically 3 or 2 yearly to Market, or fixed Annually at 2% and 3%.
Mechanisms:
Car Parking: The carparking component of the building is currently leased to various building
tenants.
Other Third Party Independent Police Conduct Authority shall pay an annual payment of $10,000 for
Arrangements: the rental of fitout provided by the landlord.
Land
Gibsons TP Limited shall also pay an annual payment of $18,750 for the rental of
fitout provided by the landlord.
The fitout rentals are both not subject to review, and are only payable during the
initial lease terms.
Improvements
4.3 LEASE EXPIRY ANALYSIS
LEASE EXPIRY ANALYSIS Number Lettable Area Gross Market Rent
of Tenants (sqm) % of NLA $pa % of Total
Vacant - - - 11,960 0.2%
Year 1 1-Aug-21 31-Jul-22 8 961 9.2% 648,730 11.4%
Year 2 1-Aug-22 31-Jul-23 2 3,183 30.5% 1,561,727 27.4%
Year 3 1-Aug-23 31-Jul-24 4 1,651 15.8% 894,105 15.7%
Year 4 1-Aug-24 31-Jul-25 3 2,971 28.5% 1,653,224 29.0%
Occupancy
Year 5 1-Aug-25 31-Jul-26 - - - - -
Year 6 1-Aug-26 31-Jul-27 3 1,561 14.9% 816,900 14.3%
Year 7 1-Aug-27 31-Jul-28 - - - - -
Year 8 1-Aug-28 31-Jul-29 - - - - -
Year 9 1-Aug-29 31-Jul-30 - - - - -
Year 10 1-Aug-30 31-Jul-31 - - - - -
Year 11 1-Aug-31 31-Jul-32 1 117 1.1% 106,132 1.9%
TOTAL 21 10,443 100.0% 5,692,778 100.0%
SUMMARY Number Lettable Area Gross Market Rent
Market
Office and Retail Tenants of Tenants (sqm) % of NLA $pa % of Total
Vacant - - - 11,960 0.2%
< 2 years 1-Aug-21 31-Jul-23 10 4,144 39.7% 2,210,457 38.8%
2 - 5 years 1-Aug-23 31-Jul-26 7 4,622 44.3% 2,547,329 44.7%
5 - 10 years 1-Aug-26 31-Jul-31 3 1,561 14.9% 816,900 14.3%
> 10 years 1-Aug-31 31-Jul-32 1 117 1.1% 106,132 1.9%
TOTAL 21 10,443 100.0% 5,692,778 100.0%
Valuation
WALT Comment: The property has a WALT of 2.98 years. The WALT associated with the office
component only is 2.63 years whilst the retail component is 4.32 years, this is
underpinned by Badaro Limited with an expiry date of 31 March 2032.
Disclaimers
Appendices
© CBRE LIMITED | VALUATION REPORT | PAGE 26 of 581 GREY STREET, WELLINGTON CENTRAL, WELLINGTON
31 JULY 2021
Introduction
4.4 OUTGOINGS
Item 2021-2022 Adopted
$pa $psm $pa $psm
Outgoings
Municipal/Council Rates 549,810 52.65 583,936 55.92
Water and Sewerage Rates 15,897 1.52 15,897 1.52
Land
Other Statutory Charges 4,966 0.48 4,966 0.48
Insurance Premiums 625,224 59.87 522,170 50.00
Air Conditioning/Ventilation 16,520 1.58 16,520 1.58
Common Area Cleaning 39,215 3.76 39,215 3.76
Electricity 108,144 10.36 108,144 10.36
Fire Protection/Public Address 10,572 1.01 10,572 1.01
Improvements
Gas & Oil 28,526 2.73 28,526 2.73
Lifts & Escalators 32,633 3.13 32,633 3.13
Pest Control 744 0.07 744 0.07
Repairs & Maintenance 68,197 6.53 68,197 6.53
Security/Access Control 6,480 0.62 6,480 0.62
Administration/Management Fee 81,792 7.83 81,792 7.83
Total Statutory Charges 570,673 54.65 604,799 57.92
Occupancy
Total Operating Expenses 1,018,047 97.49 914,993 87.62
Total Outgoings 1,588,720 152.14 1,519,792 145.54
Source: Client outgoings schedule
Outgoings We have generally adopted outgoings in line with the budget provided as they are
Comment: within market parameters.
We have adopted actual Wellington City Council rates and have inflated them by
Market
13.53%. This is in response to the Wellington City Council recently passing the
increase in accordance with budgets for the Long Term Plan which was previously
indicated at 5.10%.
Given the current premium is $59.87 psm we have adopted $50.00 psm and made
an adjustment below the line as set out in Section 1.8 Special Assumptions.
Outgoings Typically net leases with some on a gross basis with minor recoveries. Valuation
Recovery:
Disclaimers
Appendices
© CBRE LIMITED | VALUATION REPORT | PAGE 27 of 581 GREY STREET, WELLINGTON CENTRAL, WELLINGTON
31 JULY 2021
Introduction
4.5 NET INCOME SUMMARY
We summarise the property’s net income as follows:
INCOME SUMMARY Area Gross Passing Rent
(sqm) $pa $psm
Rental Income
Jacobs NZ Ltd 1,584.3 862,683 544.52
Land
Maritime New Zealand 1,597.3 777,627 486.84
Financial Markets Authority 1,106.2 497,532 449.77
Westpac (NZ) Inv. Ltd 1,095.8 497,160 453.70
Independent Police Conduct Authority 803.2 431,823 537.63
Total Major Tenants 6,187 3,066,824 495.70
Improvements
Other Income
Other Office Income 3,168 1,467,137 463.05
Other Retail Income 1,087 975,268 897.05
Other Car Parking Income - 73,840 -
Other Storage Income - 25,886 -
Other Signage Income 1 18,587 18,587.39
Sundry Income 5,751
Total Other Income 4,257 2,566,469 602.94
Occupancy
GROSS INCOME 10,443 5,633,294 539.41
Less Expenses
Statutory Expenses (604,799)
Operating Expenses (914,993)
Total Outgoings Expenses (1,519,792)
NET INCOME 10,443 4,113,501 393.89
Market
Valuation
Disclaimers
Appendices
© CBRE LIMITED | VALUATION REPORT | PAGE 28 of 581 GREY STREET, WELLINGTON CENTRAL, WELLINGTON
31 JULY 2021
Introduction
5 MARKET
5.1 COVID-19 MARKET COMMENT
The situation due to the COVID-19 pandemic has continued to evolve since the end of the nationwide Alert
Level 4 lockdown on 27 April 2020. New Zealand is currently in Alert Level 1. Whilst domestic economic
activity is essentially functioning in a normal manner and global vaccination programmes have commenced,
New Zealand’s borders remain largely closed, except for a Trans-Tasman ‘Bubble’ with Australia which
Land
commenced in April 2021.
The market has shown better than expected sentiment upon exiting the Alert Level 4 lockdown. Prime
properties (particularly those leased to Government or healthcare providers, or those with long term leases
to reputable tenants) remained strongly sought after with analysed yields showing no material discount from
pre-lockdown, buoyed in part by interest rates which fell during 2020 to record low levels. Industrial property
Improvements
has proven to the be the least affected sector. The residential market has surged since restrictions were lifted.
Notwithstanding the above, there remains a degree of uncertainty in the market because of the economic
impacts of COVID-19. Questions remain over the parts of the office and retail leasing markets. The Tourism,
Retail and Hospitality sectors remain the worst affected by the pandemic and some material value
discounting is evident.
Occupancy
To assist the economy, the Government has set aside NZD$50 billion for the “COVID-19 Response and
Recovery Fund”, which encompasses a range of initiatives to support economic recovery, the most significant
of which was the Wage Subsidy Scheme which ended in September 2020. Further economic stimulus has
been announced including significant infrastructure investment.
Generally speaking, there has been a sufficient depth in transactions in most markets since the April 2020
lockdown to provide considered valuation advice. However given the wider uncertainty, we recommend our
valuations are reviewed periodically to reflect the duration and severity of impact COVID-19 has on the
Market
local and international economy.
5.2 CBD OFFICE DYNAMICS (VACANCY – SUPPLY – ABSORPTION)
The H1 Vacancy and Net Absorption 2021 data is set be to be released shortly and subsequently an updated
market commentary will follow.
Valuation
Disclaimers
Appendices
© CBRE LIMITED | VALUATION REPORT | PAGE 29 of 581 GREY STREET, WELLINGTON CENTRAL, WELLINGTON
31 JULY 2021
Introduction
Wellington CBD Office Vacancy – Prime and Secondary
200,000 20
180,000 18
160,000 16
140,000 14
SQM
120,000 12
Vacancy (%)
Land
100,000 10
80,000 8
60,000 6
40,000 4
20,000 2
Improvements
0 0
Prime Vacant Stock Secondary Vacant Stock Market Vacancy
Secondary Vacancy Prime Vacancy
CBD office vacancy was 8.3% in December 2020. The Prime vacancy rate was 2.7%, while the Secondary
Occupancy
vacancy rate was 10.7%. The total CBD vacancy level has increased by 27,949 sqm to 112,588 sqm. The
total CBD office net absorption was -42,459 sqm in H2, with -13,890 sqm in Prime and -28,569 sqm in
Secondary.
Of note, sublease vacancy accelerated its development in H2. Sublease vacancy is space that tenants have
physically vacated and made available for sublease. Under this definition, we observed 24,723 sqm
sublease vacant stock in total in H2. In this period, backfill vacancy developed as well. 7 Waterloo Quay
and 94-106 Cuba Street, two newly refurbished buildings returned to the market, and tenants all relocated
Market
from either older buildings or with planned upgrades. For example, Kainga Ora moved out from 80 Boulcott
Street to 7 Waterloo Quay, resulting in 4,895 sqm new vacancy in 80 Boulcott Street, while GWRC relocated
from 15 Walter Street to 94-106 Cuba street, 2,413 sqm new vacancy in the former building. The good
news is as of mid-February, sublease vacancy has been decreasing slightly. However, due to some major
developments coming into the market in the next few years, backfill vacancy will result in higher vacancy
rates in the CBD office market. Valuation
Disclaimers
Appendices
© CBRE LIMITED | VALUATION REPORT | PAGE 30 of 58You can also read
