Sale of CBD towers ‘confirms overseas investors’ eyes on NZ’

Queen St buildings’ sale — thought to be for close to $175m — biggest deal for area since 2010, says property broker

Two Queen St office towers have sold to an overseas buyer in what is being billed as the biggest property deal in Auckland’s central business district since 2010.

The buildings, at 205 Queen St, are formerly known as National Bank towers and are located on one of the busiest intersections in the central city. One tower has 22 office levels and the other has 17.

Going on the market last year, the site has recently changed hands and although the purchase price and buyer were not disclosed, it’s understood the buildings sold for almost $175 million to an overseas entity.

Broker CBRE described it as the biggest CBD property deal in seven years and said the sale “further confirmed New Zealand’s status as a location of choice for offshore investors”.

It follows other big CBRE-brokered deals in 2017, including Wellington’s Majestic Centre selling to South Africa’s Investec for $123m and a local arm of a Singaporean property investor buying Fonterra’s Hamilton headquarters and the PwC building in Christchurch for $22m and $49m respectively.

CBRE New Zealand’s senior managing director Brent McGregor said the deals showed that New Zealand was a favoured location for international investment.

“For the 205 Queen St deal for instance, we had close to $1.5 billion in bids from nine genuine bidders from North America, Africa, Singapore, China and Switzerland including a mix of private and institutional funds,” McGregor said.

“We haven’t had this level of interest in some time and it is a reflection of the fact many of these groups are being priced out of assets in Australia and are increasingly attracted by our yield levels sitting mostly over 6 per cent compared with 3 to 4 per cent in Europe. It’s also indicative of Auckland and our other key centres maturing as a market and the strong real estate fundamentals of the assets being taken to market.”

McGregor said the Labour-led Government’s recent changes to the Overseas Investment Act were “primarily residential-focused and as such we are continuing to see offshore capital flows into the commercial property sector”.

Warren Hutt, senior director in CBRE’s capital markets and institutional investments team, was confident 2018 would see international capital coming into New Zealand.

“The reality is we still have very attractive yield rates and New Zealand is seen as an easy place to transact with clean, clear title processes, stable government and solid CBRE says the remarkable amount of buyer interest in the towers at 205 Queen St showed New Zealand’s increasing maturity as a market and the “strong real estate fundamentals” of assets coming up for sale. economic indicators into the future. Based on this we expect continued international interest in real estate assets in New Zealand for this year regardless of any possible change in funding rates,” Hutt said.

The US Federal Reserve raised its target rate by a quarter point to 1.25-1.50 per cent in its final meeting of 2017 and is eyeing three more increases this year.

Locally, forecasts from the big four banks range from two lifts in the Official Cash Rate this year to none until late 2019.

Interest rate market pricing suggests that there is an 85 per cent chance of an official cash rate hike from its present position of 1.75 per cent by the end of this year, with further increases expected beyond that. in US crude output, according to Energy Aspects’ chief oil market analyst, Amrita Sen.

But Goldman Sachs Group warns that Opec would try to talk down an oil rally above US$70 a barrel to cushion the impact on the global economy and rival supplies. Russian Energy Minister Alexander Novak said on Friday producers regularly talk about options for winding down the supply-reduction deal.

Iran’s Oil Minister Bijan Namdar Zanganeh even admitted that Opec doesn’t like crude above US$60 because of shale oil. The statement comes at the same time the US Government is forecasting output this year and next to reach record levels.

Even though US explorers have hinted they’ll stick to conservative spending budgets, the oil rig count rose by 10 this week, the biggest addition since June. And they have been hedging like never before, meaning they are more protected than ever to keep producing even if prices drop.

“Will these producers be disciplined or not? There is this dichotomy between what people are saying and what their actions are suggesting,” said Tamar Essner, an analyst at Nasdaq Inc. in New York.

A number of experts don’t seem to be getting too excited over crude’s recent rally. It’s premature to expect to see a further price rise, at least until the market gains a better grasp of the pace of US production growth, according to RBC Capital Markets. UBS Group AG cites the potential of record output weakening prices over the course of the year.

Bank of America Merrill Lynch’s head of commodities research, Francisco Blanch, said to see prices remain near US$70 a barrel, heightened demand momentum needs to continue for the entire year.

We had close to $1.5 billion in bids from nine genuine bidders. Brent McGregor, CBRE New Zealand