Building a $400m property empire
Wellington’s Cornerstone Partners has built its commercial property portfolio close to $400 million in the capital with the recent purchase of two buildings.
Cornerstone is relatively new to the game, led by local Chinese businessman Chao (Charlie) Zheng, building property wealth over eight years, including spending about $25m-to-$30m on earthquake strengthening.
It expects to complete the $26m upgrade and seismic strengthening of the heritage listed-Harbour City Centre in the Wellington CBD in July.
It is one of several seismic strengthening projects in a portfolio of 18 buildings.
The property investment company has completed a more than $10m two-year refurbishment and seismic upgrade of the former Craigs Investment Partners Building at 36 Customhouse Quay, renamed Cornerstone House.
Chief executive Andrew Cotterrell said the portfolio was ‘‘approaching $400m in value’’ and that included a rise in the value of the properties, helped by seismic work. He estimated that as part of the building upgrades about $25m to $30m had been spent on seismic work to raise strength to 100 per cent of the National Building Standard (NBS).
Cotterrell said seismic issues were one the biggest challenges facing Wellington commercial property owners.
Government and corporate tenants would probably not look at buildings unless they were 80 per cent and more of NBS. They hired property consultants who had a battery of questions about the structure and seismic strength of a building before leasing space.
Cornerstone had recently bought the ground floor and three other commercial floors above it which accommodated Trade Me in the building at One Market Lane in central Wellington for $21m. The deal also included buying some car park spaces but not the car park itself. Cornerstone did not buy the privately-owned apartments on the floors above.
This week it purchased 93 The Terrace from well-known Wellington property investor Clem Griffiths for $10.5m Cotterell said that building was about 95 per cent of NBS and next door to another building owned and managed by Cornerstone, 89 The Terrace, called Sas House.
It had spent about $3m upgrading Sas House following the Kaikoura earthquake. The previous owner, an Australian fund, had strengthened it but there were questions about some cracks.The company always took a conservative approach and added steel to corners of the building which cost about $2m to $3m.
Cotterrell said property owners in Wellington would be forced to strengthen for earthquakes because the lifeblood of a building was the tenants and if they would not lease a building because of safety concerns the owner had no income leading to problems with its banker and insurers.
The Kaikoura earthquake was both positive and negative for landlords, he said.
When the earthquake struck in November 2016, Cornerstone had almost finished a $10m refurbishment and strengthening of Ricoh House at 1 Victoria St, the former ANZ building, and had not secured a tenant, but after Kaikoura BNZ leased almost the whole building, apart from a floor and a half.
‘‘I think landlords who had good seismic buildings were lucky. The Crown and other big tenants flooded to your buildings.’’
One of its early purchases, 69 Tory St, a small two-storey building, was a big job to get to 100 per cent of NBS. Now it had a government tenant. By the time Cornerstone had completed the job at Tory St and got a tenant in it was only breaking even.
‘‘In time you’d hope with rent reviews etcetera it will turn a profit,’’ Cotterrell said.