Add-value opportunities at former Lion Breweries
Afully-leased Newmarket building, once home to Lion Breweries, is for sale with agents tipping significant add-value potential. Located on a 1191sq m site at 5 Kingdon St, the 4712sq m building comprises ground floor retail accommodation; parking for 72 cars over three-levels and six-levels of offices.
The property, just off Khyber Pass, is leased to seven tenants and four sub-tenants.
These generate total annual net passing income of $1,485,570 plus GST, with a mix of fixed and market related rent reviews.
The property is featured among
108 offerings in Bayleys’ final and largest Total Property portfolio for 2018.
Marketed by Bayleys’ director of capital markets Layne Harwood, it is being offered is for sale by deadline private treaty, closing 4pm December
6, unless sold earlier. “Though now 100 per cent leased, the options to enhance value through building renovation and repositioning are numerous” says Harwood.
“The building offers excellent B Grade accommodation, but it is ready for refurbishment and modernisation.
“And very likely a new owner will continue upgrading office floors as they become available.”
Harwood adds that the floors would be easily sub-divisible, while a substantial pending tenancy expiry could appeal to a larger occupant.
“There are also opportunities around street-level-retail repositioning, facade remodelling and services upgrades, to enhance the image and investment profile.”
Longer term conversion options under the Metropolitan Centre zoning could include apartment, serviced apartment, hotel, aged care or education uses.
“Increasing the appeal for residential or hotel conversion is the largely unobstructed north-facing aspect and extensive outdoor decks.
The largest of these wraps around the top two levels, providing a great recreation and function area with panoramic views.”
He says the property’s 72 car parks represent a much higher ratio of parks per-square-metres of building space than planning regulations now allow.
The property has a Weighted Average Lease term of close to three years.
Harwood believes that the shortterm-nature of the tenancy profile will be reflected in the yield — expected to be about 7.5 per cent — at which the property sells.
Healthcare provider Bupa Care Services is the largest tenant at present, generating about 35 per cent of the total rental income. But having relocated to another building on nearby Carlton Gore Rd, Bupa won’t be renewing its lease.
“This really opens up a good chunk of space as well as naming rights to the building,” Harwood points out.
“The space vacated could attract a larger occupier and there could also be flexibility to gain access to those spaces prior to the end of the Bupa leases.”
The next biggest tenant, chartered accountancy firm, Ecovis KGA, occupies 508sq m. The Palazzo Italia restaurant leases 350sq m of ground floor space on the Kingdon St frontage.
The property is rectangular in shape, with about 21m of frontage to Kingdon St and a similar frontage to Suiter St — which provides vehicle access.
Harwood believes that better use could be made of the Suiter St frontage, which is opposite an entranceway to a 5.2ha block owned by the University of Auckland.
The university is in the early stages of creating a new inner-city campus on this site; purpose-built teaching and research facilities, student accommodation and other facilities are to be built there over the next 30 years.
Harwood says 5 Kingdon St was constructed in the mid 1980s. An Initial Evaluation Procedure (IEP) seismic assessment in 2013, was 79.95 per cent of the New Building Standard.
The building has been well maintained, being regarded as in excellent condition for its age, says Harwood.
“More than $500,000 was spent on improvements this year, including chiller, air conditioning and lift upgrades.
“However, in order to secure new professional and commercial tenants and increase rental levels, floors will need refurbishment of foyer and office space,” he adds. “This would include new bathrooms and kitchenettes, as well as modernised lighting, flooring, wall and ceiling panels.”