Rare university offering for educated investors
The first fully university-tenanted Auckland CBD commercial property to be brought to the open market in recent years is one of the trophy listings in Bayleys’ latest Total Property portfolio.
The nine-level Auckland University of Technology (AUT) WY Building, located on a 1721 sq m corner site at 120 Mayoral Drive, offers its next owner significant value upside possibilities both in the short and longer term, says Bayleys broker Peta Laery.
She is marketing the property with Ryan Johnson and Brad Ross.
“A unique feature of this offering is that while the building is fully occupied by one tenant – AUT – there are seven different leases in place across various floors which provide an attractive, diversified lease expiry profile for an investor looking for an addvalue angle,” says Laery. “Earlier this year, AUT exercised rights of renewals for Level 1 and part of Level 4. Further expiries, with rights of renewal, are spread over the next six years, offering a purchaser considerable shortterm rental upside potential from these renewals as well as regular rent reviews.”
The property is currently generating net annual rental income of $1.491 million plus GST. The average rental is $242 per sq m for the office space and $70 a week for carparks.
AUT’s Law School occupies the top two floors with other business-related AUT faculties tenanting the remainder of the building, which comprises seven levels of office space with a net lettable area of 4947 sq m and two levels of basement carparking for up to 71 vehicles.
Built in 1988 and constructed of a combination of concrete and steel, the building has an A+ seismic rating, with an Initial Evaluation Procedure (IEP) assessment of 145 per cent of New Building Standard.
Laery says the property has been well maintained with an active management and capital expenditure programme. Air conditioning controls were replaced in 2016, the building’s two passenger lifts underwent a comprehensive modernisation in 2018-19 and its two cooling towers are currently being replaced.
Ross says the property also has long-term development potential.
The location’s Business City Centre zoning’s maximum floor area ratio of 10 sq m of building per one sq m of land, up to a height of 50m, means approximately 3500 sq m of further gross floor area could be accommodated on the site, subject to council approval.
“One of the possible development options longer term could be to convert the property to student accommodation to cater for what is expected to be continuing growing numbers of students attending New Zealand’s two largest universities – Auckland University and AUT – which are located next to each other in the CBD’s education precinct,” Ross says.
“There is also likely to be continuing demand for lecture, tutorial and administrative accommodation so there are a variety of options to consider in terms of adding long-term value to the property.”
Ross says 120 Mayoral Drive is strategically positioned in the heart of AUT’s CBD campus, surrounded by a cluster of other AUT-occupied buildings. Impending final lease expiries on around 13,500 sq m of commercial space in some of these buildings is expected to provide enduring occupier demand for the WY Building.
“It is situated in a high-profile corner location at the intersection of Mayoral Drive and Wakefield St, with further frontage to Airedale St which provides additional vehicle access to the basement parking. The site receives exposure in excess of 18,500 vehicles daily and is particularly well serviced by public transport, with bus routes along Mayoral Drive.”
Johnson, Bayleys’ national commercial and industrial director, says the strength of the location is further enhanced by its proximity to the under-construction Aotea City Rail Link Station which is 350m or a fiveminute walk away.
“The station’s opening will be of considerable benefit to the CBD’s education and entertainment precinct and is a significant catalyst for approximately $1.6 billion of additional development projects currently underway or planned within a 500m radius of 120 Mayoral Drive.
“This encompasses a 21-level mixed-use development above the Aotea Train Station plus further education, residential, hotel and office building,” Johnson says.
The property is for sale by deadline private treaty closing at 4pm on Thursday June 24, unless sold prior.
Johnson says university-tenanted assets within university campuses are seldom offered for sale on the property market.
“New Zealand’s tertiary education sector presents highly compelling, resilient investment fundamentals, being a $4 billion industry responsible for the education of more than
181,000 students and employing
22,000 staff, in addition to receiving $2.8 billion of annual Government funding.”
AUT has over 29,000 students across three campuses on the North Shore and Manukau as well as the CBD. It is New Zealand’s second largest university and employs 4500 staff.