The costs of Argosy's new 'world leading' green star building in Wellington's CBD have ballooned to $140m
Wednesday, 19 May 2021
The costs for Argosy Property’s new 6-star green office building in Wellington to be leased by Statistics New Zealand have ballooned by $30 million to $140m.
The company revealed the extra costs at its annual result for the year to March 31, 2021, where the company’s profit more than doubled from the year before on the back of a $157.7m jump, 8.5 per cent, in the value of its portfolio of properties.
A 6-star Green Star Built rating is considered world-leading.
Argosy chief executive Peter Mence said the company’s profit on the 8-14 Willis Street redevelopment, with 12 levels, would still be about $10m, but not as much as initially expected.
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The building with almost 13,000 square metres of space, is Argosy’s biggest development. Its expected completion date is February next year, almost a year later than initially stated, April 2021.
Two years ago Argosy announced the Willis Street building development and said its cost would be $64m, not including the value of the land, and when completed the building was expected to be worth $94m.
Mence said today the total costs of the redevelopment had risen to $140.1m. That figure included the value of the land.
The extra costs were about $30 million and due to adding an extra floor because of tenant demand for that, design variations, changing the use of the Stewart Dawson building on the corner of Willis and Lambton Quay to office rather than retail, except the ground floor, as part of the development, and delays caused by Covid-19 lockdowns.
The extra floor wanted by Statistics NZ and changing the use of the Stewart Dawson building were the two biggest costs. The additional 11th floor would cost $6.8m and would deliver incremental income of $700,000.
The Stewart Dawson building at 360 Lambton Quay had been expected to be leased, but that did not eventuate, and it is being redeveloped with Willis St.
The net rental for the combined building was expected to be $7.4m. The expected end value of the property, including land value, would be about $150m, Mence said.
The rate of return was still pretty good at 7.2 per cent. The initial rate of return has been stated at 8.2 per cent.
” There have been a lot of changes, a lot of moving parts on the way through. It is costing us more. We’re getting more building for it.”
The building was on track for its targeted 6-star Green Star Built rating, a 5-star energy efficiency rating and to be 130 per cent of the Building Code.
Argosy posted today a profit after tax of $241.7m, a lift of 102 per cent over its profit of $119.1m the year before. The 8.5 per cent rise in the value of its portfolio of industrial, office and large format retail stores took the portfolio’s total value to $2.01 billion.
Argosy had now leased 89 per cent of 7 Waterloo Quay and was in discussion with the Government to lease the remaining space on levels 9 and 12.
Chairman Jeff Morrison said the 2021 financial year had been challenging. The board was pleased with the way Argosy management navigated through difficult times.
While the 2022 financial year could still bring further headwinds, “Argosy’s resilient financial and portfolio position sees it well-placed to manage any near term economic volatility”, he said.
Argosy has 35 industrial, 16 office and four large format retail properties.
For the March 2021 year Argosy completed 111 rent reviews achieving annualised rental growth of 3.3 per cent.
Argosy is paying a full year dividend of 6.45c a share, a 1.6 per cent increase from the year before, and for the 2022 financial year it expects to pay a dividend of 6.55c a share, an increase of 1.6 per cent on the 2021 year.