Precinct Properties secures major government leasing

Monday, 1 August 2016

The significant redevelopment of Bowen Campus is primarily due to an expansion of the Bowen State building, as well as additional floor area gained from a new facade at Charles Ferguson Tower.

One of New Zealand's largest listed property companies will pocket more than $500 million over the next 15 years, after it secured a series of long-term leases in Wellington.

Precinct Properties have signed leases on four of its buildings as part of the Government's Wellington Accommodation Project (WAP) - Bowen Campus, Pastoral House, Mayfair House and 3 The Terrace.

It also extended its existing lease at 1 The Terrace.

In total, the departments have leased 68,000 square metres of office space on an average term lease of 14.6 years.

* Government reduces its rental footprint in Wellington

* Ministries moving to cut costs and cluster

* Precinct on shortlist for Crown offices

* Ministry head office on the move, big time

* Wellington office market heats up, as development continues**

The commitment by the Government will see Precinct spend $380m developing Bowen Campus, and undertaking significant refurbishment works on its other assets.

Precinct chief executive Scott Pritchard said the commitment by the Crown concluded a 'comprehensive and rigorous process', which required the crown to relocate a number of different government agencies.

'This is the largest leasing transaction ever undertaken by Precinct - and potentially in the New Zealand office market - and represents the successful conclusion of three years of complex negotiations.

'We are confident that the very substantial investment we are making will result in significant benefits for Precinct and the Crown through re-purposing existing Crown occupied buildings to deliver modern, highly efficient and cost effective public sector workspace,' he said.

'The long term leases represent some half a billion dollars in income over the lease terms and provides material earnings security for Precinct, while significantly strengthening our portfolio quality in line with our long term strategy.'

Bowen Campus, Precinct's most significant development opportunity in Wellington, will undergo a significant redevelopment which will see the existing area increase from 26,100sqm to 38,400sqm.

The increase in floor space is primarily due to an expansion of the Bowen State building, as well as additional floor area gained from a new facade at Charles Ferguson Tower.

Work to the Bowen Campus buildings include the demolition of existing facade, removal of all plant and equipment, demolition of existing fit-out, stripping back to existing concrete structure and completion of seismic strengthening to 100 per cent of new business standards, the installation of new curtain wall glass facade, and the installation of new lifting systems throughout each building, among other works.

Construction firm LT McGuinness will complete the project at Bowen Campus.

At Bowen Campus, the Crown have committed to 32,400sqm of office space and have an option to take the remaining three floors at Bowen State.

'Importantly, future development potential is retained over the balance of the Bowen Campus site with 4000sqm of land remaining available for future development,' Pritchard said.

'This land could support up to a further 25,000sqm of additional office development in the future.'

The Bowen Campus project is expected to cost about $203m.

Work will begin in November, when the Ministry of Social Development's lease expires. It is expected to be complete by 2019.

Bowen Campus had been an outstanding investment for the Precinct portfolio, Pritchard said.

'Purchased in June 2012 for $50.4m, by the time works commence in November, Precinct would have received $27m in income.

'Now the business will create two premium-grade assets immediately adjacent to parliament underpinned by long term leases to the Crown with further development potential in the future'.

Work on Pastoral House will start in March next year and is expected to be complete 12 months later.

These works include the complete refurbishment of the base building plant and equipment, as well as major upgrades to the inside of the building.

Mayfair House and 3 The Terrace will each undergo their respective works in 2018 and should be complete by mid-2019.

Work on Pastoral House, Mayfair House and 3 The Terrace is expected to cost about $55m.

The Government WAP 2 process had resulted in an outstanding outcome for both the Crown and for Precinct, Pritchard said.

'Precinct has obtained long term leases across almost 70,000sqm of space throughout its Wellington portfolio while the Crown will benefit from premium quality assets with below market rental levels.

'Precinct and the Crown have agreed a bulk offer discount of 5 per cent to market rental levels reflecting the high quality covenant the Crown provides and the scale of the leasing transaction.'

The projects would be funded through existing bank facilities, he said.

Precinct's property profile

Auckland:

- PWC Tower

- AMP Centre

- ANZ Centre

- Zurich House

- HSBC House

- Commercial Bay (Downtown Shopping Centre)

Wellington:

- State Insurance Building

- 157 Lambton Quay

- 1-3 The Terrace

- Pastoral House

- Mayfair House

- Deloitte House

- Bowen Campus