Capital Properties sells city tower

The property investment company has unconditionally agreed to sell the 16-level City Tower on Customhouse Quay for $9.4 million - $600,00 below last year's $10 million valuation.

The building is sited on Wellington City Council leasehold land and is tenanted by National Provident Fund and AMP on leases that expire in May 2003.

Capital Properties says both leases commenced in 1988 and are at rental levels significantly above current market levels, reflecting market conditions at the time.

However it says the substantial ground lease costs of $850,000 a year which are presently being recovered from existing tenants may not be able to be passed on in future leasing arrangements.

"This will result in a substantial decline in income from the property once existing leases expire," the company says.

Capital Properties believes that the value of City Tower is likely to fall consistently up to the expiry of existing leases.

Settlement of the sale is expected settlement within the next week.

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