Exit raises queries over Waltus' investment

By Christine Nikiel

Friday 28th June 2002

Legal and accounting firm KPMG's plans to move from the KPMG Centre to Auckland's waterfront raises questions about the future of the syndicate that owns the building.

Waltus Prime Properties, a single-asset syndicate, faces the prospect of finding tenants for a building that has slipped in value from the $50 million it was sold for in 1998 to $40 million before KPMG's exit in 2004. The building is rented at above-market rates, meaning Waltus cannot demand the same rental level as KPMG pays. When the lease expires the rent will revert to the market rate.

The only thing that could offset this would be if Auckland rentals increase and the market rate increases to the level KPMG currently pays. Property Council figures from March showed the five-year annualised returns from the Auckland office was 5.18% last year compared with Wellington's 6.3%.

The market questioned Waltus' ability to find tenants willing to rent the 11 available floors of a building located on the fringe of Auckland's CBD.

KPMG is one of a number of firms moving to the waterfront following extensive development of that area and AMP's new PriceWaterhouseCoopers tower.

One market source said the building would also need refurbishing before new tenants moved in and asked what kind of incentives Waltus might offer. Waltus principals could not be contacted for comment.

The KPMG Centre, on Princes St, was refinanced earlier this year after the Commonwealth Bank of Australia refused to roll over its existing loan of $26.4 million. Waltus Prime Properties bought the now 12 year-old building in 1997 for $50 million, after valuation by Jones Lang LaSalle and CB Richard Ellis, and syndicated it in 1998.

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