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Kiwi Income snares 90-year lease for $16.5 million in Auckland's showcase Wynyard Quarter

Friday 26th February 2010

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Kiwi Income Property Trust is paying $16.5 million for a 90-year lease to build a headquarters for ASB Bank on the old Auckland waterfront tank farm site, now called the Wynyard Quarter.

Prime Minister John Key kicked off an "open for business" function at the Wynyard Wharf development on-site this evening, using the announcement of the $121 million project that will give iconic Auckland business, the ASB, a new, high-sustainability head offfice on an 18 year lease as a centre-piece.

Both KIP and ASB are owned by the Commonwealth Bank of Australia, so that NZX waivers were required to allow the related party transaction to occur without shareholder approval.

Auckland City Council and Auckland Regional Holdings, the city's investment unit, are jointly developing the 29 hectare prime waterfront land, and seeking "investment into the precinct of $2 billion to $3 billion over the next 25 years".

The new ASB headquarters will occupy 0.7 ha and create 18,000 square metres of office space, near the new Air New Zealand Vodafone headquarters, in an area of the Auckland waterfront once dominated by fresh produce markets and boat builders and is being developed as a public area ahead of the 2011 Rugby World Cup.

Kiwi Income shares rose 1% to $1.01 after the release to the NZX at 4p.m. NZT.  Construction is to start in mid-2011 for a lease commencement date of July 2013.

Kiwi Income will receive an initial net rental yield of 8.78% on development cost, and for ASB to "secure its objectives in terms of maximum rent payable under the lease".  Rental increases are fixed at 2.5% annually , with a mid-term rent review, which is subject to a 15% cap and collar agreement.

Agreements are still formally required between KIP and its trustee, New Zealand Permanent Trustees Ltd.

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