By Ray Lilley
Friday 26th May 2000
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Investment banker FR Partners is looking at fresh options to raise the $34.5 million of financing needed for a new $76 million Lambton Quay tower block, director Andrew Body said.
The cash-raising property trust fell $15.5 million short of target, so investors' funds are being returned by the banker.
Late last year a bid by Property Asset Management to syndicate the WestpacTrust's headquarters building, with three key tenants signed in for an average 10 years, failed to attract support for its $14 million offer.
An offshore property investor group finally bought the building early this month.
Mr Body said the response from retail investors to the 23-level Lambton Tower offer had been disappointing, while professional investors had shown "reasonably strong interest" in the proposal.
The fall of 7% in the NZSE40 and 9% decline in listed-property values during the four months of the issue being open had influenced the retail investors.
"It's difficult to raise money for these types of issues in that sort of investment environment," he said.
The $43.5 million fixed rate loan from HSBC Bank for the project was still in place.
Finance for the tower is being raised by FR Partners for subsidiary and developer Customhouse Quay Properties, and it will be built by Fletcher Construction.
Work on refurbishing the Harcourts Building, which will encase the ground floor and first levels of the tower block, is already under way and due for completion late this year.
The Ministry of Foreign Affairs and Trade (Mfat), which has a 15-year lease with two extra two-year rollovers on nine and-a-half floors of the tower block (9600 sq m), will quit four separate buildings, including its Stafford House headquarters on the Terrace.
The lease on Stafford House expires in June 2004, on Manchester Unity and the nearby Simpson-Grierson buildings on November 1, 2001, with a one-year right of renewal.
Its floors in the Local Government Building are on annual rollovers.
Mfat officials are delighted with the deal, which will bring the operation together from its scattered locations.
"If Lambton Tower is not going ahead, we will have to look at other options," spokesman James Funnell said.
It would also need to discuss options with its current landlords if there were further delays to the completion of Lambton Tower.
While Mr Body would not indicate the time slippage involved in the financing delay, it's understood Mfat may need to roll over some of its smaller leases if the occupancy date stretches to September 2002.
Mr Body said Customhouse Quay Properties has an agreement with Mfat to investigate the financing options and keep within the timeframes of the ministry.
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