AMP buys landmark towers

By Suzanne Green

Friday 4th June 2004

Wellington's low-premium office vacancy rates and escalating building costs will ensure good returns for AMP NZ Office Trust from its two newest acquisitions in the Capital, executive manager Rob Lang says.

The commercial property trust has bought landmark office towers Mobil on the Park Building and State Insurance Tower in a $146 million deal, increasing its Wellington CBD property ownership to nearly 40% of its portfolio.

Benefits for unit holders included increased tenant diversification and portfolio occupancy rate, reduced over-renting and improved rental growth prospects, Mr Lang said. State Tower's office space was 100% occupied and Mobil on the Park 98%.

Wellington had an all-time low vacancy rate of 2.3% for its top eight or nine office buildings and no new supply coming on in the short to medium term.

"I think there's considerable growth potential in the rentals the buildings are well positioned in the market and enjoy good tenant demand," he said.

Another important factor was the escalating cost of building. That had affected on the likelihood of new office blocks being built.

Rent for prime existing stock was $300sq m, compared with between $450 and $500 for a new building. For those to be any lower, costs would have to be cut reflecting on the quality, Mr Lang said.

"And this is where I believe our two new buildings provide good opportunites." Their rents were well below those of a newly built tower but at the same time they were good-quality buildings.

State Insurance Tower [formerly the BNZ Centre] was built in 1984. The 22-level building, which also has street and underground retail, is adjacent to Willis St and Lambton Quay, with pedestrian access from Willis, Victoria and Willeston Sts.

It has underground links with the Grand Complex, the Old Bank Arcade and the Colonial Building. Its value in May was $75.3 million.

Mobil on the Park was built as the oil company's New Zealand headquarters in 1998. Like the State Tower, its 15 office floors have panoramic harbour views. It has ground-floor retail and is close to the courts, Parliament and Treasury.

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