Information Memorandum:
396 Queen St Auckland CBD For Sale by Deadline Private Treaty Closing 4pm 20th March 2014 (unless sold prior)
Dean Humphries National Director - Hotels Colliers International T: +64 9 358 9896 M: +64 21 408 156 dean.humphries@colliers.com
Contents Introduction 2 396 Queen St, Auckland CBD
4
Method of Sale
5
Executive Summary
6
Investment Highlights
9
Property Description
14
Proposed Conversion Options
20
Title and Tenure
25
Zoning 27 Location 30 Competitive Set
34
Purchasing Options and Financial Viability
36
Operating Structure
39
New Zealand Economy
41
Auckland Tourism Market and Infrastructure
42
Auckland Hotel Market
45
Auckland Student and Budget Accommodation Market
46
Auckland Residential and Apartment Market
47
Auckland Commercial Office Market
48
Disclaimer 49
Colliers International • 396 Queen Street, Auckland • 1
Introduction With no existing CBD accommodation available for sale and the city running at a historic high occupancy level of circa 80%, this is an opportunity that should not be overlooked.
Colliers International has been exclusively retained by AQM Limited (the owner) to offer for sale one of the most attractive hotel conversion opportunities the city has seen for many years. Located on Auckland’s main retail and commercial thoroughfare, 396 Queen Street is ideally positioned to be immediately converted to: • Circa 250 key hotel or 209 key serviced apartment development; • Circa 400 bed budget/tertiary facility; • Residential apartments; • Retrofitted commercial office space; or • Mixed use development incorporating elements of the above.
2 • 396 Queen Street, Auckland • Colliers International
Colliers International • 396 Queen Street, Auckland • 3
for sale by Deadline Private Treaty
396 Queen St, Auckland CBD ideally positioned for immediate conversion to circa 250 key
hotel
circa 209 key
serviced apartments circa 400 bed
budget/tertiary facility Residential apartments retrofitted
commercial office space combined
Mixed use development
so close to Auckland's
Best Attractions
4 • 396 Queen Street, Auckland • Colliers International
Method of Sale Colliers International has been appointed by AQM Limited as its sole agent to market for sale 396 Queen Street, Auckland. The property is being offered for sale by Deadline Private Treaty closing 4pm Thursday 20 March 2014 (unless sold prior).
Offers to be lodged at: The offices of Colliers International, Level 27, 151 Queen Street, Auckland, attention: Dean Humphries or via email to dean.humphries@colliers.com. Offers are to be presented on a Draft Sale & Purchase Agreement which is able to be downloaded from the electronic data room.
Due Diligence and Data Room Access Due diligence material is available for download from a secure electronic data room at www.colliers.co.nz/23028. Parties wishing to access the data room are required to register names and email addresses on the website. After agreeing to the confidentiality statement, a password will be emailed to provide access to the property information.
Secure Data Room
www.colliers.co.nz/23028 For all data room access queries please contact: Maria Verner Hotels Analyst, Colliers International +64 9 358 8752 +64 21 035 8228 maria.verner@colliers.com
Colliers International • 396 Queen Street, Auckland • 5
Executive Summary Existing offering
A freehold strata title comprising levels 4–19 of a modern office tower together with an entrance from Queen Street through the renovated Queens Head historic building on a separate freehold title The property is readily able to be converted for a number of different uses. The property can be purchased ‘as is’ with vacant possession or as a turn-key development
Alternative uses
Hotel, serviced apartments, student accommodation, hostel, residential apartments, commercial office space or mixed use development
Location
396 Queen Street, Auckland CBD, New Zealand
Site Tenure and Area
Freehold strata title of approximately 1,470 sqm
Gross floor area
Levels 4–19 have a gross floor area of approximately 9,000 sqm with the ability to add a further 800 sqm of additional floor area on levels 20 and 21
Floor Plate Size
Typical gross floor area of 601 sqm
Zoning
Strategic Management Area (SMA) 1 under the Auckland City District Plan Central Area Operative 2005
Building age
Originally opened as an office tower in 1989
Seismic Rating
IEP over 100% of NBS
6 • 396 Queen Street, Auckland • Colliers International
Colliers International • 396 Queen Street, Auckland • 7
8 • 396 Queen Street, Auckland • Colliers International
Investment Highlights 396 Queen Street offers an investor or owner operator the rare opportunity to acquire and develop or be provided with a turn-key hotel/serviced apartment development in the tightly held Auckland CBD market.
Ability to Own a Hotel in the Highly Sought After Auckland Market Investors have the ability to purchase the tower ‘as is’, or alternatively purchase the completed development with the current owner providing for appropriate resource and building consents and the development of the hotel within a 15 to 18 month time frame. Auckland remains the most sought after market in New Zealand by hotel investors and is tightly controlled with limited opportunities available for new investors and operators. The property is situated in the heart of Auckland’s entertainment precinct being diagonally opposite Auckland’s Town Hall and Aotea Entertainment Centre. Auckland is New Zealand’s largest city and is the main commercial centre for the country attracting a high proportion of corporate and MICE business. It is also the main gateway for inbound tourists with Auckland International Airport handling approximately 70% of international visitor arrivals to the country. The city also benefits from an active calendar of cultural and sporting events throughout the year and is the primary cruise port in the country.
Ideal and Practical Conversion Opportunity 396 Queen Street provides one of the best hotel conversion opportunities seen in the market for many years. The office tower was completed in 1989 and is located on a high profile corner of Queen Street which is the main retail and commercial thoroughfare of the Auckland CBD. It is also situated in an elevated position along three road frontages providing unobstructed views over the central business district and spanning out towards Auckland’s famous Waitemata Harbour. The building possesses many factors that make it an ideal conversion opportunity including a central core with excellent floor plates for optimal conversion to rooms, four elevators, a Queen Street entrance, back of house entry, drop off zones and secure car parking and storage. The external building form of the hotel does not need to be altered with internal reconfiguration the only requirement. The building is fully sprinklered and has a seismic assessment of over 100% of NBS.
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Preliminary plans have been completed for a mid-market hotel/serviced apartment development providing up to 250 keys with costings completed by the owner’s quantity surveyor and alternative plans for budget accommodation and serviced apartments. This opportunity will allow an incoming investor to choose an operator of their choice to run the hotel or be an owner operator in their own right. It is rare that any hotel in Auckland is offered with vacant possession and therefore allows a number of operators the chance to penetrate the highly sought after Auckland accommodation market.
Convert to Budget/Tertiary Accommodation Whilst the building has the ability to be converted into a traditional hotel/serviced apartment development there is also a preliminary design for a circa 400 bed tertiary/ budget accommodation facility, allowing investors to also review this opportunity. A major hostel operator has expressed strong interest in operating this facility. The property is located within close proximity to two of New Zealand’s largest tertiary facilities; The University of Auckland and Auckland University of Technology which together have a roll of close to 60,000, many of which require centrally located accommodation during the calendar year from February to December. The backpacker/budget accommodation market is one of the fastest growing sectors in New Zealand representing around 25% of the entire accommodation market. The Auckland backpacker market is well established with over 3,500 beds including Australasian branded Base and Nomads Backpackers, the internationally known YHA Hostels and a number of both large and small independent operations. The majority of larger scale hostels are located within the Auckland CBD or immediate surrounds and it is envisaged that new supply will be required for increasing demand in this sector over the short/medium term.
Range of Other Alternative Uses Residential Conversion
There is also the opportunity to purchase the property and convert to residential apartments to take advantage of the current boom in the Auckland housing sector which has seen an increase in values of 12.1% in the past 12 months. Office Refurbishment
Traditional office developers and investors should not overlook this unique opportunity given the growing shortage of office accommodation options available in the city with vacancy rates now well below 10% and demand for commercial office space growing on the back of strong business confidence and favourable GDP growth projections. Mixed Uses
Alternatively the building may be converted to a mixed use development incorporating a number of the uses noted above.
10 • 396 Queen Street, Auckland • Colliers International
Take Advantage of New Zealand’s Surging Economy The New Zealand economy is poised for strong economic growth in 2014 on the back of a surge in global demand for dairy products, Christchurch rebuild, Auckland housing boom and a wider improvement in business sentiment. Business confidence as measured by the New Zealand Institute of Economic Research (NZIER) is the strongest in 20 years translating to increasing profits, higher capital investment and additional jobs. Many economic commentators anticipate GDP to be in excess of 3% this year and at the top end of all OECD countries, fuelled predominantly by the Christchurch rebuild, which is estimated to contribute 20% of National GDP. The outlook for the wider New Zealand investment market is for robust demand and increasing returns in 2014 based on sound economic fundamentals and positive market sentiment across most sectors of the economy.
Colliers International • 396 Queen Street, Auckland • 11
Vantage Prominent and elevated location providing largely unobstructed views.
Aotea Centre
12 • 396 Queen Street, Auckland • Colliers International
Sky Tower
Britomart
Civic Theatre Metro Centre
Aotea Square
Town Hall
Colliers International • 396 Queen Street, Auckland • 13
Property Description 396 Queen Street was completed in 1989 comprising a 19 level modern commercial building. The property is situated on a prominent corner location, at the intersection of Queen Street and Mayoral Drive, with a third street frontage to Airedale Street.
The building can be accessed via all street frontages; the main entrance and reception lobby via Queen Street, a secondary and vehicle access gained from Mayoral Drive and a third entrance, predominantly used for loading, car parking and back of house space, from Airedale Street. The building was originally built to contain car parking on levels 1 and 3, a two level podium housing the Historic Queens Head Tavern and 16 levels of office accommodation. In 2013, the podium levels of the building were extensively redesigned and extended along the Queen Street and Mayoral Drive frontages creating 24 retail units and the lobby was relocated to Queen Street (from Mayoral Drive). At the same time the property was subdivided into six separate freehold titles as described in the title and tenure section of the information memorandum. Upon completion of the redevelopment the levels will comprise: • level 1 - basement car parking and storage areas with access gained from Airedale Street • level 2 – retail units and tower entrance accessed from Queen Street • level 3 – retail, storage units and covered car parking access from Airedale Street • level 4 – retail and uncovered car parking with access gained from Mayoral Drive • levels 5 to 19 – existing office accommodation Please note that this offering is for Lots 1 and 6 as described in the title and tenure section of the information memorandum, which is primarily levels 4 to 19 and the entrance to the tower on level 2 (including plant and core services). The purchaser can acquire a number of car parks and an additional retail unit to improve the profile/access from Queen Street, if required.
14 • 396 Queen Street, Auckland • Colliers International
Construction Overview The building’s structure is constructed of reinforced concrete foundations, columns, beams and floor slabs built around a central core housing key services. External walls are predominantly a glazed curtain wall system offering full floor to ceiling natural light to all floors. The internal walls and ceilings are currently plasterboard with acoustic tile ceilings. The floor plates are serviced by a central core of four lifts, two of which have been recently modernised. The remaining two lifts have been decommissioned by the owner and require upgrading or replacement. The concept plans for levels 20 and 21 assume that the two existing lifts are replaced and that servicing is extended to the two new floors. The building is fully sprinklered and has a seismic assessment in excess of 100% of NBS. Further details on the building’s seismic performance will be available to qualified parties on request.
Technical Summary Element
Description
Air Conditioning and Heating:
Ducted air conditioning servicing all floors with cooling towers in the plant room
Lifts:
Four lifts, two modernised in 2013/14
Fire Safety:
Automatic sprinkler system, smoke and thermal detectors, break glass alarms – fully compliant with local requirements
Seismic Rating:
IEP in excess of 100% of NBS
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Panorama looking North
16 • 396 Queen Street, Auckland • Colliers International
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looking North-East
looking North-West
18 • 396 Queen Street, Auckland • Colliers International
looking South -west
looking North-north-west
Colliers International • 396 Queen Street, Auckland • 19
Proposed Conversion Options A number of design concepts and costings have been completed by the current owner and their wider consultancy team to convert the building to a three star plus to four star rated hotel, serviced apartment development, residential development or budget/tertiary accommodation.
Further information on costings and design can be made available to qualified parties on request. Investors have the ability to purchase the office tower ‘as is’ with preliminary design plans and costings in place or alternatively purchase the completed ‘turn-key’ development with the current owner providing for appropriate resource and building consents and undertaking the refurbishment to create the hotel within a 15 to 18 month time frame. The building possesses many factors that make it an ideal conversion opportunity including; a central core with ideally sized floor plates for optimal conversion to rooms, four elevators, Queen Street entrance and reception lobby, designated back of house entry, drop off zones for tour buses, secure car parking and storage. The property is situated in the heart of Auckland’s entertainment precinct being diagonally opposite Auckland’s Town Hall and Aotea Entertainment Centre. We note that the property may also be converted to a number of other uses including residential apartments, commercial, retail or a mixed used development.
Proposed Hotel/Serviced Apartment Overview We outline below preliminary plans for a hotel/serviced apartment conversion. A three star plus to four star rated mid-market hotel/serviced apartment development contained within a 19 level development comprising circa 250 keys. Main Reception/Lobby and Vehicle access
Guest and pedestrian access is gained directly from Queen Street (level 2) leading to a reception and lift lobby. Secure basement car parking and loading of goods and services is available from Airedale Street with Mayoral Drive providing a secondary access for tour group and valet drop off. Proposed Guest Rooms and Suites
Located over levels 5 to 19, typical floor plates can accommodate approximately 18 hotel keys ranging between 22 sqm to 35 sqm in area, together with dedicated housekeeping on each floor level. The building is serviced by four lifts and two egress stairwells. The current concept designs provide for rooms of a three star plus to four star standard incorporating split beds, LCD flat screen TV’s, three point bathrooms, individually controlled air conditioning thermostat, desks, minibars and all other normal facilities provided within a hotel of this standard. More importantly, all rooms have full floor to ceiling height glazing providing panoramic views over the city.
20 • 396 Queen Street, Auckland • Colliers International
Typical Layout:
Hotel
House Keeping
Typical Layout:
Serviced Apartments
Colliers International • 396 Queen Street, Auckland • 21
An alternative configuration and design providing for fully self-contained serviced apartments has also been completed. Two additional floors (levels 20 and 21) have been designed to accommodate a further 26 rooms if this should be of interest to potential parties. Food and Beverage Facilities
There is the ability to add a restaurant, café and bar on level 5, 6 or 19 of the building if required. However, we note there are a large number of food and beverage facilities provided within close proximity to the property which may negate this requirement, dependent upon the service offering required by the eventual owner. Conferencing and Meeting Facilities
There is the ability to add a number of conferencing/meeting rooms to level 5 or 6 of the building if required. We note that extensive conferencing facilities are located directly opposite the property at the Aotea Centre and Auckland Town Hall. Additional Facilities
We outline below additional facilities that could be provided by the hotel on completion: • business centre • appropriate back of house areas including office storage, staff amenities and commercial kitchen • gymnasium • car parking We note that all of these facilities are subject to final design. Additional Offering
There is the ability to secure a number of additional areas of the property in addition to the office tower as noted below; • Retail unit: The property provides for a dedicated reception and lobby which is accessed via Queen Street. There is the ability to secure an additional Queen Street retail unit directly adjoining the entrance (shop 7 with an area of 48sqm), to expand the entrance if required. • Car parking: There are 61 on-site car parks that can be made available with the offering, subject to the specific requirements of the new owner. • Level 4 Podium: A pre-leased restaurant and internet café together with 24 uncovered car parking bays are currently contained in the offering. However, if these components in part or full are not required, this can be subdivided from the title.
22 • 396 Queen Street, Auckland • Colliers International
Typical Layout:
Restaurant & Bar Potential configuration providing up to 169 pax together with a small bar and commercial kitchen.
Kitchen
Buffet tables
Buffet tables
Coffee shop 169 seats
Lou
nge
Storage
/Ba
r
Bar store
Typical Layout:
Conference Areas Potential configuration providing up to 3 conference rooms seating 110 pax together with facilities and back-of-house areas.
Housekeeping
Store
Gm
sales HR
admin
finance
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Tertiary/Budget or Hostel Configuration A third design option has been completed which involves a conversion to a circa 400 bed hostel or student accommodation facility. The property is located within close proximity to two of New Zealand’s largest tertiary facilities; The University of Auckland and Auckland University of Technology, which together have a roll of close to 60,000 full time equivalent students. Many of these students require centrally located accommodation during the year from February to December. Many student hostels provide backpacker/budget accommodation when the rooms are not required for students.
Typical Layout:
Tertiary/Budget or Hostel Configuration
Vending Machines
Lockable washing machines
Lockab le wash
Cleaner's Cupboard
ing ma chines
Laundry
24 • 396 Queen Street, Auckland • Colliers International
chines
ing ma
le wash
Lockab
Title and Tenure 19
Freehold stratum title Site area approximately 1,470 sqm
18
Lot 1
16
Title Details
15
Computer Freehold Register 624219
14
17
Deposited Plan 4666857
13
Description
The entire office tower (levels 4–19) together with the lift/ stair core and service/plant areas (located on levels 1–3), two pre-leased retail units and 24 uncovered car parking spaces located on the level 4 podium.
12 11 10 9
Lot 1 also includes the underlying land as well as air rights and development rights which enable further development above level 19.
8
We note that the owner can further subdivide level 4 if part or all of these areas are not required by the purchaser.
5
7 6
4 3
Lot 6
2
Title Details
1
EE T STR
LEVE
L
Computer Freehold Register 624224 Deposited Plan 4666857
areas indicative only
Description
Queen Street entrance to tower via lift core and reception lobby. In 2013, the owners of 396 Queen Street undertook a comprehensive redevelopment of the first four levels of the buidling to create a high quality 24 unit retail development leaving the tower to be repositioned by an incoming purchaser. The subdivision was designed to give maximum control to the office tower through a series of covenants between the lots and the inclusion of all of the plant and servicing areas of the entire property. The subdivision created six freehold titles with Lots 1 and 6 being offered for sale. The purchaser of Lots 1 and 6 can also acquire the following if required: • One or more of the unit titled car parks on levels 1 and 3; and/or • One or more of the unit titled storage units on levels 1 and 3; and/or • The retail unit directly adjoining the Queen Street entrance known as Principal Unit 7R (a Unit Title within Lot 2). A copy of all title documents and further detailed explanation of the freehold subdivision is available to qualified parties on request. Colliers International • 396 Queen Street, Auckland • 25
26 • 396 Queen Street, Auckland • Colliers International
Zoning The subject site is zoned Strategic Management Area (SMA) 1 under the Auckland City District Plan Central Area Section Operative 2005. The objective of this zone is to maintain the highest intensity of activity in the central Auckland area. Emphasis is on commercial, entertainment, recreational, cultural, educational, retail, residential and tourist activities to ensure the continuation of the central area as a principle business and commercial centre and to achieve vitality and manage adverse effects. This property is identified as falling within the pedestrian orientated area and the Aotea Square special height control area.
Permitted Use A wide range of permitted activities are allowed for this site and include: • accommodation • community care facilities • food and beverage • education • entertainment and gathering • offices • retail services The property has a maximum floor area ratio of 10:1. The existing structure represents a floor ratio of 7.1:1, which is less than the maximum. Specialist planning advice would be required to ascertain whether any further development is permitted on the site. We also note that the façade of the old Queens Head Hotel has been retained as part of the repositioned retail offering on Queen Street due to its heritage value. The property enjoys a high car parking ratio of approximately 1:100 sqm of gross floor area which is in excess of the number that would be permitted under the existing District Plan. We expect existing use rights to apply. The purchaser of the tower Lot will own the air rights above level 19 and therefore controls the future development opportunities.
Colliers International • 396 Queen Street, Auckland • 27
Queen st Since 1840, Queen Street has been Auckland’s hub of the city centre, with an abundance of popular shops, restaurants, pubs and cafés.
Location 396 Queen Street enjoys a prominent profile on the intersection of Queen Street and Mayoral Drive. Queen Street is Auckland’s main retail and commercial thoroughfare with Mayoral Drive being a major arterial loop road linking the east and west of the Auckland CBD.
Guest and pedestrian access to the property is accessed via Queen Street with vehicular access to car parking gained from both Mayoral Drive and Airedale Street. The property is located in a popular mid-town position directly opposite the Auckland Town Hall and Aotea Conference and Entertainment Centre. This area is the main entertainment and cultural precinct of Auckland. Other attractions include: • Queen Street shopping • proximity to two of New Zealand’s largest tertiary facilities; The University of Auckland and Auckland University of Technology • the main library and Academy cinema • the theatres within the Civic • the Auckland Art Gallery • the Metro Centre including Event Cinemas 10 screen multiplex and home of the Imax screen • Myers Park and Albert Park • SkyCity Casino and Convention Centre The immediate area around the building is characterised by a range of retail, commercial, residential and other accommodation providers including Rendezvous Hotel and the adjacent Scenic Hotel. Free public transport provides easy access to Auckland’s Waterfront and other key tourist attractions.
30 • 396 Queen Street, Auckland • Colliers International
Colliers International • 396 Queen Street, Auckland • 31
Nearby Attractions SkyCity Casino
Metro Entertainment Centre and Cinema
Q Theatre and Civic Theatre
Auckland Public Library
University of Auckland and Auckland University of Technology
Myers Park and Albert Park
Auckland Art Gallery
Retail Shopping
Airbus stop (24/7 connection to Auckland International Airport)
Britomart Transport Centre (Bus, Train Ferry)
32 • 396 Queen Street, Auckland • Colliers International
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Competitive Set The proposed hotel is centrally located in Auckland CBD. Other hotels within close proximity include: Hotel
Address
Star Rating
Scenic Hotel
380 Queen Street, Auckland
Rendezvous Hotel
71 Mayoral Drive, Auckland
452
Crowne Plaza
128 Albert Street, Auckland
352
SkyCity Hotel
72 Victoria Street West, Auckland
344
Langham Hotel
83 Symonds Street, Auckland
410
34 • 396 Queen Street, Auckland • Colliers International
No. of Rooms 97
Colliers International • 396 Queen Street, Auckland • 35
Purchasing Options and Financial Viability Investors have the ability to purchase the tower (Lot 1 and Lot 6) ‘as is’ with preliminary design plans and costings in place or alternatively purchase a turn-key hotel, serviced apartments or a hostel with the current owner providing for appropriate resource and building consents and the completion of the project within a 15 to 18 month time frame. As discussed previously, purchasers can also elect to purchase shop 7 (PU7R in Lot 2), carpark unit titles and storage unit titles. A number of design concepts and costings have been completed by the current owner and their wider consultancy team. This includes options for a three star plus to four star rated hotel, serviced apartment development and budget/tertiary accommodation. Further information on costings and design can be made available to qualified parties on request. Alternatively, potential parties can employ their own consultants to look at the various design options of the building including the reinstatement of the building as a commercial offering or a conversion to residential apartments or a mixed use development.
Financial Viability Colliers International has also completed a number of ‘as if complete’ financial viability cashflows which can also be provided upon request by qualified parties. The financial performance and feasibility of the hotel post conversion is likely to be in line with the wider performance of the Auckland hotel sector. We note that the Auckland hotel market currently has significant pent up demand with occupancy rates currently at historically high levels. Market forecasts are for continued growth over the short to medium term. Based on the current market performance we would expect the hotel to achieve a stabilised average occupancy of 80% once a typical trade up period has been completed. We would anticipate the hotel to achieve an average room rate on completion (in 15 to 18 months) of $150 exclusive of GST, dependent upon final room configuration and star rating. Additional income can be generated from food and beverage, conferencing and meeting facilities, and car parking. Net profitability returns are likely to be in the general vicinity of 20% to 30% of total operating revenue. Further information in terms of the property’s potential operational performance can be made available to qualified parties on request. Please note that full independent advice should be undertaken by all parties prior to entering an offer on the property.
36 • 396 Queen Street, Auckland • Colliers International
Three-star-plus to four-star mid-market hotel comprising circa 250 keys.
Four-star serviced apartments with circa 209 keys.
Student/budget accommodation facility circa 400 beds.
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“ we would expect the hotel to achieve a stabilised occupancy of between 75% to 80% after a typical trade up period ”
38 • 396 Queen Street, Auckland • Colliers International
Operating Structure We are aware of a large number of hospitality operators that would look favourably at managing the hotel on completion for a new investor. Many of these companies are global in nature and highly motivated to obtain a position in the tightly held Auckland CBD hotel market. We would be more than happy to discuss with you potential operators that could operate the hotel on your behalf and could connect you with these operators at your specific request. Alternatively the property would be ideal for a range of owner operators in the wider hospitality region including hotels, serviced apartments or budget accommodation.
Colliers International • 396 Queen Street, Auckland • 39
economic resurgence Sound fundamentals and positive market sentiment across most sectors of the economy point to a robust outlook for the wider New Zealand investment market in 2014.
40 • 396 Queen Street, Auckland • Colliers International
New Zealand Economy The New Zealand economy is poised for strong economic growth in 2014 on the back of a surge in global demand for dairy products, the Christchurch rebuild, the Auckland housing boom and a wider improvement in business sentiment.
Business confidence as measured by the New Zealand Institute of Economic Research (NZIER) is the strongest in 20 years translating into increasing profits, higher capital investment and additional jobs. Many economic commentators anticipate national GDP to be in excess of 3% this year and at the top end of all OECD countries fuelled predominantly by the Christchurch rebuild, which is estimated to contribute 20% of National GDP. Over the past 12 months Auckland has experienced strong GDP growth of 2.4%. Other key factors relevant to New Zealand’s economic resurgence include: • The New Zealand dollar which has appreciated 40% over the past four years against the Reserve Banks Trade Weighted Index with many expecting it to reach parity with the Australian dollar later this year. • The New Zealand share market has outperformed many other countries in the world with the NZX 50 index having risen by 47.4% in two years. • The unemployment rate is forecast to fall to historically low levels as the demand for labour, particularly in the construction sector, increases. • The property boom is anticipated to continue fuelled by the Auckland housing market which increased 15.4% in the past 12 months with house prices now 32% above the previous market peak in 2007. Strong demand from local and offshore buyers together with low levels of new supply is driving prices up in the market. • The tourism market is expected to continue its strong performance into 2014 after recording record growth in many cities last year. It is anticipated that the Auckland hotel market will see occupancy rates over 80% this year and Rev Par growth of in excess of 5.0% with other key markets including Wellington, Christchurch, Queenstown and Rotorua also expected to show strong trading fundamentals. In summary, the outlook for the wider New Zealand investment market is for robust demand and increasing returns in 2014 based on sound economic fundamentals and positive market sentiment across most sectors of the economy.
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Auckland Tourism Market and Infrastructure Auckland is New Zealand’s key tourist destination and is the country’s international gateway, attracting over 70% of all international visitors through its world-renowned airport.
Contributing approximately 35% of the country’s total GDP, Auckland is New Zealand’s economic hub. 2013 Census figures illustrate that the Auckland Region had a resident population of 1.42 million, up 8% since 2006. The region accounted for over half of the country’s population growth since 2006. Located between the Waitemata and Manukau Harbours, Auckland is referred to as the “City of Sails” due to its harbour side location and tourist attractions.
Airport Access Auckland Airport is New Zealand’s main international gateway and the busiest airport in the country. For the year ended June 2013, the airport handled approximately 14.52 million passenger movements of which 7.32 million were international. Over the period from 2004 to 2011, approximately $575 million was spent on a major upgrade of the airport. The domestic terminal was also upgraded at a cost of approximately $42 million in 2007 and plans for further works are in the pipeline. For the fifth year in a row, Auckland Airport was awarded the title of the best airport in the Australia-Pacific region at the 2013 annual SKYTRAX World Airport Awards.
Convention Centre The New Zealand Government has recently confirmed that casino and entertainment operator SkyCity will build a new 3,500 seat convention centre between Hobson and Nelson Streets within Auckland CBD. The project is estimated to cost approximately $350 million. It is anticipated this will bring significant new business to city, further adding to hotel demand. The Convention Centre is expected to open in 2017/18.
Cruise Ship Industry New Zealand experienced its largest cruise season in 2012/13 with over 200,000 passengers and a contribution of over $310 million to the economy. Auckland is New Zealand’s key exchange port and benefits considerably from its status as a key arrival and departure point, with guests booking hotel accommodation in the city pre and post cruise. A new $12.5 million cruise ship terminal opened on Auckland’s waterfront in August 2013 to assist with increasing demand in this sector.
42 • 396 Queen Street, Auckland • Colliers International
Visitors New Zealand experienced its largest cruise season in 2012/13 with over 200,000 passengers contributing over $310 million to the economy.
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Auckland Entertainment Arts Precinct The Arts precinct is located in the ‘heart’ of the city centre, and is home to the Auckland Art Gallery, Auckland Central City Library, Aotea Square, Auckland Town Hall, Aotea Centre and Civic Theatre. It is also home to a number of private dealer galleries, theatres and cinemas, and is serviced by great bars and restaurants. This is where people come to enjoy the Auckland’s vibrant arts scene. The property is situated within the Arts precinct sitting opposite the Q Theatre and within a short walk of the other theatres, galleries and the Aotea Centre.
Vector Arena Vector Arena is located toward the eastern end of the Auckland CBD and is the city’s premier indoor, multi-purpose arena hosting a range of sporting and entertainment events. The Arena is situated on Mahuhu Crescent approximately five minutes from Queen Street, Auckland’s main retail thoroughfare. The arena can be configured as a theatre or intimate concert venue for smaller audiences or can cater for over 12,000 people for large concerts and events. Vector Arena opened in March 2007 and over the first five years, more than 300 shows have been held at Vector Arena and over 1.5 million people have come through its doors.
44 • 396 Queen Street, Auckland • Colliers International
Auckland Hotel Market The Auckland hotel market traded at record levels over 2013 which we expect to continue over 2014. Occupancy rates for Auckland 3 to 5 star hotels for the year ending December 2013 was at 78.8%, an all-time high. We have also seen healthy increases in room rates with the city having witnessed an increase of 7.4% in revenue per available room in 2013. These increases are due to increasing visitation numbers, resurging business demand and limited new stock coming onto the market. We outline below a snapshot of the Auckland accommodation market for 3-5 star hotels over the period from 2009 to 2013.
Auckland City Hotel Market — Recent Performance Hotel
Occ
ADR
RevPAR
Y-O-Y RevPAR Growth
Dec-09
69.5%
$134
$93
–
Dec-10
74.8%
$133
$100
6.5%
Dec-11*
77.2%
$159
$123
23.2%
Dec-12
75.9%
$136
$103
-16.0%
Dec-13
78.8%
$140
$111
7.4%
* Rugby World Cup
$180
85%
$160
80%
$140
75%
$120 $100
70%
$80
65%
$60
60%
$40
55%
$20 $0
Dec-09
Dec-10 ADR
Dec-11* RevPAR
Dec-12
Dec-13
50%
Occ
Source: NZHC / Colliers International
Colliers International • 396 Queen Street, Auckland • 45
Auckland Student and Budget Accommodation Market The student and backpacker/budget lodging sectors represent two of the largest accommodation providers in New Zealand, with a strong profile in the Auckland Central City catchment.
The Auckland student accommodation market is considerable in nature due primarily to the location of the University of Auckland (UoA) and Auckland University of Technology (AUT) in the city. As at 2012, the UoA had over 32,500 equivalent full time students (EFTS) and AUT with over 26,750 equating to around 60,000 students. In addition to the two Universities there are numerous language schools located within the CBD which attract students from all corners of the world. Furthermore, demand is increasing with annual growth in student numbers equating to approximately 2.0% per annum over the past five years. Many of these students require centrally located accommodation close to the tertiary institutions during the year from February to December. A number of new developments are currently under construction to cater for the increasing demand in this sector and it is envisaged further projects will be required over the short/medium term. The backpacker/budget market is one of the fastest growing sectors in New Zealand representing around 25% of the entire accommodation market. The Auckland backpacker market is well established with over 3,500 beds including Australasian branded Base and Nomads Backpackers, the internationally known YHA Hostels and a number of both large and small independent operations. The majority of larger scale hostels are located within the Auckland CBD or immediate surrounds and it is envisaged that new supply will be required for increasing demand in this sector over the short/ medium term.
46 • 396 Queen Street, Auckland • Colliers International
Auckland Residential and Apartment Market The Auckland residential property market is currently undergoing an unprecedented capital growth phase with the average house price reaching $700,000 in December 2013. This represents an increase of 15.4% in the past 12 months and an increase of over 32% since the previous market peak in 2007.
Strong demand from local and offshore buyers together with low levels of new supply is driving up prices in the market and this is anticipated to continue over the short/ medium term. The Auckland inner city apartment market has also benefited from the current housing boom with increased sales volumes and capital appreciation over the past 12 months. Many first home buyers and investors are now actively looking to this market for affordable accommodation options and investment assets. Over the past 2 years, Auckland inner city apartment prices have appreciated by 47% and we are now seeing a number of office conversion and new developments taking place to cater for the pent up demand in this segment of the market.
ApartmentAuckland Sales:City/Pt Chev Zone** Median Sale PriceSales vs- No Sales 2009—2013 Apartment Median Sale Price vs. Number of Sales 2009 - 2013 Auckland City/Pt Chev Zone Median Sale Price
Number of Sales
$250,000
2000
$240,000
Median Sale Price ($)
$230,000
1600
$220,000 1400 $210,000 1200
$200,000
Number of Sales
1800
1000
800 Jul-13
May-13
Jan-13
Mar-13
Nov-12
Jul-12
Sep-12
Mar-12
May-12
Jan-12
Nov-11
Sep-11
Jul-11
Mar-11
May-11
Jan-11
Nov-10
Jul-10
Sep-10
May-10
Jan-10
Mar-10
Nov-09
Jul-09
Sep-09
May-09
Jan-09
$180,000
Mar-09
$190,000
Source: REINZ & Colliers International Research. Median sales price calculated over 12 months. Source: REINZ& Colliers International Research Median sales price calculated over 12 months
Colliers International • 396 Queen Street, Auckland • 47
Auckland Commercial Office Market The New Zealand economy is on the verge of witnessing one of the strongest growth phases in its history with business confidence at a 20 year high and most economic commentators anticipating that 2014 will see record GDP levels via increased profits, hiring and investment activity. Strong growth patterns are already having a positive impact on the Auckland commercial office sector with vacancy rates falling in 2013 to 9.5% and are forecast to decline further over the short/medium term as further space is absorbed by new and expanding businesses. Increasing demand, coupled with relatively low levels of new supply argues well for the repositioning of secondary office buildings that have previously seen higher levels of vacancy. Auckland CBD Office Vacancy Rate By Grade
Auckland CBD Office Vacancy Rate by Grade Prime
25%
Secondary
Overall
20% 15% 10% 5%
Source: Colliers International
48 • 396 Queen Street, Auckland • Colliers International
Dec-17
Jun-16
Dec-14
Jun-13
Dec-11
Jun-10
Dec-08
Jun-07
Dec-05
Jun-04
Dec-02
Jun-01
Dec-99
Jun-98
Dec-96
Jun-95
0%
Disclaimer This Information Memorandum has been prepared solely for information purposes in order to assist interested parties in making an initial evaluation of the property and does not constitute advice nor purport to contain all of the information that a prospective purchaser may require. In all cases, interested parties must conduct their own investigation and analysis of the property and the data set out in this Information Memorandum to satisfy themselves in all respects and not rely on the information in this Information Memorandum to make their purchasing decision. This Information Memorandum has been prepared in good faith and with due care by Colliers International, but neither Colliers International, nor the Vendor accept responsibility hereunder for the accuracy of any part of the information contained in this Information Memorandum. Therefore the recipients of this Information Memorandum to the extent that they rely on the information contained herein do so entirely at their own risk. The Vendor and Colliers International NZ Limited (and its brokers) expressly disclaim all liability for representations, express or implied, contained in, or for omissions from, this Information Memorandum or any other written or oral communication given to any prospective purchaser in the course of their evaluation and/or offer. This Information Memorandum does not constitute an offer for sale or purchase or otherwise. For further information please contact the nominated broker: Colliers International NZ Limited
Dean Humphries
Level 27 SAP Tower, 151 Queen Street, Auckland
National Director I Hotels Colliers International
Phone: +64 9 358 1888
Direct: +64 9 358 9896
Fax:
Mobile: +64 21 408 156
+64 9 358 1999
dean.humphries@colliers.com
Colliers International • 396 Queen Street, Auckland • 49
colliers.co.nz