Wellington Scoop

Owners of Majestic Centre now spending $54m on earthquake strengthening

News from Kiwi Income Property Trust
The value of four of the Trust’s five office buildings has increased, but the value of the portfolio as a whole decreased by $4.2 million (-0.8%) due to a $14.3 million write-down in the value of The Majestic Centre in Wellington following an increase in the earthquake strengthening budget.

“We set out in November 2011 to strengthen The Majestic Centre to 70% of New Building Standard (NBS) at a projected cost of $35 million,” said Chris Gudgeon, chief executive of the Manager of the Trust.

“Having now substantially completed the structural design for the strengthening solutions it has been necessary to increase the project budget by $19 million due to an increase in the scope of work. The increase in the project budget will however allow us to strengthen the building to a target level of 100% NBS, in recognition of the strong tenant demand for fully strengthened buildings in the Wellington market.”

“The value of this rigorous and comprehensive strengthening project, which commenced on site in July 2012, has been recognised by incumbent tenants, Opus and New Zealand Trade and Enterprise, who have recently entered into new long-term lease agreements for a combined area of approximately 6,300 sqm.”

Excluding Beca House, which was sold during the period, and The Majestic Centre, the like-for-like value of the Trust’s portfolio of office buildings grew by $11.0 million (+2.4%), reflecting generally improved market conditions. The like-for-like weighted average capitalisation rate firmed by 26 basis points to 8.08% and the independent valuations indicate that over-renting across the office portfolio has reduced to just 3.6%.

The full report is here