Landmark tower sold in global bidding war

10:00 AM Saturday August 16, 2014 Colin Taylor

The Lumley Centre is one of only five premium office towers in Auckland.

In New Zealand's biggest commercial office transaction for the past six years, Deka Immobilien, a German investment fund, has purchased Auckland's landmark Lumley Centre on Shortland St for $146 million.

The sale on behalf of Australian based Dexus Property Group followed a competitive bidding process run by real estate agencies Knight Frank and JLL and reflected a net initial yield of 7.08 per cent on the purchase price.

Deka Immobilien is a global investment fund with property assets of $25 billion located in 22 countries. This is their first acquisition in New Zealand.

Constructed by Mansons TCLM, the Lumley Centre at 88 Shortland St is one of the most recent additions to the Auckland office market, providing 15 floors of modern and premium grade office space.

It has a net lettable area of 19,478 sq m with large 1300 sq m floor plates and six levels of associated car parking on a freehold 2935 sq m CBD site.

The building is 93 per cent leased to leading commercial firms including Simpson Grierson, Minter Ellison Rudd Watts, Macquarie Group and Lumley General Insurance.

The property produces a net annual income of $10,336,867 and has one of the longest Weighted Average Lease Terms (WALTs) in the market at eight years, as at October 1 this year.

Lumley Centre was jointly sold by Layne Harwood, Richard Horne and Neil Brookes of Knight Frank alongside Nick Hargreaves and Simon Storry of Jones Lang LaSalle.

Harwood, Knight Frank's country head and managing director, said it was very rare that a commercial property asset of such quality became available to purchase.

The offer showcased a strong demand, particularly from overseas investors, seeking exposure to the New Zealand and Auckland office market.

"Deka, in acquiring the flagship premium office building, beat seven competitive bidders in the process, who were keen to profit from Auckland's impressive rental growth and strong investment fundamentals" Harwood said.

Neil Brookes, Knight Frank's head of capital markets in Asia Pacific said there was strong interest from overseas investors based in Europe, Asia and the United States, who were "attracted by the prospect of owning a trophy office property in a strengthening office market such as Auckland".

Ross Du Vernet of Dexus said the Lumley Centre represented a non-core asset for Dexus. "We are very pleased to capitalise on the superb strength of the New Zealand economy for our investors".

Horne, Knight Frank's managing director NSW, said the Lumley Centre was one of only five premium office towers in Auckland.

"Only two of these buildings have ever been on the market with the last transaction occurring in 2005.

"The building has an excellent history of attracting and retaining tenants. Its rental growth and capital value is supported by the Auckland office market in which premium grade office space accounts for approximately 8 per cent and forecast supply is limited," Horne said.

Situated in an elevated position in the heart of Auckland's Central Business District, the Lumley Centre features uninterrupted views over the Waitemata Harbour, with the two top floors benefitting from external decks with far-reaching views of the city and Hauraki Gulf.

The building is moments away from city centre rail, bus, ferry and boat terminals; nearby shopping outlets and entertainment within the Downtown precinct, on Queen St and in High St. It is also close to the Auckland Waterfront and Britomart, which have undergone extensive redevelopment over recent years occupied by numerous bars, restaurants and fashion retailers.

Nick Hargreaves, New Zealand managing director of JLL said the New Zealand economy was growing "with Auckland infrastructure upgrades underway and the plan for the city to become the most liveable in the world taking shape.

"These factors, alongside low vacancy rates - currently 3.8 per cent and 4.3 per cent across premium and A-grade stock - offer a positive outlook."