Fletcher revamped HQ for sale and leaseback

5:00 AM Saturday February 14, 2015 Colin Taylor

Aerial view of the Fletcher Building headquarters at 790-816 Great South Rd, Penrose - roughly identified by a red circle.

Fletcher Building is redeveloping its 2.2 hectare Penrose head office campus which it is offering for sale subject to a 20 year leaseback agreement.

“Following the completion of this 18 month project, the multi-building campus is expected to generate more than $5.6 million in net annual rental income,” says Peter Herdson of Colliers International who, with colleague Andrew Reed, is marketing the property for sale by international private treaty closing at 4 pm on Thursday March 19.

“This very well known property, encompassing a large area at 790-816 Great South Road, offers investors one of the strongest tenant covenants available on the New Zealand market,” Herdson says.

“Fletcher Building is one of New Zealand’s largest listed companies with a market capitalisation of more than $5.7 billion. The property has been Fletcher’s home for decades via leases or the firm’s acquisition of the freehold interest which the company has purchased on at least three occasions so its commitment to the location speaks for itself.”

The redevelopment of the complex is due for completion in the third quarter of 2016 with four existing office buildings undergoing refurbishment to be interconnected by a new single level pavilion building at the heart of the campus.

At its completion the revamped property will encompass a total net lettable area of about 13,200 sq m on 22,287 sq m of freehold land.

The new pavilion will include a reception area, cafe with kitchen and a meeting room suite.

The largest eight level office building will contain 4900 sq m of open plan net lettable space while an adjoining two level annex building will have close to 1500 sq m.

An adjacent three level office building has another 4300 sq m and a two level office building occupying a prominent position at the corner of Great South Rd and Penrose Rd that will offer over 1400 sq m of net lettable space.

All these buildings are to undergo a substantial interior office refurbishment including new ceilings, lighting, electrical and mechanical services upgrades to most areas and new meeting rooms.  The seven storey building will also get new lifts.

Peter Walkinshaw, development manager at Fletcher Building, says the sale aligns with the company’s strategy of prioritising capital investment in its core manufacturing, distribution and construction businesses while retaining its headquarters on long term leases.

“The Fletcher Construction Company is the main contractor delivering the redevelopment project,” Walkinshaw says. “The changes we will deliver will modernise the company’s office accommodation at Penrose and provide a much-improved home for most of the Fletcher Group’s Auckland-based businesses,” he says.

Herdson says the property offers an ideal, long-term, income-generating investment.

True Commercial - 790-816 Great South Rd, Fletchers HQ, Penrose - artist's street level impression.jpg

Artist’s impression of part of the redeveloped Fletcher Building complex at 790-816 Great South Rd in Penrose.

“The sale of Fletcher’s office campus presents a substantial and secure return that is future-proofed through the inclusion of rent reviews every year and a very long lease to an established, international tenant.”

The new 20 year lease that Fletcher Building will take over the property on settlement will include the right to renew the initial term for two further terms of five years each. Income growth will be offered through annual 2.5 per cent rent increases with market reviews at the 10 and 20 year marks.

Fletcher Building is one of Australasia’s largest manufacturers and distributers of building products with annual revenues of over $8.4 billion and nearly 19,000 employees around the world.  The Fletcher Building group of companies includes: The Fletcher Construction Company, New Zealand’s largest construction company; Golden Bay Cement, Firth and Placemakers.

Fletcher Construction has completed some of Auckland’s most significant projects including Vero Centre, Sky Tower and most recently, ASB North Wharf and the ANZ Centre refurbishment. 

Andrew Reed, international director of capital markets for Colliers, says interest is expected from offshore investors as well as prospective local buyers.

“International investors are looking for real estate opportunities that give exposure to outstanding tenant covenants, long term tenure and guaranteed growth,” Reed says.

“The acquisition of this property, with one of New Zealand’s biggest companies as its tenant, will be highly desirable prospect for a wide range of global investors.”

The immediate vicinity of the property includes a range of property uses with predominantly light industrial and warehousing operations, and an increasing proportion of commercial uses within closer proximity along Great South Road. 

One of New Zealand’s largest listed property trusts, Goodman Group, own and manage two prominent business park developments nearby, Millennium Centre and Central Park, which feature numerous recently completed office buildings. The business parks have transformed the area over the past 15 years and now accommodate many of New Zealand’s leading companies.

Penrose is about 10 km from Auckland’s Central Business District. The south eastern highway crosses Great South Road near the property linking with State Highway One to give excellent access to the city’s motorway network and Auckland International airport. Penrose train station is only 300 metres away.

Peter Herdson, Colliers.jpg

Peter Herdson of Colliers.