Fonterra offer will ‘galvanise investors’
Eight-level Fonterra House has a conference centre and 45 carparks.
- Paul Charman
Fonterra plans to sell the building housing its Waikato business, Fonterra House.
The property at 80 London St, Hamilton, is being marketed by CBRE managing director Andrew Stringer and senior director Warren Hutt.
It is for sale by deadline private treaty, closing June 29, unless sold earlier.
With 7227sq m refurbished office building, Fonterra House sits pride of place at the corner of London St and Harwood St, says Stringer.
The eight-level building includes a conference centre, while the 4184sqm site has 45 on-grade carparks.
“Fonterra will continue to occupy the property following the sale, maintaining its long-standing commitment to Hamilton,” he says. “This opportunity provides investors with an outstanding lease covenant; regular rental growth and zero exposure to maintenance and capital expenditure costs, for at least six years.
“This is far from an everyday investment offer, it being so difficult to acquire a fully-leased office building and future development site in the heart of Hamilton CBD.
“Such favourable terms seem unprecedented, considering the dairy co-operative will sign a new six-year-lease on the building,” says Stringer.
Located on the northern fringe of the Hamilton Central Business District, Fonterra House is serviced by cafes, the new Les Mills Gym on Victoria St and the recently upgraded Centre Place shopping centre. It is close to well-known sports facilities including FMG Waikato Stadium and Seddon Park. The site will also benefit from city council plans to develop Hamilton's riverbanks, creating a garden bridge, the jetty at Hamilton Gardens and riverside facility at the St Andrews Golf Course.
Stringer says the location is also strategic transport-wise.
“The Hamilton Transport Centre is a short distance away, on the corner of Anglesea and Bryce Sts. The northern end of the Hamilton CBD is also well located for commuters travelling from the northern and western residential suburbs.”
The building comprises a well presented and maintained 1980s office block, characterised by a spectacular atrium with two glazed lifts. It features tidy office accommodation, with excellent views across the Hamilton CBD, he says.
In addition to the main office tower there is an open sealed carpark site diagonally opposite, at 9-11 Harwood St. This adds up to a total of 1118sq m, providing an additional 48 on-grade carparks.
Separate leases have been prepared for the office building at London Street and the carpark land at Harwood Street.
However, both leases have the same essential terms relating to lease length, rent review provisions, responsibility for outgoings and repairs and maintenance, including capital replacement (if applicable).
Stringer says Fonterra will enter into the six-year-lease with rights of renewal.
“Expenses associated with on-going occupation will be met by Fonterra under a “triple-net” lease structure adds a very attractive element to the property,” says Stringer.
“Under the Head lessee for the building, Fonterra takes full responsibility for the upkeep of the building, its structure and mechanical services through the life of the lease, including renewals, while the lessor will be responsible for its own management and administration costs.
“Investors will enjoy the additional certainty of rentals increasing at 2.5 per cent pa, with a market-based review on renewal.”
Investment in the building itself has been a key priority, says Hutt, who points out Fonterra has committed significant expenditure in upgrades to the majority of the office floors over recent years.
The building has also undergone progressive on-floor refurbishment since 2016, including plant replacement and upgrades. The seismic rating, supported by a Detailed Engineering Evaluation (DEE) is 96-100 per cent for the main building with one component at 77 per cent, says Hutt.
“Considering recent investment in the asset and the extremely favourable lease terms, 80 London St presents as a compelling investment proposition in a market starved of quality investment stock.
“In my view, an offer of this calibre will galvanise investors far and wide.”