Fully leased Grafton building
Elevated view of four level Procare House which is for sale at 50 Grafton Rd.
A top performing Grafton office property is being marketed as a fully leased investment that will eventually become an ideal site for long-term residential development.
Owned by Tasman Kaingaroa Nominees Retirement Scheme, the four level Procare House at 50 Grafton Road backs on to the Auckland Domain and faces Stanley Street.
The well-presented and maintained office building on a 2346 sq m site is within the hospital and university precinct and is tenanted by Procare Health and Health Research on long-term leases.
The retirement scheme is selling the property to realign assets within its portfolio and is being marketed by Savills’ joint managing director, Paddy Callesen and senior broker, John Jefferson who are selling it by private treaty closing on October 3.
“The attractiveness of this property is it current Business 4 zoning and proposed Mixed Use zoning under the proposed Auckland Unitary Plan,” says Callesen. “After a couple of more lease cycles it could be considered as a ‘real possibility’ for residential conversion.
“There will be a demand for dwellings backing onto the domain and open to Grafton Rd. The site can’t be built out and is within walking distance of the city, university and hospital, which have expanded significantly over the past few years.”
Built about 1986, the property has 2278 sq m of net lettable area over three floors of office space along with ground floor foyer and secure parking for 30 cars and open parking for another 37 plus vehicles. Parking is at a ratio of one park per 34 sq m of lettable area.
Extra parking at the adjoining bowling club is used by tenants, which is an added benefit along with a landlord supplied electricity generator providing 24 hour power back up. Jefferson says the generator is not included in the rent and neither is the car park it sits on.
The property sits below Grafton Rd and Stanley St with the upper level having views of the traffic passing along Stanley St on the northern side, while the eastern side has bush views into the domain.
The entrance to the building is on the northern side through sliding doors leading into an attractive foyer with a feature garden and seat. Jefferson says the rest of the ground floor is covered car parking access by two cage roller doors.
A lift and stairwell provides access to the upper floors. “A stepped architectural feature increases the size of the regular shaped floorplates the higher they become.”
The premises were refurbished in 2003/2004 and more recently in 2011 when Procare Health’s offices over two levels were given a high quality refit. Both tenants’ fitouts are partitioned around the perimeter, with an open plan layout in the centre.
Jefferson says the complex is fully leased to Procare Health and Health Research on a weighted average lease term of six years at rent of $579,307.50 a year. “At a rent of $193 per sq m, $41 weekly for a car park and average outgoings of $73 per sq m for city fringe office space, this is as cost-effective as you can get in a quality building.
“While quality is an important selection criterion for office tenants, it is often the intangible things, such as location, access, building features, the friendliness of the landlord that make a precinct and the particular building attractive. There are many tenants who don’t want to pay CBD rents and reap the benefits of being in the cheaper city fringe.”
Callesen says the retirement fund has been an excellent landlord and Procare Health and Health Research have been long-term tenants in the building. Procare has been based there since 2002 and took a new 10 year lease in 2010 and Health Research has been in occupation since 2003 and committed to a new nine year lease in 2012. Tenants in quality buildings near the hospital tend to stay.”
The suburb is characterised by its historic buildings many of which are unchanged from the early decades of the 20th century. While the extent of the suburb has changed with the motorway and arterial road construction in the 1950s-1960s, the remaining smaller suburb has a highly cohesive structure.
Callesen says Grafton Road, with its extensive views and closeness to the city, has always been a desirable address for professionals, especially solicitors in its early days.
“By the 1970s the type of professionals had changed to medical practitioners, working in medical chambers. The influence of Auckland University and Hospital was also evident in nurses’ accommodation, nursing homes and hospital uses.
“Major changes occurred in the 1980s with the zoning of lower Grafton Rd, making it suitable for offices and the motorway side of upper Grafton Rd being rezoned for high-rise apartments.
“With these district plan changes, the old boarding houses were removed and modern office blocks and high-rise apartment buildings were erected. Later, low-rise apartments and town houses were built on the other side of upper Grafton Road.”
Callesen says this new intensification is a reflection of Auckland Council’s desire to increase the city fringe population and the desirability of Grafton as a residential suburb close to the amenities of the city.
“In the next few years Procare House will have a mixed use zoning under the Proposed Auckland Unitary Plan, which suggests the possibility of residential conversion as a higher and better use of the site in the future.”
He says the property is close to the Grafton Gully motorway network offering good access to the State Highway One north-south and State Highway 16 north-western motorways.
Callesen says replacing the building would be more expensive than the capitalised rental value. “This is a high performing building that is value for money for a seasoned investor to add to their portfolio.
“Commercial property is often the best performing asset in a diverse portfolio but to have weighting across all the asset classes can mean selling. When the market is just climbing out of the doldrums it is the best time to sell. It gives the owner the best price available and an investor the chance to buy a good property at lower than replacement cost.”
The latest Property Council figures shows office has outpaced all sectors as an investment over the past year.
Callesen says the office sector was the last to start recovery of the global financial crisis, only moving into positive returns in March 2010. The latest surge in returns has been boosted by strong capital value appreciation.
Interior view of reception area with Procare House at 50 Grafton Rd.