Onehunga site presents many redevelopment options

1:09 PM Saturday November 15, 2014 Colin Taylor

This big Onehunga industrial property is for sale at 173 Captain Springs Rd.

A large Onehunga industrial property of nearly one hectare in four titles and numerous redevelopment opportunities has come to the market for sale through Savills.

The 9926 sq m property at Captain Springs Rd was part of a major 2007 portfolio sale and leaseback of Carter Holt Harvey’s (CHH) New Zealand properties. The portfolio was sold to Australian property investment company Valad for $312 million and CHH remained at the Captain Springs Rd site on a new nine year lease.

When the global financial crisis hit Valad downsized its New Zealand assets to pay debt and the property at 164, 169, and 173 Captain Springs Rd and 62 Grotto St was sold to a local investment syndicate.

Savills joint managing director Paddy Callesen, who is selling the property with colleague Bruce Webb, in one block, by private treaty closing on November 26, says the syndicate decided to quit the site as it is not a developer and wants to give somebody else a chance to exploit the opportunities the site offers.

Webb says the property cannot be sold in individual titles as they are legally tied together to  ensure there is enough car parking for the main three-level office block at 173 Captain Springs Rd, housing CHH’s corporate office and information technology services with a sophisticated computer system covering New Zealand and Australian operations, and wood products divisions. 

Carter Holt Harvey, part of Graham Hart’s Rank Group, has about 20 months left to run on its initial nine year lease with two, six-year rights of renewal. 

Callesen says CHH has indicated it is unlikely to stay but it will not relinquish its rights of renewal and may well take up a renewal option. Rent reviews are annual with three per cent increases.

“Whether CHH stays or goes, the property is essentially a medium to long-term redevelopment site,” he says. “It sits on the boundary between Residential and Business zonings and of the four titles – two are zoned Residential 6A and two are zoned Business 4. The owner has lodged an objection with Auckland Council to rezone the entire property as Mixed Use and indications are favourable for that zoning to be put in place.”

He says there are many redevelopment options but it will suit a developer who can take advantage of changes under the proposed Unitary Plan.

“A Mixed Use zone for the entire site is the highest and best use for the property as the adjoining the office block is a 2880 sq m 1960s saw-tooth office and warehouse. This should be demolished and redeveloped so it is similar to the adjoining property, which has medium density terraced housing at one dwelling to about every 115 sq m on a Mixed Use site. It suggests a development of similar density could be viable for this site,” says Callesen.

Callesen says Carter Holt Harvey is paying rent of just over $1 million a year and this gives a new owner holding income for the next 20 months if the company decides not to take up its rights of renewal under the existing lease.

“The rent equates to about $80 per sq m along with car parks at an average of $8 per week. This is an appropriate rent for CHH as the company doesn’t want to be in a flash city building with high costs.”

Callesen says the site is readily sellable as a freehold title either vacant for redevelopment or the existing office building and warehouse re-tenanted. “The other possibility is CHH might want to stay in the entire property or part of it and take up its rights of renewal.”

He says recent sales in the residential areas surrounding Mt Wellington/Onehunga site suggest a value range of $800 per sq m to $1000 per sq m for the 9962 sq m property.

“It will sell well to astute investors or developers who can see the opportunities and potential and can spend the next 20 months drawing up plans and getting consents in place for possible residential development.”  

Currently the saw-toothed warehouse, which sits on a 4112 sq m site has ground level parking and the column-interrupted warehouse is under utilised. There are open plan offices on the upper floor with low stud storage below and a decommissioned gantry crane sits in the centre of the warehouse. 

Webb says as the property is next to the Te Papapa railway station its highest and best use is Residential and about 40 terraced houses could easily fit on the site. 

Between 240 and 300 staff work in CHH’s corporate office at 173 Captain Springs Rd every day. The 4093 sq m, 1970s built conventional suburban office sits on a 4301 sq m site and staff work over three floors of 1350 sq m each. At least fifty staff go to work by train every day.

Webb says every floor in the property has been fully refurbished, but particularly the third floor. “This floor has a pleasant outlook over surrounding houses. A significant part of the floor is divided into meeting rooms and there is a large staff cafeteria, including a full commercial kitchen, in the south eastern corner. There is also a narrow corridor leading to a roof deck. Every floor has its own kitchen and amenity area.

“The property is well appointed and well maintained. A developer could gut the ground floor of this building for car parking and redevelop the two upper floors for apartments with a central light well and ventilation shaft.”

The two other sites at 164 Captain Springs Rd and 62 Grotto St, zoned Residential 6a and Mixed Housing Suburban, are vacant and used for parking. They are sealed, marked and near the main building. 

Over the entire site there are 243 car parks – 60 at 173 Captain Springs Rd, 131 at 169 Captain Springs Rd, 21 at 164 Captain Springs Rd and 31 at Grotto St. Based on an office area of 4093 sq m, this gives a parking ratio of one park per 16 sq m of floor space. The council requires one park for every 40 sq m of office space.

Webb says that if the Residential zoned sites are removed from the equation there are still 191 car parks available, equating to one for every 21 sq m of office space. “The limitation on selling the sites in individual titles may be removed if an alternative car parking proposal is approved by Auckland Council,” he says. “The council does not want to see a shortage of on-site parking so to unlock value there must be a viable solution put in front of it.” 

True Commercial - John Binning of JLL.jpg (1)

Paddy Callesen of Savills.