By Campbell McIlroy
Friday 19th October 2001 |
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But it could also prove a shrewd strategic move, adding KPMG Legal to the company's tenant list as it investigates developing a new office building in Wellington.
Capital Properties chief executive Nick Wevers said the purchase of 89 The Terrace, which was negotiated by David and Michael Bayley of Bayleys' Auckland office and Mark Hourigan in Wellington, would have no material impact on the companies development plans in the capital.
This is largely due to the $31.3 million price tag for the new purchase being made up of $10 million in new ordinary shares to be issued to the vendor, Fletcher Building Retirement Plan, $10 million of new capital notes at a coupon rate of 8.5%, and an $11.3 million extension of existing bank debt evenly split between the National Bank and HSBC.
This structure is in keeping with the company's desire to maintain equal one-third weightings of ordinary equity, capital notes and bank debt as outlined in this year's annual report.
As in Auckland, KPMG Legal is one of the key tenants to kicking off any new tower. Capital Properties has openly stated it is examining options for development on its vacant sites in Wellington.
Mr Wevers said Capital had spoken with KPMG Legal in the past but when the company took possession of the building next week it would be able to speak more seriously about what its future needs were.
Playing down any strategic link, Mr Wevers said Capital was in absolutely no rush and would only proceed with a development if it worked for the company and for the tenants.The KPMG Legal tenancy also exposed Capital to potential vacancy issues in the building should KPMG Legal decide to sign with another developer when its lease for five of the buildings 15 office floors expired in 2005.
But while stating Capital was in no rush to develop, Mr Wevers said he expected to have something under way within the next two to three years, which should see completion before KPMG Legal's lease expires.
Mr Wevers said he did not believe there was sufficient demand for a new office tower in Wellington.
Development plans aside, analysts said the purchase was a good one, especially given the initial yield of about 10.8%.
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