Urbus looks to sell Christchurch property after tenant gives notice

Friday 8th June 2001

By Chris Hutching

Commercial property company Urbus Properties hopes to sell its High St Farmers building in Christchurch because the lease on the property is running out and the tenant has given notice.

Urbus, until recently known as Waltus Property Investments, was formed last November by merging 27 Waltus syndicates, accounting for $225 million worth of properties, in an attempt to spread risk and improve overall returns.

CB Richard Ellis director David Wallace said there were already several parties who were interested in redeveloping the 1330sq m site entirely for retail use and possibly a high rise hotel. Retailer Farmers has given notice and plans to leave at the end of August.

Other development options might include refurbishing the interior space, mainly retail and mezzanine floor offices. The location at 256-266 High St is in the central business district and enjoys heavy pedestrian traffic. The property has a contract rental of $565,5000 but a market rental of $471,957 and a GV of $4.6 million. It is one of two Urbus properties in Christchurch that comprise 3% of the Urbus portfolio, the other being a well leased industrial property in Sir William Pickering Dr.

Waltus Management director Ray di Leva said the departure of Farmers and the consequent sale process was unlikely to adversely affect Urbus.

If the property sold the proceeds would be reinvested in another property, probably in Auckland.

"We're more focused on the northern part of the North Island. We didn't have a lot of success in getting into Christchurch. I guess we didn't get off on the first four ships.

"That's the beauty of putting all the properties in one melting pot and we've got some credits built up. We're also starting to get some of the benefits from reducing over-rentedness of some properties and increasing the average length of leases. We're de-risking the investment and we're pretty happy with the way things are going with the profit release we just announced."

Last week Urbus posted a $6.8 million profit for the five months to March 31, exceeding forecasts by 13% and rewarding shareholders with a dividend of $3.06 a share plus a 75c imputation credit to be paid on June 8, representing a 9.5% dividend yield, nearly twice the prospectus forecast.

The improved returns should soothe some of the vocal opponents of the merger last year.

But Mr Di Leva acknowledged it was disappointing that the share price continued to languish at about 65c - a significant discount to the asset backing of around 97c. He was at a loss to identify reasons for this.

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