36 Kitchener Street is a 16 level office tower with 27 carparks. Each individual level is strata titled for a total of 16 strata titles over the building. The Fund is acquiring all 16 strata titles.

36 Kitchener Street is on the eastern side of the Auckland CBD, and is two blocks from both Queen Street and the commercial precinct on Shortland Street. The building overlooks Albert Park and is very close to Auckland University’s city campus. Each level of the building has decks that look either to the east over Albert Park or to the north-west towards the harbour.

Augusta Capital purchased 36 Kitchener Street in October 2015 in anticipation of forming the Fund. Augusta Capital acquired the property for $16.5 million and will sell the property into the Fund at the same value.

The building was constructed in the 1980s and has an IEP rating of 115% of NBS (as at October 2012).

The building is nearly fully leased to 24 separate tenancies which have a weighted average lease term (WALT) of 1.8 years. Mid Town Properties Limited (a previous owner of the property) is providing rental underwrites (for limited terms) to 4 levels (and for parts of a further 4 levels) of the building which are either currently untenanted or which have short terms to lease expiry. The underwritten rental amount is approximately $400,000.

The Manager considers that a number of options are currently available with this property to add value. The property naturally lends itself to conversion to residential accommodation given its proximity to the CBD, the adjacent car parking building and the views from each level.

Alternatively, given its proximity to the University campus the property could also be converted to student accommodation.

The unit titles for each level provide flexibility, and could be sold individually to owner-occupiers to realise a lower yield and therefore increase value against the acquisition price. Owner occupiers could elect to utilise each level as they see fit (for example, there could be a mix of commercial or residential amongst the different unit titles).

Given the short term nature of the leases, new longer term leases could also be negotiated to increase the WALT, vacancies filled, and the property sold at a reduced yield to add value.

Initial analysis suggests the highest return to the Fund from improving 36 Kitchener Street would come from converting the building into apartments.