Ngati Whatua leasehold land rent negotiations continue…

Leasehold land rents not settled – Business – NZ Herald News.
Comments in the NZ Herald this morning that land values of between $2,000 to 2,500 a square metre are being struck for Quay park properties, leaving a rent at 6% of $120-150/m2 per annum…..not an inconsiderable sum for moderate quality office space; perhaps not so serious for high quality offices.

Local Maori say they have waited 15 years to get the first leasehold rent payments from the 20ha Quay Park waterfront land in Auckland and expect to be able to distribute $70 million in the next decade.

An executive close to the hapu blamed the big price rise on factors outside Ngati Whatua’s control.

“The Scene rent is impacted by the excess rent charged by the middle lessee, it is not Ngati Whatua’s [leasehold] rent which is the problem – and don’t forget they have gone for 15 years without paying any annual rent,” the executive said.

Rent from the first year (after completion of the various valuations and arbitrations still ongoing) is expected to be more than $15 million per year.

Now, I’ve been a bit of an apologist for the rent rises…doesn’t seem to me that Ngati Whatua have done anything wrong at all, and have taken a very long and astute view, but all of this does reinforce that in a low and even medium interest environment, a ground rent of 6% makes for very expensive real estate unless the price of your leasehold interest is very heavily discounted.  Only in times of high interest, and consequent high rent returns, does 6% fade somewhat into the background.

Sure this is just a non-valuer’s impression, but I’ve always felt that purchasing this sort of leasehold is a mug’s game….particularly for the people buying off the plans.  The smart game, if there is one, seems to be buying at more realistic prices after the rent reviews start to bite.

The fifteen year rent holiday seems to have encouraged higher prices than justified at the start – fifteen years seemingly a long way away – but did those prices steadily discount down as the review drew closer?  Perhaps not.  Harsh lessons learned.


About Ivan McIntosh

I am a partner of Carter Atmore Law...residing in City Road just off the busy thoroughfare of Symonds Street, Auckland, New Zealand....where we are specialist business & property development lawyers, working for both local and international clients. Proud husband to Joanna, and dad to two sons. Passionate rugby supporter. Email: Ph: 64 9 921 5026
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