PCNZ Market SummitA New Beginning

Gary Sellars

1 November 2012

2

Historic

3

Contents

›Then & Now

› CCDU - City Plan

›CBD - Build Potential

›Rebuild - Suburbs

›Rebuild - CBD

›Rents / Opex

›Supply / Demand

›Land Values

›Investment Market

›Summary

4

Then & Now

2010Total Stock 446,002 m2

A Grade + 37,556 m2

A Grade 34,800 m2

B Grade 132,908 m2

2012 - ExistingTotal Stock 188,978 m2

A Grade + 37,556 m2

A Grade 6,957 m2

B Grade 45,940 m2

2012 - TenantedTotal Stock 56,525 m2

A Grade + 23,556 m2

A Grade nilB Grade 13,357 m2

› Total demolished to date: 258,184 m2

› Uncertain future of existing buildings› Existing designated land includes Forsyth Barr House and IRD Building

CBD Office Stock

5

Then & Now

2010Total Stock 446,002 m2

A Grade + 37,556 m2

A Grade 34,800 m2

B Grade 132,908 m2

2012 - Existing Total Stock 117,190 m2

A Grade + 23,556 m2

A Grade nilB Grade 29,918 m2

2012 - TenantedTotal Stock 55,353 m2

A Grade + 23,556 m2

A Grade nilB Grade 13,357 m2

CBD Office Stock - Designation Land Excluded

(i.e. Land designated for key projects including the southern and eastern frame.)

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Location

CBD Tenanted Buildings

Area m2

Core 46,517Gateway 6,576Frame 1,172Mixed Use 2,261Total 56,525

82.29%

11.63%

2.07%

4.00%

Core

Gateway

Frame

Mixed Use

7

CCDU

8

CCDU

Central City - Business & Mixed Use Zones

9

CCDU

Central City - Heights

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City Plan

Central City Business› Core - Urban design requirement› Core includes west of Avon River› Gateway - Victoria Street precinct

Central City Business - Retail Precinct› Precinct - Oxford Tce, Hereford St, High St & Lichfield St block› Minimum ODP area 7,500 m2

Central City - Mixed Use › Large format retail - Minimum 450 m2

› Balance zone - Limited retail› Maximum office GLA 450 m2

CBD - Potential Build

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CBD Core - Case Study 1› Maximum 7 levels› Minimum 2 levels› Average proposed office build/land ratio 2.0› Average proposed Cathedral Square office build/land ratio 5.25› Vacant block land area 16,610 m2

› Office build/land ratio 4.5 = 74,700 m2

CBD - Potential Build

12

CBD Core - Case Study 2› Ngai Tahu - KEB Site - West CBD core› Vacant block land area 16,610 m2

› Adopting office build/land ratio 3.0 = 49,830 m2

13

Build - Suburban

Offices - Built Since 2011Burnside - Russley 8,637 m2

Addington 1,600 m2

Middleton - Riccarton 2,000 m2

Total 12,237 m2

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Build - Suburban

Offices - Confirmed DevelopmentsBurnside - Russley 17,982 m2

Addington 17,226 m2

Middleton - Riccarton 6,035 m2

Total 41,234 m2

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Build - Suburban

Offices - Proposed DevelopmentsBurnside - Russley nilAddington 6,400 m2

Middleton - Riccarton 1,200 m2

Total 7,600 m2

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Rebuild - Suburban

Offices - Confirmed & ProposedBurnside - Russley 17,982 m2

Addington 23,626 m2

Middleton - Riccarton 7,235 m2

Total 48,843 m2

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Rebuild - CBD

CBD - Office SpaceBuilt Since 2011 5,683 m2

Confirmed 34,676 m2

Proposed 159,850 m2

Total 200,209 m2

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Rebuild - Christchurch

Christchurch - Confirmed & ProposedCBD 194,526 m2

Burnside - Russley 17,982 m2

Addington 23,626 m2

Middleton - Riccarton 7,235 m2

Total 243,369 m2

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Rebuild - CBD

Developer Profile

Profile # Area m2 %Existing owners 20 116,346 60%New owners 9 78,180 40%Total 29 194,526 100%

Profile # Area m2 %Local 28 163,526 84%Not local 1 31,000 16%Total 29 194,526 100%

› Not local - Crown Precinct

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Rents

Rents› History

› Current Suburban

› Current CBD

PricewaterhouseCoopers $270/ m2 netHSBC $350/ m2 netHazeldean Business Park $260/ m2 net

Addington $350 - $365/ m2 netBurnside $300 plus/ m2 net

Confirmed Leasing $350 - $400/ m2 netAsking $400 - $450/ m2 net

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Rents

Auckland / Wellington Office Rents

Christchurch Operating Expenses

› Insurance - Key component› Rates potential to increase

Suburban $70 - $80/ m2

CBD $100 - $140/ m2

Auckland - Premium $530/ m2 netAuckland - A Grade $385/ m2 netWellington - A Grade $425/ m2 net

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Supply/Demand

Total occupied CBD 2010 382,222 m2

Adjust workplace density* 15.25 / 20.6 m2 282,956 m2

Addington vacancy 2010 13,500 m2

Christchurch built post 2011 17,920 m2

Christchurch confirmed & proposed 243,369 m2 274,789 m2

Net indicated shortfall 8,167 m2

› *Christchurch pre 2011 had an average of 20.60 m2 per person versus the Auckland and Wellington average of 15.25 m2 per person

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Land Values

Location of Sales

Sales before July 2012

Sales after July 2012

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Land Values

Land Values› Large number of sales› Victoria Street $1,500 - $2,500 m2

› Victoria Street average $2,000 m2

› One purchaser developer dominant in Victoria Street› Northern fringe - Kilmore Street $1,100 - $1,200 m2

› North Cathedral Square - The Press land $1,500 - $1,800 m2

› Colombo Street small retail $1,000 - $2,100 m2

› South & east edges - former B3 $450 - $600 m2

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Investment Market

HSBC House› 62 Worcester Street› Walt: 6.35 years› Sold May 2012› Sale price: $26,000,000› Market yield: 10.99%› Purchaser: Christchurch investor

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Investment Market

Press House› 158 Gloucester Street› Walt: 15.51 years› Sold: July 2012› Sale price: $19,030,000› Market yield : 8.74%› Purchaser: Christchurch investor

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Investment Market

Aon Building› 400 Blenheim Road› Walt: 8.49 years› Sold June 2011› Sale price: $7,120,000› Market yield: 8.10%› Purchaser: South Island group

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Investment Market

Downer EDI Building› 55 Shands Road› Walt: 14.00 years› Sold April 2012› Sale price: $6,600,000› Yield: 7.25%› Purchaser: Christchurch investor

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Investment Market

Small Suburban Investment Properties› Modern› Well located› Well leased› Market yield range 7.00% - 8.00%

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Summary

Development Issues› Increasing building costs› Rent affordability› Insurance impact on opex› Office demand› Land utilisation› Tenant appetite for repaired buildings› Investment treatment of repaired buildings› Attracting outside capital