Argosy Property believes New Zealand Post House in downtown Wellington suffered more damage than initially thought in the 2016 earthquake, but wants it upgraded quickly to meet tight demand in the capital city.
The real estate investor has already made six insurance claims totalling $14.9 million plus GST since the November 2016 quake, of which $5.1 million came in the six months ended Sept. 30. It intends to lodge further claims for the rest of the two-year business interruption indemnity period and for material damage.
The company commissioned a detailed survey of the site earlier this year which has been given to its insurer, and updates of that work will probably discover more damage to the building. It anticipates quantifying the cost of reinstatement early next year after which it will lodge a claim for material damage. The real estate investor is already working with its insurers to progress a significant claim.
"Argosy expects that, as with many earthquake insurance claims, there may be debate with insurers over the extent of damage, the appropriate method of reinstatement and the extent of cover," it said.
Independent engineers have confirmed the building is structurally sound, with damage to the fit out and services, and Argosy will spend $15 million to $20 million upgrading the property by September next year. It wants the damaged floors available for occupation by March.
"The office leasing environment in Wellington is very favourable at present and we are currently in negotiations for the remaining space in this building," it said.
The $87.7 million building is Argosy's second most valuable property behind the $110.8 million Stout St office block in Wellington. Its 62 properties were valued at $1.62 billion as at Sept. 30, with a 98.4 percent occupancy rate and a weighted average lease term of 5.6 years. That compares to 98.8 percent and 6.1 years as at March 31.
Argosy's portfolio benefited from a $34.6 million revaluation gain in the six months ended Sept. 30, which contributed to the company's net profit of $66.8 million in the half, up from $23.1 million a year earlier. The bottom line was also boosted by its insurance claims.
Distributable income, which Argosy uses to set its dividends, rose 9.2 percent to $28.7 million, or 3.47 cents per share. That came from increased property income at its industrial and office sites.
The board declared a second-quarter dividend of 1.5625 cents per share, payable on Dec. 19 to shareholders on the register at Dec. 5. The board affirmed guidance to pay an annual dividend of 6.25 cents, up 1 percent from a year earlier.
The shares last traded at $1.10 and have gained 1.4 percent so far this year.