Leasehold Land Issues: Glasgow renewable lease
The following is a summary of the more detailed article on Leasehold Land Issues available here.
The Glasgow perpetually renewable lease is unique to New Zealand. Such leasing emerged in colonial times in Otago where it was used to facilitate early land settlement. The Glasgow name seems to come from the Scottish connection.
The lease format evolved over time with a number of variations.
The common urban property lease has a 21 year term with perpetual renewal rights.
Leases commencing after the mid 1970’s usually have rental reviews at 7 year intervals.
The lessor’s estate is characterized by low investment risk, low to moderate income return, simple administration.
Whereas the lessee’s estate is characterized by greater investment and business risk as he/she sets about investing into the land to generate income that will meet the rental obligations and provide a commercial return relating to the business activity.
Considerable tension develops between the objectives of the respective parties.
Conditions that generate a substantial lessee’s interest include:-
- A lengthy period between rental reviews
- Strongly increasing land values
- Substantial difference between the cost of borrowing funds, and the ‘rack-rent’ percentage that is applied to the land value for the purpose of establishing the rental amount on review.
- A confident, low to medium risk business environment.
Assessment of the lessee’s leasehold interest is discussed at the Morice Web where this subject is developed in more detail.
Leasing arrangements work best between the parties when the market remains stable which allows the lessee’s improvements and business activity to remain relevant as the ‘highest and best use’ activity for a long period.
However markets do evolve and force change in land use which is not all bad. Freehold property in that environment has more ability to make transitions in a managed fashion with less time pressure because of not having the rental burden and having access to all of the property equity coupled with better options for financing redevelopment. A leasehold property that is underperforming with the possibility of lessee insolvency, contrasted with an impossible rental burden is a disaster for both parties
HAWKE’S BAY FARMER OF THE YEAR – 2012
Morice Ltd are sponsers of the Silver Fern Farms Hawke’s Bay Farmer of the Year 2012
WIDGY’S BACK
Richard Moore returned yesterday from a four month jaunt around Europe & the UK. He is in fine form & ready to get back to work. Great to have you home Widgy.
Prime Rents & Yields Summary June 2011
the June 2011 Hastings & Napier Prime Rents & Yields Summary is now available for download.
Key findings
- Market feedback shows ‘better things ahead’ with indications of more listings, more enquiry, and improved interest in the office market. But limited evidence of actual change yet.
- Large format retail is price sensitive to rental given the extensive supply of space, especially in Hastings.
- Napier prime retail rents continue to be close to double that of Hastings. National retailers continue to underpin leasing at earlier levels.
- Investment property yields in both Hastings and Napier are stable and remain at previous levels at 8.2% and 7.7% respectively.
Pre-1990 Dates Looming
Until 30 September 2011, the landowner can apply for an exemption if less than 50 hectares of pre-1990 forest land was owned as at 1 September 2007.
Until 30 November 2011, the landowner (as at 20 July 2010) can apply for an allocation of NZUs under the Allocation Plan. The allocation is:
• 18 units per hectare for CFL land transferred after 1 January 2008; or
• 39 units per hectare for land transferred since 31 October 2002; or
• 60 units per hectare for all other eligible land.
If you wish to make an application don’t leave it until the last minute!
Insurance Valuations
After the recent events in Christchurch and increasing insurance premiums, we have been asked to provide a number of insurance valuations for commercial/industrial buildings and dwellings or homesteads with character at the higher end of replacement value. This involves the prepartion of insurance certificates by registered valuers that includes reinstatement, depreciated replacement value and demolition estimates. The benefit of underatking this exercise is to get clear identification of the insurance values of a building, and protection of the insured in order to effectively reinstate the building. Also in times of increased premiums, it ensures that buildings are not over-insured. Should you be concerned about the insurance cover of your prime buildings please contact us by clicking on the tab at the top of this page.
Business After 5
Morice Ltd & Surveying the Bay will be hosting the Hawke’s Bay Chamber of Commerce “Business After 5″ event at 11 Ossian Street, Ahuriri on 7 April 2011 starting at 5:30pm.
Silver Ferns Farms – HB Farmer of the Year
Morice Ltd is proud to be a sponsor of the Hawkes Bay Farmer of the Year in which the objective is based on “To promote high standards of agriculture and pastoral farm management and production, by identifying each year a highly efficient farming operation and farm manager in the Hawke’s Bay area, and have their management and farm operation open to inspection at a public Field Day”.
This event will be showcased with an awards dinner on Thursday 14 March 2011 followed by a Field Day on the winners farm on Thursday 5 May 2011.
For further details contact Michael Hindmarsh (Chairman, Organising Committee) 06 8742822 or Hillary Riches (Event Manager) on 06 878 3123 or via email on events@showgroundshb.co.nz.
Prime Rents & Yields Summary December 2010
Hastings & Napier Prime Rents & Yields Summary is now available. This 6-monthly “where it is at now” analysis provides a summary of the local commercial market across the retail, office and industrial sectors; the data is also related to other investment vehicles, and property markets in both New Zealand and worldwide. A condensed summary shows an unchanged yield position over the 6 months to December 2010 with the office sector worst, rental growth has declined slightly with the office sector again the worst. A generalised summary could be “steady as she goes”.
The full report is available on our website www.morice.co.nz
Hastings and Napier commercial property market update
Download the latest Morice research on the Hastings & Napier commercial property markets.
In summary
The message seems to be “steady as she goes” in relation to the Hawke’s Bay property market.
Investment property yields in both Hastings and Napier have generally remained at previous levels at 8.2% and 7.8% respectively.
There is good demand from investors for prime retail property. Industrial property is also in demand but office property is not in favour. Transaction volumes are still down compared to previous years.
