Project Overview
Property Type
Multi-Tenant Long Term Leasehold Office Building
Client
NSW State Government - Freeholder
Reason for Service
Leasehold Interest Valuations for Financial Reporting and Asset Sale
Preston Rowe Paterson was engaged to provide current market valuations for financial reporting purposes of the Maritime Trade Towers, including the freehold and multiple interrelated leasehold interests in accordance with NSW Treasury and accounting policy requirements
Summary of Scope of Services:
- Valuation of the unencumbered freehold interest, Valuation of the Head Lessor’s interest, Valuation of the Head Lessee’s interest Valuation of the Sub Lessee and Sub Sub Lessee interests
- Analysis and quantification of marriage value
- Detailed cash flow modelling reflecting staggered lease payments
Asset Overview
Maritime Trade Towers is a prominent commercial office complex located at 201-207 Kent Street in the heart of Sydney’s CBD. The asset comprises two modern office towers, 201 Kent Street and 207 Kent Street alongside the refurbished heritage Grafton Bond Building.
Additional features include a retail podium, conference facilities and a total of 419 onsite car parking spaces, catering to tenants and visitors alike.
Total Lettable Area
The complex offers approximately 61,700 square metres of lettable space, with construction completed in the late 1980s.
Key Complexity & Challenges
The Maritime Trade Towers features a highly intricate leasehold structure. This includes a 99-year head lease, long-dated sub-leases and sub-sub-leases, as well as peppercorn rental periods and escalating rental tranches. The asset is further complicated by multiple overlapping interests, each with distinct risk profiles and cash-flow timing. Staggered annual rental payments are made in advance, necessitating precise monthly net present value (NPV) modelling. Heritage constraints associated with the Grafton Bond Building must also be managed. There is a requirement to assess marriage value between separate legal interests, and the valuation was conducted during a period of heightened market uncertainty leading up to the Global Financial Crisis.
Valuation Methodology
Preston Rowe Paterson applied a rigorous, multi-layered valuation framework to the asset. This included term and reversion analysis to determine the unencumbered freehold market value, alongside monthly discounted cash flow (DCF) modelling for each leasehold interest. The valuation explicitly considered passing rents versus market rents, adjustments for over market and under market rentals, vacancy allowances, letting-up costs, capital expenditure allowances and differences in outgoings recoveries between the towers. Discount rates were calibrated to reflect partial interest risk and wasting income streams, ensuring that all relevant complexities were accurately captured in the assessment.
Preston Rowe Paterson determined the following:
- Unencumbered Freehold Market Value
- Aggregate NSW Maritime Interests (Freehold + Sub-Sub Lease)
- Identified Marriage Value
The valuation delivered a comprehensive, audit ready, and Treasury compliant assessment for the NSW Governments holdings regarding one of Sydney’s most intricate CBD office properties. It provided clear delineation of value across legal interests, facilitating informed financial reporting and asset management decisions.
This engagement demonstrates Preston Rowe Paterson’s capability in:
- Complex CBD office valuations;
- Government and statutory authority instructions;
- Long dated leasehold and reversionary analysis;
- Marriage value and multi interest valuation frameworks; and
- Court ready and audit defensible methodology.
Building / Land Area
61,700m²
Car Bays
419
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