Quakes and opportunities: Navigating challenges and securing success – James Smith car park

Oyster purchased the James Smith car park at 150 Wakefield Street in Wellington in 2004 for $21,000,000, attracted by the enduring scarcity and desirability of parking space in the capital city.

Two earthquakes affecting the Wellington region made for a challenging 13-year ownership journey. However, a successful leasing strategy that generated a steady income for investors and a well-timed exit ultimately resulted in an adequate outcome under challenging circumstances.

Investment highlights

• Sold in 2017 for $18,500,000
• Sum of income return $10,416,212
• Annual income return of 6.1 per cent
• Annual total return of 4.2 per cent
• Total return 54.6 per cent

The James Smith car park was an attractive investment opportunity for Oyster at the time of purchase, offering 733 car parks in the heart of the Wellington central business district – a proposition hard to come by at the time.

Seeing the potential to secure a steady flow of income for investors with minimal operational burden, Oyster leased the building to an external operator to manage as a public car park.

Unfortunately, in 2013 it was damaged by a 6.6 magnitude earthquake that rattled the city centre.

Following the 2013 quake, seismic upgrades were undertaken to strengthen the building and, as a result, the car park was fully restored and back in business shortly thereafter.

In June 2015 a new tenant assumed the lease to operate the car park. As Oyster’s relationship with the occupier developed, their interest in ultimately purchasing the car park and operating as an owner-operator came to light.

Less than a year later, before ownership could be transferred, the subsequent 7.8 magnitude 2016 Kaikōura earthquake hit the city, leaving the building badly damaged and unable to function as a car park.

Oyster’s General Manager – Investment, Steven Harris said: 

“The building was likely to require significant capital strengthening work. It made commercial sense to move it on if an optimal outcome to investors could be achieved and we had a buyer that was keen to take it on.

“The Kaikōura earthquake hit before the sale was concluded and created some uncertainty around whether the sale would proceed or not, but ultimately, it did and we sold the property for $18,500,000,” Steve said.

“Our decision to exit the building when we did was timely and resulted in a great outcome for our investors.”

The car parking building remains closed to this day.