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Market Valuation
Gimblett Road Vineyard Roys Hill Hawkes Bay
Date: 31 December 2010
Client: Regenallnvestments Pty Limited
Val Ref: 5371077
TelferYoung (Hawkes Bay) Limited Valuers Property Advisors
+ + = TelferYoung
Valuers Property Advisors
14 December 2010
Planning and Investment Manager Regenal Investments Pty Limited as Nominee of CK Life Sciences Int'l (Holdings) Inc. 2 Dai Fu Street Tai Po Industrial Estate New Territories, HONG KONG
Attention: Bonita Ho
Dear Madam
Re: Market Valuation Gimblett Road Vineyard Gimblett Road, Roys Hill, Hawkes Bay
+ + = TelferYoung
Valuers Property Advisors
TelferYoung Limited Hawkes Bay 25 Pandora Road PO Box 572 Napier 4140 New Zealand
In accordance with instructions from Regenal Investments Pty Limited, as nominee for CK Life Sciences International (Holdings) Incorporated (CKLS), to provide a market valuation of the above property, we confirm to have carried out an inspection, made relevant enquiry and obtained such further information as we consider necessary for the purpose of providing the market value of this property as at 31 December 2010 (referred to as the "date of valuation").
It is our understanding that this valuation is for major transaction purposes.
Our valuation report complies with the Hong Kong Stock Exchange checklist"Valuation of Properties Being Acquired/ Disposed of (Main Board)" and with Chapter 5 of the Main Board Listing Rules "Valuation of and Information on Properties" .
This letter which forms part of our valuation report, explains the basis and methodology of valuation, and clarifies our assumptions made, title investigations and the limiting conditions. We attach a Certificate of Valuation and our Full Valuation Report, for more complete details.
Basis of Valuation
The valuation is our opinion of the market value which is defined as meaning:-
"The estimated amount for which an asset should exchange on the date of valuation between a willing buyer and a willing seller in an arm's length transaction after proper marketing wherein the parties have each acted knowledgeably, prudently and without compulsion".
TelferYoung (Hawkes Bay) Limited
25 Pandora Road, PO Box 572, Napier 4140, New Zealand .
Telephone: 068356179, Facsimile: 068356178
email: [email protected] web site: www.telferyoung.com
+ Mike Penrose + Trevor Kitchin + Max Plested + Derek Devane + Andrew Chambers + Hugh Peterson
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To establish the market value of this property we have utilised the standard approach for valuing rural land used for viticulture in New Zealand being the direct comparison approach. This is a market related approach based on analysis of comparable sales evidence however, as seldom are there two properties directly comparable, adjustments have been made within our analysis of market sales to account for differences in; size; type of property; standard of development; potential productive capacity and; management.
Title Investigation
We have searched and perused the Computer Freehold Registers for the estate in fee simple associated with this property. Details are contained in our attached Full Valuation Report.
Key findings: The lease to Delegat's Wine Estate Ltd is registered against the title. None of the registrations are considered abnormal for this type of property nor are they considered likely to impact negatively on normal saleability prospects.
Limiting Conditions
(1) We have inspected the property included in the attached Valuation Certificate and Full Valuation Report.
(2) No structural survey has been made and we are therefore unable to report as to whether the buildings on the property are free from rot, decay, infestation or any other structural defects. Also, no tests were carried out on any of the services.
(3) We have not carried out detailed site measurements to verify the correctness of the land area but have measured the individual buildings and have determined the floor areas of these.
(4) Our valuations exclude allowance for stock, plant and equipment and are made on a plus Goods and Services Tax basis.
(5) The basis of our soil investigation has been limited to perusing Hawkes Bay Regional Council soil maps and the Land Use Capability Maps.
(6) We have made no boundary survey of the property and assume no responsibility in connection with such matters. Unless otherwise stated it is assumed that all improvements will be within the title boundaries.
(7) Furthermore, we have not undertaken an environmental audit of the site and assume there is no site contamination particularly from old saw mills, sheep and cattle dips, effluent disposals, farm chemicals, fuel storage tanks, waste dumps and DDT residue in the ground, restricting potential use.
(8) Delegat's Wine Estate Limited have provided details of vineyard plantings and production and we have relied upon this information as being accurate and correct. We have no reason to doubt the truth and accuracy of the information provided to us by Delegat's Wine Estate Limited.
(9) No allowance has been made in our valuation for any charges, mortgages or amounts owing on any of the property interests valued nor for any expenses or taxation which may be incurred in effecting a sale. Unless otherwise stated, it is assumed that the property interests are free of encumbrances, restrictions and outgoings of an onerous nature which could affect their value.
V.I Ref 'i~7/077 3
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Property Address:
Brief Description:
Lease Summary:
Val Ref 5371077
VALUATION CERTIFICATE
Gimblett Road, Roys Hill, Hawkes Bay.
Involving a well situated production vineyard, located at the end of Gimblett Road which forms Hawkes Bay's premium wine growing sub-district.
The property is situated some 7 kilometres northwest from Hastings city and enjoys easy access to a full range of urban services and amenities.
This vineyard was planted between 1992 and 1999 with a small area of Chardonnay replanted in 2004. The vineyard is at full production and is leased to Delegat's Wine Estate Limited (Delegats) however the initial ten year lease term expires on 11 April 2011 and it is our understanding that Delegats have confirmed they will not be renewing this lease in its current form.
Delegats is a well established publicly listed New Zealand wine company with production from this vineyard having been 150.9 tonnes in the 2010 year although no Cabernet Sauvignon was harvested in either 2009 or 2010.
The vineyard comprises a planted area of 20.69 hectares, this comprising a mix of Cabernet Sauvignon, Merlot and Chardonnay.
This property includes a good standard of development in respect of post and wire structures, tracking, irrigation and buildings and includes elevated irrigation sprinklers covering approximately two thirds of the total planted area. These provide limited frost protection to the most vulnerable portion of the vineyard.
Lessee: Delegat's Wine Estate Limited Term: 10 years Commencement Date: 11 April 2001 Current Annual Rental: $382,147 per annum. Lease Expiry: 10 April 2011. Lease Renewal: For a further period of five years. Similar provisions apply to the first, second, third and fourth renewal terms, each for five years. Permitted Use: Permitted use means the growing and harvesting of grapes as a commercial concern.
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Market Rental:
Options and Rights:
The contract rental is considerably above the market rent which we assess at $103,700 per annum plus Goods and Services Tax.
Deed of Option to Purchase.
Key Details: The Grantor has agreed to grant to the Grantee which has agreed to take out an Option to Purchase the land and the assets upon the terms and conditions contained in this Deed.
The purchase price of the land and assets shall be the greater of the following amounts:-
(a)The amount being the lesser of the Compound Annual Return Amount and the Market Value; and
(b) The Minimum Purchase Price
Summary of Findings: This Option is considered unlikely to impact on normal saleability prospects.
Classification of Property: The property is held for investment purposes.
Tenure: Estate in Fee Simple (freehold).
Age of BUildings: Administration office and workshop estimate 1980. Implement shed 1999.
Planning and Zoning: Plains zone. Viticulture is a Permitted Activity.
Date of Inspection: 28 October 2010.
Date of Valuation: 31 December 2010.
Interest Valued: Market Value of the Estate in Fee Simple, as at the date of valuation.
Market Value As Encumbered: TWO MILLION FOUR HUNDRED AND TWENTY THOUSAND DO LARS ($2,425,000) plus Goods and Services Tax, if any.
Key Assumptions: That Delegats will not renew the existing lease in April 2011 on the existing rental basis. Renewal would be expected to be on the basis of a lower negotiated rental.
Vat Ref 5371077 5
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Key Assumptions cont:
Conditions of Valuation:
In respect of the encumbered value, the existing lease obligations will be fulfilled up until 10 April 2011 .
The market value assessed on a vacant possession basis assumes there is no ongoing Supply Contract in place for the grapes.
The valuation is made subject to the following comments:-
+ The above valuations are made on a plus Goods and Services Tax.
+ The valuation excludes allowance for stock and for plant and equipment.
+ We have not undertaken a physical count of the vines and have relied upon planting and production details supplied by Delegat's Wine Estate Limited, as being accurate and correct .
+ Our market value assessed as encumbered reflects the existing Lease and Option Agreements which expire on 10 April 2011.
Qualifications and recognition: My full qualifications are:
/
Attachment:
Yours faithfully
Fellow of the New Zealand Institute of Valuers. Fellow of the Property Institute of New Zealand .
My valuation basis follows the Hong Kong Institute of Chartered Surveyors Valuation Standards by HKIS and the International Valuation Standards by the International Valuation Standards Council.
The Property Institute of New Zealand has reciprocity agreements in place with the Royal Institute of Chartered Surveyors and the Hong Kong Institute of Chartered Surveyors. Accordingly my qualifications are recognised by these bodies.
My qualifications are furthermore recognised by the New Zealand Stock Exchange and by the Australian Stock Exchange.
Full valuation report and appendices thereto.
elferYoung (Hawkes Bay) Limited
M I Penrose Registered Valuer, FNZIV, FPINZ mike.penrose@te l feryoung.com mip / cfl
Val Ref 5371077 6
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FULL VALUATION REPORT
Gimblett Road Vineyard, Gimblett Road, Hawkes Bay
Table of Contents
1.0 Executive Summary ................................................................ 8 2.0 Introduction ......................................................................... 10 3.0 Date of Inspection ................................................................. 11 4.0 Effective Date of Valuation ....................................................... 11 5.0 Legal Description ................................................................... 11 6.0 Rating Valuation .................................................................... 12 7.0 Location ............................................................................. 13 8.0 The Land ............................................................................ 13 9.0 Resource Management ............................................................. 15 10.0 Production/ Utilisation ............................................................. 16 11.0 Improvements ...................................................................... 17 12.0 The Lease ........................................................................... 20 13.0 Deed of Option to Purchase ...................................................... 25 14.0 Market Commentary ............................................................... 26 15.0 Valuation Methodology ............................................................ 28 16.0 Risk Analysis ........................................................................ 33 17.0 Conclusions .......................................................................... 34 18.0 Valuation Summary ................................................................ 34 19.0 Conditions of Valuation ........................................................... 34 20.0 Disclosures .......................................................................... 35
Val Ref 5371077 7
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1.0 Executive Summary
Property Address:
Instructions:
Instructing Party:
Client:
Date of Inspection:
Date of Valuation:
Interest Valued:
Registered Proprietor:
Brief Inspection:
Vel Ref 5371077
Gimblett Road, Roys Hill, Hawkes Bay.
To assess the market value of the property as at 31 December.
Regenal Investments Pty Limited as nominee of CK Life Sciences International (Holdings) Incorporated.
Regenal Investments Pty Limited as nominee of CK Life Sciences International (Holdings) Incorporated.
28 October 2010.
31 December 2010.
Market Value of the estate in fee simple, as at 31 December 2010.
Challenger Beston Limited.
Involving a well situated production vineyard, located at the end of Gimblett Road which forms Hawkes Bay's premium wine growing sub-district.
The property is situated some 7 kilometres northwest from Hastings city and enjoys easy access to a full range of urban services and amenities.
This vineyard was planted between 1992 and 1999 with a small area of Chardonnay replanted in 2004. The vineyard is at full production and is leased to Delegat's Wine Estate Limited (Delegats) however the initial ten year lease term expires on 11 April 2011 and it is our understanding that Delegats have confirmed they will not be renewing this lease in its current form.
Delegats is a well established publicly listed New Zealand wine company with production from this vineyard having been 150.9 tonnes in the 2010 year although no Cabernet Sauvignon was harvested in either 2009 or 2010.
The vineyard comprises a planted area of 20.69 hectares, this comprising a mix of Cabernet Sauvignon, Merlot and Chardonnay.
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Brief Inspection cont:
Market Value Estate in Fee Simple- Vacant Possession Basis:
Market Value As Encumbered:
This property includes a good standard of development in respect of post and wire structures, tracking, irrigation and buildings and includes elevated irrigation sprinklers covering approximately two thirds of the total planted area, these providing limited frost protection to the most vulnerable portion of the vineyard.
TWO MILLION THREE HUNDRED AND FIFTY THOUSAND DOLLARS ($2,350,000) plus Goods and Services Tax, if any.
TWO MILLION FOUR HUNDRED AND TWENTY FIVE THOUSAND DOLLARS ($2,425,000) plus Goods and Services Tax, if any.
The difference between the vacant possession and encumbered valuations is attributable to the present value of rental obligations, remaining at 31 December 2010, through until lease expiry on 11 April 2011.
Value . Breakdown of Market Land $1,200,000 $326,900
$18,400 $57,700
$747,000 $2,350,000
Value- Vacant Possession Buildings Basis:
Key Assumptions:
Conditions of Valuation:
Valuer:
VaL Ref 5371077
Other improvements Irrigation infrastructure Vines and structures Total Market Value
That Delegats will not renew the existing lease in April 2011.
In respect of the encumbered value, the existing lease obligations will be fulfilled up until 10 April 2011.
The fair value assessed on a vacant possession basis assumes there is no ongoing Supply Contract in place for the grapes. Refer section 2.4 of Full Valuation Report.
M I Penrose Registered Valuer, FNZIV, FPINZ
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2.0 Introduction
2.1. Instructions
In accordance with instructions from Regenal Investments Pty Limited, as nominee for CK Life Sciences International (Holdings) Incorporated (CKLS), to provide a market valuation of the above property, we confirm to have carried out an inspection, made relevant enquiry and obtained such further information as we consider necessary for the purpose of providing the market value of this property as at 31 December 2010 (referred to as the "date of valuation").
The property has been physically inspected and our valuation has been carried out in accordance with:
+ The Hong Kong Stock Exchange checklist- "Valuation of Properties Being Acquiredl Disposed of (Main Board)".
+ Chapter 5 of the Main Board Listing Rules "Valuation of and Information on Properties" .
2.2. Responsibility
Our valuation has been prepared solely for the use of Regenal Investments Pty Limited, as nominee for CK Life Sciences International (Holdings) Incorporated (CKLS). It is valid only when bearing an original signature and is confidential to these parties.
We neither acknowledge nor accept any other duty of care in respect of either the valuation or the report, and any person other than our client who relies upon any part of this document without direct reference to a written authorisation by the Valuer does so in all respects at their own risk.
We also draw to your attention that while our inspection of the buildings is considered adequate for valuation purposes it should in no way be considered a structural survey. Verification that the buildings are sound should be obtained from a suitably qualified building engineer. If the buildings are found to be unsound then this will impact on the value of the property.
This report must be read in conjunction with the formal valuation report and with TelferYoung (Hawkes Bay) Limited's Statement of Limiting Conditions and Valuation Policy.
2.3. Documentation
We have been provided with the following documentation:
+ Property Lease and Option Deeds. + Production summary. + Details of plantings.
Val Ref 5371077 10
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2.4. Conditions of Valuation
The above valuations are made subject to the following comments:-
+ The above valuations are made on a plus Goods and Services Tax.
+ The valuation excludes allowance for stock and for plant and equipment.
+ We have not undertaken a physical count of the vines and have relied upon planting and production details supplied by Delegat's Wine Estate Limited, as being accurate and correct.
+ Our market value assessed as encumbered reflects the existing Lease and Option Agreements which expire on 10 April 2011.
3.0 Date of Inspection
28 October 2010.
4.0 Effective Date of Valuation
31 December 2010.
Our valuation is made subject to there being no material changes to the property or to market values during the intervening period between out inspection and the date of valuation.
5.0 Legal Description
5.1. Legal Description:
This property is contained in the following Computer Freehold Register:-
Legal Description Identifier Area (Ha)
Lot 1 DP 24569 and Lot 2 DP 22164 HBV2I1200 22.9336
5.2. Leasehold Interest:
An estate in leasehold is registered within Identifier 162198 (Hawkes Bay Registry) this being in the name of Delegat's Wine Estate Limited and involving all of the above title and an area of 22.9336 hectares.
5.3. Tenure:
The overall property is held as an estate in fee simple, subject to the above registered lease to Delegat' s Wine Estate Limited.
5.4. Owner:
The estate in fee simple is held in the name of Challenger Beston Limited.
Val Ref 5371077 11
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5.5. Interests:
This fee simple title is subject to the following registrations:
+ Appurtenant hereto are water rights created by Transfer 68387. + Appurtenant hereto are rights to convey water specified in Easement
Certificate 391081.6.
+ Subject to Sections 241 and 242 Resource Management Act 1991.
+ Appurtenant hereto is a right of way of rights to transmit electricity and convey water specified in Easement Certificate 556932.8.
+ Some of the easements specified in Certificate 556932.8 are subject to Section 309 (1) (a) Local Government Act 1974.
+ Subject to rights to convey water over part created by Transfer 633250.8.
+ Appurtenant hereto is a right to convey water created by Transfer 633250.8.
+ Subject to a 10 year lease term commencing 11 April 2001 contained in Transfer 715383.3.
+ Subject to Caveat by Delegat's Wine Estate Limited contained in Transfer 715440.1.
+ Subject to Mortgage to National Australia Bank Limited contained in Transfer 719569.1.
Lessee's Interest - Identifier 162198:-
+ Subject to Mortgage to West pac Banking Corporation Limited and variation there to.
Attached is a search copy of the Computer Registers in Appendix 1
6.0 Rating Valuation
As at 1 September 2007, we have ascertained the Rating Valuation as being:-
Land Value:
Improvements:
Capital Value:
Local Authority Rates:
For the year ending 30 June 2011 are:-
Hastings District Council Hawkes Bay Regional Council
$1,390,000
$1,280,000
$2,670,000
$5,208.69 $546.66
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7.0 Location
\ \
\
In brief, this property is situated within Hastings District approximately 7 kilometres north west from Hastings City, gaining access off the south end of Gimblett Road, approximately 400 metres south from State Highway 50.
Gimblett Road forms a 'no exit' carriageway running off the southern side of State Highway 50 and serving properties now almost totally developed for vineyard purposes.
Comprising a highly regarded grape growing sub· region within Hawkes Bay and within which traditionally, strong levels of demand have applied .
B.O The Land
8.1. Classification
Shown on the Napier and Hastings Land Resource Inventory Sheet as comprising Gravel Soils subject to slight erosion risk, being level in contour with cover having originally comprised unspecified grass land.
8.2. Soil Type
Based upon the Hawkes Bay Regional Council soil map this property comprises predominantly Flaxmere Sandy and Sandy Loam on Gravel Soils (Class 2) with an area of Omarunui Sandy Loam on Gravel Soil encroaching to the northeast corner and with the same soil type, Omahu Sandy on Stony Gravel Soils (Class 1A) and
Val Ref 5371077 13
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lrongate Sandy Loam on Gravel Soil (Class 21) with a small area of Te Awa Clay Loam on Taupo Pummet Sand (Class 9A) extending in from the southwestern boundary.
The Omahu, Omarunui and Irongate Soils are very light and free draining in nature, having low natural fertility and requiring irrigation but being sought after for viticulture usage.
8.3. Climate
Rainfall
The average rainfall is approximately 800 mm per annum. This falls predominantly in Autumn, Winter and Spring with Summers tending to be dry.
Prevailing Winds
The prevailing wind is from the westerly quarter. When occurring over summer these winds can exacerbate the dry spells that are common.
Winters and Frost Risk
Winters tend to be moderate with some generally light seasonal frosts experienced. The central portion of the property comprising approximately two thirds of the area is more frost prone and this has been partially protected by the use of raised irrigation micro sprinklers. These are not considered sufficient for full frost protection and the property relies on helicopter control when frost risk exists.
Summary
A dry summer location which adds to the rapid drying nature of the soils and which is well suited to viticultural production. Moderate frost risk exists and this has to be carefully managed.
8.4. Contour/Aspect
This vineyard is flat to easy undulating in nature with all the land area occupied by vineyard, headland or by buildings an associated service and access areas.
8.5. Noxious Weeds and Pests
We are advised that the property is affected by Leaf Roller Type 3 virus and this requires careful ongoing management.
8.6. Contamination/Hazards
We have not undertaken an environmental audit of the site and assume there is no site contamination particularly for contamination created by old sawmills, sheep and cattle dips, effluent disposals, farm chemicals, fuel storage tanks, waste dumps and DDT residual in the ground, restricting and potential use.
8.7. Erosion/Flooding
This vineyard is not subject to any significant flooding or erosion issues.
V~1 Rpf 537/077 14
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B.B. Disclosure
We have not received an environmental audit of the property and we are not aware of any potential environmental concerns of the subject property 's land with regards to the Australian and New Zealand Valuation and Property StandardsARPGN 1 and NZRPGN 1 'The Valuation of Contaminated Land' .
We have made no boundary survey of the property and assume no responsibility in connection with such matters. Unless otherwise stated it is assumed that all improvements will be within the Title boundaries.
69 10
Cd' DP24569 "386
Lot 3 DP 16598 16.0549
Lot2 DP 22164 19.6950
Lot 1
9.0 Resource Management
9. 1. Local Authority
Hastings District Council.
9.2. Plan Status
Operative.
9.3. Zoning:
Plains Zone.
Zone Description:
/ /
co , DP 22164
"""
The main focus of the 'Plains Zone' is to sustain the life supporting capacity of the soil resource. The zone provides for a wide range of land based activities which will be progressively reviewed to ensure that the land management regimes undertaken continue to be sustainable.
Val Ref 5371077 15
+ + a
The objectives of this zone are:-
+ To maintain the life supporting capacity of the unique resource balance of the Heretaunga Plains.
+ To avoid, remedy or mitigate potential adverse effects of land use activities on the rural community, adjoining activities, Marae and the economy.
+ To provide for the establishment of land holdings on the Plains which can accommodate a wider range of activities that can retain the life supporting capacity of the Plains' resources.
+ To ensure that existing levels of amenity associated with existing land based primary production on the Plains are maintained.
Zone Rules:
Land based primary production and wineries form Permitted Activities under this zone. The zone imposes a maximum building height of 10 metres, extended to 15 metres for wineries.
Minimum subdivision within the Plains Zone is 12 hectares and a minimum legal access width of 5 metres is imposed.
9.4. Compliance Matters:
This property is subject to the following water consent:-
Water Consent WP990240T
Between Hawkes Bay Regional Council and Challenger Beston Limited who are permitted to take water from a 150 mm bore for the purposes of irrigating 21 hectares of viticulture. The consent is for a term expiring 31 May 2019.
This Consent a maximum rate of taking of 32 litres/second or 3,600m3 over any 7 day period.
10.0 Production/Utilisation
This vineyard was planted between 1992 and 2004 in Cabernet Sauvignon, Merlot and Chardonnay. The vineyard involves a range of different varietal clones and we refer you to Appendix 2 for more complete detail on the plantings. A summary of plantings follows:-
Total Variety Vines Total Ha. Percentage
Cabernet Sauvignon 12,077 5.98 28.9%
Merlot 19,657 9.73 47.0%
Chardonnay 10,052 4.98 24.1%
41,786 20.69 100.0%
Val Ref 537/077 16
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The vineyard is at full production and a summary of production over the past five seasons, follows:-
Cabernet Sauvignon
Area Planted
Tonnest Ha
Merlot
Area Planted
Tonnest Ha
Chardonnay Area Planted
Tonnest Ha
Total Production
Area Planted Otali Tonnest Ha
2006 2007
42.2 5.98 7.1
123.2 9.73 12.7
40.1 4.98 8.1
205.5 20.69
9.9
50.2 5.98 8.4
119.8 9.73 12.3
81.4 4.98 16.3
251.4 20.69
12.2
2008 2009 2010
46.5 0.0 0.0 5.98 5.98 5.98 7.8 0.0 0.0
81.2 125.9 97.3 9.73 9.73 9.73 8.3 12.9 10.0
66.5 0.0 53.6 4.98 4.98 4.98 13.4 0.0 10.8
194.2 125.9 150.9 20.69 20.69 20.69
9.4 6.1 7.3
The block has achieved the following average yields for the planted varieties over the past five seasons:-
Variety
Cabernet Sauvignon
Merlot
Chardonnay
Tonnes/ha
7.7
11.3
9.7
Generally production from this vineyard has been above a level of district averages although the above Cabernet Sauvignon yield relates only to the 2006-2008 period as this variety was not harvested in 2009 and 2010.
Merlot has achieved consistently good yields except for 2008, the only year below 10 tonnes I ha. The Chardonnay has fluctuated from 8.3 tonnes to 16.30 tonnes per ha although none was harvested in 2009.
11.0 Improvements
11.1. Administration Office/Workshop
Comprising a standard workshop type building estimated to have been erected in 1980 and with office and amenities having been developed to one end.
Val Ref 537/077 17
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Gross floor areas associated with this building are:-
Office / amenities Workshop Attached verandah
Construction:
Foundations:
Floor:
External Walls and Roof:
linings:
Internal Subdivision:
Area (Square Metres)
Concrete.
Concrete.
Corrugated iron.
31.35 91.05
14.8
Wallboard to the walls within the office and amenities with hardboard ceiling to the amenities and sloping Pine panelling to the office.
The workshop is unlined in nature and includes laminated wood trusses. Connected with electricity and alarmed.
Comprising the main workshop serviced via two overhead vehicle doors together with a separate office and a lunchroom with adjoining toilet and shower facilities.
Fittings and appointments include an electric hot water cylinder, wall mounted heater, galvanised washtub and sinkbench with under cupboard.
Condition:
This building is in average maintained condition.
11.2. Implement ShedlWorkshop
Understood to have been erected in 1999 and containing the following areas:
Area
Implement shed Workshop Storeroom/ amenities Chemical store Spray filler area
Total
Val Ref 5371077
(Square Metres)
86.87 117.9 29.94 50.16
53.3
338.17
18
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Construction:
Foundations:
Floor:
External Walls:
Structural Framing:
Roof:
Internal Linings:
Internal Subdivision:
Concrete.
Concrete.
Corrugated Zincalume.
RSJ portal and steel framing.
Zincalume.
Predominantly unlined but with plywood lining adjacent to the storeroom and office.
Comprising a good quality three bay implement shed accessed to two full height sliding doors and built to approximately 4 metre stud height at the side walls. The implement shed is separated from the workshop by an entranceway and amenities area, the amenities providing a toilet with washbasin, separate locker room and a store room.
The workshop is of similar construction to the implement shed, incorporating two overhead vehicle doors leading from a front concrete apron with roof overhang above and having a two tonne gantry rail.
A separate chemicals shed adjoins the implement shed to one end and this in turn is adjoined by a semi enclosed spray filler area with concrete floor and in-built drains.
Condition:
This building is in well maintained condition.
11.3_ Bird Scarer Store
Of similar age to the main workshop and constructed with concrete flooring, leanto roof with Zincalume cladding to the roof and part walls, part netting enclosed walls and containing 12.15 square metres in area. Good condition.
11.4. Other Improvements
11.4.1 Access and layout:
The property is situated off the end of Gimblett Road and is accessed via a metal driveway which leads to a metal parking area of approximately 500 square metres, this adjoining the main buildings. Additional tracking is provided along part of the northwestern and southwestern boundaries.
Val Ref 537/077 19
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11.4.2 Fencing:
The property is fenced on boundary with mixed average quality post and wire construction although no fencing is provided to the southwestern common boundary.
11.4.3 Water Supply:
We are advised that water for irrigation purposes is pumped from a 150 mm Artesian bore by means of a 25 horse power electric pump and that this is utilised for under and over vines irrigation via a series of mains and sub mains.
Also associated with the property is a 10,000 litre PVC water reservoir which is utilised for spray filling purposes and staff amenity purposes.
We understand that water supply is adequate for the irrigation needs associated with this property.
11.4.4 Power:
Reticulated to the main buildings and with overhead power running along the northeastern side boundary.
11.4.5 Effluent System:
We understand effluent disposal is by way of septic tank disposal and that the spray filler area incorporates collection sumps.
12.0 The Lease
We have perused the Deed of Lease and this is now summarised:-
Lessor:
Lessee:
Term: Commencement Date:
Current Annual Rental:
Lease Expiry:
Outgoings:
Val Ref 5371077
Challenger Beston Limited
Delegat's Wine Estate Limited
10 years 11 April 2001
$382,147 per annum from 11 April 2010.
10 April 2011.
Lessee to pay outgoings and to promptly pay utility charges including water, sewage, drainage, electricity, gas, telephone and rubbish collection.
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Permitted Use:
Maintenance of Premises:
Val Ref 537/077
The Lessee will not use or permit to be used the premises for any purpose other than the permitted use. Permitted use means the growing and harvesting of grapes as a commercial concern.
The Lessee shall preserve and maintain the land and the vines growing on the land in a proper and efficient state of cultivation in accordance with best viticultural practice and, without limiting the above the lessee shall:-
The Lessee is to prune the vines on the land at least once in each calendar year to a standard and in a matter consistent with the best viticultural practice.
To provide the land with irrigation, fertilisers and nutrients to a standard and in a manner consistent with best viticultural practice.
Minimise soil erosion and maintain soil quality on the land to a standard consistent with best viticultural practice.
Maintain any buildings, sheds, fire breaks, wind breaks, access roads or tracks on the land in good repair in all respects.
Keep the vines free from insects and diseases which might damage or inhibit the growth of the vines to a standard and in a manner consistent with best viticultural practice.
At the cost in all things of the Lessee to maintain, replace, repair and keep the whole of the buildings and improvements, fences, plant and equipment, including without limitation, all vine trellis/trellising and irrigation systems, comprising in the premises in good and substantial repair and where applicable working order and at the expiration of the lease to surrender and yield up to the Lessor the premises together with the Lessor's plant, equipment, fixtures and fittings in a good state of repair and condition as at the commencement date.
21
+ +
Insurances:
Alterations and Additions:
Assignment and Sub-letting:
Rent Review:
Vat Ref 537/077
The Lessee is to take out and keep current in the joint names of the Lessor and the Lessee an insurance policy against loss or damage caused by perils (listed in the lease agreement) to trellis, irrigation, frost protection system, reservoirs and buildings (including the plant, equipment, fixtures and fittings) and the vines situated on the premises and;
In the case of the improvements, to the full replacement value;
In case of the vines to their replacement value as agreed annually between the Lessor, the Lessee and the relevant insurers.
Additional public risk insurance policy for an amount of S 10, 000, 000 in respect of any single incident.
We are advised that Delgat's hold all required insurance covers.
The Lessee will not make nor will it permit to be made any alterations or additions in the construction or arrangement of the buildings and improvements, the trellis, the irrigation system, the fences and sheds and the plumbing and electrical installations without the consent of the Lessor, which consent shall not be unreasonably withheld.
The Lessee shall not agree to assign or transfer this lease or its estate or interest therein without having first obtained the prior consent in writing of the Lessor.
The annual rent payable under the lease shall be reviewed and adjusted on each anniversary of the commencement date of the lease in each year of the term of the lease to a new annual rent being the annual rent payable immediate prior to the relevant annual adjustment date increased by the movement in the Consumer Price Index.
22
+ +
Rent Review cont:
Lease Renewal:
Water Rights:
Right of Purchase:
Disaster:
Val Ref 537/077
At any renewal date, the annual rent payable shall be reviewed and adjusted in accordance with a formula prescribed in the lease, this assessing the rent by multiplying the market value by the Government Bond rate plus a 4.5% margin.
If the Lessee wishes to take a further lease of the premises from the expiration of the initial term hereby granted for a further period of five years then the Lessee must provide written notice to the Lessor at least three month's but not more than six month's prior to the expiration of the lease term. Similar provisions apply to the first, second, third and fourth renewal terms, each for five years. The Lessor shall grant to the Lessee the exclusive rights to take water from the land pursuant to all water licences and bore licences held in respect of the land.
The Lessee shall at all times comply with all of the conditions of the relevant water licences and bore licences and all legislative requirements when exercising its rights granted pursuant to this clause.
If at any time during the term the Lessor wishes to sell the premises or any part of them, the Lessor shall give the Lessee the first right of refusal to purchase the premises subject to specified terms and conditions.
If, in the Lessee's opinion, the amount of grapes produced or capable of being produced from all vines on the premises in respect of anyone vintage is reduced by more than 50% of average production capacity for that vintage year due to a natural disaster, the Lessee must immediately notify the Lessor in writing and must assist the Lessor to determine whether the reduction in production or production capacity was due to a natural disaster.
23
+ +
Disaster cont:
Upgrade Works:
Upgrade Works continued
Option to Purchase:
Schedule One:
Vel Ref 5371077
The lease sets out circumstances under which the Lessee may terminate the lease, these including a payment to the Lessor in one lump sum given 60 days to the date of termination of the lesser of:-
+ An amount representing 24 months rental calculated at the annual rental which was payable at the time of the giving of the Lessee's notice; and
+ An amount equal to the rent payable at the time of giving notice, for the unexpired term of the lease; and
+ May exercise the Option to Purchase within the Option Deed at the purchase price determined in accordance with the option to purchase.
The lease sets out the process whereby upgrade works are to be undertaken by the Lessee and the basis upon which the Lessor reimburses the Lessee for such upgrade works and determines the additional rental payable.
The Lessee must during the initial term of this lease pay an additional amount of rent annually on account of each specific upgrade consideration payment made by the lessor. The amount of additional rent shall be calculated in accordance with the formula whereby the upgrade consideration payment is assessed for rental on the basis of the bond rate plus a 4.5% margin.
The parties acknowledge and agree that the Option to Purchase, the Easement Options and the Winery Options form part of this lease and are intended to bind all successors and assigns.
This outlines the average production capacity for the block.
24
+ +
13.0 Deed of Option to Purchase
We have perused the Deed of Option initialled and signed, with this now summarised:-
Grantor:
Grantee:
Mortgagee:
Background:
Option Period:
Grant of Option:
Determination of Purchase Price:
Caveat:
Role of Mortgagee:
Val Ref 5371077
Challenger Beston Limited
Delegat's Wine Estate Limited
National Australia Bank Limited
The Grantor has agreed to grant to the Grantee which has agreed to take out an Option to Purchase the land and the assets upon the terms and conditions contained in this Deed.
Commencing six months before and ending at midnight on the day that is two month's after the expiry date of the initial term or, the first, second, third or fourth renewal dates.
The Grantor hereby irrevocably grants to the Grantee an Option to Purchase an estate in fee simple in the land and to purchase the assets on the terms and conditions contained in this Deed.
The purchase price of the land and assets shall be the greater of the following amounts:-
(a) The amount being the lesser of the Compound Annual Return Amount and the Market Value; and
(b) The Minimum Purchase Price;
The Grantor consents to the Grantee lodging a Caveat for registration to protect the Grantee's estate and interest in the land and assets under the option.
The Mortgagee enters into and executes this Deed for the purposes of giving and receiving the benefit of the Covenants set out in this Deed on and from the date the securities are granted in favour of the mortgagee.
25
+ +
14.0 Market Commentary
Hawkes Bay comprises New Zealand's second largest wine growing district having approximately 14.3% of the total planted area. All New Zealand wine growing districts having suffered as a result of the world financial crisis, impacts of over supply and the comparatively high value of the New Zealand dollar.
Problems started with the 2008 vintage which saw a huge increase in New Zealand wine production and created a huge challenge to the industry to find markets for the significantly increased crop. Moving into the 2009 vintage there remained a large volume of wine from the 2008 vintage still in tanks and as a result contract prices dropped significantly.
Total production for the 2009 vintage was 282,447 tonnes and again this exceeded established demand levels and exacerbated the significant oversupply situation. As a consequence, contract prices fell again and contracted production caps became more strictly enforced. Some contracts were not renewed and a distinct market value differential emerged between those blocks with contracts and those without.
Careful management of production through the 2010 vintage saw the total vintage fall 7% down to 263,445 tonnes which provided some relief in terms of the over supply situation but not in terms of contract prices.
Exports of New Zealand wine for the year ending June 2010 showed positive growth with a 26% increase over the previous year. Of this packaged imports were up 13% but bulk exports were up 71 %. This increase in exports was some 9% ahead of growth forecasts however the increased proportion represented by bulk exports has impacted on average price levels and with these falling 17% to $7.37 per litre overall or down 10% to $8.81 per litre, if bulk wine was excluded . Contract prices have fallen dramatically over the past three year period as is illustrated from the following table:-
Average Hawkes Bay Grape Prices Vintage 2006 (SIT) 2007 (SIT) 2008 (SIT) 2009 (SIT) 2010 (SIT)
Sauvignon Blanc S 1,557 S 1,587 S 1,709 S 1,396 S 1,024
Pinot Noir . Table S 2,036 S 2,049 S 2,292 S 2,168 S 1,760
Pinot Gris S 1,838 S 2,054 S 1,961 S 1,664 S 1,332 Chardonnay · Mendoza and Clone S 1,683 S 1,569 S 1,673 S 1,461 S 1,233 15
Chardonnay· all S 1,581 S 1,538 S 1,673 S 1,434 S 1,213 other clones
Riesling S 1,252 S 1,181 S 1,428 S 1,311 S 1,285
Vionier S 1,943 S 2,324 S 1,845 S 1,981
Cabernet Franc S 1,860 S 1,627 S 2,029 S 1,759 S 1,765
Cabernet Sauvignon S 1,751 S 1,842 S 1,870 S 2,045 S 2,019
Malbec S 1,554 S 1,642 S 1,719 S 1,612 S 1,719
Merlot S 1,649 S 1,648 S 1,817 S 1,631 S 1,619
Syrah S 2,087 S 1,992 S 2,199 S 2,244 S 2,282
Source: Hew Zealand Wine Grower
Val Ref 5371077 26
+ + a
The viticulture industry is suffering from general recessionary patterns and as a result very low levels of demand existing for vineyard and winery properties .
In terms of sales within the Hawkes Bay region, there has been low transaction volume with the most significant activity having been shown for property in the preferred Gimblett Road locality by Delegat 's Wine Estate, who purchased four blocks to consolidate their holding within this locality. Vineyard properties within the other grape producing areas of Hawkes Bay have proved very difficult to sell and there would appear to remain a significant differential between vendor and potential purchaser expectations.
It is imperative that production for the coming season closely aligns to demand levels as any significant over supply would further increase the availability of bulk wine, undermine demand for branded product and put further pressure on export wine prices.
The following tables summarises the regional spread of vineyards within New Zealand:-
New Zealand Vineyard Regional Areas (hectares) Region 2005 2006 2007 2008 2009 2010· 2011· Auckland 514 504 533 534 543 550 556 Waikato /Bayof Plenty 148 150 145 147 147 147 147 Gisborne 1890 1913 2133 2142 2149 2083 2072 Hawkes Bay 4249 4346 4665 4899 4921 4947 4993 Wairarapa I Wellington 779 777 827 855 859 871 882 Marlborough 9944 11488 13187 15915 18401 19295 19024 Neson 646 695 782 794 813 842 861 Canterbury IWaipara 853 925 1034 1732 1763 1779 1809 Otago 978 1253 1415 1522 1532 1540 1540 Other and Unknown 1001 565 634 770 836 1374 1716
Total 21002 22616 25355 29310 31964 33428 33600
Val Ref 5371077 27
+ + a
2012· 573
147 2003 5046 885
19570 880
1828 1543 1125
33600
The areas planted in the different varietals are now summarised:·
New Zealand Vineyard Areas (Ha)
Variety 2005 2006 2007 2008 2009 2010' 20 11' 2012'
Sauvignon Blanc 7,277 8,860 10,491 13 ,988 16,205 16,910 16,758 17,297
Pinot Noir 3,757 4,063 4,441 4,650 4,777 4,773 4,803 4,828
Chardonnay 3,804 3,779 3,918 3,881 3,911 3,865 3,823 3,792
Merlot 1,492 1,420 1,447 1,363 1,369 1,371 1,386 1,403
Riesling 811 853 868 917 979 986 993 1,009
Pinot Gris 489 762 1,146 1,383 1,504 1,763 1,725 1,764 Cabernet Sauvignon 614 531 524 516 517 519 519 521
Gewurztraminer 257 284 293 316 311 314 313 290
Syrah 211 214 257 278 293 297 299 300
Other 2,290 1,850 1,970 2,018 2,101 2,630 2,981 2,396
Total 21,002 22,616 25,355 29,310 31,967 33,428 33,600 33,600
2005· 2009 lactual) , 2010· 2012Iforecast')
15.0 Valuation Methodology
15.1. Introduction
To establish the market value of the property we have utilised the standard approach for valuing rural land in New Zealand which is using the direct comparison approach. This is a market related primary valuation approach however as seldom are any two properties directly comparable, adjustments are required to account for the differences in :
+ Size + Type of Property + Standard of Development + Potential Productive Capacity + Management
Analysis of recent sales establishes the basic parameters that impact on price motivate purchasers at any given t ime in the market place.
Val Ref 537 /077 28
+ + a
15.2. Sales Data
Relevant vineyard sales evidence is detailed in Appendix 2B . The sales can be summarised as follows:
Sale Price Plantings ' Land Area Exclg Plant! Ha inclg
Address Date of Sale Ha Ha Land
2091 Maraekakaho Rd 1/02/2008 15.7625 $ 120,539 $ 95,440
State Highway 50 1/02/2008 8.0907 $ 240,399 $ 151,41 5 Gimblett Rd 1/02/2008 16.1875 $ 102,703 $ 103,884 Lawn Rd, Clive 1/07/2008 10.8506 $ 80, 180 $ 78,124 201 1 Maraekakaho Road 1/0812008 17.0909 $ 134,692 $ 100,697 State Highway 50 27/04/2009 4.0500 $ 135,802 $ 150,000 156 Mateo Pa Rd 1/05/2009 7.9477 $ 137,147 $ 11 5,540 2145 State Highway 50 9/06/2009 8.0520 $ 134,998 $ 142,464 Puketapu Rd 1/08/2009 17.9019 $ 81,220 $ 77,587 Gimblett Rd 1109/2009 16. 1875 $ 123,552 $ 125,019 Cnr Gimblett Rd and SHWay 50 24/12/2009 12.1405 $ 131,790 $ 136,400 Mere Rd & SH 50 1/03/20 10 10.0000 $ 220,000 $ 154,231 Sandy Rd 1/04/20 10 4.9087 $ 146,780 $ 91,738 275 Te Mata Rd 16/04/2010 2.8328 $ 458,910 $ 172,378 Dartmoor Rd 16/04/2010 6.0050 $ 99,917 $ 93,272
As discussed there has been very limited sales evidence over the past two year period with value levels having generally been under downward pressure.
The main sa les activity involves the four blocks around the Gimlett Road locality which has been purchased by Delegat's Wi ne Estate and all of which included existing plantings in fair to average condition . While the market viewed the grape plantings on these properties as having ongoing economic life, Delegats chose to completely redevelop three of the blocks so as to standardise and align vineyard configuration to suit their machinery and production needs.
These sales were transacted in mid to late 2009 and indicate values ranging from $125,000 to $150,000 per hectare for the land, vines and structure content . Some of these land blocks reflected high per hectare land values due to their relatively small areas involved whilst the va lues analysed to the vines and structures range from $46,400 per hectare to $65,000 per hectare, net of land.
There have only been four recorded sales that we are aware of in 2010, all t ransacted around April with two situated in secondary localities, and the others in Mere Rd and Te Mata which are preferred localities. Analysis of these sales indicates values to the vines and structures of $20,925 to $35,636 per hectare for the secondary locations and $45,000 and $60,000 per hectare for the two better localities.
Gimblett Road is regarded as the premier grape growing sub district within Hawkes Bay and in the past has attracted strong interest from the main wineries seeking to benefit from the high quality soils and reputation of this address.
Val Ref 5371077 29
+ + e
15.3. Valuation Approaches
+ Built-up approach. + Rental capitalisation approach.
Built Up Approach
The built-up approach has considered a wide range of land sales evidence from a range of outlying locations with soils suitable for grape growing and has factored in the added value of the water rights and provided irrigation.
We refer to Appendix 2A detailing a summary of the available and limited relevant land value evidence. This evidence indicated a range of $31,891 to $145,931 per hectare for land holdings involving areas ranging from 3.5 ha to 19.85 ha.
Demand for viticultural land for development has dropped significantly as a result of the current recession. Based upon our analysis of the blocks recently purchased by Delegat's Wine Estate Limited in the Gimblett Road area, we adopted a land value of $1,200,000 on an unencumbered basis, this equating to $52,325 per hectare. This land value is well down on the peak reached in 2007 of around $90,000 per hectare in the Gimblett locality.
In terms of the structural improvements these were assessed on an added value basis, having regard to depreciated replacement cost methodology but factoring in a saleability discount as analysed from sales evidence and estimated at 15% in respect of the buildings, 25% in respect of the specialised vineyard improvements and 40% in respect of the vineyard plantings and structures.
The added value of the vines and structures was determined from analysis of recent sales evidence particularly that associated with the Delegat's Wine Estate Limited purchases, the Mere Road and Te Mata Road sales. Additionally we have had regard to limited sales evidence from other preferred wine growing regions.
On the basis of our analysis we adopted the following unencumbered vacant possession value for the land and vineyard content:-
Value per Hectare Vineyard Plantings Irrigation Infrastructure
Total Value per Planted Hectare
$52,325 $32,572 $2,789
$87,687
This value excludes allowance for the associated buildings and other improvements and is assessed on a vacant possession basis, assuming there being no supply contract in place for the grapes.
Rental Capitalisation
The rental capitalisation approach has considered what the market would be prepared to pay for this vineyard having regard to the above canvassed issues.
Val Ref 5371077 30
+ +
The existing rental of $382, 147 per annum equates to $18,474 per planted hectare. This is considered well above market levels at the current time .
We considered two approaches in determining the market rental for this vineyard, these being:-
(i) Direct comparison to recent vineyard letting evidence. (ii) Rental affordability.
In terms of analysing recent evidence of new vineyard leasings, our investigations reveal that there has been no recent activity within this sector. Many growers are currently under significant financial pressure and short term negotiated variations to leases are taking place, effectively aimed at allowing growers to weather the current financial crisis.
In the absence of direct market evidence, as an alternative approach, rental levels have traditionally ranged from 6.5% to 8.5% of the assessed value of the vineyard and associated improvements. On this basis and reflecting that the fall in profitability would reduce the rental percentages, the following rental levels were indicated:
Market Value - Return Vacant Possession on Value Indicated Rent
$2,350,000 6.00% $141,000 6.50% $152,750
Indicated Rentl Ha
$6,816 $7,384
An alternative rental approach involves the affordable rental methodology which is now summarised:-
The first table shows the average yields for the past five years, comparing these to the district average yields for those varieties and with the budgeted yields used by Delegats (where known). The adopted yield applied in the calculation has been determined having regard to these three sources and data and reflects the fact that the impact of frosts could possibly be better managed better in future years. This calculation follows:
District Average Budgetted Income Per
Variety Yield Yield Adopt Yield Price Per Tonne Ha
Cab Sauv 5.5 0 8 $ 2,019 $ 16,152
Merlol 10.09 11 11 .00 $ 1,619 $ 17,809
Chardonnay 7.55 10 12.00 $ 1,233 $ 14,796
Prodn Costs Surplus Per Proportion To Indicated Variety Per Ha Ha Rent
Cab Sauv $ Merlol $
Chardonnay $
Variety Cab Sauv
Merlol Chardonnay
8 ,250 8,250 8,250
Planted Area
$ $ $
5.98 9.73 4.98
20.69 Indicated Rental
Val Ref 5371077
7,902 60% 9,559 60% 6,546 60%
Indicated Rent 1 Ha
$ 4 ,741 $ 5,735 $ 3,928
Rent 1 Ha 4,741 5,735 3,928
Indicated Rent
$ 28,346 $ 55,812 $ 19,545
$ 103,703 $103,700
31
+ + a
Based on actual yields achieved from the property, a much lower rental is indicated by the affordable rental methodology than by the return on market value methodology. The allowance made for production costs at $8,250 per hectare has been estimated, without knowledge of the actual costs incurred by Delegats.
In summary, the rental approaches indicated a wide disparity in rental levels from $103,700 per annum to $152,750 per annum. For the purpose of rental capitalisation we are of the view that regard should be paid to the medium term prospects for this vineyard, not solely the current recessionary impact.
Nevertheless, we would expect that the current economic conditions would dictate a rental more aligned to the afford ability approach. On this basis we assess a market rental of $103,700 per annum.
15.4. Valuation Assessments
Vineyard values in New Zealand are not traditionally calculated on a rental capitalisation approach. Analysis of the more recent Gimblett Road sales indicate that, with potential rental levels based on average levels of production and current contract price levels, yields of between 1.6% to 2.1% are currently applying.
Valuations using such low capitalisation rates become very subjective and for this reason, we have not placed any reliance on the capitalisation approach to value. Our Fair Values assessed as at 31 December 2010 are:-
Vacant Possession Unencumbered Value
Our valuation for the property as unencumbered by any lease is represented as follows:-
Land 22.9336 Ha $ 1,200,000
Area M2 Admin Office!
Workshop 122.4 $ 59,800
Bird Scarer Shed 12.15 $ 4,600 Implement Shed &
Worksuop 338.17 $ 262.500 326,900
Fencing $ 1,700
Tracking $ 6,000
Water and Irrigation $ 57,700
Power $ 5,600
Effluent Disposal $ 5,100 $ 76,100 $ 403,000
$ 1,603,000
Vineyard 20.69 Ha $ 747,000
Fair Value- Unencumbered Basis $ 2,350,000
Encumbered Value
The property is subject to an existing lease that expires on 11 April 2011 and in the current environment, would not be expected to be renewed in its current form and at the current above market level of rental.
Val Ref 537/077 32
+ +
The encumbered value has been based on the above vacant possession value but adds allowance for the present value of the existing rental premium for the period from 31 December 2010 through until lease expiry in April 2011.
The value assessed for the property as vacant includes allowance for the inherent ability of the property to achieve letting at market rental levels and it is only the surplus, represented by the current rental over this level that has been factored in.
Vacant possession value PV Rent benefit Actual rent
Market rent
Benefit in rent P.A
Benefit in rent mth Mths
PV rent 3.29
$ $ $ $
382,147 103,700
278,447 23,204
PV
0.970439445 $ 74,048 Added Value Adopt
Encumbered Value as at 31 December 2010
$ 2.350,000
$ 75,000
$ 2,425,000
Adopt $ 2,425,000
We refer you to Appendix 5 for the apportionment of this valuation. Discounted Cash Flow
Due to the likelihood of the lease not being renewed, we have not utilised the DCF methodology for valuation purposes.
15.5. GST
In quoting the sales we have identified where possible, whether the sale price was inclusive or exclusive of GST. The appended sales are all quoted plus GST unless stated otherwise.
16.0 Risk Analysis
16.1. Strengths
+ Leased to strong industry player with strong market and supply relationships.
+ Comprising a well developed vineyard. + Gimblett Road comprises a very well regarded viticultural location.
Val Ref 537/077 33
+ +
16.2. Weaknesses
+ General uncertainty and weakness of the viticu lture market. + Threats presented by the risk of continuing oversupply, further erosion
of profitability and further downward pressure on property and rental values.
+ The current rental is at above market levels and above affordable levels based on current revenue and expenditure levels.
+ The eXisting lease will not be renewed in April 2011. + Climatic and pest risk.
16.3. Opportunities
+ Consolidation and rationalisation with in the wine industry. + Improvement to frost protection on the vineyard to secure better yields. + Well established industry players may be able to exploit market
opportunities due to the demise of some competitors.
16.4. Threats
+ Non renewal of lease in 2011 and difficulties in attracting a new lessee. + The value of vineyards could remain depressed for some time.
17.0 Conclusions
In summary, comprising a medium sized production vineyard situated within the preferred Gimblett Road viticultural sub district, close to Hastings City.
The property is subject to a long term lease to Delegat's Wine Estate Limited however the initial 10 year term expires on 10 April 2011 and Delegat's have confirmed that they will not be renewing this lease on its current terms.
The vineyard is at full production and is planted in three main varieties.
18.0 Valuation Summary
We assess the market values for the Gimblett Road Vineyard, Hawkes Bay as follows:-
Unencumbered Value - vacant possession
Encumbered Value - Lessor's Interest
19.0 Conditions of Valuation
The above valuations are made subject to the following comments:-
Market Value
$2,350,000
$2,425,000
+ The above valuations are made on a plus Goods and Services Tax.
+ The valuation excludes allowance for stock and for plant and equipment.
Val Ref 537/077 34
+ +
+ We have not undertaken a physical count of the vines and have relied upon planting and production details supplied by Delegat's Wine Estate Limited, as being accurate and correct.
+ Our market value assessed as encumbered reflects the existing Lease and Option Agreements which are due for renewal on 10 April 2011.
20.0 Disclosures
Experience
M I Penrose has in excess of 20 years experience in valuing this class of property, has all appropriate qualifications and registration enabling Mike to practice as a valuer and he has not been subject, at any stage, to disciplinary action by the governing professional body.
It is hereby declared that M I Penrose is a Registered Valuer within the meaning of the Valuers Act 1948, that he holds an Annual Practising Certificate No 633 and that in preparation of this report he has acted in an independent capacity. M I Penrose is a Fellow of the New Zealand Institute of Valuers and the New Zealand Property Institute.
Independence
M I Penrose has no direct or indirect pecuniary or other interest in the property being valued. He is not aware of any other potential conflicts of interest.
Professional Indemnity Cover
We certify that TelferYoung Limited Hawkes Bay holds professional negligence insurance for an amount of not less than 20% of the valuation assessed.
Compliance StatementEi: Disclosures
This valuation has been prepared in accordance with the Property Institute of New Zealand and New Zealand Institute of Valuers Code of Ethics, Rule of Conduct in Valuation Standards. Furthermore, it is our understanding that the valuation complies with the Hong Kong Stock Exchange checklist- "Valuation of Properties Being Acquired! Disposed of (Main Board)" and with Chapter 5 of the Main Board Listing Rules "Valuation of and Information on Properties".
+ TelferYoung (Hawkes Bay) Limited and M I Penrose in performing this valuation are authorised to practice as a Valuer under New Zealand Law;
+ The valuer performing this valuation update has at least five years continuous experience in the valuation of property of a similar type;
+ Neither Telfer Young (Hawkes Bay) Limited nor M I Penrose in performing this valuation has a pecuniary interest that could conflict with the update valuation of the property;
+ We confirm that we have not provided any advice to CK Life Sciences International or Regenal Investments Pty Limited in relation to the proposed transaction;
Val Ref 5371077 35
+ +
+ To the best of our knowledge the statements of fact presented in this report are correct;
+ The analysis and conclusions in the report are limited only by the reported assumptions and conditions;
+ We have no interest in the subject property being valued; + Our fee is not contingent upon any aspect of the report; + The valuation has been prepared in accordance with the New Zealand
Valuation and Property Standards and with the Property Institute of New Zealand and New Zealand Institute of Valuers Code of Ethics and Rules of Conduct.
+ The Valuer has satisfied professional education requirements; + The Valuer has experience in the location and category of the property
being valued; + The Valuer has made a personal inspection of the property; + No one, except those specified in the report, has provided professional
assistance in preparing the report;
Statement of Limiting Conditions and Valuation Policy
This report must be read, where appropriate, in conjunction with TelferYoung Limited's Statement of Limiting Conditions and Valuation Policy, which is as follows:
Purpose
This valuation report has been completed for the specific purpose stated. No responsibility is accepted in the event that this report is used for any other purpose.
Responsibility To Third Party
Our responsibility in connection with this valuation is limited to the client to whom the report is addressed and to that client only. We disclaim 01/ responsibility and will accept no liability to any other party without first obtaining the written consent of TelferYoung Limited and the author of the report. TelferYoung Limited reserves the right to alter, amend, explain or limit any further information given to any other party.
Reproduction Of Report
Neither the whole nor any part of this valuation and report or any reference to it may be included in any published document, circular or statement without first obtaining our written approval of the form and can text in which it may appear. Our report is only valid when bearing an original signature.
Date Of Valuation
Unless otherwise stated, the effective date of the valuation is the date of the inspection of the property. This valuation is current as at the date Of valuation only. The value assessed herein may change significantly and unexpectedly over a relatively short period (including as a result of general market movements or factors specific to the particular property). We do not accept liability for losses arising from such subsequent changes in value.
Without limiting the generality Of the above comment, we do not assume any responsibility or accept any liability where this valuation is relied upon after the expiration Of 3 months from the date of the valuation, or such earlier date if you become aware of any factors that have any effect on the valuation.
Val Ref 5371077 36
+ +
Legislation
We have not obtained a Land Information Memorandum (UM) or Property Information Memorandum (PIM) for this property which unless otherwise stated is assumed to conform to all requirements of the Resource Management Act 1991, the New Zealand Building Code contained in the First Schedule to the Building Regulations 1992, the Building Act 1991, the Building Act 2004 and any Historic Places Trust registration. Our valuation reports are prepared on the basis that properties comply with all relevant legislation and regulations and that there is no adverse or beneficial information recorded on the Territorial Local Authority (TLA) property file, unless otherwise stated. Legislation that may be of importance in this regard includes Health 8: Safety In Employment Act 1992, the Fire Safety and Evacuation of Buildings Regulation 1992, and the Disabled Persons Community Welfare Act 1975.
Registrations
Unless otherwise stated, our valuation is subject to there being no detrimental or benefic/al registrations affecting the value of the property other than those appearing on the title. Such registrations may include Waahi Tapu and Historic Places Trust registrations.
Reliability Of Data
The data and statistical information contained herein was gathered for valuation purposes from reliable sources and is believed to be correct. All reasonable attempts have been made to verify the authenticity of this information but we cannot guarantee its accuracy.
Assumptions
This report contains assumptions believed to be fair and reasonable at the date of valuation. In the event that assumptions made based on information relied upon is later proven incorrect, or known by the recipient to be incorrect at the date of reporting, TelferYoung Ltd reserves the right to reconsider the report, and if necessary, reQssess values.
GST
When analysing the sales and/or leasing evidence relied upon for this valuation, it is noted that we have attempted to ascertain whether or not the sale price/rental is inclusive or exclusive ot Goods and Services Tax (GST). The national property database of sales evidence does not always identify whether or not the sale price is inclusive or exclusive of GST. Where we have not been able to verify the matter Of GST, we have assumed that the national property database record of sale price is inclusive of GST (if any) for residential properties and plus GST (if any) for non residential properties. Should this not be the case tor any particular sale or rental used as evidence, we reserve the right to reconsider our valuation.
Land Survey
We have made no survey Of the property and assume no responsibility in connection with these matters. Unless otherwise stated, it is assumed all improvements lie within the title boundaries.
Unless otherwise stated, we have not undertaken investigations or been supplied with geotechnical reports with respect to the nature of the underlying land. Unless otherwise stated, we have assumed the land to be firm and suitable ground for the eXisting and/or potential development without the need for additional and expensive foundation and retaining work or drainage systems.
Contamination
We have not undertaken an environmental audit of the property. Unless otherwise stated our valuation and report assume that the land and buildings are unaffected by harmful contaminants or noxious materials which may impact on value. Verification that the property is free from contamination and has not been affected by noxious materials should be obtained from a suitably qualified environmental expert.
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Not A Structural Survey
Our inspection has been undertaken for valuation purposes only, and does not constitute a structural survey. Verification that the building is sound should be obtained from a suitably qualified building engineer. If the building is found to be unsound then this is likely to impact on the value of the property.
Systems
In preparing this valuation, it has been assumed that alf hot and cold water systems, electric systems, ventilating systems and other devices, fittings, instalfations or conveniences, including lifts and escalators where appropriate, as are ;n the building to be fn proper working order and functioning for the purposes for which they were designed.
Market Valuations
Market valuations are carried out in accordance with the Valuation Standards and Guidance Notes recommended by the New Zealand Institute of Valuers and the Property Institute of New Zealand, where the definition of Market Value is "the estimated amount for which an asset should exchange on the date of valuation between a willing buyer and a willing seifer in an arms length transaction after proper marketing wherein the parties have each acted knowledgeably, prudently and without compulsion OJ.
No a{{owances are made in our valuations tor any expenses of realisation or to reflect the balance of any outstanding mortgages either in respect of capital or interest accrued thereon.
Water Leaks Ii: Penetration Effects
We are aware that a number of buildings have developed problems associated with water leaks, water penetration, weat:herproofins, moisture and water exit control systems, mOUld, fungi, mildew, rot, decay, gradual deterioration, micro organisms, bacteria, protozoa or like forms. Problems can result from defects in design, construction methods and materials used, or any combination of defects.
Our vaLuation has been assessed conditional upon all buildings and structures being constructed strictly in terms of recommended practices and free from defect unless otherwise stated. We are not qualified to undertake nor have we undertaken a structural survey of the buildings or structures. We accept no liability for any defects that may arise as a result of poor building design, construction methods or building materials. If you have any concerns, you should engage a suitably qualified person to report on this matter. Defects revealed by a report by a suitably qualified expert may affect the value of the property.
Asbestos
We are unable to comment on the existence or otherwise of asbestos within any structure or the land. A suitably qualified expert should be engaged to determine if asbestos is present. Asbestos in a building or the land may affect our assessment of value.
Leases
The interpretation of leases or other contractual agreements referred to in this report is solely the opinion Of the author and should not be construed as a legal interpretation. Further, summaries of contractual agreements which may appear in the report or appendices, are presented for the sale purpose Of giving the reader an overview of the salient facts thereof.
Tenancies
Unless specifically requested, we do not make detailed enqUlnes into the covenant strength of occupational tenants but rely on our judgement of the market perception of them. Furthermore, we assume, unless otherwise advised, that the tenant is independent Of the owner and capable of meeting its financial obligations under the lease and that there are no arrears of rent or undisclosed breaches of covenant. Further, it is assumed that all rents referred to in this report represent the rental arrangement stipulated in the contractual agreements pertaining to the tenants occupancy, to
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the extent that such rents have not been prepaid, abated or inflated to reflect extraordinary circumstances, unless such conditions have been identified and noted in this report.
We trust that this form of report meets your requirements but should you require any further information or clarification of any point please do not hesitate to contact the writer.
I Yours faithfully TelferYoung (Hawkes Bay) Limited
M I Penrose Registered Valuer, FNZIV, FPINZ mi ke. [email protected]
Enclosed:
Appendix 1 - Computer Registers (2) Appendix 2A - Land Sales Appendix Appendix 28 - Vineyard Sales Appendix Appendix 3 - Planting Summary Appendix 4 - Additional Photos Appendix
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