Move to former chief post office option for Silver Fern Farms

Silver Fern Farms is considering moving its Dunedin headquarters into the former chief post office as the anchor tenant.

Property industry sources in Dunedin say SFF has signed a conditional lease agreement for the ground and first floor of the Princes St building, subject to board approval.

SFF chief executive Keith Cooper said yesterday, when contacted, the landlord's redevelopment of the company's present George St building would prompt a ''rent review'', which would be based on a ''materially higher value''.

The old chief post office was one of several sites being considered and, in order to ''future-proof'' SFF, a new site would include facilities for a larger workforce, product development and meeting facilities.

The number of Dunedin staff, 120 at present, could be boosted in the future, if staff from the company's other 23 sites around the country were relocated.

''We may have to consider sub-letting,'' he said, referring to the prospect of having more space than initially required.

Property industry sources say SFF's annual lease costs would rise from about $300,000 at its present headquarters to $625,000 at the post office, with possibly $3 million-$3.5 million to be spent fitting out the two floors.

Mr Cooper said it was ''not us with that figure''. He said he would expect any prospective landlord to share fit-out costs. The post office lease ''was not double'', he said.

''To put it bluntly, we won't be paying $625,000.''

It could be ''several months'' before SFF was in a position to release relocation cost estimates, he said.

On the question of a conditional agreement having been signed, Mr Cooper said: ''We have no committed position. We have several options open to us to exercise, and have got [first option] preference at the head of any queue.''

Building owner, Invercargill-based Geoff Thomson, of Distinction Hotels, who bought the former chief post office in May 2010 for a reported $4.4 million, could not be contacted yesterday about his plans for the building.

Last October, he said he remained committed to developing the former post office into a hotel. His initial plans were for a $20 million hotel, including 180 rooms and suites, restaurants, bars, conference facilities, a business centre, gym and lap pool.

SFF chairman Eoin Garden said yesterday when contacted it was a ''management issue'', noting ''nothing had come to the board yet, [so] it's not a board issue''.

Last financial year, SFF booked an after-tax loss of $31.1 million, on $2 billion turnover, after demand for lamb fell dramatically in the face of unsustainably high prices.

Turnover was down 3%.

SFF's debt surged by $206 million, from $111 million to $317 million.

- simon.hartley@odt.co.nz