Investors jump on board big Albany syndication scheme

By Colin Taylor

KCL Property has completed the syndication of an Albany property leased to the New Zealand headquarters of Billabong, one of the world's biggest surf-wear fashion labels.

A proportional ownership scheme, or syndication, was established by KCL Property to purchase the modern industrial office and warehouse building, located at 44 Arrenway Drive. KCL property offered 100 investment parcels of $50,000, with individual investors entitled to purchase one or more parcels. By acquiring a parcel investors purchased a proportionate share in the property.

KCL Property executive director Matthew Gibson says the offering met the criteria required in today's property investment market _ a strong tenant, a long-term lease, a good location and the potential to improve on the initial return.

"More and more investors are considering syndication as an investment strategy," says Gibson. "We have been delighted by the response to the Billabong property, which was sold out by Thursday this week."

KCL Property has been active in property syndication since the mid-1990s and currently manages 51 active property syndicates, with total property assets under management in excess of $450 million.

Other KCL property syndicates which have successfully been placed on the market this year include: Formation St, Wacol, Brisbane, leased by Western Star Trucks; Henderson Place, Penrose, Auckland, leased by Mulford Plastics; and Courtenay Place, New Plymouth, leased by Woolworths.

The Albany scheme was marketed by Bayleys North Shore sales consultants Daryl Devereux and Brian Caldwell, who say the offer was an excellent opportunity for investors to enter the commercial and industrial property market, earning a passive return on their investment.

"Billabong is a highly recognised fashion brand that many new investors will have an association with," says Caldwell.

"Their long-term tenancy combined with the relative ease of investing in a syndication will give new investors a sound introduction to investing in commercial property." The property is currently tenanted by GSM Operations (NZ Ltd), the New Zealand trading arm of the international Billabong brand..

The lease term is for 10 years from November 1, 2007, leaving 8 1/2 years to run from May 1, 2009. The rent is adjusted annually by the movement in the CPI, with a ratchet clause preventing it from decreasing.

"This offering gives smaller investors involvement with a substantial property that would normally only be available to large investors, with the cash flow underpinned by a multinational tenant _ the world's largest publicly listed surf apparel company, capitalised at A$2 billion ($2.52 billion)," Caldwell says.

The property is in a strategic location within Interplex@Albany, a newly developed industrial subdivision.

"It's located at the corner of Arrenway Drive and Triton Drive and has become recognised as one of the best industrial sites on the North Shore," says Caldwell. He adds that the main thoroughfare in the area is the busy Apollo Drive, which provides the main access into Interplex@Albany. The northern motorway runs parallel to Arrenway Drive and is accessible from nearby Constellation Drive.

Devereux says the two-year-old, high quality Billabong building provides two levels of office accommodation and a semi-detached warehouse. There are 70 car parks on site _ 38 secure basement parks and 32 available in front of the building, accessed from Arrenway Drive. The first- and second-floor office space is 2128.4sq m, and the warehouse is 1000sq m of clear span, high stud and column free warehousing, with an 8m central stud height.

Devereux says the syndication scheme is forecast to provide a cash return to investors of 9.5 per cent per annum before tax.

"This return is calculated on the basis of distributions from available cash surpluses. The return doesn't take into account any retained profit or loss that may result from rental activities or any increase or decrease in the value of the property.

"The cash return is paid monthly, as opposed to some other forms of investment that are paid quarterly or on maturity of the term of the investment."

It is intended that the cash distributions made to investors will be $395.83 per month for each $50,000 interest parcel, for the 12 months up to March 31, 2011 _ the first full financial year after the scheme's commencement. KCL forecast that investors would receive a total of $4750 per annum in cash. The 100 interests subscribed a total sum of $5 million, which together with $4.5 million of the first mortgage borrowings will be used to acquire the property and to fund the establishment costs.

KCL Property will manage the property for the term of the scheme, which will involve:

collection of rent,

payment of outgoings payable by the syndicate,

monthly income distributions to investors,

management of the property and tenancy,

overseeing accounting matters,

reporting to the investors, and

arranging annual general meetings of the investors.

- NZ Herald

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