Retail investment a mighty opportunity

By Colin Taylor

The MEGA Mitre 10 centre is situated in a highly visible area in Pukekohe. Photo / Supplied
The MEGA Mitre 10 centre is situated in a highly visible area in Pukekohe. Photo / Supplied

Fifty-six interests are being offered for collective ownership of a Mitre 10 MEGA store in Pukekohe.

The Oyster Property Group has launched its latest property syndication scheme offering investors a projected initial annual return of 9.06 per cent from their collective ownership of a Mitre 10 MEGA store in Pukekohe.

A total of 56 interests of $100,000 each are being offered through a proportionate ownership scheme in the 9718sq m hardware store and its 1.475ha site on Wrightsons Way in the Pukekohe MEGA Centre.

Oyster Group is paying $10,315,000 to acquire the property from Mitre 10 (New Zealand) Ltd in a transaction negotiated by Nick Wevers of Bayleys North Shore Commercial. Wevers says the property's strong tenant covenant, with a long-term lease to Mitre 10, makes it ideal for syndication. "In the current risk-averse investment environment, length of lease and strength of tenant, which equate to a secure long-term cash flow, are the most important factors that property investors take into consideration."

The property has a 12-year lease from December 2010 to Mitre 10 (New Zealand) Ltd with rights of renewal for a further 18 years.

Oyster Group's Mark Winter, who is marketing the proportionate property interests, says investors will also benefit from the lease's built-in rental growth. It provides for three-yearly compounding rent increases based on the increase in the Consumer Price Index, capped at 9 per cent growth every three years.

Winter says another attraction for investors is the near-new nature of the building, which opened in late 2010, and that large bulk retail complexes are low maintenance structures. Under the net lease, Mitre 10 pays all of the building's operating expenses.

Established in 1974, wholly New Zealand owned and operated Mitre 10 is the country's largest hardware retailer. Its first MEGA store was opened in 2004, offering customers an increased product range and services such as cafes, play areas for children, garden centres and drive-through areas. The MEGA store network is undergoing rapid expansion.

The Pukekohe Mitre 10 MEGA store incorporates a main building supply retail area, with drive through, a garden centre, cafe, mezzanine office area and yard. The building comes with 111 external car parks, although there are a total of 750 car spaces in the Pukekohe MEGA Centre's parking area.

The centre has a number of other high-profile tenants including Countdown, Harvey Norman, Briscoes and Rebel Sports. It is located on the southern fringe of Pukekohe, next to the race course, and in a high visibility position off Manukau Road. The centre is positioned alongside the proposed Pukekohe Eastern Arterial Route, which would further enhance its profile. Winter says the Mitre 10 property is situated in a growth area that will benefit from the expected continued population expansion in Pukekohe and surrounding areas.

He says greater demand for retail services from a growing population, a strong local rural economy and the increased number of lifestyle property owners in the catchment area has resulted in a wide range of national branded retailers establishing themselves in Pukekohe, whose population is projected to double to approximately 40,000 people by 2051.

Auckland Council intends to consolidate most of the former Franklin District's population growth in Pukekohe, "achieving a compact urban form that is located within defined urban boundaries and which uses land efficiently. This protects the surrounding rural area from inappropriate development, and creates living environments where residents can access most day-to-day destinations by walking, cycling or short motor vehicle trips".

The investment scheme and the Mitre 10 Pukekohe property will be managed by Oyster Management Limited, which has been involved in a wide range of property syndications over the past eight years.

Oyster Group merged with Prime Retail Management Ltd and its portfolio of specialist retail properties, including the Dress-Smart outlet chain, in 2010.

Nationally, Oyster Management Limited manages a $500 million portfolio of properties from Auckland to Dunedin, ranging from central city high-rise buildings to suburban retail shopping centres and industrial property.

Oyster Group managing director Mark Schiele says the company has more than 500 clients. Schiele says there is no limit to the number of interests any one investor may hold in the Mitre 10 Pukekohe scheme but only 56 will be available, totalling $5.6 million. "The balance of the purchase price will be funded by a bank loan to take advantage of the very attractive interest rates that currently exist," says Schiele.

He says proportionate ownership schemes allow investors to spread their risk and to participate in the ownership of large-scale, quality commercial properties that enjoy the benefits of professional property management. "They are an attractive form of investment for those wanting to benefit from ownership of commercial real estate without the knowledge or time to ensure its ongoing value and returns are maximised."

Schiele says in order to qualify under the Securities Act Exemption Notice 2002, allowing promotion of an offering to the public, a proportionate property ownership scheme must meet strict criteria regarding structure and information disclosure, with all relevant information, including an independent property valuation, provided in an Offeror's Statement.

- NZ Herald

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