Hammer runs hot at retail auctions

By Colin Taylor

Sale of 13 properties for $13.3m shows bidding battles are the way to go when demand is high, agent says.

This Burger King property in Albany went for $2,530,000. Photo / Bruce Clarke
This Burger King property in Albany went for $2,530,000. Photo / Bruce Clarke

Retail properties were again in hot demand at Bayleys' latest Greater Auckland portfolio auction, with 13 of a total of 17 properties up for auction selling for a total of $13.3 million

Six tenanted retail offerings sold at yields of under 7 per cent as investors fought it out on the auction room floor to secure well-located premises.

Bayleys' commercial and industrial auctioneer, Richard Valintine, said the clearance rate reinforced how effective auctions were in capitalising on the strong demand for a limited supply of good quality investment properties.

"High clearance rates for this type of property have been a feature of our auctions throughout the year, with demand outstripping supply," he said.

"However, investors are clearly distinguishing between well-located retail properties perceived as top tier and secondary properties usually occupied by local tenants in less desirable locations.

"There is still a market for these secondary properties, particularly if there is an opportunity to add value, but investors expect a higher yield for the additional risk, and they obviously adjust what they are prepared to pay accordingly."

The property which attracted the strongest bidding and sold for the highest price was a Burger King facility on a 2224sq m corner site at 112 Apollo Drive, Albany which went for $2,530,000.

Valintine declared the property to be "on the market" at just over $2.4 million and several parties continued to place multiple bids before it eventually sold at a 5.8 per cent yield.

The property was sold with a 10-year lease from the date of the building's completion in April 2007, with rights of renewal for a further 20 years.

It was leased to Antares Restaurant Group, which holds the New Zealand franchise development rights for Burger King.

Also sold under the hammer for for $2.3 million at a 7.5 per cent yield was a 595sq m, two-level bank building on a 329sq m corner roundabout site at 179 Onehunga Mall, Onehunga.

Westpac last year exercised the second of three three-year rights of renewal over the property.

The lowest yield of the auction was 4.3 per cent for a 180sq m early 1900s villa converted for restaurant use at 227 Jervois Rd, Herne Bay, which sold for $1.8 million.

The Empress Garden Chinese restaurant last year exercised the first of two six-year rights of renewal on its lease, which produces current net annual rental income of $78,000.

James Chan, of Bayleys Auckland, said the sales price reflected the longer term redevelopment potential of the 726sq m freehold Business 1 zoned site and its prime location close to the central city.

The landmark former Epsom Post Office building sold after auction with vacant possession for $2,050,000. The two-storey, 415sq m building on a 789sq m site, has a Historic Places Trust Category 2 classification.

It was built in 1909 and has been extended over the years.

The property was put up for sale by Daryl and Valerie Kirby who purchased it from the Government in the late 1980s. They renovated the building, renamed it Kirkby House, and ran their advertising business from the 263sq m ground floor until their retirement.

They kept the layout of the postmaster's original two bedroom apartment on the first floor largely unaltered, although they modernised it with the rest of the interior of the building.

Bayleys agent Rachael Pittaway says the property generated huge interest, with more than 65 inquiries and 45 site visits.

It has been bought by an investor who will do further refurbishment and strengthen the building before re-letting it.

"He is intending to further enhance the character features of the building and may look at utilising the vacant land at the rear of the site to suit a tenant's requirements," Pittaway said.

Other properties to sell at the auction included:

Unit 1A at 89 Ellice Rd, Wairau Valley - a 118sq m road front cafe and bakery with a 22sq m outdoor courtyard and 13 customer parking spaces, sold for $840,000 at a 6.6 per cent yield. It is part of a 35-unit complex built five years ago by Kea Property Group, and the Ellice Cafe has a 10-year right of occupation from June 2008.

Unit E at 292 Dominion Rd, Mt Eden - a 54sq m outlet in the Eden Quarter Shopping shopping complex occupied by the Sharing Shed hairdressing chain, which has been in the unit since 2007 on a six-year lease, was sold for $625,000 at a 6.2 per cent yield.

Lot 5, Unit K, at 185 Great South Rd, Manurewa - a 257sq m unit in the Southmall Shopping Centre with two tenants, was sold for $590,000 at a 9.6 per cent yield. One of the tenants, a dry-cleaner is on Great South Rd side and the other, a shoe store, is within the centre.

Unit K at Titan Place, Silverdale - a 547sq m, three-year-old industrial unit that is mostly vacant, with holding income of $15,700 gross from basement tenancies, was sold for $560,000. It has a 302sq m workshop and warehouse, a 15sq m showroom, 25sq m office and 37sq m of amenities plus a 300 sq m yard including eight car parks and container drop off area.

Lot 42 in the Westgate Shopping Centre - an 89 sq m unit leased to Labtests for eight years until 2017, was sold for $520,000 at a 6.4 per cent yield.

415 Great South Road, Otahuhu - a two-level, 153sq m building with ground floor retail and a three-bedroom flat upstairs on an 80sq m site sold for $525,000. The 73sq m retail unit is producing monthly net rental income of $1993, and the flat is vacant.

Unit J2 at 239 Queen St, Auckland - a 16sq m unit in Mid City retail complex with a three-year lease to Blog Fashions from August 2011, was sold for $390,000 at a 10.7 per cent yield.

Unit 19 at 3 Northcroft St, Takapuna - an 85sq m ground floor unit in the 31-level Sentinel Apartments building was sold for $370,000 at a 7.6 per cent yield. It is occupied by dry cleaning and laundromat business, Ocean Drycleaners, on a six-year lease from February 2010.

Unit 118 at 184 Symonds St, Auckland - a 72sq m ground floor commercial unit with three car parks and a two-year lease from December 2011 to Machine Monitor NZ, in a high profile position next to a building entranceway on Khyber Pass corner, was sold for $250,000 at a 6.9 per cent yield.

- NZ Herald

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