Full range of options among Taupo offerings

By Colin Taylor

The property at 28 Heuheu St offers the stability of 13 tenancies and comes with 10 carparks.
The property at 28 Heuheu St offers the stability of 13 tenancies and comes with 10 carparks.

In Taupo a retail office complex, a hospitality-based commercial development and an industrial property with future development upside are being featured in Bayleys latest Total Property Portfolio.

The first of the three is a two-level commercial building of nearly 1000sq m on a 1014sq m site in the heart of the CBD at 28 Heuheu St. Described as an "absolute prime retail investment opportunity", it is being marketed by Mike Houlker of Bayleys Auckland who, with Gary Harwood of Bayleys Taupo, is selling the property by tenders closing on July 17 at 4 Viaduct Harbour Ave, Maritime Square, Auckland, unless it sells earlier by private treaty.

The building was originally developed in the 1970s but the ground floor, previously occupied by one tenant, was retrofitted in 2001 to provide multiple retail tenancies with their current modern retail facades. The upper-floor offices are partitioned and carpeted with wall-mounted air conditioning along with front and rear stairwell access.

"This attractive-looking property offers an investor an excellent opportunity to spread their risk across 13 different tenancies on varying lease terms," says Houlker.

"There is a good mix of national and well-established local businesses providing exposure to two different sectors of the market, with retailers on the ground floor and office occupiers above all in a prime pedestrian thoroughfare in one of the preferred retail strips."

The property has a net lettable area of just under 2000sq m and earns a net rental of around $324,000 per annum.

Tenants include Brumbys Bakery, a franchise operation with more than 280 stores across Australia and New Zealand; fashion retailer Pagani which was established in Auckland in the early 1980s and now has more than 40 stores across New Zealand; and footwear store Footloose, which has 19 stores mostly in provincial New Zealand cities and towns.

The largest office tenant, Central Plateau REAP, is one of 13 rural education activities programme providers in New Zealand and began operating in 1980. REAP is a not-for-profit organisation that provides a variety of educational and family support programmes.

Harwood says an upgrade to the upper-floor office space could widen tenant appeal and enhance returns.

"Retail vacancy in Taupo's town centre is typically very low and this building has always leased well," he says.

"Moves by Taupo District Council to limit future commercial development outside of CBD boundaries will serve to future-proof the inherent demand for this offering."

Ten car parks come with the property and the pedestrian walkway down the western side of the building enhances its street frontage and public profile. It also links Heuheu St with Horomatangi St, the second main retail area in the Taupo CBD.

The second of the Taupo properties encompasses the freehold land and buildings of the former Lake Hotel at 29 Tongariro St at the junction with busy Tuwharetoa St in the central Taupo shopping precinct.

"Retired vendors John and Shirley Goodman are selling up with established tenancies locked in and with further development options already in place," says Yvonne Westerman of Bayleys Taupo, who is offering the property via expressions of interest.

"There is an exciting add-value opportunity to create further vertical development using the existing structural foundation work above Cobb & Co to enhance an already solid return on this building," says Westerman.

"The previous owners extended the building and thought ahead by creating the structural infrastructure, including access, to allow vertical development at a later stage.

"While the original planning permissions have expired, the Taupo District Council has signalled that, with consents, vertical development within the CBD is acceptable under the current District Plan."

In its current form, the property has a floor area of 2684sq m on a 3487sq m site and earns rent of $650,000, plus GST, per annum.

The tenants are on varying lease terms and include family dining mainstay Cobb & Co, New Zealand's oldest restaurant chain now present in just eight New Zealand centres.

"Another well known tenant is Finn MacCuhal's traditional Irish pub offering restaurant food, a sun-drenched deck, big screens, gaming room, pool tables, and a vibrant nightlife including playing host to top New Zealand bands and a live DJ," Westerman says. Other tenants are Anatolia Cafe, Experience Taupo, Finns Global Backpackers and Verge Gallery.

Westerman says the Taupo economy has been recovering and improving since 2011 and is now back towards the growth level prevailing during 2007. "The Taupo District Economic Monitor December Quarter 2013 report outlines a number of individual economic indicator gains in the district which could give confidence to investors looking for opportunities here.

"Highlights of the report include a census-verified population gain, relatively stable levels of consented new residential and commercial-industrial development, increased consumer confidence, increased retail spending, and a rise in commercial visitor arrivals, visitor night-stays, and total visitor spend in nominal terms."

The gains were further backed up by increased economic activity in dairying, forestry, logging, wood manufacturing, geothermal energy, tourism and public/community services plus a fall in unemployment.

The third property for sale comprises the freehold land and buildings known locally as BP Tauhara at 235 Tauhara Rd, which is 750m from the Taupo Eastern Arterial Bypass on the fringe of the Tauhara residential area.

"The property has a net rental annual income of $160,000, plus GST," says Brendan Gallagher of Bayleys Taupo who is marketing it for auction at Bayleys Taupo on August 1.

Gallagher says the high-profile and easily-accessed property has a sound tenant covenant with the BP Service Station beginning a 10-year lease a year ago with a single five-year right of renewal. On Gas has a lease with a final expiry of 2030.

Gallagher says a seismic assessment of the buildings places the service station premises at 100 per cent of New Building Standard and the newer On Gas buildings at 155 per cent of NBS.

"In addition to the fully leased buildings, which total around 1345sq m including canopies, there is a further 1200sq m of the total 6166sq m site that could be developed in any number of ways to increase income streams," says Gallagher. "It is effectively bare land and a forward-thinking new owner will recognise the intrinsic value of well-located land on one of the principal feeder roads from the bypass into Taupo town."

BP Tauhara has signalled its commitment to the site by recently undertaking major renovations.

"The underground fuel storage tanks have been replaced, new concrete surface forecourts have been laid, and new protective safety walls are due to be erected around the bulk gas tank," says Gallagher.

"There is also a survey plan with an estimate of costs defining the property into three lots with individual titles which may also be appealing to a prospective purchaser."

- NZ Herald

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