East Tamaki print site offered in 72 syndicated titles

Times House is tenanted by two of the country's biggest publishers. It contains a 2400sq m press hall and about 1300sq m office and cafe space. Photo / Supplied

One of the biggest independent printing presses in Australasia is housed within an East Tamaki building that is being sold through a syndication scheme.

Times House at 48 Stonedon Drive is tenanted by two of the country's biggest publishers. The 160-tonne press churns out suburban and special interest newspapers and publications five nights a week.

Auckland-based syndication specialist SPI Capital is offering 72 proportionate ownership titles at $50,000 each in the $6.1 million, two-storey 3761sq m building sitting on a 5805sq m site at the edge of the $1 billion Highbrook Business Park. It is forecasting yearly cash returns of 9.25 per cent to investors.

Built by Euroclass in 2004, the building contains a 2400sq m press hall that has a strengthened floor providing maximum space for the printing press, paper reels and forklifts, and about 1300sq m of office space and a cafe.

The office area is open-plan apart from a few offices around the exterior wall. On the second floor is office administration space, a boardroom and a training room. All the walls are soundproofed.

SPI Capital sales manager Aaron Gascoigne says the property is tenanted by two sound businesses with six-year leases. Discount Web, trading as Business Media and owned by Horton Media - Australasia's biggest independent contract newspaper printer - occupies 69 per cent of the gross lettable area. Times Newspapers, jointly owned by Fairfax New Zealand and three private investors, leases 31 per cent of the building.

Horton Media CEO Matthew Horton says having premises with reasonably long leases is vital for a printing and publishing business. "Presses are difficult and expensive to move. The press now housed within the building was moved from Times Newspapers' Howick premises and had new parts added to it, so it has become considerably bigger and able to handle a lot more work."

Horton says presses need few people to operate them these days as they are highly automated. He says there is no doubt the publishing sector has slowed down across New Zealand.

"Suburban newspapers, in particular, and other publications are sensitive to the vagaries of real estate and motor vehicle advertising, which have been dropping, but they are now stabilising. There are a few signs there is more activity in these sectors, but it will be some time before they return to their glory days."

Times House sits to the southwestern corner of the East Tamaki site and has a large, easy turnaround area for trucks and vans that deliver raw materials or collect newspapers for delivery.

Gascoigne says East Tamaki has become a premier business location for many commercial offices and industrial operations. "Times House sits on the edge of one of the biggest business parks in Australasia, and nearby tenants include Office Max in new, purpose-built, 20,000sq m premises and New Zealand Post in a 1.6ha facility designed specifically for new state-of-the-art mail sorting equipment."

SPI Capital director Ray Knight says Times House has new leases, net yearly income of $512,126 and funding of $2.5 million from the BNZ.

"Interest on the loan has been set at a floating rate but capped at a minimum of 5 per cent and a maximum of 6 per cent for the first 18 months. It will be combined with investors' contributions of $3.6 million to buy the property. Bank debt on settlement will be at 43.25 per cent loan value ratio."

Times House has come on to the market at a time when syndicators and private companies are back, buying property after several years' absence from the market.

Knight says accepted wisdom is that property should be part of a diversified investment portfolio. "Ways of investing in commercial property vary, but syndication has gained a strong foothold among smaller investors."

He says a number of well-managed syndication companies throughout New Zealand are now offering smaller investors the opportunity to become the owners of good-quality office, industrial or retail property without an enormous capital outlay.

As listed trusts and institutions are selling off property to re-weight their portfolios or pay debt, it has allowed syndicators, in particular, to buy good-quality properties at more reasonable prices. "The recession has been helpful for small investors who can buy good property through syndicates with a reasonably small capital outlay."

Gascoigne says interest in Times House has exploded. "A number of high net worth people have registered an interest in taking five to 10 parcels each. Buying into property through syndicates is giving them a reliable, tax-effective income while enhancing their investment portfolio. In any asset allocation there needs to be a proportion of direct property investment."

Knight says established and well-managed syndicates are making yearly cash returns to investors of 8-10 per cent, derived from rental income after all costs are paid.

"Investors also benefit from tax advantages and capital growth over time because they own the property outright. But they need to make an informed judgment call on the quality and location of the property being offered for syndication, the strength of the tenants and the experience of the syndicate manager.

"The manager is the long-term custodian of investor interests and responsible for returns and value. Investors should spend time doing due diligence on the investment and looking at management fees and whether they are closely, or exactly, aligned to the returns of the investors, so both parties drive cash and capital gains together."

While many investors like syndicated property as a passive investment, there are some risks. Knight says movement in bank interest rates in the short to medium term can affect returns, and there is always a risk the tenant or tenants will leave.

"If a property is in a good location and is able to be altered for a new tenant's business, it won't stay vacant for long."

Detractors of property syndication often cite the illiquid nature of the investment and lack of a secondary market.

Knight says property syndicates might be illiquid in some people's eyes, but investors prepared to buy in for the long term don't get wild fluctuations in income. "After five years of ownership, we offer investors the chance to sell the property, and then they are asked biannually after that. We have not yet sold one property."

On the secondary market, SPI Capital and most other syndicators run in-house schemes. Investors register their titles for sale with the syndicate manager. Knight says the few titles that do come up for sale are often bought within a short time by investors already in the syndicate.

In a sign of the country's property syndicators' drive to continually improve the industry, a number are in the process of forming an informal association to improve investment documentation, self-regulate and work closely with the Securities Commission.