High-profile site offers huge redevelopment potential

The 1.2ha freehold property at Mt Wellington has a large showroom, office and warehouse. Photo / Supplied

One of the few remaining large-scale commercial redevelopment opportunities available in the Mt Wellington area has come on the market with the offering of a 1.2ha freehold property at 500 Mt Wellington Highway.

A large 5820sq m showroom, office and warehouse building sits on the Business 5 11,557sq m corner site at the junction of Monahan Rd and the Mt Wellington Highway with 120m of frontage on to a roundabout on one Auckland's busiest arterial routes.

Mainly built in the 1960s, the building incorporates a two-storey office that was erected in 1985 on the Monahan Rd frontage, as well as medium-to-high stud warehousing.

"High-profile sites of this size and quality are incredibly scarce," says Colliers International broker Andrew Hooper, who is managing the sale with colleagues Greg Goldfinch and Todd Kuzmich.

"This is a great opportunity to purchase a high-performing corner site - one that has strong and secure current income but would also offer probably the best redevelopment potential on the market at the moment," Hooper says.

The vendor is restructuring its portfolio and looking to receive offers for the property, which is leased to Australasian fruit and produce business Freshmax, by the close on September 24.

Freshmax is a major player within the Australasian fresh produce business with sales of $150 million a year and employs more than 200 staff. It has held a 12-year lease at 500 Mt Wellington Highway since March 2001.

Rent reviews are conducted on a three-yearly basis and the lease is due to expire in February 2013.

With an underlying land value representing over 70 per cent of the capital value at the property, Hooper believes considerable interest will be generated.

"The security of the medium-term income in this highly sought-after location, combined with the significant opportunity to redevelop, means that we are expecting to field interest from a wide range of parties," Hooper says.

Pointing to an annual rental of $592,800, Kuzmich says the length of the tenancy means there is a secure and strong income stream in the medium term.

"This means that the property offers passive investors a great ownership opportunity," Kuzmich says.

However, it also offers owners the potential to redevelop, says Goldfinch.

"This building sits in a high-profile corner position in a location that has seen considerable development of larger, industrial premises over recent years," he says.

"Its central location will continue to be attractive to both national and international tenants."

"In addition to the considerable passing traffic, the site sits across the road from Vestey Drive, which is a hub of industrial real estate.

It is also opposite the high-tech Pacific Rise business park and a short distance from the Sylvia Park shopping and entertainment centre."

Goldfinch says the site is close to the Southern Motorway with quick access to the Auckland CBD and is surrounded by suburbs offering a large employment pool.

Other major occupiers nearby include Turner & Growers and Repco.

The area, said Goldfinch, is progressively becoming a commercial area rather than an industrial area.

"This is largely caused by land scarcity and its proximity to Sylvia Park, which has been open for business for three years and will likely influence appropriate uses on this site. We are seeing a lot of intensification of use in the area."

Alan McMahon, Colliers research director, says that although Mt Wellington has seen a slowdown when compared with the flurry of deals in 2007, it has been the engine room of Auckland's industrial market and retains the potential to grow further.

"Land values in the area more than doubled between 2003 and 2007 on the back of soaring capital growth," says McMahon.

"Greater difficulties since then in sourcing finance have reduced development activity in the area, which has helped keep supply in balance with levels of occupier demand.

Prime yields now sit between 8 per cent and 8.75 per cent and secondary yields between 8.25 per cent and 9.75 per cent.

"However, the Mt Wellington precinct offers good opportunities as it contains many of the city's best redevelopment opportunities.

"Combined with its exceptional locality - at the centre of Auckland's industrial heartland, half way between Auckland's CBD and Auckland International Airport - Mt Wellington will continue to attract developers and businesses, especially from manufacturing, importing and distribution industries."

McMahon says that in time, given a modest easing of debt finance, land values will find their level and allow development activity to recommence.

"The industrial property market continues to grapple with a low level of supply, the consequence of low demand, minimal debt finance, and depressed rental and capital values, which sit alongside high levels of private investor demand.

"This private investor demand is not as visible in the industrial market as the retail market, but it is just as strong.

"This is a particularly frustrating time for private investors, as they know that in the absence of any competitive Australian or New Zealand listed buyers, they have the market to themselves - but little opportunity to acquire."