The sub six per cent yield this Burger Fuel outlet, which sold for $655,000, set a new level.
Strong demand for provincial offerings, properties selling at low yields at well over their reserve price and two mainland China investors purchasing Auckland properties were features of Bayleys' first Total Property North Island portfolio auction for 2015.
A total of 26 properties out of 39 offered sold at auctions in Auckland, Hamilton, Rotorua and Wellington at a total value of just under $30 million, with a number of the unsold properties still under negotiation.
John Church, Bayleys' national commercial director, says it was particularly pleasing to see the strong performance of provincial offerings with 10 out of 11 of the portfolio's properties in Northland, Hamilton, Rotorua and Wanganui selling - some setting new benchmark yields in the process.
"This suggests that the property market recovery that has been evident in Auckland for some time is now permeating into other parts of the country which is a very encouraging sign," Church says. "Conversely, Auckland seems to be catching its breath after a record breaking number of sales over the past year or so. Indications are that this market is returning to a more normal level of activity, particularly given that there is a very limited supply of top shelf properties available for purchase."
Two Northland properties sold at the Auckland auction. A new 200 sq m building on a 759 sq m main street site at 94 Normanby St, Dargaville, with nine car parks, sold for $885,000, at a 6.6 per cent yield. The property is leased to Rabobank for nine years from February 2015 plus two three-year rights of renewal. "This would be one of the firmest yields achieved for a Northland commercial property and reflects the quality of the development undertaken by Wallace Development Company and the long lease to one of the world's biggest banks," says sales agent Ross Blomfield of Bayleys Whangarei office.
Further north in Kaitaia, a 1228 sq m Carters hardware store on a 4155 sq m industrial zoned site at 4-8 Dunn St sold for $1,275,000, at an 11 per cent yield though Alan Broadbent of Bayleys Kerikeri. It is leased to Carter Holt Harvey for 15 years from August 2007 with two six-year rights of renewal.
In Rotorua, four units in a recently completed 10 unit retail complex in a prime city fringe location on Fairy Springs Road (State Highway 5) sold at yields of between 5.95 per cent and 6.7 per cent.. The development in a high profile position on the main road into and out of Rotorua is anchored by a medical centre and pharmacy and has 90 common car parks.
Sales agent Mark Rendell says the sub six per cent yield on a 120 sq m Burger Fuel outlet, which sold for $655,000, set a new level for what investors are prepared to pay to secure good property in Rotorua. It has a 10 year lease with built in 3 per cent annual rent increases.
Three other units with six year leases also sold at very firm yields. An 87 sq m Best Sushi outlet sold for $390,000 at a 6.69 per cent yield, a 130 sq m bakery sold for $507,000 at 6.66 per cent and a 279 sq m superette sold for $762,000 at a 6.56 per cent yield.
"These yields are getting closer to returns seen in Auckland and it shows that investors are looking at Rotorua now, with purchasers of the units coming from Auckland, Hamilton and Matamata," Rendell says. "The Auckland buyers came and stayed in Rotorua for two days and they saw that it was a busy little complex so it gave them confidence."
Rotorua developer Tony Bradley says it is good to finally get some "decent yields" for Rotorua. "It shows a good product and a good agent will bring investors."
Rendell also sold a significantly redeveloped 1130 sq m vehicle testing station on a 3595 sq m site at 51 Marguerita Street, Fenton Park, Rotorua for $2.4 million under the hammer. It has a 10 year lease to VTNZ from October 2014, with four three-year rights of renewal. The property earns $189,250 net plus GST annually from a lease that has Consumer Price Index (CPI) rent reviews. However, this includes $45,888 per annum for 10 years for tenant repayments for renovation works on the premises.
In Rotorua's CBD, a 792 sq m fully leased two-level, 10-year old CBD office building sold for $1.7 million at an 8.72 per cent yield through Bill Wilson of Bayleys Rotorua. Each floor is unit titled with one tenant on the top floor and two on the ground floor and there are nine on-site car parks.
In Hamilton, there was also very strong bidding on a 2360 sq m warehouse and office building on 5273 sq m site at 10-12 Wickham St in Frankton. Sales agent Andrew Shaw says the property was declared on the market by the auctioneer at $2.2 million before selling well in excess of expectations for $2,460,000 at a 7.5 per cent yield to a Queenstown investor. He says the site has room for expansion and is occupied by a long established business Strata Precision Plastics on a new five year lease with one five-year right of renewal.
Two investors based in mainland China were the top bidders on two of the 13 properties which sold at the Total Property auction in Auckland. A buyer from Dalian, in northwest China, purchased a 3298 sq m residential development site at 276 Te Atatu Road, Te Atatu South in West Auckland for $1,780,000, at $534 per sq m, through James Chan and Quinn Ngo of Bayleys' Auckland-based International Division. Chan says the property's current zoning provides the potential for six townhouses, but the attraction for the purchaser was the site's Terrace Housing & Apartment zoning under the Proposed Auckland Unitary Plan which would allow for more intensive residential development.
The site currently has a single large dwelling with a swimming pool set in landscaped grounds.
A Chinese buyer based in Guangzhou also purchased a childcare centre in Mangere East for $1,320,000, at a 5.9 per cent yield. Located at 48 Buckland Rd, on a 698 sq m Main Residential zoned site, the 154.5sq m purpose-built centre is licensed for 39 children and was sold by Tonia Robertson, Tony Chaudhary and Chan.
He says the main attraction for the offshore buyer of this property was its 15-year lease from December 2014 to NZX listed Evolve Education Group which operates childcare centres throughout New Zealand many under the Lollipops brand. "While most offshore Chinese interest has been focused on large scale investment and development property opportunities, increasing attention is being shown in smaller properties particularly by investors interested in immigrating into New Zealand," Chan says.
Local Chinese and Indian investors were buyers of many of the other properties at the Auckland auction. Attracting the strongest bidding on the day was a block of three flats on a Residential 5 zoned 612 sq m site at 64 Shoreham Street, Avenue, Avondale, producing gross rent of $42,640 a year which was sold for $1,166,000 by Ngo and Harry Cheng.
The brick and tile building, comprising two two-bedroom and one one-bedroom flats, was declared "on the market" by auctioneer Richard Valintine at $1,016,000 and over 50 further bids, including many $1000 increases, followed adding a further $150,000 to the sale price.
"Two local Indian investors fought it out in the end and it sold for a 3.5 per cent gross yield which is very low even for a residential property where yields are generally lower than for commercial property," says Ngo.
Another very hotly contested property was a 655 sq m high profile corner site zoned Mixed Use at 1 Exmouth Street, Eden Terrace, which sold for $1,920,000 at $2,931 per square metre through Owen Ding and Chan. Bidding on the bare land site, currently used for car parking, started at $1.3 million and it was declared on the market at $1.7 million with multiple additional bids pushing the final sale price up a further $220,000.
Three retail outlets in the Highland Park Shopping Centre in Pakuranga, sold by Ngo, Sunil Bhana and Tony Chaudhary, also attracted brisk bidding and sold at low yields. The units are located in converted former cinema premises in the centre:
• a 110 sq m unit occupied by a Coffee Club on an eight year lease from March 2014, with fixed annual 3 per cent rental increases, sold for $972,000, at a 5.4 per cent yield;
• an 82 sq m unit occupied by Pita Pit, on a 10 year lease from March 2014 with annual CPI rental increases capped at 3 per cent, sold for $591,000, also at a 5.4 per cent yield;
• an 88 sq m unit occupied by Tank with an eight year lease from June 2014, with fixed annual 3 per cent rental increases sold for $600,000, at a 5.8 percent yield.
The highest bid at the Auckland auction was $7.5 million for a 2270 sq m, multi-tenanted building on a 5433 sq m site at 91-93 Central Drive, Henderson producing net annual rental income of $569,290 from eight tenancies. However, this was below the property's reserve price and it was passed in for negotiation with the highest bidder.
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