New Bay of Plenty fund opts for IPO

Aerial view of a new warehouse and office facility under construction in Truman Lane, Mt Maunganui.

Pacific Property wants initial cash for Mt Maunganui warehouse and office facility but has other plans too.

A new, unlisted commercial property company, Pacific Property Fund Ltd (PPF), based in the Bay of Plenty, is set to launch an initial public offering of shares, offering for subscription up to 7,820,000 ordinary shares at an issue price of $1 per share.

PPF chairman Denis McMahon says the offer is primarily to help fund the acquisition of a new warehouse and office facility in Truman Lane, Mt Maunganui.

The property is being purpose-built for Tui Products, which has agreed to lease the site for a term of 20 years with two 10-year rights of renewal. The offer opens on October 29 and closes on December 18.

McMahon says PPF is starting off its portfolio with the Truman Lane property. He said the company was recently formed with the aim of building a diversified portfolio of industrial, retail and commercial properties primarily located in Auckland, Waikato and the Bay of Plenty.

"We will focus on properties valued between $5 million and $30 million where we believe better opportunities exist to purchase on attractive terms due to more limited competition from individual investors at the lower end of the market and larger listed property funds at the higher end of the market.

"We are targeting sound, earthquake-compliant, well-located generic buildings that offer sustainable yields, have good lease structures, and offer the opportunity to add value through active management"

McMahon says PPF has engaged Tauranga-based Property Managers Ltd (PML) as its property manager. PML was formed in 1992 and has $120 million of commercial property under management and promotes itself as adding value to buildings through active asset management.

McMahon, also the executive director of PML, says PPF will need a strong partnership with an experienced property manager in order to manage the property and build up the property portfolio.

The new warehouse and office facility that PPF has chosen to launch its portfolio with is in a prominent location on Truman Lane in Mt Maunganui.

The development, which occupies a 3.05 hectare site at the major arterial route junction of State Highways 2 and 29, is under construction and due to be completed no later than March 28, 2014. It will provide about 10,100sq m of commercial space at the front of the site with around 4000sq m of land to the rear of the site remaining available for future expansion.

The main warehouse has a stud height of 7.25 metres, rising to 10.24m at the apex. The complex also contains a mezzanine area for storage, a warehouse office and a two-level office and amenities block.

Philip Tushingham, director of PPF, believes the property will offer a long and secure income stream for the company, with a starting net rental of $1 million per year and built-in Consumer Price Index annual growth.

He says the current target gross dividend yield of the offering is about 7 per cent per annum for the first full year to March 31, 2015, although he stresses that the target dividend yield is indicative only and is not guaranteed.

Tui Products is a 100-year-old New Zealand-owned and operated company, Tushingham says.

The firm is relocating its Mt Maunganui head office and multiple existing facilities to the Truman Lane site.

While the building has been purpose-built for Tui Products, it is considered a generic office and high-stud warehouse facility which would lend itself to a number of large footprint users which may include storage, distribution, or manufacturing.