Gisborne's Kaiti Mall, the East Coast city's largest suburban retail hub, on the northeastern edge of the central business district, has been put on the market and is featured in Bayleys' latest Total Property magazine out this weekend.
"This sale marks the biggest commercial real estate sell-down in Gisborne for decades," says Colin McNab of Bayleys Gisborne who is selling the shopping mall at 498 – 508 Wainui Rd by tenders closing at 4pm on Thursday June 21.
"We'd have to look back to the turn of the last century to find anything of this size and scale coming onto the market in Gisborne," McNab says.
Kaiti Mall is occupied by 12 individual retail, business, government and commercial tenants; and is well-known throughout Gisborne for its rows of stately palm trees and availability of parking for more than 100 vehicles - in addition to the staff parking bays at the rear of individual business premises.
The centre also has dual entries/exits from Wainui Rd, which doubles as State Highway 35 – the main route north out of the city – and also serving as the arterial route linking the city with the Southeastern suburbs of Tamarau and Wainui.
For stock delivery and staff entry, the mall's retail businesses are accessed from Craig Rd or the cul-de-sac of Jackson St.
McNab says the U-shaped property encompasses 3680sq m of retail space occupying a 12,410sq m block of freehold land held in eight titles. Each tenancy has its own individual staff amenities and bathroom facilities.
"Kaiti Mall is very much a 'neighbourhood' focused retail destination with its tenancies reflecting its geographic and socio-economic residential location. Tenants include the baker, the grocer, the bottle shop and bar among the 'cornerstone' operators relying on the local clientele."
He says the centre has been mooted for a 'make-over' to attract more commercial activity and broaden the customer appeal for operators on site.
"Kaiti Mall was built in the 1960s and has 'solid bones' from a construction perspective. However, it would certainly benefit from a phased refurbishment and modernisation programme to brighten up its general appearance.
"The mall's real potential lies in renovating it into the 21st century - not only from a physical infrastructure perspective, but also reinvigorating its public persona by making it more 'customer-friendly'."
Tenants at Kaiti Mall are:
• Kaiti Mall Super Value supermarket – one of 40 nationwide grocery stores operating under the franchise moniker;
• Red Door Liquor Shop with a lease running through until 2020 with two further three-year rights of renewal;
• Kaiti Mall Fish Shop on a lease until next year with three further three-year rights of renewal;
• Kaiti Bakery tenanted through to next year with a further five-year right of renewal;
• Kaiti Mall Pharmacy signed to a tenancy through to 2021 with a further three-year right of renewal;
• Shiralee Dairy on a lease running through to next year with two further three-year rights of renewal;
• Liquid Self-Service Laundromat paying rent to 2019, with five further two-year rights of renewal;
• Work and Income New Zealand occupying two adjoining premises; and
• New Zealand Police on a lease running through until 2021.
Additionally, there are commercial leasing agreements for ANZ Bank 'hole in the wall' money dispensing machines; and a 2 Degrees Mobile cellphone tower. Combined, these 12 tenancies generate net annual rent of $339,344 plus GST.
"While Kaiti Mall delivers one of the biggest retail and commercial rent rolls in Gisborne, there are several avenues to grow revenues," McNab says.
"The most obvious is by filling three vacant tenancies which would immediately increase the rental stream." The areas of the three empty units are 368sq m, 312sq m and 56sq m.
"Basing an estimate on the existing lease terms for other mall tenants, the three empty units could be expected to earn an additional $40,000 to $50,000 per annum when fully occupied."
Another revenue growth prospect is the mall's wide grass verge between the car park and Wainui Rd.
"With careful placement, this could accommodate a small number of 'pop up' food and beverage outlets like coffee carts and caravan-styled fast food operators," McNab says. "With easy vehicle access, these could almost operate on a 'drive-through' basis.
"Expanding this theme of increasing the diversity in food and beverage options further, there has been talk of Gisborne establishing a night market attraction within the car park on a fortnightly or monthly basis – with site holders paying one-off rental fees or subletting the night market concept.
"These food markets are hugely popular and incredibly successful in the bigger cities where they bring together a fusion of global cuisines – Chinese, French, Thai, Indian, Mexican, Italian, Korean and so on – along with boutique menu options like barbecued ribs, hangi pork, Cajun chicken, or Hungarian fried bread.
"Gisborne is pretty quiet on a Sunday evening, so a night market would bring a vibrancy to the city – not only for the core customer base of locals, but also for tourists."
A further potential money earner for the mall is signage.
"Subject to council consent, billboard advertising could be installed for a considerable length along the Wainui Rd street frontage – pitched at the relatively high traffic flows travelling in both directions along Route 35."
McNab says he expects the property to be purchased as a passive investment. "But, with three vacant premises, an owner/occupier could also take up residency on site."
He says the broad mix of tenants at the shopping hub makes for a spread-risk investment ranging across small privately-owned retail outlets, two government departments, and through to a standalone supermarket.
"While the terraced Kaiti Mall was built to a 1960s configuration, the strategy behind a 'one stop' suburban shopping location has been reinvigorated over the past 10 years through changing society dynamics.
"More and more families have become reliant on two working parents, so there is often less time for fundamental household chores such as shopping for food and groceries. As a result, popping into a suburban mall has become a social 'one-stop' norm – enabling urban dwellers to quickly buy ready-made meals, or ingredients for that night's dinner, along with a bottle of wine, and collecting the dry cleaning at the same time."
McNab says the Gisborne district was home to 43,653 residents as recorded in the 2013 Census with 32,690 living within the city.
"Another factor working in favour of investment in the Kaiti Mall is a forecast 2.11 per cent population increase from 2011 to 2025," he says.