A six-level Auckland building in the heart of the city's tertiary education precinct, is on the market for the first time since its construction, as a sale and lease back opportunity with a long-term triple net lease.
"This is an investment property that will take care of itself," says Warren Hutt of CBRE who, with colleagues Brent McGregor and Mark Maginness, is selling 345 Queen St via a deadline private treaty process 4pm Thursday June 27.
Situated on an elevated 2032sq m site adjoining picturesque Myers Park, on the corner of Queen St and Mayoral Drive, the freehold property is owned and tenanted by ACG Pathways, a well-established private education provider that runs preschools, schools and vocational colleges at over 50 campuses across Australasia.
ACG is New Zealand's largest provider of tertiary pathway programmes for students with English as a second language, and 345 Queen St operates as its Auckland campus offering foundation studies for students wishing to study at AUT and the University of Auckland.
"It's strategically located close to tertiary education providers including the University of Auckland and AUT's city centre campus," Hutt says.
Most of the levels in the building, with floor plates ranging from 850sq m to 1100sq m, are structured in a classroom style and are designed to maximise natural light.
Hutt says the current net annual passing income is $2.4m with the lease allowing for strong annual fixed rent growth of 3 per cent per annum.
"While the rent growth profile is attractive, and will support a strong internal rate of return, what makes the covenant such a standout is a commitment by the tenant to a 20-year term on a triple net lease.
"Whether it's air conditioning, painting or lift maintenance, there's no disguising the ongoing management and costs that come with property ownership; but with capital costs and day-to-day management being the tenant's responsibility at 345 Queen St, investors can anticipate those benefits along with enhanced returns."
With a total net lettable area of 5159sq m, Hutt says there's also plenty of room to develop the site in the future.
"The property sits on a large site by CBD standards, and is underdeveloped with current planning regulations allowing for a basic floor area ratio [FAR] of six-to-one and maximum FAR of 10:1. By making full use of the zoning, a development could be created with a gross floor area of over 20,000sq m.
"A development of this scale on Queen St near numerous amenities and transport connections like the City Rail Link and the planned light rail route is likely to be highly sought after. In the meantime, the building's new owners could have a stable income with minimal management input thanks to what is the first triple net lease arrangement the CBD market has seen in a few years.
"From this perspective 345 Queen St is the perfect asset for investors looking for a property that essentially looks after itself, allowing them more time to grow a portfolio or put time into other core business operations."
Hutt says other landmarks in the area include the Grand Millennium hotel, and several performance venues like Aotea Centre, Auckland Town Hall and Q Theatre.
"With nearby Aotea and Karangahape train stations under construction as part of the City Rail Link just a short walk away, this location is future proofed for ongoing use as a destination for students and as a significant mixed-use development site downstream," he says.