Portfolio targets big investors

Investors have more than $1 billion looking for quality property investments in Auckland's commercial, industrial and retail markets, says Colliers International sales director Peter Herdson.

Colliers International has launched one of its biggest commercial and industrial property portfolios in the past decade, featuring 52 properties worth nearly $500 million - including $340 million of commercial property.

"The golden weather for property investment shows no sign of abating," Herdson says.

"Interest rate hikes are not dampening the demand for commercial property. Our variable interest rates may be more than 1 per cent higher than Australia, but investors and developers locally and from across the ditch are bullish on New Zealand's property market and economy."

Herdson says the gross yields of commercial and industrial property outstrip those in Australia, making New Zealand highly attractive.

About $2 billion of property assets were sold last year and property has been the investment darling for the past five years, particularly for New Zealand and Australian institutions and trusts.

Herdson quotes a news report stating that Australians invested $690 million in New Zealand in the past year, taking about 34 per cent of sales above $3 million. This reflects confidence in the economy's strength, despite some economists' doubts about its sustainability, he says.

Herdson is expecting substantial international and local interest in Collier's portfolio because there are few quality investments on the market.

Prices are still strengthening and prime properties haven't sat around long before selling. It's the same throughout New Zealand - a scarcity of quality property investments and a large number of buyers.

One of the stars of the Colliers' portfolio is the Foodtown complex at Takanini. The property has a rent roll of $651,000 a year, paid by blue chip tenants, including Foodtown, McDonald's and Resene, as well as resource consent for a further 14 shops covering about 2100sq m.

Herdson says there will be little trouble finding tenants for the new shops, as the Foodtown complex has a strong existing cashflow and sits next to Retail Holdings' new bulk retail development, which includes Mitre 10 Mega, Plastic Box and Briscoes.

Among the $160 million worth of Auckland property on the market, Swanson Towers offers prospects for redevelopment or added value.

Swanson Towers was Colliers' main sale in 1990 and the company has managed the property since then for Singapore-based Asiawide Investments.

Colliers broker John Green says Swanson Towers is ripe for redevelopment. There have been numerous nearby conversions of older offices to residential apartments.

The three freestanding buildings, with a total area of 6365sq m, are known as The Federal, Swanson and Hobson Blocks. Two main tenants occupy 80 per cent of the buildings. Employment Relations and the Auckland Language Centre have leases expiring within 18 months.

Green says Asiawide Investments is selling because of the New Zealand dollar's strength. A number of Singaporean investors have recently sold out of New Zealand and are reinvesting back into the Asian market.

"Twenty years after floating, the New Zealand dollar is now the 11th most-traded currency in the world, with daily turnover of around $7.7 billion. Although the dollar has fallen in the past couple of weeks, the ANZ says an estimated 'fair value' of the New Zealand dollar is 61USc but it has sat above that for 18 months."

The Southward industrial portfolio, worth more than $30 million, is also expected to generate strong buyer interest. The portfolio includes property in Auckland, Wellington, Hamilton and Christchurch. Most of the properties are leased by Stainless Alloys and Southward Engineering, recently bought by Australian listed company Atlas Group Holdings.

At East Tamaki the property covers 8.3ha, including an 8000sq m building. The land is in four separate titles and will be sold separately or as one parcel. Several of the buildings on the 3ha Wellington site will be sold as one lot.

The Christchurch property has a long-term lease, and the Hamilton property has a short-term lease and will suit owner-occupiers or developers.

Wellington broker Richard Findlay says he is expecting a rush of industrial buyers and investors as the properties have strong tenants.

The Colliers portfolio includes 19 Wellington properties valued at about $190 million and Findlay says the number of prime properties on the market stems from several of the vendors being buyers in other transactions. As the market has strengthened they are moving to bigger developments and investments.

Two historic Christchurch buildings are featured in the portfolio, which carries about $50 million of property from the south.

The Press newspaper's former paper store at Lincoln Rd, Addington, is for sale after being converted to a two-level building, with Postie Plus headquarters on the first floor and retailers on the ground floor.

The 7566sq m site's redevelopment also includes a new two-level retail complex with offices on the top floor and a car wash/cafe.

DY Investments bought the redevelopment site two years ago and Christchurch broker Dick Thomas says the company is selling to reinvest in an office development on the old PDL site across the road. The property is expected to sell in the $11 million-plus range.

Well-known former student haunt, the Carlton Hotel, on Bealey Ave is for sale after undergoing a major refurbishment about five years ago to include a new addition housing Burger King on the ground floor and office suites above. It is priced at $3.6 million-plus.

Herdson says it is ironic there is a quality collection of stock for sale after a shortage over the past year.