Queenstown XBase hostel on market

The XBase backpackers' hostel in Queenstown

The freehold land and building housing the popular XBase backpackers' hostel on a long term lease is for sale in the centre of Queenstown.

"This is the biggest commercial property investment opportunity to hit the market in the Queenstown CBD in the past decade," says Steve McIsaac of Colliers International's Queenstown office who is marketing the property at 47-49 Shotover St with colleague Barry Robertson for sale by deadline private treaty closing on May 22.

The 3168sqm four-level Queenstown hostel contains 65 rooms and sleeps up to 388 people. It features a ground floor retail area and the 'Loco Cantina' bar. Other facilities include a reception area, travel desk, guest lounge, guest kitchen, laundry, TV room and high-speed internet access.

The building was constructed in 2004 and XBase has occupied the property since it was built.

The hostel sits on a 992sqm site on Shotover St opposite one of the busiest corners in town. Nearby hospitality businesses include Quicksilver, Sofitel Hotel, YHA Central and Queenstown's famous Fergburger outlet.

Robertson says the property's location, flexible building configuration and tenant covenant make it an "absolute premium" investment opportunity.

"In terms of investment fundamentals, this property has everything investors are looking for. It offers a prime CBD land holding; a quality, modern building; and nine years remaining on the current lease term to a well-established Australasian accommodation provider."

The full net lease to XBase, which expires in May 2024, generates a strong income stream of $1,020,000 a year, with potential income growth built in.

The XBase trans-Tasman chain operates 14 hostels throughout New Zealand and Australia which also include public bars and travel desks.

"As a backpacker accommodation provider, XBase is part of the largest growth sector in the New Zealand tourism market," McIsaac says. "Queenstown has always been a firm favourite among backpackers touring New Zealand and is expected to remain so, resulting in high occupancy rates for well-located, quality hostels like XBase."

McIsaac says the property represents an exceptional, strategic hotel investment opportunity at a time when tourism and population growth in the Queenstown Lakes region are leading the country.

"The growth being experienced in the Queenstown Lakes region is filtering through into high demand for commercial and tourism property among both investors and operators. There is currently zero retail vacancy in the Queenstown CBD so properties are tightly held by owners and keenly sought after by occupiers when they do come to market," he says.

"The XBase building will be considered a trophy holding for investors, particularly given the long lease in place to the established Australasian Hostel chain 'XBase' which is located throughout New Zealand and Australia in key tourism hotspots. We expect a broad mix of interest from throughout New Zealand and also internationally given the growth in inquiry we are seeing out of Australia and more recently Asia for hotel assets of this nature."

McIsaac says tourism continues to be one of the biggest forces driving the demand for commercial property in Queenstown, with continued growth expected to underpin the regional economy into the future.

Total guest nights in the Queenstown Lakes district increased by 8.8 per cent over the previous year to December 2014, according to Infometrics' quarterly economic monitor. This compares with an increase of 6.2 per cent for New Zealand as a whole.

Visitors stayed a total of 3,701,892 nights in the Queenstown Lakes district in 2014, which was up from 3,402,138 the previous year.

The tourism boom is spurring on population increases for the district, with the average population of 47,800 and peak population 96,500 in 2015 expected to rise to an average of 57,000 residents and a peak of 115,500 by 2025.