Spirited bidding means low yields

The highest price achieved at the auction was $2,170,000 for a childcare complex at 114-116 Maskell Street, St Heliers.

Strong competition resulted in four properties selling at yields of under 5 per cent

A total of 12 properties sold at a combined value of $14.6 million representing a clearance rate of 75 per cent at Bayleys' latest commercial and industrial Total Property auction in Auckland.

Spirited competition among a big crowd of investors attending resulted in four properties selling at yields of under 5 per cent with another four generating yields of between 5 and 6 per cent.

Richard Valintine, Bayleys' commercial and industrial auctioneer, says there was multiple bidding across all of the offerings.

"It was one of the largest crowds we've seen at an auction in recent years with rapid fire bidding from all around the auction room and telephone bidding also on most properties."

John Church, Bayleys' general manager, commercial and industrial, says a pleasing feature of the auction was the widespread interest across a range of properties encompassing not only passive investment offerings but also listings that provided add value and development opportunities.

"There was also excellent bidding on a couple of industrial offerings, one of which sold for a 5.2 per cent yield as well as the traditional strong interest in smaller retail offerings," Church says. "The wide range of sales, and the high clearance rate, reflects the increasing breadth and depth of buyer activity that is now evident in the market."

Two properties with modest tenancy profiles, but with significant redevelopment potential fetched the lowest yields at the auction.

Attracting the most bidding, with a total of 127 bids, was a 746sq m high profile site with a Mixed Sse zoning at 112 New North Rd, Eden Terrace, which sold for $1.5 million at a 2.9 per cent yield through Scott Kirk and James Were of Bayleys Auckland in conjunction with Tony Chaudhary of Bayleys Manukau. The site is currently occupied by a car yard, with a lease expiring in December 2015 and no renewal rights.

The property was initially passed in at $1,150,000 but bidding recommenced and two competing parties chalked up over 100 further bids before it eventually sold. "It is a superbly located site with huge corner profile on a main road into the CBD and is close to one of the stations for the proposed underground rail network," says Kirk. "Its Mixed Use zoning allows the property to be much more intensively developed than it is at the moment, up to a height limit of 15 metres, and provides for a very wide range of potential end uses including retail, office, light industrial and residential."

Chaudhary says the investor who has purchased the property has no immediate plans for the site.

Another underdeveloped 1068sq m site at 1885-1897 Great North Rd in Avondale with a 372sq m single level building split into six retail outlets sold for $1,630,000 at a 3.9 per cent yield through Mike Adams and William Coates of Bayleys Auckland.

The building has been classified as earthquake prone by Auckland Council but Adams says it is possible to sell these types of properties provided they have added value potential and other attributes such as location and underlying land value.

"We had over 70 inquiries on the property and 10 potential bidders in the room. The Business 2 zoned site has substantial frontage to an arterial road and has been classified as town centre land in the draft Auckland Unitary Plan with potential for intensive Mixed Use commercial and residential redevelopment in the future."

Bidding on the property commenced at $750,000 and it was pronounced "on the market" at $1.4 million.

Two bidders then fought it out through a long series of $10,000 raises, adding a further $230,000 to the final sale price of the property. Adams says it was purchased by a local investor who sees long-term growth and potential in the Avondale area.

First to go under the hammer at the Total Property auction were four shops in a recently completed food and beverage retail convenience centre developed by Aubrey Edward Group at 490 Pakuranga Road, Pakuranga, and marketed by James Chan of Bayleys Auckland and Tony Chaudhary of Bayleys Manukau. Two sold at yields of under 5 per cent and the other two at under 6 per cent. Chan says there were close to 30 bidders either in Bayleys' Auckland auction room or on the phone competing for the Pakuranga shops with the offerings each attracting up to 57 bids before they sold under the hammer.

A Columbus Coffee outlet in a high-profile position at the entrance to the centre fetched the highest price and the lowest yield of the four shops. The 130sq m cafe, with a covered outdoor seating area, sold for $1,182,000 at a 4.7 per cent yield on its new eight-year lease which will produce initial net annual rental income of $55,250. Bidding started at $600,000 and it was declared to be on the market at $1.1 million.

A further 16 bids totalling $82,000 took it to its final sale price.

The cafe chain, which was established in 1994, now has close to 50 outlets nationwide. Chaudhary says Columbus has utilised a number of similar new retail convenience centre developments to expand its presence around Auckland where more than half of its cafes are located.

A 70sq m Bruce Lee Sushi store - its fifth Auckland outlet - with a 10-year lease was the next unit to sell, at a 4.8 per cent yield. A series of $5000, $2000 and then $1000 bids saw it finally sell for $541,000.

An 80sq m frozen yoghurt outlet sold for $681,000 at a 5.6 per cent yield. The unit is occupied on a six-year lease by a Yogg yoghurt bar - its second shop in Auckland - which offers soft-serve yoghurts with a range of toppings that customers can "pick'n'mix" themselves.

The final Pakuranga shop to sell, the 70sq m Snacker Convenience Store, sold for $602,000 at a 5.7 per cent yield on its eight-year lease. It was declared on the market at $550,000 but then attracted a further 40 bids, mostly in $1000 lots but with some $500 increases which added a further $52,000 to the sale price.

Chaudhary says a big attraction for investors was the built-in rental growth of the four leases which "inflation proofed" their income. "They all have annual rental increases based on the consumers price index (CPI) with three having additional fixed increases of between 1 and 3 per cent per annum plus reviews to market on renewal. This offers investors real rental growth, and thus good capital growth potential. Purchasers were therefore prepared to pay a premium to secure these units."

Chan says another enticing factor for investors was the fact that the centre is anchored by a drive-through facility occupied by Carl's Jr, a giant American-headquartered fast food chain.

The site has a central common parking area for up to 45 cars.

The highest price achieved at the auction was $2,170,000 for a child- care complex at 114-116 Maskell St, St Heliers, which was sold by Mark and Rachael Pittaway in conjunction with James Chan.

Tenant Bear Park, which runs a pre-school and nursery from two converted residential dwellings, has been in occupation for over 20 years and is currently on a 6-year lease term with two-yearly rent reviews to CPI.

The property on 1218sq m of residential land in two titles sold at a 5.8 per cent yield. There were multiple bidders for the property including two telephone bidders. It was declared to be on the market at $2,050,000 with three bidders pushing the price up a further $120,000.

The Pittaways also joined forces with Stephen Scott of Bayleys Auckland in the sale of 1415sq m of land at the rear of a substantial office building at 128-130 St Georges Bay Rd, Parnell, for $1.7 million at a 7.3 per cent yield.

Two properties located in a popular industrial precinct in Pakuranga also attracted good interest. A 1494sq m building split into four tenancies on a 3136sq m corner site at 2 Canon Place sold for $1,525,000 after 64 bids at a 5.2 per cent yield through Ben and Nick Bayley and Dave Stanley of Bayleys Manukau.

At 18 Ben Lomond Crescent, a 1049sq m building on a 1792sq m fully fenced site with seven tenancies sold for $1,550,000 at a 9.05 per cent yield through Shane Snijder of Bayleys Counties and John Bolton of Bayleys Manukau.