Warehouse rates best investment property

By Bob Dey

The warehouse which last night won the property industry's supreme investment and development award, the Total Logistics distribution centre in Mt Wellington, will be syndicated next week by new owner Waltus Investments.

The annual awards presented by the Building Owners and Managers Association (renamed the Property Council of New Zealand this month) are based more on investment criteria than on how pretty they look, but the Total Logistics centre on Niall Burgess Rd in the Westfield business park at Mt Wellington, Auckland, is a smart building.

Two years old, it was built by Watts & Hughes on the design of Williams Architects with engineering by Law Sue Consultants. It was purpose-built for Stephen Owens' Total Logistics Co and covers 18,740 sq m on a 29,740 sq m site.

Waltus bought it for $19.27 million on an effective yield of 9.7 per cent - indication enough that it has very solid investment value - and will go to the market next week to raise $10.8 million in shares and bonds, with a forecast return to investors of 9 per cent.

Waltus director Shayne Hodge was unaware the industrial building was up for an award, but is impressed by both the building and elements such as the thumb-print security system, and the tenant's operation.

"There is a move towards large companies subcontracting distribution. Total Logistics does it all through barcoding and computer scanning. It means companies with seasonal requirements no longer have to tie up capital in buildings."

Hodge says investors should also be pleased at getting 9 per cent, and not surprised if yields on quality industrial property slip half a per cent over the next few months.

"Quality property yields have definitely moved south, but you still have 300 to 400 basis points between that and five-year government stock. I see yields going further down. We've broken the psychological barrier of 10 per cent and investors should feel quite relaxed about getting 8.5 per cent in three months."

The warehouse will be syndicated on its own and is the largest single industrial property offered by Waltus. Its previous biggest was the Paykel Engineering property in Mt Wellington at $4.5 million.

The chairman of the Property Council judging panel, AmTrust Pacific chief executive Peter Wall, says judging "is not strictly on architectural and engineering excellence but more from their success as an investment, in terms of revenue returns and capital appreciation.

"The judges also consider user satisfaction, building efficiency in terms of ease of management and maintenance, and relevance is placed on the creation of a product which has industry and community acceptance."

Two other Auckland industrial buildings won merit awards. One was the Carters distribution centre on Harris Rd, East Tamaki, developed by Quadrant Properties for one of that company's shareholders, David Levene's Lewis Holdings, and the other was the Esanda Auto Select property developed on the Ellerslie Panmure Highway by Hartford Group, and also bought by Waltus for syndication.

The Heritage Auckland apartments hotel - started by David Brown Construction and completed by Mainzeal for Symphony Group and operator Dynasty - won the tourism and leisure award.

The Auckland Institute of Technology's science and technology building, also built by Mainzeal on a Jasmax design, won the special purpose category and the best of the commercial office buildings was Andrew Krukziener's One Queen St refurbishment with a merit award.

A sector tribute award was made in the apartment building category, with Holdsworth Group's Latitude 37 first stage in the Viaduct Basin winning the gold
trophy.

The listed property award went to St Lukes Group, which continues to stand out as the one property listing commanding a substantial premium.