Millennium business park to be syndicated
Wholesale investment office syndication is New Zealand’s biggest ever, reports Colin Taylor
he Millennium Centre business park in Greenlane, which has just been purchased unconditionally by Oyster Property Group in New Zealand’s biggest ever single office transaction, is now to be syndicated by the commercial fund and property manager.
Earlier this week Oyster Group and vendor Goodman ( NZ) Ltd announced the business park at 600- 604 Great South Rd had changed ownership for just over $ 210 million, at a yield of 7.25 per cent with settlement due at the end of February 2017.
Oyster, in conjunction with Colliers International’s syndication division, is offering wholesale investors a total of 448 parcels at $ 250,000 each in the property which generates net rental income of about $ 15.24 million per annum plus GST.
Tim Lichtenstein, national director of syndications for Colliers, says investors are projected to receive a pre- tax cash return of 8 per cent per annum, paid monthly.
The complex comprises three adjoining properties designated Millennium Centres I, II and III, that were developed progressively from 2001 through to 2009.
They encompass a commercial hub of seven office buildings totalling 43,500sq m in net lettable area which occupy a site area of more than three hectares.
Situated in a prominent position in Auckland’s well- established Southern Corridor commercial precinct, stretching from Newmarket to Ellerslie, the Millennium Centre is one of Auckland’s biggest commercial business parks occupied by over 40 businesses, 2500 people and a total of 1567 on site car parks.
National and international tenants include American Express, Avis, Siemens, L’Oreal, Chevron, Griffin’s Foods, Adidas, Bridgestone and Toyota Finance New Zealand Limited. Among other business tenants are a childcare facility, a Pilates studio, a gym and seven retail amenities including two cafes.
Lichtenstein says the average tenant lease term is five years, which is considered outstanding for an asset of this size.
“This syndication offer represents an exceptional deal for astute investors looking for an outstanding institutional grade property investment opportunity,” he says.
“The Millennium Centre features a well- diversified income stream with the top 10 tenants accounting for 59 per cent of the property income.
“In addition, the property benefits from leases with fixed growth provisions and a secure cash flow supported by a strong lease expiry profile.”
The three complexes, on separate titles, which form part of the syndication are:
Millennium Centre I which was constructed in 2001, comprising three multi- level office buildings with a total net lettable area of 15,488sq m. It houses Toyota Finance as one of the major tenants and has basement car parking beneath each building along with a standalone four level car parking building.
Millennium Centre II’s modern commercial office buildings were constructed in 2005 and include three, three- level office buildings and a separate gym with a total net lettable area of 19,874sq m. It encom- passes integrated two levels of basement car parking beneath all three buildings with additional on grade parking. Notable tenants include Salesforce New Zealand, occupying 12.6 per cent of the lettable area, as well as Spotless Facility Services ( NZ), American Express International and Oxygen Business Solutions.
Millennium Centre III i s an A- grade office building and the most recently constructed, in 2009. It has three office levels plus three basement car park levels with ground floor retail. The building stands out with a distinctive full- height, exterior curtain- wall glazed facade and longrun metal clad roof over a steel frame. Chevron New Zealand ( now owned by NZX li sted Z Energy) i s one of the major tenants, together with various other retail tenancies, occupying the ground level.
Lichtenstein says Greenlane’s well- established suburban commercial precinct i s benefited by easy access to the motorway network with direct routes to the CBD along with retail and other amenities at the nearby Ellerslie Town Centre.
Transport connections include access to the State Highway 1 southern motorway at the Ellerslie- Penrose on/ off- ramps about 1km to the south, and the Greenlane on/ off- ramps approximately 1.5km to the north.
Public transport is available at the Ellerslie Train Station which has recently been upgraded. The Great South Rd and Main Highway arterial routes both have regular bus services..
“Surrounding developments feature a mixture of office and warehouse uses,” Lichtenstein says.
“However in recent times the focus of development has seen a rise in commercial office space with the locality now featuring a number of quality developments including the Central Park Corporate Centre.”
Lichtenstein says official statistics show businesses are demonstrating confidence to lease and expand into new space driven by buoyant economic conditions. A total of 120 further businesses and almost 1200 more employees have been recorded as relocating to Greenlane over the past four years. Overall vacancy rates in the Southern Corridor precinct now sit at a historic low of just eight per cent.
A Colliers International analysis of 500 Southern Corridor leasing deals over the past nine years indicates an average maximum vacancy period of less than a year.
Despite the high proportion of small to medium- sized businesses in Auckland, office space of more than 2000sq m in the Southern Corridor is typically vacant for less than eight months.
“This signals the attractiveness of the area for a large cross section of businesses,” Lichtenstein says.
Mark Schiele, Oyster’s chief executive officer, says the Millennium purchase i s consistent with the company’s strategy of acquiring quality assets in areas of enduring occupier demand.
“As a major commercial hub in Auckland, in a well- connected central location with high quality buildings and diversified income streams, it made long term commercial sense for Oyster to acquire the Millennium Centre and then structure it as a multi- investor, wholesale investment opportunity.
“Purchasing the Millennium Centre is an important achievement for Oyster as it continues our investment strategy focused on providing superior assets with strong economic rent profiles, to our broad range of investors.”
Oyster’s purchase of Millennium closely follows its acquisition and successful syndication of the $ 97 million Cider building in the central Auckland suburb of Ponsonby earlier this year.
Schiele says the wholesale investment opportunity is the largest ever offered in the New Zealand syndication space, which is experiencing unprecedented demand for quality investment products.
“Investors are continuing to seek opportunities for yield and competitive monthly returns.
“The Millennium Centre offer represents a very good return for an A- grade investment property of this scale and quality in the currently low global interest rate environment.
“Institutional grade properties of this calibre are seldom ever available to investors who want to participate in direct ownership and we have already received interest from our investors who knew we were purchasing the Millennium Centre.”
Oyster Group will be responsible for the day to day property and facilities management of the Millennium Centre and undertake the management of the proportionate ownership scheme created to own the property, including the payment of monthly income distributions to investors.
Following this purchase Oyster will have over $ 1.1 billion of property assets under management through a combination of public and private property syndicates and funds, and property management mandates from institutions and private investors.
Peter Herdson, national director capital markets at Colliers, who brokered the Millennium sale between Goodman and Oyster Group, says the scale of the transaction is noteworthy among several other $ 100 million plus transactions in New Zealand over the last t wo years.
“Demand for commercial property will continue to be spurred on by domestic economic expansion, balanced supply and demand fundamentals and positive debt- to- yield spreads.
“Auckland faces significant challenges with its massive projected population growth stretching the city’s resources on all fronts,” Herdson says.
He says Colliers approached a select group of experienced property investors regarding the Millennium opportunity and received a number of bids as part of an off- market competitive process.
Lichtenstein says that with no immediate respite in rental increases forecasted, it is an extremely favourable time to be investing.
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Mark Schiele