Big chance for small in­vestors

Syn­di­ca­tion of­fers $ 50,000 shares in Manukau prop­erty, writes Colin Tay­lor

The New Zealand Herald - - Properties For Sale -

SMALLER in­vestors are be­ing of­fered the op­por­tu­nity to ac­quire a free­hold ti­tle in­ter­est in a prime Manukau in­dus­trial in­vest­ment prop­erty with a long lease to one of New Zealand’s largest me­dia com­pa­nies, APN.

Au­gusta Funds Man­age­ment has launched a pro­por­tion­ate own­er­ship scheme for the prop­erty at 587 Great South Rd, Manukau City and has ap­pointed Mike Houlker and David Gubb, of Bay­leys Real Es­tate, to mar­ket 169 in­di­vid­ual ti­tle in­ter­ests at $50,000 each.

Sub­scribers can ap­ply for more than one ti­tle.

Un­der a pro­por­tion­ate own­er­ship scheme, each in­vestor ac­quires a ben­e­fi­cial in­ter­est in the reg­is­tered free­hold ti­tle to the prop­erty which they can later sell.

This also en­ables in­vestors to take ad­van­tage of de­pre­ci­a­tion al­lowances for tax pur­poses.

Au­gusta will man­age the scheme and pro­vide sub­scribers with an itemised list of as­sets to en­able max­i­mum de­pre­ci­a­tion to be claimed.

Au­gusta has been in­volved in sev­eral pro­por­tion­ate own­er­ship schemes dur­ing the past five years, al­though manag­ing di­rec­tor Mark Fran­cis says the mar­ket has been rel­a­tively sub­dued over the last two years or so be­cause of a com­bi­na­tion of higher bor­row­ing costs and lower yields.

‘‘What we’ve seen over the last six months or so has been a big change in the dy­nam­ics of the com­mer­cial and in­dus­trial prop­erty mar­ket with in­come yields in­creas­ing and in­ter­est rates start­ing to come down.

‘‘ This is re­sult­ing in the reemer­gence of a pos­i­tive yield gap where in­come re­turns from prop­erty ex­ceed bor­row­ing costs and is mak­ing th­ese pro­por­tional schemes more at­trac­tive to smaller in­vestors.

It has meant that with this APN of­fer­ing we are pro­ject­ing an ini­tial an­nual re­turn of 10 per cent for in­vestors.’’

Au­gusta has se­cured prime bank fund­ing for half the prop­erty ac­qui­si­tion cost of $15.6 mil­lion.

The bal­ance of the pur­chase price will come from sub­scrip­tions se­cured from in­vestors.

Fran­cis says a pru­dent de­gree of gear­ing at a com­pet­i­tive in­ter­est rate is a key el­e­ment in mak­ing pro­por­tion­ate own­er­ship work for in­vestors.

‘‘It in­creases the re­turn on eq­uity for in­vestors to a level that makes it at­trac­tive for them. In this case, it means we can of­fer a dou­ble-digit re­turn on a prop­erty in­vest­ment with a long lease to one of New Zealand’s largest pub­lic com­pa­nies.’’

APN Print NZ has a 12-year lease over the 13,312sq­min­dus­trial build­ing and its 3.46ha un­til 2018, with three rights of re­newal for a fur­ther 20 years.

The to­tal rental in­come of the prop­erty is $1.455 mil­lion plus GST and all out­go­ings. The rent is re­viewed ev­ery three years to the lesser of CPI or 3 per cent com­pounded per an­num, with a re­view to mar­ket at the re­newal of the lease in 2018.

The lease is guar­an­teed by APN News and Me­dia , which has list­ing on the New Zealand and Aus­tralian stock ex­changes and a cur­rent mar­ket cap­i­tal­i­sa­tion of about A$1.5 bil­lion ($1.71 bil­lion).

APN pub­lishes 23 daily and more than 100 non-daily news­pa­pers in Aus­trala­sia, in­clud­ing this coun­try’s larg- est metropoli­tan daily, The New Zealand Her­ald, as well as sev­eral re­gional and com­mu­nity news­pa­pers and mag­a­zines.

APN is also Aus­trala­sia’s largest ra­dio broad­caster and a ma­jor player in the out­door ad­ver­tis­ing sec­tor.

APN utilises the Great South Rd premises as a print fa­cil­ity, pro­duc­ing na­tional and lo­cal pub­li­ca­tions and ad­ver­tis­ing ma­te­rial. The build­ing has an ex­ten­sive ten­ant fit-out, in­clud­ing air-con­di­tion­ing, a sprin­kler sys­tem, com­pressed air sys­tem, hu­mid­ity con­trol and sus­pended ceil­ings.

The prop­erty has been fully main- tained with a roof up­grade in 2006 and var­i­ous re­fur­bish­ments and up­grades by APN, which for­merly owned the prop­erty.

Houlker says a ‘‘triple net’’ lease struc­ture means all costs as­so­ci­ated with the build­ing, in­clud­ing struc­tural re­pair, are borne by the ten­ant. ‘‘This is par­tic­u­larly sig­nif­i­cant as most build­ing own­ers pro­vide for at least some re­pairs and main­te­nance ev­ery year — with this prop­erty there is no need to.’’

He says the large site has am­ple room for ex­pan­sion if APN is in­ter­ested in the fu­ture.

Great South Rd is a ma­jor ar­te­rial route and Houlker says the prop­erty ben­e­fits from easy ac­cess to the South­ern Mo­tor­way ( SH1) via the Te Iri­rangi Drive or Manukau mo­tor­way in­ter­changes and also to the South West­ern Mo­tor­way (SH20) and Auck­land In­ter­na­tional Air­port via Puhinui Rd.

He says the area is a sought af­ter lo­ca­tion for com­mer­cial and light in­dus­trial users.

Houlker says the APN of­fer­ing has gen­er­ated sub­stan­tial in­ter­est from in­vestors, and that Bay­leys has built up a data­base over many years of in­vestors in­ter­ested in this type of prod­uct which of­fers ac­cess to the higher yields that large com­mer­cial and in­dus­trial prop­er­ties pro­vide, without hav­ing to out­lay mil­lions of dol­lars.

‘‘How­ever, it has been hard for pro­mot­ers of th­ese schemes to se­cure prop­er­ties of the cal­i­bre of the APN of­fer­ing in more re­cent times be­cause they were be­ing snapped up by larger in­sti­tu­tional in­vestors.

‘‘With th­ese com­pa­nies hav­ing largely stopped buy­ing and with yields now at more at­trac­tive lev­els and bor­row­ing costs com­ing down, we are likely to see more syn­di­ca­tion of­fer­ings com­ing back on to the mar­ket.

‘‘How­ever, to be suc­cess­ful, shared prop­erty own­er­ship schemes re­quire a com­bi­na­tion of a well-lo­cated build­ing and a long lease to a strong ten­ant, and the schemes also need to be well­struc­tured and man­aged,’’ he said.

FOR SALE: An aerial view of the APN build­ing at 587 Great South Rd, Manukau City (top) and in­te­rior (right).

Newspapers in English

Newspapers from New Zealand

© PressReader. All rights reserved.