A three-tower office estate in the Auckland business hub of Penrose - which is 100% leased to blue chip customers - has come to market, presenting the opportunity for both domestic and offshore investors to secure a property with solid long-term cash flow.
Colliers International has been exclusively appointed to market for sale by way of international private treaty the Connect Business Estate at 581-585 Great South Road, Penrose in Auckland.
Offers for the 9,655 sqm site - with a net lettable area of 8,903 sqm - are to be lodged at Colliers’ offices, Level 27, 151 Queen Street, Auckland by 4pm 17 March.
“This property’s long term cash flow is secured by an outstanding tenant covenant,” says Andrew Reed, Colliers International’s Director of Capital Markets, who is marketing the property with colleague Greg Goldfinch.
“Connect Business Park is 90% leased to a crown entity healthAlliance, with the remaining 10% split between established New Zealand company Smart Parking, charitable trust Fletcher Trust and Fletcher Concrete.
“The property generates an annual net passing income of $2,919,510 plus GST, with a Weighted Average Lease Term of 9.37 years by income, as at 1 July 2016.
“With such excellent lease terms and established tenants, the fundamentals are in place for a solid investment opportunity.”
HealthAlliance is a subsidiary of a number of Crown entities - operating as a not-for-profit organisation - that provides key non-clinical business and procurement services to District Health Boards (DHBs) across the country, Reed says.
“It was formed in 2000 to provide services to Waitemata District Health Board and Counties Manukau Health, as a joint venture between the DHBs. It has since expanded nationally to all 20 DHBs, with 600 employees in 15 locations throughout New Zealand.”
The organisation leases 7,989 sqm of the business park and 446 carparks, Reed says.
“healthAlliance is based in all three towers of the property - Wright Stephenson House, Ron Trotter House and James Fletcher House - and their office space has recently undergone a complete refurbishment, another significant drawcard for potential buyers.”
Smart Parking - which has been operating for over a decade and is listed on the ASX - designs, develops and manages parking technology and is based in Ron Trotter House. The Fletcher Trust are based in Wright Stephenson House and Fletcher Concrete and Infrastructure are in Ron Trotter House.
The three connected towers are octagon-shaped, with a seismic rating of 166% of New Building Standard (NBS). Ron Trotter and James Fletcher Houses comprise of three levels of office, while Wright Stephenson House is five levels high. All office levels have direct internal access to a three-level, secure car park, Reed says.
“The octagonal shape of the buildings provides for large, efficient floor plates - a great future-proofing feature - while the complex itself is constructed of sturdy reinforced concrete column and beam frame, with precast concrete floors and external sheathing of double glazed curtain walling, granite panelling and tinted glazing and aluminium frames.
“Built by Fletcher Construction, potential buyers can be sure this building is of the highest quality.”
The buildings are connected via two entrances, which lead to tiled lobbies - each containing two 14 person lifts and full height atriums, Reed says.
“The office layout is generally made up of an open layout around the perimeter of each floor with open areas, meeting rooms and kitchenette facilities towards the centre.”
The building has a 1,000kVA 3 phase standby generator with a 2,860L fuel tank capacity that provides over 12 hours of running time, Reed says.
“The generator provides full back-up power to the three office buildings.”
Further underpinning the long-term security of this investment is the location, Goldfinch says.
“The property is situated in a prominent position on Great South Road, opposite its intersection with Penrose Road. It is a key commercial estate in the Penrose area, surrounded by amenities and key transport routes.
“Ellerslie Town Centre and Sylvia Park are only a few minutes’ drive away.”
The property is currently zoned Business 5 under the operative Auckland City District Plan Isthmus Section and proposed to be rezoned Light Industry under the future Auckland Unitary Plan, Goldfinch says.
“Light Industry zoning provides for a wide range of activities, including workers’ accommodation, dairies, food and beverage offerings, offices and that are accessory to an industrial activity on site, storage facilities and show homes.”
Penrose’s overall popularity can be attributed to its ease of access to State Highway 1, its relatively short distance from the CBD, good access to the Airport via SH20 and its close proximity to the nearby labour pools of Onehunga, Mt Wellington, Ellerslie, and Greenlane, Goldfinch says.
“This accessibility makes it a hotspot for tenants, owner occupiers and investors – so vacancy rates are extremely low, placing upward pressure on rents in the area. This would give the property’s new owner the opportunity to potentially increase their income in the future.”
The Penrose area is also tipped to improve further following the Government’s announcement last month of its intention to streamline the consent process for the $1.85 billion East-West Connection roading project, Goldfinch says.
“This will provide a seamless link between the South-Western Motorway (SH20) and the Southern Motorway (SH1).
“Transport Minister Simon Bridges recently labelled the Onehunga-Penrose area as the ‘engine room of New Zealand’s industrial and manufacturing economy’ when he announced the Government’s intention to fund the East-West Connection through the Land Transport Fund so construction can start as early as 2018.”
Connect Business Estate is currently owned by listed commercial property company Goodman Property Trust.
“We have placed Connect on the market with a view to recycling capital into developments currently in the pipeline, including Highbrook Business Park in Auckland, which incorporates a business town, retail hub and commercial services across 107 ha,” Goodman NZ, CEO, John Dakin says.