Investors now have the opportunity to own an interest in the eagerly anticipated Cider Building in Ponsonby, Auckland - which is anchored by a 20-year lease to General Distributors; with additional tenanted commercial space and street level retail.
A total of 50 interests of $1 million each are available to wholesale investors for the 13,200 sqm mixed-use retail and office development on the corner of Williamson Ave and Ponsonby Rd through Oyster Property Group - in conjunction with Colliers International’s Syndications
division - from mid-April.
Developed by Progressive Enterprises, and recently purchased by Oyster Property Group for approximately $93 million, the high profile property is due for completion circa April 2016.
“This property’s key point of difference is the tenant mix which consists of bulk retail, commercial and specialty retail,” says Colliers’ Syndication Investments National Director, Tim Lichtenstein
“This provides a diversified income, further strengthened by the tenant covenant, long Weighted Average Lease Term (WALT), structured rental growth and projected pre-tax return of 7.5% per annum - making it a suitable candidate for a proportionate ownership scheme.”
The property comprises a new 4,000 sqm supermarket, 8,000 sqm of office space across three floors, 11 specialty retail tenancies over 900 sqm along both Williamson Ave and Ponsonby Rd, as well as around 520 carparks, Lichtenstein says.
“This property represents the very best in city-fringe commercial investment-grade stock.
The ownership scheme is structured to provide investors with monthly cash returns without the burdens of private property ownership. As manager of the scheme, Oyster Property Group takes care of and accounts for all of the day to day management aspects of the scheme on behalf of investors. This is particularly attractive to those investors who are seeking passive investments in the commercial property sector.
“All the boxes are ticked, including national brand-name tenants, a brand new building and an outstanding Ponsonby location surrounded by a variety of strong commercial operators and a sought-after residential catchment.”
Cider is leased to General Distributors Ltd (Countdown), on a new 20-year lease, Fairfax NZ Ltd on a new 12-year lease and additional convenience retail tenants. There is some vacancy in the commercial office component however if the building is not 100% leased on settlement, the vendor will underwrite the rent payable for any vacant space, Lichtenstein says.
“Countdown is the largest single supermarket chain in New Zealand in terms of number of stores, with 183 stores nationwide serving 2.5 million customers every week, and a subsidiary of Progressive Enterprises.
“Investors can be sure of an exceedingly strong and established national brand as an anchor tenant, which in turn will continue to attract other strong tenants as neighbours in the future.
“Supermarkets alone are considered an exceptionally resilient asset class due to their very nature in providing food – one of life’s necessities – as well as their strategic location in key residential catchments such as Ponsonby.”
Adrian Walker, Progressive Enterprises’ General Manager of Property, says the company knew this development would be an attractive offering for buyers given its great location and potential for future growth.
“We are not long-term property holders and would prefer to lease sites we have developed for our own supermarket use. The sale and lease of this property will allow us to generate capital which we can then reinvest in growing our business.”
Unique aspects about the opportunity include the fact a relatively limited pool of investors will be purchasing interests in a new build property and featuring prominent tenant profiles, in a location that cannot be repeated, Lichtenstein says.
“The Cider building is part of a wider $200m project, which also includes the Vinegar Lane precinct of architecturally-designed residential and commercial lots. Cider and Vinegar are named as a nod to the site’s former use as the Dominion Yeast Vinegar (DYC) factory. Only Cider is the subject of this potential investment opportunity, however its integration within the wider development makes it a substantial focus point to the newly-created precinct.
“Locals will remember the yeasty smell of the factory, which was best known for its DYC vinegar but also manufactured related foods such as sauces and pickles. The factory had stood on the site since 1910 and was a well-known landmark in the area.”
The development is tipped to form the heart of a new Ponsonby precinct, with the ability for patrons to both live and work in the same building, says Charlie Oscroft
, Colliers’ Investment Sales and Syndications’ Director.
“There are also a diverse line-up of food and service operators to compliment the residential and commercial spaces.
“Overall, this major development is expected to prompt a general uplift in the quality of buildings and occupiers in this part of Ponsonby and will likely be reflected in increased rents and values. Another noteworthy recent development just along the road from Cider is Ponsonby Central, which has a great range of retail and food offerings that have proved very popular among occupiers and shoppers – making the area a destination in itself.”
Ponsonby is a suburb which has generally seen extensive revitalisation in recent years, Oscroft says.
“Ponsonby is attractive for tenants thanks to its easy access to the CBD, proximity to a large and affluent residential area, excellent public transport, accessibility to the Southern, Northern and North Western Motorways as well as Proximity to the thriving retail and hospitality strips of Ponsonby Rd and Karangahape Rd.”
The likes of Ponsonby Rd have excellent leasing histories and a good retail mix aimed at high-end shoppers as well as high-quality smaller business premises, Oscroft says.
"Properties on Ponsonby Rd generally are highly sought after and hold 'trophy' value. Ponsonby Rd itself is a huge hub - approximately 1.7km in length that intersects with 31 side streets - is used by pedestrians, cyclists, motor vehicles and buses, with an average 28,000 passing vehicles.
“The population of Ponsonby and its surrounding suburbs is also expected to boom over the next two decades - from 12,636 residents to 18,650 – furthering strengthening investment in commercial property in the area.”
Mark Schiele, Oyster’s Chief Executive Officer, says the multi-investor ownership structure will ultimately be the largest which Oyster has created to date.
“Cider is an outstanding mixed-use development which has been extremely well executed by Progressive Enterprises in terms of its design fit in the Ponsonby area. As a ground-breaking development project in Auckland, it made good commercial sense for Oyster to acquire the property and to create an investment structure for it.”
Schiele says property ownership structured for wholesale investors continues to be an important part of Oyster’s NZ$800 million property and funds management business, alongside public syndication offers.
Oscroft says the syndication space in New Zealand generally is experiencing high demand for quality investment products which this offer meets in all respects.
“Demand for syndicated properties is exceeding the number of offers coming to market and to ensure they secure a place in this offer, investors need to get in quick to avoid disappointment.
“Investors are looking for long term stable returns, with a weight of capital in the market looking for a suitable home. With syndications offering competitive returns compared to alternative asset classes, it’s an attractive time for investment in this area.”
Confidence in the entire commercial property sector is at the highest it’s been in the past two years, according to Colliers’ latest research, Oscroft says,
“Investor sentiment has built on the growth in confidence achieved late last year and is now at a two-year high. The number of optimists outnumbered pessimists by a margin of 27% in March, up from 26% in December 2015.”
Colliers’ research also shows that the retail sector is booming thanks to economic factors, Oscroft says.
“Retail – and the wider commercial property market - is benefiting from record high immigration, strong labour conditions and a rising housing market in a low interest rate environment.
“The level of demand for retail space in Auckland CBD, the suburbs and shopping centres symbolise a market on fire. Vacancy rates are down across all of Auckland. Retail spend will be driven particularly by rising house prices and real wage growth.”
Auckland region’s 2.4% vacancy rate is the lowest since late 2007, Oscroft says.
“Demand has grown steadily from retailers looking for opportunities to take advantage of the rise in Auckland consumers’ buoyant mood. CBD retail vacancy has reduced and city fringe retail spots are also feeling the positive vibe, with Newmarket, Ponsonby and Parnell recording declining vacancy rates.”