Lessors interest in Z Energy site offers long-term income

Two ground lease investments in central Wellington are offered for sale, providing investors with stable, long term cash flow.

Richard Findlay and Michelle Chadwick of Colliers International are offering the ground lessor’s interest in the two land parcels, which make up part of the Z Harbour City site. They are for sale individually by tender closing on December 8.

The two parcels at 1 Whitmore St are leased individually to Z Energy and a wholly-owned subsidiary of Z Energy on perpetually-renewable 20 and 21-year leases. Together the parcels make up 392m2 of land area and provide a combined annual net income of $165,870, said Findlay.

“This is a completely passive, zero-maintenance investment with a substantial, secure income stream. With two perpetually-renewable, extra-long term leases in place, the ground lessor is able to avoid the risks usually associated with property ownership, through holding a secure and non-depreciating portion of the property,” he said.

“This sale offers a rare opportunity to acquire passive investments occupied by a publicly-listed tenant in a prime central-city location.”

Chadwick said the zero-maintenance, low risk and passive nature of these long-term investment opportunities is expected to appeal to buyers.

“Many investors are looking for security and cash flow. Holdings such as this offer attractive, stable, defensive characteristics and low default rates,” she said.

Z rebranded the site as part of its nationwide brand roll-out which was completed in 2012, indicating its commitment to the location, said Findlay. “The perpetually-renewable lease arrangements will be viewed as a big plus among investors, providing long-term income security along with the potential for income growth from rent reviews.”

Formed in 2010 through a joint venture between Infratil and the New Zealand Superannuation Fund, Z Energy operates a network of over 350 service stations and truck stops around the country, along with pipelines, fuel terminals, bulk storage facilities and a share in the Marsden Point oil refinery.

In June 2016, Z also purchased the assets of Chevron New Zealand, which makes Z the wholesale fuel supplier to Caltex service stations.

“In just a few years Z Energy has emerged as a market leader and a real New Zealand success story,” Findlay said. “The size of the company’s network and its large portfolio of assets makes it an ideal heavyweight, stable tenant.”

The site has been home to a petrol station since 1963, said Chadwick. “Wellingtonians are familiar with this convenient CBD service station, which was taken over by Shell in 1995. It’s the only petrol station at the northern end of the CBD and services Wellington’s corporate sector as well as traffic passing along Customhouse Quay.”

This part of the CBD is undergoing significant development, with the construction of two new A grade office projects – the new PwC building and 20 Customhouse Quay – just a stone’s throw away, Chadwick said.

“There is a lot of revitalisation happening in this area, which has long had a place in Wellington’s dress circle overlooking the waterfront. It has also recently been announced that the nearby Bowen Campus will undergo a significant $213 million redevelopment for Government tenants.”

Other key amenities in the immediate vicinity of the Z station are the TSB Arena and several well-known bars, restaurants, and hotels, she said.

The properties are in the heart of this vibrant, commercial zone and close to Wellington’s waterfront entertainment precinct. Also located in this region is the TSB Arena, a popular concert venue, along with many notable restaurants, bars and hotels. 

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