Christchurch logistics facility for syndication

Industrial facility at 55 Lunns Road, Middleton, has new five-year lease

A substantial Christchurch industrial facility with a new lease to a leading transport and logistics company is being offered to investors through a proportionate ownership scheme.

Silverfin Capital Limited has appointed Colliers International to market the syndication of 55 Lunns Road, Middleton, Christchurch.

Located in one of Christchurch’s most popular industrial precincts, the 2.3ha freehold property offers a conventional warehouse to office ratio, full drive-through truck access and room for future expansion.

It is tenanted by K & S Freighters Limited, a wholly owned subsidiary of Australian Stock Exchange-listed K & S Corporation Limited. The company is on a new five-year lease that commenced in July 2018.

Silverfin is offering investors the chance to acquire a beneficial interest in the property through a propionate ownership scheme comprising 150 investment parcels of $50,000 each.

Investors are projected to receive an annualised pre-tax cash return of 9.0 per cent per year to 31 March 2020.

Colliers International Syndications Director, Charlie Oscroft, says it is an opportunity to invest in New Zealand’s buoyant industrial property sector at an affordable price point.

“Industrial property continues to perform very well, particularly in Christchurch, where it is outperforming other commercial property sectors.

“The Lunns Road offering is a substantial industrial facility comprising two warehouses and associated offices with a total floor area of 9,157sq m.

“The buildings have good seismic ratings and are of a conventional configuration, with about 90 per cent warehousing to 10 per cent office space.

“The large, flat, rectangular site offers full drive-through capability and dedicated entrance and exit facilities for ease of access.

“With site coverage of only 39 per cent, the property has 5,000sq m of surplus land that provides scope for future expansion should the tenant require more space.”

Zoned Industrial Heavy, the property is well situated to main arterials, with links to the central city, the Southern Motorway, Christchurch International Airport and the port at Lyttleton.

“This excellent accessibility, combined with the site’s large yards, make the property an attractive proposition for logistics operators.”

The original front building, constructed in about 1970, offers 3,728sq m of warehouse and 645sq m of office space.

Significant improvements were undertaken in 2005, including the addition of a rear warehouse and office, as well as capital improvements to the existing warehouse, including a new floor slab and re-cladding.

The new addition comprises 4,347sq m of warehousing and 197sq m of office space. A lean-to provides an additional 240sq m of space.

Kris Ongley, Investment Sales Broker at Colliers International, says the two warehouses contain several gantry cranes, making them suitable for a variety of industrial tenants.

“The front warehouse has a stud height of 7.4m while the rear warehouse has a 9.1m stud, with the steel roof supported by a combination of steel frames and precast concrete panels. “

The property is being sold by The Gama Foundation – a charitable trust set up by Christchurch philanthropic couple Marilyn and Grant Nelson.

Read more: Millions from industrial property sale will go to charity

Ongley says the sale price was $12,949,000, representing an 8.0 per cent yield on net rental. The property has been independently valued by JLL at $13.2 million.

The vendor has invested significantly in the Lunns Road property over the years, he says.

“In addition to the 2005 expansion and refurbishment, seismic strengthening work was carried out in 2014. As a result, the property is not considered earthquake prone or an earthquake risk.

“A post-strengthening assessment by consulting structural engineers Buchanan & Fletcher determined the buildings meet between 70 to 75 per cent of the New Building Standards.

“The site itself was also inspected following the 2011 Canterbury earthquake. Buchanan & Fletcher found no evidence of liquefaction.”

Tenant K & S is signed to a five-year lease returning $1,035,900 plus GST in annual rent. The lease contains annual rent reviews indexed to the Output Producers Price Index (a subcategory of CPI).

The tenant has a five-year right of renewal, which would extend the total lease term to June 2028, with a market rental review upon renewal.

The Gama Foundation sublets the front office block and car park, paying $102,282 in rent on a five-year lease from July.

Ongley says K & S is a well-established transport and logistics provider that partners with some of New Zealand’s leading companies, including Fonterra, Norske Skog and New Zealand Steel.

With depots in Cambridge, Auckland, Mount Maunganui and Christchurch, the company’s operations support six key sectors – timber, paper, dairy, steel, agriculture and general transport.

The Lunns Road property primarily supports New Zealand Steel, part of Australian steel giant Bluescope.

Silverfin Chief Executive Officer, Miles Brown, says Silverfin has reviewed the tenant’s financial statements for the last four financial years and considers K & S to be in a strong financial position.

“K & S has maintained positive cashflows for each of the last four years while achieving consistent growth.

“The company reported revenue of $46.1m in 2017 and a profit before tax of $3.6m. K & S has $48.1m in assets, of which $19.7m is in equity.”

The Lunns Road propionate ownership scheme and property will be managed and administered by Silverfin on behalf of its investors. 

The offer is open to wholesale and eligible investors until 5pm on 2 November, unless it is fully subscribed, extended, withdrawn or closed earlier.

Silverfin has steadily become a leading player in the New Zealand property syndication and management market since it was founded in 2016.

The company was established by experienced syndicator Cheryl Macaulay, who passed away this year.

Silverfin’s executive team is committed to continuing the strong track record established under Macaulay’s leadership.

The company currently has approximately $220 million of commercial property assets under management.

Silverfin’s schemes are structured to provide investors with a cash return from commercial and industrial real estate, without the burdens of private property ownership.


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