Property syndication investment nears total sell out

First asset purchased as regionally-focussed property syndication investment nears total sell out

The phenomenal growth of warehousing and logistics activity in New Zealand’s commercial property sector as a result of Covid-19 has been an underlying factor for a provincially-focussed property syndication investment portfolio which has been brought to the market.

Experienced property syndicator Erskine + Owen is managing the investment scheme which encompasses three substantial provincial North Island warehouse buildings and landholdings. The offering is to be known as the NZ Warehousing & Logistics Property Fund LP (Limited Partnership).

The trio of large warehousing and logistics premises within the portfolio are located in Hamilton, Hastings, and Havelock North - with tenants ranging from two of New Zealand’s foremost retailing brands through to New Zealand’s largest cherry fruit growing, packing and distribution firm.

Erskine + Owen director Alan Henderson said the fund’s three buildings were being acquired for $17.10 million and generated a combined total annual rental of $1,061,544 – with a weighted average leas term of 5.43-years across the tenancy schedule. The company was forecasting an annual net pre-tax return of 6.75 percent to investors. The purchase of the fund’s first property had already been settled in June – ensuring the fund is operational and generating income.

The fund is offering 11 million units for purchase by wholesale investors only, at $1 per unit, with a minimum investment of $100,000, and additional incremental parcels of $50,000 for 50,000 $1 units. Initially released to the investing public in May, the NZ Warehousing & Logistics Property Fund LP has already received 63.6 percent of investor subscriptions. Mr Henderson said the offer would be 100 percent underwritten.

He said the fund was being marketed as a long-term, open-ended investment vehicle – giving investors the opportunity to acquire an interest in a high-value real estate asset class which they would not necessarily be able to purchase outright on their own. Erskine + Owen will manage all properties within the portfolio and take on landlord’s responsibilities.

“In compiling this portfolio, we identified properties in regions with strong local economies driven by industries that have proven resilient to the pandemic – such as agriculture, horticulture, food processing, manufacturing, infrastructure development, retailing support, and construction,” Mr Henderson said.

“The strong local economies in both the Waikato and Hawke’s Bay are generating demand for infrastructure, construction, housing, and business services - with all these industries requiring warehousing, storage, workshop and logistics facilities.

“As an open-ended property fund, the NZ Warehousing & Logistics Property Limited Partnership will acquire more properties over time. Key criteria for the selection of any new real estate assets will be their ability to complement the existing property portfolio, improve bank funding terms, enhancing income and reducing overall risk.”

Headlining the initial trio of assets in the NZ Warehousing & Logistics Property Fund LP is a 3,440-square metre packhouse and coolstore on some 6,015-square metres of land at 18 Cooper Street in Havelock North, Hawke’s Bay. The warehouse and coolstore plant is tenanted by cherry fruit producer/retailer/wholesaler Cherri Global which has operations in both Hawke’s Bay and Central Otago – with an ambitious goal of doubling the size of New Zealand’s cherry production sector.

Vertically-integrated Cherri Global is on a current lease running through to 2031 with two further five-year rights of renewal generating annual rental of $420,000, and rent reviews every three years.

The main warehouse within the Havelock North complex was built in 1983 and has benefited from a number of additions and alterations over the years – such as the cool store facility added in 2015 which incorporates modern refrigeration and control systems.

The next asset in the portfolio is a multi-tenanted warehouse, workshop building at 146 Collins Road in Hamilton. The 5,316-square metre building sits on some 9,432-square metres of land and is tenanted by sports and recreational goods retailer Torpedo7 and domestic whiteware and home products retailer Noel Leeming - which both run call centre and warehousing operations from the venue.
Other tenants within the premises include engineering workshops, a food distribution company, construction and building sector suppliers, and an import and distribution businesses. Combined, the tenancies generate annual rental of $468,624.
Originally built in the 1970s, the property has been substantially refurbished in recent years. Major works in 2016 upgraded its seismic capacity and created a mix of industrial warehouse, workshop, and storage space tenancies to attract a diverse range of enterprises. The property transaction was settled in June.
Rounding out the trio of assets within the NZ Warehousing & Logistics Property Fund LP is a block of eight newly built tradie-style industrial units at 822 Omahu Road in Hastings. Sitting on some 1,526-square metres of land, all eight units are tenanted – generating annual rental of $172,920.
Located close to the Hawke’s Bay Expressway, units within the tilt-slab constructed block have internal stud heights of 5.5 – 7 metres, with capacity to add a mezzanine floor subject to council approvals.
“Hawke’s Bay’s growth is fuelling an ever-increasing demand for these types of tenancies, while Erskine + Owen’s property management experience and expertise will ensure multi-tenancies of this nature are well managed and their occupancy is optimised,” Mr Henderson said.

Footnote:

Erskine + Owen’s NZ Warehousing & Logistics Property Fund LP adds to a successful catalogue of syndications the company has placed in the New Zealand investment market over the past two years.

Last year the Auckland-based company launched its Daycare Property Syndicate Limited Partnership which brought together $15.55 million worth of five early childhood centres. The fully subscribed offering is currently distributing annual returns of seven percent – above its forecast of 6.6 percent at the time of going public.

At the end of last year, the company launched its Waterloo Property Syndicate Limited Partnership - buying a $5 million industrial property in Christchurch and paying returns of eight percent. The offer was fully subscribed - with minimum investment parcels of $100,000 snapped up by the New Zealand public.

Erskine + Owen’s investment fund acquisitions also solidify the company’s presence in Hawke’s Bay. In 2019 the company promoted its Hastings Distribution Centre Property Limited Partnership – taking ownership of food manufacturer Wattie’s national distribution centre, adjacent to the Heinz Wattie’s processing plant. The investment offering was fully subscribed within eight weeks – delivering an annual return of eight percent to unit holders as well as capital growth on the value of the premises.

Since taking on the expansive Hastings industrial complex developed over a 15-year period, the fund also subsequently negotiated a new lease – with increased rent – for a smaller tenant on the property.

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