Industrial Trio Sale $136m

Three prominent modern and specialised industrial properties have sold in Hastings recently for a collective $135.9m, reflecting a very strong Hawke’s Bay economy, says Turley & Co valuer and property strategist Pat Turley.

He said industrial property sales for more than $24.5m were unusual “and especially so three in five months”.

T&G Global’s property at Whakatu sold for $79.5m in October in a sale-and-leaseback arrangement, resulting in a 4.4% yield for the new owner.

T&G Global negotiated a 15-year lease for itself and said the sale was to fund its new $100 million automated packhouses, set to be one of the largest in the southern hemisphere.

The 2015-built Miracle Water property at Elwood Road was another sale and leaseback arrangement, with new owner Mackersy Property syndication receiving a 5.0% initial return on its $24.5m January purchase.

The most recent of the three sales were at Hill Road in the Omahu Rd industrial area, involving Mr Apple-occupied specialised coolstores of 18,566 sqm.

The property sold in March for $31.9m with an existing lease of 3 years remaining, reflecting 4.75% yield for the new owner.

Turley said the properties were “apple-industry dominated and export-revenues focused”.

“On average, they sold 40 points below a 5.0% return, a value benchmark similar to any large centre in New Zealand,” he said.

“The initial average investment return for the three sales was 4.6%, with an average of 11 years left for leases or 12 years weighed average.

“The sale valuation factor is at least 140 points better now than it would have been several years ago.

“This would mean the 3 properties would have previously valued in the ballpark of 6.0% or $104m. The sales at $135.9m reflect an increase of circa 30%.”

Turley said sale-and-leasebacks were a form of debt financing.

“They enable an owner to release capital while striking a bespoke lease that suits businesses requirements.”

He said the Hawke’s Bay industrial property market had performed strongly over the past 5 years while land supply has increased.

“There has been a significant land-use expansion in the Omahu Rd and Irongate precincts, industrial land use expansion at Omahu Road and Irongate, with significant developments in Whakatu and Napier.

“The value of industrial land has increased and is now scarce at certain locations, including Napier and Whakatu. However, industrial land is overall in good supply in Hawke’s Bay.”

Meanwhile, the Farmers Hastings retail store on Hastings’ Heretaunga St West sold in December 2021 for $26.95m - a 5.45% yield.

“The strong sales are a function of a very strong Hawke’s Bay economy,” Turley said.

But the future was not plain sailing.

“Market change is underway, led by increasing interest rates and affected by Covid-related uncertainty. Currently, construction costs very high inflation is a property values influence though increasingly an affordability challenge.”

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