Hell of an opportunity in Rotorua

A prime corner property in Rotorua’s CBD with seven established tenants - including Hells Pizza and Webb’s Footwear - is being offered for sale by deadline private treaty with a close date of 10 July.

Bill Wilson of Bayleys Rotorua is marketing the property which occupies the corner of Tutanekai and Amohau Streets directly opposite Rotorua’s Central Mall.
The two-level property is sited on 916sq m of perpetual leasehold land with the lease renewable by right every 21 years. The current lease still has 12 years to run with the next review in May 2021. The annual ground rental is $37,000 plus GST paid half-yearly in advance.

“Leasehold land in the CBD does have a couple of advantages for investors,” says Wilson.
“Based on past sales in Rotorua, an investor can honestly expect a higher yield or cap rate compared with that attained with freehold land. Just how much greater is the question, however, if the market place is currently suggesting freehold yields at around the eight percent mark, then it would not be unreasonable to expect a leasehold property such as this to return a yield of 10 percent.”

“Another benefit to investors is that with a lease in perpetuity and a review every 21 years, you know exactly what your cost structure is from year to year without having to factor in a regular increase based on rising land prices.”
The property was built in the 1950’s and has a gross floor area of approximately 1320sq m. The ground floor premises total 815sq m while the upstairs level is approximately 505sq m.

The current nett total rental received from the six ground floor retail tenancies and the one upstairs office tenant is $162,060.00.

Hells Pizza occupies the largest of the retail tenancies offered by the property with a six year lease term with two rights of renewal and a final expiry of 2022. The highly-visible corner outlet was formerly a pharmacy and was quickly secured by Hells Pizza when it became available five years ago.
“Hells Pizza had their eyes on that site and moved promptly when it became vacant. This is a popular location in the city given its proximity to the Central Mall complex and tenancies are sought-after here,” says Wilson.
Long-established family business Webb’s Footwear have been in this building for much of their 50-plus years in the trade. The store caters for the middle to upper end of the conservative footwear market, with the entire 132sq m store taken up with retail display and point-of-sale.

A further 140sq m upstairs - accessed by an internal spiral staircase - is leased by Webb’s for stock storage.

Webb’s also operate the adjacent Sole Outlet store on the ground floor as their second tier business catering for the younger market.

Other ground floor tenants are Ambience Indian Restaurant, Hong Kong Takeaway, and City Trader, a second-hand store which moved to the site 18 months ago.
“City Trader was operating from a more central location in Rotorua but they have found this site to be beneficial to their business. With the current economic climate there is a demand for second-hand goods and they seem to be filling a gap in the market,” says Wilson.

The balance of the upstairs space (approximately 365sq m) is leased by Storage Unlimited, a business specialising in document storage.

“The upstairs level is configured in the 1950’s style with a central hallway and offices leading off this,” says Wilson.

“This property offers a sound investment opportunity for a cashed-up individual investor looking for good rental return from established tenants. With seven tenancies, the risk is spread across the building and location-wise, this is a happening part of town.”

Rotorua’s Central Mall across the road from the property occupies the former New Zealand Railways site and offers ‘bulk barn’ style shopping from major retailers such as Briscoes, Rebel Sport, Farmers, Harvey Norman and New World supermarket.