High profile serviced apartment building on the market for sale

The building housing one of Dunedin’s leading serviced apartment accommodation providers has been placed on the market for sale. The 42-room Quest Serviced Apartments building near the city’s CBD is just four-years-old.

The purpose-built complex is housed within a three story building on 1012 sq metres – complete with reception and secured under cover car parking on the ground floor, with the accommodation suites on the upper two floors. All of the 42 units are strata titled.

The property consists of 16 one-bedroom and 26 studio suites, serviced by 26 car parks. 14 of the one-bedroom units share an entry hall with a neighbouring studio so they can be let as a two-bedroom suite. Each one-bedroom unit is fitted with lounge furniture, TV/DVD player, laundry amenities, kitchenette with microwave/hot plate/dishwasher, and under-bench ‘fridge/freezer.

The property is leased to a Quest franchisee under a 10-year lease agreement running through until 2017, with two further renewals for five years each – making the final expiry date of the lease in 2027. The Quest Dunedin property is being marketed for sale by Bayleys Dunedin with tenders closing in June 16.
Bayleys Dunedin director Robin Hyndman said the Quest Dunedin building was located within the city’s ‘central activity zone’ and the accommodation business had built up a strong database of corporate and leisure clientele.

“Because of its proximity to Dunedin Hospital, Otago University, Otago Polytechnic, and the city’s commercial hub, Quest Dunedin has a core business clientele booking regularly throughout most of the year, and is less reliant on leisure or tourist bookings than other hotels in the city,” Mr Hyndman said.
“In addition to this core clientele, Quest Dunedin benefits from its highly visible location – directly overlooking State Highway One – and often attracts guest bookings because it is so easy to find for those travellers coming into the city late at night.”

The property generates annual net rental of $610,000 plus GST – broken down into room rental, reception area rental, and car parking spaces. Rental increases of two percent per annum are automatically factored in, rising in August every year

Under the terms of the lease, the tenant meets the costs of managing the building on behalf of the landlord. The landlord owns all the chattels, however the tenant maintains and replaces those chattels as required at the tenant’s cost.

“This property and its associated tenant have performed very well over the past three years in a market which has been challenging for all accommodation providers in the city,” Mr Hyndman said.

“Consequently, with growing signs of the economic recovery building pace throughout the latter part of this year, the owners have chosen to free up capital for other non-competing ventures they are planning in the city.”

“With such a long lease agreement in place, and a well run business as tenant, this building offers the security of an annually-adjusted cash-flow delivering a potentially attractive yield. There are few, if any, other almost recession-proof opportunities of this type available in the city.”

As a prominent brand in New Zealand’s accommodation sector, the Quest Serviced Apartments chain has some 130 properties throughout Australasia and Fiji – strategically located close to head offices, business hubs, and popular tourist destinations.