Property syndicators go shopping in Tauranga mall

A Tauranga shopping arcade in the heart of the CBD leased by ‘top name’ tenants is being offered for sale to investors under a proportional ownership scheme.

The Goddard Centre, is being marketed by Bayleys sales consultants Robert Pinny and Jack Downer. It has 22 tenancies including big name tenants such as Life Pharmacy, Moochi, Rialto Cinemas, Caci Clinic, Esquires, and Glassons.

Pinny says the offeror of the syndication scheme is Goddard Holdings Limited, and is offering 103 interests at $75,000each. Investors may purchase one or more units.

“A proportionate ownership scheme gives investors an opportunity to own part of a large commercial property, without having to commit a huge amount of capital, and with the benefit of professional management,” says Pinny.

“More and more investors are considering syndication as an investment strategy. It’s an excellent opportunity for investors who are unfamiliar with commercial property investment to make an entry into the market, while still earning a passive return on their investment,” he says.

“Interestingly, in the ASB’s latest confidence survey just out shows property reclaiming top slot as the preferred investment vehicle – ahead of bank savings and shares. Some 18 per cent of those polled by ASB said rental property offered the best returns – up from 15 per cent three months earlier, with bank savings slipping to second place.”

The Goddard syndication offering – which opened to the market in June – was initially scheduled to close off on July 7. This has now been extended until September 15. A further 33 of the 103 units must be sold for the offer to go unconditional.

“Significant progress has already been made in selling the syndication parcels over the first four weeks of the campaign, and we are confident of selling out the syndication well in advance of the September date. We anticipate continuing on-going strong interest from throughout the greater Bay of Plenty region,” says Pinny.

Pinny says each investor will acquire a proportionate share of the property, and will be entitled to a proportionate share of the rent paid on the property on a monthly basis after expenses.

“An initial yield of 9.5 percent is forecast for the first 12 months of the scheme, and a selection of floating interest rates on the secured bank borrowings has the potential to increase the yield to approximately 9.9 percent per year,” he says.

Pinny says the property is owned by the NZX-listed National Property Trust, and with the capital from the sale of all 103 parcels in the scheme, plus borrowings from the bank on $5.22million, the property will be sold to Goddard Holdings Limited for $12 million.

“The current market value of the property has been assessed by registered valuers DTZ at $11.6million dollars,” he says.

The property was developed in 1992 and has been extensively refurbished in 2004, and again in 2008.
“The centre was developed to create a dynamic and modern shopping environment complemented by the three-screen Rialto cinema complex. The refurbishments have transformed the centre into a fashion destination, and it’s now a retail focal point of downtown Tauranga,” says Pinny.

The property is located at 21 Devonport Road; with site access from both Devonport Road and Grey Street, making it a pedestrian hot spot that creates a link between the two streets.

“Devonport and Grey Street are both key retail destinations in Tauranga, and developments surrounding the Goddard Centre are both retail and small office space typical for a CBD,” says Pinny.

The sites total area is 2,450 square metres, which is in four titles with the value per square metre at $4,996.
The Goddard Centre has several well-established tenants with long term leases, including:

• Glassons Ltd - New Zealand’s most visited fashion store with 135 stores in New Zelanad and Australia, rent per annum $122,400, lease term six years, lease expiry June 2014
• Moochi - a boutique fashion label designed in New Zealand, rent per annum $43,560, lease term six years, lease expiry June 2014
• Goddards Coffee Ltd/ Esquires - a thriving café brand with 35 stores in New Zealand, rent per annum $21,000, lease term 12 years, lease expiry December 2018
• Rialto Tauranga - three boutique cinema screens offering a selection of quality films for a wide audience, rent per annum $100,000, lease term eight years, lease expiry July 2013
• Step Inn Shoes - located in the Goddard Centre for the last 16 years offering a quality selection of footwear, rent per annum $55,400, lease term eight years, lease expiry May 2016

The property will be managed by Realty Management Services Limited, a subsidiary of Realty Services Limited, which wholly owns the Bayleys and Eves Real Estate agencies in the Bay of Plenty and Waikato. The property manager is responsible for all day to day and all other property management issues.

“The property manager will be Paul Kilsby, who is extremely qualified - with more than 15 years experience in property management and more than 23 years in the property industry – including 10 years of managing retail, office and industrial property for ASB Bank nationally, Jones Lang LaSalle and Commercial Property Managers in Auckland,” says Pinny.

Pinny says the management fee is four percent plus GST of the net annual rent, which is principally recoverable from the tenants, together with a scheme management fee of $10,000 per year which will be paid out of the scheme’s gross income monthly.

Other successful proportionate ownership schemes completed recently have been KCL Property’s syndication of the site leased by Billibong in Albany, Auckland; and the Augusta Funds Management syndication of 510 Mt Wellington Highway also in Auckland.