Coca Cola office syndication brings plenty of fizz to the property market

The syndication of Coca Cola’s Lower North Island distribution centre through a proportionate ownership structure has closed oversubscribed.

A total of 78 proportionate $50,000 interests in the freehold title of the Palmerston North property were offered with a projected initial return of 9 percent per annum.

Mike Houlker of Bayleys Real Estate, which marketed the offering on behalf of syndicator Commercial Investment Properties Limited, said there was strong interest from around the country. A total of 41 investors located from Northland to Canterbury invested in the offering - with some taking multiple interests.

“We ended up with a number of disappointed investors who missed the cut off and whose cheques had to be returned,” Houlker said.

He says the property “ticked all the boxes” as far as investors were concerned - offering a quality building in a good location with a strong multinational tenant providing secure cash flow on a long-term lease.

Coca-Cola Amatil (N.Z.) Limited has occupied the Kaimanawa Street premises since completion in 2003, and recently renewed its lease until November 2017, with a further right of renewal of nine years. Its rental is reviewable to the Consumer Price Index (CPI) every two years.

Mr Houlker says the CPI rent review structure is likely to provide built-in rental growth at a time when the outlook for market rental growth remains subdued.

Cheryl Macaulay, managing director of Timaru-based Commercial Investment Properties Limited, says this is the 27th successful syndication that the company has been involved in.

“It reinforces the fact that there is good demand from smaller investors for these type of offerings which provide access to large-scale, high quality properties at better income returns than are generally available on lower valued properties.

“The strength of the tenant covenant and the length of the lease has become the paramount consideration for investors over the last couple of years and this was a big factor in the strong take up on this property.”

She says the property’s strong location was another important factor. The 7,000 sq m distribution centre is set on just under one hectare of land within Palmerston North’s East Terrace Estate industrial area which has experienced considerable growth over recent years.

A number of significant tenants have established distribution centres there, including Woolworths and Foodstuffs as well as Coca Cola. Other substantial companies located in the area include Fletcher Easy Steel, Toyota, Turners & Growers and Fonterra owned Kapiti Fine Foods.

The property was acquired for $6,500,000 by Commercial Investment Properties from listed property fund Kermadec. Kermadec managing director Mark Francis said the property had been offered for sale following the company’s decision to focus on the Auckland CBD market which it considered offered the market’s best medium to long-term capital growth potential.