Bunnings warehouse syndication is just the beginning

One of Whangarei’s largest bulk retail outlets, the Bunnings hardware store, is being syndicated for sale - with investors being offered $50,000 shares in a company that has been established to purchase it.

Commercial Investment Properties Limited has entered into a contract to purchase the 11,830 sq m store and the 3.2645ha site it occupies on Tauroa Street from the DNZ Property Fund for $13.59million.

In a variation on recent syndications which have been proportionate ownership schemes - where investors own part of the property’s title - the Bunnings property syndication is being offered through a company structure with a registered prospectus and investment statement. Investors are able to purchase one or more shares in the company worth $50,000 per share.

Commercial Investment Properties Limited managing director Cheryl Macaulay said this structure enabled the investment offering to be structured as Portfolio Investment Entity (PIE). The investment is projected to produce an initial return of nine percent per annum which will be paid monthly to investors with tax being deducted at each shareholder’s Prescribed Investor Rate (PIR). New lower PIRs take effect in October.

Bayleys Real Estate has been appointed to market the offering through Mike Houlker and David Gubb of Bayleys Auckland and David Beattie of Bayleys Whangarei.

Ms Macaulay said CIPL was very selective in the properties it chose for syndication, and focused on sites that provided a quality building in a good location with a long lease to a ‘blue chip’ tenant.

“The strength of the tenant and the length of the lease has become the paramount consideration for investors over the last couple of years, and Bunnings long-term commitment to the site was a big factor in why we have decided to purchase this property,” she said.

The entire property is leased to Bunnings for 12 years from June 2007, with rights to renew the release for a further 25 years at the expiry of the initial lease in mid 2019. Bunnings Limited is a wholly owned subsidiary of Wesfarmers group - one of Australia’s top 50 ASX listed companies, and is a leading Australasian retailer of home improvement and outdoor living products and a major supplier of building materials

Mr Houlker said that in addition to its longevity, another attractive feature of the lease was its built-in income growth with fixed increases of three percent per annum.

“This is something that should provide additional comfort to purchasers at a time when the outlook for market rental growth remains subdued.”

The building was constructed in 2006 for Bunnings and includes 6,702 sq m of high stud warehousing for bulk retailing, a 2,718 sq m timber warehouse and yard, plus an outdoor nursery. Close to $100,000 has also recently been spent on upgrading the on-site cafe.

The building is located on a high profile corner site approximately 3.5 kilometres from Whangarei’s Central Business District with frontage to State Highway One and Smeaton Drive as well as Tauroa Street and benefits from extensive exposure to passing traffic on State Highway One.

Mr Houlker said the site also had approximately 2,290 sq m of additional land on the northern boundary with the potential for future development which would be expected to increase the value of the property longer term.

CPL will manage the property on behalf of investors. It has undertaken numerous property syndications with a total value of approximately $170 million and currently manages 26 properties.