Substantial residential and commercial complex on the market in mortgagee sale

One of the biggest mixed tenancy commercial and residential property holdings in Taranaki has been placed on the market for sale through a mortgagee process.

The substantial 18,800square metre site in New Plymouth – formerly the Westown Motor Hotel – is held across two land titles, and comprises 62 self-contained accommodation units, car parks, as well as 2340square metres of additional commercial space serviced by some further 187 car parks.

The Westown Motor Hotel ceased trading last decade, when it was converted into a live-in polytechnic institute, before eventually evolving into the mixed use commercial and residential facility. The property is adjacent to Yarrow Stadium in the city.

The property is being marketed for sale by tender through Bayleys Taranaki, with tenders closing on 18 August 2011. Bayleys Taranaki commercial sales person Robert Angus said the property generated a gross annual income of $623,020 in the 12 months to 31 March 2011 – split between $429,839 from residential rental activities, and $193,181 from the commercial premises.
“What were formerly hotel rooms have been converted into short and medium-stay accommodation units, while the hotel’s restaurant and bar, conference facilities and reception areas were converted into commercial premises,” Mr Angus said.

The 62 residentially-occupied rooms are currently being rented for between $190 and $230 per week, and had an average occupancy rate of 90 percent in June while operating a waiting list system during busy periods. Among the longer-term tenants are 10 occupants who have been living in the units for between three and four years, with one occupant being domiciled at the premises for five years.
The accommodation is spread throughout four blocks. Each block has communal facilities – such as coin-operated washing machines in the laundry, heavy duty cookers alongside ovens and sink washing space in the kitchens, and lounge/dining room areas.
The individual bedrooms have their own en-suite and kitchenettes, which include cooking equipment such as a microwave or frying pan. The accommodation business is currently administered by an on-site property manager.

Mr Angus said the accommodation units in the two older blocks had the potential for redevelopment or refurbishment into newer and larger one or two bedroom apartments which could increase yields in the longer term.

Most of the current accommodation users are on short-term stays – with the clientele ranging from building and construction industry contractors through to Work and Income NZ referrals. The units are also used by professional rugby players coming into the region to play at both club level, and for the Taranaki National Provincial Championship squad.

The commercial buildings are leased to a consortium of affiliated health service providers who benefit from sharing facilities. Each of the 12 separate leases have varying terms – with most expiring in 2014, although Mr Angus said the majority of entities had expressed interest in continuing to stay at Westown in the longer term under renewed rental agreements.
“The size and diversity of this property is unique within Taranaki,” Mr Angus said. “Outside of small retail units with maybe one shop and a flat upstairs, it is unusual to derive rental incomes from residential and commercial tenants within the same property.”

“With the potential for anchor tenant negotiations on the commercial part of the property, and holding rental from the residential units for the foreseeable future, there is considerable scope to expand and refurbish both amenities to further build revenues.”
The Westown property was formerly part of a North Island-wide accommodation empire previously owned by mother and son entrepreneurs Jenepher and Kenyon Clarke under their Sarvee Group of companies. Twelve of the companies were put into receivership in 2008.

Seven of the Sarvee Group’s accommodation-focused properties have already been sold - including hostel-like and converted motel unit accommodation complexes in Central Hamilton, Palmerston North and New Plymouth.