Investors eye commercial over residential

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Investors switching from residential property in favour of commercial are driving strong interest in industrial sites and buildings across the country despite pandemic uncertainty.

Alan Henderson, Director at property company Erskine & Owen, said there is growing interest in commercial property because investors want a simple and long-term investment.

“Residential investment is expensive, with landlords already having to spend significant funds to bring rentals up to standard as part of the government’s healthy homes legislation. The recent changes to tax deductibility meant for many that it all got too hard,” he said.

Henderson said the company is also seeing increasing numbers of investors looking outside of Auckland, in areas like Canterbury, for less expensive commercial opportunities.

“These investors have made money out of owning a number of properties, many of them are near retirement, and they are wanting an investment that is less onerous and demanding – commercial property offers this.

Erskine & Owen’s latest property syndicate project is a large manufacturing and storage warehouse in Selwyn District’s Izone Southern Business Hub in Rolleston 20 minutes from central Christchurch.

The 9,809 sqm building was purpose built for leading structural steel company Pegasus Engineering Limited which services the construction and infrastructure sectors in the South Island.

The Erskine & Owen investment opportunity, known as the Westland Property Syndicate, is the first of a number of large-scale commercial property syndication opportunities the company has planned in Canterbury.

Henderson said areas such Izone and other areas of Canterbury will become more sought-after with Selwyn’s economy growing 1.7% in the year to 31 December 2020 compared to a 2.6% drop nationally.

“It’s a pivotal location for transport and the centre of future infrastructure growth for the region. Selwyn has also endured the pandemic well and the local economy is buoyant with the region set for significant growth with more than 8,000 additional dwellings planned in the next 10 years.”

Henderson said the Westland Property Syndicate provides investors with the opportunity to invest in a high-quality building with Pegasus as a long-standing tenant.

“Ideally investors want a property that has a longish lease, with a minimum of six years, and a syndication like Westland offers this along with a good return and a long-term tenant that occupies a purpose-built building that manufactures products for the construction and infrastructure sectors.

“Because it is purpose-built for Pegasus, with potential for the lease to run until 2036, and Pegasus is a key supplier to the infrastructure and construction industries around the South Island, it makes them an incredibly safe and reliable long-term tenant.”

The Westland Syndicate is raising a total of $7.7 million through the issue of 7,700,000 units in the Limited Partnership at $1 each. The capital, together with mortgage funding, will be used to purchase the $11.5 million property.

The minimum investment is $100,000 (with additional increments of $50,000 available) and a projected 6.25% per annum cash return paid monthly.

The building includes high-stud warehousing, a large power supply, offices over two levels, drive-around site access, sealed yard areas suitable for heavy equipment and storage, and 39 sealed car parking spaces.

The Westland Property Syndicate follows the success of a smaller syndication Erskine & Owen undertook in Canterbury in 2020.

“Canterbury is a tough region to break into, but we are committed to being part of the continued growth of the area. Whereas once there was an excess supply of buildings, that has now been soaked up so companies and investors are on the lookout for quality properties that can deliver significant financial returns for the long term.”

KEY INFORMATION

Where: 20 Westland Place, Izone, Rolleston

Property Type: Prime industrial manufacturing and storage warehouse

Land Area: 12,669 sqm

Floor Area: 9,809 sqm

Purchase Price: $11,500,000

Market Valuation: $12,300,000

Annual Rent: $633,816

Lease Term: Fifteen (15) Years Lease Term from 10 December 2012. Next Expiry 9 December 2027. Two (2) Rights of Renewals of Six (6) Years each

Objective of Limited Partnership: To provide investors with a competitive return through investment in a single, high-quality, commercial property.

Target Annual Cash Return: A projected 6.25% per annum cash return paid monthly

 

For more information please contact:

Alan Henderson

Email: alan@erskineowen.co.nz

Phone: 021 679 311