Syndicated sale of bank building sells out

Monday 27 August 2012

Applications for investment in the ASB bank national support centre building in Auckland are oversubscribed ahead of the scheduled closing date for the syndicated sale.

By The Landlord

The proportionate title sale of the low-rise commercial office complex in the Auckland suburb of Mt Eden property was completed in less than four weeks. It closed on August 10.

There were 340 individual units in the property sold at $50,000 each through property development/management company Augusta Funds Management Limited. The sell down was marketed and brokered through Bayleys Auckland.

Augusta Funds Management Limited is the wholly-owned subsidiary of NZX-listed Augusta Capital Limited (formerly Kermadec Property Fund Limited), and has a market capitalisation of about $58 million.

Augusta Funds Management purchased the property for $26.73million plus GST. It negotiated an extension of the original ASB lease - creating a new 12-year term with ASB Bank Limited from July 2012 with annual 2.5% rental growth, and with a further six-year right of renewal - thereby extending the remaining potential lease term up to 18 years, expiring in 2030.

Augusta managing director Mark Francis said the proportionate ownership offering was projected to provide a cash return of 9% per annum for the first year.

Bayleys Auckland commercial and industrial salesperson Mike Houlker said the underlying fundamentals of the offering were strong.

"As with any investment opportunity, investors are looking for a good building, with a proven tenant and a long lease with growth prospects. The commercial premises at 360 Dominion Road certainly delivered those… tenants don’t come much stronger than ASB Bank, and with a lease expiring in 2030, that’s a lengthy tenancy in anyone’s books," Houlker said.

"Unit buyers came from a wide cross-section of New Zealand society - both geographically, and demographically. We had a considerable number of traditional ‘mum and dad’ investors in their 40s and 50s, a large percentage of retirees looking for an investment offering better returns than bank term deposits, and we also sold to a number of professionally-run family trusts," he said.

"The common feedback we received from the market throughout the campaign was that the forecast rate of return, 9% in the first financial year alone, was far better than other options in the investment market.

"Combined with a ‘bricks and mortar’ building, and an outstanding tenant, built-in annual rental growth, all of our $50,000 unit buyers were comfortable with the total package being offered."

Deposits from unsuccessful applicants have been return.

Augusta was looking at its next proportional ownership purchase.

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