Big Christchurch complex for syndication

8:08 PM Friday October 5, 2018 True Commercial

The logistics facility at 55 Lunns Rd, Middleton, is leased to K&S Freighters. Photo / Supplied

A substantial Christchurch industrial facility with a new lease to a leading transport and logistics company is being offered to investors through a proportionate ownership scheme.

Silverfin Capital Limited has appointed Colliers International to market the syndication of 55 Lunns Rd, Middleton, Christchurch.

Located in one of Christchurch’s most popular industrial precincts, the 2.3ha freehold property has a conventional warehouse to office ratio, full drive-through truck access and room for future expansion.

It is tenanted by K&S Freighters Limited, a wholly owned subsidiary of Australian Stock Exchange-listed K&S Corporation Ltd. The company is on a new five-year lease that commenced in July 2018.

Silverfin is offering a proportionate ownership scheme comprising 150 investment parcels of $50,000 each. Investors are projected to receive an annualised pre-tax cash return of 9.0 per cent per year to March 31, 2020. Colliers’ syndications director Charlie Oscroft sees an opportunity to invest in New Zealand’s buoyant industrial property sector at an affordable price point.

“Industrial property continues to perform very well, particularly in Christchurch, where it is outperforming other commercial property sectors.

“This is a substantial industrial facility with two warehouses and associated offices with a total floor area of 9157sq m. The buildings have good seismic ratings, being about 90 per cent warehousing to 10 per cent office space. The large, flat, rectangular site offers full drive-through capability and dedicated entrance and exit facilities for ease of access. With site coverage of only 39 per cent, the property has 5000sq m of surplus land that provides scope for future expansion should the tenant require more space.”

Zoned Industrial Heavy, the property is well situated to main arterials, with links to the central city, the Southern Motorway, Christchurch International Airport and the port at Lyttelton.

The original front building, constructed in about 1970, has 3728sq m of warehouse and 645sq m of office space.

In 2005 a rear warehouse and office were added, and the existing warehouse received new floor slab and re-cladding. The addition comprises 4347sq m of warehousing and 197sq m of office space. A lean-to adds a further 240sq m.

Investment sales broker Kris Ongley says the two warehouses contain several gantry cranes, making them suitable for a variety of industrial tenants.

“The front warehouse has a stud height of 7.4m while the rear warehouse has a 9.1m stud, with the steel roof supported by a combination of steel frames and precast concrete panels.”

The property is being sold by The Gama Foundation — a charitable trust set up by Christchurch philanthropic couple Marilyn and Grant Nelson.

Ongley says the sale price is $12,949,000, representing an 8.0 per cent yield on net rental. It has been independently valued by JLL at $13.2m.

The vendor has invested significantly in the Lunns Rd property over the years, he says.

“In addition to the 2005 expansion and refurbishment, seismic strengthening work was carried out in 2014. As a result, the property is not considered earthquake prone or an earthquake risk. A post-strengthening assessment by consulting structural engineers Buchanan & Fletcher determined the buildings meet between 70 to 75 per cent of the New Building Standard.

“The site itself was also inspected following the 2011 Canterbury earthquake. Buchanan & Fletcher found no evidence of liquefaction.”

Tenant K & S is signed to a five-year-lease, returning $1,035,900 plus GST in annual rent. The lease contains annual rent reviews indexed to the Output Producers Price Index (a subcategory of CPI). The tenant has a five-year right of renewal, which would extend the total lease term to June 2028, with a market rental review upon renewal.

The Gama Foundation sublets the front office block and car park, paying $102,282 in rent on a five-year lease from July.

Ongley says K&S is a well-established transport and logistics provider, partnering with Fonterra, Norske Skog and New Zealand Steel. With depots in Cambridge, Auckland, Mount Maunganui and Christchurch, its operations support six key sectors: timber, paper, dairy, steel, agriculture and general transport.

The Lunns Rd property primarily supports New Zealand Steel, part of Australian steel giant Bluescope.

Silverfin CEO, Miles Brown, says Silverfin has reviewed the tenant’s financial statements for the last four financial years and considers K&S to be in a strong financial position.

“K&S has maintained positive cashflows for each of the last four years while achieving consistent growth. The company reported revenue of $46.1m in 2017 and a profit before tax of $3.6m. K&S has $48.1m in assets, of which $19.7m is in equity.”

The Lunns Rd proportonate ownership scheme and property will be managed and administered by Silverfin on behalf of its investors.

The offer is open to wholesale and eligible investors until 5pm on November 2, unless it is fully subscribed, extended, withdrawn or closed earlier.

Silverfin has steadily become a leading player in the New Zealand property syndication and management market since it was founded in 2016.

The company has about $220m of commercial property assets under management.