Mass supermarket checkout

5:00 AM Saturday July 18, 2015 Colin Taylor

The Browns Bay Countdown occupies a high profile corner site within the suburb’s business district.

A national portfolio of 19 supermarkets leased by Progressive Enterprises and located from Auckland to Invercargill has been put on the market with a total passing income of nearly $18.9 million and individual property rent rolls ranging from around $430,000 to $1.7 million.

The Countdown supermarkets are located in the Auckland suburbs of Browns Bay, Greenlane, Highland Park, Meadowbank, Onehunga, and Papakura. Wellington locations are Johnsonville, Kilbirnie, Lower Hutt and two in Upper Hutt. The other north island supermarket is in Morrinsville.                

The South Island Countdown locations are Blenheim, Beckenham in Christchurch, Kaiapoi, Timaru, Dunedin and Invercargill. The sale also includes a Fresh Choice supermarket in Queenstown.

The portfolio has a combined net lettable area of 71,896 sq m and is being offered to investors individually or as one package with the majority of premises subject to 20 year leases.

The properties are being marketed for sale on behalf of London based, William Pears Group, and its joint partner, Jonny Berman, by an upcoming international private treaty sale process in New Zealand and Australia by Peter Herdson, Andrew Reed and John Green of Colliers International, and to Asia and the rest of the world through Stuart McCann and Stuart Crow of JLL Singapore.

Herdson says the portfolio sale represents the largest supermarket property investment opportunity in New Zealand in many years.

“This is the biggest portfolio offering of institutional grade supermarket properties in New Zealand and one of the largest in the Asia pacific region. It is an exceptional chance to invest in a portfolio that delivers immediate scale in a highly sought after asset class.”

He says Colliers anticipates wide interest from a range of buyers like private investors, family trusts and syndicators and including onshore and offshore institutions.

Herdson says the nationwide spread of properties which encompasses six in Auckland and five in Wellington will have big appeal.

“Supermarkets are viewed as exceptionally strong investment properties due to having high profile sites and being very well located within their chosen catchments which provides the potential for sound alternative uses of the properties well into the future.”

Sixteen of the supermarkets are for sale with 20 year leases and three other supermarkets in Onehunga, Morrinsville and Upper Hutt have 10 year leases commencing March 1, 2015. 

Herdson says Colliers assisted in brokering the new lease arrangements across the portfolio which are designed to reflect a partnership approach between landlord and tenant. Work will also be undertaken to upgrade the properties to reflect current earthquake requirements where necessary.

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The Countdown supermarket for sale in Blenheim. 

“The total passing income is subject to turnover based rent reviews with guaranteed growth of five per cent at year five,” Herdson says.

The largest of the six Auckland based stores by income is Countdown Greenlane at the corner of Great South Rd and Greenlane East Rd. The store sits on a large landholding of 14,440 sq m right next to State Highway One near the north and southbound on and off ramps.

Reed says it services a very strong residential and business catchment area and neighbouring properties to the supermarket along Great South Road continue to be developed for consistently higher quality uses.

“Owning a leading Auckland supermarket on a significant land holding within a very tightly held area would be considered a jewel in the crown for serious commercial property investors,” he says.

The Browns Bay Countdown on Auckland’s North Shore is a large modern supermarket that underwent a major refurbishment in 2013. Its 12,317 sq m property occupies a high profile corner site within Browns Bay’s central business district. Reed says the store dominates the local catchment and benefits from a very strong customer base.

He says large scale investments like the supermarket portfolio with guaranteed cash flow remain a key focus for domestic and international investors, especially with New Zealand’s continuing strong economic fundamentals.

“A portfolio with a weighted average lease term of more than 18 years is extremely rare and will be highly sought after, particularly in this low interest rate environment.”

He says the portfolio offers an ideal, long-term, income-generating investment.

“The sale of these properties presents a substantial and secure return, particularly with 39 per cent of the assets by income coming from New Zealand’s biggest city and a further 25 per cent from the second largest city.”

Drops in the Official Cash Rate (OCR) are continuing to drive investor demand as well, says Reed.

“With further forecast drops in the OCR by the end of this year, investors will be attracted to the favourable debt-to-yield spread that this portfolio offers.”

Countdown is New Zealand’s largest private sector employer, with 18,000 staff. Founded in 1981, there are 177 Countdown supermarkets operating throughout New Zealand, serving more than 2.5 million customers each week.

Herdson says potential investors can take a high degree of confidence from a tenant that is ultimately owned by Woolworths Limited,  Australia’s largest supermarket chain boasting an A-Grade Standard & Poors credit rating since 2001 along with a turnover in excess of AUS$60 billion (NZ$66.3 billion) and a market capitalisation of AUS$35 billion (NZ$38.66 billion).  

“The future financial security and performance of this investment opportunity is further underscored by a market demand for food as one of life’s necessities.”

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The Invercargill’s Countdown. 

Stuart Crow, head of JLL’s Capital Markets business in Asia Pacific, predicts the portfolio is likely to attract strong interest from offshore groups.

“The New Zealand real estate sector is attracting record levels of offshore investor interest. Of the $5.2 billion of real estate transacted across the country last year, $2.9 billion was driven by international capital,” Crow says.

“The major contributors to this significant level of offshore investment were DEKA, GIC and PSP which combined contributed over $2.4 billion. These major commitments have focused significant international attention on New Zealand as a core proposition that also provides strong risk adjusted returns.”

McCann of JLL Singapore says that, while international investors are attracted to New Zealand’s transparent real estate markets and favourable long-term indicators, accessing investments with scale within that environment is typically a key challenge. 

“Being able to acquire a platform of 19 supermarket based centres generating more than $700 million in turnover annually and offering a strong income growth profile, will attract significant offshore interest,” he says.

Reed says having a portfolio that is largely underpinned by six stores in Auckland will be highly attractive to investors.

“Auckland is leading the way in New Zealand with its strong economic performance. It is New Zealand’s largest city with a population of 1.5 million people. By 2040 it is forecast that another one million people will live in Auckland, accounting for 45 per cent of the country’s population.

“Auckland makes up 35 per cent of New Zealand’s Gross Domestic Product [GDP] and is unique in the world in its scale to the national economy. The city’s GDP is growing at 2.9 per cent annually and this growth is creating new investment opportunities in a range of sectors says Reed.

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Peter Herdson (left) and Andrew Reed (right) of Colliers.