Pacific Property Fund seeks to expand portfolio
An elevated view 307 Sandwich Rd, Te Rapa, Hamilton one of the two new properties to be acquired by Pacific Property Fund Ltd (PPF).
Tauranga-based unlisted Pacific Property Fund Limited (PPF) is raising capital to acquire two industrial properties in Auckland and Hamilton as part of its strategy to continue to grow and diversify its portfolio.
The new capital raising venture by PPF follows the successful launch of the fund in April 2014 when the company raised $6,320,000 in an initial public offering to acquire a new warehouse and office facility in Truman Lane, Mt Maunganui. The property of around 10,100 sq m is leased to national garden products company Tui Products Limited on an initial 20 year lease term with two 10-year rights of renewal.
The latest offering is for a minimum of 5,750,000 ordinary shares in the fund and up to 6.5 million ordinary shares at an issue price of $1 per share, to assist funding the acquisition of two more commercial properties - 59 Druces Rd in Auckland and 307 Sandwich Rd, Hamilton.
The offer, which closes on December 15, is supported by a detailed product disclosure statement and requires a minimum subscription of 20,000 shares.
Matt McHardy of Property Managers Group, who is the selling agent for PPF, says strong interest has already been shown by existing and new clients.
“We have been very encouraged by the level of investor and market appetite in our latest offer. Within 24 hours of launching it, half of the available shares have been taken up,” McHardy says.
"Investors can see we are targeting sound, earthquake-compliant, well-located, generic buildings that offer sustainable yields. The properties have 99 per cent occupancy to diversified tenants on good lease structures with a weighted average lease term [WALT] of 12.15 years and they offer the prospect of adding value through active management.
“The product disclosure statement shows that, if the latest offer is successful, the fund will provide investors with an indicative 7.75 per cent annual gross dividend yield for the first full year ending March 31, 2017.”
Street view of 59 Druces Rd, Manukau, Auckland – the second prospective property to be purchased by PPF.
Philip Tushingham, director of PPF, says the portfolio will offer a long and secure income stream.
“The combined net rental totals just over $2 million with additional income growth considered achievable through rental reviews and building expansion on our existing Truman Lane property,” Tushingham says.
The properties that PPF has chosen to add to its portfolio are both in established industrial areas in Te Rapa, Hamilton and Wiri, Auckland.
The 4088 sq m building at 59 Druces Rd occupies 8111 sq m of land and was constructed in 1986. It comprises a medium to high stud warehouse with a two level office building attached.
The property has an A-grade seismic rating and is fully occupied with three tenants comprising: insulation supplier Premier A-Grade Insulation Limited; Amrita Nutrition, a natural health products manufacturer; and the Royal New Zealand Plunket Society.
It is located to the western side of Druces Rd, about 700 metres from the intersection with Wiri Station Road and a short distance from on-off ramps to both the southwestern State Highway 20 motorway and the north south SH 1 motorway close to Manukau City.
The Te Rapa property at 307 Sandwich Rd occupies a 5062 sq m site in the heart of Hamilton’s industrial zone.
The complex consists of a large two-storey office and amenities portion fronting Sandwich Rd, behind which is a 1460 sq m high stud industrial workshop with the balance of land in car parking and landscaping.
The original office portion and workshop were erected in 1977, with additions made in 1981. The property has recently been extensively renovated with new office fit outs for the two tenants: DeLaval Limited, a multi-national supplier to the dairy sector; and the national office of Alfa Laval New Zealand Limited, which is part of a wider global group.
The property is situated within the northern industrial area of Te Rapa on its eastern fringe with easy access to SH1 and to the Port of Tauranga port and Tauranga city.
Pacific Property Fund Limited was formed by directors Denis McMahon and Tushingham who have over 45 years of combined experience investing in, and managing commercial property.
Tushingham says the fund was launched “in response to a perceived need for a simple commercial property investment vehicle”.
He says the aim is to build, over time, “a diversified portfolio of industrial and commercial properties which provide strong and sustainable returns to investors while offering more diversification and liquidity”.
Wide angled street level view of the warehouse and office facility in Truman Lane, Mt Maunganui, purchased earlier by PPF and leased to Tui Products Ltd.
The decision to purchase two further properties was made following the successful performance of the Truman Lane building.
“With an initial lease term of 20 years, its good location close to Mount Maunganui and the major arterial route junction of State Highways 2 and 29, and the fact that Tui Products has continued to trade for over 100 years, we considered the Tui Property was a good first investment for the company.
“The company’s performance for the financial year ended March 31 this year met our expectations and the annualised return on investment before tax was 7 per cent. Equally pleasing, the company has achieved a revaluation gain on the Tui Property. This, combined with the annualised return on investment before tax, has delivered a pre-tax return of 12.7 per cent in the 2015 financial year.”
Tui Products is a New Zealand owned and operated company specialising in manufacturing, supply, and distribution of garden products and seed-based pet food products to outlets throughout New Zealand.
Tushingham says the board has continued to seek additional properties which meet similar requirements for quality and location that are comparable to the initial Truman Lane acquisition.
“With the addition of these latest two properties to the portfolio, we will achieve diversified income from six tenancies occupying three properties in Auckland, Hamilton, and Tauranga,” he says.
McMahon, PPF’s chairman, says the plan has always been for the fund to grow.
“Our clients are telling us they want security of income with steady capital growth and we formed Pacific Property to satisfy this demand by building a diversified portfolio of quality industrial, retail, and commercial properties.
“By focusing our criteria around securing properties in strong locations predominantly across Auckland, Waikato, and the Bay of Plenty, together with a spread of income across multiple tenants, we feel we are providing an offering for investors that will endure and thrive within these uncertain economic times.”
Tauranga based Property Managers Group, which has been engaged by PPF as its property manager, was formed in 1992 by McMahon.
“Property Managers has built a wealth of experience and knowledge over the past 23 years and now manages in excess of $150 million of commercial assets,” McMahon says.
“Our vision is to be the market leader and the most trusted bespoke full service property group in New Zealand - offering investment opportunities, funds management, property management, body corporate and facilities management services to owners and investors.”
Denis McMaho, PPF chairman (left) Matt McHardy of Property Managers Group (centre) and Philip Tushingham, director PPF (Right).