Millennium Centre syndication heats up

5:00 AM Saturday January 28, 2017 True Commercial

One of the modern buildings in the Millennium Business Centre.

Long-anticipated among investors, the syndication of one of Auckland’s premier business parks — the Millennium Business Centre — is now attracting high levels of interest.

“More than half of the Phase One interests are already sold down and there is only four weeks remaining until the offer closes,” says Colliers International’s national director of syndications, Tim Lichtenstein.

The three hectare site at 600-604 Great South Rd Greenlane was originally developed in part by Manson TCLM and completed by Goodman Group.

Commercial fund and property manager Oyster Property Group bought the property last year for about $210 million, making it New Zealand’s largest ever commercial office transaction.

Oyster, in conjunction with Colliers International’s syndication division, is offering wholesale investors a total of 448 parcels at $250,000 each in the property, which has a commercial hub of seven office buildings totalling 43,500sq m in net lettable area.

It generates  a net rental income of about $15.24 million per annum plus GST and provides a home to a string of major national and international brands with outstanding tenant covenants.

“Many early investors have chosen to purchase multiple parcels of $250,000, underlining the confidence astute investors have for this product,” says Lichtenstein.

“This is an exceptional deal for an outstanding institutional grade property investment opportunity. The Millennium centre enjoys a well-diversified income stream with the top 10 tenants accounting for almost 60 per cent of the property income.

“The property benefits from leases with fixed growth provisions, and the cash flow is supported by a strong lease expiry profile. Investors are projected to receive a pre-tax cash return of 8 per cent per annum, paid monthly,” says Lichtenstein.

The offering is further strengthened by a robust tenant line-up of top tier brands such as American Express, Avis, Siemens, L’Oreal, Griffin’s Food, Adidas, Bridgestone, Toyota Finance and Chevron.

As one of Auckland’s largest commercial business centres the Millennium Centre houses more than 2500 people in over 40 businesses including a childcare facility, a Pilates studio, a gym, retail amenities, six cafe options and extensive underground parking.

The property comprises three centres, Millennium Centre I, Millennium Centre II and Millennium Centre III. Millennium Centre I was constructed in 2000 and includes three multi-level office buildings with a total net lettable area of 15,488sq m, housing Toyota Finance as one of the major tenants. It also includes basement car parking beneath each building and a standalone four level car parking building.

Millennium Centre II’s modern commercial office buildings were constructed in 2005 and include three, three-level office buildings and a separate gym with a total net lettable area of 19,874sq m.

It also consists of an integrated two levels of basement car parking beneath all three buildings with additional on grade parking.

The major tenants include Salesforce New Zealand Limited occupying 12.6 per cent of the lettable area, as well as Spotless Facility Services (NZ) Ltd, American Express International and Oxygen Business Solutions.

The A-grade office building known as Millennium Centre III is the most recently constructed. It was built in 2009 and provides three office levels plus three basement car park levels with ground floor retail.

The building stands out with a distinctive full height exterior curtain wall glazed facade and long run metal clad roof over steel frame. Chevron New Zealand (now owned by NZX listed Z Energy) is one of the major tenants, together with various other retail tenancies, occupying the ground level.

The property is owned on three separate titles and is strategically positioned in the heart of the Greenlane corridor, a part of Auckland’s critical southern corridor.

Greenlane’s well-established suburban commercial precinct offers extensive benefits such as providing easy access to the motorway network with direct routes to the CBD, and abundant retail and other amenities at Ellerslie town centre in the neighbouring suburb.

“Surrounding developments include a mixture of office and warehouse uses, however in recent times the focus of development has seen a rise in commercial office space with the locality now featuring a number of quality office developments including the Central Park Corporate Centre,” says Lichtenstein.

Greenlane’s transport connections include access to the Southern Motorway provided at the Ellerslie-Penrose on/off-ramps approximately 1 km to the south, and the Greenlane on/off-ramps approximately 1.5 km to the north.

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The property comprises three centres, Millennium Centre I, Millennium Centre II and Millennium Centre III.

Public transport is provided via the Ellerslie Train Station which has recently been upgraded, and Great South Rd and Main Highway are both well-serviced by main bus routes.

Lichtenstein says official statistics show businesses are demonstrating confidence to lease and expand into new space due to the recent buoyancy in economic conditions.

A total of 120 further businesses and almost 1200 more employees have been recorded in Greenlane over the past four years.

Overall vacancy rates in the Southern Corridor precinct sit at an historic low of just 8 per cent.

A Colliers International analysis of 500 Southern Corridor leasing deals over the past nine years indicates an average maximum vacancy period of less than a year.

Despite the high proportion of small-to-medium sized businesses in Auckland, office space of more than 2000sq m in the Southern Corridor is typically vacant for less than eight months, which Lichtenstein says signals the attractiveness of the area for a large cross section of businesses.

“With no immediate respite in rental increases forecasted, it is an extremely opportune time to be investing. A typical feature of rental increases is being exhibited by the market via tenant demand that is unmatched by enough new supply,” he says.

“Businesses are increasingly cognisant that total operating costs over the length of the lease can be more expensive in and adjoining the CBD, unless tenant incentive is available. However, incentives are a reducing feature in the current market.”

The outlook remains positive with optimistic business confidence and sound economic conditions and Auckland continues to stand out as a top performer. “Strong demand, rising rents, low interest rates and competitive debt costs provide the perfect platform for syndication schemes,” Lichtenstein says.

Oyster chief executive officer Mark Schiele says the Millennium purchase was consistent with the company’s strategy of acquiring quality assets in areas of enduring occupier demand.

“Purchasing the Millennium Centre was an important achievement for Oyster as it continues our investment strategy focused on providing superior assets with strong economic rent profiles, to our broad range of investors.

“As a significant commercial hub in Auckland, in a well-connected central location with high quality buildings and diversified income streams, it made long term commercial sense for Oyster to acquire the Millennium Centre and to create a multi-investor ownership structure for it.”

Schiele says the wholesale investment opportunity is the largest ever offered in the New Zealand syndication space, which is experiencing unprecedented demand for quality investment products.

“Investors are continuing to seek opportunities for yield and competitive monthly returns. The Millennium Centre offer represents a very good return for an A-grade investment property of this scale and quality in the currently low global interest rate environment.

“Institutional grade properties of this calibre are seldom ever available to investors who want to participate in direct ownership and we have already received significant interest from our investors.

“The offer continues the momentum generated by our recent purchase and successful syndication of the Cider Building in the central Auckland suburb of Ponsonby.”

Oyster Group will be responsible for the day-to-day property and facilities management of the Millennium Centre and undertake the management of the Proportionate Ownership Scheme created to own the property, including the payment of monthly income distributions to investors.

Following this purchase Oyster will have more than NZ$1.1 billion of property assets under management through a combination of public and private.

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Tim Lichtenstein, Colliers International