Hamilton building has impressive yield prospect

4:46 PM Friday August 25, 2017 Colin Taylor

The premises at 456 Victoria St, Hamilton, is known as the Kings Buildings and dates back to the late 1930s

A substantial site in a prime retail position on Victoria St in Hamilton’s CBD is expected to provide the next owner with an income yield of in excess of 12 per cent.

The 1517sq m of land at 456 Victoria St with a 1574sq m building, is leased to seven retail and commercial tenants, plus an undercover stacker parking facility.

Mike Swanson, who is marketing the property with Bayleys Waikato colleague Alex ten Hove, says it will sell at a high, double-digit yield because of the land’s leasehold tenure. It has a 20-year ground lease, with five-yearly rent reviews and continual rights of renewal.

The property will go under the hammer on September 14, unless sold earlier, as part of Bayleys’ next Total Property national auction portfolio.

“The offering presents an opportunity to secure a big slice of a sought-after part of the Hamilton CBD at a very affordable price given it is leasehold,” says Swanson. “It is also means it is likely to sell at an attractive net yield, expected to be at least 12 per cent — maybe higher.

“The new owner will benefit from a substantial monthly cash flow with ground rent payments required every three months.”

Multiple tenancies are producing just over $342,000 in gross annual rent. Less ground lease rent and other expenses this means a net return of $190,000.

The premises, known as the Kings Buildings, dates back to the late 1930s. Adjoining buildings developed around the same time, including the old Kings Theatre, were demolished to make way for the TSB Bank building on one side and the Westpac tower office and retail building on the other.

The Kings Arcade, formerly comprising internal shops, has been replaced by 11 car stackers, providing 22 fully-leased parks accessed through the rear of the building, says ten Hove.

“The high pitched roof in part of the building means cars can be stacked two-high and they are a key feature of the property in terms of diversifying its income stream. They generate $51,400 of annual income, or $45 per carpark per week, underpinned by strong demand for parking in this part of the CBD.”

The building was strengthened when the stackers were installed and now has a seismic assessment of 80 per cent of New Building Standard.

The front two levels house a variety of tenancies which ten Hove says benefit from more than 30m of exposure to one of the busiest parts of Hamilton’s main street, across the road from the newly refurbished Centre Place shopping mall and Ward St shopping precinct.

Town & Country Food, a well-known and established 24-hour cafe associated with the Bakehouse Cafe group, is one of the anchor ground floor tenants. Its lease began in 2010 and it exercised the first of two six-year rights of renewals late last year.

Time Zone has also exercised the first of two six-year rights of renewal on its ground floor lease. It is a family oriented video games parlour established in 1978, with s nine locations in Auckland, Rotorua and Christchurch as well as Hamilton.

The other ground floor tenant is Kino, a popular Sushi outlet which has been in occupation since 2004 and has two Hamilton stores.

Upstairs occupants include City Smile which provides seven-day emergency dental and general family dentistry care; and a long-established clothing alteration business.

Swanson says 456 Victoria St is one of the most visible and strategic properties in the Hamilton CBD; being close to the Waikato River and Claudelands Bridge and a number of hotels, with an Ibis behind the property and Novotel close by.

“The area continues to benefit from ongoing redevelopment following the rejuvenation of the Centre Place shopping centre,” he says.

“Projects include Stark Property’s refurbishment of the Beggs Wiseman building on the corner of Ward and Victoria Sts with Tainui also planning a significant redevelopment on the opposite corner site.”