Ponsonby’s Cider complex for syndication

5:03 AM Saturday April 16, 2016 Colin Taylor

An artist’s impression of the Cider Building anchored by a Countdown supermarket at 4 Williamson Ave near the corner with Ponsonby Rd.

Ponsonby’s highly-publicised Cider Building development, which was recently purchased by commercial fund and property manager Oyster Property Group, will be marketed for syndication this month.

Anchored by a 20-year lease to General Distributors for its Countdown supermarket, the building complex at 4 Williamson Ave, near the corner with Ponsonby Rd, encompasses additional tenanted commercial space and street level retail outlets.

Oyster, in conjunction with Colliers International’s syndications division, will shortly offer a total of 50 interests of $1 million each to wholesale investors in the 13,200sq m mixed-use retail and office development.

Constructed by Progressive Enterprises and purchased by Oyster Property Group for about $93 million, the complex is due for completion this month.

“This property’s key point of difference is its tenant mix which consists of bulk retail, commercial and specialty retail,” says Tim Lichtenstein, Colliers’ syndication investments national director.

“This provides a diversified income, further strengthened by the tenant covenant, long Weighted Average Lease Term [WALT], structured rental growth and projected annual pre-tax return of 7.5 per cent - making it a suitable candidate for a proportionate ownership scheme,” Lichtenstein says.

The development comprises a new 4000sq m supermarket; 8000sq m of office space across three floors; 520 car parks; and 11 specialty retail tenancies that will complement residential and commercial spaces. Fairfax NZ Ltd is also a Cider tenant on a new 12-year lease.

“This property represents the very best in city-fringe commercial investment-grade stock,” says Lichtenstein. “The ownership scheme is structured to provide investors with monthly cash returns without the burdens of private property ownership. As manager Oyster will take care of the day to day management of the property and account for all aspects of the scheme on behalf of investors. This is particularly attractive to investors who are seeking passive investments in the commercial property sector.

“All the boxes are ticked, including national brand-name tenants, a new building and an outstanding Ponsonby location surrounded by a variety of strong commercial operators and a sought-after residential catchment.”

“However, some of the commercial office component is not yet tenanted and, if the building is not 100 per cent leased on settlement, the vendor will underwrite the rent payable for any remaining space,” Lichtenstein says.

“Investors in this proportionate ownership scheme can be sure of an exceedingly strong and established national brand in Countdown as the anchor tenant which, in turn, will continue to attract other strong tenants as neighbours in the future.

“Countdown, as a subsidiary of Progressive Enterprises, is the largest single supermarket chain in New Zealand with 183 stores nationwide serving 2.5 million customers every week.

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An earlier aerial view of the Cider building at commencement of construction depicting its Ponsonby setting. 

“Supermarkets alone are considered an exceptionally resilient asset class due to their very nature in providing food necessities – as well as their strategic location in key residential catchments like Ponsonby.”

Adrian Walker, Progressive Enterprises’ general manager of property, says the company believed the development would be an attractive offering for buyers given its excellent location and potential for future growth.

“We are not long-term property holders and would prefer to lease sites we have developed for our own supermarket use. The sale and lease of this property will allow us to generate capital which we can then reinvest in growing our business.”

Lichtenstein says points of difference in relation to the investment opportunity include the relatively limited pool of investors purchasing interests in a newly built property that will feature prominent tenant profiles in a location that cannot be repeated.

“The Cider building is part of a wider $200 million project, which also includes the Vinegar Lane precinct of architecturally-designed residential and commercial lots. Cider and Vinegar are named as a nod to the site’s former use as the Dominion Yeast Vinegar [DYC] factory. “While only Cider is the subject of this pending syndication investment opportunity, its integration within the wider development makes it a focal point within the newly-created precinct.

Lichenstein says older locals will remember the yeasty smell of the factory, which was best known for its DYC vinegar but also manufactured related foods such as sauces and pickles. “The factory occupied the site from 1910 and was a well-known landmark in the area.”

Charlie Oscroft, investment sales and syndications’ director for Colliers, says the development will form the heart of a new Ponsonby precinct and will enable occupants to both live and work in the same building.

“Overall, it is expected to prompt a general uplift in the quality of buildings and occupiers in this part of Ponsonby which will likely be reflected in increased rents and values. Another noteworthy recent development just along the road from Cider is Ponsonby Central, which has a great range of retail and food offerings that have proved very popular among occupiers and shoppers – making the area a destination in itself.”

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An artist’s perspective of a common area within the Cider Building.

Oscroft says Ponsonby has seen extensive revitalisation in recent years. “The suburb is attractive to tenants because of its easy access to the Auckland CBD, and to the north-south and north-western motorways. It’s also close to a large and affluent residential catchment, has excellent public transport services and is near popular retail and hospitality strips in Ponsonby Rd and Karangahape Rd.

“Properties in nearby Ponsonby Rd, travelled by an average 28,000 vehicles daily, have excellent leasing histories and a good retail mix aimed at discerning shoppers as well as high-quality smaller business premises,” Oscroft says. “In addition, the population of Ponsonby and its surrounding suburbs is expected to boom over the next two decades - from 12,636 residents to 18,650 – furthering strengthening investment in commercial property in the area.”

Mark Schiele, Oyster’s chief executive officer, says the multi-investor ownership structure will ultimately be the largest which Oyster has created to date.

“Cider is an outstanding mixed-use development which has been extremely well executed by Progressive Enterprises in terms of its design fit in the Ponsonby area. As a ground-breaking development project in Auckland, it made good commercial sense for Oyster to acquire the property and to create an investment structure for it.”

Oscroft says the syndication space in New Zealand generally is experiencing high demand for quality investment products which the pending offer meets in all respects.

“Investors are looking for long term stable returns, with a weight of capital in the market looking for a suitable home. With syndications offering competitive returns compared to alternative asset classes, it’s an attractive time for investment in this area.”

Confidence in the entire commercial property sector is the highest it’s been in the past two years, according to Colliers’ latest research, Oscroft says,

He says the research shows that the retail sector and wider commercial property market is benefiting from record high immigration, strong labour conditions and a rising housing market in a low interest rate environment.

“The level of demand for retail space in Auckland CBD, the suburbs and shopping centres symbolise a market on fire. Auckland region’s 2.4 per cent vacancy rate is the lowest since late 2007,” Oscroft says.

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(from left to right) Tim Lichtenstein and Charlie Oscroft, of Colliers International, and Mark Schiele