To give you an insight into the investment strategy for Provincia Property Fund, this case study reveals the perfect building, but no way would we buy it…
The perfect property for Provincia Property Fund
The property is a split-risk investment comprising two buildings with three tenants. The left-hand building is leased to Abodo Wood Ltd, which is headquartered on the neighbouring site and uses the building for timber warehousing.
The right-hand building has two tenants. VTNZ occupy the major part of the building and operate a vehicle testing station from the premises. The second tenant comprises two businesses – a car rental company, and a vehicle compliance and servicing company.
Here’s how it was pitched in the real estate advert…
Split risk investment
6 Andrew Baxter Drive, Mangere
Asking price: NZD $4,800,000 + GST (if any)
Floor area: 1,493m2 over two separate buildings
Land area: 4,047m2 freehold site
Annual: Returning $191,250 p.a. net from two of three tenants. Opportunity to negotiate a brand new lease over the third tenancy. Potential market rental of $249,000 p.a. + GST & OPEX.
Location: Tightly held and popular Airport Oaks precinct
Zone: Light industrial
This is a fantastic opportunity for the astute investor to get their hands on a split risk investment with an add value upside situated in the heart of the Airport Oaks industrial precinct.
The property is well presented and consists of clear span warehouse with office/amenities across two buildings. The site provides ample car parks along with drive through access.
The Airport Oaks precinct continues to be a highly desirable and sought after industrial location and is home to some of the world’s largest freight and logistics companies. With new roading upgrades this precinct has easy access to the other main industrial precincts of Wiri, Penrose, Onehunga and Mt Wellington.
What we like about the property
- Firstly, it’s an industrial property, which fits Provincia’s low-risk investment strategy.
- Airport Oaks is a great location with low vacancy rates for industrial property.
- Two buildings with 3 tenants provides diversity of income.
- Two of the three tenants fit Provincia’s profile for secure, low-risk tenants.
- The asking price of $4.8 million is within Provincia’s target buying range.
- The buildings are in good condition with no apparent deferred maintenance issues or capital expenditure requirements.
Why we wouldn’t buy it
The indicated potential market rental of $249,000 is only 5.2% yield on the asking price of $4.8 million.
At the eventual selling price of $4,475,000 the yield at the indicated potential market rental of $249,000 is still only 5.6%. It’s okay but not great, and lower than our target of 6%.
Despite being advertised as an investment “with an add value upside,” we couldn’t see the upside. The vendor was the third tenant and had a leaseback at $56k p.a., bringing the total rent up to $247,250 p.a.
If the potential market rental really was $249,000 that only leaves $1,750 p.a. upside!
Provincia doesn’t buy anything that doesn’t have potential upside so we can provide our investors with both capital gains AND a stable 6% cash dividend every quarter.
In short, great building with low yield and no upside. That’s why it was a “yeah, nah” from us.
Where to get more info…
If you’re looking for somewhere safe to park your funds and earn a decent return plus capital gains, find out more about investing in Provincia at our investor information evening this Thursday…
WHEN: Thursday 19 September 2019 at 6:15 PM for a 6:30 PM start. Allow one hour.
WHERE: Newland Burling offices, 268 Manukau Rd, Epsom
RSVP: Simply email firstname.lastname@example.org to register for the evening.
- Visit our Provincia property fund page
- Phone +64 9 522-4936 » (click to call)
- Freephone 0800 522-222 » (click to call)
- Email email@example.com
- Or complete the online form below…
This content is provided for general information only and should not be relied upon or used as a basis for making any investment or financial decision. To the extent that any information or recommendations in this content constitute financial advice, they do not take into account any person’s particular financial situation or goals. As individual circumstances differ, we strongly recommend you seek independent legal and/or financial advice prior to acting in relation to any of the matters discussed herein. Neither Newland Burling & Co Ltd nor Provincia Property Fund Management Ltd nor any person involved in this content accepts any liability for any loss or damage whatsoever may directly or indirectly result from any advice, opinion, information, representation or omission, whether negligent or otherwise, contained in this content.