Introducing Pacific Property Fund Limited

Posted on Tuesday, May 6 2014

A new, unlisted commercial property fund, Pacific Property Fund (Pacific Property www.pacificproperty.co.nz), has just been launched, offering investors the opportunity to invest in a brand new industrial building on Truman Lane in Mount Maunganui that is newly built generic warehouse to be occupied by Tui Products Limited on a 20 year lease.

The first public offering took place via a Prospectus and Investment Statement in December 2013. The offer was fully subscribed and closed on 28 March 2014. Pacific Property settled the property on 18th April 2014 and is offering a target yield of 7% per annum.

 

Tui Building

 

FUND & MANAGER

Pacific Property is based in – and managed from – the Bay of Plenty; aiming to grow a diversified fund that concentrates on properties in Auckland, Bay of Plenty and Waikato.

Pacific Property is managed by Property Managers Limited, the highly experienced Tauranga-based property manager that was established in 1992. Property Managers manages $130m of commercial property and prides itself on adding value to buildings through active asset management.

Denis McMahon, Director of Pacific Property and Property Managers Ltd, says that the fund has been established to grow a diversified portfolio of commercial buildings to deliver sustainable shareholder returns though income and capital growth.

“Pacific Property will focus on properties valued between $5 million and $30 million, where we believe better opportunities exist to purchase on attractive terms due to more limited competition from individual investors at the lower end of the market and larger listed property funds at the higher end of the market.”

“We are targeting sound, earthquake-compliant, well-located generic buildings that offer sustainable yields, have good lease structures, and offer the opportunity to add value through active management.”

McMahon says that he and co-director Philip Tushingham, who together have over 45 years of experience in investing in and managing commercial properties, will retain provincial values, whilst investing fundamentally in the growth geographical locations of Auckland, Hamilton and the Bay of Plenty.

“In order to manage the property and build up the property portfolio over time, Pacific Property will need a strong partnership with an experienced property manager. Property Managers Limited is ideally suited to this role, having more than 22 years’ experience in commercial property management based in Tauranga.”

FIRST PROPERTY

The first property to go into the fund is a new industrial building in a prominent location on Truman Lane in Mount Maunganui.

 

Tui Building. Mount MaunganuiInside

 

The development, which occupies a 3.05 hectare site near the major arterial route junction of State Highways 2 and 29, was completed in April 2014. The new facility provides over 10,000 sqm of accommodation situated at the front of the site, with approximately 4,000sq m to the rear of the site remaining available for future expansion.

The main warehouse has a stud height of 7.25 metres, rising to 10.24 metres at the apex. The complex also contains a mezzanine area for storage, a warehouse office and a two-level office and amenities block.

OCCUPIER

The facility has been leased to well-known North Island gardening product company Tui Products on a 20 year lease, with two further ten-year rights of renewal.

Philip Tushingham says that built-in rental growth is assured through two-yearly CPI-linked increases. “The property will offer a long and secure income stream, up to forty years in total, at a net rental of $1,000,000 per annum and built in CPI annual growth.

“Tui Products is a 100 year old New Zealand owned and operated company, specialising in the manufacture, supply and distribution of garden products and birdseed to outlets throughout New Zealand.”

“In 2010 Tui Products was awarded a Centenary Trade Mark from the patenting office in recognition of the Tui trade mark that was registered 100 years ago. Tui Products was the winner of the Westpac Tauranga Business Awards in 2012.”

“Tui Products is relocating their Mount Maunganui head office and multiple existing facilities to the Truman Lane site.”

“While the building has been purpose-built for Tui Products, with capacity to cater for future growth, the building is considered a generic office and high stud warehouse facility which would lend itself to any number of large footprint users which may include storage, distribution, or manufacturing.”

Tushingham adds that the title to be acquired by Pacific Property is a registered leasehold title with, a 99 year ground lease from the proprietors of Mangatawa-Papamoa.

“The annual rental is subject to two yearly rent reviews, as per the Tui lease, capped by structured amounts. It is important to note that the entire ground rent is being paid for, and has been budgeted for, by Tui Products.”

“The Directors of Pacific Property wanted a ground lease structure that was economically sustainable and so the lease provides for market reviews of the ground rent every 2 years to CPI with a cap of 10%, which mirrors the lease to Tui Products.

Tushingham says that although the tenant is responsible for payment of the ground rent, it must be sustainable from all parties’ points of view and the agreed review provisions give the tenant a fair degree of certainty in this regard. ”

FUNDING AND RETURN

Tushingham says the current target gross dividend yield for the first full year is 7% with the aim to lift the return as part of a growing diversified fund.” He adds that the property will be funded through investor equity and bank borrowing.

“The maximum initial borrowing being proposed is 55% loan to value (LVR). Pacific Property has a long term gearing target of below 40% LVR which will assist with further acquisitions in line with the company’s strategic growth objectives.

 

EXPRESSIONS OF INTEREST

To register your expression of interest in Pacific Property, please contact the team on (07) 578 3494 or email:  info@pacificproperty.co.nz

 

Pacific Property Logo

 

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Expert's Bio

Denis McMahon

Brought to you by Property Managers Ltd: Pacific Property has been formed with the aim of building, over time, a diversified portfolio of Industrial, Retail and Commercial properties to provide strong sustainable returns to investors which will be managed by experienced property manager, Property Managers Limited (PML). The directors of Pacific Property Fund are Denis McMahon and Philip Tushingham, who together have over 45 years of experience in investing in, and managing commercial properties. “Pacific Property presents an opportunity for investors to invest in a brand new quality industrial building in Mount Maunganui and to join us as we build a quality commercial property portfolio diversified both geographically and across industrial, retail, and commercial assets.”

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