Industrial Trio Sale $136m | Scoop News

Three prominent modern and specialised industrial
properties have sold in Hastings recently for a collective
$135.9m, reflecting a very strong Hawke’s Bay economy,
says Turley & Co valuer and property strategist Pat
Turley.

He said industrial property sales for more
than $24.5m were unusual “and especially so three in five
months”.

T&G Global’s property at Whakatu sold
for $79.5m in October in a sale-and-leaseback arrangement,
resulting in a 4.4% yield for the new owner.

T&G
Global negotiated a 15-year lease for itself and said the
sale was to fund its new $100 million automated packhouses,
set to be one of the largest in the southern
hemisphere.

The 2015-built Miracle Water property at
Elwood Road was another sale and leaseback arrangement, with
new owner Mackersy Property syndication receiving a 5.0%
initial return on its $24.5m January purchase.

The
most recent of the three sales were at Hill Road in the
Omahu Rd industrial area, involving Mr Apple-occupied
specialised coolstores of 18,566 sqm.

The property
sold in March for $31.9m with an existing lease of 3 years
remaining, reflecting 4.75% yield for the new
owner.

Turley said the properties were
“apple-industry dominated and export-revenues
focused”.

“On average, they sold 40 points below a
5.0% return, a value benchmark similar to any large centre
in New Zealand,” he said.

“The initial average
investment return for the three sales was 4.6%, with an
average of 11 years left for leases or 12 years weighed
average.

“The sale valuation factor is at least 140
points better now than it would have been several years
ago.

“This would mean the 3 properties would have
previously valued in the ballpark of 6.0% or $104m. The
sales at $135.9m reflect an increase of circa
30%.”

Turley said sale-and-leasebacks were a form of
debt financing.

“They enable an owner to release
capital while striking a bespoke lease that suits businesses
requirements.”

He said the Hawke’s Bay industrial
property market had performed strongly over the past 5 years
while land supply has increased.

“There has been a
significant land-use expansion in the Omahu Rd and Irongate
precincts, industrial land use expansion at Omahu Road and
Irongate, with significant developments in Whakatu and
Napier.

“The value of industrial land has increased
and is now scarce at certain locations, including Napier and
Whakatu. However, industrial land is overall in good supply
in Hawke’s Bay.”

Meanwhile, the Farmers Hastings
retail store on Hastings’ Heretaunga St West sold in
December 2021 for $26.95m – a 5.45% yield.

“The
strong sales are a function of a very strong Hawke’s Bay
economy,” Turley said.

But the future was not plain
sailing.

“Market change is underway, led by
increasing interest rates and affected by Covid-related
uncertainty. Currently, construction costs very high
inflation is a property values influence though increasingly
an affordability
challenge.”

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