An investment that takes care of itself best describes a building that is for sale in the heart of the Auckland City centre tertiary education precinct.
The six-level building at 345 Queen Street is being brought to the market for the first time ever as a sale and lease back opportunity on a long-term triple net lease.
Marketed by Warren Hutt, Brent McGregor and Mark Maginness of CBRE, the property is due to be sold via a Deadline Private Treaty process closing 27 June.
Situated on an elevated 2,032sqm site on the corner of Queen Street and Mayoral Drive and adjoining the picturesque Myers Park, 345 Queen Street is strategically located close to tertiary education providers including Auckland University and AUT’s city centre campus.
Other landmarks in the area include the Grand Millennium hotel, and several performance venues including Aotea Centre, the Auckland Town Hall and Q Theatre.
With nearby Aotea and Karangahape train stations under construction as part of the City Rail Link just a short walk away, Hutt says the location is future proofed for ongoing use as a destination for students and as a significant mixed-use development site downstream.
The freehold property is currently owned and tenanted by ACG Education, a well-established private education provider that has preschools, schools and vocational colleges at over 50 campuses across New Zealand.
ACG is New Zealand’s largest provider of tertiary pathway programmes for students with English as a second language, and 345 Queen Street operates as its Auckland campus offering foundation studies for students wishing to study at AUT and Auckland University.
As such most of the levels are structured in a classroom style and designed to maximise natural light with floor plates ranging from 850 to 1,100sqm.
The current net passing income is $2.4 million per annum with the lease allowing for strong annual fixed rental growth of 3% per annum.
Hutt says while the rental growth profile is attractive and will support a strong internal rate of return, what makes the covenant such a standout is the commitment by the tenant to a 20-year term on a triple net lease.
“Whether it’s air conditioning, painting or lift maintenance, there’s no disguising the ongoing management that comes with property ownership, but with capital costs and day to day management being a tenant responsibility at 345 Queen Street investors will certainly reap the benefits with enhanced returns.”
With a current total net lettable area of 5,159sqm, Hutt says there’s also plenty of room to develop the site in the future.
“The property sits on a large site by CBD standards, and is underdeveloped with current planning regulations actually allowing for a basic FAR of 6:1 and maximum FAR of 10:1. By making full use of the zoning there is potential to create a development with GFA of over 20,000sqm.
“A future development of this scale on Queen Street near fantastic amenities and future transport connections such as the City Rail Link and the planned light rail route is certain to be highly sought after. In the meantime, investors can enjoy a stable income with minimal management input thanks to what is the first triple net lease arrangement the CBD market has seen in a few years.
“From this perspective 345 Queen Street is the perfect asset for investors looking for a property that essentially looks after itself, allowing them more time to grow a portfolio or put time into other core business operations.”
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CBRE Group, Inc. (NYSE:CBRE), a Fortune 500 and S&P 500 company headquartered in Los Angeles, is the world’s largest commercial real estate services and investment firm (based on 2018 revenue). The company has more than 90,000 employees (excluding affiliates), and serves real estate investors and occupiers through approximately 480 offices (excluding affiliates) worldwide. CBRE offers a broad range of integrated services, including facilities, transaction and project management; property management; investment management; appraisal and valuation; property leasing; strategic consulting; property sales; mortgage services and development services. Please visit our website at www.cbre.com.