32 Iport Drive sale demonstrates benefits of prime industrial property as a long-term institutional investment class

Overview

The $60 million sale of 32 Iport Drive, Rolleston, Christchurch in 2024 to Booster KiwiSaver Scheme is highly significant as one of the largest industrial property transactions ever recorded in the South Island. Booster’s purchase of the 30,000sqm logistics facility also demonstrates the attractiveness of prime industrial & logistics property as a secure, long-term institutional-grade investment class.

The asset 

Leased to Lyttelton Port Company (LPC) for at least the next 13 years, the property is in a class of its own as an institutional-grade property asset in one of New Zealand’s fastest-growing localities.

One of the property’s key differentiators for prospective bidders was its infrastructure asset characteristics, rather than purely a property play.

The site’s open boundary and direct drive-through link to a rail siding within Midland Inland Port gives the occupier full intermodal transit capability, as well as streamlining supply chain integrations with Midland Port’s infrastructure, providing both operational and sustainability benefits.

The security of the asset, with its 13-year lease (plus rights of renewal) to one of New Zealand’s largest port operators was undoubtedly a big drawcard and elevated the property into a class of genuine international institutional grade assets rarely seen outside the upper North Island. 

Campaign process

CBRE’s international marketing campaign attracted expressions of interest from a range of parties. Most potential buyers were New Zealand domiciled, which was expected, given the asset’s location in a provincial centre. Notably, there was also some enquiry from Australia and Asia, demonstrating the international recognition of the asset’s strong investment characteristics and its infrastructure-linked fundamentals.

Seven bids were received. The CBRE team then worked with the vendor to select Booster as the preferred party and worked through a formal negotiation phase, resulting in the successful conclusion of the transaction in July 2024.

Booster is a new entrant to the institutional-grade property market and this deal represents the investment manager’s first substantial property acquisition for its KiwiSaver portfolios. 

Outcome & analysis

Reaching a deal in a difficult economic environment where transaction volumes were significantly reduced was a challenge, as there were no recent comparative sale benchmarks to indicate the market price. 

The asset’s long-term investment nature and security of the tenant were key considerations outweighing shorter-term economic and market-related concerns. Data from CBRE Research supporting wider market commentary that the property cycle had most likely bottomed out gave the purchaser further confidence. Additional asset-specific characteristics, including CPI-linked rent increases and the growth of Rolleston into the South Island’s pre-eminent logistics hub also contributed to the purchaser’s favourable long-term view of the investment.

The deal is also significant in that very little KiwiSaver money is invested directly into property. Recent research from CBRE found that New Zealand lags Australia by a large margin when it comes to superannuation funds’ direct real estate allocations. KiwiSaver providers’ allocations to direct/unlisted real estate are less than 1% of their total funds under management. This compares with Australian super fund providers’ overall average direct property allocation of 4.8%. 

However, with the roughly $11 billion annual growth in total KiwiSaver funds under management over the past three years and the industry consolidation that is occurring, this may be changing, as more KiwiSaver funds achieve the necessary scale to meaningfully participate in direct property investment.