205 Great South Road: A sound investment for investors

A strong performer in the Oyster portfolio for almost 14 years, 205 Great South Road, Greenlane, proved the benefits of long-term commercial property investment when the scheme was concluded in 2018, delivering a total return of 155.6 per cent to investors.

Investment highlights

• Sold in 2018 for $17,525,000 – $475,000 more than its book value at the time
• Annual income returns of 7.5 per cent
• A total return of 155.6 per cent

Strong investment potential

205 Great South Road carried all the hallmarks of a strategically located commercial property investment with excellent long-term potential when it became part of Oyster’s commercial property portfolio in 2004.

Situated on a prominent corner site in central Auckland with easy motorway access, rail access and 120 on-site parks, the property also boasted a secure government tenant on a long-term lease.

The asset was a mixed-use property with a flexible profile well-suited for a range of potential uses, from office to retail – a feature Oyster Chief Executive, Mark Schiele, said added value in the market and made it an attractive proposition for tenants well into the future.

“205 Great South Road was a sound investment for investors,” Schiele said. “The location was widely acknowledged as a thriving suburban office hub with considerable potential for rental appreciation.”

Capitalising on market conditions

Across its lifetime in the Oyster portfolio, the asset delivered robust leasing activity and solid rental growth, producing annual income returns of 7.5 per cent per annum.

When Oyster received early indication that anchor tenant, Housing New Zealand Corporation (HNZC), was considering vacating the property for larger premises, a strategic review of the property was undertaken to get ahead of this potential change in tenant profile and determine the best course of action for investors.

“While re-leasing and capital works to maximise the tenancy opportunities were considered, this would have come at considerable expense and we knew stable returns were important to investors in this scheme.

“The market was buoyant, and with the asset at 100% occupancy, prime conditions existed to materialise total value for our investors.”

“Divestments, where we can achieve optimal returns relative to market conditions, play an important role in our active management strategy and the timing was right for 205 Great South Road after a solid 14 years,” says Schiele.

A successful sales campaign saw the property sell in August 2018 for $17,525,000, representing a $475,000 premium to the property’s book value at the time.

“205 Great South Road is an excellent example of commercial property investment as a long-term play and the benefits of well-timed divestment. At the conclusion of the scheme after a period of almost 14 years, investors had received an annual income return of 7.5 per cent.”