Oyster’s Strategic Acquisition of Tauranga Crossing Provides New Investment Opportunity2 December 2019 / 6 min read
Tauranga Crossing, the newest and largest shopping centre in the Bay of Plenty region, provides wholesale investors with a rare opportunity to invest in one of New Zealand’s most strategically located regional shopping centres.
Oyster, which has managed the centre since it was first developed, will form a limited partnership to acquire a 60 per cent ownership share in the property, which includes Tauranga Crossing Shopping Centre, Lifestyle Centre, and land for further development of the centre. The remaining 40 per cent will be retained by the current owner and developer, Tauranga Crossing Limited.
“Oyster has been involved with the centre for over four years in both a development management and centre management capacity,” says Oyster’s Chief Executive, Mark Schiele.
“We’re delighted to now enter into a joint venture with Tauranga Crossing Limited allowing our investors to participate in the centre’s future success.”
Tauranga is New Zealand’s second fastest growing city and the property is centrally located in the suburb of Tauriko approximately 7.5km south of the Tauranga CBD and 9km from the Port of Tauranga.
“Alongside Auckland and the Waikato, Tauranga constitutes the eastern corner of New Zealand’s economic ‘Golden Triangle’, a sought-after location for many commercial property investors,” says Schiele.
Tauriko has been identified by Tauranga City Council as a major growth area and one Tauranga’s key commercial centres, and the centre itself occupies a prime location at the junction of State Highways 36 and 29.”
Tauranga Crossing is currently leased to more than 100 tenants including PAK’nSAVE, The Warehouse, H&M, Event Cinemas, Farmers and Gilmours and provides a diverse tenant mix and income stream with a weighted average lease term of 6.6 years as at December 2019.
The forecast annual pre-tax cash distribution is 6 per cent, payable on a monthly basis with a targeted annualised total return of 12 per cent over the first three years being a combination of capital growth achieved through further development of the property and income distributed.
Oyster and Colliers International will market 432 interests with a minimum investment of $1,000,000 (comprising four $250,000 interests) and $250,000 increments thereafter, in the newly formed limited partnership.
Colliers’ Syndications Director, Charlie Oscroft, expects the fund will have broad appeal to wholesale investors and provide an investment opportunity that very rarely comes to market.
“Tauranga Crossing is a premium investment opportunity and a superb chance to capitalise on the strong economic performance of one of New Zealand’s fastest-growing urban centres.
“The retail investment sector in the ‘Golden Triangle’, which now accounts for approximately 50 per cent of New Zealand’s population and economic output, continues to go from strength to strength.
“Retail yields in Tauranga, Auckland and Hamilton often outpace many other cities across New Zealand.
“Given the positive prospects for the region, these buoyant conditions for the real estate sector in Tauranga are set to continue.”
Stage 1 of Tauranga Crossing opened in late 2016 incorporating external facing large format and mini-major retailing. The Lifestyle Centre, currently comprising of three large format retail tenancies, opened in April 2018. Stage 2 of Tauranga Crossing, comprising of the enclosed mall opened in two stages, 17 tenancies in October 2018 and the grand opening of the two-level enclosed mall incorporating the cinema and adjacent dining precinct and lower level atrium with 73 tenancies opened in April 2019.
Tauranga Crossing Stage 1, Stage 2 and the Lifestyle Centre currently comprises approximately of 45,637m² of net lettable area and 1,789 car park spaces over two sites. The strategy for the property will focus on future development works to unlock the remaining 5.5 hectares of expansion land and to benefit from future capital gain generated by a new anchor tenant mix. Completion of the phased development is expected in late 2022.
Oyster, a leading New Zealand commercial property and fund manager, has expertise in property fund structuring and equity raising, and currently manages more than 20 property funds structured for retail and wholesale investors including Oyster Industrial and the diversified Oyster Direct Property Fund.
Oyster manages a range of retail, office and industrial assets throughout New Zealand, with a combined value in excess of $1.7 billion.
Oyster’s Capital Sourcing Manager, Rich Lyons, says the new fund reflects appetite for quality commercial property in a sought-after growing location.
“We know from investor feedback that there is continued demand for quality wholesale investment opportunities particularly for property with a diversified income stream that is well located.”
“Our existing wholesale investments remain tightly held by investors and we expect this new investment opportunity to be well received given the targeted total return through future development and expansion of the centre”
Colliers International Research says one of the key factors driving positive real estate performance in Tauranga over the past few years has been the exceptional increase in population.
With Tauranga’s population growing by approximately 19 per cent since 2013, according to Census 2018 data, one of the fastest growth rates in the country.
Along with population growth, steady employment growth and the increase in the number of locals and visitors spending more has been a major boon for Tauranga’s retail sector.
Local hotspots and highly frequented stores are clear, predominantly in main centre strips, with shopping centre retailers also enjoying high levels of non-discretionary and discretionary retail spending.
The most prosperous retail premises are destination locations that have captured the consumer through a holistic shopper experience, combining sought after brands, convenience, variety, experience and leisure activities.
The latest Colliers International quarterly investor confidence survey, which asks respondents their 12 month-outlook on commercial and industrial property expectations across the country, showed that Tauranga / Mount Maunganui was the top pick amongst respondents.
With a net positive 55 per cent (optimists minus pessimists), Tauranga / Mount Maunganui is expected to see strong levels of occupancy, rising rents and capital value increases in the future, according to respondents.
Highlighting this popularity amongst investors, average prime retail yields in Tauranga are now among the sharpest in the country. Yield firming (moving closer to zero) has been a key trend in the last few years, created from positive fundamentals, pent-up demand and a low interest rate environment.
To receive a copy of the Information Memorandum once available, please head to our Current Offers page where you can register your interest and download the information flyer.