Navigating market shifts: The strategic divestment of 102 Rosedale Road

102 Rosedale Road presented a compelling opportunity for Oyster investors in 2010, offering the potential for long-term strong returns. The building was a near brand-new fully leased premium quality building, strategically located in what was the main business hub of Albany at the time.

In response to shifting market conditions in 2018, Oyster made the decision to divest the property, delivering an annual total return of 7.9 per cent over eight years and a 60.4 per cent total return to its investors.

Investment highlights

• Sold in 2018 for $8,750,000, $963,286 over the purchase price
• Sum of income return $2,268,560
• Annual income return of 6.5 per cent
• Annual total return of 7.9 per cent
• Total return 60.4 per cent

Oyster purchased 102 Rosedale Road in Albany on Auckland’s North Shore for $7,786,714 in 2010, just two years after construction was completed.

At the time of purchase, the property boasted full occupancy with long-term blue-chip tenants attracted to its modern office space, ample parking and advantageous location that offered excellent connectivity to major motorways.

Projected to generate $712,166 in rental income during its first full financial year, investors oversubscribed Oyster’s offer to own a share at $100,000 each, highlighting their confidence in the investment opportunity.

Changing tides: A shift in the market

The ground floor of the building was leased to two tenants, and in 2018 one of these occupiers indicated that they would be leaving.

The 300sqm tenancy remained vacant for some time, due to a locational shift in the Albany office market which made it harder to attract and retain quality occupiers.

Oyster’s General Manager – Investment, Steven Harris said:

“Another commercial hub had surfaced in a different part of the suburb, and Rosedale Road and the surrounding area were no longer considered the business hub of Albany,”

“New cycleways had recently been introduced on both sides of Rosedale Road meaning there was less street parking available nearby and public transport in the area was also limited.”

Oyster evaluated the potential risk of a future vacancy and the capital required to upgrade the space, such as base build works. There was also the cost of running a comprehensive re-leasing strategy to consider.

Oyster recognised the additional value that could be obtained for investors and made the decision to divest the building, ultimately providing investors with a total return of 60.4 per cent over the ownership period.

“The timing was ideal to capitalise on the short-term full occupancy and extended lease of a major tenant, allowing us to deliver an outstanding return for our investors,” Steve said.