The evolution of 246 Queen Street: From vibrant investment to strategic divestment

9 September 2015   /   3 min read

Purchased in 2006, 246 Queen Street benefited from the vibrant energy of Auckland city for several years, before a surge in development saw new precincts emerge and the popularity of some areas shift.

Oyster’s exceptional market expertise and sharp market insight shone through their well-executed leasing strategy and timely exit, resulting in an outstanding total return for investors.

Investment highlights

  • Purchased for $24,987,950 in 2006
  • Sold for $34,700,000 in 2015
  • Sum of income return $9,900,717
  • Annual income return of 7.7 per cent
  • Annual total return of 13.9 per cent
  • Total return 131.4 per cent

When Oyster purchased 246 Queen Street for $24,987,950 in 2006, its central location and strong tenant profile made it a compelling investment opportunity with significant potential.

Predominantly anchored by a diverse mix of international education-based tenants and
well-known retail lessees, the property’s versatile layout combined with its prime location in Auckland’s CBD main retail thoroughfare, made it a highly sought after property among tenants.

246 Queen Street was managed by Oyster for a total of nine years, during which time the CBD underwent significant changes. These were mostly driven by the 2012 City Centre Masterplan which proposed a package of projects to revitalise parts of the city with a focus on the waterfront.

Newly built precincts offering mixed-use developments sprung up in places such as Wynyard Quarter and Commercial Bay and were a drawcard for some office tenants looking to swap out their city location for the sea.

Looking at the positives, Oyster’s General Manager – Investment, Steven Harris said “the significant foot traffic generated by 246 Queen Street’s educational tenants was central to its success for investors.”

However, the time remaining on some of the property’s then-leases were short, prompting Oyster to recognise the need for substantial capital expenditure to upgrade the asset ready for re-leasing.

Steve said “In the last five to ten years, we’ve noticed a shift in the preference of some office tenants towards the waterfront. Although a well-maintained building, a lot of capital expenditure would have been required to reposition 246 Queen Street.

“At the time, demand for office space was high in the CBD and market conditions were good. We knew the time was right to capitalise on the opportunity and generate strong returns for our investors.”

Ultimately, Oyster decided to divest the property for $34,700,000 in 2015, representing a 33.5 per cent premium to its 2013 book value of $26,000,000.

Across the nine-year lifecycle of the property, investors received annual income returns and annual total returns of 7.7 per cent and 13.9 per cent respectively and a total return of 131.4 per cent.

Steve said: “We are thrilled to have achieved such an excellent outcome for our investors.

“Our ability to adapt and refine our strategy in response to changing market conditions demonstrates our expertise and our unwavering commitment to delivering the best possible returns for our valued investors.”

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