The 18-year journey of 60 Khyber Pass Road18 April 2023 / 4 min read
In June 2005, Oyster Property Group welcomed 60 Khyber Pass Road in Grafton, Auckland, into its expanding commercial property portfolio.
It was ultimately sold recently, some 18 years later, and provides a good example of executing in a long-term commercial property investment strategy. During this time Oyster navigated challenges including the Global Financial Crisis, changing market dynamics and the COVID-19 pandemic to deliver strong returns to its investors.
Oyster Chief Executive Mark Schiele said:
“60 Khyber Pass Road has proved to be a resilient and valuable asset for our investors, highlighting the importance of taking a long-term view of commercial property investment.
“It’s an example of the benefits of focusing on quality assets in strong locations, combined with reputable tenants and long-term leases, which is at the heart of our investment philosophy.
“By prioritising quality tenant services, taking an active fund management approach and focusing on adapting to the market, we were able to navigate some significant bumps in the road and deliver strong returns to our investors over the course of the property’s lifecycle with us.”
- Annual income returns averaging 8.4 per cent per annum since inception
- Annual total return of 12.1 per cent for investors
- Total return of 213.8 per cent for investors
- Sold February 2023 for $21 million, double the original purchase price
A solid past and a strong future
60 Khyber Pass Road was purchased in June 2005 for $10.2 million, offering investors $100,000 parcels.
At that time, the six-level office building was fully leased to four high quality tenants on long leases, attracted by its proximity to Auckland CBD, key transport links and panoramic views of the Waitematā Harbour and city centre from upper levels.
Oyster Chief Executive Mark Schiele said from the outset, 60 Khyber Pass Road’s potential was clear.
“CBD fringe assets are always an attractive investment opportunity Oyster is keen to explore as generally the property fundamentals are good and the potential for capital appreciation is high,” Schiele said.
“At the time It’s location and quality tenants on long leases made it a sound investment that Oyster was excited to offer our investors a chance to be a part of.”
Smooth sailing on stormy waters
A targeted leasing strategy that addressed occupancy challenges and changing market conditions was a main contributor to Oyster’s success.
To stay ahead of evolving office market trends, the property needed to continually adapt its offering to ensure high occupancy and consistent rental income.
This involved undergoing the first of three refurbishments when the anchor tenant’s lease came to an end in April 2010.
The design and refurbishment breathed new life into a prime office space and, coupled with a strong leasing campaign, Oyster secured a replacement tenant to move into the improved workspace.
The property was revamped again in 2019 and most recently in 2021 – this latest makeover totalling $3.6 million was instrumental in securing the current anchor tenant.
Oyster General Manager – Property Fabio Pagano said:
“We focused on improving financial performance, filling occupancy gaps, maintaining a diverse tenant mix, and adapting to dynamic rental market conditions.”
“Our resilience, strategic planning and relentless efforts paid off. By continually improving the property, we were able to attract and retain quality tenants, resulting in high occupancy rates and consistent rental income – the benefits of which we were able to pass onto investors.”
Bringing it home for investors
The property navigated a number of economic cycles as well as the pandemic, and went through several changes in tenancy including a key tenant vacating in December 2020. Oyster continued to assess the asset’s potential and, to ensure optimal value was realised for investors, accordingly made the decision to sell the property.
In February 2023, Oyster sold 60 Khyber Pass Road for more than double the purchase price – $21 million – delivering an annual total return of 12.1 per cent and a total return of 213.8 per cent to investors in the process.
Schiele said: “The decision to sell the asset was the best way to optimise returns to our investors.
“It represented an opportunity for investors to realise strong capital growth while also having enjoyed annual average income since the property’s inception.
“We’re proud to celebrate this success for our investors and look forward to continuing to provide them with long-term investment opportunities that yield strong results in the future.”
Key Property Facts:
- Constructed 1975
- Purchased June 2005
- Three extensive refurbishments carried out in 2010, 2019 and 2021
- The 2021 refurbishment included end of trip facilities, a lobby refurbishment, lift interior upgrade and base build refurbishment of levels 4 and 5.
- The upgrade saw Levels 4 and 5 completely refurbed in conjunction with base build upgrades which included new HVAC units both levels, LED lighting install, fire system upgrades and new kitchen and break-out facilities.