Ground Lease Property Purchase
Great South Road, Auckland
Trust Management is pleased to advise that the Trust Investments Property Fund (“Fund”) has confirmed an unconditional contract to purchase a 99 year terminating ground lease property at 238-246 Great South Road, Papakura, Auckland.
The property has a particularly high tenant covenant as it is leased to Investore Property Ltd, a listed property company on the NZX with asset backing of circa $640m. The property is sublet to General Distributors (Countdown) and operated as a supermarket.
Being a ground lease it has a low risk characteristic as the depreciating building improvements are owned by the Ground Lessee.
The property is well located in Papakura, has three street frontages and a land area of over 1.2 hectares. The Ground Lease has 73 years to run and the rental was reviewed in 2015. The purchase price is $7.65m with an initial yield of 5%.
The ground lease is unusual as it has a 5 yearly rental review cycle which is more regular than the standard 7 or 21 year reviews for commercial ground lease property. The rental is fully ratcheted - meaning that the rental at review can not fall below the previous rental level.
Patrick O’Reilly, General Manager Property for Trust Management noted that,
“This off-market ground lease property purchase for the Trust Investments Property Fund, on the back of the sale of 50% of The Warehouse South Island Distribution Centre, is a great example of the Trust Management’s active asset management philosophy in operation.
The purchase of the ground lease property will see the Weighted Average Lease Term for the Fund increase from 7.1 years to 11.5 years. This reinforces the low risk nature of the Fund for investors by having such a long average contracted rental commitment”.
The Trust Investments Property Fund is performing strongly with an annual unit holder return of 13.7% for the one year period to 31 August 2016.
The ground lease purchase aligns with the long term strategic property sector allocation of the Fund. Settlement is scheduled for 12 October 2016.
Trust Investments Property Fund Acquires A Ground Lease Property
Under the Financial Markets Conduct Act this communication may be deemed to be an advertisement for an offer of units. Trust Investments Management Limited is the issuer of the units to be issued under the offer to which this advertisement relates. A product disclosure statement for the offer, which sets out the terms and conditions of the offer, is available, and can be obtained at www.trustmanagement.co.nz/investment-products.