Half share of Bayfair up for sale

Bayfair centre at Mt Maunganui has 100 stores and more than 15,000 customers a day.

A half share in Bayfair, one of the country's largest and most successful shopping centres, has been put on the market by Tower Property Nominees.

The award-winning 7.7ha Bayfair at Mt Maunganui makes up 55 per cent of Tower Asset Management's Tower Property Fund, a weighting the company says carries asset concentration risk.

The shopping centre's success and its ongoing need for expansion capital means the fund is too heavily weighted to one asset, says Greg Whitten, Tower Asset Managements head of property investment. "We need to rebalance the fund to reflect the conservative nature of the investors."

Colliers International directors John Goddard, Auckland, Bill Leckie, Wellington, and Simon Clark, Tauranga, are marketing 50 per cent of Bayfair and calling for registrations of interest by July 12.

Selected parties will then negotiate with Tower Asset Management on price and a proposed joint venture agreement.

In addition to offering 50 per cent of Bayfair in one parcel, Tower Asset Management is willing to enter into an agreement relating to the sub-contracting of the management rights.

Bayfair has 100 stores occupying 31,000 sq m and 1643 car parks with a total annual turnover of $186 million as at March 31, up 14.2 per cent over the previous year.

The centre dominates the broader Tauranga area which is one of the country's fastest growing regions.

On average more than 15,000 customers visit Bayfair each day and it has more than 5.5 million visitors a year. Bayfair is generally regarded as the best regional retail centre, Goddard says.

"Bayfair's turnover takes a huge surge in January, when the immediate catchment swells with up to 216,000 visitors. Add to that the positive demographics, the shopping centre's ability to expand to meet the inevitable demand arising from population growth and Bayfair is well placed to retain its special retail qualities."

The city has above average population density and is forecast to grow from the current 100,000 residents to 150,000 over the next 20 years. Tauranga grows by 53 people a week, 88 new houses a month and is the highest spending region per capita.

Bay of Plenty retail sales during December totalled $1.21 billion, up $109 million (10.8 per cent) on the same month in 2004.

Bayfair came to life 21 years ago as a 7000 sq m neighbourhood shopping centre anchored by Woolworths and with 25 specialty stores.

The centre expanded in 1993 when a 2000 sq m Countdown supermarket, a Kmart store and an additional 1200 sq m of specialty stores were added along with the expansion of the car parking areas.

It was extended again in 2002 when Farmers moved into an 8000 sq m store, 1000 sq m was added to Countdown, more specialty stores were built and a new Caltex service station, four-level car park building and a 600 sq m stand-alone bar-restaurant went up.

Bayfair's anchor tenants are now Woolworths, Farmers, Kmart and Countdown, with a blend of global, national and local brands in the specialty stores, including Whitcoulls, The Body Shop, Pumpkin Patch, Pascoes, Hannahs, Michael Hill Jewellers, McDonald's, Starbucks and the main banks.

This mix includes a dominant share of Australasian retailers, accounting for nearly 70 per cent of the total specialty shopping area. Overall the stores return $5988 per sq m a year.

Whitten says a $45 million to $50 million expansion is being planned to ensure Bayfair remains the dominant retail centre in the region. The next step is an eight-screen movie theatre, more specialty stores and additional car parking.

In the long term more expansion is also planned. The shopping centre is well positioned to benefit from intensification under the proposed Bay of Plenty District Council's smart growth strategy.

It would enhance Bayfair's reputation as a hub in the region, says Goddard. The well maintained and in near new condition shopping centre won the supreme award at the 2003 Property Council Building Awards.

Tower Property Fund has been involved in Bayfair's ownership since it was developed in the early 1980s. The fund owns eight properties and Bayfair will remain its largest single asset. Investors are mainly parties associated with the Tower group or substantial superannuation funds.

Since inception the fund has produced annual average returns of 11.42 per cent before tax and management fees and Bayfair's strong performance has been a significant contributor.

Tower Asset Management is committed to being a long-term joint venture owner taking part in the expansion of Bayfair, says Whitten. Money from the sale will be used to diversify the fund while enabling it to inject capital in Bayfair's future expansions.

Tower Property Nominees is offering a 50 per cent unencumbered interest in Bayfair and the new owner will be issued a new title for its interest.

Goddard says the interest in Bayfair both locally and from Australian funds will be significant. Tower is in a position to be quite selective, given the exceptional retail quality of the property.