Bidders snap up Fonterra Farm Source stores in hotly contested auctions

178 Thames St, Morrinsville

Six Fonterra Farm Source stores sold at auctions around the North Island last week after generating strong bidding competition from investors.

The properties, auctioned by Bayleys and jointly marketed with CBRE's director of agribusiness Jeremy Keating, sold at a total value of $9.9 million, with eight-year lease backs to RD1, a wholly owned subsidiary of Fonterra, from their settlement date, July 23.

"The offerings generated a lot of interest and we would have had at least a dozen bidders in our Hamilton auction room competing for the four properties that went under the hammer there," says Richard Graham, Bayleys' commercial manager for Waikato, Bay of Plenty and Taranaki.

"Three of those properties sold at yields of between 6.4 per cent and 6.7 per cent after spirited bidding which reinforces the fact good quality regional properties with strong lease covenants are attracting plenty of demand and excellent outcomes for vendors. They are also providing higher income returns to investors than are available in major metropolitan markets."

The highest sale price achieved was $2,610,000 for a 1052sq m Farm Source store on a 2719sq m site at 104 Broadway, Matamata (SH 24) which sold at a 6.6 per cent yield through Blair Hutcheson, Bayleys Waikato and Jeremy Keating, CBRE.

In nearby Morrinsville, a 1043sq m store on a 2772sq m site 178 Thames St, in the centre of town with dual street frontage sold for $2,305,000 at a 6.6 per cent yield through Josh Smith, Bayleys Waikato & Jeremy Keating.

The lowest yield of 6.4 per cent was achieved on a 596sq m store with 119sq m of canopies on a 4555sq m site at 59-65 Orchard West Rd (SH2) Ngatea which went for $1,950,000.

59-65 Orchard West Rd (SH2) Ngatea

The other Farm Source properties to sell were:

• 14-20 Kensington St Putaruru: a 1089sq m store which has been servicing surrounding rural community for over 20 years on a 2313sq m site close to town's main roundabout sold for $1,385,000 at a 7.85 per cent yield through Blair Hutcheson & Jeremy Keating.

• Horomanga Rd, Galatea: A longstanding 479sq m store on a 4912sq m site sold for $400,000 at a 9.6 per cent yield through Mark Slade and Mark Rendell, Bayleys Rotorua and Jeremy Keating.

• 64 Tasman St, Opunake: a 1125sq m store plus 145sq m of canopies on a 3054sq m main street (SH 45) site, with three street frontages, sold for $1,250,000 at a 9.1 per cent yield through Alan Johnston and Iain Taylor, Bayleys New Plymouth and Jeremy Keating.

All the leasebacks to RD1 have two-yearly cumulative CPI adjustments and will be reviewed to market on renewal and two-yearly thereafter.

Following the initial eight-year lease there are to be four three-year rights of renewal.

RD1 has 71 rural stores around New Zealand which are being progressively transitioned to trade as Farm Source, part of a transformation initiative to provide "one stop" facilities providing rural supplies services as well as advice and support to rural communities, says Keating.

"With many of the stores in the nationwide network now trading as Farm Source outlets, the opportunity is being taken to free up capital to redeploy within the business - providing the chance for investors to secure well leased and located rural properties."