Industrial property a steel

Above: The Scott Package Handling Systems base in Te Atatu; Pacific Steel rents this plant.

Two big Auckland industrial investment properties, both with new leases to long-established tenants, are among more than 100 commercial and industrial properties featured in Bayleys final Total Property portfolio of commercial and industrial properties for the year.

The larger of the two, a 13,000sq m steel manufacturing facility on just over 2ha at 21 Beach Rd, Otahuhu, is producing net annual rental income of $953,431 from a new five-year lease to Pacific Steel (NZ) Limited. It is being offered for sale by tender through Sunil Bhana, James Hill and Mike Houlker of Bayleys Auckland, closing November 27 unless it sells earlier.

Pacific Steel Group's Otahuhu rolling mill and wire manufacturing business, its New Zealand long-steel sales and distribution operations, and a rolling mill in Fiji, were sold this year by Fletcher Building to BlueScope Steel (NZ) Limited, a wholly owned subsidiary of ASX listed BlueScope Steel Limited. The company has more than 100 steel-making facilities in 17 countries, employs more than 16,000 people and is now the dominant player in the New Zealand steel industry. It also owns New Zealand Steel, which is investing about $50 million at its Glenbrook steelworks to supply steel billet to the Otahuhu plant.

Having occupied the site since the early 1960s, Pacific Steel's new five-year lease on the Otahuhu property commenced in June and has two five-year rights of renewal which, if exercised, would take its final expiry through to mid-2029.

The property is on the western side of Beach Rd, a cul-de-sac running off James Fletcher Drive, a main arterial route linking Otahuhu with the South-western Motorway, Auckland Airport and the Wiri inland port. It is close to the Otahuhu Central Business District and the Otahuhu motorway interchange, which provides access to State Highway 1.

Bhana says the 20,713sq m site is in a strategic heavy industrial location, zoned Business 6 under the Manukau Operative District Plan and Heavy Industry under the Proposed Auckland Unitary Plan. "The area in general is characterised by large-scale national and international manufacturers who benefit from being in one of the increasingly rare heavy industrial precincts this close to Auckland's CBD."

Houlker says the buildings include a five-bay warehouse and factory with a detached two-level office building and a good-sized yard area at the northern end of the site.

The main industrial facility is constructed of concrete foundations and floor; concrete block and galvanised steel walls; a corrugated galvanised steel roof; and translucent light panels over a steel portal frame. The stud height is about 5.35m throughout at the knee, rising to around 7.5m at the gable apex and the complex has multiple roller door access to the yard.

"While it's an older-style industrial facility, it is well suited to its current heavy-duty manufacturing use and is solidly built, having an A-grade earthquake rating with a seismic assessment of 100 per cent of new building standard [NBS]," Houlker says.

Bhana, Hill and Houlker are also marketing another industrial investment property in West Auckland, which has future development potential. This encompasses a 3392sq m engineering workshop, warehouse and office building on a freehold site of 7615sq m at 60A Wharf Rd, Te Atatu Peninsula.

The property has a new 10-year lease to well-established occupant Scott Package Handling Systems Limited from last month, with two five-year rights of renewal. The lease produces net annual rental income of $293,800 plus GST and has built-in rental growth from annual reviews tied to the Consumer Price Index, with a minimum increase of 1 per cent and a maximum of 3 per cent.

Scott PHS has been designing, manufacturing and servicing materials handling systems for almost 60 years, initially for the brewing industry but then expanding into a wider range of other industries. Its Te Atatu premises has a fully equipped engineering workshop used for turning, milling, welding, brake press, general fabrication and painting work. The company also provides equipment relocation and installation services.

Hill says the property is in a small pocket of tightly held industrial buildings about 3km from the Te Atatu interchange of the North-western Motorway. "It comprises a very tidily presented industrial facility with an L-shaped warehouse essentially constructed in three bays with a more modern bay linking two older style warehouses. Like the Otahuhu property, it has a good yard area with multiple roller door access. There is also an adjoining two-level office building, which has largely been modernised in recent times." The warehouse has reinforced concrete foundations and flooring, concrete block and concrete tilt slab and profiled metal exterior walls, RSJ steel portal framing, metal purlins and an iron roof. The office area provides a reception lobby with an adjacent meeting room and offices, plus a large lunchroom opening out to a paved courtyard on the ground floor together with further offices on the first floor.

Bhana says the building covers only about 40 per cent of the site, which means there is potential for future expansion or development.

The property is zoned Working Environment which covers the industrial/employment areas of the former Waitakere City.

It is zoned Light Industrial under the Proposed Auckland Unitary Plan allowing for light manufacturing, production, logistics, storage, transport and distribution activities.