Split-risk tenancies make mall fair bet

An Otara retail building built in 1960 and subdivided into two large tenancies housing a Shop n' Save supermarket and a general retail store, with a smaller third tenancy to a BNZ ATM machine, will go under the hammer next week.

"With split-risk tenancies this is an ideal property for a retail portfolio," says Agnes Teh, Barfoot & Thompson Commercial agent, who is marketing the property for sale by auction at 10.30am on Thursday, August 7 in Barfoot & Thompson's auction room at 34 Shortland St.

"There are three tenancies paying annual rent of $248,022 plus GST and outgoings and the anchor tenant supermarket has renewed its six-year lease," Teh says.

The 1403sq m building including a 189sq m mezzanine floor is on a freehold site of 1246sq m that has good council parking to the front and rear of the property.

"Situated adjacent to Manukau Institute of Technology the building has great exposure to all sites within the Fair Mall shopping centre," Teh says.

Zoned Business 2 under the Manukau District Plan, the building occupies a rectangular site with a frontage to Fair Mall of about 27.26m and a depth of 45.72m. The land is level with its rear boundary abutting the large public parking area.

The property is on the western side of Fair Mall in the Otara Town Centre which is on the northwestern corner of the Bairds and East Tamaki Rds intersection.

Shop n' Save Supermarket is occupying a ground floor area of 857sq m and mezzanine offices of 189sq m for a total tenancy of 1064sq m. The General Store leases a ground floor area of 357sq m and the BNZ ATM machine occupies just 1sq m.

"The vendor has obtained an independent engineering report from EQ Struc Limited indicating the building has a seismic rating of 70 per cent of New Building Standard," Teh says.

"The property is being sold with its three tenants in place," she says.

The Shop n' Save supermarket has a six-year lease commencing August 12, 2008 that is renewed from August 12 taking the expiry to August 11, 2020 with two further rights of renewal of six years each. Current annual rent is $150,000 plus GST and two-yearly reviews based on Consumer Price Index [CPI] rental increases.

The General Retail Store's six-year lease commenced on February 1, 2009, with its current expiry on January 31, 2015 and two further rights of renewal of six years each.

Annual rent is $88,782.50 plus GST with two-year reviews based on the CPI plus 2 per cent rental increases.

"Both the leases contain a hard ratchet clause whereby the rentals cannot be less than what was pay-able in the previous 12 months," Teh says.

The ATM machine owned by BNZ Branch Properties Ltd generates $9240 plus GST in annual rent on a three-year lease that commenced March 1, 2011.

That was renewed this year taking the expiry date to February 28, 2017 and a further right of renewal of three years.