Stakes for sale in Bay of Plenty supermarket

Small investors can have a proportional ownership take in the Countdown Supermarket within Fraser Cove shopping centre. Photo / Supplied

Smaller investors are being offered an ownership stake in the recently opened Countdown Supermarket in the Fraser Cove Shopping Centre in Tauranga with the offer projecting an initial annual income return of 9 per cent per annum.

Augusta Funds Management is establishing a proportionate ownership scheme to buy the supermarket for $15,558,640 from the developer of the Fraser Cove centre, the New Zealand Retail Property Group (NZRPG).

There are two 15-year leases over the Countdown property to General Distributors, a wholly owned subsidiary of Progressive Enterprises.

Augusta managing director Mark Francis says the proportionate ownership scheme will be structured in the same manner as previous successful syndications the company has undertaken, with investors purchasing a proportion of the registered freehold title in the property's land and buildings.

A total of 183 individual titles are being offered, at $50,000 each, with subscribers able to apply for more than one title. Mike Houlker and David Gubb, of Bayleys Auckland, and Kevin Wehipeihana, of Bayleys Tauranga, have been appointed to market the units.

Houlker says it is an opportunity for private investors to share in the ownership of an anchor tenant of a major shopping centre. "Supermarkets have been the stand-out performers of the retail sector in recent years - it doesn't matter what's happening in the world, people have to eat."

Francis says investors are scrutinising all property offerings these days. "Investors are looking for offerings with long-term leases to blue chip tenants," he says.

"One of the attractions of supermarket properties is that they offer the longest leases currently available in the market - in this case 15 years.

"The grocery market is also dominated by two of New Zealand's biggest and most successful retail companies, Progressive and Foodstuffs, which also provides a lot of investor comfort. "Location, income returns and the potential for capital growth are also important considerations but first and foremost investors want security of income."

The Fraser Cove supermarket is one of the largest Countdowns in New Zealand and has a net lettable area of about 5112sq m. It sits on 5767sq m of freehold land within the recently expanded shopping centre.

The 15-year leases commenced in March 2009 with three further rights of renewal of six years each for a final expiry of 2042.

Progressive Enterprises is the wholly owned New Zealand operating company of Australian publicly listed company Woolworths, which has a market capitalisation of about A$34 billion ($42 billion).

In New Zealand, Progressive operates the Woolworths, Foodtown and Countdown brands. The company has recently announced a $150 million to $200 million capital expenditure programme which will fund the development of three to five new supermarkets and 18 to 20 refurbishments across the existing store network every year for the next three to five years.

Francis says the acquisition of the supermarket will be funded by a conservative non-recourse prime bank debt facility equating to about 45 per cent of the purchase price with the balance by way of investors' equity.

He says the interest rate on the bank debt will be hedged via a blend of term swaps.

Augusta will also manage the Countdown property on behalf of investors while NZRPG will manage the overall centre.

The Fraser Cove Shopping Centre is located in a high profile area of Tauranga sitting between the central city and residential development to the south. Other tenants include The Warehouse, Warehouse Stationery, Kathmandu, Postie Plus, Big Save Furniture, Repco, Paper Plus, United Video, Contours Gym and a wide range of speciality stores.

The centre was opened in 2002 with an initial net lettable area of about 19,000sq m and has subsequently expanded to 31,000sq m.

With the addition of the Countdown site and car parking last year, Fraser Cove now occupies 9.1 hectares of land.

The opening of the supermarket has also increased traffic flows into the centre by 25 per cent to an average of 44,000 vehicles per week.

This has been helped by the continuing popularity of food and beverage sites within the centre - such as World's End Sports Café bar and the Burger King fast food outlet.

"Fraser Cove Shopping Centre has matured during the past two to three years, to become a well-established super convenience centre with a strong presence and awareness within the Tauranga retail sector," says Wehipeihana.

"Having anchor tenants such as the Warehouse and Countdown, along with a mix of nationally-branded tenancies and independent operators, provides a wide range of retail and service activities."