A Quest Apartment Hotel in a redevelopment within the Central Park commercial business park is for sale with a new 15-year lease that offers structured rental growth and an exceptional tenant covenant.
The hotel will occupy what is currently Building 4 at Central Park, 660 Great South Rd, Greenlane, on a new freehold title.
Due for completion in October next year, the development is located on Auckland’s Southern Corridor – an area with many large corporate occupiers, but few short-term accommodation options for business travellers.
It comprises a seismically upgraded office building that is being extensively refurbished and converted into a modern, high-quality serviced apartment complex.
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The building is located in leafy surrounds at the southeast of Central Park – a 6.2ha business park located in Greenlane that provides excellent on-site amenity and superb access to transport links.
The business park was purchased last year by Oyster Property Group in a joint venture with global investment firm KKR.
Oyster and KKR have exclusively appointed Colliers International to market Quest Central Park for sale by deadline private treaty.
Offers close at 4pm on Wednesday August 7, with settlement to take place upon completion.
Dean Humphries, Hotels Director at Colliers, says it’s an opportunity to acquire a newly refurbished investment property in an area crying out for short-stay accommodation.
“More than 50,000 people work in the area, many of whom are employed by large national and international organisations.
“However, despite the area’s business popularity, there is a considerable lack of short-term accommodation in the vicinity.
“As a result, companies either have to compromise on quality or look further afield to accommodate out-of-town staff, contractors and clients. This comes at a cost in terms of room rates, travel times and expenses.
“The lack of accommodation is even more surprising considering the range of key tourist amenities in the area. The Ellerslie Event Centre and Racecourse, Alexandra Park, ASB Showgrounds and Mt Smart Stadium are all within a few minutes’ drive.
“Quest Central Park will fill the gap, making it ideally placed to attract business and tourism customers.
“When an exceptional tenant covenant is added in with a prime location, advantageous lease terms and fully refurbished building, the investment fundamentals really stack up.”
He says the hotel will be operated by Quest on a new 15-year lease from completion, returning an estimated $789,000 plus GST in net annual rent, with three rights of renewal of five years each.
Structured rental growth is locked in at 2.5 per cent a year from the fourth year of the lease, with market reviews at years five and 10.
Humphries says Quest is a proven accommodation brand with an exceptional history of expansion and revenue growth.
“With more than 160 locations across Australasia and the Pacific, Quest has $500 million of New Zealand property value under its brand.
“In addition to its scale, Quest’s annual revenue in New Zealand has grown spectacularly since its 2002 inception, surpassing $60 million last year.
“Quest is now looking to add a further 20 new purpose-built operations throughout the country over the next five years.”
Humphries says Central Park met Quest’s key criteria of a geographical location with unsatisfied demand.
“There are no hotels or serviced apartments in the immediate area, with the nearest two hotels being the Novotel and Ibis in Greenlane, 3.5km to the north.
“There are some motels in Ellerslie, about 1km to the east, but these do not provide the level of accommodation that corporate clients typically require.
“As a 4.5-star offering, Quest Central Park will satisfy this demand. The new 47-room complex will comprise 38 studios and nine single-bedroom apartments that meet Quest’s exacting standards.”
Gareth Fraser, Auckland Director of Investment Sales at Colliers, says the hotel will leverage off Central Park’s success.
“Central Park is a premium commercial business park that accommodates more than 60 businesses and 2300 employees across 11 buildings, spanning a total area of 44,000sq m.
“Key tenants include Genesis Energy, Restaurant Brands, Mars, George Weston Foods, the Bunnings Head Office and Colgate.
“The location provides easy access to the Auckland motorway network via the nearby Ellerslie interchange, putting it within 10 minutes of the CBD and 20 minutes of the airport.
“Central Park also offers extensive amenities, including an on-site childcare centre, cafes and convenience food retailers.”
Fraser says the New Zealand hotel market has experienced a period of unprecedented growth driven by rising international visitor numbers.
“Auckland is the largest hotel market in the country, with some 10,000 rooms, but most of the inventory is in the CBD.
“This makes the Southern Corridor a key growth area as the city looks to additional inventory to the wider Auckland region.”
Fraser says high land and construction costs have contributed to supply lagging demand at a time when hotel occupancy rates remain at over 80 per cent, so this is a timely addition to the Auckland hotel sector.
“Room nights in Auckland totalled 4.61 million in 2018, with an occupancy rate of 83.4 per cent.
“Corporate customers contributed to 18 per cent of this demand, which demonstrates how necessary new developments like Quest Central Park are.”
The property will have a net lettable area of 2560sq m on a 1836sq m Business Park zoned site, subject to a final subdivision survey.
An existing ground floor car park will be converted for guest arrivals, a reception, guest rooms, car parks, and administration, storage and back of house areas. The top two office levels will become guest room floors.
