Cold store facility in Palmerston North

A large cold store facility in Palmerston North, offering an “exceptional” tenant covenant and income growth rate, has been placed on the market by CBRE.

375 Tremaine Ave, Palmerston North, is being marketed by Bruce Catley and John Bedford and is for sale by expressions of interest closing at 4pm on April 2, 2020.

The 2.12 hectare property is occupied by Premier Beehive NZ Ltd, a subsidiary of Primo Foods Australia. Primo is in turn owned by JBS SA, a Brazil-based company which is the largest meat processor in the world by sales, says Catley.

“The tenant covenant offered by Premier Beehive is quite outstanding and will put this asset high on the wish-lists of many industrial investors around the country,” he says.

“A tenant which has the backing of a global heavyweight in the food industry like JBS is sure to get a big tick of approval from individuals, syndicators and funds looking to enhance their industrial portfolios.”

The long-term lease to Premier Beehive also offers 5% fixed income growth every year, a level which is much higher than income growth provisions commonly included, Bedford says.

“A five per cent annual income growth clause is quite exceptional and very rarely seen in the current market. This alone makes this asset a stand-out investment, but when you add the excellent tenant covenant you have a highly desirable package.”

The large freehold site has surplus yard area which makes expansion of the facility a future possibility, says Catley.

“The asset offers the potential to extend the size of the current cold store facilities. Given the high cost of building this type of facility from scratch, the option to expand the current buildings on to the excess yard space is likely to be very attractive from a tenant retention point of view.”

The lease to Premier Beehive, which has nearly 10 years remaining on the current term, also includes rights of renewal to potentially extend the lease for up to a further 10 years, until July 2039. Net annual income as at July 2020 amounts to just over $833,000 and a management fee of 4 percent is also recoverable from the tenant.

The high-demand, low-supply nature of the cold store property sector will be viewed as a further positive investment attribute, a time when safeguarding New Zealand’s food distribution and exports is more critical than ever, Bedford says.

“The cold storage industry is still experiencing shortages of space in the face of growing global demand for food and the resulting high demand from cold storage users. Current high building costs are proving a deterrent to large-scale new construction, and as such existing facilities, which do not command premium rents, are subject to high demand from tenants,” he says.

“This has resulted in cold storage property becoming a highly sought-after sub-sector of the market among property investors.”

Premier Beehive uses the 6,391sq m of cold storage and food-grade warehousing facilities on the site to store and distribute bacon, ham and other meat products.

The company has been producing bacon and ham for over 21 years and employs over 150 staff in New Zealand. It also manufactures and distributes the outdoor-reared Freedom Farms brand.

The buildings on the property include substantial large-scale freezers and chillers, with clear span interiors and high studs. The site also features an enclosed loading area, warehouse, offices and amenities, as well as various sheds and equipment buildings.

The industrial-zoned property is located in the western part of the Takaro industrial precinct, close to Palmerston North Airport. The area also has excellent access to state highways and the rail network.

Palmerston North has developed into a significant logistics hub in recent years, with several large logistics businesses operating distribution centres in the city, which is well located to service the lower North Island.