CBRE is marketing five residential accommodation buildings for sale in South Auckland, offering a diversification opportunity with a hassle-free single commercial lease.
118 Browns Road, Manurewa, includes five recently constructed three-level buildings on individual titles, providing the opportunity for investors to purchase one or more buildings, right up to the entire mini-portfolio of five assets.
CBRE Structured Transactions & Advisory Director Natasha Sarkar said the property, which is leased to a community housing provider, offers investors exposure to the fundamentals of the residential sector with the benefit of a high-yielding, long-term lease to a single occupier.
“This is an ideal opportunity for traditional commercial property investors looking to diversify their portfolios into the residential sector through a passive holding.
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"The semi-gross head lease structure means the owner enjoys the simplicity and hassle-free nature of a single lease in place, which provides market-based income growth over the long term.”
Under the semi-gross lease, the owner is only responsible for paying for rates and any structural maintenance.
The single tenant takes 100% occupancy of the 75 residential units, with a fixed contract rent payable.
Offered for sale by deadline private treaty closing on July 11, the property has a weighted average lease term of more than nine years.
The lease generates a high-yielding income amounting to over $1.6 million annually, reviewed to market every three years with a hard ratchet.
A right of renewal offers the potential to extend the lease for a further 10 years, said Sarkar.
“This asset will appeal to investors who are looking for an annuity-type income stream and passive exposure to the residential sector in Auckland, while benefiting from investment of scale.
"Compared with traditional direct residential property investment, this structure cuts out the hands-on involvement usually required from the landlord, as the community housing lessee takes care of all the day to day resident management, operations and building maintenance.”
When considered alongside commercial property leases typically offered in the current market, the asset provides both a comparatively longer lease term as well as a more competitive return than what is generally available from commercial property, providing a very attractive opportunity for long term investors.
Market conditions also create a compelling demand backdrop for the residential accommodation sector in Auckland, Sarkar added.
“Strong population growth is coming up against an existing undersupply of accommodation and a constrained development pipeline of new stock.
"This creates favourable market dynamics for investors, supporting the outlook for investment into residential accommodation assets.”
Net migration between 2023 and 2025 is expected to amount to 210,000 people, while units in the apartment delivery pipeline in Auckland are at the lowest level since 2014, according to CBRE Research.
StatsNZ data shows Auckland region residential rental growth for the year to January 2024 was 6.23%.
The five blocks each house 15 fully occupied, furnished studio units, along with common kitchens and living areas.
Constructed to a high quality, modern standard, they provide comfortable and well-equipped accommodation with plenty of natural light.
Spread over a 2,031sq m freehold site in one of Auckland’s fastest-growing residential catchments, the property is ideally positioned close to public transport, with Homai Station across the road and bus stops nearby.
It is also located adjacent to the Wiri industrial precinct, providing convenience for workers employed by businesses in the industrial area.
- Supplied by CBRE
