Longtime Tauranga syndicator Denis McMahon and his Auckland-based partner, Phil Tushingham, will launch an unlisted commercial property company next Tuesday as an alternative to their 100%-equity investments.
The new company, Pacific Property Fund Ltd, will open with an initial offer of up to 7.82 million $1 shares, which will be used to acquire a $12.275 million 10,100m² warehouse still under construction at Truman Lane, Mt Maunganui.
Mr Tushingham said yesterday they were looking at “a couple of others” but didn’t want to commit until the initial offering is completed. The offer opens on 29 October and closes on 18 December.
The target properties are in the $5-30 million range, where they believe they have the best opportunity to add value, and their focus will remain on the markets of Auckland, Hamilton & the Bay of Plenty.
Mr McMahon launched Property Managers Ltd 20 years ago and was joined by Mr Tushingham 4 years ago. They’ve produced 25 syndicates on a proportionate ownership basis, all fully equity-funded, and have built up a following of 500 investors, including grandchildren of original investors, primarily in the Bay of Plenty & Waikato.
Pacific Property Fund’s first investment is being purpose-built by Wallace Development Co Ltd as the headquarters & warehouse for garden products company Tui Products Ltd. Tui has a 20-year lease starting at a net $1 million, with 2 10-year rights of renewal and 2-yearly rent reviews to CPI.
The 3.05ha site, including 4000m² at the rear for expansion, is on a 99-year ground lease from the proprietors of Mangatawa-Papamoa and the ground rent will also be subject to 2-yearly reviews, capped by structured amounts. Tui will also be responsible for the ground rent.
Mr Tushingham said the target gross dividend yield was 7% for the first full year to 31 March 2015, but that yield wasn’t guaranteed. Investment parcels will be a minimum of $20,000.
He said Property Managers would continue to offer syndicated property, but had launched the new company to give their investors an alternative. For both types of investment, however, the expertise in adding value & repositioning the investments were important factors.
As an example, Property Managers’ first syndicated building, on Durham St in Tauranga, had been repositioned with an upgrade & new tenancy last year, and many of the original investors were still involved.
Attribution: Company release, interview.