Five Mile Development Opportunity Frankton | Queenstown
Information Memorandum to Mackersy Property Investors 8 December 2020 The investment offer set out in this information memorandum is not intended to and does not constitute an offer to the public of a financial product. This information memorandum is not a registered prospectus or disclosure document. The investment is only open to Wholesale Investors under the Financial Markets Conduct Act 2013.
Mackersy Property has secured the opportunity to purchase a 30% share in majority of the buildings located within the Five Mile Centre, Frankton Queenstown. Be part of Queenstown’s fastest growing and well established Commercial Precinct with future development upside.
5.55% Projected Gross Return Year 1
3
4 FIVE MILE CENTRE
Location and outline indicative only
5
Contents
6
Executive Summary - The Opportunity
8
Key Investment Details & Key Property Details
12
Five Mile Centre Virtual Tour
14
Key Investment Fundamentals
16
Investment Structure
18
Queenstown Gateway (5M) Limited
20 Location 22
The Existing Buildings
27
The Buildings to be Completed
32
Future Development Sites
33
Development Sites
36
Investment Model
37
Projected Cash Flow
39 Assumptions 40
Risks & Considerations
42
Non-public Offer
43 Disclaimer
6
Executive Summary - The Opportunity Located in the heart of one of New Zealand’s fastest growing population areas as well as exposure to a potential rebound in international tourism, Mackersy Property is excited to present this investment opportunity to purchase a 30% share in the assets of the Five Mile Centre in Queenstown. The Five Mile Centre is an established shopping and commercial centre located in the heart of Queenstown’s Frankton District. The district has experienced significant growth over the past five years driven by the topographical constraints of the Queenstown CBD, strong population and tourism growth. Locals increasingly want to work and shop in Frankton rather than travel into Queenstown. Despite the absence of international tourism, and in contrast to the Queenstown CBD, Five Mile visitor numbers are at an all-time high and rental income is now above pre Covid levels. The mix of retail and office buildings offer a diverse range of tenants and cashflows. Notable tenants include: ANZ, BNZ, ASB, The Warehouse, Noel Leeming, The Sudima Hotel, Kathmandu, Mackersy Property, Craigs Investment Partners and Joes Garage. Additional anchor tenants who contribute to the Centre’s success but who do not form part of this opportunity include: Countdown, Briscoes, Warehouse Stationary and Rebel Sports. Projected gross returns for the first five years is 5.55% on all equity contributed with added upside associated with the further development of the Five Mile Centre. Future Development plans awaiting consent include a multi-screen cinema, additional food and beverage and another four level office building. Additional development sites which form part of the opportunity include 2,791m² of industrial zoned land and 4,030m² of mix use land. This opportunity arises from a long standing relationship that Mackersy Property has with the current owners of the property. Mackersy Property has been involved in the development of the Five Mile Centre from its outset purchasing the first two buildings that were completed, as well as being a tenant in the centre for a long period of time and having first hand knowledge of the development capabilities of the current owners. Mackersy Property are confident that the macro environment will continue to underscore the growth opportunities and the continued success of the centre.
7
FIVE MILE CENTRE
Location and outline indicative only
8
Key Investment Details
Key Property Details
Equity Requirement
Address
$100,000 parcels
Buildings 1,5,6,7,8,& 10, along with 3 future development sites,
Equity Payment 20% deposit by Friday 18 December 2020 Balance Tuesday 23 February 2021 Projected Gross Return 5.55% per annum before tax for the first 5 years plus future development upside
located within and adjoining the Five Mile Centre, Frankton, Queenstown Total Site Area In terms of the Commercial Centre all of the property combined (including those not forming part of this offering) is 6 hectares. All of the separate titles have an undivided share in Lots 8, 9 & 14, which form common areas and car parking lots.
NBS
The net area apportioned to the individual titles already built
Minimum of 100%
on is 12,686m², the hotel site area under construction is a
WALT 6.3 years Occupancy 97.4% (by gross floor area)
further 3,306m², in addition to this is a further 11,016m² of future development land. Total Lettable Area 20,287m² of retail and office, together with the 120 room hotel currently under construction.
9 FUTURE DEVELOPMENT LAND
BUILDING
8
FUTURE DEVELOPMENT
BUILDING
10
LAND
BUILDING
BUILDING
5
1
BUILDING
7
BUILDING
6
Locations indicative only
10
Key Property Details Legal Descriptions
Land Area (m²)
Building
Title
Lots
B1
695477
Lot 1 DP 486920, 7/100 share in Lots 8-9, 14 DP486920
1,964
B5
695481
Lot 5 DP 486920, 1/5th share in Lots 8-9, 14
5,704
B6
695482
Lot 6 DP 486920, 3/20th share in Lots 8-9, 14 DP486920
2,781
B8
713305
Lot 12 DP 486920, 1/20th share in Lots 8-9, 14 DP486920
1,285
B10
659430
Lot 6 DP 476309 (subject to subdivision & new title)
B7 retail
695483
Lot 7 DP 486920, 2/25th share in Lots 8-9, 14 DP486920
Hotel
695483
Lot 7 DP 486920, 2/25th share in Lots 8-9, 14 DP486920
Lot 10 and 13 (Building 9)
713304 & 713304
Two floating titles that sit above the basement car park
Lot 6 (Outlet Centre)
659430
Lot 6 DP 476309 (subject to subdivision & new title)
Lot 2 (Car parking)
814583
Lot 2 DP 519098
952
Under Construction 3,306
Future development land
Total
4,195 4,030 2,791 27,008m²
11
Key Property Details Value Apportionment by JLL Registered Valuation
Net Rent as Fully Leased
Passing Net Contract Rent
WALT by Income
Fully Leased Cap rate
Net Contract Cap Rate
Value
B1
$1,349,027
$1,283,452
3.90
5.00%
4.75%
$27,000,000
B5
$1,325,351
$1,325,351
7.20
4.59%
4.59%
$28,750,000
Building
B6
$786,368
$786,368
3.90
4.77%
4.77%
$16,500,000
B8
$2,576,490
$2,223,080
7.10
5.20%
4.51%
$49,250,000
$431,600
$431,600
9.90
4.80%
4.80%
$9,000,000
B7 retail
$1,399,425
$1,399,425
2
5.28%
5.28%
$26,500,000
Hotel
$2,519,601
$2,408,606
10
5.20%
4.95%
$48,500,000
Area m²
Rate
Value
4,195
$1,049
$4,400,000
4,030
$1,005
$4,050,000
2,791
$1,397
$3,900,000
B10 Under Construction
Future development land Lot 10 and 13 (Building 9) Lot 6 (Outlet Centre) Lot 2 (Car parking) Total Valuation
$217,850,000*
Proposed Debt
54%
$117,357,392
Total Equity
46%
$100,492,608
Partnership Share Sales
30%
$30,147,782
*In addition to the Building valuations the Net Assets of the combined balance sheets of Queenstown Gateway (5M) Ltd and 5M Management Ltd will be added to the building valuations to calculate the Partnership share. This includes the net of such items as accounts receivable, accounts payable, cash, tenant bonds held and fixed assets.
12
Five Mile Centre Virtual Tour Click the grey drops or scan the QR Codes to view virtual tour 1
QR CODE
5
QR CODE
4
3
QR CODE
2
Lot 2
QR CODE
2
3
QR CODE
4
1
5
*Areas 1 and 2 are perspectives of the future development sites
13
14
This investment satisfies all key investment fundamentals •
Near new buildings
•
Strong tenant covenants
•
Solid lease terms offering good forward growth
•
Growth location within the Frankton Flats
•
Queenstown / Frankton has very strong forecast population growth over the medium term
•
Good current cashflow at 5.55% pre tax, with the benefit of future development upside
•
It is proposed that future development will be funded from development equity upside and additional borrowing
•
Strong management & development background of the Management Entity
•
Relative resilience with minimal impact from elimination of International tourism on centre activity
15
16
Investment Structure Eq 5M QUEENSTOWN Owner of shares in
Distribution net
uit
QG Ltd &
y in
Equ
5M Management Limited
Dis
trib
Out
Funds out
No2 Trust 35% Tranmere Queenstown
on uti trib s i t D Ou
LIMITED PARTNERSHIP
QUEENSTOWN GATEWAY (5M) LIMITED Manager
Funds in
Craig Greenwood
ity
utio
Limited Partnership Tranmere35% Queenstown Limited Partnership 35%
in
n
Equity in Mackersy 5M Limited Partnership 30%
Distribution out Equity in Distribution out
Structure The land and buildings being acquired are currently owned by Queenstown Gateway (5M) Limited (QG Ltd) and 5M Management Limited (together the Current Owner). A new Limited Partnership, 5M Queenstown Limited Partnership (5MQ LP), is being set up and the shares in QG Ltd will be owned by 5MQ LP. Mackersy Property is setting up a new Limited Partnership, Mackersy Five Mile Limited Partnership (M5M LP), that will hold up to 30% of the units in 5MQ LP, which will own 30% of the land and buildings referred to on page 9 and 11 (Properties). Investors who commit will hold units in M5M LP.
investor funds being received with units in M5M LP to be issued to investors in proportion to the level of funds contributed following settlement of the Properties.
Governance M5M LP will be governed by the General Partner which is a limited liability company, Mackersy Five Mile GP Limited (GP). The GP will be an entity controlled by the Directors of Mackersy Property until settlement of the Properties. Following settlement, a Board of Directors will be appointed that will include Adam Copland of Mackersy Property and investors from within the group. Any investor wishing to become a director will
The Limited Partnership structure is ideally suited
need to provide a written statement to Mackersy
to a commercial property investment entity as it
Property setting out their skills and how they can
provides the protection of limited liability, simple
contribute to the governance of M5M LP. Directors
liquidity and tax flexibility. Limited liability means
insurance will also be in place from settlement of
investors, as Limited Partners, are only liable to
the Properties.
the extent of their equity contributions (funds invested), plus any other obligations expressed in the Limited Partnership Agreement. M5M LP will be established by Mackersy Property prior to
The GP will be liable for the debts and liabilities of M5M LP and will provide the corporate governance to run the investment professionally and profitably.
Mackersy Investors
Mackersy Investors
Purchase Price
Establishment Costs and
The total value for the Properties has been
Investment Model
established by registered valuation at $217,850,000
All project establishment costs in connection with
less proposed bank funding of $117,357,392, which
the acquisition such as legal fees, building reports,
gives total equity of $100,492,608, with a 30%
engineer reports, bank and valuation fees are set
share value at $30,147,782 (pre-acquisition costs).
at $652,218 plus GST. See the investment model on
The equity has a projected gross return at 5.55%.
page 36. These costs are fixed and M5M LP will not
Equity Requirement
incur further establishment fees.
The initial 20% of investors’ equity is required by
Projected Gross Return
18 December to confirm an investors’ involvement
M5M LP is forecast to provide investors with a
in M5M LP. The balance of equity is required by
5.55% gross return in the first five years of the
23 February 2021 to enable settlement of the 30%
investment following acquisition of the Properties.
share by 1 March 2021.
The first monthly payment to investors will occur
Bank Funding
three months following settlement and will continue to be paid monthly. The investment
The Current Owner has a committed term
model on page 36 includes the projected income,
investment funding facility of approximately
expenses and net return to investors for years 1—5.
$117,000,000. The facility is secured by way of
The actual returns to investors may vary due to
a mortgage over the Properties and personal
variables such as interest rates, tax, depreciation,
guarantees from the Current Owner. This loan
unforeseen expenditure and vacancies.
facility will be non-recourse for new investors meaning personal guarantees are not required. The loan will initially be partially interest only to maximise investor returns with an initial loan to value ratio of approximately 54%.
17 The return over the first 5 years will be set at a maximum of 5.55% gross paid out to investors pre tax. The modelling allows for retention of surplus funds to be retained to provide for conservative debt to equity funding of the future development opportunities that exist. Significant expenses will be incurred by QG Ltd, 5MQ LP and M5M LP, which is likely to mean the projected gross return being paid to investors will be close to the net return
return. Investors in M5M LP are forecast to receive projected returns of 5.55% per annum until such time as the other Limited Partners of the 5MQ LP accumulated balances have been repaid. The reduced return from the 6% received by M5M LP from 5MQ LP to 5.55% is to account for the costs incurred in managing the M5M LP which are
These costs include management fees, directors
existing tax losses, depreciation, and other tax-
fees, accounting fees and insurance which are
deductible expenses.
fixed at 0.15% of the value of the assets owned by M5M LP. On the basis that M5M LP owns 30% of
Exit Process/Liquidity
5MQ LP and the initial value of the assets owned by
Investors will have the ability to sell their units
5MQ LP is $217,850,000 the fees will be $100,000
in M5M LP at anytime, at the maximum value
per annum. This is shown in year 1 of the model at
another investor is willing to pay. The investor can
page 36.
then decide on the value they wish to sell their interest for and Mackersy Property will use its
explained further below.
Insurance
Additional returns on equity are also likely as a
Property and Development
The Queenstown Gateway (5M) Limited policy
Transfers to family or related parties are exempt
result of the development opportunities that are
Management
includes full replacement and reinstatement
from the standard sale process. Investors will not
included in the Properties owned by 5MQ LP.
insurance with NZI. The majority of tenants are
be subject to pre-emptive rights to other investors
The Properties and ongoing development of the
These returns cannot be guaranteed but based on
responsible for premium payments in accordance
in M5M LP. If and when an investor wishes to
centre will be managed by the current board of
conservative modelling that has been completed
with the leases.
sell they will be required to give written notice
QG Ltd (Craig Greenwood, Shannon Walsh, David
the return on equity over a 5 year period is
Linehan) and Adam Copland from Mackersy
Unit
estimated to be between 6% and 13% per annum.
Property will be appointed to this Board. A
The investment is for units in M5M LP which will
sale along with the latest market valuation of the
schedule of delegations will be entered into which
own the 30% share in the 5MQ LP. The M5M LP has
Properties and a suggested market valuation of
covers the rights, obligations, costs and fees that
M5M LP is forecast to receive a projected return
been structured to provide a total of 30,800 units
their ownership interest at that time. Purchasers
can be incurred by QG Ltd. The forecast annual
of 6% per annum from 5MQ LP. This return is
at an issue price of $1,000 per unit. The minimum
will be sought from within the ownership group,
costs incurred by to QG Ltd for managing the
underwritten in year 1 by way of a reduced return
investment will be $100,000 representing 100 units
from the wider Mackersy Property investor
Properties are detailed for the first 5 years of the
being paid to the other Limited Partners within
but investors may choose as many units as they
database or interested third parties, subject to
investment as shown in the models on pages 37
5MQ LP. The other Limited Partners will receive
wish above 100, subject to availability. Units in M5M
those purchaser’s complying with the Anti-Money
and 38. Initially these costs cover salaries for the
their 6% return by way of an accumulating
LP will be issued to investors following settlement.
Laundering and Countering Financing of Terrorism
CEO and CFO, Directors fees, marketing for the
balance in their Limited Partners accounts. Those
Until such time as the units are issued, all units in
Act 2009 and the wholesale exclusion criteria
centre, unrecoverable opex, property maintenance,
accumulating balances may be repaid when
M5M LP and investor funds will be held on trust for
of the Financial Markets Conduct Act 2013. It is
accounting and other disbursements.
the benefit of investors in proportion to the sum
Mackersy Property’s objective to create liquidity
invested.
by providing investors with a simple, fast and
(projected 5.55%).
Returns and Current Accounts
the surplus cash returns within 5MQ LP allow
best endeavours to find a purchaser of the units.
to Mackersy Property. The investor will then be provided with information regarding any costs of
for returns above 6% to be paid to the Limited
Investment Management
Partners. When this occurs, which is estimated
Mackersy Property will be responsible for managing
Tax
to happen from year 2 onwards, M5M LP is
M5M LP. This management includes collecting and
forecast to receive a return of 6% and the other
Investors invest through a limited liability
will also enable new investors to enter M5M LP at
disbursing funds, ensuring the investment made by
Limited Partners have the option of having their
partnership, established and managed by Mackersy
any time in the future.
M5M LP is protected/enhanced and all associated
accumulated balances repaid. It is estimated that
Property. Investors will benefit from tax free
compliance costs (accounting, insurance etc).
distributions from 5MQ LP. Tax will be paid in the
this will take less than 5 years to be resolved. Once the other Limited Partners accumulated balances are repaid all Limited Partners will receive the same
company, QG Ltd, and it is likely that investors will benefit from company tax offsets relating to
transparent exit process that also has the objective of maximising value to the investor. This process
In the event that M5M LP wish to sell their 30% share, then normal pre-emptive rights will apply back to the balance of Limited Partners within 5MQ LP.
18
Queenstown Gateway (5M) Limited The Board The Board of QG Ltd will consist of:
Craig Greenwood Clearmont Limited director and co-founder. Craig has a BCom Dip Bus Finance from University of Auckland. Craig’s early career was in stock broking. He has gone on to develop extensive experience across a range of business verticals including finance, retail, property and investment. Craig has been a director of Queenstown Gateway (5M) Ltd from its inception. He has overseen the master planning, leasing, and construction of the retail and commercial development at 5 Mile. Craig has undertaken a number of significant property transactions over his career including the restructuring of the Beaumont Quarter ground leases and is also a substantial shareholder in a large commercial, aged care and residential development in Taupo.
David Linehan David graduated from the University of Canterbury with BE (hons) in civil engineering and a BCom majoring in finance. He had a successful career with Deloitte in the management consultancy practice, working in New Zealand and the United States. David now runs an Auckland based family office (Tranmere Holdings Ltd) and is a director of Five Mile. He has been intimately involved in the management, design and strategic planning of the centre. Until recently, Tranmere Holdings Ltd was the major shareholder in Anglesea Medical Properties Limited, a large Hamilton based property company.
Shannon Walsh Shannon has a BCom/LLB (Hons) from The University of Auckland. He started his career in law and investment banking, having worked at Russell McVeagh and UBS Bank before co-founding Clearmont Limited, a diversified group founded in 2003 which invests in finance (insurance and property finance), commercial property and digital media.
Adam Copland Adam has a Law Degree and a Bachelor of Science from the Otago University along with a Masters in International Business and Law from La Trobe, Melbourne. He started his career with Duncan Cotterill in New Zealand and then worked in Melbourne and London before returning to New Zealand in 2012. Adam is a Director of Mackersy Property and has played a critical role in the growth of the business over the past 6 years. He is also a Director of Mackersy Legal and holds multiple directorships on the various Mackersy Property investment entities as well as other private entities that focus on property investment and development.
Building 7 | Sudima Hotel and Retail Centre
19
20
Frankton Flats | Queenstown
Queenstown CBD
Remarkables Park Town Centre
Queenstown International Airport
Five Mile Shopping Centre
Queenstown Central Shopping Centre
Fr an kt on -L ad ie sM ile Hawthorne Drive
Gl en da
Dr ive Locations and outline indicative only
21
The Location
The Queenstown Lakes District region offers unparalleled lifestyle in a unique environment, captivating national and international visitors alike and is home to a growing permanent population. On any given day there is an average of 70,000 people including visitors, swelling to 120,000 at peak visitor times. The region benefits from growth in the resident population and growth in international and domestic visitors, driving visitor expenditure growth significantly higher than the national average. FiveMile is well positioned to capture this expected growth. Five Mile Centre is located on the corner of Grant Road and Frankton Ladies Mile Highway (State Highway 6), Frankton, circa eight kilometres by road north of Queenstown International Airport. The FiveMile Centre is in the centre of growth in Queenstown. Topographical constraints restrict the ability to extend or expand the CBD. Congestion, parking and limited access are all significant challenges of a CBD location. Frankton is the fast growing alternative, fulfilling the need for accessible and dynamic places to shop, work and stay for locals and visitors alike. The immediate area of Frankton comprises primarily of commercial and service retail provided through the subject Centre, the adjoining Queenstown Central and Remarkables Park together with industrial development situated on Glenda Drive. Remarkables Primary School and Wakatipu High School is situated a short distance away from the complex. Queenstown International Airport is situated immediately to the south of the subject properties, providing the main tourism gateway to the Central Otago area. The wider ‘Five Mile’ development comprises an integrated shopping centre in Queenstown that has been completed in various stages. Buildings One through to Six and Eight have been completed and are anchored by Countdown, The Warehouse, Noel Leeming, Briscoes and Rebel Sports, together with numerous specialty and large format retailers, and office units on the first level of Building One. Building Eight provides the premium office accommodation for the development. Buildings Seven and Ten are under construction and the Southern Precinct is proposed to be developed over the short to medium term to provide additional food and beverage focused retail and office accommodation together with a cinema. Queenstown’s visitor growth rate of 10% is well above the national average of 4%. International visitors to New Zealand are projected to exceed 5 million in 2025 translating to a 34% growth in overall expenditure to reach almost $15b. Domestic tourism represents 70% of visitors to the Region and visitor forecasts remain strong despite the impact of Covid-19 to international tourism. Visitor growth is expected to continue with New Zealand set to capitalise on it’s reputation as a safe destination.
22
Building One Existing Building Lot 1 Deposited Plan 486920 Building One comprises ground floor retail accommodation and first floor office units. The building was completed in 2015 with tenancy sizes ranging from 50m² to 618m² on the ground floor and 93m² to 383m² for the office tenancies (including common area proportionate shares). It is currently 96% occupied with one small vacancy (201m²). Has a WALT of four years based on income. The building is occupied by a number of nationally branded retailers including ANZ, AMI, Dominos and Bordertown, together with local tenant covenants and small business operators within the office units.
Tenancy Overview
Net Rental
Lettable Area
Proportion of Lettable Area
Flex Fitness
$218,035
618m²
16.80%
$35,857
109m²
3.00%
Boardertown
$121,119
305m²
8.30%
WSP
$89,215
292m²
7.90%
Building One
$153,334
248m²
6.70%
WALT
$65,575
201m²
5.40%
NBS
100%
$600,317
1,915m²
51.90%
Age
2015
$1,283,452
3,688m²
100%
Occupancy
96%
Batchelar McDougall Consulting
ANZ Bank Vacant Tenancy Balance of Tenants Total
Outline indicative only
4 years
23
Building Five Lot 5 Deposited Plan 486920 Building Five is predominately occupied by The Warehouse (4,916m²). Three other large format retailers and specialty units occupy the remaining space ranging in size from 97m² to 395m². Building Five is currently fully occupied with a WALT of 7.4 years, based on income. The building is occupied by nationally branded tenants including The Warehouse, GJ Gardner, Postie Plus and EB Games.
Tenancy Overview
Net Rental
Lettable Area
Proportion of Lettable Area
The Warehouse
$1,062,381
4,916m²
88.10%
Postie Plus
$147,496
395m²
7.10%
GJ Gardner
$47,178
173m²
3.10%
EB Games
$68,295
97m²
1.70%
$1,325,351
5,580m²
100%
Total
Building Five WALT
7.4 years
NBS
100%
Age
2017
Occupancy
100%
Outline indicative only
24
Building Six Existing Building Lot 6 Deposited Plan 486920 Building Six comprises ground floor retail accommodation, which was completed in 2016 with units ranging from 62m² to 1,053m². Currently fully occupied with a WALT of four years, based on income. The building is occupied by a number of nationally branded retailers including Noel Leeming, Lighting Plus and Look Sharp, plus local retailer Phone Zone.
Tenancy Overview
Net Rental
Lettable Area
Proportion of Lettable Area
Noel Leeming
$357,546
1,189m²
51.00%
Phone Zone
$41,733
62m²
2.60%
Lighting Plus
$119,415
322m²
13.80%
$249,673
758m²
32.50%
$786,368
2,330m²
100%
Look Sharp Total
Building Six WALT
4 years
NBS
100%
Age
2016
Occupancy
100%
Outline indicative only
25
Building Eight Existing Building Lot 12 Deposited Plan 486920 Building Eight is situated on a 1,285m² land area and recently been completed. A five level office and retail building, providing Queenstown’s premier office accommodation, with high quality tenant covenants including Bank of New Zealand, Craigs Investment Partners, Naylor Love and Mackersy Property amongst others. Majority of leases are long term with annual fixed increases. Including the vacancies, Building Eight has a WALT of 5.82 years, based on income and is 91% occupied. There are no car parks situated on the site. The property benefits from car parks on neighbouring sites which are also owned by the registered owner.
Tenancy Overview
Net Rental
Lettable Area
Proportion of Lettable Area
BNZ
$538,418
1,075m²
20.30%
Joes Garage
$165,520
407m²
7.70%
Mackersy
$254,211
738m²
14.0%
Todd Walker
$170,577
499m²
9.50%
Building Eight
Focus IT
$105,498
308m²
5.80%
WALT
Vacant Tenancy
$206,850
394m²
7.50%
NBS
120%
Balance of Tenants
$782,006
2,256m²
42.70%
Age
2019
$2,223,080
5,677m²
100%
Occupancy
91%
Total
Outline indicative only
5.82 years
26
Building Ten Existing Building Lot 6 Deposited Plan 476309 Building Ten is due for completion in December 2020. It will provide a restaurant with a gross lettable area of approximately 350m² of restaurant area, 140m² covered external area and 372m² courtyard. An Agreement to Lease is in place for $431,600 per annum net plus GST and Outgoings. The Lease is for a 10 year term with one further right to renew of 10 years and annual 3% fixed rental increases. Peter Jefford (the operator) is a well-known reputable business man within the Queenstown area, currently operating a number of other restaurants including Pier 19, Brazz and The London. The 2,791m² development site is located at the rear of the Five Mile Centre, on the north eastern corner of this site providing 20 dedicated car parking spaces. Tenancy Name
Premises
Lettable
Car
Lease
Contract
Area
Parks
Term
Rental
20
10 years
$236,000
Gastro Bar
Main Area
350m²
Gastro Bar
Covered Area
140m²
10 years
$84,000
Gastro Bar
Outdoor Area
372m²
10 years
$111,600
Aggregate
862m²
20
Building 10 WALT
9.90 years
NBS
100%
Age
2020
Occupancy
100%
$431,600
Outline indicative only
27
Building Seven Sudima Hotel & Ground Floor Retail to be Completed The plan shows that the retail units will range in size from 63m² to 574m². Some of these units will have frontage to Grant Road facing out from the Centre, with the remainder of the stores providing internal frontage to ‘Car Park Area A’ within the Centre. A lobby is located on the ground floor, along with a through site link providing access from the internal centre to Grant Road. Stair and elevator access is available to access upper levels.
Tenancy Overview
Net Rental
Lettable Area
Proposed - Retail T43
$304,450
474m²
ASB Bank
$267,600
446m²
Proposed - Retail T34
$215,250
574m²
$617,125
1,050m²
$1,404,425
2,544m²
Balance Total - before adjustments* * includes $5,000 opex adjustment
Rental Underwrite Building Seven is due for completion in October 2021. The Vendor has agreed to underwrite any retail vacancies in Building Seven (excluding Sudima Hotel income) not leased for 24 months from issue of Code of Compliance, to a total sum $1,531,000 per annum. This sum is inclusive of operating expenses.
28
Building Seven Sudima Hotel to be Completed
On completion the 120 room property will be a 4.5 star rated hotel, operating as the Sudima Queenstown. In addition to the guest rooms the hotel is to provide a restaurant, bar, conferencing and meeting space and typical front & back of house areas. The Sudima Queenstown is to be situated on a corner position within the Five Mile Centre development in Frankton, Queenstown and have high profile to State Highway 6 and Grant Road. The hotel is to be predominantly located on levels 1-3, with the ground floor providing the hotel’s reception and a number of retail tenancies. Sudima Queenstown No. of Rooms
120
Registered Owner
Queenstown Gateway (5M) Limited
Star Rating
4.5 star
Operating Group or Manager
Hind Management (NZ) Limited
Year of Construction
2020/2021
Brand
Sudima
Refurbished
N/A
Initial Term
Ten (10) years from completion
Seismic Rating
139% of NBS
Final Expiry
Fifteen (15) years from completion
Vacant Possession Available
Yes, from year 5 subject to a termination fee
The Sudima Queenstown is to be operated by Hind Management (NZ) Limited under a ten year management agreement with a gross operating profit underwrite provided for the first five years of trading at predetermined levels. •
Newly constructed hotel presented to a 4.5 star Qualmark standard
•
Strong underwrite of Gross Profit at agreed figures for the first five years for trading
•
Management agreement with a well-recognised domestic operator with a presence in several major markets throughout the country
•
Strong Queenstown tourism market, the premier tourist destination in New Zealand
•
Strong investment demand for hotels in Queenstown
•
No capital expenditure required in the short to medium term due to ‘As If Complete’ nature
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Building Seven Sudima Hotel to be Completed
The hotel will provide 120 guest rooms with the current room configuration.
Room Type
No. of Rooms
Approx. Room Size
Standard Room
118
24m²-27m²
One Bedroom Suites
2
47m²
Total
120
Gross Operating Profit Underwrite Hind Management (NZ) Limited have agreed to underwrite 80% of the budgeted gross operating profit provided within the submission to operate the hotel, which were assumed post covid as follows: Year 1 $2,634,279 Year 2 $2,960,870 Year 3 $3,299,153 Year 4 $3,557,201 Year 5 $3,832,175
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Sudima Hotels Group Sudima Hotels are predominately owner-operated by the Hind Group, which is a family interest based out of Hong Kong. The below table displays a list of Sudima Hotels throughout New Zealand. Property
Star Rating
No. Rooms
Ownership
Sudima Auckland
4.5
153
Owned
Sudima Auckland CBD*
4.5
194
Owned
Sudima Lake Rotorua
4.0
250
Owned
Sudima Kaikoura*
4.5
118
Managed
Sudima Christchurch Airport
4.5
246
Owned
Sudima Christchurch City
5
86
Owned
Total
1,047
*under construction
Sudima Hotels is a privately held NZ registered company, with ownership of $200m in Hotel net assets and an additional $90m in commercial premise net assets. In addition, the Group has long term management agreements in place for over 1,300 Hotel rooms within NZ. The family interests of the Jhunjhnuwala family outside of New Zealand are extensive, with 60 corporate offices globally managing an International portfolio of commercial enterprises. We are advised that 80% of the group’s NZ Hotels, are currently under government MIQ contracts, with all contracts extended well into 2020. As such 80% of all of the NZ hotels are fully occupied and guaranteed by the Government. For further background please click the following links: https://www.sudimahotels.com/en/about-us/ & https://www.hindmanagement.com/our-team/
Building 7 | Sudima Hotel 31
32
Future Development Sites Lots 2 & 6 Lot 2 comprises a 2,791m² site situated on Grant Road, providing a regular shaped parcel of land currently utilised for car parking and would be available for immediate development. Surrounding sites provide car dealerships and car hire facilities. Lot 2 is zoned Frankton Flats (B) Zone under the Queenstown Lake District Plan, and falls within Activity Area D. This underlying zoning permits industrial and yard based activities and ancillary offices to permitted activities. Lot 6 comprises an overall site of 4,982m² inclusive of Building Ten, net land area across Lot 6 has been reduced to approximately 4,030m². The site is zoned Rural General Zone under the Queenstown Lakes District Council, however proposals are in place for retail development. The site is currently used for car parking to service other buildings in the wider Five Mile development so it provides a reasonable level of holding income. Future car parking will be developed as part of the Southern Precinct, which will allow for development of the subject site. The current development proposed is for a new retail outlet precinct.
B9 Land | Lots 10 & 13 The site provides two floating titles that sit above the sunken car park below the Countdown Supermarket. The floating space area equates to 4,195m² as per the title plans.
Outline indicative only
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Development Sites This is a mixed-use development proposal, with an entertainment heart completing Five Mile Way, and separately adding another office building and outlet stores to compliment the existing Five Mile Retail Centre. A new development is proposed for the southern side of the Five Mile Retail Centre. The vision is to create a dining street, which ties in the existing food & beverage offerings on the site, namely Joe’s Garage (B8) and the new Pub (B10) which is under construction. A new cinema will add to the entertainment offering and amenity of this street, as well as providing various outdoor seating areas and multi-functional spaces. Together this will create a strong critical mass of food, beverage and entertainment on the end of ‘Five Mile Way’ and will be the entertainment heart of the centre. As part of the mixed use proposal, a 5 level office building will finish the block and create a street edge on the Southern Access Way, capturing broad views of The Remarkables and other ranges to the south, as well as creating a separate street entrance and address on that street frontage. Transitioning to the more open nature of the centres periphery a new outlet offering is proposed on the southern site, with on-grade parking and coach drop-off. This group of buildings has been designed as a stand-alone centre distinct from the dining and entertainment precinct with a semi-industrial scale and materiality to mark themselves from the rest of the development. Resource consent for the proposed development has been lodged with Council. Full feasibility and costing will be completed on all sites and the intention is to have sufficient leasing committed to ensure the developments are bankable prior to any construction commencing.
34
Building 9 | Proposed cinema and office building
Building 9 | Proposed office building and food & beverage
35
36
Investment Model Blended CAP Rate
4.70%
Purchase Price
$217,850,000
Total Cost
$217,850,000
Bank (53.87%) Equity 30% Mackersy LP Share Mackersy Facilitation Fee Total Equity
$117,357,392 $100,492,608 $30,147,782 $652,218 $30,800,000
Projected Cash Flow Year 1
Year 3
Year 5
$1,808,871
$1,808,871
$1,808,871
Management
$91,150
$91,150
$91,150
Accounting
$6,500
$6,500
$6,500
Directors Insurance
$2,350
$2,350
$2,350
Total Costs
$100,000
$100,000
$100,000
Surplus
$1,708,871
$1,708,871
$1,708,871
5.55%
5.55%
5.55%
Income*
Estimate Gross Return
*Income is assumed at 6% gross return on 30% Mackersy LP Share, being $30,147,782.
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Projected Cash Flow Senario A Includes hotel at guaranteed minimum income and no further development to occur. Summary financials for the 12 months ending:
Dec 21
Dec 22
Dec 23
Dec 24
Dec 25
$6,478,841
$10,237,256
$10,656,477
$11,131,940
$11,473,358
$787,097
$810,710
$835,031
$860,082
$885,885
$2,849,459
$2,850,673
$3,203,222
$3,671,987
$3,925,901
$5,691,744
$9,426,546
$9,821,446
$10,271,858
$10,587,474
$360,461
$2,467,070
$2,509,420
$2,491,068
$2,552,769
$2,481,824
$4,108,804
$4,108,804
$4,108,804
$4,108,804
$954,835
$-
$-
$-
$-
Less Committed Capex
-$465,000
$-
$-
$-
$-
Cash Profit
$3,332,120
$6,575,874
$6,618,224
$6,599,871
$6,661,573
$217,850,000
$221,112,500
$224,456,563
$227,884,227
$231,397,582
$117,357,392
$117,357,392
$117,357,392
$117,357,392
$117,357,392
$100,492,608
$103,755,108
$107,099,171
$110,526,835
$114,040,190
Cash Yield
3.3%
6.3%
6.2%
6.0%
5.8%
Return on Investment
3.3%
6.5%
6.6%
6.6%
6.6%
Return on Equity Per Annum
3.3%
9.8%
9.9%
10.0%
10.1%
Total Revenue Total Costs Funding Costs EBITDA EBIT Add back: Depreciation Capitalised Interest
Total Property Assets
Total Bank Funding
Equity
Outline indicative only
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Projected Cash Flow Senario B Includes hotel at expected income, and additional land fully developed Summary financials for the 12 months ending:
Dec 21
Dec 22
Dec 23
Dec 24
Dec 25
$6,478,841
$10,233,705
$11,079,336
$14,274,889
$15,748,754
$787,097
$810,710
$835,031
$860,082
$885,885
$5,691,744
$9,422,995
$10,244,305
$13,414,807
$14,862,870
$2,849,459
$3,130,616
$4,184,088
$5,555,649
$6,157,352
$360,461
$2,183,576
$1,668,742
$2,340,812
$2,262,208
$2,481,824
$4,108,804
$4,391,474
$5,518,346
$6,443,309
$954,835
$291,709
$790,887
$411,618
$-
Less Committed Capex
-$465,000
$-
$-
$-
$-
Cash Profit
$3,332,120
$6,584,088
$6,851,104
$8,270,776
$8,705,518
$217,850,000
$221,112,500
$237,698,229
$303,873,706
$307,387,061
$117,357,392
$117,357,392
$131,265,316
$182,473,659
$182,473,659
$100,492,608
$103,755,108
$106,432,913
$121,400,047
$124,913,402
Cash Yield
3.3%
6.3%
6.4%
6.8%
7.0%
Return on Investment
3.3%
6.6%
6.8%
8.2%
8.7%
Return on Equity Per Annum
3.3%
9.8%
9.5%
23.1%
12.2%
Total Revenue Total Costs Funding Costs EBITDA EBIT Add back: Depreciation Capitalised Interest
Total Property Assets
Total Bank Funding
Equity
39
Assumptions Net Income
Total Costs (pages 37 - 38)
For the purposes of the financial summaries on pages 22 – 32 and the
These costs are nonrecoverable operating expenses for running the Five Mile
financial models on pages 38 – 40 these are based on the contractual net
Centre and development programme. These costs are charged by QG Ltd and
rental under the leases, known rent reviews and specified underwrites
payable by 5MQ LP and forecast at $787,097 in year 1 and rising to $885,885 at
mentioned in this Information Memorandum.
year 5. These costs cover all property, facility, asset management and building
For the purposes of the JLL valuations on page 11, these numbers vary slightly
maintenance costs.
from the contract net income due to adjustments made by JLL in regard to
Management (page 36)
OPEX.
Management fee charged by Mackersy Property set at 0.15% of total value of
Underwrites
the property being managed by Mackersy Property. This is set at $100,000 in
Any vacant space within Building 7 at completion is to be underwritten by
year 1 and includes accounting and directors insurance costs.
the vendor for 24 months from completion at market rates to a maximum of
Accounting
$1,531,000 per annum (inclusive of OPEX). Any construction cost increases or
$6,500 per annum payable by M5M LP, fixed for 5 years.
variations is also to be covered by the vendor. Interest Rate Cost Average cost of funds estimated to be 2.85% for years 1 to 5 on a mixture
Directors Insurance $2,350 per annum payable by M5M LP, fixed for 5 years.
of fixed and floating rates. Interest rates yet to be confirmed and subject to
Depreciation
change.
The tax benefit associated with building depreciation is based on our best
Loan-to-value ratio Based on 54% lending of the contracted purchase price of $217,850,000. Loan to value ratio not to exceed 60% during any development phase. Development Modelling completed for development forecasts has used actual development costs incurred by QG Ltd on its current buildings with an additional contingency of 10%. Capital growth is assumed at 2.5% per annum. Assumed
estimate at depreciation rates for buildings under construction, and our understanding of current tax depreciation rules, but could be subject to change. Car Parking We have forecast the construction of a multi-level car park building as part of the Southern Precinct development. The exact number of parks required is subject to council resource consent and meeting tenant covenants in place.
development process is for the outlet centre to be completed in year 2, the
No Guarantee
office building in year 3, the food and beverage in year 4 and the cinema in
No guarantee can be given in respect of the returns payable or any capital
year 5.
expenditure increased.
40
Risks & Considerations
There are several risks and considerations associated with all commercial property investments which are set out below. Mackersy Property always considers risks and has a number of acquisition and investment strategies to mitigate and reduce potential risks. These are listed in the right hand column below as “Mitigation Strategies� .
41
Tenant
Repairs
Risk
Mitigation Strategies
A tenant or number of tenants are unable to pay rent or on expiry (or termination) of the
Based on Mackersy Property’s tenant analysis, we are confident the likelihood of a
leases the property may not be immediately re-let or re-let on less favourable terms.
tenant default is minimal. The Properties are well located for selling.
Unforeseen major structural repair or capital expenditure may be incurred (excluding
Full replacement and reinstatement insurance is put in place to cover any damage
any structural repairs).
caused by insured risks and the majority of tenants are responsible for premiums and excesses in accordance with the leases. The tenants are responsible for the majority of repairs and maintenance. A maintenance budget has been factored into the financial scenarios.
Development
A decision may be made to further develop the undeveloped property leading to
Full development feasibilities will be completed prior to any development occurring
additional costs being expended.
and development will only be undertaken where development risks are managed to the fullest extent possible.
Construction
In conjunction with any development that may occur further construction will also be
All construction risk will be managed through appropriate contractual documentation
required and the inherent risk with construction are price and timing uncertainties.
and all construction will be completed in such a way as to ensure that cost and time over runs are managed as best as possible. The governance team along with the Mackersy Property have ample experience in running fully risk mitigated development and construction projects. Construction insurance also in place during any build.
Funding
Interest rates and the bank covenants are subject to change.
Advice is provided to the directors with an interest rate hedging strategy to mitigate this risk.
Increase in interest rates may impact the return to investors.
The investment model allows for a mixture of fixed and floating interest rates and an appropriate hedging strategy will be adopted by the Directors.
Liquidity
If 5MQ LP is not meeting its bank covenants it may need to raise additional capital to
To the extent that any investor provides further capital, this investment would ordinarily
meet the banks’ amended covenants.
attract a return on the additional funds invested.
Investors’ equity may be locked in for an indefinite period of time if they are unable to
Mackersy Property manage the unit sale process endeavouring to offer the best
sell their units or until the Properties are sold and M5M LP is wound up.
opportunity for finding a willing purchaser; initially units are offered to all current unit holders under the M5M LP limited partnership agreement and to Mackersy Property’s private investment group.
At the time of selling units, the unit price M5M LP may be more or less than the original
Any issue of further units cannot occur without first offering the units to existing unit
price paid. Investors’ percentage interest in M5M LP may be diluted if M5M LP issues
holders. Further capital invested would ordinarily attract a return on the additional funds
further units to raise capital.
invested.
No Guarantee No guarantees are given by Mackersy Property or any other person in respect of the opportunity, the Properties, the tenants or the return which investors may receive in relation to this investment.
42
Non-Public Offer
The investment oer set out in this information memorandum is not intended to and does not constitute an oer to the public of a financial product. The investment is only open to the Mackersy Property pre-qualified investment group. To be eligible to invest you must be exempt under the provisions of the Financial Markets Conduct Act 2013. This information memorandum is not a registered prospectus or disclosure document and does not comply with the disclosure requirements of the Financial Markets Conduct Act 2013. This document does not contain the information that those documents would contain. This information memorandum has been prepared for general information purposes only and investors should carry out their own independent review, investigations, analysis and assessment of the information in this document.
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Disclaimer
At the time this Information Memorandum is presented Mackersy Property has completed its due diligence investigations and the information included in this document is based, to the best of our knowledge, on the information available to us at this time. Mackersy Property reserves the right to change any aspect of the proposed investment should that be in the best interests of the parties. Where Mackersy Property finds any information included in this document to be incorrect or any aspect needs changed prior to confirming the Agreement as unconditional, Mackersy Property will advise you of this and give you an opportunity to accept the updated situation before committing any funds to this investment on your behalf. No guarantee is provided by Mackersy Property regarding the number of Units that you will be allocated or the quantum of investment you can make in this opportunity or the actual returns that will be distributed to investors. The projections and indications given are made based on the information that is held at this time.
To register your interest in this investment, please email: invest@mackersyproperty.co.nz
To discuss this investment further, please contact: Adam Copland
Omea Willows
acopland@mackersyproperty.co.nz
owillows@mackersyproperty.co.nz
(+64) 27 944 0510
(+64) 21 331 742
Mick Pannett
Hamish Wilton
mpannett@mackersyproperty.co.nz
hwilton@mackersyproperty.co.nz
(+64) 22 477 8267
(+64) 27 594 8527
Marianne Coen
Kate Mackersy
mcoen@mackersyproperty.co.nz
kmackersy@mackersyproperty.co.nz
(+64) 3 450 9539
(+64) 27 535 3023
mackersyproperty.co.nz