City childcare centre with apartments above provides split-risk investment

A fully leased investment property for sale in a Wellington city-fringe suburb with commercial and residential components offers investors a foothold in two wellperforming market segments.

The Mount Cook property has a lettable floor area of 730m2, two car parks, and rear service lane access.

The ground floor is occupied by a long-standing tenant, early childhood education centre Kākāpō Kids, which has been on site since 2011. On the upper level, there are three apartments with a total of 15 bedrooms leased on monthly tenancies.

Combined, the building returns an annual net income of $280,000, with the Kākāpō Kids lease having more than two years remaining, with a further three, three-year rights of renewal.

The property, which sits on a 564m2 site at 19 to 21 Hopper St, was on the market last year via a tender campaign but did not sell.

But Bayleys Wellington salespeople said the vendor’s price expectations had since realigned with current market dynamics and given the returns, location, tenant covenant and underlying land value of the well-located property, it was expected to find favour with investors.

Mark Walker of Bayleys Wellington Commercial said the central area-zoned offering was now for sale by negotiation, with offers invited over $3.5 million plus GST (if any) making for an 8% yield.

Walker said with a shortage of residential apartment accommodation in the city and growing demand for early childhood education services, this property presented investors with an attractive investment proposition with a good spread of risk.

‘‘Broader childcare-related property is proving to be a defensive asset class, underpinned by rising two-income family households,’’ he said. ‘‘On its own, a childcare centre is a very desirable investment and when combined with sought-after residential apartments, its appeal skyrockets.’’

He said there was good activity from investment buyers in the market and lenders were looking favourably on properties with resilient leases and reliable returns.

In 2011, the ground floor of the property was converted to a childcare facility specifically to house Kākāpō Kids which is licensed for 40 children, and the premises seismically upgraded to 130% of the required New Building Standard of that time. Walker said the ground floor strengthening and

layout had been constructed to ensure that in the future this part of the building could be converted into two separate warehouse or workshop-style units.

On the first floor, the three apartments – comprising a four

bedroom, a five-bedroom and a sixbedroom apartment – had been refurbished, he said.

‘‘These well-managed and maintained residential apartments are compliant with the recent healthy homes legislation and have

seldom had any vacancy since they were converted in 2004. A new owner could continue to outsource the management of the residential component as the vendor has done, making the property a reasonably passive investment.’’