The biggest singularly owned commercial property landholding in Taupo’s central business district has been placed on the market for sale.
The 3487 square metres of buildings sitting on 2723 square metres of land sits on the high– profile corner of Tongariro Street and Tuwharetoa Street on one of the key entry points to the town’s retail heart.
Tenancies on the prominent site include Cobb & Co restaurant, Finn MacCuhal’s Irish Pub, a backpackers, a fast food outlet, and an art gallery.
The freehold block consists of four adjoining buildings – the core of which was once the original Lake Hotel dating back to 1952. The other three buildings have been added to over the ensuing decades, with the most recent being constructed in 2009.
The land is zoned ‘pedestrian precinct’ under Taupo District Council’s plan. Combined, the five tenancies occupying the busy corner site generate $661,752 worth of rental revenue annually. The tenants include:
- Finns Taupo – operating as Finn MacCuhals Irish Pub – which has a current lease term running through until June 2023 generating $300,000 of rent per annum, with three six-year rights of renewal.
- Family restaurant chain Cobb & Co which has a current lease term running through until 2021 with three four-year rights of renewal after that, and delivering approximately $193,752 in rental revenue per year.
- Finns Global Backpackers which has a lease running through until 2017 generating a return of $80,000 per annum with three further six-year rights of renewal. The backpacker rooms are situated on the top level of the building and are configured in single, double, twin and dormitory formats, licensed to sleep up to 95 guests.
- Fast food outlet Kebab Turka which has a lease running until 2018 delivering rental returns of $45,000 per annum with a further five-year right of renewal
- Arthouse Verge Gallery which has a lease expiring in 2018 bringing in $43,000 of rental yield per annum with two further three-year rights of renewal.
The buildings and land are being marketed for sale by Bayleys Taupo salesperson Gary Harwood through a tender process closing on June 1. Mr Harwood said the corner premises strategically straddled Taupo’s two distinct retail strips – the busy Tongariro Street which was the township’s busiest arterial road, and the town’s six block retail ‘hub’ running between Tongariro and Titiraupenga streets.
“It’s easily the biggest commercial block in central Taupo to have come onto the market in the past two decades,” he said.
“The location of the Tongariro/Tuwharetoa streets block is key. It benefits from high passing vehicle and foot traffic volumes, Ample parking immediately outside the front doors, and future development options.
“The tenancy mix is well balanced – with two of the town’s biggest hospitality operations taking a cornerstone holding on a majority of the floor plan with an alfresco aspect, and a retail presence running to the side of those on the higher foot traffic zone.
Mr Harwood said the near-full tenancy schedule for the block supported multiple purchasing options.
“Quite simply, it could be bought as a pure investment holding – continuing to be run under its current format and tenancy schedule,” he said.
“Long-term, there is the opportunity – subject to council consent – to add further storeys to the current structure. A higher floor plan could support an expansion of the existing backpacker operation, the establishment of a boutique apartment-style hotel of which there is nothing like it in the CBD, or even the development of residential apartments.
“The considerable holding income would sustain such a project while any necessary planning consent applications were lodged.”
Mr Harwood said that while the portfolio of buildings was currently generating one of the highest commercial real estate returns in Taupo, the property had the immediate potential to increase yield even further by leasing a vacant 61 square metre retail space fronting onto Tongariro Street. The shop site previously housed leisure activity booking outlet Experience Taupo.
“As an indication, the previous tenant of the now-vacant retail premises was paying in the region of $17,000 annually. It would be fairly safe to calculate a similar return from any new retail tenant under the current leasing market rates for the locale,” Mr Harwood said.
The latest Taupo District Economic Monitor repot produced by business support organisation Enterprise Great Lake Taupo shows the town and its surrounds are now performing well – having rebounded strongly from the global financial crisis of 2009/2010.
“The period since then has seen positive annual growth – especially so in 2011/12, 2013/14 and 2014/15. Economic growth of 4.1 percent was recorded for the year-end March 2015, compared with the 5.1 percent growth of the previous year.
“Visitor arrival numbers into the Taupo District area staying in commercial accommodation totalled an estimated 533,248 for the year ending December 2015, up on the previous year. The number of nights spent in the area by visitors staying in commercial accommodation for the 2015 calendar year was also up three percent on the previous year.”
Mr Harwood said the data highlighted that tourism and hospitality were now cornerstone sectors to Taupo’s economic prosperity.
“And with all five tenants in this block deriving a high percentage of their revenues from these markets, their business activities should be in a healthy space for the immediate future at least,” Mr Harwood said.
“The decision for any new owner of this block, in consultation with the existing tenants, is whether they wish to grow their business activities together, or whether the owner expands into new areas of commercial activity.”