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NZ Herald Article - May 2010
AUCKLAND, NEW ZEALAND, 08 May 2010 – Jones Lang LaSalle Hotels has been instructed to seek international public expressions of interest closing June 9 for one of New Zealand’s largest private sector tertiary accommodation portfolios that has been put to the market by its owner, Australian based ING Real Estate Community Living Group.
The Ustay Portfolio in Wellington comprises a total of 550 beds contained within three recently refurbished buildings in the heart of the Wellington CBD and close to University of Victoria. Revenue from the three properties is primarily derived from a long term contract with the university which provides for a Government guaranteed income for over 90 per cent of the beds over the 38-week academic year. Additional income is generated from short-term letting during the remainder of the year and by a number of established commercial tenancies including WINZ, Wilson Carparking and Vodafone.
Craig Collins, managing director Australasia for Jones Lang LaSalle Hotels says he expect the portfolio will be highly sought after by offshore investors who are currently seeking low risk, secure and high yielding investments.
“Compared to other global markets, the Australasian region is considered highly transparent, very low risk with its real estate markets at or just past the bottom of the cycle," Collins says. "It is for these reasons that over the past six months we have sold over A$500 million in accommodation assets, to high net worth investors from Asia.”Collins says there is a critical shortage and consequential strong ongoing demand for tertiary education facilities in the Wellington region.
"This is largely due to the high barriers of entry given the inability to construct financially viable facilities in the current market and believe this will add further to the attractiveness of this portfolio.”
Victoria University has a student population of about 22,000 and enrols over 4000 new students every year. Approximately 55 per cent of enrolments are from out-of-town students who require accommodation during the academic year – equating to between 12,000 and 14,000 beds.
“The Ustay Portfolio comprises over 20 per cent of the beds held by the university," Collins says.
"The portfolio has a purpose built car park, WINZ tenancy and some of the largest signage rights in the city that will provide an investor with a well balanced portfolio with over two thirds (67.5 per cent) of income coming from government related entities and the remaining income via a mixture of commercial, retail, car parking, signage and short stay accommodation."
He says there is the potential to immediately increase the room yield by 60 beds and extend all three buildings as demand from the university continues.
"This portfolio is managed by one of the world’s largest providers of on-campus tertiary education, Campus Living Villages, and the portfolio has recently been refurbished at a cost of over $7 million."
Simon Owen, chief executive dfficer, ING Real Estate Community Living Group, says the fund is "divesting all non-core assets to concentrate on its Australian and US seniors' businesses".
Dean Humphries, New Zealand national director for Jones Lang LaSalle Hotels, says the portfolio sale represents an opportunity for a local investor to acquire a large social infrastructural portfolio with a mixture of private and public sector guaranteed income.
"With an oversupply of commercial buildings in most major centres in New Zealand, investors are now seeking opportunities to acquire assets that will produce immediate rental and capital growth," Humphries says.
“The Ustay Portfolio offers investors immediate rental upside based on the strong annual growth due to the critical shortage of student accommodation in the Wellington region. In addition, further growth is expected from the ability to conduct short stay accommodation trades over a 14-week summer period to domestic and international tourists.”
Humphries says Wellington currently has the best performing hotel sector in the country and since the opening of the Ustay brand 18 months ago, the growth in revenue for short stay accommodation has been "exponential" and this is likely to continue over the short to medium term.
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