Recognition of a strong performance across a range of property investment fundamentals played into Oyster’s decision to invest in this well-positioned supermarket. Understanding that the local retail landscape was changing, and that the tenant’s long-term plans were uncertain drove the decision to realise returns on the well-timed investment.

Investment highlights

In 2011, when Oyster added a supermarket in Papakura to its property portfolio, the asset met several key property investment fundamentals.

With a favourable location in a strong catchment area, ample parking and multiple road entrances, the supermarket possessed key attributes that appealed to Oyster. The lease structure, supported by a prominent nationwide supermarket tenant, further enhanced its appeal with three-yearly market reviews.

Having proven itself as a strong performing sector with rental growth during previous years, the decision to invest was made.

Changing conditions kept the team on its toes

During its ownership period the conditions in the property market surrounding the Papakura supermarket evolved.

Multiple additional supermarkets moved into the area in the five years prior to sale: both a competitor and an additional outlet of the same brand in the neighbouring suburb of Takanini.

At the same time, a key large store retailer moved from the Papakura town centre to a new premise in Takanini, leading to an increased number of commercial tenancy vacancies and subdued foot traffic on Papakura’s main retail strip.

We also needed to consider a near-term lease expiry and the risk that it could mean for our investors.

A divestment: the best next step

It became clear that a divestment strategy would enable Oyster to capitalise on the remaining lease term and crystallise growth for its investors.

The team’s assessment of the situation was proven correct when the tenant did not take up its first right of refusal to purchase the property.

The asset sold in 2016 for $850,000 above its valuation.