Cinema chain offloads huge parcel of industrial land

Reading reaped a US$41m (NZ$58.45m) gain from the sale after costs, saying the property sold for well above its book value of US$13.5m and “substantially’’ above estimates before the pandemic.

Buyers Anne and David Norman own James Pascoe Ltd, an umbrella company for several retail brands including Farmers, Whitcoulls, Pascoes and Australian jewellery chain Prouds. It also holds a cornerstone stake in the Warehouse Group.

Brett Nicholls, a Norman family spokesman, said it had not been completely decided what the land would be used for, but it was well suited to a light industrial or business park.

“We do intend to utilise the land sooner rather than later so our focus is on getting a design and opening up the land as soon as possible.”

Another source close to the deal said a business park seemed likely.

“There’s not much land in Auckland, zoned industrial land, [the Normans are] a private family and they’ve got a lot of retail interests without a lot of industrial in that portfolio and this balances it out nicely, I suspect.”

Paddy Callesen of Savills, who sold the block to Reading in 2006 and was involved in the latest deal, said it was the largest undeveloped parcel of industrial-zoned land to be offered on the open market in Auckland in several years.

Property records show Reading bought the 25.8ha site at 100 Prices Rd in 2006 for $11.89m, well above its rateable value at the time of $2.7m, later adding a 2.5ha block in McLaughlins Rd.

Reading pushed for years to rezone the land to light industrial, joining neighbouring landowners to jointly develop a 150ha block, which is close to Auckland Transport’s rapid transport lane to the airport.

The group formed the Southern Gateway Consortium, including property developers James Kirkpatrick Group, and former Pacific Aerospace director Nicksha Faraq. Others involved at the time included Faraq’s colleague and property developer Christopher Verissimo.

Now with those plans significantly progressed, Callesen said it was an opportune time for Reading to sell “at a critical time for the Auckland industrial sector, where land availability and vacancy rates are at all-time lows”.

Reading’s recent fourth quarter results showed that although New Zealand has been a bright spot for the company, it had taken some heavy losses due to Covid.

Box office results were still ‘’significantly depressed’’ and it had monetised “assets that are not subject to distressed market conditions”.

“We relied on our real estate assets as well as our cinemas in Australia and New Zealand, where the pandemic was more controlled, to support us through this challenging period,’’ president Ellen Cotter said.

All of Reading’s cinemas in New Zealand and most in Australia and the US are now open. But its worldwide revenues for 2020 were US$77.9 million, compared to US$276.8 million in 2019.

Its net loss widened to US$65.2m, compared to a loss of US$26.4m previously.

In New Zealand, where Reading owns nine cinemas plus its closed Courtenay Central multiplex in downtown Wellington, cinema revenue was down 66 per cent to US$7.077m, resulting in a loss of US$1.418m.

The company told shareholders that plans were still afoot for Courtenay Central, which has been slated for redevelopment for the best part of a decade.

The multiplex and carpark has been open intermittently since being damaged by earthquakes in 2013 and 2016. It received a NZ$25m insurance payout for the damage, largely to its carpark.

Long held plans for the site included a supermarket, but Reading said it was “continuing to review alternative plans for the redevelopment”.

A carpark at the rear of Courtenay Central is opposite the new Wellington Convention Centre under construction in Cable St.

Allure of industrial

Industrial land, already very popular with investors, has become even more sought after in recent months, particularly in Wiri and along the Auckland Airport corridor.

A senior commercial real estate agent said that with residential land facing new tax and landlord rules, investors had been increasingly turning to industrial.

Over 1.2 million square metres of industrial land had been bought in the Wiri and airport corridor precincts over the last five years – about 39 per cent of the total industrial land take-up throughout Auckland, according to CBRE.

CBRE agent Bruce Catley, who also assisted the Reading sale, said freight, logistics and food grade warehousing had taken off since Covid as pressure came on supply chains.

“Market statistics show that Wiri and the airport are the epicentre of the action when it comes to industrial occupier and investor activity.”