Hotel investment offers a suite deal

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Media Release
Date 18.5.2009

Hotel investment offers a suite deal

Passive property investors wanting to own a slice of Auckland’s most lavish hotel are being offered the opportunity to buy penthouse level suites with fixed yields for the first two years.

Some 24 suites on the top level sixth floor of the hotel at Lighter Quay overlooking the Viaduct Basin are on the market for sale. Included among the 24 rooms on offer is the luxury suite which global football star David Beckham and pop legend Sir Elton John both stayed in during their last New Zealand visits.

The suite offering is being marketed through Bayleys, with sales consultant Duncan Ritchie pointing out that the hotel investment offered above-market rental returns at a time when sharemarket speculation, bond yields, and fixed interest levels were at historically low levels as a result of the global economic uncertainty.

The Lighter Quay hotel suite offering is available in two different investment packages:
• Either, eight per cent net return fixed for two years
or
• Six per cent net return fixed for two years, plus 21 days use of the room annually during that two-year period.

Each suite contains king and queen-sized beds, stereo TV and sound system, lounge armchairs, kitchen with microwave, cooktop and rangehood, climate controlled air conditioning, all flooring underlays and coverings, curtains, bath and shower units, and vanity fitments. All fittings and furnishings are included in the purchase price.

“Our target market for this offering is family-type investors, family trusts, and mature professionals – all of whom are looking at their bank term deposits coming off rates up around eight per cent, but having to face up to current term rates around four per cent. That’s a marked drop,” said Duncan Ritchie.

“Commentary from Reserve Bank governor Alan Bollard is that the Official Cash Rate will remain low well into 2010, and with a minimal OCR keeping the lid on any growth in fixed term rates for the corresponding period. Conversely, the Lighter Quay suites are promising rates some two to four per cent higher for the first two years – with payments direct credited monthly to investors’ accounts.

“This opportunity allows for a total passive investment – and with the spectre of the Rugby World Cup looming large in 2011, the hotel is well positioned to take advantage of the enormous benefits this major sporting event will bring to the New Zealand economy.

“The hotel currently records an occupancy level far above the industry norm for Auckland. In addition, the nightly average room rate is also considerably higher than other four and five star hotels in the city. Those two factors combined, from an investment perspective, make ownership of a suite in the Lighter Quay very attractive. Lighter Quay regularly achieves the highest revenue per available room (REVPAR) across the five-star hotel market in Auckland.”

Mr Ritchie said the 21-night usage option for the first two years could prove an incentive for ‘out-of-town’ investors who spend time in Auckland either conducting business or en-route to overseas destinations.

“The tax accruals of such an arrangement deliver a positive outcome for those in the position of having to spend say three weeks a year in Auckland.

The 24 Lighter Quay suites on offer through Bayleys range in size from 31.7 metres to 74.3 metres, and deliver annual returns of between $29,200 and $69,808. Prices start from $365,000 and are zero-rated for GST. The apartments are sold as ‘going concerns’.

“Management of the suites is completely taken care of by the hotel, so owners don’t have to suffer any of the typical tenancy or vacancy issues often associated with property investment,” Mr Ritchie said.

Mr Ritchie was quick to point out though that the suites could not be used as owner/occupier apartments such as those found in other Auckland hotels - such as The Heritage, The Hyatt or The Sebel Suites.

“The operational strategy of Lighter Quay hotel ensures that its ‘exclusive’ nature, combined with its high occupancy rate which ranges between 80 and 95 per cent, doesn’t lend itself to ‘live-in’ residents. It’s the management company’s preference to have all room stock available to the general accommodation pool where revenues can be directly generated for the owners,” he said.

Since opening in 2007, the Lighter Quay hotel has quickly become renown for its stylish amenities – not only throughout the 172 rooms, but also the food and beverage establishments on the ground level – such as the visually stunning Q restaurant serving fine dining cuisine overlooking the city’s only boat lock, or the intimate Office Bar with its funky retro’ décor.

“Ownership of a suite within the Lighter Quay will certainly come with an enviable degree of ‘bragging rights’ for those involved,” said Mr Ritchie, “simply because of the outstanding design and decor of the property, its location within the heart of the Viaduct precinct, and the restaurant and bar amenities which have made it such a magnet for those who enjoy stylish hospitality.”

ENDS

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