As you know we are active property investors, usually in a partnership arrangement with a party that will add value to the real estate thus securing better returns for our clients than they would otherwise be able to achieve through acquiring property that has fully developed potential, or potential that has to be realised by buying in ‘paid’ talent to release it.
For the moment we are only focusing on projects in Auckland, Queenstown and Tauranga. We are targeting housing rather than commercial in those locations, as generally, commercial is now significantly over priced with yields not representing much of a premium to the term deposit rate obtainable with banks, on what are now quite fully priced rentals.
Also since the election was announced and now the non-result is in, we are not actively chasing housing either, for reasons that are obvious. This said, we have one live project that is available which is a worker accommodation project at the Remarkables Park in Queenstown.
In the last twelve months we closed two projects…
The first was a commercial site at 131 Queen Street which is a redevelopment site. This was settled in May this year with a total equity raise of $30m to secure a long term hold position. It will be redeveloped to improve the tenancy profile and yield. The key risk in this was bank funding which we were successful in obtaining in what is a very tight market. The Australian banks are under pressure to repatriate funds to Australia.
The second was a land development opportunity in Christchurch. The equity raise for this project amounted to $3m. Just under half the land was sold at roughly the cost of acquisition and the other half is to be developed into sections.
Given the perception of an overheated market where value is hard to find (and easier to extract) our prime focus was on selling three of our earlier acquisitions and releasing our equity to the extent possible from the remaining sites held.
In the last 12 months we have closed out the following:
- Commerce Street was successfully sold returning a tax paid IRR of 24%
- The corner of Queen Street and Mayoral Drive succeeded in settling the tower sale with some residual units in the lower levels still to be sold and the IRR to investors, tax paid, amounted to 12% (a relative failure) and certainly below expectations but not bad all the same
- 350 Queen Street settled last week with an IRR of nearly 25% over the term (over 7 years)
- McLennan, a financing arrangement in respect of affordable housing in Papakura, settled out late with numerous headaches along the way. Almost exclusively induced by government local and central ineptitude. It did however produce the minimum expected return of a 10% tax paid IRR. If I ever get the rush of blood again to do an affordable housing project which is in effect a government private sector partnership, shoot me
If I ever get the rush of blood again to do an affordable housing project which is in effect a government private sector partnership, shoot me!
Total of all realisations was just under $100m.
In addition, our retail office development in St Georges Bay Road was refinanced realising just under half of our capital in the last month.
So overall we have significantly cashed our investors up over the last 12 months whilst also securing opportunities, for those that wish to, to reinvest with credible partners.
We have one other land project in Auckland, being Orewa. This is a section financing arrangement for a group scheme builder. As would be expected, sales have been slow, however it still has time on its side and the land was acquired long enough ago that with the rise and fall of land prices we are still in okay shape.
We are now preparing for 2018, as we anticipate that value will begin to emerge again. If you are not already a qualified investor with us and you are interested in becoming one, feel free to email myself or anyone of our VAS team for a discussion about this asset class, how we work, and what you need to qualify to participate.