Archive | Gainz

Net migrant inflow just short of 72,000/year

The net inflow of migrants dropped slightly from April to May and fell 36 short of 72,000 for the year to May, according to Statistics NZ’s monthly figures released yesterday.

Statistics NZ also released a study yesterday of migrants from other countries using the easier entry to New Zealand as a backdoor way of getting into Australia (link below). That flow spiked in 2001, when Australia changed its welfare rules, and has fluctuated since.

The present rise in net immigration began in 2014 and the net inflow has doubled since then.

The annual net inflow hit 71,885 in April and rose to 71,964 in May, but the net inflow for the month of 3117 was down from April’s 3406.

Compared to last year’s figures, the monthly net inflow was up by 79 on last year and up by 3532 on the previous year.

The number of migrants arriving on student visas has dropped by 4000 to 23,700 for the year, principally affecting migration from India, which dropped by a net 4681. Net immigration from the UK jumped by 2592 to 6534 for the year, and from South Africa by 1801 to 4729. The net inflow from China was up by 551 to 10,218 for the year.

Net migration into Auckland for the month was 1899 (1493 last May), and for the year 36,270 (31,623).

Link:
Statistics NZ paper, 22 June 2017: Backdoor entry to Australia

Attribution: Statistics NZ tables & release.

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PFI vote strongly in favour of internalisation, and building sale settles

Property for Industry Ltd shareholders voted 94.4% in favour yesterday of paying $42 million to internalise the NZX-listed company’s management.

The same management team will stay in place, making some wonder why the transaction was needed at all.

But deputy chair Anthony Beverley said benefits included the control on expenses, dealing with conflicts and strategic benefits. He said the return to shareholders would from the investment would flow through reduced expenses and higher profits.

NZ Shareholders Association chair John Hawkins told the PFI meeting the association had seen lower numbers than the 6.5% accretion to shareholders that the independent report by Northington Partners ascribed to the internalisation, but all the other predictions were still accretive.

And then he added: “I am confident that if shareholders reject this deal the management contract will be sold to a third party – that’s from some of the parties we have spoken to.”

And that’s the crux of the internalisation. PFI had an opportunity to control the future of its management, whereas sale of the management contract to a third party could have led to a far different future.

There were some quibbles that owners of the present manager, PFIM Ltd, would switch to internal contracts yet would still be allowed to conduct other business from the company office, but Mr Beverley said the external contract allowed that and the new contract would require them to give PFI priority.

The vote was held at PFI’s annual meeting, where the operational highlight was a presentation by general manager Simon Woodhams on the returns the company had achieved from its $28.5 million acquisition of the Sistema Plastics Ltd portfolio of 5 Penrose properties in 2015.

Sistema moved last year to new premises at Ihumatao, near Auckland Airport, after a period leasing back its Penrose premises. PFI has signed long-term leases on 3 of the Penrose buildings, sold one and has the fifth building still vacant.

The sale of 65 Hugo Johnston Drive to Crown Equipment Ltd for $14.25 million, up from PFI’s August 2015 acquisition price of $11.01 million, settled on Monday.

Earlier stories:
29 May 2017: Northington sees big gain for PFI from internalisation
24 May 2017: IRD makes tax ruling relating to PFI internalisation
1 May 2017: PFI sells one & leases 3 of 5-property Penrose portfolio
3 April 2017: PFI proposes internal management after 6 years of external

Attribution: Annual meeting, company releases.

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NZF passes resolutions to become Blackwell

NZX-listed shell company NZF Group Ltd’s shareholders passed all 9 resolutions at a special meeting yesterday, called to implement a capital & organisational restructure which will see it formally become part of Taiwanese wholesale investor Chai Kaw Sing (Michael Chai)’s Blackwell Global Group.

The restructure is scheduled to be settled in the second week of July.

Under the proposal, NZF will change its name to Blackwell, Mr Chai & 2 local associates – real estate agency owner James Law & lawyer Ewe Leong Lim – will become directors, current director Mark Thornton will revert to his role as chief executive and the 2 directors who’ve worked on keeping NZF alive, chair Sean Joyce & lawyer Craig Alexander, will stay on as independent directors.

Mr Chai will invest $2.5 million (at 0.8 of a cent/share) to capitalise NZF and will pay the existing directors the fees they haven’t taken while they’ve been searching for a future for the company (about $75,000 each).

As Blackwell, NZF will launch a new finance company operation, acquire assets related to a derivative trading operation and launch a new derivatives trading operation.

It will raise new debt through the issue of up to $3 million of convertible notes and secure third-party debt finance through the issue of up to $6 million of secured bonds.

Earlier story:
9 June 2017: Listed shell NZF calls meeting on future as Blackwell finance & derivatives business

Attribution: Company release.

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3 ex-Masala restaurants nearly make $8 million forfeiture order price tag at auction

3 restaurants in the former Masala chain were sold for $7.875 million at Bayleys’ auction yesterday, just short of a forfeiture order made in February.

Image above: Dining room of the former Masala restaurant in Mt Eden.

A Glen Eden shop with the Mad Butcher as tenant and a Dilworth apartment at the foot of Queen St were also sold under the hammer.

The restaurants, owned by JKK Holdings Ltd (Supinder Singh & Daisy Kaur) were taken to auction by the Official Assignee under the Criminal Proceeds (Recovery) Act after Justice Rebecca Edwards agreed in the High Court to an $8 million assets forfeiture order between the Commissioner of Police and 8 companies & 2 individuals associated with the Masala restaurant chain.

Justice Edwards said in her decision approving the settlement: “The settlement sum of $8 million represents almost all of the unlawful benefit said to have been derived from the tax evasion offending. The settlement sum is expected to be met in full through the sale of restrained properties.”

The 2 individuals, Joti Jain & Rajwinder Singh Grewal, were sentenced in 2015 to home detention and ordered to pay reparations on a long list of immigration & exploitation charges.

In March, Ms Jain was reported to have left New Zealand ahead of an appeal against being deported, but she was in the auctionroom yesterday.

All 3 restaurants in Mt Eden, Stanmore Bay & Birkenhead attracted multiple bidders. The properties were marketed for sale on an “as is where is” basis and subject to occupancy.

Apartments

CBD

Queen St

Dilworth, 22 Queen St, unit 5L:
Features: one bedroom, high stud
Outcome: sold for $530,000
Agents: Julie Prince & Diane Jackson

Commercial

Isthmus west

Mt Eden

510 Mt Eden Rd:
Features: 554m² section, 200m² restaurant in converted villa at corner of Disraeli St in Mt Eden village, additional 206m² downstairs area gives potential to split risk
Outcome: sold for $3.61 million on “as is where is” basis, subject to occupancy
Agents: Scott Kirk, Adam Curtis, John Algie

North-east

Birkenhead

188-192 Hinemoa St:
Features: 835m² site, development potential, 280m² restaurant in converted villa, wraparound covered deck, vacant office area below restaurant previously used as accommodation
Outcome: sold for $2.535 million on “as is where is” basis, subject to occupancy
Agents: Adam Curtis, John Algie & Damian Stephen

Stanmore Bay

195 Brightside Rd:
Features: 1783m² site, 276m² restaurant
Outcome: sold for $1.73 million on “as is where is” basis, subject to occupancy
Agents: Jeremy Milton, John Algie & Adam Curtis

North-west

Glen Eden

5 Oates Rd, unit 5:
Features: 292m² corner unit in block of 13 shops, dual access, split internally between retail, office storage, meat processing & cool storage, opportunity to split or occupy the tenancy
Rent: $92,040/year net + gst from established tenant, the Mad Butcher
Outcome: sold for $1.375 million at a 6.7% yield
Agents: Adam Curtis, Adam Watton & Oscar Kuang

Earlier story:
28 February 2017: $8 million Masala assets forfeiture agreed

Attribution: Auction.

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Kiwi Property seeks $161 million new equity

Kiwi Property Group Ltd announced a $161 million equity-raising on Monday through a fully underwritten pro rata entitlement offer.

The $1.36/share issue price reflects a 4.5% discount to the theoretical ex-entitlement price of $1.424/share. The theoretical ex-entitlement price equals the average price of 118,132,021 new shares at the application price of $1.36 and 1,299,452,240 existing shares at $1.43, which was the closing price on the NZX on 16 June.

Kiwi Property chief executive Chris Gudgeon said the NZX-listed company intended to use the net proceeds initially to pay down bank debt and reduce gearing, before being used to fund potential investment & development opportunities, including the potential expansion & improvement projects at Sylvia Park, Northlands, The Base, and in the longer term at Drury.

Under the offer, eligible Kiwi Property shareholders will be entitled to acquire one new share for every 11 existing shares held on the record date, which is today.

The institutional component of the offer will be accelerated and occur over the next 2 days.  Settlement & allotment of new shares is scheduled for Friday 30 June.

The retail component of the offer will open tomorrow for eligible retail shareholders with a registered address in New Zealand or Australia and close on Monday 10 July. Settlement & allotment of new shares is scheduled for 17 July.

Under the offer, there is no rights trading. Instead, new shares not taken up or attributable to ineligible shareholders will be offered to institutional investors through 2 bookbuilds run by the joint lead managers, one for the institutional offer and one for the retail offer.

Any premium achieved above the application price for the new shares in each of the bookbuilds will be shared on a pro rata basis (with no brokerage costs deducted) between those shareholders who don’t exercise their entitlements or who are ineligible to do so.

Due to the timing of this offer, Kiwi Property’s dividend reinvestment plan has been suspended for the final dividend payable tomorrow. Shareholders who elected to participate in the plan will be paid the dividend instead.

Attribution: Company release.

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Summerset sees bonds as helpful diversification

Summerset Group Holdings Ltd set an interest rate last week of 4.78%/year for its $100 million issue of secured, unsubordinated fixed-rate bonds. The issue includes $25 million of oversubscriptions. There’s no public pool.

The offer closes on Thursday 6 July and allotment will be on Tuesday 11 July. The 6-year bonds have a maturity date of 11 July 2023.

Summerset chair Rob Campbell said the transaction was a significant milestone for Summerset, being its first domestic regulated bond issue and the first for the New Zealand retirement village & aged care sector: “The proceeds will be used to reduce existing bank debt to $211 million, leaving significant headroom within the $600 million facility.

“This provides further diversification of funding sources and tenor for the group and provides strong levels of certainty for future years for funding. The bonds complement existing syndicated loan facilities which were refinanced in March.”

Attribution: Company release.

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Ryman plans retirement village for Lincoln Rd

Ryman Healthcare Ltd announced plans on Friday for a new retirement village on a 4.5ha Lincoln Rd site in Henderson.

The land is part of Laidlaw College’s Henderson campus, but is surplus to the college’s needs. Laidlaw College is an evangelical theological college, formerly the Bible College of NZ.

Laidlaw College Foundation chair Graham Burt said: “Ryman is an ideal organisation to become our new neighbour. We feel very much part of the Henderson area having been here for over 50 years and we’re keen to ensure a good fit for both ourselves & the community as a whole.’’

Ryman Healthcare group development manager Andrew Mitchell said the company intended to redevelop the site as a resort-style retirement village which would be home to over 400 residents.

The village would offer independent retirement housing, a full range of aged care services including serviced apartments, and resthome, hospital & dementia care.

Ryman group sales & community relations manager Debbie McClure said the village would be named in honour of a West Auckland local and suggestions were welcome.

The village will be Ryman’s 11th in Auckland. The company is developing villages at Hobsonville, Greenlane, Lynfield & Devonport and has existing villages in St Heliers, Remuera, Howick, Pukekohe, Birkenhead & Orewa.

Attribution: Company release.

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Fed lifts rate again

The US Federal Reserve decided overnight to raise its federal funds rate to a range of 1-1.25%.

The central bank dropped its target range to 0-0.25% in December 2008 and held it there for 7 years. In December 2015 it lifted the target range to 0.25-0.5%, and raised it again in December 2016 & March 2017, each time by 25 basis points.

One member of the bank’s open market committee, Federal Reserve Bank of Minneapolis president Neel Kashkari, wanted to hold the rate today. The vote to raise was 8-1.

The bank expects to start a “balance sheet normalisation programme” this year, by gradually decreasing reinvestment of principal payments to reduce its holdings of Treasury securities.

The committee said it expected economic conditions would “evolve in a manner that will warrant gradual increases in the federal funds rate; the federal funds rate is likely to remain, for some time, below levels that are expected to prevail in the longer run. However, the actual path of the federal funds rate will depend on the economic outlook as informed by incoming data.”

Attribution: Bank release.

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Vital buys another Sydney hospital

The Vital Healthcare Property Trust has bought a Sydney private mental health hospital, The Hills Clinic, for $A30.3 million. Settlement is expected to occur in July. It comes a fortnight after the NZX-listed Vital bought a rehabilitation hospital in north Sydney suburb Chatswood, the Hirondelle Private Hospital, for $A23.5 million.

The Hills will be run on a 30-year lease by Healthe Care Australia Pty Ltd, Australia’s third largest corporate private hospital operator and pan-Asian healthcare services group, now owned by the Singapore-based Luye Medical Group Pte Ltd. Healthe Care runs Hirondelle on a 25-year lease.

Vital management company chief executive David Carr said today The Hills, in Kellyville, 40km north-west of the Sydney cbd, was modern & innovative. It’s a 2-level purpose-built mental health hospital offering specialist inpatient programmes.

Built in 2011, The Hills is a 59-bed private inpatient facility, including a medical clinic with 8 consulting rooms & about 30 referring clinicians. Mr Carr said it was differentiated by its dedicated youth mental health programme providing accommodation for adolescents with drug, alcohol, depression & anxiety disorders.

“The Hills Clinic is Vital’s fifth mental health hospital in Australia and its first in New South Wales and directly supports our scale & diversification strategy. The Hills site has expansion capability, with potential for an additional 24 beds, which fits nicely with Vital’s philosophy of supporting its operating partners as population growth & wider demand for mental health services increases over time”.

Earlier story:
2 June 2017: Vital buys Sydney hospital

Attribution: Company release.

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Reserve Bank raises question of new debt:income loan limits

The Reserve Bank published a consultation paper yesterday seeking feedback on serviceability restrictions such as debt:income (DTI) limits on loans being added to its macro-prudential toolkit.

The notion immediately drew fire, but the bank said it wanted feedback from stakeholders on alternatives as well. The 3 questions:

  • the risks posed by high debt:income lending and the potential for a debt:income limit or similar policy to ameliorate these risks
  • alternative policies under the Reserve Bank’s control and how they would compare to a debt:income limit, and
  • desirable design features for any debt:income policy and the potential costs & benefits.

The bank has outlined its views on these issues in the consultation and said it wouldn’t implement a debt:income policy in current market conditions, but that it considered debt:income limits could be a useful option in the future.

The consultation paper includes a cost:benefit analysis for a debt:income policy and found there could be significant net benefits.

Feedback closes with the bank on Friday 18 August.

Property Institute warning

Property Institute chief executive Ashley Church repeated his warning that such limits on mortgage lending “would have the potential to do significant damage to the Auckland housing market & the wider New Zealand economy”.

Mr Church said a similar policy introduced in the UK in July 2014 theoretically restricted a buyer to a mortgage that didn’t exceed 4.5 times their annual earnings, but it wasn’t compulsory for banks to impose it and it only applied to a section of the market: “The Brits wisely chose to use this tool as a way to protect those who were at most risk of a market crash rather than as a blunt tool to curb house price inflation. But our Reserve Bank already has that ability in the form of the LVR restrictions – so you’d have to question why they would want this tool unless they want to kill the market – something they’ve repeatedly tried, and failed, to do.” 

Mr Church says the probable consequences of such a policy would be disastrous: “The number of new homes being built – the very thing that Auckland needs most – would plunge as the number of people earning enough to build or buy them would dwindle to a trickle. So the policy could very well kill off the one thing that can fix the Auckland housing crisis – the construction of new homes.”

He said the policy would also lead to a dramatic increase in rents over a relatively short space of time as property investors looked for ways to increase income so they could buy more property: “In an environment where every extra dollar enhances borrowing power, landlords will want to maximum rentals and they’ll be able to do it because the Reserve Bank policy will exacerbate the current housing shortage.”

Mr Church said a debt:income policy could also:

  • create a further barrier to young people looking to buy their first home, “a prospect already made almost impossible by the Reserve Bank clampdown on loan:value lending”, and
  • restrict or eliminate the ability of small business owners to use the equity in their home as security for cashflow, potentially putting thousands of small businesses at risk.

Mr Church said recent house price inflation in Auckland was the result of strong demand and a severe lack of supply, and that the Reserve Bank’s efforts to artificially slow down demand had made the situation much worse.

Reserve Bank says loan:value restrictions have worked

The Reserve Bank introduced loan:value ratio restrictions in 2013 to mitigate the risks to financial system stability posed by a growing proportion of residential mortgage loans with high loan:value ratio (ie, low deposit or low equity loans).

The bank said in its summary of the new paper: “This increase in borrower leverage had gone hand in hand with significant increases in house prices, particularly in Auckland. The Reserve Bank’s concern was the possibility of a sharp fall in house prices, in adverse economic circumstances where some borrowers had trouble servicing loans. Such an event had the potential to undermine bank asset quality given the limited equity held by some borrowers.”

The bank said it believed loan:value ratio restrictions had been effective in reducing the risk to financial system stability.

The bank has produced evidence in its paper that a debt:income limit “would reduce credit growth during the upswing and reduce the risk of a significant rise in mortgage defaults during a subsequent severe economic downturn.

“A debt:income limit could also reduce the severity of the decline in house prices & economic growth in that severe downturn (since fewer households would be forced to sharply constrain their consumption or sell their house, even if they avoided actual default). The strongest evidence that these channels could materially worsen an economic downturn tends to come from countries that have experienced a housing crisis in recent history, (including the UK & Ireland.”

Link: Consultation document: Serviceability restrictions as a potential macroprudential tool in NZ

Attribution: Bank & Property Institute releases, bank paper.

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