Archive | Development funding

Construction starts on Ngai Tahu subdivision at Hobsonville Pt

Construction has started on Ngai Tahu’s innovative new residential development for Hobsonville Point that includes a number of long-term rentals.

It’s funded by the NZ Super Fund, Ngai Tahu Property Ltd & New Ground Capital Ltd.

The 208-home development on the former Defence Force base at the top of the Waitemata Harbour, announced in December 2015, was the initial step for Ngai Tahu Property into the Auckland market and is the first direct property investment for the NZ Super Fund.  First homes in the development will be on sale off the plans from September and the whole development is due to be completed by the end of 2018.

The Ngai Tahu development, now known as Kerepeti, covers 2 1ha superlot sites called Kerewhenua (111 homes) & Uku (97 homes).

The NZ Super Fund & Ngai Tahu Property are investing 48% each of the capital required for the development, and New Ground Capital is contributing the remaining 4%.

Each superlot will consist of a mix of apartments, terrace homes & walk-up apartments based on a masterplan by Context architects. They’ll be built by 4 local building companies – Classic Builders Ltd and Naylor Love Ltd (Kerewhenua) and Jalcon Homes Ltd & Haydn & Rollet Ltd (Uku).

About 50% of the 1- to 4-bedroom properties will be priced under the Auckland median house price and 30% will be priced in keeping with the Hobsonville Point affordable homes Axis programme.

About three-quarters of the homes will be available for sale as they are developed, but 47 are to be retained and made available as long-term rental properties to be managed by New Ground Capital, which was set up in 2014 to develop a long-term rental portfolio.

Anyone can apply to rent one of these homes once completed, with lease terms of up to 7 years to provide security of tenure, while still allowing leaseholders to shorten their lease should their circumstances change.

Ngai Tahu Property chief executive David Kennedy said: “The shared vision for this development was to ensure public & iwi funds are reinvested into infrastructure for the long-term benefit of New Zealanders – those who live there and the investors themselves.

“With building of terrace homes and early foundation works for the apartments now starting on both of the superlot sites, we are on the way to ensuring a broader section of the market, be they renter or homeowner, can have a quality place to live and enjoy access to all the amenities & lifestyle on offer at Hobsonville Point.

“We expect the new long-term rental properties to be listed on www.newgroundliving.co.nz in the third quarter of this year.”

Links:

Ngai Tahu Property 
www.ngaitahuproperty.co.nz
NZ Super Fund
www.nzsuperfund.co.nz
New Ground Capital
http://www.newground.co.nz
New Ground Living
www.newgroundliving.co.nz

Attribution: Company release.

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First NZ Capital invests in property lender Pearlfisher

Pearlfisher Capital Ltd has entered a joint venture with First NZ Capital Group Ltd which opens the smaller private property investment & development lender to new business and will add a new direction to the country’s largest full service investment bank.

Pearlfisher founders Tony Abraham & Jarrod Bruce (left & centre) with First NZ Capital head of investment banking Sam Ricketts.

Pearlfisher, started by Tony Abraham & Jarrod Bruce in 2009, has worked with a pool of high net worth investors to fund residential subdivisions, townhouse & highrise apartment projects and suburban retail developments.

It’s an asset class First NZ Capital has left alone as it’s concentrated on advisory wealth management.

First NZ Capital’s head of investment banking, Sam Ricketts, said yesterday the company saw non-bank property financing as an area of opportunities & growth, both for its own investment and as an additional offering to its institutional & high net worth client base: “The non-bank property finance market overseas is quite sophisticated & well developed,” he said.

Mr Bruce believed it was the first time in New Zealand an institution had made this step into direct non-bank property financing.

Pearlfisher has sat between that inhouse investment style and the New Zealand finance company sector model of raising money from the public through debentures, which was destroyed in the global financial crisis in 2008.

The company offers first & second mortgages, using funds from a small pool of wealthy investors. Unlike finance companies that attract funds and then have to use them or face paying high returns on low-interest bank deposits, and where investors don’t see where their money is being placed, Pearlfisher lines up a project then goes to its investors.

“We originate opportunities then decide whether we want to pursue them, and match with investors. The investors look at the specifics of that transaction. We don’t just dole out cash, but in theory we also don’t have a cap.”

Mr Ricketts said First NZ Capital had invested in the Pearlfisher business: “The benefit of that is the alignment of interest. In most transactions we’d like to think Pearlfisher would be putting their capital in as well.”

First NZ Capital had seen interest in property investment grow among high net worth individuals, and also among institutions, and Mr Bruce some of that was evident through the advent of family offices, which he saw as opportunistic. By comparison, “We’re trying to grow a long-term business.”

First NZ Capital introduces a large support base to Pearlfisher. Mr Ricketts: “I’ve got 20 guys in my investment banking team, plus the global strategic alliance with Credit Suisse, in place since 2002.”

Mr Bruce said the timing of the Pearlfisher-FNZ joint venture was good, but it wasn’t based on taking advantage of immediate opportunities. Mr Ricketts said First NZ Capital also saw long-term opportunities in the non-bank lending sector.

One early outcome should be an increase in availability of first mortgage funding. Mr Abraham: “Under the current structure, if we got a deal for $20-25 million, we’d probably struggle to place it. Most of our loans are in the $1-10 million range, but we’ll start to see larger first mortgage opportunities.”

2 reasons for that have arisen. One is the capital constraints the Australian banks are facing and the other is the tightening of credit criteria.

For investors, syndication has attracted increasingly large sums, but on a different timeframe. Syndicate managers look at investors placing their money for several years, whereas for Pearlfisher’s investors the average term is 12 months: “They recycle their capital. We’re also not selling $50,000 parcels, but $1-2 million chunks. For a $4 million deal, we’d take it from one person.”

Mr Abraham said the difference in investor markets came down primarily to market nous: “Our investors actually understand the risk profile, which has been critical to how we run our business – not everyone understands the space we play in.”

First NZ Capital will add independent governance to the mix. Mr Ricketts has joined Pearlfisher’s board and Sean Keane has been appointed as its independent chair. Mr Keane’s 30 years in financial markets locally & internationally included being managing director of global money market funding & short-term interest rate trading in Asia & the Pacific for Credit Suisse before he returned to New Zealand in 2008.

He founded Triple T Consulting Ltd, which has close ties to Credit Suisse & First NZ Capital, joined First NZ’s board in 2012 as a non-executive director, is deputy chair of NZX-listed Eroad Ltd and is a director of Foundation Life (NZ) Ltd.

Attribution: Interview.

The content of this article has been tweaked shortly after initial publication, correcting some of my terminology in particular.

 

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Arrow joins merchant banker in development fund

Christchurch merchant bank Murray & Co Ltd and construction group Arrow International Ltd have formed a $20 million property development fund that will seek opportunities throughout New Zealand, including in the Christchurch rebuild.

Arco Property Fund will be open for investment in January, seeking capital commitments from eligible persons, with 25% of any commitment payable upfront.
Merchant banker Justin Murray and Arrow incorporated Arco Property Ltd & 2 partnership companies on 22 November, with Mr Murray and Arrow’s Bob Foster as directors and prominent Auckland listed company director Rob Campbell as chairman. Another prominent listed company director, Humphry Rolleston, is a director of Mr Murray’s companies.

Mr Campbell said on Friday there was a relative scarcity of development funding in New Zealand: “We believe the time is right to offer investors the opportunity to participate in professionally managed property development in New Zealand. This is a good time to develop property projects that possess strong underlying fundamentals, built on a steady domestic economic foundation.

“Arrow International and Murray & Co provide a strong combination of property development, financial & governance experience that will position the fund well to take advantage of quality property development projects.”

Mr Murray said Arco would focus on industrial, office, retail & residential developments. No more than a third of the fund’s capital would be committed to any one project and there would be a geographic spread of investments.
“We will seek property development opportunities across New Zealand, with a focus in regions where economic activity is concentrated. As such, while Arco will not be exclusively focused on the Christchurch rebuild, being based in Christchurch is expected to provide the fund with privileged access to local opportunities.
“We will look at projects that we initiate & manage through to completion and will also consider joint ventures with other developers.”

Mr Murray said Arco didn’t intend to retain developments in the long term and, once sold, would distribute proceeds to the investors.
“The fund is designed for investors who understand and seek returns associated with longer-term investment opportunities derived from property development.”
Murray & Co is advising parties on various aspects of the Christchurch rebuild, including assessing development options & financial structuring of proposals.

Attribution: Company release, story written by Bob Dey for the Bob Dey Property Report.

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