Archive | NZ Super Fund

Super Fund beats its benchmarks

The NZ Super Fund continued to perform above its benchmarks in the June 2018 financial year, finishing $4 billion up at $39 billion.

Chair Catherine Savage said both broad markets and the NZ Super Fund had performed well. Global equities rose in value and the NZ Super Fund beating its reference portfolio benchmark.

The fund returned 12.43% (after costs, before NZ tax), beating its passive reference portfolio market benchmark by 2.02% ($700 million). It exceeded the average return on treasury bills, its other benchmark, by 10.71% ($3.7 billion).

Ms Savage said the fund continued to take a long view, as it won’t start to experience sustained withdrawals until the 2050s.

The 2018 result took its returns since its inception in 2003 to 10.4%/year, and value added versus the reference portfolio to 1.49% – a total of $7.6 billion.

Chief executive Matt Whineray pointed to 3 reasons the fund exceeded the reference portfolio benchmark: strategic tilting, in which the fund’s exposure to different asset classes is adjusted over time; timber, primarily its 42% stake in Kaingaroa Timberlands; and an internally managed credit mandate.

However, looking ahead, he said the external environment appeared challenging: “Global growth is beginning to decelerate, inflation is starting to rise in some developed markets, and financial conditions are tightening with the withdrawal of central bank liquidity. While trade tensions have been escalating, the contagion into financial markets has been limited to date.

“While the fund remains heavily weighted towards growth assets such as shares, with many markets at or above fair value, we have lowered the amount of active risk being taken. This is a measure of how different the fund’s actual portfolio is from the passive reference portfolio – they have got closer during the year.

“We are also maintaining higher than normal levels of liquidity in the portfolio – assets that can be sold easily to meet our obligations or to fund new investments. This will ensure the fund can withstand any future market stress and take advantage of new investment opportunities as they arise. We remain committed to our long-term investment strategies and will continue to take a highly disciplined approach to active investment.”

Government support resumes

The new Government resumed contributions to the fund in December 2017, after an 8-year suspension, contributing $500 million over the 2018 financial year.

The Government monthly contributions increased to $89 million/month from July 2018 and are projected to increase to the level specified in the fund’s governing legislation by 2022. Since inception in 2003, the Government has contributed $15.4 billion and the fund has paid $6.4 billion in NZ tax.

Links:
Fund performance figures as at 30 June 2018
June 2018 performance report

Attribution: Fund release.

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Next Super Fund investment a US recycling technology innovator

Fresh from proposing to develop & fund Auckland’s light rail line from downtown to the airport, the NZ Super Fund has added another expansion capital investment to its $38 billion portfolio, investing $US65 million in cloud-based US waste & recycling technology company Rubicon Global Holdings LLC.

The Super Fund’s acting chief investment officer, Mark Fennell, said today Rubicon, based in Atlanta, Georgia, provided an innovative technology platform for waste & recycling: “It connects customers to a network of independent waste haulers and is leading the development of smart city products in the waste & recycling space. The company’s goal is to help businesses, governments & organisations confidently execute on their sustainability goals through their waste management operations.”

Mr Fennell said Rubicon provided an attractive opportunity for the fund to increase its exposure to expansion capital, now about 2% of its portfolio. It also has a 2% global allocation to infrastructure.

The fund has direct investments in fuel cell manufacturer Bloom Energy, dynamic glass manufacturer View Inc and waste-to-energy company LanzaTech (founded in New Zealand, now based in Chicago). In New Zealand, the fund has supported a large number of small & medium-sized high growth companies via external managers Direct Capital Ltd, Pioneer Capital Partners Ltd, Pencarrow Ltd, Waterman Capital Ltd & Movac Ltd.

Mr Fennell said: “It’s pleasing to be able to leverage our timeframe, scale & diversification to support growth companies such as Rubicon that, while established from a technology point of view, are pre-IPO. As a long-term investor, the NZ Super Fund is able to invest in high growth companies with a view to realising long-term potential. These expansion capital investments are an important part of our investment mix because they can help drive long-run returns.

“This particular investment also aligns with the fund’s strategy to identify investments that have the potential to benefit from the global transition to a low-carbon economy. Rubicon, which aims to divert waste from landfills and reduce greenhouse gas emissions, has strong sustainability credentials and complements our climate change investment risk strategy.”

Related stories:
11 May 2018: Government starts on light rail procurement, Super Fund talks assessing viability & investment, mayor talks intensification
5 July 2017: Super fund explains tilting strategy
15 February 2017: Steamrolling & funding
18 December 2015: Super Fund, Ngai Tahu & private financier join in Hobsonville Pt project
30 September 2014: Super guardians pose some investment thoughts

Links:
NZ Super Fund
Rubicon Global
NZ Super Fund, 3 July 2017: How we invest white paper: Strategic tilting

Attribution: Fund release.

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Government starts on light rail procurement, Super Fund talks assessing viability & investment, mayor talks intensification

Transport Minister Phil Twyford & Finance Minister Grant Robertson announced on Wednesday that Cabinet had agreed to launch a procurement process for the Auckland rapid transit light rail network.

They also mentioned that the NZ Super Fund had made an unsolicited proposal last month to form an international consortium “to design, build & operate Auckland’s light rail network”.

The fund put it slightly differently, saying it had offered “to assess the viability of the Auckland light rail project for commercial investment”.

Housing & Urban Development Minister Phil Twyford.

The fund added that it “understands & respects the Government’s need to run a procurement process and looks forward to further engagement with the NZ Transport Agency”.

Mr Twyford said: “The Government is committed to progressing light rail to transform Auckland. It will be a magnet for private investment in urban renewal and will be able to carry 11,000 commuters/hour – the equivalent of 4 lanes of motorway.

“We are investigating innovative solutions to tackle congestion and build a vibrant & modern city.”

Mr Robertson added: “The NZ Transport Agency will now set up a robust process to explore a range of possible procurement, financing & project delivery options. This process will invite & assess all potential proposals and report back to the Ministers of Finance & Transport. The Transport Agency will work with the Treasury & the Ministry of Transport in this process.”

The procurement process covers both the city-Mangere & city-north-west lines. The recently announced 10-year transport plan for Auckland earmarked $1.8 billion in seed funding, with the option of securing private investment in the network.

Fund investment still tentative

Critics of Auckland Council & the Government’s proposal for the light rail line, especially the proposed path down Dominion Rd, skipped the notion that the Super Fund would “assess the viability” and stretched their criticism to the fund’s as-yet-tentative investment.

The New Zealand sovereign fund was created in 2003 and had $12 billion of funds when the National-led government suspended contributions in 2009. While suspending contributions, then-finance minister Bill English also told the fund he wanted it to increase its investment in New Zealand, aiming for an eventual target of 40% of its portfolio. The new government said in December it would resume contributions and would add $7.7 billion through to June 2022.

The fund has $5 billion (13.2%) of its $38 billion invested in New Zealand and about 2% invested globally in infrastructure. It’s returned 10.5%/year since inception – despite an $881 million loss in 2008, first year of the global financial crisis – while many other sovereign funds around the world have continued to struggle.

Sovereign funds have come looking for over a decade

Representatives of many of those funds have visited Auckland over the last 15 years to talk investment, and Auckland Council & its isthmus predecessor, the Auckland City Council, have acknowledged such funds as potential infrastructure financiers without indicating any steps have been taken to advance beyond a passing idea.

Matt Whineray.

The NZ Super Fund’s acting chief executive, Matt Whineray, said on Wednesday: “The Government has signalled its intention to accelerate core infrastructure investment in a number of areas. We consider the Auckland light rail network to be an infrastructure project of sufficient scale & significance to be an attractive prospect for investment. We wish to explore whether a NZ Super Fund-led consortium leveraging our international relationships can fund & deliver the project, on a fully commercial basis.”

The NZ Super Fund has identified as its potential partner CDPQ Infra, a wholly owned subsidiary of Caisse de dépôt et placement du Québec (CDPQ) responsible for developing & operating infrastructure projects. Mr Whineray said other members could be added to the consortium.

The Quebec provincial government created CDPQ in 1965, initially to manage its new universal pension plan. It’s become a leading institutional fund manager, with a net $US238 billion of assets. CDPQ Infra is responsible for developing, building & operating Montreal’s 67km light rail network.

Mayor says intensification in suburbs will follow

New Auckland mayor Phil Goff.

Auckland mayor Phil Goff said: “Light rail will facilitate new & more intensive housing along major arterial routes, including Mangere, Mt Roskill & West Auckland, and better connect centres of employment across our city. It will help to meet Auckland’s need for more housing for our rapidly growing population.”

Mr Goff said the light rail funding would be on top of the $28 billion earmarked by the Government & council to address congestion. He added: “Light rail will replace buses on routes that are already facing congestion and has been adopted by cities across the world to move large numbers of people more quickly & efficiently. “Unlike heavy rail, light rail does not require the purchase & demolition of thousands of houses to extend rapid transit services to new areas of Auckland.”

Links:
9 May 2018: Government statement on light rail project
Auckland Transport, Airport & Mangere rail
Charles Marohn, Strong Towns, 19 September 2016: Infrastructure spending for dummies
Revitalization News, 15 July 2015: Funding infrastructure to rebuild equitable, green prosperity
Rick Rybeck, report for Washington DC Tax Revision Commission2013: Funding long-term infrastructure needs for growth, sustainability & equity
Just Economics LLC (Rick Rybeck)

Earlier stories:
6 March 2017: Property Council joins call for new infrastructure funding
Tracking ideas Sun27Sep16 – sprawl v compact, inclusionary housing, infrastructure funding, related pieces, Making NZ
14 August 2017: Billions astray, but political thinking on Auckland transport infrastructure is positive
24 July 2017: New Crown entity will advance housing infrastructure
12 June 2017: NZ infrastructure body takes lessons from Scotland
15 February 2017: Steamrolling & funding
3 July 2016: PM talks $1 billion infrastructure fund, English talks payback frame, Smith talks grabbing more power
10 June 2016: Joyce hunts for foreign direct investment in Singapore
6 December 2015: How Panuku proposes to lead transformation of Auckland
24 August 2015: An action plan called 42
26 November 2014: Auditor-general issues blunt warning on infrastructure
30 September 2014: Super guardians pose some investment thoughts
14 May 2009: Finance Minister Bill English direction to the fund to increase NZ allocation
2 June 2009: Fund response to Finance Minister Bill English on increasing allocation to NZ investment

Attribution: Government, council & Super Fund releases.

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Reserve Bank plays unchanged game, and Peters unimpressed

The Reserve Bank left the official cashrate unchanged at 1.75% yesterday.

The bank’s acting governor, Grant Spencer, said: ‘”Monetary policy will remain accommodative for a considerable period. Numerous uncertainties remain and policy may need to adjust accordingly.”

This nudging along of economic policy doesn’t sit well with the man with the most influential say on future directions, NZ First leader Winston Peters.

Winston Peters.

While voters who believe we’re still in the era of first-past-the-post elections have been busily writing letters to editors explaining that, as National got most votes, it therefore won and should govern, Mr Peters has issued a few statements indicating likely shifts in economic direction:

  • He said the decision to hold the official cashrate at 1.75% “maintains the tone of complacency on New Zealand’s economic outlook”
  • He criticised National for taxing the NZ Superannuation Fund and not making taxpayer contributions for 10 years, and
  • 2 days before the election, he issued a statement affirming his view that the immigration level was too high, criticising the National government “for deluding the public these migrants are skilled”.

Those who see Mr Peters as a negative poser should find his advocacy for change refreshing, because all his policies of the last week have been about improving economic performance.

He issued succinct statements on what the Super Fund ought to be doing, how the Government ought to be supporting it and how international markets bloated with ultra-cheap money are riding for a fall.

Crucially, Mr Peters might change the view commonly held by Western central bankers, including New Zealand’s, that the policy of printing money to stimulate economies is flawed.

But first the Reserve Bank view, from Mr Spencer:

Grant Spencer.

“Global economic growth has continued to improve in recent quarters. However, inflation & wage outcomes remain subdued across the advanced economies and challenges remain with ongoing surplus capacity. Bond yields are low, credit spreads have narrowed and equity prices are near record levels. Monetary policy is expected to remain stimulatory in the advanced economies, but less so going forward.

“The trade-weighted exchange rate has eased slightly since the August Reserve Bank monetary policy statement. A lower $NZ would help to increase tradables inflation and deliver more balanced growth.

“GDP in the June quarter grew in line with expectations, following relative weakness in the previous 2 quarters. While exports recovered, construction was weaker than expected. Growth is projected to maintain its current pace going forward, supported by accommodative monetary policy, population growth, elevated terms of trade and fiscal stimulus.

“House price inflation continues to moderate due to loan:value ratio restrictions, affordability constraints and a tightening in credit conditions. This moderation is expected to continue, although there remains a risk of resurgence in prices given population growth & resource constraints in the construction sector.

“Annual CPI inflation eased in the June quarter, but remains within the target range. Headline inflation is likely to decline in coming quarters, reflecting volatility in tradables inflation. Non-tradables inflation remains moderate but is expected to increase gradually as capacity pressure increases, bringing headline inflation to the midpoint of the target range over the medium term. Longer-term inflation expectations remain well anchored at around 2%.

“Monetary policy will remain accommodative for a considerable period. Numerous uncertainties remain and policy may need to adjust accordingly.”

If you think those closing words are familiar, you’re right: they’re identical to the bank’s closing paragraph in its March statement.

Peters on Reserve Bank

Mr Peters saw less of the smoothing, more a likelihood of troubled times internationally: “Beneath the veneer of stability, large risks are lurking in the global economy. The prolonged era of ultra-cheap money has created expectations that this unprecedented period will continue forever. Fed by cheap money, share & property markets are at record levels and have a long way to fall. In particular, the US share market has had an amazing run with barely a hiccup. In China, debt levels are staggering.

“Irrational exuberance rules. It is impossible to predict when, but something will go wrong and New Zealand should be prepared.”

On the Super Fund

The NZ Super Fund reported a 20.7% return for the year on Wednesday, but Mr Peters went behind that performance to look at a gigantic loss brought about by 2 National acts: “National should apologise to New Zealanders for robbing their NZ Super nest egg,” he said.

“Taxing the NZ Superannuation Fund, and not making taxpayer contributions for 10 years is a serious economic loser.

“The magnificent 20.7% return achieved by the fund in the year to 30 June will help meet future demand for NZ Super, but the nest egg could have been so much bigger if the National government had kept its hands off it.

“In 2015, then Finance Minister Bill English said: ‘Over time, along with the other funds, it will become a more & more significant part of the economy’. That’s ironic given he started taxing it in 2014.

“NZ First would encourage the fund’s managers to invest in infrastructure in New Zealand so it works for New Zealand’s long-term interests.”

On immigration

As for the high net immigration level – 73,500 in the year to August – Mr Peters said it would ensure housing, health services & infrastructure would continue at bursting point.

“The Government deludes the public these migrants are skilled – it’s a myth, most of them are unskilled & drawn to this country in many cases by the generosity of our social services.

“Few countries in the world are as generous, or soft, as we are. Where are the new hospitals, the extra doctors & nurses, the new schools & general infrastructure to cope with all these people?

“New Zealanders find it harder to get a job with the influx from overseas. The fact is, every year we are creating a city the size of Rotorua and the country cannot handle it. Even the Prime Minister [Bill English, in a reference 2 days before the election] admits they can’t keep up with population growth.”

Earlier stories:
22 September 2017: An immigration pause – or a turning point?
6 September 2017: Updated: Reserve Bank sublets to help pay the rent
5 July 2017: Super fund explains tilting strategy
9 June 2017: Reserve Bank raises question of new debt:income loan limits
23 March 2017: Housing supply the main concern as Reserve Bank holds cashrate
30 September 2014: Super guardians pose some investment thoughts
29 September 2008: NZ Super Fund has $2 billion turnaround to $880 million loss

Attribution: Bank & Peters releases.

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Super fund explains tilting strategy

The Guardians of NZ Superannuation, the Crown entity that manages the NZ Super Fund, has published a paper on its strategic tilting programme for investment – how it works, how it aligns with the fund’s endowments & investment beliefs, and the performance to date.

The authors of the paper, the fund’s head of asset allocation, David Iverson, & strategic tilting manager Alex Bacchus, say the strategy has performed above expectations since inception on 1 April 2009 through to 30 April this year, returning about 1.2%/year (or about $2 billion): “This exceeds our expectations of 0.4%/year return (estimated since inception).

“Tilting returns have been uncorrelated with the reference portfolio returns since we began, and the strategy has only marginally increased the fund’s realised risk during this period. However, we acknowledge that the 8 years since inception is a relatively short timeframe for performance evaluation of a long-term strategy.”

Link:
NZ Super Fund, 3 July 2017: How we invest white paper: Strategic tilting

Attribution: Fund release & paper.

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Super Fund confirms sale of offshore property funds

The NZ Superannuation Fund has agreed the sale of its investments in 5 offshore private equity real estate funds to investment funds advised by affiliates of Partners Group AG, a global private markets investment manager listed in Switzerland and serving 850 institutional investors.

The investments which have been sold are Orion European Real Estate Fund III, Mountgrange Real Estate Opportunity Fund, MoREOF (Parallel I) Unit Trust, Red Fort India Real Estate Fund II & Gateway Capital Real Estate Fund III.

NZ Super Fund head of investments Fiona Mackenzie said: “While private equity real estate has been a profitable part of the fund’s portfolio, these were relatively small investments and the move to sell them is consistent with our strategy to have fewer, deeper relationships with our investment managers.”

The sale price is confidential. None of the funds sold included New Zealand assets.

Attribution: Fund release.

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Super fund sells down and Infratil sells out of Z Energy

Z Energy Ltd shares went into a trading halt overnight pending completion of a bookbuild for Infratil Ltd to sell its whole 20% of the company and the NZ Superannuation Fund to sell 9.725%.

The indicative price range for the bookbuild was set at $6-6.20/share, down from Tuesday’s closing price of $6.63. The institutional bookbuild will close at 4pm this Wednesday, 30 September.

Infratil & the fund entered a 50:50 partnership in 2010 to buy the downstream assets business of Shell NZ, which became Z Energy, and 17.1% of The NZ Refining Co Ltd for a base purchase price of $696.5 million, plus an adjustment for actual net working capital in excess of $208 million at settlement date.

The 2 partners recouped $840 million when they listed Z Energy in 2013, selling 60% of it at $3.50/share.

Infratil will collect $480-496 million for its remaining 80 million shares, depending on the bookbuild price, and the super fund $233.4-241.2 million from its sale of 38.9 million shares.

The Guardians of NZ Superannuation’s chief investment officer, Matt Whineray, said today the fund would retain a stake of more than 10% in the company, reflecting the Guardians’ confidence in Z Energy’s business strategy & management team.

Mr Whineray said: “The current market environment provides an opportunity to reduce the fund’s large overweight position in Z Energy and realise further value from what has been a highly successful investment. We look forward to continuing our relationship with Z Energy through the retention of our significant minority stake.”

Attribution: Company & fund releases.

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Propbd on Q F3July15 – Super Fund mandate, DJs progress

Mint gets Super Fund mandate
2 steps towards DJs’ Wellington opening

8.23am:
Mint gets Super Fund mandate

The NZ Superannuation Fund has appointed Mint Asset Management Ltd has been appointed to a $150 million active New Zealand equities mandate, effective 1 July.

Super Fund chief investment officer Matt Whineray said yesterday transition of the mandate to Mint had been completed. He said the fund was committed to using a combination of external managers alongside its internal team to manage its $1 billion-plus portfolio of New Zealand equities.

Devon Asset Management also has an active New Zealand equity mandate, but Milford Asset Management Ltd’s mandate remains suspended and is being managed by the fund’s guardians until further notice.

2 steps towards DJs’ Wellington opening

The directors of Kirkcaldie & Stains Ltd said yesterday landlord consent to assign the lease on its Wellington department store to Australian retailer David Jones Pty Ltd and for refurbishment had been granted, and David Jones had also extended by one day the timeframe for Kirkcaldie’s to get shareholder approval for the sale.

Kirkcaldie & Stains intends to call the meeting for approval on 31 July. Approval will pave the way for David Jones to open its first New Zealand store in the Lambton Quay premises in mid-2016.

Attribution: Fund & company releases.

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NZ Super Fund fights Portuguese loan switch back to toxic bank

The NZ Superannuation Fund said yesterday it was fighting the Bank of Portugal’s switch of a senior debt obligation from Banco Espírito Santo’s “good bank”, Novo Banco, back to the toxic side of the bank.

Espírito Santo was split in 2 last August, when it received a €4.4 billion bailout.

NZ Super Fund chief executive Adrian Orr said the fund had written down its $US150 million exposure to the Oak Finance loan while it & other investors took the Bank of Portugal to court over its December decision to retrospectively return the loan to the toxic bank after transferring it & other senior debt obligations to the good bank.

Mr Orr said the dispute had wider ramifications: “In making this loan, the fund was providing liquidity to the Portuguese banking system. The fund was protected against the risk of Banco Espírito Santo defaulting through the purchase of credit insurance. This is a very standard, insured, investment activity globally that keeps the financial world liquid. The Bank of Portugal’s actions, however, in treating the Oak Finance loan differently to all other senior debt obligations, appear to have had the effect of negating this insurance.”

Mr Orr said the New Zealand Superannuation Fund had successfully undertaken the provision of liquidity, among other investment activities, over a long period. “This is a standard, low risk investment activity for institutions such as the fund.

“The Bank of Portugal’s retrospective decision puts our liquidity provision activities with respect to Portugal – and potentially other jurisdictions – at risk, given the apparent unreliability of debt provision & credit protection policies.

“It is concerning for investors in Portuguese banks that senior debt can be treated on a similar basis to equity & subordinated debt, solely by virtue of the debt arranger’s – not lender’s – shareholding in the bank.”

The Bank of Portugal based its decision on a view that investment bank Goldman Sachs, which arranged the loan, was both an associate of Banco Espírito Santo and had in fact made the loan.

“As Goldman Sachs has said publicly and to the Bank of Portugal, Oak Finance was an independent entity from Goldman Sachs International. We understand that at no point did Goldman Sachs hold a participatory interest in more than 2% of Banco Espírito Santo’s shares.

“Legally, the loan arranger’s shareholding in Banco Espírito Santo should not be the basis for treating the Oak Finance loan as related-party lending.”

The switch came after the Bank of Portugal gave written assurances that senior debts such as the Oak Finance loan had moved to Novo Banco. Novo Banco also confirmed in writing that the Oak Finance loan had been transferred as one of its liabilities.

Mr Orr commented: “We note that Novo Banco continues to have the benefit of the money that we lent.

“It will also be of considerable concern to any investor that the Bank of Portugal has not treated all senior debt holders equally. We understand that holders of senior bonds arranged & underwritten by at least one other financial institution have remained with Novo Banco when, unlike the position with the Oak Finance loan, the bonds were subscribed by a related party of a substantial shareholder in Banco Espírito Santo.”

Link: NZ Super Fund timeline & background

Attribution: Fund release.

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Infratil & NZ Super Fund enter new JV to buy RetireAustralia

Infratil Ltd and the NZ Superannuation Fund have entered into another 50:50 joint venture, this one to buy Australia’s largest privately owned retirement village owner & operator, RetireAustralia.

Infratil and the Super Fund bought Z Energy Ltd – Shell NZ Ltd’s distribution & retail businesses and 17.1% interest in the NZ Refining Co Ltd – from global energy company Shell in 2010. Their remaining 20% each on listing was locked in until the release in November of Z’s results for the half-year to 30 September 2014.

The 2 partners announced their Australian joint venture in a statement to the NZX & ASX after the markets closed on Christmas Eve.

Their agreement is to acquire 100% of RetireAustralia from JP Morgan Chase & Co and Morgan Stanley for $A640.2 million, with settlement scheduled for Wednesday, 31 December.

Australia media said early this year the vendors had contemplated listing RetireAustralia, but abandoned that option in August.

Infratil & the Super Fund will invest $A214.8 million of equity each and take over existing bank debt on RetireAustralia’s balance sheet for the remaining 30% of the investment.

The consideration includes estimated transaction costs of $A23.5 million and is subject to the usual completion adjustments for working capital & net debt. The acquisition price represents a multiple of 1.0x NTA.

RetireAustralia managing director Tim Russell founded Meridien Retirement Living (now RetireAustralia) in 2005 and built up a portfolio of 3700 independent living units & apartments through the acquisition of 28 retirement villages in New South Wales, South Australia & Queensland, with development plans for another 500 units. It is the largest privately held pure-play retirement operator in Australia.

Mr Russell spent 10 years in investment banking & funds management at Graham & Co and Bankers Trust before joining FKP Ltd as investments general manager in 2003. He was responsible for creating FKP’s real estate funds management business and had overall responsibility for its retirement business.

FKP, previously a property developer, also became Australia’s biggest retirement village operator a decade ago. Through the Retirement Villages NZ Ltd partnership with Macquarie Bank, FKP bought a majority stake in NZX-listed Metlifecare Ltd, exiting at the end of 2013 after the merger of 3 retirement village companies into an enlarged Metlifecare.

Out of that selldown, Infratil & the NZ Super Fund acquired 19.88% of Metlifecare each.

Infratil chief executive Marko Bogoievski said in the Christmas Eve statement: “RetireAustralia provides a strong platform in an Australian sector that offers very attractive long-term growth prospects…. The business has the potential to become the market leader in the retirement living sector.

“RetireAustralia is led by an experienced management team and comes with a strong development pipeline & a mature existing portfolio. Underlying ebit for the June 2015 financial year is forecast at $A35-40 million. [Underlying earnings before interest & tax is a non-GAAP financial measure which removes the impact of non-cash items, deferred tax & the impact of the company’s capital structure.]

“We have spent a considerable amount of time evaluating the sector in Australia and identified RetireAustralia as a high quality access point, given the profile of the assets and the capability of the management team.”

Super Fund chief investment officer Matt Whineray said: “We are pleased to be increasing our exposure to the retirement village sector in Australia. The sector’s attractive demographics & growth opportunities make it a good fit for long-term investors such as the NZ Super Fund.”

RetireAustralia chief executive Mr Russell said: “My preference has always been to find owners like Infratil & the NZ Super Fund who have the necessary experience & access to capital to enable a long-term focus for the business as it enters the next phase of growth.”

Attribution: JV release.

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