Billionaire Graeme Hart is expanding his Auckland industrial building empire. Photo / Getty Images
What is New Zealand’s wealthiest person, Graeme Hart, up to?
The answer: building $155 million worth of new warehouse/logistics buildings - with many more planned.
The reclusive billionaire has made considerable progress in the past few months as he turns his focus to his home city of Auckland, in what some observers believe are “lockdown projects”, hatched when our borders were shut during the depths of the pandemic, and people were unable to travel.
Hart’s business Fernbrook Properties is now finishing the development of two huge new industrial logistics/warehouse projects made up of four buildings in South Auckland and the business is building more.
Developments with up to 1.1ha of indoor floor areas are now being advertised for lease by agents, with tenants signed up to one already.
Hart’s eye has certainly been caught by the fast-expanding industrial or logistics/warehouse building sector.
Aerial images show the size and expanse of the completed new buildings, developed and owned by his businesses. The two projects are:
* 90 Pavilion Dr, Airport Oaks, Māngere
Two new buildings in a much sought-after location near Auckland Airport, built by Haydn & Rollett, with a Green Star 5 rating, with 36 car parks, fully sprinklered, a high-stud clear-span international warehouse space with high-spec floors and offices. These buildings are on land on the edge of the Villa Maria Estate, sold by receivers after the financial failure of the business founded by Sir George Fistonich. Hart’s buildings are PD1 with 8290sq m and a 420sq m office and PD2 which is 5200sq m with 317sq m of offices.
* 9 Jerry Green St, Wiri
Haydn & Rollett also built these two massive new buildings for Hart’s business. Bayleys says the warehouses have a high stud soaring to 16.5m at the tallest points: “This site is also advantaged by its proximity to the Ports of Auckland Inland Port and the Auckland International Airport Precinct,” leasing advertising says. JG1 is a 7000sq m warehouse with 50 car parks, a 1120sq m breezeway and 400sq m office. JG2 is 11,000sq m of warehouse with 72 exterior car parks, a 4142sq m yard, 2155sq m canopy and 500sq m of offices, according to Fernbrook’s website.
All four buildings have extensive on-site car parking, breezeway areas and office space, needed for tenants to run efficient warehouse/logistics operations.
The properties are designed for easy truck access and good traffic movements needed to move heavy freight.
In a separate move, Hart has also done something unusual for him. He’s not the biggest user of social media and doesn’t often engage with the media. But his fast-expanding real estate business now has a public face: the relatively newly formed business Fernbrook Properties, which holds the ever-expanding industrial portfolio, has a website.
“Fernbrook is a property company wholly owned by Rank Group, a family-owned New Zealand investment company. Fernbrook’s focus is the development and management of new-generation industrial properties. As well as developing buildings to its own high specifications Fernbrook undertakes design and build developments,” that new website explains.
Six listings have been posted on that website of properties Hart’s company wants to lease. They are at 90 Pavilion Dr, Airport Oaks, 9 Jerry Green St and 31 Prices Rd in Wiri and 68 Cryers Rd and 11 Greenmount Dr in East Tamaki.
The 5200sq m warehouse at Pavilion Dr is available this month and 11,000sq m or 1.1ha of space is available at Jerry Green St in February. A further 7000sq m of Jerry Green St is available in March.
A warehouse of up to 12,340sq m on Cryers Rd won’t be available to lease until the middle of next year.
One industrial property specialist estimated 90 Pavilion Dr would be worth around $65m once it was fully leased and 9 Jerry Green St would be worth about $90m once finished and leased.
So collectively and fully leased, the two new projects could be worth around $155m, he estimated.
“The maths from Hart’s point of view is the land would owe him about $1000sq m and the basic base build costs would be around $2000sq m plus around $500psm for incidentals like funding costs/council consenting/ professional fees/agents leasing fees/tenant inducements,” the expert said.
Hart’s Fernbrook may have spent around $3500sq m to deliver the land and build assets and they are worth $4500sq m based on a 5 per cent cap of rentals once fully leased.
Property specialists CBRE released a report towards the end of last year which showed vacancy rates in the industrial sector “remained below 1 per cent”. That compares to a 16 per cent vacancy rate in non-CBD offices and 8 per cent for CBD offices.
JLL’s Q4 2022 industrial market snapshot showed just what an absolute winner Hart’s business picked.
“South Auckland prime industrial rent increased by 5.6 per cent or $10/sq m and secondary space increased by 3.5 per cent or $5/sq m. Natural competitiveness in the sector due to occupier demand, limited new stock in the pipeline and increasing yields will continue to drive the performance of industrial assets into 2023,” JLL forecast.
The property expert said: “Industrial vacancy remains low. Spec building large buildings with no tenant pre-commitment can only be done by very wealthy high net worth individuals like Graeme Hart or listed property companies like Goodman Property, Property For Industry or Argosy Property but these latter public companies will be more risk-averse. So it will fall to just the high net worth privates doing spec building,” he predicted.
Hart’s Fernbrook falls squarely into that category and seems to have hit the market at the perfect time.
Scott Campbell of Bayleys said one of the two new completed warehouses at 90 Pavilion Dr had been leased by another agency “and one is under negotiation”. At Jerry Green St, the buildings were still under construction “but there’s plenty of interest in them. We’re in a very low vacancy environment. We reckon it’s 0.75 per cent,” he said of high-spec South Auckland industrial property.
In 2021, the Herald reported on Hart’s businesses buying industrial properties in five deals worth $189m. Those were:
Alistair White, managing director and founder of Auckland planning and resource management consultancy Planning Focus, has been involved in many Hart deals. White also lists Rank as one of his clients on his Planning Focus website.
Some in the sector credit White with being the driver behind the new projects but he’s not commenting.
Hart has not spoken directly to the Herald about Fernbrook’s activities.
In 2021, the Herald reported Hart saying about his property purchases, via a third party, that information from agents and property records would give a “fulsome picture” of his companies’ industrial property interests.
Industrial projects dominate new supply, the study found, comprising 65% of new stock.