KEY POINTS:
Charter Hall Group, Australia's biggest manager of property opportunity funds, has launched a potential multimillion-dollar expansion into New Zealand.
Neil Berryman, former finance and property general manager for Harvey Norman's local operations, has taken up the reins as New Zealand manager for the company and is combing main centres for large office, industrial and retail property and development opportunities.
Established in 1991, the AXS-listed property funds management and development group has A$1.7 billion ($1.96 billion) of assets under management and a market capitalisation of A$600 million.
Since it listed in mid-2005, Charter Hall has bought 20 properties predominantly off-market for A$1 billion, with another AA$$1 billion at its disposal.
The sector spread has been 40 per cent office, 25 per cent industrial and 35 per cent bulk retail and retail.
Charter Hall joint managing director David Harrison says this is likely to be replicated in New Zealand.
"However, it will not be constrained and will be driven by opportunities, not sector allocation criteria."
Berryman is well versed in the acquisition and development of property. He started with Australian-based Harvey Norman as the company was opening its first two furniture and appliance stores in New Zealand, at Wairau Park and Manukau City.
"Harvey Norman is a major property developer in its own right, with numerous stores developed and owned in New Zealand," he says.
The company now has 22 stores throughout the country.
Berryman is chasing several deals for Charter Hall. "Few New Zealand organisations have investment capacity across investment, value add and development properties in the mainstream sectors. This is a huge opportunity for Charter Hall in New Zealand."
The group's office portfolio has A$1 billion of capacity and Charter Hall is looking at a substantial investment in New Zealand. Its industrial fund is A$700 million, says Harrison.
He says Charter Hall has bought a Perth Coles Myer distribution centre with a new 20-year lease for A$155 million together with several other industrial assets to seed the industrial fund.
The company is an active manager and doesn't stick to allocation benchmarks. "We believe in long-term total returns - both income and capital growth.
"New Zealand provides an attractive investment home for our funds because of the sound property fundamentals, transaction cost efficiencies and an immature wholesale fund market," Harrison says.
Charter Hall's reputation has been built on being a value manager as opposed to being an index manager, says joint chief executive David Southon.
"We built our reputation in the mid-1990s by pioneering the concept of opportunity funds - essentially development funds - raising and investing capital from the major superannuation funds for development projects.
"Once the projects are completed we return the capital and profits to investors.
"We also have the capacity to create through our development funds our own product, which once the projects are completed can often find a home in our core investment funds."
Southon says Charter Hall has generated average returns over a nine-year period of 27 per cent.
Harrison says a major issue for the typical listed retail investor is a shortage of properties in Australia and New Zealand.
"They are less competitive compared to wholesale funds, which can take a total-return approach. Wholesale funds are not so yield-focused initially."
Berryman sees Charter Hall being able to exploit a gap in the New Zealand market, particularly through its access to Australian wholesale capital.
"New Zealand has been dominated by funds that are raising capital from the retail market," he says, "because the country hasn't got Australia's access to a substantial amount of capital from superannuation funds that are prepared to look at a genuine 10-year total return."
