Got a property to sell? Then talk to Hong Kong because a giant new vulture fund is searching for offices, warehouses and maybe even mortgagee sales; Bayleys still chasing buyers forex; Auckland Central Police Station; Downtimes in property land and an update on Ockham: all in today’s Property Insider column.
Property Insider: $7 billion Asia-Pacific PAG fund hunts in NZ; InterContinental Auckland sale analysed; ex-cop shop buyers sought; Health Minister Simeon Brown on Summerset Group
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Fifty Albert in Auckland CBD, New Zealand's most expensive new commercial premises, sold to PAG after Mansons TCLM finished it late last year.
Opinion by Anne Gibson
Anne Gibson, Property Editor for New Zealand's Herald, has been writing about real estate since 1985 and is a skilled and knowledgeable journalist with deep insights into property as well as other businesses.
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Late last year, a PAG partner and co-head of real assets based in Hong Kong, Brod Storie, said the business planned to keep investing in this country.
“We absolutely see our investment expanding. We’ve continued to grow our New Zealand business and hire people locally. It’s a terrific time right now to look at New Zealand as we look at the wider region. There are opportunities in New Zealand that are very compelling, on a risk-adjusted basis. It’s a very attractive market for us.”
On February 13, PAG announced its eighth Secured Capital Real Estate Partners fund: SCREP VIII.
Zach McHerron, PAG’s New Zealand managing director, told Property Insider: “This new fund is in our opportunity series which has a broader mandate in terms of asset classes: data centres, logistics, offices, multifamily, and distressed debt.”
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That has a broader mandate.
“SCREP VIII has US$4b in total capital commitments, including co-investment capital. It marks the largest United States dollar-denominated real estate fundraising dedicated to Asia Pacific for the past 12 months, according to data from Preqin,” PAG said.
More opportunities now exist in New Zealand so SCREP VIII can become more active. Dare we use the phrase ‘vulture fund’? That does seem appropriate given what PAG is saying.
“Part of the reason is that many public vendors, private and unlisted owners of real estate in Australia and New Zealand have faced liquidity issues. This has created opportunities to buy assets on an attractive basis compared to their replacement costs and their trading values from three to four years ago,” McHerron said.
“We think it is a good time to tap into these opportunities given capital dislocation and constrained liquidity across multiple sectors and situations.”
The New Zealand office buildings PAG has bought are:
- $650 million 50 Albert St by Mansons TCLM, leased to Spark, Milford Asset Management and others;
- $550m under-construction 139 Pakenham St or 30 Daldy St, Wynyard Quarter by Mansons TCLM;
- 155 Fanshawe St, Kiwibank Auckland headquarters by Mansons TCLM;
- $329m offices, 136-142 Fanshawe St by Mansons TCLM, leased to lawyers MC, 2degrees, Lion, and Fidelity Life.
- Joint venture partnership with Precinct Properties on Te Tōangaroa: 8 Tangihua St and the nearby 30 Mahuhu Crescent;
- $240m joint venture with Precinct on 40 and 44 Bowen St, Wellington, announced November 2022;
- 2 Wakefield St, Auckland, former AUT building;
- AA Insurance House, 46 Sale St, developed by Mansons TCLM: PAG has since sold this asset.
McHerron said the new fund’s primary focus would be Auckland office, industrial or logistics properties but its mandate may extend to Tauranga, Hamilton and Christchurch “for the right industrial / logistics opportunity”.
Investments were aimed to be completed in the next year to 18 months.
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New Zealand is a great place to invest, mainly because of its transparent market, sound western legal system, simple tax system and the fact that PAG’s experience with the Overseas Investment Office had been “positive”, McHerron said.
Investors in PAG funds were some of the world’s most reputable and largest sovereign wealth funds, pension funds, endowments, insurance companies, and institutions, he said.
“We operate in a fiduciary capacity, protecting the savings of teachers, nurses, government workers etc from around the globe,” McHerron said.
InterContinental Auckland hotel sale
Nicholas Hill, a Craigs Investment Partners’ research analyst, delved into Precinct Properties’ conditional agreement to sell its hotel at One Queen Street and the office space on levels three to five of the refurbished block for $180m to the listed Singapore-listed Hotel Properties Group.
The transaction is conditional on subdivision being completed, expected Q3 of this year. Precinct will retain ownership and management of the property.
And it seems Precinct is going to sell well.
“We understand the sale price represents approximately a 7% to 8% premium to book value and that the office space was acquired as an expansion option should the buyer wish to later increase the size of the hotel space,” Hill wrote in a March 6 note, headed Suite deal for LVR accommodation.
“As of 1H25, PCT had $177m in capital commitments relating to 61 Molesworth Street as well as the Downtown Carpark site. This sale means we now see Precinct’s committed LVR decreasing below 40% to 39.1% [previously 41.9%].”
Craigs estimated the hotel and office floors had a combined annual operating profit of around $9.8m.
Precinct will forgo that when it sells.
Craigs has a neutral rating on the stock.
Auckland ex-police station sale
Last October, Bayleys began marketing Auckland’s now-decommissioned central police station after the cops shifted to College Hill.
The building at 67-101 Vincent St is on a 4580sq m site and has 12,657 of 1960s office space. Sole agents are Mike Adams, Layne Harwood and Paula Bennett.
“After much anticipation, the former Auckland Police Station HQ is now offered to the market for sale by tender, providing a unique redevelopment a rare large-scale opportunity in a CBD location that is currently undergoing significant infrastructure improvements and is being repositioned,” Bayleys said.
The strategic and large-scale CBD property appears to be positioned as a redevelopment opportunity, “ensuring appeal to a wide range of buyers including developers of scale, add-value investors, owner-occupiers, special interest groups and accommodation providers”.
So after five months on the block, this arresting opportunity is still for sale.
The agents say they’ve had inquiries but nothing is concluded yet.
Tough times in property land
Property Insider hears of the toll the ongoing slump is taking.
One business that’s been going some decades said it had never been hit this hard before.
The combination of higher interest rates, stricter lending criteria, low consumer spending, shaky economic confidence, unemployment, big migration outflows, job insecurity and the housing market’s failure to reignite meant an economic malaise remains.
It’s not just heavy-concrete, hard-to-demolish dated old cop shops remaining unsold.
Barfoot & Thompson managing director Peter Thompson said last week: “February’s trading was typical of what we have experienced over the past three years at the start of the year. Prices remained there or thereabouts with where they were in January, as was the number of sales made.”
February’s sales were heavily dependent on the activity which took place during January’s holiday period, and it will not be until March that any uplift attributable to recent declines in mortgage interest rates are likely to influence sales activity.”
Available listings swelled from 5383 at the end of January to 5997 by the end of February.
We haven’t seen that agency list 6000 places in any one month since the records were presented from 2014. Given the agency’s expansion, could a new record be about to be set?
Health Minister on Summerset
What effect could Summerset Group’s pondered ban on non-resident hospital admissions have?
Could it drive more sales, as older people fear a lack of care?
On February 28, Summerset CEO Scott Scoullar said the company was considering banning non-residents from care because the company couldn’t afford it.
“We will have to consider making our care centres available to our village residents only and no longer accepting referrals from the public health system,” he said.
So what does new Health Minister Simeon Brown think about that? Could it exacerbate pressure in the aged care sector?
Brown indicated what Summerset did was Summerset’s business.
“Summerset Group’s policies about who to admit to their facilities is ultimately a decision for them,” Brown told the Herald.
But he did not think there was a lack of care beds throughout the sector.
Based on recent provider reporting, Health NZ has informed me there are 2751 available aged residential care beds across New Zealand.
“The Government is committed to ensuring all New Zealanders can access timely and quality care,” he added. “This is why we have made a record investment in health - $16.68 billion over three budgets in Budget 2024.”
Anne Gibson has been the Herald’s property editor for 25 years, written books and covered property extensively here and overseas.
