Cranes and construction at 50 Albert St, a new 12-storey $650 million building development for Spark and Milford Asset Management. Photo / John Weekes
First interview with $1.6b investor PAG which wants more properties here; tenancy laws to change; debate about Du Val and if authorities were too heavy-handed - all in today’s Property Insider.
Giant Asia-Pacific investment firm PAG has bought about $1.6 billion of Auckland and Wellington office buildings since 2017.
The Herald has listed many purchases made by the business over the years via Overseas Investment Office data but now, Brod Storie, a partner and co-head of real assets based in Hong Kong, said it planned to continue to invest in this country.
The Australian is one of the bosses of the business which has US$55b ($89b) of assets under management for clients and US$100b invested across the Asia-Pacific.
“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.”
Although he’s reluctant to talk exact numbers, he acknowledged big purchases in the last few years, particularly driven by the new buildings achieving high Green Star building ratings for features including rainwater recycling, proximity to public transport, low-energy use, and energy efficiency.
“We have bought 10 buildings in total in Auckland and Wellington since 2017,” Storie said in a rare interview from Hong Kong.
Overseas Investment Office records show clearance issued for it to buy significant assets from privately owned developer and investor Mansons TCLM alone.
“It’s via our real estate activities and equity activities when we started lending post-GFC, that we got into New Zealand. Then we started making equity investments and hence the buildings you see now that we own.”
Storie said PAG partners and staff invest alongside clients in its funds. Clients are institutional investors like superannuation businesses and sovereign wealth funds from various countries including the United States.
The New Zealand office buildings PAG has bought are:
Storie said alliances with Mansons TCLM and Precinct were crucial to PAG.
“The key to success has been having great partners. My family and I spend a lot of time in New Zealand. We have a lot of connectivity there and that happened through our relationships. So we’ve been able to build around these,” Storie said.
New Zealand is a place he is drawn to and he has established alliances with a number of business people.
PAG intends to buy more property.
This country has been one of PAG’s best-performing markets “and there are other opportunities as we grow, particularly from an equity perspective supporting partners like Precinct, Mansons TCLM, the JV with NW are set up to grow. Also working in an environment where banks remain cautious at this time.”
One of the key drivers in investment here is the Green Star rating with many of its blocks achieving six stars and wellbeing ratings.
Storie said staff in the New Zealand office are on a lower level at Precinct’s One Queen. Zach McHerron is head of real estate assets in New Zealand and the managing director while Kathryn Hughes heads the lending business in New Zealand.
PAG describes itself as “a leading alternative investment firm focused on APAC with three core strategies: credit and markets, private equity, and real assets. We manage capital on behalf of nearly 300 institutional fund investors, including some of the most sophisticated global asset allocators. PAG has more than 300 investment professionals in 15 key offices globally.”
Around a decade ago, PAG was called Pacific Alliance Group.
Pension and sovereign wealth funds dominate its investor base but endowments, foundations, banks, insurers and family offices are also clients.
The coalition Government’s reversal of Labour’s changes to the Residential Tenancies Act is due to fully take effect early next year.
The Residential Tenancies Amendment Bill 2024 was introduced to Parliament on May 16.
Its stated aim is to “remove barriers to rental supply and incentivise property owners to rent their properties via the private rental market”. The changes will apply to all tenancies regardless of when they started.
Changes will undo what Labour did to give tenants more rights.
The new law will reintroduce the right of a landlord to terminate tenancies “without cause”. No cause terminations will be reinstated as long as 90 days’ prior notice is given.
Fixed-term tenancies will also automatically terminate at the expiry of the fixed term, unless a party gives prior notice for it to continue.
But the new law also has more liberal aspects such as introducing significant changes for tenants to keeping pets in rental properties.
Landlords will be able to take an extra two weeks’ bond for a pet. Four weeks’ rent is the usual standard.
A pet will be kept by agreement, prohibiting a landlord from unreasonably refusing consent. Size, type or breed of pet, or its propensity for causing damage or disruption to neighbours are possible refusal grounds.
A select committee got public submissions up until July.
The Government expects most of the changes to come into effect in early 2025.
Moves against Du Val Group by the Financial Markets Authority, the Cabinet, and PwC are being questioned, most prominently by insolvency practitioner Damien Grant.
“Given the remarkable power Parliament has reserved to the executive, what was the urgency, the driving need, for the state to use such overwhelming force?” Grant asked in a Stuff opinion piece about Cabinet appointing PwC statutory managers.
“The rights, not only of the Clarkes and their company have been gazumped by this action so have those of creditors.”
Others in the finance world backed Grant, saying authorities were far too heavy-handed and all the actions were OTT.
“The initial receivers’ report looks like a marketing document from PwC to the FMA to get the statutory manager appointment. I can’t see why normal receivership was not undertaken. This is a relatively small business with a development to complete and a few sites to sell. Very sad for investors,” said one businessman.
It didn’t matter that several other receivers or liquidators were moving on other Du Val businesses, he said. It all would have unwound in the way it was meant to if Cabinet hadn’t got involved.
The only reason financiers cancelled loans was due to the statutory management, so it was a foot-shooting exercise, he said.
However, Commerce and Consumer Affairs Minister Andrew Bayly explained reasons behind the Cabinet’s involvement.
“It’s a large complex group with several entities. There is the risk and it’s already starting to happen with multiple liquidators seeking to enforce their position so it’s important to bring a process where those would cease and someone could bring about a more orderly outcome and, thirdly there have been allegations of misconduct so there’s a number of reasons.”
Information presented to him by the FMA was compelling enough for him to take the proposal to the Cabinet and for it to pass the order for statutory management.
Anne Gibson has been the Herald’s property editor for 24 years, written books and covered property extensively here and overseas.
Reserve Bank says leaving banks to their own devices hasn't worked.