Opinion: No time to waste -- let's invest smart

Asset class: Shouldn't Whanganui council be investing in the London building industry? Photo/Getty Image

HAVING written about the potential to dispose of underused council-owned freehold property to enable Whanganui District Council to reduce debt, I was pleased to see property manager Leighton Toy present a draft Property Portfolio Investment Plan to councillors on November 28.

As Mr Toy states, the purpose of this plan is to "demonstrate council's investment approach for properties categorised as 'investments' or properties considered 'surplus to requirements'."

It is important to have such a plan so we all know the rules and guidelines that should be followed. However, some of the properties listed for disposal will not be without controversy.

Two that will probably be controversial are part of Handley Park in Carlton Ave and 88 Duncan St, which was formerly the Whanganui Scouts hall and is now the Koha Shed.
The paper listed 23 properties in Whanganui considered surplus and potentially to be offered for sale, and the plan is to dispose of properties and apply the money to reducing debt.

That makes sense given our debt levels, especially given that most of these properties are under-utilised and offering minimal return on investment or value to the community.
It is important to note that any funds from the disposal of City Endowment or Harbour Endowment properties must be reinvested and held in trust for the future of the community.

What amazes me is that there has never actually been a descriptive policy on how we divest properties owned by the community, or indeed, how we make future investments.
It also amazes me that these properties have been sitting around in limbo land, producing absolutely nothing for the community.

They have been poor investments or perhaps wasted investment opportunities as the proceeds from the disposal of these properties could have been used to reduce debt a long time ago or even be invested in something else that would return good dividends, helping reduce rates and maintenance costs in the long term.

There will be those of a certain political or philosophical persuasion who abhor the disposal of assets in principle.

These people become dogmatic, with good investment acumen and common sense never entering into their equation.

The disposal of these properties should not be confused with the sale of properties of cultural or historical significance, which is not the intention of council, as such properties may have far more value to the community in other ways, apart from investment value.
A quick scan shows the properties considered for disposal do not appear to represent any cultural or historical significance.

Mr Toy has proposed that no more than 33 per cent of the asset value of each portfolio be invested outside of Whanganui, so 67 per cent would be invested here.

I suggest this is a particularly high percentage to have invested in just one location.
For example, the New Zealand Superannuation Fund has more than 80 per cent of its funds invested offshore, and most fund managers would consider anything less than 80 per cent as risky. Perhaps Whanganui should consider a similar figure as a guideline.
Mr Toy mentioned places like Kapiti, New Plymouth, Hamilton and South Auckland as potential investment spots. But why limit ourselves?

New Plymouth District Council made over $280 million from the sale of a farm investment in Tasmania. And why just invest in direct property investment when there are numerous ETFs (Exchange Traded Funds) around the world that invest in all sorts of property (or businesses).

Take the Tierra XP Latin America Real Estate ETF for example. This has returned 32 per cent for the year to date and 48 per cent since inception. Or the iShares US Real Estate ETF which has returned nearly 10 per cent since inception.

Other considerations might be businesses like UK-listed builder Taylor Wimpey, who own and develop thousands of building sites around London. Taylor Wimpey's stock price has performed admirably over the years (I know that because I own the stock).

Another consideration is that if these properties are considered to be investment properties, who is best to manage them? While council is essentially the trustee for Harbour Endowment and City Endowment investments, under the Local Government Act, perhaps properties outside of these should be managed by Whanganui District Council Holdings, the investment arm of council whose board would surely be considered more experienced in investments than council staff.

If they are not, we need to find experienced investment managers who are.
Mr Toy had intended to close submissions by February 5, but this did not allow much time for submissions, and councillors asked for the time to be extended.

The public, and interested parties, have until February 16 to make submissions.
It won't be easy keeping the self-interested happy if the decision is made to dispose of some of these properties.

However, the words of Mayor Hamish McDouall rang strongly at the council meeting when he commended the plan, saying it would drive our investments forward.

Let's hope our councillors have the intestinal fortitude and common sense to stand up to a vociferous minority who are in pursuit of their own self-interest or deluded ideology at the expense of the whole community.

Steve Baron

■ Steve Baron is a Whanganui-based political commentator, author and Founder of Better Democracy NZ. He holds degrees in economics and political science.