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Cromwell reit spends $647 million to add 23 European properties to portfolio

Brisbane-based ASX-listed Cromwell Property Group completed an $A228 million ($NZ242.5 million) capital-raising at the start of this month intended largely to contribute to its share in a 23-property investment by the European trust it launched in 2017.

For decades, Australia & New Zealand have been targets for limited investment by European & North American investors & funds, and Cromwell is an investor in New Zealand through its 50% ownership of New Zealand property funds manager Oyster Property Group Ltd.

Northbound investment by Australian interests is a burgeoning trade, done through a variety of Australian & offshore vehicles and aimed at various sectors, including student accommodation, industrial, retail & office stock.

Cromwell’s European investment is more complicated than its New Zealand investment – Cromwell of Australia listed the Cromwell European Real Estate Investment Trust on the Singapore securities exchange in November 2017, holds a 35.3% interest in the trust and manages the European portfolio on behalf of the trust.

Cromwell sought $A210 million ($NZ223 million) through an entitlement offer at the end of November, closing at the start of January, aiming to raise a total $A300 million ($NZ319 million), including commitments received from major securityholders, and pulled in $A228 million ($NZ242.5 million) from other investors. Of that, $NZ133 million (€79 million) has gone to pay the Australian group’s share of a simultaneous capital-raising by the Singapore-listed reit, and some to reduce the Australian company’s gearing from 37% to between 30%-33%.

The Singapore-listed reit’s 23-property acquisition is costing it €384 million ($NZ647 million), to be partially equity funded through a €224 million ($NZ377 million) equity-raising.

The new European assets are in 3 portfolios – 11 properties in Finland, 5 properties in Poland & the Netherlands, 5 in France & 2 in Italy.

10 of the Finnish properties, acquisition now settled, are in Helsinki, one in the rapidly growing regional hub of Kuopio, a university city in the east of Finland, with a total valuation of €116.8 million ($NZ197 million), and 61972m² lettable floor area.

Cromwell chief executive & managing director Paul Weightman said: “The success of CEREIT has facilitated the ongoing transition of our European assets under management to more permanent sources of capital. About 45% of European assets under management will be long-term in nature following the completion of CEREIT’s recently announced acquisitions.”

Cromwell’s head of Nordics, Tomas Beck, added: “We are currently operating in a buoyant office market in Finland, supported by strong domestic demand, job growth & rising consumer confidence. These conditions have put upward pressure on rents in high quality, well located buildings that offer efficiency & connectivity.”

As of June 2018, Cromwell had a market capitalisation of $A2.2 billion, a direct property investment portfolio in Australia valued at $A2.5 billion ($NZ2.7 billion) and total assets under management of $A11.5 billion ($NZ12.2 billion) across Australia, New Zealand & Europe.

Links:
Cromwell European REIT (website open only to Singapore residents)
Cromwell Property Group

Attribution: Company releases.

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North Head transfer completes maunga authority control of cones

Legal administration of Maungauika/North Head transfers from the Department of Conservation to the Tupuna Maunga o Tamaki Makaurau Authority today, the last of 14 transfers begun in 2014 under the Nga Mana Whenua o Tamaki Makaurau Collective Redress Act.

The other 13 tupuna maunga (ancestral mountains), which Auckland Council had administered, returned to the 13 iwi/hapu of Tamaki immediately as part of the co-governance regime between the Tamaki collective of iwi/hapu & the council, but administration of Maungauika remained with DoC as an interim step.

The authority is a co-governance body with 6 iwi representatives, 6 Auckland Council representatives & one non-voting Crown representative. The authority is independent of Auckland Council and has its own decisionmaking powers & functions.

Authority chair Paul Majurey said the final transfer was an important step in integrating the management of all maunga in Tamaki Makaurau.

“In 2016 we adopted the tupuna maunga integrated management plan to care for & protect the maunga of Tamaki Makaurau in a cohesive way. DoC have helpfully been aligning their management of Maungauika to the values in the plan. The transfer now allows a focused effort on restoring Maungauika consistent with the other maunga. It enables these special places to be treated as a collective whole and forever valued, restored, protected & managed as the taonga tukuiho (treasures handed down the generations) that they are.”

Parking at Maungauika, in Devonport, is located halfway up the mountain, and the tihi (summit) is already a pedestrian space. Mr Majurey said: “We know that Maungauika will be a focal point for a large number of visitors around the America’s Cup event in March 2021, so we will be looking towards management initiatives to ensure visitor safety & enjoyment of the maunga during this high profile event.”

Photo: Maungauika (North Head), with the Waitemata Harbour & Auckland central city in the background. Photo: The Tupuna Maunga o Tamaki Makaurau Authority.

Link: Tupuna Maunga o Tamaki Makaurau Authority

Attribution: Tupuna maunga authority.

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Bank’s Henderson centre among 4 commercial sales

Ray White Commercial agents have sold 4 properties around Auckland, 3 in conjunction with other Ray White agencies. One is on Newmarket Broadway, 2 are in Grey Lynn and the biggest, ASB Bank’s north-west regional centre, is in Henderson.

Isthmus east

Newmarket

25 Broadway:
Features: 193m² office space 
Rent: leased to Fuse Creative Ltd for $95,000/year net + gst, 3-year lease with 2 3-year rights of renewal
Agents:Conrad Traill & Natasha Christensen

Isthmus west

Grey Lynn

36 Douglas St:
Features: 259m² character villa zoned business mixed use
Outcome: sold for $1.65 million
Agents: Conrad Traill & Natasha Christensen (Ray White Commercial) & Ray White Damerell Group Ponsonby

24A Williamson Avenue:
Features: 356m² site zoned mixed use urban, 201m² street-level warehouse, 2-bedroom loft apartment with rooftop terrace & deck, 5 parking spaces
Outcome: sold for $3.45 million
Agents: John Davies & Natasha Christensen (Ray White Commercial) & Ray White Damerell Group Ponsonby

North-west

Henderson

288-290 Lincoln Rd:
Features: 1871m² site, 1504m² building, ASB West Auckland regional centre on 9-year lease running until January 2022
Outcome: sold for $10.15 million at a 6% yield
Agents: John Davies & Nigel Ingham (Ray White Commercial) & Ron Yang (Ray White City Apartments)

Attribution: Agency release.

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Riverhead development site & Glen Eden commercial building sell

Bayleys agents have sold a Riverhead property with a development scheme plan in place and a Glen Eden commercial building with vacant tenancies.

North-west

Glen Eden

190 West Coast Rd:
Features: 448m² corner site opposite train station with frontage also to Glen Mall Place, zoned town centre; 361m² 2-level commercial building, 4 parking spaces; 71m² of retail space leased to hair salon until October 2019, 2 vacant tenancies
Rent: holding income of $16,880/year + gst; estimated potential income fully leased $85,000/year net + gst
Outcome: sold for $1.165 million
Agents: Tony Chaudhary, Janak Darji & Amy Weng

Riverhead

1064-1068 Coatesville-Riverhead Highway:
Features: 4663m² site in 5 titles zoned business mixed use; scheme plan completed for live/work development
Outcome: sold to a developer for $4.957 million at $1063/m²
Agent: Mike Adams

Attribution: Agency release.

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December home sales dive – but medians rise

House sales in December fell to their lowest level for that month in 7 years, the Real Estate Institute said today.

The 5330 sales were down 12.9% from December 2017’s 6117.

Auckland sales for the month were the lowest in 10 years, down 24.3% to 1336 (1765 in December 2017).

Outside Auckland, sales were the lowest December tally in 5 years. The 3994 sales were down 8.2% from December 2017’s 4352.

Sales declined from the previous December in 12 of the institute’s 16 regions.

The institute’s response was to try convincing vendors that the market is falling and to drop their asking price to get a sale. Institute chief executive Bindi Norwell said: “With national listing levels down 11.3% in November and 13.3% in December, it’s not entirely surprising that December was a quiet month in terms of sales volumes. However, what we’re hearing is that part of the lower sales volumes can also be attributed to some vendors’ understanding of the value of their home. A realistic approach to market value may help vendors sell their property in a more reasonable timeframe.” 

The median sale price rose in every region and hit a new record in the Bay of Plenty, rising 2% to $610,000 ($598,000).

Median house price, December 2018 (November 2018 & December 2017 in brackets):
Auckland: $862,000, ($860,000 in both November 2018 & December 2017), up 0.2%
National: $560,000 ($579,000, $551,750), down 3.3% from November, up 1.5% from December 2017
NZ ex-Auckland: $480,000 ($485,000, $451,000), down 1.0% from November, up 6.4% from December 2017

Volume sold, December 2018 (November 2018 & December 2017 in brackets):
Auckland: 1336 (2133, 1765), down 37.4% from November, down 24.3% from December 2017
National: 5330 (7514, 6117), down 29.1% from November, down 12.9% from December 2017
NZ ex-Auckland: 3994 (5381, 4352), down 25.8% from November, down 8.2% from December 2017

House price index (December 2017 in brackets):
Auckland: 2822 (2872), down 1.7%
National: 2740 (2653), up 3.3%
NZ ex-Auckland: 2672 (2473), up 8.0%

Median days to sell (December 2017 in brackets):
Auckland: 39 (34)
National: 35 (32)
NZ ex-Auckland: 33 (31)

Auctions (December 2017 in brackets):
Auckland: 260, 19.5% of all sales (462, 26.2%)
NZ: 584, 11% of all sales (836, 13.7%)

The breakdown of sales in price brackets and their share of the market (December 2017 in brackets):
$1 million-plus:  687 (852), 12.9% (13.9%)
$750-999,999: 834 (872), 15.6% (14.3%)
$500-749,999: 1596 (1730), 29.9% (28.3%)
Under $500,000: 2213 (2663), 41.5% (43.5%)
Total sales: 5330 (6117)

Median prices & volumes around Auckland on old council boundaries for December 2018 and, in brackets, November 2018 & December 2017:
Auckland region: $862,000 ($860,000, $860,000), 1336 (2133, 1765)
Auckland City: $986,000 ($950,000, $915,000), 414 (704, 605)
Franklin District: $680,000 ($702,000, $710,000), 66 (89, 88)
Manukau City: $830,000 ($835,000, $840,000), 275 (398, 336)
North Shore City: $980,000 ($1,050,000, $1,108,000), 213 (319, 278)
Papakura District: $685,000 ($650,000, $700,000), 52 (97, 68)
Rodney District: $855,000 ($865,000, $812,500), 120 (207, 149)
Waitakere City: $828,000 ($773,000, $780,000), 196 (319, 241)

Attribution: Real Estate Institute.

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Corrected: Wiri sale one of 4 for Colliers

The Trust Investments Property Fund has ended up with ownership of HEB Construction Ltd’s headquarters building in Wiri at a slightly higher price than it negotiated early last year after the rental figure was finalised, taking its portfolio of commercial properties to $150 million.

It was one of 4 recent transactions by Colliers agents. The others were in Christchurch, across the road from the casino in Hamilton and in Whakatane.

South

Wiri

Corrected: 105 Wiri Station Rd:
Features: 1.46ha heavy industrial site with frontage also to Plunket Avenue, 6317m² building, 4993m² of medium to high stud warehousing, the balance a mix of modern & older-style offices, 88 parking spaces, formerly occupied by Honda NZ Ltd, refurbished early this year before HEB Construction Ltd occupied it on a 15-year lease
Rent: the lease has annual 2.5% rental increases with reviews to market every 5 years (cap & collar mechanism)
Outcome: sold vacant for $9.85 million in February, contract signed last April by the Trust Investments Property Fund and settled in November on completion of the refurbishment at $20.12 million, based on the final rental
Agents: Greg Goldfinch, Hamish West & Ben Herlihy

South Island

Canterbury

Christchurch

4 Russley Rd, corner Yaldhurst Rd; & Rangiora, 300 High St, corner King St:
Features: 2 Caltex service stations up for sale & leaseback to Z Energy 2015 Ltd at auction on 10 December; Russley Rd: 4249m² site, 383m² floor area, leaseback term 10 years 1 month + 3 5-year rights of renewal from 28 February; Rangiora: 1987m² site, same renewal rights & lease terms
Rent: Russley Rd: proposed rent $310,490/year net + gst + opex; Rangiora: proposed rent $190,035/year net + gst + outgoings; both 2%/year fixed growth, market reviews at end of initial lease term
Outcome: both sold to an Auckland buyer – Russley Rd for $5.3 million, Rangiora for $3.335 million
Agents: Mark Macauley & Will Franks

South of the Bombays

Bay of Plenty

Whakatane

106 Commerce St:
Features: 1553m² site, 1013m² 2-level office building, 2 long-term tenants, 26 parking spaces, seismic rating 100% new building standard
Rent: $204,600/year net + gst
Outcome: sold for $2.6 million, at a 7.87% yield
Agents: Rob Schoeser & Simon Clark

Waikato

Hamilton

331 Victoria St:
Features: 364m² site, 710m² 2-level building opposite SkyCity & the new Riverbank Lane retail development, seismic rating 51% new building standard
Rent: $95,000/year gross + gst
Outcome: sold for $1.13 million at a 7% yield
Agents: Justin Wang & David Palmer

Attribution: Agency release, Trust Management.

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It’s a buyer’s market, says Barfoots chief

Barfoot & Thompson managing director Peter Thompson acknowledged last week – on the agency’s latest residential sales figures – that it’s become a buyer’s market.

“The Auckland property market ended the year edging towards its first decline in prices for 10 years,” he said.

His analysis is supported by Quotable Value Ltd’s monthly index release, out today, which showed the Auckland index just positive (by 0.4%) in the 12 months to November, but has slipped to 0.4% negative in the 12 months to December.

“In the past few months the tide has turned towards it becoming a buyers’ market,” Mr Thompson said. “The overriding market sentiment at present is indecision as to the direction the market is heading.

“A range of factors contributed tomarket uncertainty at year end. These included non-New Zealand residents being restricted from buying certain categories of property, the reported major decline of property prices in the major Australian cities, the potential for capital gains to be applied to investment properties in the future and concerns over world economic stability, in part caused by the trade friction between the US & China.

“The sales data for December masks that trend, but it shows up clearly in the year-on-year figures between 2018 & 2017.

“In December, the point was reached where it was vendors that were prepared to meet the market who were achieving a sale while those holding out for their asking price were not.”

Mr Thompson said residential sales rose 8.1% from 2017 to 2018, but the median price fell 0.8% to $836,792 in 2018 – “the first time the median price has fallen below that for the previous year since 2008, the year the impact of the global financial crisis affected house prices.

“The average 12-month sales price for 2018 at $929,910 is up on that for 2017, but by only 0.4%. Earlier in the year it was tracking between 1-2% above 2017’s average price.”

While the focus has moved from constant price rises, Mr Thompson said the standout feature of 2018 for him was in the under-$500,000 price category, where sales rose from an 8.9% share ofthe agency’s total in 2017 to 11.4%: “This increase can be linked directly to the higher number of apartments, terraced housing & townhouses hitting the market, giving first-time buyers & those on limited incomes far better access to property.”

He said the 555 new listings in December were in line with a year earlier, and the 4194 properties on the agency’s books at year end were also similar: “It will ensure that we start the year’s trading with buyers being offered the highest level of choice for 7 years.”

The figures:

Related story today:
Auckland house price chart turns from just-positive in November to just-negative

Attribution: Agency release.

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Commission takes anti-competition case against First Gas

The Commerce Commission said last week it had filed proceedings in the Wellington High Court against gas network operator First Gas Ltd for anti-competitive conduct in acquiring the Bay of Plenty assets of GasNet Ltd.

The commission alleges First Gas, a much larger gas distribution business, engaged in anti-competitive conduct by:

  • Having unsuccessfully offered to buy GasNet’s assets, taking steps to retrofit gas pipelines in areas where GasNet had already laid its own pipelines
  • Acquiring the GasNet assets in December 2016 without clearance or authorisation from the commission, and
  • Contractually restraining GasNet from re-entering the Bay of Plenty region for 5 years from the time of acquisition.

First Gas has filed admissions to the alleged conduct and the matter is before the court for a penalty hearing.

First Gas took ownership of Vector Gas Ltd & Maui Development Ltd’s transmission networks in 2016, and now owns & controls the only transmission network in the North Island. It also bought Vector’s distribution networks in Northland, the Waikato, the Bay of Plenty, Taupo, Gisborne & the Kapiti Coast.

GasNet is owned by Whanganui District Council Holdings Ltd, a council-controlled organisation of the Whanganui District Council, and operates the distribution network in Whanganui.

Attribution: Commission release.

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Summerset lifts 4th quarter sales but falls short of previous year

Retirement village developer, owner & operator Summerset Group Holdings Ltd lifted its sales in the fourth quarter, the same as it did in 2017, but fell well short of its total 2017 sales figure.

The company achieved 193 sales in the December quarter compared to 204 in the final quarter of 2017, and took total sales for the year to 640 (682 in 2016).

Resales were steady for the year, new sales down.

Chief executive Julian Cook said the 112 new sales in the last quarter was the highest figure in 2 years and the second highest quarter ever for the group.

He said stock for resale was at a consistent level, and minimal uncontracted stock was available.

The company achieved its build target of 450 new homes for the year, delivering 454 retirement units, 133 of them in December.

Attribution: Company release.

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Auckland house price chart turns from just-positive in November to just-negative

Quotable Value Ltd’s monthly chart of house price movements, out today, shows Auckland going from a just-positive 0.4% shift over the 12 months to November, to a just-negative 0.4% shift for the December year.

Nationally, the picture remains more positive than in Auckland, as it has been for the 2 years since the Auckland charts stalled (with the exception of the southern suburbs on the isthmus & the north-west of old Manukau – QV still works on the local government boundaries abandoned in 2010).

QV’s average residential value for the Auckland region in December 2018 was $1,048,145. Back one year it was $1,050,647. Back 2 years it was $1,047,179.

In the north of the region, prices in Rodney, and the more rural north of Rodney, have held up, while pricing on the Hibiscus Coast remains weak, declining in the last 3 months. That weakness is also apparent on the North Shore (but not North Harbour) & the isthmus, but not the Hauraki Gulf islands (on the usual thin results). Prices in the south of the region have stayed positive over both 3 & 12 months.

Outside Auckland, the catchup continues – Dunedin’s QV index has risen 11.2% over 12 months, Invercargill’s 11.6%, Gisborne’s 10.7% and, on the northern border, Kaipara’s has risen 10.8% (on low numbers, as usual).

Nick Goodall, head of research for CoreLogic NZ Ltd, which contributes analysis for the QV reports, said: “Responsible bank lending standards remain and have been a defining factor of the property market in 2018. However, solid market foundations also continue, both of which shape our outlook for the market to perform similarly to last year.

“These foundations include low mortgage interest rates and a relaxation of loan:value ratio (LVR) rules for both owner-occupiers & investors, still-high (albeit slowing) population growth, a strong labour market & a remaining deficit of new properties being built, despite very encouraging consent figures.

“Counteracting these factors are proposed tax changes for investment property, potentially an increased requirement for banks to hold greater capital against their loans, and the elimination of foreign buyers in the New Zealand property market.

“These all contribute to our expectation of growth rates remaining constrained, while not necessarily doing enough to see values drop.”

“In Auckland in particular, there’s still a deficit of supply from years of under-building, which is likely to guard against a significant drop in values, given still-strong population growth.

“The lending environment will remain another key market fundamental. We’ve just seen a loosening of the LVR restrictions and, with interest rates likely to stay low, certainly in the short term, we’re in a relatively accommodating position, which will allow for a continuation of modest property growth.”

Below, the dollar figure is the average value for December. The first percentage is for the 3 months to December, the second is for the last 12 months (QV switches those around in its tables) and the third is the change since the 2007 peak. For Auckland, QV still works on the old council boundaries (councils marked in bold); Kaipara & the Hauraki Gulf Islands, as usual, have low counts:

Auckland region: $1,048,145, 0.1%, -0.4%, 92.4%
Total NZ: $682,938, 1.2%, 3.2%, 65.1%

The Auckland region:
Rodney: $950,940, 0.1%, 1.1%, 62.1%
North: $973,800, 0.6%, 1.3%, 62.1%
Hibiscus Coast: $929,006, -0.4%, 0.8%, 58.2%
North Shore: $1,212,664, -0.3%, -1.1%, 87.9%
Coastal: $1,383,491, -0.4%, -1.6%, 83.6%
Onewa: $969,252, -1.1%, -1.3%, 95.4%
North Harbour: $1,194,389, 1.0%, 0.2%, 96.6%
Waitakere: $822,906, -0.2%, -0.2%, 94.1%
Auckland City: $1,233,311, -0.1%, -1.0%, 98.1%
Central: $1,082,656, 1.1%, -0.2%, 90.1%
East: $1,547,702, -1.1%, -1.7%, 94.2%
South: $1,095,532, -0.4%, -0.5%, 103.5%
Islands: $1,166,500, 6.5%, 0.5%, 82.5%
Manukau: $906,658, 0.9%, 1.2%, 98.1%
East: $1,156,353, 0.3%, 0.5%, 94.0%
Central: $707,726, 1.2%, 1.7%, 88.3%
North-west: $784,662, 1.3%, 2.0%, 112.4%
Papakura: $701,230, 0.2%, 0.6%, 94.9%
Franklin: $673,679, 0.5%, 1.1%, 70.3%

On the borders & down country:
Whangarei: $563,201, 5.3%, 12.8%, 42.1%
Kaipara: $550,378, 1.3%, 10.8%, 38.7%
Waikato: $486,980, 1.8%, 6.0%, 60.9%
Hamilton: $570,886, -0.2%, 5.0%, 57.9%
Tauranga: $720,645, 1.6%, 3.9%, 49.7%
Gisborne: $324,691, -0.2%, 10.7%, 9.2%
Wellington region: $688,074, 3.2%, 7.8%, 51.0%
Christchurch: $496,562, 0.5%, 0.6%, 30.9%
Queenstown-Lakes: $1,193,225, 2.0%, 7.3%, 73.5%
Dunedin: $434,903, 3.5%, 11.2%, 51.9%
Invercargill: $286,275, 3.2%, 11.6%, 29.8%.

Attribution: QV & CoreLogic releases.

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