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Demolition starts on Mangere regeneration project

Demolition has started along Bader Drive in Mangere for the next major regeneration project for state housing areas in Auckland.

The programme envisages 2700 older state houses being replaced by 10,000 new homes over the next 10-15 years, in roughly equal mixes of intensive & standalone, and state, affordable & market-price.

Mangere has joined Northcote, Mt Roskill & Oranga (near Onehunga) as a focus for largescale urban development by Housing NZ and its subsidiary, HLC (2017) Ltd (originally Hobsonville Land Co Ltd).

Hobsonville is different because it’s been all about new housing, with only a few former Defence Force homes displaced. In the other areas – and in the Government’s Tamaki programme with Auckland Council – large numbers of state houses are being demolished to make way for more intensive subdivisions containing homes that meet modern standards.

Housing, Urban Development & Transport Minister Phil Twyford onsite with HLC precinct director Mark Fraser (left) & local MP William Sio.

While existing residents are necessarily displaced, Housing, Urban Development & Transport Minister Phil Twyford said on Friday those residents would be at the top of the priority list for new homes.

He emphasised the ultimate aim of community, not just housing, and particularly access to jobs.

Light rail a factor

Mr Twyford said regeneration would be a hallmark of this government: The Mangere project is “alongside the light rail site [from the cbd to Mt Roskill and on to the airport], which will deliver 21st century rapid transit to these communities and will be a powerful stimulant for economic development, attracting investment into these communities.”

He said light rail would prove a powerful magnet for private investment around rail stops, and would also connect Mangere “to the biggest concentration of jobs in the region [around the airport]… This community has been starved of good public transport for too long.”

Mr Twyford also said it was important that the project retained the existing community, although new price & ownership options would obviously bring change: “It is not our policy to run a regeneration programme that pushes values up and pushes the community out. It’s a policy to build homes & security. Families living in this community will get priority. [But] mixed communities are strong communities. That’s why we want private [in the mix].”

“We’re also working on ideas to include in the mix for this community tenure-secure rental.”

That’s the kind of long-term rental common in Europe, where large portfolios of rental housing have become a popular investment option for US, European & Australian property investment companies.

One issue for critics is how the cost of such developments will be met. Mr Twyford was adamant: “This project will wash its face. We’re redeveloping publicly owned land, reinvesting capital into homes. The KiwiBuild homes will be supported by the $2 billion KiwiBuild fund, and there will be community & residential development alongside the light rail route.”

The KiwiBuild homes would be priced under the Auckland KiwiBuild price caps of $650,000 for 3 bedrooms, $600,000 for 2 bedrooms. In addition, Mr Twyford said, “We’re working hard to put in place a shared equity scheme, which will make it possible for a lot of people to take part in the KiwiBuild scheme, reducing the upfront costs a buyer has to pay.

“We’re mobilising capital – public, and hopefully private as well – to get families into homes. And we’re working with Maori to look at ways we can work with iwi to ensure whenua Maori get a fair share of the homes.

Mangere about 40% of regeneration programme

The Mangere development will make up about 40% of HLC’s Auckland housing programme – 10,000 of the 24,300 new homes around the region over the next 10 years (or 10-15 years for Mangere).

The start last week was on demolition of houses in the first stages of the regeneration programme (in colour on the aerial picture), along Bader Drive between McKenzie Rd & Mangere College.

Housing NZ has about 100 redevelopments underway around Auckland, ranging in scope from a property or 2 through to largescale developments involving 1000 or more new homes. The programme, begun in June 2016, has a target of delivering over 10 years:

  • almost 11,500 additional new state houses
  • over 12,800 new affordable & market-priced homes.

Links:
HLC
Housing NZ, Auckland housing programmes

Related stories, 16 July 2018:
Putting change in context
Robertson outlines focus shift from GDP measure to wellbeing
Demolition starts on Mangere regeneration project
Finance minister calls Productivity Commission in to examine local body funding

Attribution: Mangere presentation, site visit, HLC release.

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Robertson outlines focus shift from GDP measure to wellbeing

Finance Minister Grant Robertson outlined yesterday how the Government intended to revert to the 2002 version of wealth as a target for the nation – wellbeing, instead of gross domestic product.

In a speech to Local Government NZ’s annual conference in Christchurch, Mr Robertson said the coalition government elected last year recognised that it faced major challenges, and couldn’t tackle them alone. He outlined how central & local government could work together to achieve better outcomes for all New Zealanders.

The central focus of Mr Robertson’s address:

“For us in central government, this means doing things differently and measuring success differently.

“Previous governments have measured success in terms of economic growth – simple measures such as GDP (gross domestic product). But while measures like GDP remain important indicators of economic activity, they do not paint a full picture of people’s wellbeing or living standards.

“Many of our international peers have been envious of the GDP growth New Zealand experienced in recent years. But we’ve also seen increases in statistics that suggest that growth did not result in real tangible improvements to many people’s lives.

“For example, our levels of homelessness have been described as the worst in the OECD; the number of children living in poverty is not something we can be proud about, and tens of thousands of our young people are not in employment, education or training. This is not success.

“We believe that economic growth is a means to an end, not an end in itself. We are taking a broader view of success, by looking at how we improve the living standards & wellbeing of all New Zealanders.

“By placing wellbeing at the heart of what we do, we will be able to measure the extent to which our policies & investments are making real improvements to people’s lives.”

The living standards framework

Enter the living standards framework (LSF), which Treasury is developing: “The LSF uses a set of indicators for the current wellbeing of New Zealanders, and for their future wellbeing, based on the stock of the 4 capitals which determine intergenerational wellbeing: financial/physical, natural, human and social.

“This work will underpin our world-first Wellbeing Budget in 2019. This budget will be the first major step for the Government in applying a wellbeing framework to strategic decisions.

“Wellbeing is not only driven by central government actions. We recognise the crucial role local government plays in maintaining & enhancing New Zealanders’ wellbeing through the services, infrastructure, regulations & placemaking you provide to your communities.

“This was factored into the original Local Government Act 2002, by requiring local government to focus on promoting the social, economic, environmental & cultural wellbeing of communities, in the present & for the future. However, in 2012 the previous government removed these 4 wellbeings from the act, arguing that local government needed to be ‘streamlined’.”

Wellbeing bill before select committee

The Local Government (Community Wellbeing) Amendment Bill, which is before a select committee, is intended “to restore the wellbeing needs of communities to their rightful place as a central focus of local government decisionmaking, recognising the important role local government plays in ensuring people’s wellbeing.

“There is an obvious overlap with the 4 capitals of the Treasury’s LSF, meaning that both local & central government will soon be working with a closely aligned core focus on improving the wellbeing of our people.”

The power game

The Robertson line also shifts the use of power, which was firmly at the centre under the previous government, until long negotiations wrought change in the Auckland transport alignment project (ATAP) between the Government & Auckland Council.

That revised project was in sharp contrast to the approach of former housing minister Nick Smith over Auckland Council’s questioning of aspects of the government-council housing accord & special housing areas, where the minister told the council that, if it didn’t act quickly, the government would take over the housing area approval process.

Mr Robertson: “The relationship cannot be Wellington telling you what to do. Rather, we want to work with you to help deliver local solutions to local issues.

“For example, with our Provincial Growth Fund we aren’t taking a top-down approach. We aren’t interested in coming to tell you what you’re good at and what you should invest in.

“The ideas are better generated from the ground up. We want you to tell us what would benefit your region. That’s the only way such an initiative will work.

Funding solution required

“But we understand that for local government to be in a position to provide local solutions, you need the ability to finance them.

“We know there has been a huge increase in demand for investment in infrastructure all across the country.

“The previous government did not recognise the scale of development, maintenance & replacement of infrastructure needed to support a rapidly growing population and a surge in international visitor numbers.

“Infrastructure investment plays an important role in increasing housing affordability, by allowing for new developments to take place and catering for increasing demand on existing systems.

“We recognise there are some constraints that are preventing local authorities from effectively funding their obligations and from financing community expectations. Some of these can be described as ‘hard’ constraints, while others may be ‘soft’:

  • Hard constraints could be regulatory or legislative barriers that prevent local authorities being able to fund or finance infrastructure;
  • Soft constraints could be factors that influence the behaviour & practice of local authorities.

“Addressing the challenges of infrastructure funding & financing (IFF) is a key pillar of the urban growth agenda (the UGA). The UGA is an ambitious & far-reaching programme designed to improve housing affordability for New Zealanders by addressing the fundamentals of land supply, development capacity & infrastructure provision.

“IFF is specifically about reforming the existing system to provide a broader range of funding tools & mechanisms, as well as creating alternative financing models. The underlying question is whether there are funding or financing constraints hindering the timely rollout of infrastructure.

“Efficient construction of infrastructure in support of urban developments is, of course, a key determinant of the rate of land supply & therefore housing affordability.

“Different councils face different issues, yet affordability, availability of funding streams & appropriate pricing are key to any solution. We acknowledge that some high growth councils are up against their debt limits, so financing is the key constraint. That’s why we are also exploring the potential for diversifying the available sources of project financing.

“Project financing requires a dedicated revenue stream to service that capital; a revenue stream derived from charges for the provision of the infrastructure.

“The ability to identify & charge beneficiaries influences the viability of those projects, and so provides an important signal as to which projects should proceed & when. So, there is an efficiency element to this work as well.

“Central government will be exploring ways to get past funding & financing barriers. Yet we cannot do this in isolation. This is about partnering with local councils to ensure that you have the tools to provide the much needed infrastructure for your communities.”

Link:
Finance Minister Grant Robertson, 15 July 2018: Full speech to Local Government NZ conference

Related stories, 16 July 2018:
Putting change in context
Robertson outlines focus shift from GDP measure to wellbeing
Demolition starts on Mangere regeneration project
Finance minister calls Productivity Commission in to examine local body funding

Attribution: Robertson speech.

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8 commercial sales at 4 Bay of Plenty centres

Bayleys agents in the Bay of Plenty have sold 8 commercial properties at Mt Maunganui, Tauranga & Whakatane and across at Rotorua.

Image above: 120 Devonport Rd in Tauranga, sold on a 6.2% yield.

South of the Bombays

Bay of Plenty

Mt Maunganui

64 Tukorako Drive, unit 11:
Features: leasehold, 102m² unit; tenant exercised last of 3 3-year rights of renewal in February 2017
Rent: $8613/year net (after ground rent) + gst
Outcome: sold for $145,000 at a 5.94% yield
Agent: Graeme Coleman

Rotorua

20-22 Taui St:
Features: 1.0034ha industrial site in 6 titles near state highways, 5 tenants occupying a mix of buildings, surplus land available for development
Rent: $117,041/year net + gst
Outcome: sold for $1.2 million
Agents: Mark Slade & Brei Gudsell

64 View Rd:
Features: 359m² site, 310m² single-level warehouse/workshop constructed in mid-1970s
Outcome: sold with vacant possession for $330,000
Agent: Mark Slade

2 Waters St:
Features: 708m² corner site, 303m² industrial building, 2 tenancies – sushi bar returning $11,406/year gross & vacant workshop
Outcome: sold for $340,000
Agents: Mark Slade & Brei Gudsell

Tauranga

120 Devonport Rd:
Features: 445m² cbd corner site at the intersection with Elizabeth St, 690m² 2-level retail & office building, seismic assessment 45% of new building standard; fully leased to 6 tenants, redevelopment options to a maximum building height of 19m
Rent: $135,895/year net + gst
Outcome: sold for $2.205 million at a 6.16% yield
Agents: Brendon & Lynn Bradley

160-168 Devonport Rd:
Features: 2192m² site in 2 titles, city centre zoning provides mixed-use development options; 1050m² commercial building, anchor tenant is an Asian supermarket occupying 571m², gym & charitable trust occupy the balance of the building
Rent: $138,500/year net + gst
Outcome: sold for $2.95 million at a 4.69% yield
Agents: Lloyd Davidson & Jo Stewart

Tauranga – Tauriko

24 Whiore Avenue:
Features: 768m² site on the hill above The Crossing retail centre, quarter share of accessway, 3-year-old 367m² industrial building; 2 tenants on 3-year leases with 2 rights of renewal
Rent: $52,885/year net + gst
Outcome: sold for $1.05 million at a 5.03% yield
Agent: Graeme Coleman

Whakatane

6, 12 & 14 Wairere St:
Features: 3154m² freehold cbd site, 3 buildings on 3 titles adjacent to Wairere Falls Reserve, business centre zoning allows multiple commercial & residential redevelopment options up to 15m
Outcome: sold with vacant possession for $942,000
Agents: Rhys Mischefski & Lloyd Davidson

Attribution: Agency release.

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Apartment supply slowdown warning, as they get more popular

A CBRE research report out yesterday indicates the supply of new apartments in Auckland will continue this year & next, but the launch of new projects has slowed.

Senior research analyst Tamba Carleton says in her report, out yesterday, the shift in market preference to apartments has been tangible in recent years, but “a constrained development environment” means future supply is struggling to match underlying demand.

Statistics NZ data shows rolling annual building consents exceeding 12,000 in the year to May 2018, a 15-year high, with standalone housing comprising 47%, apartments at 24% & terraced housing 21%.

The rolling volume of standalone house consents hardly changed between May 2016 & May 2018, while the figure for apartments almost doubled over the same period, overtaking terraced houses to be the second largest consented typology after standalone houses.

“The quality of design is one aspect that is helping fuel demand, particularly by owner-occupiers. A wide range of purchasers, not just the stereotyped babyboomer demographic, are opting for the lifestyle & location benefits of apartment living at a better price point than other typologies, particularly in city fringe areas.”

1650 apartments were completed in Auckland last year, and CBRE’s supply projections indicate 2700 units will be completed this year and over 3300 next year.

However, Ms Carleton says that while the volume of projects under construction stage has risen, fewer new projects have been launched and the preconstruction stage of the apartment supply pipeline has declined significantly since late last year.

“If this trend is sustained, the increase in building consent numbers will only be a short-lived blip. The number of new projects getting launched to market is slowing significantly, with no cbd & fringe launches occurring since October 2017,” she said.

Attribution: Agency release.

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Tiny commercial site & Freemans Bay loft sell at auction

One of the Auckland cbd’s smallest standalone properties (pictured above), back from Victoria Park on Centre St, was sold at Bayleys’ auction on Wednesday on a 3.4% yield.

The one apartment up for auction, a loft in Freemans Bay with double-height stud in the lounge & exposed wooden beams, was also sold.

Commercial

CBD

Victoria Quarter

24 Centre St:

Features: 134m² of land, 132m² building, substantially refurbished in 2006 for use as a hair salon, leased to Wolf & Wolf Ltd until February 2019 with 2 2-year rights of renewal;  city centre zoning allows commercial &/or residential development up to 16m, permitted floor:area ratio (FAR) of 3m² of building to 1m² of land
Rent: $52,678.26/year + gst + outgoings from a lease to an established hair salon, rent review next February
Outcome: sold for $1.55 million at a 3.4% yield
Agents: Cameron Melhuish & Andre Siegert

Apartments

Isthmus west

Freemans Bay

The loft (outlined) on Margaret St, Freemans Bay.

3 Margaret St, unit 5:
Features: 125m² site, 86m² apartment, 2 bedrooms, deck, 2 parking spaces
Outcome: sold for $1.34 million
Agents: Robyn Clark & Peter Tanner

Attribution: Auction documents.

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KiwiBuild OK – and then come all the other inputs that need fixing, says bank economist

As the Coalition Government revises the accent on economic direction, housing remains a priority issue – with plenty of questionmarks from advocates of many hues.

Now that KiwiBuild’s chief advocate, Phil Twyford, is ensconced as Minister of Housing, Urban Development & Transport, the bulk of outside advice to him seems to be on how not to do his jobs.

Bank of NZ chief economist Tony Alexander took a different tack today – not criticising, but warning about the reality of the build rate, plus the many other inputs which need to be fixed before the housing sector will come right.

In his weekly overview, Mr Alexander wrote that, as over 20,000 people had signed up for the ballot for a KiwiBuild house categorised as affordable, the odds in this lottery had steadily lengthened.

This told him one thing: “You cannot build your home ownership plans around securing a KiwiBuild property. Your chances of getting one are shrinking by the day as the logic of absolutely everyone who is eligible signing up sinks in. It’s a lottery and, if you beat the odds and win, you will get a property you’ll only need to hold for 3 years then will be able to flick off probably at a decent profit – or hold off for 5 years then get that profit tax free.”

Mr Alexander also warned people looking for mortgage finance to be aware of shifts in international financial positions, and to expect an “increase in commentary regarding reducing availability of finance as global risks rise”.

As for KiwiBuild itself, he thought it was a good idea – but: “It doesn’t change the essential dynamics of our residential construction sector, which consist of many little, inefficient operators purchasing from oligopolistic material suppliers, dealing with obstructionist councils increasingly terrified about getting anything wrong, shortages of skilled & unskilled staff, and shrinking availability of finance as pressures keep growing & growing for banks to do less & less risky lending while holding more & more capital”.

Link: Full weekly overview pdf

Attribution: Alexander overview.

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All 3 apartments sell at auction

All 3 apartments sold under the hammer at Ray White City Apartments’ auction today, all after strong bidding.

CBD

Victoria Quarter

One Hobson Residences, Grand Chancellor, 1 Hobson St, unit 1309:
Features: 57m² + 12m² balcony, fully furnished one-bedroom sub-penthouse
Outgoings: rates $1591/year including gst; body corp levy $4223/year
Income assessment: $600-650/week
Outcome: sold for $590,000
Agents: Adam Gurr & Josh Muriwai

Wynyard Quarter

Lighter Quay, 77 Halsey St, unit 513:
Features: leasehold, 41m², furnished one bedroom
Outgoings: rates $1487/year including gst; body corp levy $5676/year for last year including $2753 ground rent; ground rent has gone to arbitration; residents society levy $1513/year
Income assessment: was $520/week, sold with vacant possession, appraisal $550-580/week
Outcome: sold for $164,000
Agents: Mitch Agnew & Ryan Bridgman

Isthmus west

Eden Terrace

Montpellier Square (pictured), 30 Randolph St, unit 2B:
Features: 54m², one bedroom, tandem parking, storage locker
Outgoings: rates $1168/year including gst; body corp levy $3082/year
Income assessment: $450-500/week
Outcome: sold for $438,000
Agents: Mitch Agnew & Ryan Bridgman

Attribution: Auction.

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Augusta registers St Georges Bay Rd syndication offer

Augusta Capital Ltd has registered the product disclosure statement for its offering of $68.5 million of equity in a new single asset fund which will acquire 96 St Georges Bay Rd, at the foot of Parnell.

Augusta managing director Mark Francis said today the company expected the offer to open on Wednesday 18 July, once the Financial Markets Authority’s waiting period has ended, and close on Tuesday 18 September. Settlement is now expected to occur on Friday 28 September.

The $68.5 million to be raised is fully underwritten. Augusta Capital has underwritten $24.5 million and third parties the balance. Augusta will receive underwriting & offeror fees under the offer, as well as an ongoing management fee once the single asset fund is established.

96 St Georges Bay Rd is a brand-new 5-level A grade office building developed by Mansons TCLM Ltd. The fund will acquire the 11,083m² building for $116 million. On a 10.89-year weighted average lease expiry, the initial yield would be 6.47%.

Mansons has signed up Xero Ltd for 2 floors, and Independent Liquor (NZ) Ltd & Harrison Grierson Group Ltd for one floor each. A small amount of level 1 & the ground-floor retail, which have no tenant signed, will be leased by Mansons for a 9-year term

A copy of the product disclosure statement is available on the Disclose register at https://disclose-register.companiesoffice.govt.nz/ by searching “Augusta St Georges Bay Road Property Trust” under “search offers”.

Earlier story:
6 May 2018: Augusta single-asset fund to buy new Mansons Parnell building

Attribution: Company release.

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Logistics specialist Logos buys Wiri site

Australian vertically integrated logistics property specialist Logos Property Pty Ltd has bought a 10ha site in Auckland for its first move into New Zealand.

The Australian company said yesterday it had bought the property at the corner of Roscommon & Wiri Station Rds in Wiri from Fletcher Building Ltd subsidiary Fletcher Concrete & Infrastructure Ltd.

The site has access to State Highway 20 (the South-western Motorway), and is near the Conlinxx Inland Port.

Logos joint managing director Trent Iliffe said the company would develop the site into a 55,000m² logistics estate: “The New Zealand industrial & logistics sector has experienced strong growth over the past few years on the back of the country’s underlying economic fundamentals, increasing population and, importantly, the rise in e-commerce. We believe there will be many opportunities for Logos to partner with our investors & tenant customers across New Zealand over the coming years, and the Wiri site is an important and strategic first development for the group.”

The company’s other managing director, John Marsh, said: “Wiri is the key industrial suburb in Auckland, which is experiencing significant growth due to its proximity to key freight routes and as the market widens from Auckland’s historical industrial hubs of Penrose & Mt Wellington.

“We are currently in discussions with a number of existing tenant customers from our Asia-Pacific portfolio to develop purpose-built opportunities on the site, including large-format logistics operators, FMCG (fast-moving consumer goods), e-commerce operators & 3PL (third-party logistics) groups.”

Logos has operations in Australia, China, Singapore, Indonesia & India, managing every aspect of logistics real estate, from sourcing land or facilities to undertaking development & asset management for leading global real estate investors.

At 1 January 2018, Logos had:

  • $A4 billion of equity commitments to 14 ventures with a targeted end-value of over $A9 billion of assets under management
  • 42 projects or estates owned & under development
  • Over 2.9 million m² of logistics real estate owned & under development, and
  • 9 corporate offices throughout Asia & the Pacific.

Link: Logos

Attribution: Company release, website.

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Botany expansion enters stage 3

AMP Capital Investors Ltd has entered the third stage of its $78 million expansion of the Botany Town Centre in South Auckland, closing Garden Lane for redesign.

AMP Capital Shopping Centres development manager Paul Hudson said yesterday the closure was a milestone for the development, which was on track to be completed in mid-2019.

“The development to date has seen the extension of the main entrance (Conservatory) well under way, with the roof due to be added in the next 6 weeks. The refurbishment of Market Square (near New World) is also well advanced.”

The development will take the centre’s gross lettable area to 62,700m², occupied by over 200 tenants, while preserving its qualities as an open-air shopping centre.

Plants from the community garden in Garden Lane will be distributed throughout the centre. The play area will reopen in the form of 3 smaller play areas.

Mr Hudson said 40% of the new Garden Lane had been leased.

Naylor Love Construction Ltd is the main contractor for the expansion project, which follows the Auckland Council unitary plan’s designation of Botany Town Centre as a metropolitan-zoned hub. Several special housing & future residential growth areas have been identified around it.

Botany Town Centre opened in 2001 and is Auckland’s second-largest shopping centre by lettable area.

AMP Capital has $26 billion of assets under management, and AMP Capital Shopping Centres manages a portfolio of 30 shopping centres in Australia & New Zealand, including Botany & Manukau Supa Centa in Auckland, Bayfair Shopping Centre in Tauranga, and The Palms, Northwood & Merivale in Christchurch.

Earlier stories:
16  February 2018: Botany Town Centre set for upgrade
14 December 2016: Second Canadian pension fund buys into AMP property portfolio
11 July 2014: AMP Property sells $1 billion portfolio, NZ Super Fund looks for new investments

Attribution: Company release.

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