Canadians in $1 billion property buy

The Tower Centre at 45 Queen St has been undergoing an extensive upgrade. Photo / Peter Meecham

Opportunities in the portfolio for further NZ expansion, says AMP Capital

The new Canadian owners of the $1 billion real estate fund have opportunities to expand in New Zealand by further investing in real estate assets at Botany, Manukau, Tauranga and Christchurch, according to the man in charge of managing the business.

Stephen Costley, general manager of AMP Capital Property Portfolio (APP), the country's most valuable unlisted real estate fund, said assets already in the fund offered big opportunities to the new owners and he named those four areas as having the biggest growth potential.

"There's a number of opportunities in the portfolio for further investments and it's our task to present those to the owner. We have opportunities already within the assets to redevelop and extend," Costley said.

Yesterday, AMP Capital Investors announced it had agreed to sell APP's 18 New Zealand properties valued at $1 billion-plus to Canada's Public Sector Pension Investment Board, a deal conditional on Overseas Investment Office approval.

The NZ Superannuation Fund had a 29.69 per cent stake in APP and said it had sold out as well.

The 18 properties include large retail assets such as Auckland's 60,000sq m Botany Town Centre and the 40,000sq m Manukau Supa Centa as well as Wellington's 13-level PricewaterhouseCoopers Tower and adjoining 12,600sq m Capital on the Quay retail area.

Costley, who works from level 16 of the PwC Centre on Quay St, said around 50 staff were employed to manage APP and for them, it was business as usual. Some of the staff work within the APP properties, such as shopping centre management staff.

"We're going to carry on the management function for the purchaser. This is a tremendous result for the investors who asked the manager to take the portfolio to market and it's good for the buyer who is looking to invest on behalf of Canadians," he said, adding that it made little difference what nationality the owners of the properties were. "There's been a period of due diligence. We know them [the Canadians] and we're getting to know them better," said Costley, who returned from Australia nine years ago to take his current position.

Plans were already in place to upgrade some of the assets, which would enhance values, Costley said.

APP's 15-level Tower Centre office and retail building at 45 Queen St in Auckland's CBD opposite Queen Elizabeth II Square has been undergoing an extensive upgrade for months.

The block on the Queen St/Customs St corner is getting a new range of luxury brand retailers: Prada, Christian Dior and Swarovski, shortly due to open in the ground-floor lobby, in premises once occupied by the National Bank, Watches of Switzerland and Champions of the World. ANZ's refurbished branch in the ground floor opened some time ago.

Costley said the investors who sold out of APP included two arms of AMP, including AMP Life, and the super fund.

Justin Kean, JLL research and capital markets director, said the Canadians bought APP for returns of around 8 per cent on commercial property, beating Canada's 5.5 per cent and London's sub-5 per cent.

"This deal is driven purely by financial metrics. The price they paid looks good but not outrageous.

"They didn't over-pay. This transaction started in the last quarter of last year so they spent a lot of time looking at it. A transaction like this shows that international investors who spend time getting to know NZ end up being enamoured with the place," Kean said.

Not all Canadian investments in New Zealand have gone well. In 2007, Yellow Pages was sold to Hong Kong-based Unitas Capital and Canada's Ontario Teachers' Pension plan for $2.24 billion, the largest leveraged buy-out in New Zealand.

But by December 2010, the directories business recorded a $1.44 billion loss for the June 30 year, one of the biggest corporate losses in New Zealand.

The Portfolio

Retail
•Botany Town Centre, Auckland
•Northwood Supa Centa, Christchurch
•Manukau Supa Centa, Auckland
•Centre City Shopping Centre
•Nelson Junction, Nelson
•Bethlehem Town Centre, Taurang Office
•Tower Centre, 45 Queen St, Auckland
•51 Shortland St, Auckland
•56 Wakefield St, Auckland
•385 Queen St, Auckland
•109 Featherston St, Wellington
•Freyberg House, Wellington
•Justice Centre, Wellington
•PwC Tower (office) and Capital on the Quay (retail), Wellington
•St Paul's Square, Wellington Industrial
•Americold Cool Store, Mt Wellington
•ANZ Bank Computer Centre, Auckland
•Bare land, Te Rapa
[Source: AMP Capital]