Asian investors snap up plum sites

Bayleys Real Estate is targeting Asian investors - a recent company delegation to Singapore sold $50 million of property.

Average yields in Singapore are 3 to 4 per cent, so New Zealand returns of around 9 per cent proved hard for the Asians to resist.

During the mission Bayleys sold 11 commercial properties, including Auckland and Wellington office blocks as well as provincial properties. It also sold a large slice of the new Hyatt Residences apartment block being built in Auckland.

The agency is also working on about six other deals, according to international division manager Michael Bayley.

He estimates that in the decade to the late 1990s, Bayleys sold more than $1.5 billion of property to Asians.

The recent sale included a Queen St retail-office block, an Auckland suburban shopping centre, a Newmarket office building, a Wellington central business district building, a North Island orchard and a provincial education facility.

One Singaporean buyer contracted for an entire floor of nine apartments in the new Hyatt Residences, to be built alongside the Hyatt Hotel, and eight other apartments in the block were sold.

Mr Bayley said New Zealand's economic situation and outlook did not deter the Asian investors.

"Funnily enough, the recent bad press about the new Government, rising interest rates and lack of business confidence is in some cases providing a positive spinoff for us.

"Asians like to think of themselves as counter-cyclical investors, and some of them see the current environment of uncertainty, coupled with our low exchange rate, as a good time to be sniffing out buying opportunities."

Also on the Singapore trip were Bayleys' principal John Bayley, Wellington franchisee Mark Hourigan, Tim Storey and Kate Short, from law firm Bell Gully, and John Burns and Robert Wong, from accountants Burns McCurrach.

Bayleys established a presence in Asia after the 1987 sharemarket collapse, with offices in Hong Kong and Singapore focused solely on marketing New Zealand property in the region.

"Asians started heavily investing in the New Zealand property market in the early 1990s - right at the bottom of the market when most New Zealanders wouldn't go anywhere near it," said Michael Bayley. "Many of them have done very well out of it as a result.

"Their interest was driven predominantly by what they recognised as counter-cyclical investment opportunities, much higher income yields than available in their own markets and the relatively inexpensive cost of New Zealand real estate in an international context."

Lack of a capital gains tax, few restrictions on the flow of funds in and out of New Zealand, a relatively stable political system and a transparent and reasonably straight-forward legal system all helped.

The Asian downturn in the late 1990s forced Bayleys to look to the United States for investors, but since mid-1999 the agency had noted encouraging signs of interest from Asian property investors again.

Three recent sales by Bayleys to Asians before the Singapore trip were:

* Affco House in Swanson St, Auckland, to a private Singaporean investor for $10 million.

* 242 Queen St to listed Singaporean company Grand Central for $9.7 million.

* Greenock House in Wellington to Grand Central, for $7.25 million.

Grand Central already owns $100 million of hotels and office blocks in New Zealand.