Property specialist Du Val is seeking $17.5 million from qualified wholesale investors in New Zealand, Hong Kong and Singapore to buy two Auckland residential complexes it owns to establish build-to-rent offerings.
According to an information memorandum, the Du Val Build-to-Rent Fund LP is forecasting returns of more than 8 per cent annually.
The offer closes on January 31.
Du Val says it has a $750m pipeline of new work and cites CBRE research last year to claim to be New Zealand's largest private suburban apartment developer.
Minimum amounts accepted for the new scheme are $250,000.
Kenyon Clarke, Du Val Group founder and chief executive, said today already $10m to $12m had been raised and his family planned to invest.
Roadshows were planned in Auckland, Tauranga, Wellington and Christchurch next month to explain to professional and eligible investors the prospect of build-to-rent.
Du Val developed the properties it wants to raise money for and already owns those properties via two limited partnerships. It wants the $17.5m money to settle two deals: $7.32m for 69 McKenzie Rd, Māngere and $10.06m to buy 2-6 May Rd, Mt Roskill, saying 72 units in eight blocks were in Māngere and 99 units in 11 blocks at Mt Roskill.
The extra $250,000 is needed to ensure the offer complies with the FMC Act 2013 here and Singapore and Hong Kong securities and futures laws, the IM said.
Investors should see their investment as long term, the IM said.
"Investors will be able to sell or transfer their units at any time after 12 months from the
minimum subscription close date to either another party or via Du Val's secondary market, provided such transfer occurs pursuant to the procedure set out in the fund's limited partnership agreement," it says.
The Mt Roskill project was finished in 2017 and townhouse-style dwellings are forecast to be rented for between $330/400 a week.
The Māngere project was built in 2017 and places there are forecast to go for $340 to $370/week, the IM says.
After raising the $17.5m to buy those places, it plans to seek more money to get other projects, its information memorandum says.
"The fund is raising new capital to establish a BTR portfolio, comprising initially of the proposed acquisition of two separate properties ... and subsequently
further qualifying Du Val-sponsored BTR assets," it says.
To qualify to buy into the fund, Kiwis must be wholesale investors with a net worth of more than $5m and invest at least $750,000. Singaporeans must be institutional investors and people from Hong Kong must be professional investors, the IM says.
"You're immediately eligible to invest if you put in $750,000," Clarke said. "But we're accepting lots of a minimum of $250,000."
Asked if the scheme was high-risk, he said: "No, not at all. The property is very conservatively geared. This is the most secure return in New Zealand at the moment because you have multiple streams of income from 171 tenants, so even if you have some vacancies, it's about the underlying investment. In Auckland, you're never going to have 171 vacancies, are you?"
The roadshows were to inform further investors about Du Val's plans and raise money for other Du Val-developed and owned build-to-rent properties.
Experienced property developer John Dalzell is managing director of Du Val BTR GP. He is former chief executive of Auckland Council-controlled Waterfront Auckland, charged in the early to mid-2000s with converting the 41ha Tank Farm or Wynyard Quarter into a new urban community.
Clarke has re-emerged having once been declared bankrupt following the global financial crisis when 12 of his 27 companies went into receivership.
He said he was discharged from bankruptcy more than 13 years ago but acknowledged Halifax Bank of Scotland claimed money.
Dalzell said it was not unusual for developers to be declared bankrupt and it was no barrier to him joining the business.
Du Val is "one of my many hats", Dalzell said. He has also been working with Silk Road on a rapid transport project as well as being on the Chinese bank's board.
Zoltan Moricz, CBRE head of research, said: "Based on our definition of suburban, Du Val is number one in this cycle. We define three geographic markets for apartments; CBD, CBD fringe and suburban. CBD fringe includes inner-city suburbs from Parnell in the east through Newmarket out to Grey Lynn in the west. So for suburban outside of the CBD fringe, Du Val is largest followed by Clarke Group and Ockham. If you include the CBD fringe suburbs as suburban then Ockham is the largest."
Du Val lists Westpac as Du Val's banker, Reesby & Co as its investment advisors and Herbert Morton of Hamilton as its accountants and tax advisors.
Built to rent is relatively new to New Zealand but Du Val says it has big prospects: "New Zealand's BTR market is very new but has serious potential for rapid scalability. CBRE have assessed the emergence of international BTR markets to assess how New Zealand might evolve in the short to medium term."
Build-to-rent was a key topic for the Property Council of NZ national conference last year and NZX listed Kiwi Property plans to develop such units on what is now carparking land at Sylvia Park, Mt Wellington.
Kiwi is yet to begin developing BTR units, though.
Some people believe Auckland's housing shortage could be partly solved via BTR, creating tenants for life.
That was posed in August by a Sydney specialist addressing more than 400 Property Council delegates.
One banker said the Du Val scheme was "an okay offering", noting that the scheme depended on the ability to achieve $2m annual rent after costs.