Never sell the land - simply never

By ANNE GIBSON

Land investment and long-term ownership but never land development - that has been the raison d'etre behind the quartet who are buying Fletcher Forests' trees.

Trevor Farmer, Ross Green, Mark Wyborn and Adrian Burr of Kiwi Forests Group, part of a consortium paying $725 million for the 106,000ha forest estate, are all multi-millionaire Aucklanders whose corporate histories are closely linked.

Farmer, Wyborn and Burr control Viaduct Harbour Holdings which has vast estates around Newmarket and the city's downtown waterfront. Green, along with Richard Didsbury, was one of the founders of New Zealand's largest listed property entity, Kiwi Income Property Trust, which owns about $900 million worth of real estate, largely shopping centres and high-rise office blocks.

Although it was Green who spoke at Kiwi's Christmas party held in the upmarket foyer of its 40-level Vero Centre - New Zealand's tallest office tower - on Auckland's Shortland St, he is no longer closely involved in the day-to-day running of Kiwi whose management contract was sold for $57 million in early 2002.

Many praise the vision of the foursome - and their nerve.

VHHL director Rob Campbell said much the same philosophy behind Viaduct Harbour Holdings and how it had approached transforming Auckland's Viaduct Basin would be applied.

"We are focused on long-term ownership of the land and on the co-ordination of what happens to the land rather than promoting individual developments, so we don't pretend to have any expertise in promoting individual buildings or developments. We put a lot of attention into mix and quality that we think will work in the area and in using leasehold ownership to maintain and enforce that view of the world."

VHHL is founded on a relatively simple but clever philosophy: buy land with potential before others spot the scope, co-ordinate a strategy which will maximise returns, pal up with a second party to take on the risk of developing, then let the developer take his cut by selling the improvements, apartments and office buildings at the Viaduct.

But never sell the land. Simply never.

Structure the leasehold tenure on that land so that the rents for its buildings are reviewed every three to five years, then watch while further development of the area takes place, values rise and rents come up for review.

Now reap the rewards from the steady cash flow.

Within property circles, VHHL is admired and feared for its purchase of Auckland's industrial harbour edge, a commercial zone which last decade drew few tourists but which is becoming Auckland's new heart, even though the marine industry has complained about being railroaded out of the precinct at rent review time. Development of the Viaduct Basin is the first step for VHHL, which is opening sites for redevelopment as industrial leases expire and apartment dwellers and office workers shift in.

Now they have teamed up with The Ontario Teachers' Pension Plan, one of Canada's largest financial institutions, and Boston-based Prudential Timber Investments.

The group is together only to do the forest deal and it has been known since they emerged publicly last September that the divvy up broadly gave the Auckland property investors freehold land, of which there is about 70,000ha, and the others cutting rights on leasehold land. Green and colleagues have onsold some cutting rights to the other investors.

- additional reporting: by Pam Graham