Property Fund COVID-19 Rental Impact Update
In May, the Manager of Trust Management Property Fund advised that there would be rental income collection impact due to COVID19 related issues. This is turn would impact the level of distributions. The Property Management Team has been liaising with tenants over the last 3 months to agree rental relief claims and to work through the individual tenant situation caused by the various Alert Levels. As a responsible landlord we have sought to approach the situation with empathy and understanding.
We have not experienced any tenant failures during the last three months.
Property Fund COVID-19 Rental Impact
As investors will appreciate, the country lockdown under Covid-19 Alert Levels has been unprecedented. While it has impacted on everyone, the impact on commercial tenants in the Property Fund has varied. The largest tenant in the Trust Management Property Fund portfolio is Countdown supermarkets (General Distributors Ltd), which contributes 26% of the portfolio income on a direct and indirect basis. Supermarkets being an essential service were very busy during the lockdown period so Countdown continued to pay full rental.
The Fund has a good level of diversification by property sector exposure as well as tenant and location diversification. The Weighted Average Lease Term of over 9 years provides good insulation against Covid19 as new leasing will be difficult given that the economic impact of the lockdown may be felt for some time to come.
Property Fund Portfolio Asset Valuations
With the change to a Portfolio Investment Entity (PIE) Fund from 1 April 2020, the Trust Management Property Fund property portfolio was revalued on 31 March 2020. By 31 March New Zealand had moved to Covid-19 Alert Level 4 so the updated valuations reflected the Covid-19 situation at the time. The Fund value as at 31 March was $226m.
As expected, the valuation of the portfolio dropped by 2.89% on a “like for like” basis over the first quarter of 2020. The Registered Valuers looked to modify their previous valuations to reflect the impact of Covid-19. It is noted that the valuations contain a “Material Valuation Uncertainty” provision which highlighted the challenge of undertaking valuations at this time. All major valuation firms are adopting this provision within their assessments to acknowledge the reduced certainty due to the future impact that Covid-19 might have on real estate markets.
Lease Extended 9 - 13 Sims Road, Auckland
Earlier this year, Trust Management concluded a lease extension at Sims Road, Auckland on behalf of the Trust Investments Property Fund. This industrial property has a high profile as it adjoins the entrance to a busy motorway on-ramp in Penrose.
Trust Management negotiated a lease extension of 6 years from December 2019 as well as an increased rental. The value of the property has increased from December 2018 by 25.87% due largely to the lease extension. Patrick O'Reilly, General Manager Property said "The lease extension is a great outcome for investors in the Property Fund and gives confirmation from the tenant that the property is well suited for its future occupation."
Queen Street Retail Purchase for the Property Fund
Trust Investments Property Fund announced on 22 November 2019 the unconditional purchase of 186 Queen Street in Auckland.
Queen Street retail has strengthened in recent years with the addition of premium international brands. The development of Precinct Properties Commercial Bay, which opens in 2020, will not only increase office space but further anchors the retail offer in the central city. Inner city living has also contributed to the vibrancy of retailing in the CBD.
The ground floor Unit Title property is leased to Glassons Limited, (Glassons), which is part of the NZX listed Hallensteins Glassons Holdings Ltd group. A new lease has been entered into with Glassons from August 2019 for 8 years with fixed increases of 2.5% per annum. As part of the leasing Glassons will be refurbishing the store in the coming period.
The annual net rental is $788,000 with the Property Fund purchasing the property through an open market campaign for $15.75m. This purchase represents an initial yield of 5%. The purchase price is supported by independent valuation advice.
With the property purchase the Property Fund will have allocated close to 100% of its available cash funds held for investment. Settlement date for this property is scheduled for 31 January 2020.
Auckland Commercial Property Update
In October, Steven Dunlop from Savills New Zealand provided Trust Management clients with a review of the commercial property market in Auckland. Steven is the National Head of Valuation & Advisory Services for Savills so is well placed in providing an expert's outlook on the property market.
Steven provided an informative and interesting presentation on the current market dynamics. In this low interest rate environment demand for commercial property has continued to strengthen with investors looking for yield. Commercial property remains well positioned for the future with strong fundamentals being reflected in the main property sectors.
Lunch with Steven Dunlop
We are pleased to invite you to a lunch with Steven Dunlop, National Head, Valuation & Advisory for Savills at 12pm on Friday 4th October at our office, 123 Carlton Gore Road, Newmarket, Auckland.
As one of New Zealand’s leading commercial Registered Valuers, Steven is well positioned to provide his views on the New Zealand commercial property market.
1-15 The Avenue, Lynfield Lease Extension
Trust Management is pleased to announce the securing of a eight year lease extension from 30 August 2019 with General Distributors Ltd, (Countdown) at 1-15 The Avenue, Auckland.
This supermarket property is jointly owned by Trust Investments Property Fund and St John’s College Trust Board. The lease extension provides excellent long term tenant stability for both investors. Countdown is undertaking a major refurbishment of its supermarket premises to provide the latest look and improved layout for customers together with adding a new in-store pharmacy.
Solid Six Month Revaluation Growth
The Property Fund experienced a 2.55% revaluation increase over the first six months of 2019. The like-for-like analysis sees an increase in the capital value of the property portfolio by just over $4.8m from the previous six month revaluation movement.
In addition the Manager concluded the sale of the Harbourside Retail Centre in Porirua which transacted at a 3.88% premium to the December 2018 asset value.
Strategic Land Purchase for the Property Fund
The Manager of the Trust Investments Property Fund confirmed on 10 May 2019, the unconditional purchase of 104-140 Neilson Street in Onehunga/Penrose for $16.4m.
The site is leased to NZ Bus, a company associated with Infratil and is utilised as a bus depot. It is a large piece of land being over 2 hectares in size located on a key arterial route. The lease has 7 years to run with the tenant having 2 x 6 year Rights of Renewal (requiring 12 months notice to exercise the renewal period).
Non-Core Asset Sold
The Manager is pleased to advise that an unconditional contract to sell the Harbourside Centre has been secured.
The Harbourside Centre is 50% owned with Rātā Foundation. Both parties identified the property as a non-core asset within our respective portfolios. The sale price being $7.5m (100%) with settlement due at the end of June. The sale price represents a premium to the asset valuation. In recent years the Manager has been repositioning the property for disposal – a key initiative was to Unit Title the retail premises which was completed in November.
Trust Investments Property Fund announced in December that after a period of due diligence, it had entered into an unconditional contract for the purchase of three commercial properties in Christchurch. The properties were purchased from Rātā Foundation (previously The Canterbury Community Trust).
Update on Harbourside Centre,
16-18 Parumoana Street, Porirua
The property consists of two retail buildings with common car parking and tenancies ranging from 140 –750 m². The retail environment of Porirua has traditionally been split between the major shopping Centre, North City to the south, and the Mega Centre to the North.
Harbourside sits between the two retail hubs on the edge of the Porirua Estuary and adjacent to a large Supermarket and opposite the community Library.
Over the last twelve months Trust Management has undertaken work to reposition the units to provide better quality retail space, which resulted in new leases to Caci Clinic and NZ Uniforms.
Together with creating better retail spaces, Trust Management have completed a subdivision creating 9 Unit Titles.
105 Wiri Station Road Purchase
The Trust Investments Property Fund announced today that it has contracted to purchase a substantial industrial property in Wiri Station Road in South Auckland.
The property is undergoing major refurbishment in preparation for the infrastructure contractor, HEB Construction to take occupation and for a new 15 year net lease to commence.
Lease of 439 East Tamaki Road Warehouse to O-I New Zealand
Trust Management is pleased to announce the leasing of 439 East Tamaki Road Warehouse to ACI Operations NZ Limited trading as O-I New Zealand.
O-I Group is one of the world’s largest glass container manufacturers. This is another quality tenant secured within the property portfolio.
Property Fund Purchases A Supermarket
The Trust Investments Property Fund announced today the purchase of a Countdown supermarket in Hornby Christchurch.
The property located at 17 Chappie Place was purchased through a tender process from the listed property company, Investore and settlement is due on 23 March.
The purpose built property is modern in nature having been developed in 2010 with a 20 year lease commencing in 2012. The property was purchased for $21.5m at an attractive initial income yield of 6.30%. The purchase is accretive to the current portfolio yield and increases the property portfolio from $108.8m to $130.30m.
Farmers Trading Company - New Tenant
Farmers Trading Company ("Farmers") is a new tenant with the Trust Investments Property Fund. Farmers has taken the retail premises on Broadway which was previously occupied by PaperPlus.
Farmers is a very experienced retailer having been in business for 100+ years. It is one of the largest retailers in New Zealand with 60 department stores throughout New Zealand.
Maori Television Services Opens Office at 433 East Tamaki Road
In December 2016 Maori Television Service ("MTS") held a Karakia at 433 East Tamaki Road signalling the commencement of fitting out its new premises.
After extensive fitting out of the premises, the formal opening of the Maori Television office premises and television studio was undertaken on 24 August.
This commenced with a dawn ceremony which was attended by the Minister for Maori Development Hon Te Ururoa Flavell, members of Parliament, iwi, representatives of the landlord and the Manager.
Trust Investments Property Fund Acquires Auckland Industrial Property
The Trust Investments Property Fund has purchased an industrial property in the popular Airport Oaks area near Auckland Airport.
The property located at 2 Freight Place, was purchased through a tender process and settlement is due later in August.
Patrick O'Reilly Elected President of the Property Institute of NZ
Patrick O’Reilly, Trust Management’s General Manager Property has been elected President of the Property Institute of New Zealand.
The Property Institute has over 2,500 members throughout New Zealand and the world. It was formed in the year 2000 to act as the voice of property professionals.
Trust Management Supports Property Careers Expo
A number of the Trust Management property team provided support to the Property Institute of New Zealand (PINZ) by manning the property careers stall at the Careers Expo held at the ASB Stadium in May.
The aim was to highlight to school leavers that there is a great variety of careers within the property industry sphere. The photo shows Felicity Berry and Thomas Snedden from Trust Management - before the doors opened to the expo!
Property Fund - Stellar Performance
The Trust Investments Property Fund (“Property Fund”) contributes data to the MSCI/IPD New Zealand commercial property return database. The performance index produced reflects the returns from 422 commercial properties within New Zealand.
The 31 March 2017 results have been released, with the Trust Investments Property Fund achieving the top property portfolio performance ranking for 1 year and 2nd for 3 years.
439 East Tamaki Road Leased
Trust Management is pleased to announce the leasing of 439 East Tamaki Road to Cottonsoft Limited. Cottonsoft is a well-known supplier of paper towels and toilet paper.
Cottonsoft will be using the warehouse for product storage, predominantly on pallets. The lease is for a one year term and allows time for refurbishment works to the office area, before securing a long term tenant for the site.
IZone Recognised at PCNZ Property Awards
With 83 properties being entered into the Property Council of New Zealand Property Industry Awards 2017 the competition was very high. Trust Management, in conjunction with The Warehouse Limited (“TWL”), submitted the TWL South Island Distribution Centre at IZone Industrial Park for the Industrial Property Award.
At the Awards Dinner held on Friday 16 June at the Spark Arena, the Property Fund’s IZone property was recognised with a Merit Award. The judges recognised the complexity of the project, undertaking a building expansion adjoining a fully operational distribution centre.
Izone Drive reaches practical completion
We are pleased to advise that on 20 March 2017 Practical Completion for the building expansion was achieved. The project was very successful for all involved.
The building is now one of the largest industrial buildings in the South Island being just under 50,000sqms (5 hectares) on a 10 hectare site – it is truly an impressive property to walk around.
Pumpkin Patch Update
We provide an update with respect to the properties leased to Pumpkin Patch, the latest news from the Receiver, and the impact on the portfolio of the Maori Television Services leasing, as well as provide details of the October valuation.
Maori Television Services Leasing
We are very pleased to announce the leasing of 437 and 441 East Tamaki Road to Maori Television Services ("MTS") on a 15 year lease. The leasing reduces the Fund's exposure to Pumpkin Patch.
Included within the article is a link to a "fly through" of the new offices provided by MTS.
Pumpkin Patch Receivership
On 26 October 2016, the Board of Pumpkin Patch Limited (“PPL”) placed the company into Voluntary Administration. On the same day ANZ Bank appointed KordaMentha as Receivers.
The Trust Investments - Property Fund owns a 50% share in two properties leased by Pumpkin Patch. This article provides further information about the impact of the receivership.
Trust Investments Property Fund acquires a ground lease property
Trust Management is pleased to advise that the Trust Investments Property Fund (“Fund”) has confirmed an unconditional contract to purchase a 99 year terminating ground lease property at 238-246 Great South Road, Papakura, Auckland.
Sale of 50% Interest in IZone Drive Property
Trust Management is pleased to advise that the Trust Investments Property Fund has confirmed an unconditional contract to sell a 50% interest in the IZone Drive property to the New Zealand Methodist Trust Association (“NZMTA”).
Property Business of the Year
Trust Management’s Property Team has carried on their success from the RICS awards by winning the Property Business of the Year Award from the Property Institute of New Zealand.
Commercial Property Outlook
In March 2016 CBRE held a property market briefing at Trust Management’s offices. The presentation included CBRE’s latest economic and property research, comparing New Zealand to other countries and more specifically Auckland to other international cities.
Trust Management Appoints Patrick O'Reilly
Trust Management has appointed Patrick O’Reilly, former General Manager of DNZ Property Fund, as its new General Manager Property.
With over 20 years of senior leadership experience in the property industry, Patrick is a proven commercial manager who has delivered exceptional results within listed and private entities, bringing a strategic approach to every element of his role.
RICS Fund Management Team of the Year
Trust Management’s Property Team confirmed its status as industry-leading fund managers with the news that they won last night’s Fund Management Team of the Year Award at the 2015 Royal Institute of Chartered Surveyors (RICS) Awards.
The two direct property funds managed by Trust Management that were nominated for awards have consistently outperforming the market and providing long-term, sustainable returns.
Property Fund Newsletter December 2014
Over the last quarter, positives for the fund include $13.1 million of new capital investment into the fund and distribution growth of 2.76% year to year. We have also faced a valuation challenge that we believe is of a short-term nature and will be resolved.
Property Fund Newsletter September Quarter 2014
Since the close of the quarter we have had a positive net inflow of funds in excess of $12 million, which increases the fund’s total capital to over $90 million.
Property Fund Results to 30 June 2014
Trust Investments Property Fund results to 30 June 2014 and strategy paper.
Property Fund Performance and Strategy
The attached paper outlines the Property Fund Performance and Strategy Review completed in May 2014.
Property Fund Newsletter December Quarter 2013
Building on positive third quarter results, our asset management initiatives and general market improvement have brought further valuation gains to the Fund in the fourth quarter of 2013.
Property Fund Newsletter September Quarter 2013
Over the last quarter, positive valuations and asset management initiatives have enhanced the Property Fund’s portfolio and performance. We are delighted to announce the acquisition of a prime property in Wellington.