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Country's biggest property portfolio sale launched

By Chris Hutching

Friday 15th August 2003

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New Zealand's largest private commercial property portfolio is on the market as property investment company AmTrust seeks buyers for its $340 million portfolio in what it describes as the biggest property sale in this country for 30 years.

It is also potentially the biggest deal for agents Colliers International, which won the marketing contract over two rival real estate agencies, who will be seeking buyers from overseas as well as locally.

The portfolio includes 20 commercial properties ­ 17 in Auckland and three in Wellington. Its retail properties include an Auckland retail plaza and a Christchurch CBD retail shopping centre, the Triangle Centre. The buildings carry a total net lettable area of 132,253sq m.

AmTrust is owned by New York-based brothers Michael and George Karfunkel, who own more than 182,000sq m of Manhattan office space and more than 20 leases on shopping centres throughout the US. They also own and operate America's largest privately owned stock transfer business, American Stock Transfer & Trust Co.

The Karfunkels entered the New Zealand property market in 1996 when they took over the shares in Gulf Resources Pacific,a New Zealand-listed company, after acquiring its bankrupt parent Gulf USA. The New Zealand portfolio was the parent company's major asset and the Karfunkels focused on operations here, selling AmTrust's off-shore properties.

As it transpires, their timing has been fortuitous. In the mid-1990s the office market was still recovering from the excesses of the 1980s, offering upside potential when the cycled turned. But in the interim the Karfunkels endured a 25% loss of equity as the New Zealand currency fell to the low levels that spurred an export recovery. Now, the currency is at high levels and the sentiment for commercial property investment is positive.

Over the past seven years the Karfunkels supported new acquisitions and capital upgrades of $175 million and say they have reinvested profits in the New Zealand portfolio rather than remitting div idends offshore.

This is not the first time AmTrust's Auckland chief executive, Peter Wall, has been faced with considering his own future. But at this stage all options are open, including the opportunity for an investor to retain his management expertise.

He said the relatively strong New Zealand dollar, the strength of the property market and demand for property from Australia and Asia, coupled with the well maintained portfolio's market rentals rates, were behind the decision to sell, Mr Wall said.

There had already been interest from a number of investment funds, he said.
Nearly 45% of the portfolio's total net revenue of $30 million comes from Telecom, the University of Auckland and government departments.

Included in the portfolio are:

  • Gen-i Tower, a 19-level Auckland office building with 22,730sq m of net lettable area, 192 carparks and income of $6 million. The building's upper floors have had a $3.7 million refurbishment.

  • Telecom House and Plaza, in Auckland, with 20,000sq m of net lettable space, 500 carparks and net revenue of $6.6 million.

  • NGC Building in Wellington with 10,000sq m net lettable area and $1.6 million income. It recently had a $6.8 million upgrade.

  • Triangle Centre, a two-level mall in Christchurch with 31 retail shops and $1.4 million net income. It has had a $3.7 million refurbishment.
  • Colliers will initially seek registrations of interest closing on September 30 and the respondents will be sent "sufficient" background portfolio information to make an indicative bid.

    From those bids a small group will be invited to undertake detailed due diligence before putting in a tender for the total portfolio. Alternatively, the buyer can take a 100% shareholding in AmTrust Pacific. AmTrust is hoping for a sale by the end of the year.

    Colliers International sales director John Goddard will travel to Australia, where the portfolio is expected to generate significant interest among listed and unlisted funds, Asia, Europe/UK, and possibly the US. He said the broader property dynamics in the New Zealand market had never been better.

    The CBD markets in the major New Zealand cities over the past decade had been the poorest performing property sector.

    But reducing vacancies and a growing confidence in employee growth had led to improved total returns in the past 12 months.

    The most recent returns from office properties as measured by the New Zealand Property Council in the year to March 2003 reveal the total per annum return across all cities and sectors was 8.22%, comprised of income returns (from rents) of 8.4% while capital returns (from the value of buildings) were negative 1.1% but maintaining a long-term trend toward positive territory.

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