Monthly Archives: September 2017

MHP Newsletter – September 2017

September 29, 2017

Welcome

Welcome to MHP’s Q3 newsletter. We’re sure all our readers will be happy to see the arrival of spring, which has been a long time coming. The big issue of course is the election and as we prepare this newsletter the outcome of last weekend’s vote is still unknown. We are watching developments with interest as the major parties get down to business with Winston. Whatever the outcome, let’s hope the new government is formed swiftly.

We hope you enjoy this newsletter – please contact us if you have any comments. We also invite you to follow us on LinkedIn for all our latest news and updates.

Happy reading,

the MHP team.

Comments from Ron Mackersy

As we head in to the fourth quarter of 2017, uncertainty still characterises the markets. The election is over, but the outcome is still to be determined. Globally, the effect of Trump is still a hot topic and hurricanes, weather bombs and earthquakes have caused major damage worldwide.

Where does the New Zealand property market sit? Sales numbers are down but we are yet to see sustained price falls or the loosening of commercial yields. Hot spot Queenstown still bucks the overall trends. The airport numbers defy belief (over 1.8 million passengers in the year ended June 2017), infrastructure is struggling and land prices and development costs are at all time highs. 

The banks now seem to have more available funds in the commercial area. Competition between banks should hold or soften margins. We have also seen an increase in overseas interest in buying commercial property as overseas yields are still very low and New Zealand is seen as a stable alternative. Let’s hope our political situation gets resolved quickly as this could provide a review of how the world sees us. New Zealand was going so well – how things change!

News from Dale Robertson’s desk

Since our last update in June, we have continued to grow the MHP team to meet the demands of business growth. In Christchurch we have recruited Gabrielle Wethey to look after human resources and we are in the process of bringing a new property manager on board in Queenstown.

As is usual for this time of year we are planning for 2018 and beyond. This includes business growth forecasting and making sure that our people, systems and processes are robust enough to cope with ongoing growth. We are also working with Mitchell Mackersy Lawyers on a communications plan intended to keep directors, shareholders and tenants better informed. 

Along with Mitchell Mackersy we are also analysing the results of our recent shareholder survey and looking at how we can improve our systems and processes to address the issues raised. Thank you to all shareholders who filled out the survey – your feedback was very insightful.

New joiners to management portfolio

This quarter we are pleased to have added two significant new properties to our management portfolio, detailed below. Both are owned by groups of investors represented by Mitchell Mackersy Lawyers. We have also seen growth in our private management portfolio, with the addition of an office building in Middleton, Christchurch and a retail and office complex in Dunedin.

Countdown, 24 Medway St, Gore

Leased to Countdown, this 2260m2 building was originally constructed in 1983, extended in 1994 and modernised in 2009. Its seismic strength is significantly in excess of minimum standards at 129% of NBS. The supermarket occupies a prime 5800m2 site with excellent access and parking. 

31 Deveron St and 101 Don St, Invercargill

Business advisors and chartered accountants Malloch McClean occupy this modern, purpose built two-level office building in the Invercargill CBD. Calder Stewart constructed the 1408m2 building in 2012 for the tenant, who requested a high quality build and fit out. The property includes 24 car parks.

Health and safety update

The regulations around working with asbestos changed on April 4 2016.

The Health and Safety at Work (Asbestos) Regulations 2016 state that every building built prior to 2000 must be assumed to contain asbestos, and that no-one can go near it unless they comply with the regulations. PCBUs (people conducting a business or undertaking) with control or influence over a workplace have until April 2018 to develop a plan to manage the risk of exposure. The regulations are consistent with the Act’s intention that there is a collective responsibility to manage risks to health and safety. 

As the duty to indicate the location and presence of asbestos applies to a wide range of PCBUs and activities, we will be reviewing our management portfolio to identify those buildings built prior to 2000 to ensure compliance. For more information, please contact Anita Brosnan, Project & Compliance Manager, email abrosnan@mhpl.co.nz.

Guest column from Crombie Lockwood

We are delighted to have been appointed to provide insurance broking and advisory services to MHP across its entire property management portfolio. For those readers who don’t know us, Crombie Lockwood is the largest insurance broker in New Zealand, with around 750 professionals across 26 offices. Our Christchurch office, which is overseeing our work for MHP, has around 100 staff including a dedicated claims team. Internationally we have global reach through our parent company, NYSE-listed Gallagher.

The current property insurance market in New Zealand is best described as “destabilised and uncertain” with premium and deductible increases being imposed. Unsurprisingly this is principally due to last year’s Kaikoura and Wellington earthquake along with a losing hand of floods, fire (Port Hills) and tropical tempests.  New Zealand insurers are particularly impacted as they don’t have the geographic spread of risk or premium volume to offset the claims. In short, the industry’s entire premium income is many times less than the cost of claims. This is creating an unsettled market.

In this environment, our role as MHP’s insurance broking and risk advisor is to insulate the property portfolio from these influences. We will be providing further market updates in future issues of this newsletter, so watch this space.

Guest column from ANZ

While the impacts on the economy of the election are still unknown, we did note some interesting currency movements in the lead-up to the election. 

The graph below shows the currency drop sharply (first yellow line) following the first poll with Labour’s new leadership and growing popularity. The second yellow line shows the sharp rise (almost 1 cent across the board) after a later poll showing an increase in National’s popularity. We all know the polls are what they are, but the impacts on the NZ dollar are very interesting.

On the interest rate front, bank funding pressures have eased somewhat but not disappeared. The gap between household lending and deposit growth has narrowed, which would suggest less competition for attracting domestic deposits. However, with the external borrowing constraints persisting (more scrutiny from regulators and credit rating agencies), lending growth is unlikely to increase unless deposit growth keeps pace. With the latter being somewhat of a restraint, tighter lending conditions are likely to remain for some time. This is likely to provide some stability around interest rates and credit margins at current levels, however the lag effect means a number of borrowers may face margin increases as facilities renew or extend to get to current levels.

Team member profile

Sonia Adams-Richardson

Sonia joined MHP’s Christchurch office in March 2017 as Property and Facilities Manager, looking after MHP’s management portfolio in Show Place Business Park, Addington, Christchurch. She is also Property Manager for Cardinal Logistics’ new facility at Waterloo Business Park, Christchurch; and the Countdown supermarket in Gore. 

Sonia is of Brazilian-German descent and has lived in Christchurch since late 1990s, apart from a recent five-year stint in Auckland. Her recent roles include working as a body corporate manager and commercial and industrial property manager in Auckland. Sonia holds a Bachelor of Property degree from Auckland University.