Why Iwi’s economic clout is growing
Total Property - Issue 3 2018
Iwi have fast become major players in the commercial property market. Since the first settlements of the 1990s, the value of Iwi assets has grown to almost $8 billion, while value of the Māori economy is reported to be more than $50 billion.
Those at the front of the queue for settling their claims have the largest asset bases but as other settlements occur, the value of the combined Iwi asset portfolio will grow significantly. That means for people and businesses wanting to invest in New Zealand, Iwi are key partners.
So the key for many Iwi is how to maximise their commercial opportunities while balancing their cultural and whanau needs. The commercial property sector provides a sound investment option for many, with a steady outlook on growing returns in a growing economy.
According to figures collated by economic consultants TDB Advisory, the collective asset base of the 70-odd Iwi that have finalised Treaty Settlements with the Crown rose by $1.8 billion in 2017 to $7.8 billion, driven in part by six new settlements finalised in the past two years totalling $222 million, and the above average returns on assets owned by Iwi that have a strong bias towards property investment.
TDB Advisory’s Iwi Investment Report 2017 found that the debt levels of many of the Iwi groups profiled were non-existent, with only the most active investors, Ngāi Tahu, Ngāti Whātua Ōrākei and Waikato-Tainui, recording debt of between 10 and 17 percent – relatively low compared to the debt levels of most New Zealand companies.
One of the largest commercial property players among Iwi are my own Ngāi Tahu people. Commercial property represents the largest asset class in their $1.668-billion portfolio, and their success in the market suggests a way forward for Iwi looking to grow their assets through commercial property.
Ngāi Tahu’s property strategy has been to target inter-generational investments that deliver a commercial return, a cultural return and a community return. Their buildings tend to be in prominent locations, serve a specific need and are occupied by long-term tenants – all part of their defining business principles.
Ngai Tahu Property, the property arm of Ngai Tahu, has completed a wide range of prime commercial and residential property developments over the last two decades in Christchurch, Dunedin, Queenstown and Auckland. Christchurch, in particular, has benefited enormously from its strategy.
Ngai Tahu Property’s landmark development, Christchurch Civic Building - Te Hononga, was opened months before the earthquakes that devastated the city but its standout design was a beacon during the rebuild. Housing more than 1,200 council staff and boasting 23,000m² of offices, civic chambers and function rooms, the building was the first in New Zealand to achieve a 6-Green-Star Office Built rating.
Ngai Tahu Property’s $110 million Pita Te Hori Centre/King Edward Barracks office and retail development, also located in Christchurch CBD, is another leap forward for the group. Dubbed the most energy efficient office buildings of the rebuild and officially opened last year, the development houses a combination of corporate and Government tenants, including EY, Aurecon, Vero and the Ministry of Education and Ministry of Health.
Rivalling my own Ngāi Tahu in terms of commercial property success are Waikato-Tainui, which have turned a $170 million Crown settlement in 1995 into assets worth $1.224 billion.
Waikato-Tainui comprises more than 67,000 members from 68 marae around the Waikato, and the concept of community remains central to their asset-building strategy. Last year, they recorded their best ever financial year, reporting a net profit of $137.8 million, which they used to make record distributions to members alongside the delivery of social, cultural and environmental achievements.
Waikato-Tainui’s commercial arm, Tainui Group Holdings (TGH), has rapidly grown its property portfolio, acquiring and developing commercial assets stretching from Auckland Airport to Kawhia.
TGH has leaned hard into the key drivers of the Golden Triangle’s economic success, and its plan to build an inland port on 480ha in Hamilton’s east is ambitious and forward-thinking. The Ruakura development, which has been designated a “project of national significance” by the Government, will eventually cover an area larger than Auckland's CBD and be home to a logistics zone, industrial park, educational facilities, lifestyle hub, retail and reserves.
TGH has joined forces with LINX Cargo Care Group and one of its subsidiaries C3 Limited (NZ’s largest on-wharf logistics company) to develop and operate the port.
The aim of the project is to improve efficiency in the North Island supply chain. Upon completion in 2041, the port will be capable of handling one million containers a year, and will have links to the East Coast Main Trunk Line and the new Waikato Expressway.
With the upper North Island’s freight volume set to double in the next 20 years, Ruakura could be a gamechanger not only for Waikato-Tainui but also for the region. The size and scope of development, together with the number and types of businesses it expects to attract, will be a huge boost to the commercial property market in the region and to the wider economy.
The first stage of the development is due to come on stream in 2021, and TGH has reported strong demand for large-scale industrial sites, with Auckland-based logistics firms and manufacturers viewing Ruakura as a way to future-proof their operations.
Tougher bank lending criteria in the commercial property market will only make Iwi a more attractive partner. In the current market, those with relatively clean balance sheets will be able to flex their muscles. But the issue Iwi will face is capacity. Yes, they are price setters, but they still have to gear up. There are plenty of opportunities out there, they just can’t act on all of them, which is a good position to be in.
Some of the plays being made by Iwi are huge and they will have flow-on effects for the rest of the market. Investors should be focused on Iwi that are settling - they have extraordinary first rights of access to land in Auckland and are looking for partners that get their Iwi mindset and are prepared to take the long view.
In Auckland alone, there are some 13 to 19 Iwi that are in the process of settling their treaty claims. These Iwi will settle with both cash and incredible opportunities to acquire vast tracts of land. In concert these Iwi will be unstoppable in the commercial property market.
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