HIH Global Invest presents its first public foreign real estate fund

HIH Global Invest presents its first public foreign real estate fund - Pacific Core 1. It invests in two, soon to be completed office properties that are rented to two global financial service providers.

When talking about the quality of life, Auckland is on top: In the annual report of management consultant company Mercer, the New Zealand city rated at the top of Asia and is in 5th place worldwide in 2007, putting it ahead of Düsseldorf, Frankfurt, and Munich. However, this study didn’t measure the big city flair, rather how well non-local employees can integrate. This includes how quickly they can integrate and feel happy there.

In addition, New Zealand is the number 2 employer-friendliest nation in the world. This was the result of a study by the World Bank subsidiary, the International Finance Corporation from 2006. Only Singapore offered more advantages.

The initiator HIH would now like to profit from the attractiveness of the region. With Pacific Core 1, the Hamburg company wants to build on the convincing advantages of the secret capital city of the group of islands behind Australia. For their first public fund with foreign real estate, CEOs Andreas Freier and Erik Marienfeld have taken over two building projects there in the metropolis that has also been called the City of Sail. The two properties with 14,000 and 7,800 square metres of usable space, will be completed in March and April of 2008 respectively. They have already been named after the main renters from the financial services sector. The six storey GE Plaza Building will house the New Zealand headquarters of the General Electric subsidiary GE Finance and Insurance until March 2020. Likewise, the four storey BNZ Building has been secured until 2020 by the Bank of New Zealand.


Entering New Zealand: It is the first fund with properties in New Zealand and is certainly attracting attention to the offer of the Hamburg Immobilien Handlung subsidiary. The location combines the notion of profiting from the boom in the Asian markets with the predictability of an extensively western legal system. The real estate company Colliers reports that specifically from Auckland, four major transactions have taken place with German buyers. A private investor bought the SAP Centre for approximately twelve million euro, which is Euro 1690 per square metre. An investment group purchased the property at 280 Center Queen Street for 27 million euro (1840 euro per square metre) and finally HIH purchased the GE Plaza for 47.6 million euro or 3400 euro per square metre.


Good underlying data gives rise to optimism: Of the ten most important export partners of New Zealand, Australia, USA, Japan, and China are on top. They are followed by the Tiger countries and the Next 11 countries. The New Zealand economy itself is dynamic. It grew by 2.2 percent from June 2006 to June 2007. The positive trend can be attributed primarily to the high private demand, the expansive fiscal policies, high raw materials prices and the considerable price increase in dairy products. The inflation rate is slightly below three percent and unemployment is slightly higher.

New Zealand is also a model country with regard to the transparency of the real estate market. Following Australia and the USA, it has taken third place from a total of 56 countries that were studied by the real estate consulting company Jones Lang LaSalle in an annual real estate transparency index.

The financial centre of the green island is clearly Auckland. It is true that more than four million residents live on the two main and more than 700 smaller islands of New Zealand. However, more than one-third of the “Kiwis”, as the New Zealanders call themselves, have settled in the urban agglomeration of Auckland, and there are approximately 400,000 in the city region itself.
Also, there is a higher demand for office space in Auckland than in the capital city Wellington or the third-largest city Christchurch. Therefore, the most active building activities can be seen there. Nevertheless, there is still some demand, specifically for high-quality rental space. Colliers reports that suppliers don't have to grant any incentives for new rentals in spite of the expected growth of 70,000 square metres in the coming 30 months. “In the top and class A sectors, there are practically no concessions offered to the renters,” emphasises Colliers analyst Darren Park. “Just the opposite is true; landlords can usually arrange long contractual terms. Because for the short term there isn’t enough space, this situation is most likely to intensify.”

HIH has positioned itself exactly in this sector. The two properties are located in the immediate vicinity of the Central Business District (CBD), where banks and insurance companies are conglomerated. In addition, the location at Quay Park, i.e. close to the waterside, is very much sought after. Also, with regard to the increased sensitivity to issues of environmental compatibility, the properties meet the requirements. They were among the first to apply for Green Star certification for their real estate, which is an environmental certificate that must be rechecked each year.

Pacific Core 1 is primarily distinguished by the 1A location of both properties. At a purchase price for the GE Plaza Building that was 15.5 times the annual net rent and 14.7 times the annual net rent for the BNZ Building, it was possible to buy the properties for a relatively good price. An equally positive highlight are the long-term rental contracts of 12 years as well as the renters with good credit ratings.
The total volume was 157 million New Zealand dollars (approx. 83 million euro). 35.5 percent of this is financed with borrowed capital. An interest rate of around seven percent up to 2018 was arranged for the two loans. The interest thereafter is somewhat lower. Foregoing repayment is nothing to be concerned with in view of the low amount of borrowed capital. However, it increases the dependency of the success of the investment on the sales price, particularly since payouts are subsidised from the liquidity reserves.

Investors can participate as of 30,000 New Zealand dollars (approx. 16,000 euro). The payouts are to increase from an initial six percent to 6.5 percent as of 2015. Investors can be paid out in New Zealand dollars and choose the best date themselves for the conversion to euro.

Source: Fonds & Co