Download Issue 22 of PMG's newsletter, Property Line.

This quarter's issue has the following articles of interest:

• Populist Politics
• The benefits of a commercial property fund structure
• Meet our investors - Adrian & Linda Baker
• How to spot a legitimate investment company
• PMG opposes the TCC rates differential
• Health & Safety compliance - Asbestos
• Meet the new additions to our team
• Find out what we've been doing in the community

We had a great day at our annual PMG Golf Day at the Omanu Golf Course, the rain held off and a great mix of clients, professionals and service providers all polished off their clubs for a round of golf.

Congratulations to Team Stellar  (aka Jafas) who took out top honours on the day. Final standings were:

1st - Stellar (Jafas)

2nd - AB's Team

3rd - Berry's Bashers

Thank you to all our valued friends who made the day a success.  Thanks also to Cooney Lees & Morgan for keeping us sustained with the bbq, thanks to Wai and the team at Omanu for your hospitality and of course thanks to the great team at PMG who made it all happen. 

As we head through the early part of 2018, there are some very important trends emerging and playing out. I will address these and, please, bear with me on some of them as I believe they will be affecting our lives for some years to come.

The USA got off to a good start, and despite the return of a bit more volatility as shown by the recent correction, most forecasters are predicting a good year,  but not a stellar one. There is a good deal of exuberance in the US stock market and many commentators are expecting earnings to grow.

The World Bank is predicting global growth of 3.1%*, again, not spectacular but something we need to get used to in a global environment of low inflation.

There are housing bubbles in Canada, Australia and China, although the latter appears to be stalling at present. Property bubbles are always a cause for concern as they always involve leverage and, as 2007-2009 showed only too clearly, once people are unable to service the debt, the dominoes start to tumble.

For me, the biggest threat to stability and progress around the world is the spectacular rise in populist politics.  

A lot of this is a backlash against decades of globalisation as evidenced by the rise in Protectionist Policies. Ironically, this is happening at a time when the US is stepping back from its traditional role of global leader and guarantor of what is being called the Pax Americana.

Since the end of WW11, the world has had the US enforcing the spirit of free trade, but I suspect those days are gone. The benefits of Globalisation have not been evenly distributed and we are now seeing the backlash.

Globalisation has, since the 1970s, seen the transfer of millions of jobs from the US to emerging countries and that has changed the relative value of capital and labour the world over. One of my favourite historians, Niall Ferguson, has said that around 40 million Americans lost their jobs in the GFC (Global Financial Crisis) and the backlash is starting to be felt.

The same story is playing out in Europe where populism is on the rise as a backlash against the EU, who have completely ignored the massive concern shown by many member states over both the EUs mismanagement of the financial crisis, and its apparent failure to stop over a million people entering its member states in an uncontrolled fashion.

As examples:

• Austria has elected a 31 year old anti-immigration candidate as Chancellor.

• Italy’s Populist Five Star movement are leading in the polls for the March 4 election.

• German Chancellor Angela Merkel won the election but, four months later, hasn’t been able to form a government because of the strong showing by the populist Alternative for Germany party.

Ferguson believes it is the beginning of the end for the EU and I suspect he’s right. So, when you start to see the rise in populism coupled with a rise in protectionism, you can well expect disruption in the markets.

Meanwhile, back in “Shortland Street”, business has typically not reacted well to the election of a Labour-NZ First Government, with polls** showing a sharp drop in business confidence. To be fair, this is nothing new, as 2000 was a particularly bad year for business following on from the election of the Clark-led government in 1999.

What was different then was that they then had seven years of arguably the best economic times in decades to mitigate the perceived negativity. They will certainly not have that this time around.

With so much uncertainty and a low inflationary environment, it’s hard to see any current justification for a hike in interest rates. However, with Labour clearly signalling their desire for higher wages, this will feed through into the economy and generate some inflationary pressure possibly resulting in interest rate rises.

So, some very interesting trends to watch out for, all of which only reinforce the need for a defensive portfolio approach and diversification.

Denis McMahon, Director
 

In 2017, Kiwis lost a combined total of $10.1m dollars in reported scams online, according to Netsafe – NZ’s online safety organisation. Of that number, the single biggest loss was an investment company scam which resulted in $480,000 being defrauded .   

At PMG our vision is to be NZ’s most trusted funds and property managers, here are our tips on how to sort the wheat from the chaff:

TIPS

1. The Manager of an investment scheme should be approachable, so speak to them directly about the investment(s) they offer.
2. If you have been targeted on or offline by an unfamiliar investment opportunity, do your research about the entity and the directors behind it first.  If they don’t have a website or it’s very basic (i.e. does not look professional), that’s your first red flag that it is not legitimate.
3. If you know them, search the names of the directors and management team in Google, LinkedIn and / or Facebook, to give you a level of comfort these individuals are real. 
4. If an investment firm or scheme does not comply with any of the following points then you should question the providers/managers and the offer. You can also check with the regulating body, which in our case is the Financial Markets Authority (FMA).

• Is the investment firm licensed by a regulatory body? The FMA provides a database of licensed product providers, funds managers, and investment schemes that investors should check.
• Does the firm have a statutory supervisor in place? Most investment providers are required to have one. 
• Does the firm or scheme follow stringent anti-money laundering and counter-financing of terrorism rules which include identity verification and proof of the source of funds for new clients? 
• Does the manager issue a product disclosure statement (PDS) or information memorandum (IM) for all retail and wholesale investment offers and /or schemes which are required by the FMA?
• Does the scheme manager have audited financial accounts? If so, check with the accounting firm who did them, to ensure they did indeed prepare the accounts for the scheme.
• Will the provider or manager provide the names and contact details of existing investors who have invested with the firm for a substantial period of time?  PMG would happily do this.
• Does the manager offer a registered dispute resolution scheme, like PMG provides?
• How long has the scheme manager been in existence and how are they are remunerated? i.e. there should be an incentive linked to the scheme’s performance and track record
• What level of transparency does the manager provide on the performance of the investment(s)?

Adrian & Linda Baker

- Taking time back

It was nearly 20 years ago when Adrian Baker’s father Lloyd placed his funds and trust with PMG.  Fast forward to the present day and Adrian and wife Linda have been invested across six of PMG’s managed funds and syndications for over three years. 

Like many of our investors, Adrian and Linda have worked hard to be able to invest in the property and funds they do today.   From the Waikato, they owned and ran a dairy and chicken farm as well as running an electrical business and raising three children.  Following the sale of their electrical business, Adrian and Linda invested some of their funds with PMG and moved to Papamoa.  

Their days are now spent renovating their home, keeping an eye on their property investments, and spending more time with their three children and enjoying fishing, diving, golf, yoga, and travel.  We asked them a few questions about how they have found investing with PMG.

How did you hear about PMG?
My father had been enjoying a hassle-free, sustainable income-generating investment with good returns for 17 years when we asked him for advice about where to invest.  It was upon his glowing recommendation of the PMG team and investment funds that we decided to invest with them.

What were you looking for in an investment?
We were looking for trouble-free investments, so as not to add to the workload we already had alongside the management of other commercial property we owned and were managing personally. Managing commercial property is a full-time job. It takes a lot of time and energy, especially to do it properly and ensure you get the most out of your investment.   

Why did you choose to invest with PMG?
We decided to invest in PMG because as we move towards full retirement we don’t want to manage any more investments. We’d like to take a bit more time back, knowing our investments are being professionally managed by a team passionate about getting the best value and returns for their investors.

The diversified structure of PMG’s funds also offered us an option to spread our investment portfolio across a wider range of investments (or properties) than we could achieve independently.

We also liked the idea that the directors and PMG team make every effort to get to know their investors and are in regular contact with updates on how your investment is performing. 

"We also didn’t want all our

eggs in one or two baskets."

How have you found the performance of your investments with PMG?
Three years ago we invested a large sum across six of PMG’s investment funds and syndicates.  Their financial performance has been consistent and reliable. As a result, we have continued to invest more since that initial experience.

In September 2017, Dr Wayne Beilby joined our growing team as Independent Director to the Group.  Born and bred in Tauranga, Wayne brings to the team extensive management and governance experience in the financial services industry, both in New Zealand and throughout the Asia Pacific region.  

For 15 years, Wayne was part of the executive leadership team for Tower Insurance, including CEO of Tower in Papua New Guinea, and is now managing director of Pacific Advisory Services, a company that provides consultancy advice in a number of areas including governance and risk and asset management.  He has a Doctorate in Corporate Governance and is a Lawyer by profession.  

“I see a lot of genuine care and personal drive by the team to achieve results for clients.  It’s definitely one of the reasons the group performs so well.”

PMG CEO, Scott McKenzie, says Wayne brings a wealth of knowledge in finance, compliance and governance to PMG’s Board and his appointment is part of PMG’s growth strategy.

“In the last 2 years, PMG has grown steadily with a number of successful, large capital raises and property acquisitions, in a sector which has become increasingly regulated. We are delighted to have had Wayne join the governance team of PMG as we continue to grow and build the wealth of our investors and contribute to New Zealand’s productivity,” says Scott.

Wayne decided to join the group because he saw a local company doing well in the funds management space nationally which represented a great fit with his personal kaupapa (values/principles). 

In the five months since joining, Wayne has been impressed by the directors and management of PMG.  

“We have a really good group of energetic, skilled and hard-working directors and managers in the team, with a great mix of experience and age,” says Wayne.

“I see a lot of genuine care and personal drive by the team to achieve results for clients.  It’s definitely one of the reasons the group performs so well.”

“I’m looking forward to working with the Board to help them smoothly deliver measured, quality growth across the group and even better results for clients in 2018 and beyond,” he says.
 

In late December 2017,  the Tauranga City Council voted to approve two changes to the way rates are levied on commercial and industrial ratepayers in the city. 
The Council’s proposal includes the introduction of a rates differential between commercial and residential properties over the next three years.   
If ratified by the Council, it will result in the increase of rates for commercial, industrial and retail properties located in the Tauranga area (including suburban areas).

For some commercial properties it may mean a 60% increase in rates by 2021.

At PMG we’re invested in creating value for people in property. We are supportive of an equitable tax collection across business and residential ratepayers. We believe this proposed increase disproportionately burdens businesses and commercial property owners and is not acceptable. We favour a targeted rating system where those who pay receive the benefit; this works well in many other regions such as the Waikato.

PMG is the manager of a number of properties and looks after over 100 tenants in the Tauranga region. We take this role very seriously and pride ourselves on working in support of local businesses (our tenants), to help them thrive.  Hence, on behalf of our property owners, investors, and tenants, PMG is formally opposing this increase.

PMG is working closely with the Tauranga Chamber of Commerce and the Property Council of NZ to develop a united response to the Council’s plans including engaging in meetings with the Council.

As many of you know, the proposal for a rates differential is not a new concept. The Property Council (formerly BOMA) successfully fought against a similar proposal in Tauranga 15-20 years ago.Other New Zealand cities currently have differential rates, but are in the process of reducing or removing it due to the inequitable burden it places on businesses.  

PMG is in the process of preparing a public submission which it will submit to the Council in March.  

We will be reaching out to a number of you, our property owners and tenants, for input into the submission in February.  
If you have any concerns or questions regarding this, please contact us directly.  For property owners, investors or landlords please contact Scott McKenzie.  For tenants please contact Brian Berry – both are available on 07 578 3494.

With a change to a Labour-led Government in 2017 came the promise of building more homes, reducing foreign ownership, slowing immigration and in the process, a hope to make it easier for Kiwis to own their own home.   

While none of these election promises have come into effect yet, these coupled with tougher landlord conditions, are starting to make residential property investment less attractive.  

Small-time landlords are having to deal with the prospect of a capital gains tax, as well as debt-to-income restriction. There have also been changes to the Healthy Homes Guarantee Act 2017 and there are fears of how methamphetamine contamination could ruin their retirement planning. 

There are also growing concerns around the costs landlords face to make their investment properties compliant with new legislation, as well as promises to tenants from the new Labour Government – particularly the promise to increase the no-reason 90-day termination notice to 180 days.

As a result we are starting to see growing numbers of retail ’mum and dad’ investors looking to sell their residential property investments.
With the above points in mind, it is timely to reflect on the benefits of making a passive investment. PMG’s professionally managed commercial property funds deliver regular income and typically 7% or higher returns without investors having to lift a finger.

As a direct response to investors’ requests for less risk, increased diversity and more liquidity, PMG has organised its real estate investments into dedicated managed funds. Offering multiple, quality properties within single investment funds, creates robust investment vehicles with a diversity of buildings and tenants. 

A diversified fund spreads the risk should one tenant leave a property, or a single property does not perform as expected; the performance of the other properties in the fund minimise the impact. 

Therefore, a fund structure provides strong and more sustainable and reliable cashflows. Diversified portfolios usually mean more investors, which is certainly true in the case of PMG’s investment funds, which in turn generates improved liquidity if you want to sell some or all of your holdings. We recommend approaching your investment in commercial property with a long-term investment horizon. 

From a management perspective, a professionally managed commercial property fund means investors won’t have to change light bulbs, mop up floods, re-negotiate leases or wade through changing legislation to understand the implications for their investment.  

While ups and downs in the market are entirely normal and may cause investors to worry about their investments, it has been shown over time that a diversified portfolio is a good defensive strategy to stay prepared. It has also been shown that investors who switch in and out of investments in an attempt to ‘time’ the market perform worse than those who simply held the investments over time. 

PMG Case Study 
PMG has been managing commercial property for 25 years and are passionate about getting the most value out of a property for both investors and tenants. For example we recently transformed a newly-vacant 5,000m2, single-tenant industrial property into a ten-tenant, mixed used building offering owners less tenant risk and more sustainable income. The property is now fully leased with rental yield per sqm increased by 58% and the property’s valuation by 46%. 

For investors looking to dip their toe in commercial property ownership, PMG has a range of solid unlisted investment funds to consider. Investors may choose from PMG Direct Office Fund, PMG Direct Childcare Fund or Pacific Property Fund Limited - a diversified fund comprised of industrial, retail and office assets.

For those with a greater risk appetite there is also a PMG Capital Fund, a private equity fund which facilitates the acquisition of quality property for our investment funds. (See www.propertymgr.co.nz for more information on our investment funds).

Further, to help ease the pressure of managing investments in a volatile market, it is highly likely that investors will benefit from a diversified, professionally managed fund which will assist longer-term goals such as retirement. 

Daniel Lem, Director

New faces to the Property Management Team ...

To assist with recent growth, including the acquisition of the Kelston Mall, we have recruited an experienced Leasing and Senior Asset Manager, Stephen Williams, as Head of Asset Management and Frances Mitchell to the role of Associate Property Manager. 

Appointments, such as Frances and Steve, have bolstered PMG’s asset and fund management expertise, not just in Auckland, but nationally. Their appointments will ensure we are continuing to deliver exceptional value and sustained growth for our investors and tenants alike.

Meet the new Marketing & Communications Team ...

With an ongoing focus on both looking after our existing customers and welcoming new customers to PMG, we have been fortunate to have Sarah Ramsay join us as Chief Marketing Officer and Michelle Smith as Marketing and Communications Associate. 

Sarah will also be focused on business development in the South Island, given her base in Dunedin. She brings 16 years of experience within the investment and property industries, including 8 running her own marketing consultancy. 

And now for the cutest new member of the team ...

Last, but certainly not least, we also welcomed Reyan Mukherjee, Simi Mukherjee’s, baby boy into the world on December 28th. Many of you will know Simi, our Group Facilities Manager, who is on maternity leave until 30 April 2018.

On April 4, 2018 changes to Health and Safety at Work (Asbestos) Regulations 2016 will come into effect.  

This means all commercial property owners must assess their property(s) and, where asbestos is present, prepare and implement an Asbestos Management Plan. Although most modern commercial buildings are less likely to contain asbestos or asbestos containing materials (ACM), owners should note that a ban on these products only came into effect in late 2016.

What is an Asbestos Management Plan?
The Asbestos Management Plan identifies the risks posed by the asbestos present in your property and sets out procedures to control them. It is a regulatory requirement under regulation 13 of the Health & Safety at Work (Asbestos) Regulations 2016, which utilises the data accumulated from asbestos surveys to manage asbestos risk.

An Asbestos Management Plan will typically include the following;

• Policies and procedures for emergencies, refurbishments, day-to-day operations and for less usual work or tasks.
• Key asbestos information‚ usually from an asbestos survey.
• Risk assessments of each occurrence of asbestos.
• Action plan.
• Monitoring & re-inspection regimes.
• Training requirements.
• Roles & responsibilities.
• Dissemination of information.
• Duties of the asbestos coordinator.

The arrangements within the plan should be reviewed periodically. If you are unsure of where you stand regarding compliance, you can opt for a desktop study from a suitably qualified specialist that will clearly identify any gaps, if they exist, and offer a step-by-step guide to compliance.

PMG is well progressed in carrying out assessments across our entire portfolio. We would encourage any property owner who hasn’t yet begun this process to proceed with urgency to ensure ongoing legal compliance. Feel free to contact Brian Berry in our Property Management team on (07) 578 3494 should you require some assistance.

Brian Berry, Asset Manager (Central North Island)

Whilst PMG’s diversified fund, Pacific Property Fund Limited’s acquisition of Kelston Mall didn’t officially settle until the 14th of December, PMG knew that good Christmas trade was essential for the Mall’s retailers.

To ensure no interruption to trade and help kick PMG’s management of the mall off with a bang, permission was sought from the incumbent manager to engage with retailers early and get things off the ground from 1 December.

The promotion’s objectives were to increase foot-traffic through frequency of visits, gather valuable research from the community, and build a database from which to base future promotions.

“In a very short space of time we workedin with the Mall’s retailers and launched an effective Christmas “Shop to Win” promotion. It was the first time the mall had run a promotion of this type, and after just one week we had to print another 10,000 entry forms as interest in the promotion generated so much demand from the community”, explains Associate Property Manager, Frances Mitchell.

Being the new owners and managers of the mall, engagement with the community and retailers was paramount. “We have found the support and feedback from the Christmas promotion to be outstanding from the retailers, including Countdown, one of our anchor tenants,” adds Frances.

The promotion was a team effort, with Chris from Kelston Pharmacy pitching in to collect competition entries, and helping to coordinate members of the community and staff to feature in the new branding.

As part of the brand revamp of the Mall, PMG set out to freshen-up the look and feel of a shoppers’ visit to Kelston Mall, through signage and have also created a new website and Facebook page. Signwise pulled out all the stops to print and install the signage throughout, including banners, posters and a Christmas entry booth.

Visit www.kelstonmall.co.nz to get a feel for what the team have achieved in such a short amount of time.

MEDIA RELEASE

AUCKLAND, February 14 -  Today Property Managers Group’s (PMG) diversified fund, Pacific Property Fund Limited (Pacific Property), announced it has acquired a large industrial warehouse in Tauriko in Tauranga taking the total number of properties the company owns to double digits.

The property at 8 Paerangi Place is a newly-built 5085m2 space leased to NZSKP (NZ Specialty Kiwifruit Products Limited), which develops kiwifruit products for export to Asia. With a favourable lease term of 15 years this acquisition takes the portfolio’s weighted average lease term to 8.0 years and total assets to $123.2m.

CEO of PMG, Scott McKenzie, says the acquisition is in line with Pacific Property’s strategy to grow a diversified portfolio of quality industrial, retail and office assets predominantly across the Upper North Island.

“This recent acquisition is a strong and attractive addition to the robust line up of Pacific Property’s assets increasing the industrial warehouse weighting within the portfolio,” says McKenzie.

“With nine other properties owned by the company and following the purchase of Kelston Mall in December, Pacific Property was able to leverage its scale to acquire this impressive warehouse without the need to raise additional capital,” he says.

Pacific Property is one of the largest unlisted commercial property funds in the country, not including private trusts.

“PMG has a range of diversified commercial property portfolios for investors to invest in and as one of New Zealand’s most trusted property funds managers we offer a highly-personalised and friendly service for those looking to invest in property or have their property(s) professionally-managed,” says McKenzie.

“We’d love to talk to new investors and property owners about the opportunities and services we currently have available,” he says.

The few months between Property Line issues has been the busiest in history for PMG. Not only did we oversubscribe the $15m July capital raise for Pacific Property Fund a week early, but we are thrilled to have filled our biggest ever capital raise to date - $44m across two offers (read more page four). We’ve also hosted our first series of investor roadshows, opened our Auckland office, and successfully rolled out our new property health and safety management application, Forsite.

And that’s just what’s happening within our control, which segues me to Brexit, President Trump, and most recently the devastating Kaikoura and Wellington earthquakes of 14 November 2016. Whilst investors can factor in planning for major geo-political changes such as Brexit and President Trump, it is difficult to plan for the consequences of natural disasters. And simply avoiding regions or property on the whole is not the answer, as such events have an impact across all markets.

Instead, at PMG we believe in diversifying as a measure to manage risk. This was the strategy behind the launch of Pacific Property in 2014 and now with the launch of PMG Direct Office Fund. By diversifying across property types, tenant types and regions, investors aren’t as exposed as if they had all their funds in one property should the unexpected happen – such as losing a major tenant, or at worst earthquake damage as we have seen in recent years. Furthermore, by pooling investors together we are creating scale with the potential to act as a secondary market – creating greater liquidity.

Finally, as our esteemed roadshow presenters also shared, New Zealand is well insulated from the world’s unrest. We have low inflation, low interest rates, steady growth and a booming tourism sector. It is also well known that property in New Zealand is seen by investors globally as an attractive place to invest– which is in part driving the record breaking home values in regions such as Auckland and Queenstown. The commercial property sector in particular is well poised to leverage the current environment threefold – it is not as prone to the fluctuations of the residential property sector; is well poised to leverage improved business confidence which in turn drives growth and demand for quality premises; and continues to provide sustainable returns to investors seeking better yields than interest rate driven term deposits and global property trusts.

Scott McKenzie
Chief Executive Officer & Director

As one of New Zealand’s most preferred and trusted private property and fund managers, we are thrilled to have recently offered and filled two new investment opportunities to the market. Our latest two offers raised a combined total of $44 million across two investment portfolios that Property Managers Group will manage, including the established Pacific Property Fund Limited and a new dedicated office investment scheme, PMG Direct Office Fund.

The combined raise was the largest offer Property Managers Group has presented to the market in our 24-year history, three times more than previous raises we have taken to market. With these offers we are proud to provide investors the ability to gain access to diversified portfolios with numerous buildings and tenants at relatively low entry points.

The new PMG Direct Office Fund brings together a portfolio of solidly performing office properties largely across the Auckland and Tauranga regions. It offers investors sustainable returns and excellent capital growth potential through proactive management focused on building refurbishment and leasing. The offer was fully subscribed with $28 million of investor capital raised.

With the office market performing so well, particularly in Auckland, it gave us great pleasure to present PMG Direct Office to the market. We are delighted to cater for our investors who have told us they want greater diversification and more sustainable returns. By placing multiple properties, rather than one, into a managed investment scheme which provides greater exposure to more buildings and tenants, our investors achieve greater diversification and improved likelihood of sustainable returns.

Eight properties have initially been acquired by PMG Direct Office Fund, offering diversification both geographically and across 50 tenants. The Fund is targeting a gross distribution return of 7.50% per annum for the first full year to 31 March 2018. PMG intends to introduce further dedicated funds to the market in due course.

Sixteen million new shares in Pacific Property Fund Limited, the largest investment portfolio Property Managers Group manages, were also offered to the market. The funds raised were used to assist with the acquisition of a logistics industrial hub in the central North Island (Stag Park), a CBD retail property in Whangarei leased to Farmers for 15 years, and a mixed-use commercial and retail property in the heart of Tauranga’s CBD.

As with the PMG Direct Office Fund, the assets Pacific Property recently acquired offer investors geographical and category diversity, with Stag Park and the Farmers acquisitions representing significant redevelopment and value-add opportunity.

Since its establishment in 2014, Pacific Property has had a clearly defined strategy of investing in industrial, retail and commercial properties predominantly within the ‘Golden Triangle’ of Auckland, Hamilton and Tauranga. We’re thrilled to be bringing three additional quality properties into Pacific Property with this latest offer, targeting a strong and sustainable gross dividend return of 7.20% per annum for the full financial year to 31 March 2018, and delivering greater liquidity.

Nearly 30 per cent of the funds raised came from investors who are new to Property Managers Group and who have not invested in any of our investment portfolios previously, while nearly $32.5 million was raised from existing investors.

The average investment taken up, as part of the combined offer, in PMG’s Pacific Property was $183,000 per investor.  The average investment taken up in the new PMG Direct Office Fund per investor was $160,000.

Subscription to both PMG Direct Office Fund and Pacific Property are now closed. If you would like to be first to know about future offers, please do not hesitate to contact either Matt McHardy on 07 929 7109 or Mat Harvie on 09 280 3469 , or email info@propertymgr.co.nz.

The following article featured in the NZ Herald on the 17th of December. You can see the article online here.

Tauranga-based Property Managers Group has closed its largest combined offer, raising more than $44 million in five weeks across two of its managed investment portfolios, says chief executive Scott McKenzie.

The portfolios are Pacific Property Fund and a new dedicated office managed investment scheme, PMG Direct Office Fund.

The capital raised was three times more than previous offers the company has taken to market, said Mr McKenzie.

"Nearly 30 per cent of the funds raised came from investors who are new to Property Managers Group and who have not invested in any of our investment portfolios previously, while nearly $32.5m was raised from existing investors," he said.

Property Managers Group plans to settle the 11 acquisition properties before Christmas, with three properties added to Pacific Property's existing portfolio, and eight going into the new PMG Direct Office Fund.

Pacific Property will acquire the former State Insurance building at 46 Spring St where it has its Tauranga office, and Stag Park, an industrial logistics hub in Taupo.

The third acquisition is Pacific Property's first acquisition in Whangarei, which is tenanted by the Farmers Trading Company on a new 15-year lease.

Pacific Property director Denis McMahon said Pacific Property's assets offered investors geographical and category diversity, with Stag Park Taupo representing a significant redevelopment opportunity.

"We're thrilled to be bringing three new properties into Pacific Property," he said.

Pacific Property is targeting a gross dividend return of 7.2 per cent per annum for the full financial year to March 31, 2018. The Direct Office Fund is targeting a gross distribution return of 7.5 per cent per annum for the first full year to March 31, 2018.

Mr McKenzie said investors had told the company they liked the fact that it managed all of its properties in-house.

I have been reflecting for some time now of my time as a child, when I used to save 50 cents per week through the ASB 1080 Club. Some of you might recall Kashin, the Asian elephant whom ASB gifted to the Auckland Zoo in 1972. Kashin became the key advertising symbol for ASB and it didn’t take long for her to become a star attraction at Auckland Zoo for generations of young New Zealanders. Kashin is a play on the words “cash in”, but it also means “compassionate” in Hindi.

The elephant-shaped moneybox (which ASB has now re-incarnated into a digital moneybox linked to parent’s smartphone banking apps), is an ingenious idea to encourage good savings habits in kids, as an elephant never forgets. It got me thinking that with bank deposit rates so low, why not encourage people of all ages to invest (rather than save) small amounts often, in order to achieve the higher returns that commercial real estate can offer?

We can take note of Stephen Covey’s5 advice to “start with the end in mind”. Well, with the recent announcement by the Government that it will raise the retirement age in 20 years to 67, most of us and certainly our children, in the end, will need either a moneybox of funds to live from or have created a passive income which will replace our salaries when we are no longer able to work. While there are many strategies to get you there (including winning the lottery) - these are the only likely possibilities.

Smart people make calculated investments and experience tells me that the compounded effect of low-risk small investment over time (such as investing in commercial property portfolios), will far outweigh oneoff singularly large investments of a higher risk.

This brings me back to education and why we should be encouraging and teaching our younger generations how to invest in their future. Going forward, PMG will be working on a number of initiatives geared towards assisting Kiwis into generating wealth for themselves and their families and we’ll share our efforts with you.

Next time you sit down with your loved ones, I encourage you to have a conversation around what they are doing towards their financial future.

Daniel Lem

Director & Head of Investment

In July’s Property Line, I shared some of PMG’s milestones over the past 25 years and the significant strides we have made in the last four years in particular. After 25 years as pioneers in commercial property investment and management, we are very proud to be recognised as one of the most established and trusted unlisted property and funds managers in the country. In early October, we celebrated those 25 years with many of you at events in Auckland and Tauranga. You can see photos from the celebrations on page 6 & 7.

I’d like to acknowledge and thank so many of you who have been with us from our early days, many of whom now have their children and grandchildren invested with us. 

Our strategy over this time has remained the same: to deliver long term sustainability and value growth for investors through proactive management and innovative portfolio diversification.

The current PMG offer in the market, is a testament to our strategy. Upon closing the offer, our largest investment portfolio, Pacific Property Fund Limited, will become one of the most robust and largest unlisted property portfolios in the country.

Looking forward to 2018, while some are predicting a few storm clouds ahead, with PMG’s diversified strategy we know we are in a great place to weather any rainy days well. PMG has proven its stability by surviving two major economic downturns in the last 25 years.

The next few years bring some interesting challenges for New Zealand as a nation and for many business sectors including real estate. Advances in technology, new innovations and global players such as Amazon coming into the market will mean many organisations will need to change the way they do business. Some say that the property sector has, to date, been largely untouched by technology and digital disruption, and while to an extent this might be true, at PMG we have been planning for it for some time. We’ve asked ourselves the tough questions and what it means for our business, our investors, partners and tenants. Some of these include the following:

•    With the predicted arrival of Amazon in NZ, which have publicly said it will undercut all retail sectors by 30%(1), what will this mean for New Zealand retailers, shopping malls and the retail property sector?

•    With the retail offering changing and more online shopping likely, what does this mean for industrial property? Does warehousing need to be located in city hubs or can they be based in the regions where land is cheaper?

•    How will people want to use office space in the future? In 2018, Millennials (those born between 1981 and 2000) will become the largest age group in the workforce, and by 2025 they will become three quarters of the global workforce(2). They have different ideas about the ways they like to work, including more flexibility, less contractual commitments, co-working space, hot-desking, mobility and placing more emphasis on culture and working for organisations with a social conscience. What does this mean for future office space and property management services?

•    With $78.7 billion invested in ‘responsible investments’ in NZ alone in 2016, how and what will investors want to invest in, in the future?

•    Uber have a target to have a fully autonomous self-drive fleet by 2030(3), just 13 years away. What’s to become of the inner city carparking building, when cars don’t need to park in town any longer?

What is certain about the future is that change will continue to be a constant and the rate of change will increase. This is why PMG has developed a diversified fund and portfolio structure to generate the autonomy to anticipate these changes, preserve investor value, and proactively take steps to add value. 

Unlike many of our competitors  PMG has kept, grown and improved an in-house property management division, to ensure our investors’ assets are receiving the best care and oversight. 

PMG has stood the test of time over the past 25 years by asking ourselves the tough questions and addressing them front on. It’s one of the reasons why we will be here for the next 25 years and beyond. I look forward to sharing the journey with you.

Scott McKenzie
CEO & Director

Source 1
Source 2
Source 3

Since the Global Financial Crisis (GFC) in 2008 the world has become a different place. Regulators have quite rightly tightened their watch and compliance demands on the financial and investment industry, to the extent some organisations have found it difficult to survive and investors have been more cautious. 

Despite this, New Zealand has enjoyed a strong economic base for business and property.

We’ve also seen Brexit, Trump and North Korea’s threats. Economic and geopolitical uncertainty and volatility is the new norm, fueled by a continuance of central bank expansionary monetary policy, ongoing low interest rates, and asset inflation. 

The world has not seen this set of circumstances before. For New Zealand, our view is when it comes to investing it makes good sense to plan for if or when the clouds come rolling across the horizon – which we know is cyclical.

So how should investors proceed in times of such global uncertainty? 

The most common and time-tested strategy is to simply make a beeline for “safe haven” assets. 

Gold, treasury bonds, certain real estate investments and defensive stocks like utilities, healthcare, biotech and consumer goods are usually the top picks. 

However, these investments also come with their own challenges. The return on treasuries or some of these defensive stocks can hardly be termed as tempting. Investing in real estate can itself be a risky option and often requires substantial time investment to analyse the underlying asset first.

As a response to the changing economic and geopolitical environment, PMG has proactively focused on greater diversification for its investors. 

The focus has been to deliver a greater spread of risk, sustainable distribution returns with improved levels of liquidity versus standalone investment properties. PMG now offers a number of dedicated investment property funds with multiple properties diversified by sector, geography and industry segments. 

Acquiring quality properties within a property investment fund creates a robust investment vehicle with geographic and tenant diversification. This provides strong and more reliable cashflow and underlying returns.

PMG’s investment funds provide investors with greater choice and the opportunity to spread their risk across multiple properties which they may not otherwise be able to gain access to.

Commercial property investment has merits in that several investors can join smaller investment parcels together and buy shares or units in a fund. At the time of writing, all of PMG’s investment funds are generating gross cash distribution returns of between 7 and 10% per annum which is considered competitive in the current market. Investors also benefit from the feel good ‘bricks 
and mortar’ factor and a sector which has performed well in recent times.

While ups and downs in the market are entirely normal and may cause investors to worry about their investments, it has been shown over time that a diversified investment portfolio is a sound strategy to balance risk and returns. It has also been shown that investors who switch in and out of investments in an attempt to ‘time’ the market, perform worse than those who simply held the investments over time. 

At PMG, we’re focused on providing greater diversification through creating portfolios of sector or segment – specific properties and achieving strength through economies of scale – we believe this is now essential in managing investment risk and is something a number of our investors have said they enjoy.

Where will you put your hard-earned money?

Daniel Lem
Director & Head of Investment

Disclaimer

The views and opinions expressed in this article are those of Daniel Lem solely. This is not personalised investment advice and readers should always consider taking professional advice before making any investment decision. 

We are pleased to announce that Pacific Property Fund Limited (Pacific Property), has a new offer to the market which will see the property investment portfolio become one of the largest in New Zealand, not including private trusts.

Pacific Property is issuing 24 million shares under the offer at an issue price of $1.02 per share, with a minimum investment of 20,000 shares and parcels of 10,000 shares thereafter. The target cash distribution return is 7.20 cents per share for the full year to 31 March 2019.

Currently Pacific Property has a total asset value of $74.3m under management; this latest offer and acquisition will increase its value to $114.6m. The funds raised, alongside bank borrowings, will be used to acquire the Kelston Shopping Centre in West Auckland. 

Director of Pacific Property, Denis McMahon, says he is delighted to see Pacific Property reach such a milestone.

“It was our strategy from the outset to grow Pacific Property into the largest unlisted diversified property portfolio in New Zealand,” McMahon says.

“An investment vehicle of this size and diversification provides our investors with strong, sustainable returns over time, growth in value over time, and improved liquidity and we are proud to be delivering on our promises,” he says.

Pacific Property is a diversified investment portfolio of industrial, retail and office properties spread across locations including Whangarei, Auckland, Hamilton, Tauranga and Taupo. 

PMG CEO, Scott McKenzie, says this latest offer cements Pacific Property as a significant and robust investment vehicle in New Zealand and recognises PMG’s successful management approach.

“In today’s rapidly changing global economic environment, influenced by technological disruption and geopolitical risks, customer demand and the market for your product can change quickly,” says McKenzie.  

“This is one of the main reasons why PMG has focused on building Pacific Property into a highly diversified investment portfolio, which offers greater autonomy to anticipate market changes and adapt quickly.”

“Having multiple tenants and multiple properties in an investment portfolio means total income is less likely to be as affected by the loss of a single tenant or an unforeseen event. This results in more reliable and sustainable returns, attracting more investors to invest, which then results in providing greater liquidity for the underlying shares,” he says.

“We also maintain a conservative level of bank gearing compared to other peers in the market. This ensures the portfolio is well positioned to weather any economic clouds that may roll across the horizon and better look after our investors’ interests,” says McKenzie.

Pacific Property’s purchase of the Kelston Shopping Centre will take the total number of properties it owns to nine, which will include a total of 75 tenants (with a 97% occupancy rate) on a weighted average lease term (WALT) of 7.53 years. 

“Located on the corner of two main arterial routes in West Auckland, just off the South Western Motorway and only 15 mins to the CBD, Kelston Shopping Centre represents an excellent opportunity to add further value for Pacific Property,” says McKenzie.

“The surrounding area is now predominantly designated under Auckland’s Unitary Plan as Terrace Housing and Apartment Buildings and the population is forecasted to grow by close to 30% in the next 15 years, ” says McKenzie.

Anchored by three major tenants, Countdown, Mobil and McDonald’s, and supported by 32 smaller specialty, medical, food, beverage and convenience stores, PMG plans to undertake strategic improvements to the Centre and will look to offer more health and community services-related tenants, with a medical centre taking up a lease in the Centre from November 2017.

Those investors interested in the offer can download the Product Disclosure Statement (PDS) and register their interest online (www.propertymgr.co.nz), contact the selling agents, Matt McHardy on 07 929 7109 (in Tauranga) or Mat Harvie on 09 283 0222 (in Auckland), or email info@propertymgr.co.nz.

Alternatively, the PDS and its accompanying documents are available online at  www.business.govt.nz/disclose (OFR 12122).

The offer formally closes on 22 November 2017. 

I joined the PMG team at the end of 2016. I am excited to add value with my extensive administrative experience, to a growing, successful team. Both my organisational skills and great time management are highly appreciated by the team and our clients!

What were your previous roles?
Prior to starting with PMG, I immigrated from South Africa in 2007 and took up a position at KPMG Chartered Accountants as a personal assistant to two Partners, two directors, various managers, and a rapidly growing team of accountants. My key responsibilities included risk management administration, administration of office systems and processes, company office administration, maintenance of a large client database, as well as the role of a personal assistant.

How did you hear about PMG?
Property Managers Group was a client of KPMG and I was involved in a few pieces of work for PMG. I also kept in touch with Nigel Lowe, PMG Chief Financial Officer when he moved across from KPMG to PMG.

What attracted you to working with PMG?
Nigel had spoken about the great team environment, and the directors’ enthusiasm, drive, and professionalism. I wanted to be part of a hardworking, high performing team with good values and genuine relationships with its clients.

What do you bring to the PMG team?
The AML /CFT space is rapidly changing and I aim to a provide our investors with a simple step-by-step process to getting compliant. I always aim to make it easier for our customers to do business with us by providing efficient and high-quality service.

What are you passionate about?
I love hanging out with my children (Matt 23 and Que-ann 19) – whether it be going out for breakfast together on a Saturday morning or having them over for dinner and board games. I love my sport (hockey, netball, yoga, lawn bowls) and being outdoors. In summer, most evenings you will find me walking up the Mount.

I joined the PMG team in March 2017 in the Auckland office to take on the role of Sales & Investment Manager. PMG has a fantastic work culture and strong focus on client satisfaction. This combined with a growing workforce and client base, is great to be a part of!

What were your previous roles?
Whilst completing my Bachelor of Commerce in Dunedin, I was lucky enough to represent Otago in cricket for 8 years. As a working professional, I worked for ANZ and BNZ with my most recent roles being to manage customer relationships and to improve profitability and customer satisfaction. These roles enabled me to get a strong understanding of deal structuring, business drivers, managing cashflow and how to best deal and manage market forces with businesses typically turning over $10-50m.

How did you hear about PMG?
I was introduced to PMG through a previous cricket team mate – Nathan McCullum. Long story short, after meeting the team and understanding PMG’s vision it’s a decision I am very pleased to have made.

What attracted you to working with PMG?
The people and the quality of investment options. The diversified investment funds that PMG offer has the best interests of investors at heart. When you are being trusted with investors hard-earned money it’s important to believe that what you are offering is sustainable and that investment risk has been well managed
– PMG’s investment funds model does just that.

What do you bring to the PMG team?
Energy and an attitude to give it 100%. I have been lucky to meet and work with many successful businesses and professionals in Auckland. I look forward to growing the PMG footprint in this region and beyond.

What are you passionate about?
Spending time with family and friends, fishing and golf. I am always looking to learn, and currently I am training to be an Authorised Financial Advisor on top of my day job. I also have two kids under 4 years of age, so you could say I’m a busy father!

PMG’s Head of Sales & Investment Products, Matt McHardy, is a familiar voice and face to many loyal PMG investors. You may have recently heard from him on two new PMG offerings, PMG Capital and PMG
Direct Childcare Funds.

For the last two years he’s been the voice on the phone or in presentations and meetings discussing PMG’s investment opportunities.

Since joining PMG in 2015 Matt has worked tirelessly to shape and enhance PMG’s relationship management processes and services for investors, with great results.

Quickly establishing relationships, Matt has become the dedicated point of contact for investors to get information on PMG products, and has developed a robust secondary market which has significantly improved investors’ ability to liquidate their investments.

“Our recent investor surveys show that not only are our investors happier with the level of care and attention we are providing them, but that they are investing more with us more regularly than before, and we are also receiving more referrals from them,” says Matt.

“This is really humbling. Ensuring we are delivering on our promises to our loyal existing investors is the most important element of my team’s role.”

“We’re also thrilled to be placing an even greater focus on delivering exceptional, investment services to investors with the recent appointment of two new members to PMG’s sales and investment team,” says Matt.

Experienced business banking professional, Mat Harvie, (yes there are now TWO Mat(t)s in the team) joined PMG at the start of 2017 as sales and investment manager.

His role is to support the growing interest in PMG’s offerings from investors in Auckland and Northland. Based in PMG’s Auckland office in Newmarket, Mat Harvie has come from a strong corporate banking career with BNZ and ANZ, where he looked after large business clients.

Mat has a strong network of investors in the Auckland region and brings to PMG exceptional and professional relationship management skills and an in-depth understanding of financial products.

Sally Lavis also joined PMG in the Tauranga office in late 2016, as Compliance and Administration Associate, supporting Matt and Mat and specifically helping PMG investors navigate their way through the anti-money laundering requirements.

“Sally’s role is key to removing some of the pain points for investors when it comes to complying with anti-money laundering legislation,” says Matt.

Originally from South Africa, Sally spent the last decade at KPMG in Tauranga. Sally is renowned for her strong client relationship, communication, and time management skills as well her exceptional ability to multitask. Her process driven mindset makes her the perfect fit for the Compliance and Administration Associate role.

While the sales and investment team is charged with bringing in new business for PMG, the most important remit for the team is, first and foremost, to ensure our existing and loyal investors are given the first priority and care.

If you are interested in hearing more from PMG’s investment sales team about PMG Direct Childcare or any other PMG offering, please contact Matt McHardy in Tauranga on 07 929 7109 or Mat Harvie in Auckland on 09 283 0222.

We are pleased to announce that we have secured an unconditional agreement to purchase the Kelston Shopping Centre in West Auckland for one of our diversified investment funds, Pacific Property Fund Limited (Pacific Property).

Secured as an off-market acquisition, it is the largest single purchase in PMG’s 25- year history. We will be offering interested investors the ability to participate in a new Share Offer by Pacific Property in September, following the registration of a Product Disclosure Statement (PDS).

Head of Sales & Investment, Matt McHardy, says Kelston Shopping Centre presents an exciting opportunity for investors.

“Located on the corner of two main arterial routes in West Auckland, just off the South Western Motorway and only 15 mins to the CBD, the surrounding area is now predominantly designated under Auckland’s Unitary Plan for further intensification,” says McHardy.

“This means a greater density of homes can be built around the shopping centre. Auckland Council has identified Kelston as a key suburb to facilitate intensification over the next decade which will have a positive impact on the centre.”

“The Kelston Shopping Centre’s immediate primary catchment area is expected to grow by 29% to 42,000 by 2043. Within this catchment, local resident purchasing power is estimated to increase 17% from $780 million in 2014 to $910 million in 20234,” says McHardy.

Investors wishing to indicate their interest to participate in Pacific Property’s Share Offer, to assist with the acquisition of the Kelston Shopping Centre, can contact PMG’s Head of Sales and Investment, Matt McHardy on 07 929 7109, or Sales Investment Manager, Auckland, Mat Harvie on 09 283 0222.

DISCLAIMER
Pacific Property Fund Limited is seeking preliminary indications of interest in a proposed offer of shares (offer). Indications of interest may be registered by contacting Matt McHardy or Mat Harvie.
Indications of interest will not involve an obligati ffer. If the Offer is made, it will be made in accordance with the Financial Markets Conduct Act 2013.
The selling agents are not providing personalised advice. As such, prospective investors are recommended to seek professional advice from an authorised financial adviser which takes into account
their personal circumstances before making any investment decision. The selling agent will make a copy of the Product Disclosure Statement and Adviser Disclosure statement available for all
prospective investors on request and free of charge.

PMG Direct Childcare Fund launches as part of PMG’s portfolio diversification strategy.

You may recall in the March edition of Property Line, I tackled the issue of how we can prepare and help family members and future generations build their own wealth. This is in a world where the costs of living are skyrocketing, in large part thanks to house prices, with ‘experts’ commenting that younger generations are very unlikely to own their homes in the future.

For me this all comes back to education. Providing a safe, nurturing, engaging and quality learning environment from an early age is essential to creating a love for lifelong learning and attainment. I believe a quality education should be accessible to all New Zealanders.

As a business PMG recognises the importance of education from a young age and is thrilled to announce the launch of PMG Direct Childcare Fund. Its launch is in direct response to the shortage of quality early learning centres which currently exists, particularly in our main cities. In rapidly growing urban areas, parents are demanding new and purpose-built facilities, evidenced by growing waiting lists as parents return to work sooner.

As mentioned in March the NZ Government is also investing in early learning through the provision of subsidies and has committed an additional $396 million in the 2016 budget to fund care for an extra 14,000 children by 2019/2020 (1). This takes the total investment in the sector from $860 million in 2008 to $1.8 billion in 2017.

PMG Direct Childcare Fund is partnering with experienced planners and developers to acquire or design, build and proactively manage purpose-built, industry-leading early learning centres nationwide. PMG has secured two new-build early childhood education properties (with a third in the wings) to be acquired by the Fund, in Auckland and in Christchurch. These will be run by two of the best and most experienced childcare centre operators in the country.

The Fund is now open to eligible wholesale investors and is offering up to 10 million units to be issued at $1 per unit. We are targeting a strong year-one gross distribution return of 6.5cpu* per annum for the full financial year to 31 March 2019. The Fund is targeting a 10%** internal rate of return for the full financial year to 31 March 2019.

We’re thrilled to be providing parents, grandparents and clients the opportunity to invest in the education of the future generation - a cause many of us are very passionate about.

The centres within PMG Direct Childcare Fund will be innovation-led centres, purpose-built from the ground up, both in terms of facilities and interior as well as from an educational perspective. This means the operators can focus on delivering exceptional learning opportunities for youngsters in their care.

The centre operators will be secured on long-term lease contracts to provide secure and stable income for investors.

The PMG Direct Childcare Fund is part of PMG’s wider strategy to provide a diversified portfolio of funds. This ensures our investors enjoy greater choice, improved liquidity, and long-term sustainable returns – a strategy that we’ve been successfully deploying for over 25 years.

The Information Memorandum (IM) for PMG Direct Childcare Fund is available to existing and new eligible wholesale investors and the offer formally closes on August 11, 2017.

To receive copies of the IM or to register your interest see www.propertymgr.co.nz or contact Matt McHardy on 07 929 7109 (in Tauranga) or Mat Harvie on 09 283 0222 (in Auckland) or email info@propertymgr.co.nz

Source 1

DISCLAIMER
*Target distribution return for the full financial year to 31 March 2019 stated net of expenses but before tax and performance fees, fair value derivative gains/losses and asset revaluations. The payment of distributions is at the discretion of the Manager and is dependent on a number of factors, including meeting appropriate solvency requirements and successful completion of the development of ELE properties being owned by the Fund. Distributions are, therefore, not guaranteed and no distributions are expected to be paid for the full financial year to 31 March 2018.

**Equivalent annualised internal rate of return net of expenses but before tax and performance fees for the full financial year to 31 March 2019. The projected gross distribution is indicative only. The return is not guaranteed by any person. Eligible wholesale investors refers to persons who fall within the definition of “wholesale investor” under the Financial Markets Conduct Act 2013. Further information on the definition of “wholesale investor” will be set out in the information memorandum which will be provided on request to prospective investors. The Fund is not open to retail investors. Property Managers Group is seeking preliminary interest in the Offer. Indications of interest can be made by contacting the Sales and Investment team. No money is currently being sought and no investment interests can be applied for or acquired. No indication of interest will involve an obligation or commitment to acquire the financial products being offered. Prospective investors are recommended to seek professional advice from an Authorised Financial Adviser, which takes into account their personal circumstances. The Sales team is not providing personalised advice.

Compliance: “The act of conforming, acquiescing, or yielding. Cooperation and obedience; compliance with the law is expected of all.” http://www.dictionary.com/browse/compliance

Whatever the meaning, for most, compliance means a heck of a lot of work, crossing t’s and dotting i’s, checking, authenticating, verifying and timeconsuming paperwork. And, if one thing is for sure, it’s here to stay.

Regardless, when it comes to investing, compliance with the law is paramount. It ensures ethical processes are undertaken, investors funds are protected and there is transparency by all.

PMG Chief Financial Officer, Nigel Lowe, says PMG takes compliance very seriously.

“Over the past six months we have invested in strengthening our in-house risk and compliance team and have worked hard on developing a robust process to alleviate some of the compliance pain for our investors,” Nigel says. “We’ve used technology to streamline the rigorous ‘form-filling’, that is required under the new anti-money laundering (AML) laws which came into effect last year, to speed up the process and prevent repetition for our investors who make more than one investment with us.”

“A large part of my role since joining PMG last year has been to reinforce our capabilities in this space. We’ve hired Sally Lavis in the role of Compliance and Administration Associate, who is dedicated to helping PMG investors navigate their way through the anti-money laundering requirements. We know we’re making it easier for our investors as a result,” he said.

In January 2018, the AML regulations will be extended to include lawyers, accountants and financial advisors, meaning they will be subject to the same scrutiny when advising and investing on behalf of clients.

“PMG has just been audited by an independent auditor who has given us an excellent rating when it comes to our compliance processes,” says Nigel.

“We know our practices are right up there with best practice and we have the skills and systems in place to also help professional advisors manage their compliance processes when these new laws extend to them next year,” he says.

Last year PMG became one of only a handful of unlisted property and fund managers to attain a ‘Managed Investment Scheme’ Licence from the Financial Markets Authority. This means investors can rest assured PMG is being managed with absolute integrity, transparency, and is invested in continuing to provide exceptional governance across all of our investment offerings.

If you would like more information on PMG’s compliance and AML processes please contact Sally Lavis on sally.lavis@propertymgr.co.nz or 07 578 3494.

DISCLAIMER
The views and opinions expressed in the article are those of Nigel Lowe solely. This is not personalised investment advice and readers should always consider taking professional advice before
making any investment decision

Over the last two years PMG has been through some exciting and significant changes to improve the value we bring to the funds and properties we manage.

The total focus of these changes has been to grow the value of our clients’ investments, while ensuring we respond effectively and proactively to changing market and regulatory conditions.

Below is a brief recap of our journey as a management company and the changes we’ve implemented over the past two years.

2015
• Daniel Lem joined PMG as Director & Head of Investment bringing a number of properties to PMG’s portfolios, as well as his skills in asset acquisition and project management.

2016
• PMG invests further in technology and systems to improve efficiency and manage increasing compliance requirements and costs.
• Nigel Lowe joined PMG as Chief Financial Officer to strengthen PMG’s in-house finance team.
• Single-property syndications transitioned into Fund structure.
• Largest single capital raise achieved by PMG - $45m.
• PMG became licensed as a manager of Managed Investment Schemes by the Financial Markets Authority (FMA)* – one of only a handful of New Zealand companies to do so.

What does our journey look like going forward?
In 2017 PMG’s investment strategy remains the same: To deliver long term sustainability and value growth for investors through proactive management and portfolio diversification.

Given global economic uncertainty, volatility and a continually changing geopolitical landscape, focusing on greater diversification is now essential in managing investment risk.

Our strategy to achieve greater diversification is to create a range of sector or segment specific property investment portfolios. Within each investment portfolio we acquire multiple quality properties offering a diversity of buildings and tenants, which creates a robust investment vehicle offering greater economies of scale, more reliable cashflows and improved liquidity.

Over recent years the cost of property acquisitions has increased due to increasing compliance, due diligence and capital raise costs. This is consistent with our peers in the industry. PMG’s strategy to establish and grow a portfolio of sector or industry specific investment funds, using economies of scale to acquire larger assets, or multiple assets together, results in keeping overall establishment costs down, and therefore improves value for investors.

PMG’s innovative selection of property portfolios caters for the differing needs of investors, providing greater choice, value and reduced risk through improved liquidity, diversification and sustainable income over time.

What does this mean for existing PMG managed investment portfolios?
For PMG’s diversified fund (Pacific Property Fund Limited), our strategy is to grow its market value to around $250m through acquiring quality properties over time, whilst maintaining a sustainable return and achieving growth in value. Our research shows that this size will provide the best relative and sustainable return to investors, as well as reduced risk and improved liquidity.

To date the year-on-year performance of Pacific Property has consistently exceeded expectations, and we are optimistic about delivering increased and sustainable returns as we continue to grow our asset base.

For PMG Direct Office Fund, our aim is to grow the Fund’s market value to around $250m also, a value which will provide the optimum number of investors and level of
autonomy within the fund.

Finally, this month’s launch of PMG Direct Childcare Fund is an exciting new offering by PMG, which provides investors with an alternative investment choice, with secure and competitive long-term returns, as well as the chance to participate in the future of New Zealanders – a cause we know many of our investors are passionate about.

PMG Capital Fund is a property, private equity fund established to create value through shorter term transactions and facilitate the acquisition of quality properties into our investment funds to hold for the long term. With a transparent and defined exit strategy, the creation of PMG Capital Fund represents a win-win scenario for PMG’s investors.

In summary
As a management team, PMG is 100% committed to ensuring investors achieve their investment goals and believe our strategy, in-house property and funds management team, and investment portfolios will continue to deliver on these goals.

We operate an open-door policy to all our investors and encourage you all to comeand see us or pick up the phone and tell us about your investment objectives. It’s our mission to create value for people in property, through strategic investment and build lasting relationships you can trust. I look forward to hearing from you.

Scott McKenzie
Chief Executive Officer & Director

*Property Managers Limited is licensed under the Financial Markets Conduct Act 2013 to manage Managed Investment Schemes (excluding managed funds) (‘schemes’) which invest in, or own, real property in New Zealand.

In 2012¹ the Government set itself the goal of ensuring 98% of all children, aged between three and five years old, attend a quality early learning centre prior to starting primary school. It committed $80 million over four years to achieve this, which included providing subsidies to early learning centres to ensure their fees were affordable.

However, by the end of 2016 this target of 98% was not reached. In our view, more needs to be done to invest in our future generations. In response to a growing need for more early learning centres, PMG has entered into a partnership with a specialised early learning centre planner and developer to establish quality childcare properties across New Zealand.

PMG Director and Head of Investment, Daniel Lem, says PMG will create a dedicated childcare property fund comprising of multiple centres across New Zealand. “PMG Direct Childcare Fund is part of PMG’s strategy for diversified investment offerings,” says Daniel. “We’re pleased to be able to provide another alternative investment choice for our investors, as well as the opportunity for them to contribute to the education of young New Zealanders - a cause so many of us are very passionate about.” “The Fund is also part of a wider PMG initiative to use the skills that we have, as property professionals, to help tackle issues in the community,” he says.

PMG Direct Childcare Fund will be underpinned by experienced childcare operators on long-term lease contracts, and will provide secure and stable income for investors. Our partners are experts in connecting existing operators with suitable sites for early childhood education, as well as project and development management. Early learning centres reinforce what children are learning at home and in the community. They provide experiences in numeracy, literacy and science, but through the child’s preferences and choices in free play. While time in a loving, secure home is vital to their development, learning in a new environment gives children a chance to make friends, master new skills and learn to trust people outside of their family. “For PMG this is all a part of helping to support the welfare, education and prosperity of New Zealanders in the longer term,” says Daniel.

For further information about PMG Direct Childcare Fund please contact Matt McHardy at our Tauranga office, matt@propertymgr.co.nz.

Matt McHardy

Authorised Financial Advisor

While we are already one quarter through 2017, I wanted to both reflect on 2016 and share some projections for 2017. In 2016 PMG raised $65 million across three offers, culminating in our largest capital raise of $44 million in December. I will remember 2016 as a year of feeling very humbled by the huge amount of support we received from our investors throughout all three offers. I’d like to personally and sincerely thank our valued investors - some of whom have invested with PMG for 25 years - for their interest in PMG’s portfolios, and for putting their faith in us as property and fund managers. We don’t take that trust lightly and will do everything in our power to ensure you get the most out of your investments with us.

I’d also like to acknowledge our partners and suppliers who helped us achieve so much in 2016. Despite global volatility, last year was a great year for the New Zealand economy. The NZ share market (NZX50 Gross Index) returned 8.8%, bonds (BNZ 090) returned 5.15% (as at Feb 17), term deposits increased 3.5% (one year) to 4.2% (five years) and the IPD Property Index showed 13.9% (total return) for 2016. The cash yield for property trusts were also up with Argosy returning 5.9% (as at Feb 2017), Goodman Property Trust 5.2% (as at Feb 2017) and Property For Industry 4.7% (as at Feb 20171). Our own Pacific Property Fund Limited had an annualised cash return in 2016 of 7.36% ($2.2m of distributions).

Global economic predictions for 2017 paint a similar picture of volatility (although uncertainty has become the new norm in macro-economics). Global bank UBS has identified five main risk areas for 2017:

1) Trumponomics – non-delivery on Trump’s promises.

2) Rising protectionism by a number of western countries.

3) Geopolitics.

4) Populism leading to European disintegration.

5) Withdrawal of central bank support².

Despite this international picture, New Zealand has a strong economic base and the outlook remains strong for business and property. The events to watch that could affect New Zealand’s economy this year are the liquidity of New Zealand banks (as they manage their own balance sheet funding to comply with APRA and Reserve Bank requirements), a possible trade war between China and the US, and any more Eurozone uncertainty. However, as positive net migration continues to occur, with more Kiwis coming home (or not leaving), New Zealand will see ongoing asset price inflation.

We will also see the local commercial property market remaining strong and buoyant. This thinking was recently reconfirmed when the room was completely full at Collier’s commercial auction³ on 9 March 2017. At the auction, assets under $10 million were hotly contested achieving yields between 5.2% and 5.8%. This local and global picture reinforces to me that PMG is on absolutely the right track with diversification as our focus, including diversification within our existing funds, as well as launching new funds for different property categories.

Economist and business professor, John Kay, was recently quoted saying “get rich slowly” and “stay rich, once you are”⁴. Diversification across commercial property is an excellent mechanism to achieve this as part of an investor’s overall investment portfolio approach. Overall, NZ is well placed in the global context. While volatility and uncertainty does offer risk, having a longterm investment strategy based on diversification in commercial property, we believe 2017 will be a positive year for the country, PMG, and our investors.

Scott McKenzie

Chief Executive Officer & Director