Waikato Business News August/September 2020

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8 WAIKATO BUSINESS NEWS August/September 2020 CONVERSATIONS WITH MIKE NEALE OF NAI HARCOURTS HAMILTON Should I sell my commercial property – Or is there a better way? There have been some interesting discussions over the last month or so with commercial property owners looking to make decisions – should I sell up and put the money in the bank, enjoy life and remove any stress that the property may provide in the future? Most are close to or at retirement age and whilst not needing the money for anything in particular, are looking for a passive income and not wanting to leave the family with future issues that a commercial building may have. This is an actual example from a discussion we had with an owner about a fortnight ago. Building: Returning circa $65,000pa plus GST and Outgoings Building Age: 1990s Sale Value: circa $1,100,000 plus GST (if any) They have owned the building for over 20 years and it’s now freehold with no debt. The reason they are considering selling is that recently there have been a few dramas over Covid-19 and while a reliable local tenant is in place, there are now challenges with the rental being paid. If they were to sell and put the money in the bank at a return of say 1.50 percent, Mike Neale - Managing Director, NAI Harcourts Hamilton. it would provide a return of $16,500 per annum before tax. The Better Solution? May well be to retain the property and get it professionally managed. Why and how would this work? • Based on the current net rental it currently provides a return of 5.9 percent. • Even at the current 50 percent rental being paid, it provides a net return of 2.95 percent. • In many cases the ADLS Lease provides for the landlord to recover the cost of the property management from the tenant. Even if management expenses are not recoverable (at say 6 percent), the above returns would still be 5.55 percent or 2.77 percent respectively. This is significantly better than the returns in the bank. Another Important Element To Consider? There is no capital gain on the money held by your bank – in fact, allowing for inflation, it is quite the opposite. As an example, this particular property has doubled in value over the last 15 years. There is increasing talk by pundits that with the quantitative easing programme and very low interest rate environment, we are likely to experience asset price inflation over the next few years, i.e. the value of the assets, will increase as we see increasing competition for income-producing assets, due to the alternative of low returns from bank deposits. So, if you are selling because you don’t want the management hassle and compliance issues, or worried about leaving it to family members in the future, then this may just be worth consideration. If you don’t need the capital for anything in particular, but prefer or would be happy to maintain the cashflow, this is definitely worth serious consideration. Yes, buildings will require future capital expenditure and even allowing for the occasional vacancy, the combination of the returns and future capital gains, make property a compelling investment both now and in the future. As one of my colleagues once said, “only in Holland are they making more land”- you can guess where he originates from. All assets have some element of risk associated with them – some will remember the Bank of New Zealand being bailed out in 1989/1990 and the share market crash of 1987 – and real estate is no different, but it is an investment in something tangible - bricks and mortar. A great property manager is key to success in real estate. - Robert Kiyosaki of the book, ‘Rich Dad Poor Dad’. I will at this stage give a plug for Greg Wills who heads our NAI Harcourts Property Management division (there are others out there too). Greg has previously managed one of Hamilton’s most challenging assets – Centre Place shopping mall. This experience has left him with not only the technical skills and facilities management experience, but the ability to deal with a wide range of tenants and the various personalities that are often the most challenging aspect of property management in my view. He would be happy to talk to anyone considering their options – so on a no obligation basis, give him a call on 021 896 585. NAI Harcourts Hamilton Monarch Commercial Ltd MREINZ Licensed Agent REAA 2008 Cnr Victoria & London Streets, HAMILTON 07 850 5252 | hamilton@naiharcourts.co.nz www.naiharcourts.co.nz MODERN INDUSTRIAL WITH ALL THE FEATURES! 8A De Leeuw Place, Te Rapa Park, Hamilton • High stud industrial building of 1,357sqm approx. • Tekplas as tenant returning $180,441pa plus GST net, until October 2021 • Fully fenced concrete yard, two entrance ways • Designed for B-train movements around the building • Canopy for off-loading, dangerous goods area • 3,844sqm (more or less) of industrial zoned land De Leeuw Place is part of Te Rapa Industrial Park; a well-established premier industrial estate. The property has good exposure to Te Rapa Road, and is close to Hamilton’s main city arterial routes and Expressway interchange junctions. Close by are The Base Shopping Centre (NZ’s largest bulk retail centre), also Te Rapa Gateway Industrial Estate and Pukete Industrial Estate. Nearby neighbours include Alsynite One NZ Limited, Awards Trophies & Engraving, Bridgestone Tyres and Crown Worldwide Movers to mention a few. Deadline Private Treaty: 4pm, Thursday, 1st October 2020, NAI Harcourts, 678 Victoria Street, Hamilton Theo de Leeuw 027 490 3248 theo.deleeuw@naiharcourts.co.nz Borders are indicative only Owner Occupiers and Investors take note, do not miss this opportunity. Inspections are recommended. Full information memorandum available on request. Mike Neale 027 451 5133 mike.neale@naiharcourts.co.nz Monarch Commercial Limited | MREINZ | Licensed Agent (REAA 2008)
WAIKATO BUSINESS NEWS August/September 2020 9 Rebuilding and reimagining the future of tourism Unfortunately, the recovery of our visitor sector took a step backwards with the lockdown of the Auckland region. Auckland is our biggest drive market from a corporate and leisure travel perspective, and we immediately saw the cancellations of bookings for the next two to three weeks. TELLING WAIKATO’S STORY > BY JASON DAWSON Chief Executive, Hamilton & Waikato Tourism Adding to our woes was the return of Alert Level 2 for the Waikato region, which led to the postponement or cancellation of large events, and the return of physical distancing and compulsory contact tracing. Up until the change in alert levels, we were starting to the see the benefit of increased domestic visitors into the region, as well as the lift in expenditure. We are all hopeful that this is just a short-term blip on our Covid-19 recovery journey. This time of year has traditionally been a quieter time for the region with regards to tourism, and is giving us the time to rethink the future of our sector for the short and long-term. There is no doubt that some parts of New Zealand were under significant pressure from visitor numbers leading to issues around over-tourism and eroding the social licence to operate around the country. Here in the Waikato, we still had the space to disperse domestic and international visitors around lesser known places of our region, plus our shoulder season events calendar was growing. However, we still had challenges around transport connectivity, mobile phone black spots, a shortage of large-scale commercial accommodation in Hamilton, Waitomo and Matamata, and the inability to introduce regional visitor levies to fund key infrastructure in our destination communities. The Tourism Futures Taskforce has been established by the Government to help us use this ‘circuit-breaker’ of Covid- 19 to reassess and reimagine a sustainable tourism sector that actively contributes to the wellbeing of our communities and creates added-value experiences for our domestic and international visitor market. The Taskforce will advise on what changes New Zealand can make to the tourism system and make long-term recommendations to address the long-standing productivity, inclusivity and sustainability issues present in some part of the sector. For Waikato, we were already ahead of the pack by adopting our Tourism Opportunities Plan in 2016. This two-year project involved a range of community, industry and iwi consultation to identify our key game-changers, plus identify opportunities to increase the ‘value vs volume’ challenge for the region. We will use this plan, and our achievements to date, as a foundation to implement a destination management approach for the Waikato and broaden the scope of community involvement, plus align to the many regional strategies and plans to ensure an integrated approach is fully realised. Developing a destination management framework will also raise a number of issues, challenges, ideas and solutions which we can feed into the Tourism Futures Taskforce as they seek wider contributions from around New Zealand. The big question to be addressed in this work is how will we successfully co-curate a future for tourism in Waikato that benefits everyone. We were also succesful in attracting funding from the Strategic Tourism Assets Protection Programme (STAPP) for regional tourism organisations based on the retention of our existing local government funding. This additional funding will make up the significant shortfall of industry investment from our tourism operators, accommodation providers, tour and transport businesses, suppliers plus the events and venues sector. The STAPP funding will help us deliver 27 projects over the next 12 months under the three Government priority areas for investment – domestic marketing, industry capability building and destination management. Out of the 27 programmes of work, 11 are collaboration projects with other regions which border the Waikato. Examples include touring route development with Ruapehu and Taranaki, partnering with Auckland on a joint venture campaign, plus rolling out a regenerative tourism programme across the Central North Island. We look forward to updating you on the progress of these regional projects over the coming months as we rebuild and reimagine the future of our tourism. Hamilton & Waikato Tourism is the regional tourism organisation charged with increasing international and domestic leisure and business travellers, expenditure and stay. The organisation is funded through a public/private partnership and covers the heartland Waikato areas of Hamilton City, Matamata-Piako, Otorohanga, South Waikato, Waikato, Waipa and Waitomo Districts. Find out more: www.waikatonz.com Experience care as it should be, experience the Braemar way. Authorised by Timothy Grigg, 160 Willis Street, Wellington. Jamie Strange for Hamilton East Braemar Hospital is one of the largest private surgical hospitals in New Zealand, and it’s here in Hamilton. With more than 100 world class specialists, 10 state-of-the-art operating rooms, 84 beds including 32 private rooms, at Braemar you’ll receive the highest level of care. Choose the very best. Choose Braemar. braemarhospital.co.nz If you would like to discuss anything, or find out more information, please contact me: jamie.strange@labour.org.nz /jamiestrangemp /jamiestrange_mp Let’s keep moving
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Waikato Business News August/September 2020

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