NZ Super Fund makes its first direct investment in local hotels
Thursday, 18 July 2019
The Government fund investing to pay for the pension in the future is making a $300 million local hotel investment including three established hotels and plans to develop more.
It is the NZ Super Fund's first direct investment in hotels in this country. It is a 'phased investment' from which the fund will invest further in the tourism sector.
NZ Super Fund invests worldwide and in New Zealand to build a national nest egg to help fund the pension in the future.
Its partners in this tourism investment venture are the Russell Group of companies, one of New Zealand's largest privately owned and operated construction and property businesses, and the Lockwood Group, a private investment group.
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The hotel portfolio was established by Russell Group and Lockwood Property Group who had been looking to sell the three hotels - Four Points by Sheraton and Adina Britomart in Auckland and BreakFree Hotel in Christchurch.
NZ Super Fund head of direct investments Will Goodwin said the country was short of hotel rooms to cater for future growth in tourism and the fund had been considering opportunities to invest in New Zealand's tourism sector.
'This partnership will give the NZ Super Fund exposure to New Zealand's fast-growing tourism sector, diversify our investment portfolio and help support the industry's strategic objectives.
'New Zealand needs additional hotel accommodation to support both growing domestic tourism and international arrivals. There are clear capacity constraints in this sector and we look forward to working with our partners to identify opportunities for future growth,' Goodwin said.
Tourism employed one in seven people here and was the country's largest export industry in terms of foreign exchange earnings.
Total tourism spending in the year to March 2018 was $39.1 billion, 7.7 per cent higher than the previous year.
New Zealand needed another 4500 rooms by 2025. Auckland needed the most, up to 4300 additional hotel rooms, but only 2500 were projected to be built, according to a report commissioned by NZTE (New Zealand Trade and Enterprise), 'Project Palace'.
Russell Group managing director Brett Russell said the venture created an opportunity for a strong New Zealand-owned portfolio in the hotel and tourism sector.
The group was delighted to partner with NZ Super Fund and to see the assets remain in local ownership.
Lockwood Property Group's Steve Lockwood said it was an opportunity for future growth in the sector, a major motivation for the deal.
Under the arrangement, two joint ventures had been created - one to own the properties and the other to manage the properties and identify future opportunities.
Russell Property Group's latest hotel project is QT Auckland due to open in 2020.
Colliers International's specialist hotel advisor Dean Humphries played a key role in the introduction of the parties and negotiations. He said the $300m was the indicative value of the current portfolio.
Tourism consultants Horwath HTL have warned of an oversupply of hotel rooms with just over 3000 due to hit the market in 2019 and 2020.
Humphries said he could not comment on Horwath's report other than to say their numbers were different from Colliers'.
Russell Group and Lockwood had the expertise to develop hotels. Hotel development required a lot of capital and the deal enabled them to stay involved in the industry.
It was New Zealand's largest ever off-market transaction, Humphries said. Quality New Zealand hotels were rarely traded and many were owned by offshore interests.
The portfolio of three hotels made it the sixth largest hotel group in New Zealand measured by room numbers, Humphries said. The Four Points has 255 rooms, the Adina 160 and BreakFree 263.
Top six hotel owners in New Zealand measured by room numbers
1. Pandey Corporation with more than 2300 rooms across 18 hotels.
2. Colwall Group, Hong Kong-owned, with almost 1600 rooms across eight hotels.
3. MCK (Millenium, Copthorne, Kingsgate), a subsidiary of Singaporean company CDL, with about 1450 rooms.
4. Scenic Hotels with about 1450 rooms.
5. Distinction Hotels with 1300 rooms.
6. Russell and Lockwood's three hotels portfolio with 678 rooms and another 150-room QT Auckland hotel under construction.