CB RICHARD ELLIS

NZ Investment Transaction Monitor

www.cbre.co.nz/research September 2010

Six Monthly Total Investment Sales Volume ($5 Million+)

SUMMARY – FIRST HALF 2010 2.0 200
1.8 No. Sales 180
•Dramatic fall in sales numbers and volumes 1.6
$ Sales
160

Sales ($ Billions)
SALES
•Biggest decline ACTIVITY
in Wellington 2009 1.4 140

No. Of Sales
1.2 120
•A number of significant sales which have large bearing on trends 1.0 100
•Disposal of assets by managed funds a large contributor to sales 0.8 80
0.6 60
•Private purchasers still the most active 0.4 40
•Nearly half a billion dollars of overseas funds has exited NZ p 0.2 20
0.0 -
plproperty over the past two and a half years

The performance of the property market is reflected in a

number of market variables with total transaction volumes
being one of the more prominent indicators. Our analysis
of sales covers transactions over $5 million in the Auckland,
Wellington and Christchurch regions for the various non
residential investment property types. It covers both overall
sales volume as well as a more detailed breakdown of
activity by vendor and purchaser types, property sector and
price stratum.
In the first half of 2010 (for sales above $5 million each)
there were 33 sales totaling $597 million. 2010 has seen
fewer sales compared to 2009, resulting in a lower volume
of transactions. However average transaction sizes have
increased. Transaction volumes are only slightly better than
volumes recorded in 2008 when the market receded and
the actual number of sales is the lowest since 2002.
Altogether, volumes over the past two and a half years
have been well down compared to the years leading up to
the peak of the market in 2007.
AUCKLAND
The Auckland market is the largest, therefore has the
biggest influence on nationwide figures. The number of
sales halved, however due to some large deals, sales
volumes were not hit as hard. There were 26 sales above
$5 million amounting to $463 million.
The largest sale in the first half of 2010 was the sale of the
Deloitte Centre for $177 million. This was sold by
developer Brookfield Multiplex to Sabina Ltd and was the
largest ever sale of a single office building in New Zealand.
The 23,000 sqm tower is leased to Deloitte, Bank of New
Zealand and True Alliance (Lacoste, Ben Sherman,
Rockport and the North Face stores). The sale comes after
being marketed for the past two years and this length of
time indicates the lack of potential buyers in the current
market for large assets despite having strong
fundamentals. This single sale contributed to 30% of the
total sales volume in the first half of 2010.

1H 2010 2H 2009 Six month average over 5 years

Volume Volume Volume

No. Sales No. Sales No. Sales
($mill) ($mill) ($mill)

Auckland $463 26 $675 52 $786 55

Wellington $67 5 $171 13 $202 14
Christchurch $67 2 $37 4 $65 6

TOTAL $597 33 $883 69 $1,053 75

© 2010, CB Richard Ellis, Inc.

 DETAILED SALES ANALYSIS 1H 10

NZ Investment Transactions Monitor MarketView

The next largest sale in the first half of 2010 was Dress
PROPERTY SECTOR
Smart Onehunga for $80 million as part of the $185
The office sector recorded the highest volume of sales
million Lend Lease deal to buy ING Retail Property
above $5 million, accounting for $254 million. The
Fund’s New Zealand assets. Both of these parties are
volume of retail transactions accounted for $244 million.
predominantly Australian owned. The deal included the
The industrial sector has performed worst over the first
acquisition of the Meridian Mall (Dunedin), and Dress
half of 2010 with total sales reaching only $99 million.
Smart outlet stores in Onehunga (Auckland), Tawa
Office sales have historically accounted for the highest
(Wellington) and Hornby (Christchurch).
proportion of sales, followed by industrial. However with
a number of shopping centres transacting in the first half
WELLINGTON
of 2010, the volume of retail transactions has been
Over the first half of 2010, total sales volume totaled
higher than industrial.
$67 million, well below the $171 million over the
second half of 2009. The largest sale in the first half of Sales By Property Sector
2010 was the sale of Morrison Kent House for $33 300

million. This was a mortgagee sale and was purchased

250
by the Farmers Trading Company. The Lambton Quay Sales ($ Millions)
200
Farmers store operates from retail portion the 23 storey
office building. The sale of two properties in Lower Hutt 150

by DNZ to Oyster Group were also a large contributor. 100

These were the sale of the Lower Hutt Bunnings store
50
and 266-274 High Street, which is leased to the Ministry
-
of Social Development and ACC.
Office Retail Industrial

CHRISTCHURCH LOCAL/FOREIGN VENDORS & PURCHASERS

Sales activity for property above $5 million also totaled
$67 million in the first half of 2010. This was the result
of two large retail sales. The largest was the sale of
South City Mall on Colombo Street for $34 million. It
was sold by Brookfield Multiplex to South City Holdings.
The mall includes anchor tenants, The Warehouse and
New World Supermarket. The other significant sale was
the sale of Dress Smart Hornby for around $33 million
as part of the $185 million Lend Lease deal to buy ING
Retail Property Fund’s New Zealand Assets.
In the first half of 2010 there has been a large outflow of
foreign funds in New Zealand property. This is largely due
to the sale of assets by Brookfield Multiplex (Australia). The
trends over the past two years are in stark contrast with the
period between 2006 and 2007, when there was a net
inflow of nearly half a billion dollars worth of foreign funds
into New Zealand property. However since then, nearly
half a billion dollars of foreign funds has flown out of New
Zealand property through ownership changes of physical
assets.

City By City Sales Volumes Comparison Net Inflow of Foreign Funds into NZ Property
1,800 300
Christchurch
1,600 Auckland 250
1,400 Wellington 200
150
Sales ($ Millions)

1,200
Sales ($ Millions)

100
1,000
50
800
-
600
-50
400 -100
200 -150
- -200
September 2010

© 2010, CB Richard Ellis, Inc.

 due to developers making up a larger proportion as a

NZ Investment Transactions Monitor MarketView

VENDOR & PURCHASER TYPE PROFILES
result of the sale of The Deloitte Centre by developer
Looking at the profile of vendors, “Other Managed Brookfield Multiplex.
Funds” have been dominant. This is predominantly due
to large sell downs by Brookfield Multiplex and ING Looking at purchasers, investors account for 87% of
Retail Property Fund. We have classified DNZ as a sales volumes. Owner occupiers are the next largest
managed fund, however since their recent share market sector with 9%. Like in the past 2 years, developers once
listing, they will be classified as a listed property trust in again account for a very small proportion of the
the future. Private vendors contributed to 25% of all purchasers.
transactions, while mortgagee sales are still occurring,
Vendor Purpose Type
but make up only a small proportion of total sales at 5%.
Developer
40%
The majority of the active purchasers in the market have
once again been private. As a result of Lend Lease’s (ASX
listed) purchase of a number of shopping centres, listed
Owner
property trusts have featured, contributing 22% of total Occupier
2%
transaction volumes. The remaining transactions have Other
6%
been purchased by other managed funds, corporations Undisclosed
1%
and syndicates.
Investor
51%
Vendor Ownership Type
Purchaser Purpose Type
Private Developer
25% 2%

Owner
Occupier
Mortgagee In 9%
Possession
Other
5% Undisclosed
Managed Fund
66% Other 2%
1%
Undisclosed
1% Investor
Government 87%
2%

Purchaser Ownership Type

PRICE STRATUM
Syndicate
3% In the first half of 2010 there has been a large fall in
Undisclosed
2% transaction numbers across all price stratums. As the
Corporation chart shows below, transaction numbers are also well
4%
Private
65% below those in 2008 when the number of transactions fell
significantly.
Listed Property
Trust
22% Sales By Price Stratum
45
Other 1H 08
Managed Fund 40 2H 08
4%
35 1H 09
VENDOR & PURCHASER PURPOSE PROFILES 2H 09
30 1H 10
No. Sales

We also classify each party of the sale according to the 25

nature or purpose of their activity. Vendors who have 20

15
held for the purpose of investment account for half of
10
the total transaction volumes. This is significantly lower
5
than the average of 75% over the past two years and is
September 2010

0
$5-10 mill $10-15 mill $15-20 mill $20 mill +

© 2010, CB Richard Ellis, Inc.

 NZ Investment Transactions Monitor MarketView
FOR MORE INFORMATION PLEASE CONTACT:
CONCLUSION
Greater uncertainty and loss of sentiment around the CB Richard Ellis
Research & Consulting
economic outlook contributed to a loss of momentum in
the property investment market. Added to this, Zoltan Moricz, Senior Director
uncertainty over tax changes prior to the 2010 budget zoltan.moricz@cbre.co.nz
made many buyers hold back. With commercial Craig Wong, Senior Research Analyst
property being less adversely impacted than many craig.wong@cbre.co.nz
expected by the tax changes, some of the prior hurdles in AUCKLAND HAMILTON
the investment market have waned. However, a large Level 14, 21 Queen Street Cnr Te Rapa Road & Forest
Auckland 1010 Lake Road
proportion of the properties offered on the investment PO Box 2723 Hamilton 3200
market are of weak fundamentals and most potential Auckland 1140 PO Box 1330
T 64 9 355 3333 Hamilton 3240
buyers have not been prepared to take on the risk these F 64 9 355 3330 T 64 7 850 3333
properties carry. Sales of larger assets remains difficult F 64 7 850 3330
WELLINGTON
as indicated by the lack of concluded sales for a number ASB Bank Tower SOUTH AUCKLAND
Level 12, 2 Hunter Street 7A Pacific Rise
of properties marketed since 2009. On the other hand,
Wellington 6011 Mt Wellington
cashed up private individuals with preferences for certain PO Box 5053 Auckland 1060
Wellington 6145 PO Box 11 2241 Penrose
property types in lower price stratums are willing to pay a T 64 4 499 8899 Auckland 1060
premium at yields which only provide slightly better F 64 4 499 8889 T 64 9 573 3333
F 64 9 573 3330
returns than risk free alternatives to property. The CHRISTCHURCH
proportion of mortgagee sales has been relatively stable PwC Centre NORTH AUCKLAND
Level 6, 119 Armagh Street Unit 8, 35 Apollo Drive
at around 5% of total transaction volumes for each of the Christchurch 8011 Mairangi Bay
PO Box 13643 Auckland 1080
last three 6 month periods. This may increase as
Christchurch 8141 PO Box 33 1080
receivers work through the complexities of some larger T 64 3 374 9889 Takapuna
F 64 3 374 9884 T 64 9 984 3333
holdings and portfolios. Also, with the seasonal trend of F 64 9 984 3330
more activity in the latter part of the year we could see
the number of sales increase in the second half of 2010.

PLEASE NOTE
•This report covers the sale of physical assets and excludes the
purchase of equity stakes in holding companies.
•Due to the complexity and confidentiality of large
transactions, details of transactions will often surface months
after they take place, therefore transaction details will be
historically adjusted when new details surface.
•For our analysis, transaction date reflects the unconditional
date announced by the parties concerned.
•All detailed sales analysis is based on total sales volumes,
apart from analysis of price stratum, which is based on sales
numbers.
This publication is intended for general guidance only and no responsibility is accepted by CB Richard Ellis for any omissions or errors. The
information contained herein should not be relied upon to replace professional advice on specific matters. This publication is the subject of
copyright protection. All rights reserved. No part of this publication may in any form or by any means (electronic, mechanical, photocopying,
recording or otherwise), be reproduced, stored in a retrieval system or transmitted to any other person, without our specific written
September 2010

permission.

© 2010, CB Richard Ellis, Inc.