Ngai Tahu businesses where the action is

16:00, Oct 10 2014

South Island iwi Ngai Tahu is chasing large investments in various asset classes, as its footprint through the Mainland becomes ever more visible.

From a half holding in the Christchurch City Council (CCC) building, 100 per cent of Shotover Jet and subdivisions at Prestons Road and Wigram, the iwi's investment arm has a noticeable presence within the landscapes and waterways of the south.

The commercial arm, known as Ngai Tahu Holdings Corp (NTHC), has just reported a bumper profit with the bottomline more than doubling to $160.8 million, though there was a $33m quake insurance contribution to that.

Chairman Trevor Burt says given NTHC's strong balance sheet the company is searching for further assets worth $100m and more.

The earthquakes have hampered some of the iwi's progress, damaging its building stock, and forcing its head office operation out of the city centre to a reconditioned Wigram aerodrome control tower building.

Some of Ngai Tahu's corporate team is at Show Place, Addington.


But detailing the full year financial result this week, NTHC chief executive Mike Sang sits within Burt's paper and document-laden office in Hazeldean Business Park.

Sang says the 2014 profit was significantly helped by NTHC's sales in the residential subdivisions arena. In the 2014 financial year it sold 520 sections up from 276 in the prior year, with the increase mainly due to the Prestons site to the north of Christchurch coming on line.

The Prestons site has early show homes. But Wigram is where the action is, from prospective home owners to weekend drive-bys.

Canterbury Employers' Chamber of Commerce chief executive Peter Townsend says the iwi is now a key stakeholder in the South Island economy with a diverse range of inputs. "It's not just property, it's exporting and tourism, and they're targeting their investment strategy for the long term, which is really good for the South Island."

While Ngai Tahu has "a position where they have access to land the Government puts up for sale", the iwi works much like any other entity, playing a "strong commercial hand".

As Christchurch is rebuilt, cultural diversity and a stronger Maori "look" to the city is emerging, Townsend says.

Ngai Tahu Property's influence will be felt in a project management role with the development of a Convention Centre and precinct project. "We're still nutting through the timeframes, how it will progress, and the details of it. All those discussions are happening at the moment," Sang says.

"[Australian-based developer] Plenary bring a lot of the conjvention centre skills, but there's a lot of commercial development that goes on around . . . the precinct. That's more where our [property development] skillset will play."

Christchurch's former police station on Hereford St and associated land may be developed into "mixed use" apartments and offices, or just a commercial venture, Sang says.

The police base was built in the early 1970s and at the time was the sixth tallest building in the city but is due to be demolished then the site redeveloped, given that Ngai Tahu has settled on a quake-related insurance claim.

"Behind it you've got the town living around the arts precinct. The block can either be used for offices or mixed use.

"[Designers] have a lot of concepts, they're still working through which of the concepts makes the most (economic) sense."

One project that stood up to the quakes was a partnership between the iwi and CCC on the rebuilt civic offices. Located between Hereford St and Worcester Blvd the $113 million project was paid for half and half by the partners.

Little is known about the iwi's Te Puna Ahurea anchor project for iwi-owned land near the Avon River and behind the courts on Durham St.

Infrastructure is another area of interest. There has been talk that Ngai Tahu might pay to take a stake in council investment vehicle Christchurch City Holdings Ltd, as the council looks to release up to $400 million in capital.

Burt says NTHC has been open with CCC about wanting to take a look at those assets that include stakes in the port, airport, broadband service builder Enable and electricity lines provider Orion.

"They tend to be infrastructure assets and if you look at our portfolio we don't really have a major investment in infrastructure and ideally we would like something."

Talks with the council have not formally started, but "they are certainly aware that we there with aspirations to invest in infrastructure assets," he says.

Burt says the size of the investment team including Sang has increased to three with further hires possible as the company does its own due diligence on "intergenerational assets" rather than relying too much on paid-for outside advice.

"He's building a team under the chief investment officer to do more of: how do we find these [assets]?

"We as a board sit here saying we should not be constrained finding opportunities because we haven't got the resource."

Sang says a prime investment worth north of $100m over three years is allocated to land conversion projects. The iwi is reworking two big blocks of forest, the first in Eyrewell - a site that already has all the water and consents needed to develop dairy farms. There are three farms operating profitably occupying about 1200ha on that 6700 hectare stretch, with plans to develop another 18 dairy and support units. Work on developing the next batch of farms has already started.

Water for irrigation was sourced from the Waimakariri with rights consents in place.

On the other big 9000 hectare Balmoral block NTHC was still working on consents and water rights with appeals lodged in the Environment Court.

The iwi is a 29 per cent shareholder in a Hurunui River-based irrigation project along with other farmers in the area.

Burt says the iwi's strategy of creating a diverse cluster of assets is designed for any weakness in a sector. For example, the fall in the milk price over the last six or so months or volatility in other asset classes is of no particular concern.

"It does obviously impact us, but we never planned for the milk price to stay as high as it was," Sang adds. "So like any dairy farmer we take the highs and lows in the milk price and we focus on being efficient."

Rural land was only about 14 per cent of NTHC's total assets and less of its profits.

Another example is an eventual crash in demand for residential subdivision lots around Christchurch. There is probably another two or three years of good demand, Burt estimates.

With the extra asset classes NTHC continues to add or refine board and management structures for these new divisions. The dairy farm group had already been largely split out from Ngai Tahu Property in terms of governance, with a new six-member board chaired by Gil Cox and and a new chief executive to be found.

"As we build the scale of the operations, we'll build the management structures underneath," Burt says.

Likewise NTHC had already put some of its own appointees at the head of Go Bus, following the purchase of the urban bus operator with North Island iwi Tainui earlier in the year.

The Go Bus board will look to grow that business, particularly on a geographic level with public bus routes coming up for tender in Auckland, Sang says.

Last year Ngai Tahu said it was prepared to plough $110m over three years to convert its land holdings, often leased to forestry businesses, to high value agricultural uses. Sang says while this requires capital, the reconditioned land gives a capital gain that is useful to its balance sheet.

NTHC also has land in forestry on different sites along the West Coast that can be developed into farming and hopes to make plans in the next year.

NTHC will continue to scout around for land suitable for residential development, Sang says. "The guys have got their eyes on a couple of options and they're working through those."

Burt says finding suitable new subdivision sites has become harder."Longer term, there will be an inevitable downturn in the market, somewhere along the way. We don't know when.

"There's that delicate balance of how far forward are you looking to landbank, to acquire new land for the future, and what the demand profile will be."

Buying and holding is not a problem.

"Not all our eggs are in the property development basket. That's the beauty of holding a diversified portfolio, if there is a downturn in property development in Christchurch we can weather that across the entire portfolio," Burt says.

Ngai Tahu's Kaiwhakahaere (tribe chairman) Ta (Sir) Mark Solomon says an important measure was the increase in net worth of the wider organisation to more than $1 billion. This figure includes shareholder equity of $987.8m plus other iwi assets including seafood quota. That was a milestone for the iwi which settled with the Crown in 1998.

The corporation distributed a $31.36m dividend to the iwi and that figure is likely to jump towards $36m and $40m plus in the following two years as equity increases, Sang and Burt say. But the iwi takes a long term view on bolstering its assets.

Burt says in his time the investment arm has never had a knockback when it has presented an opportunity to the main shareholder board.

Not every potential investment Sang and his team run their ruler over are necessarily bought.

They have stepped away from a Ruataniwha dam project in the Hawke's Bay, Sang says.

At one point NTHC was working with a regional investment company on the storage scheme for irrigating farmland but became nervous when TrustPower pulled out.

Other investments it has either been keen on or investigated have also failed to pan out. An expression of interest in helping build a Dunedin Hospital did not occur, and a venture to develop a $20m student hostel for Otago Polytechnic no longer has the involvement of NTHC, Sang says.

The Press