7 Aug 2023
At PMG, we are currently focused on increasing investments targeted towards wholesale capital markets, which enables us to identify and take advantage of niche, counter-cyclical opportunities that arise during challenging market conditions.
Most recently, we acquired the 96a Trig Road property in Whenuapai, Auckland, where we aim to undergo a private land change. Subject to a successful change, we believe this will provide investors with a holding income and growth in value over time. This acquisition is a big milestone for PMG, seeing us bring the first genuine private equity offering to the NZ market with a focus on investing in counter-cyclical property transactions.
Our GM of Investments, Daniel Lem, shares more about PMG's hands-on investment and management strategy, which has enabled us to be agile enough to take advantage of opportunities in the challenging current environment, but also enabled us to build this agility on strong foundations that deliver continuous long-term growth and regular returns to our investors.
The next few years in investment will undoubtedly be complex because of pressures we're seeing globally, high inflation, supply issues and high interest rates resulting in smaller discretionary incomes unlike anything we’ve seen in a long time. While the global environment will remain challenging in the near term, PMG has a 30-year history of transacting real estate through market cycles and is able to pivot its strategy accordingly.
Shifting the focus to wholesale
At PMG, our immediate focus is on increasing investments targeted towards wholesale capital markets, what most of us refer to as high-net-worth individuals, who have experience in investing and can demonstrate that they are aware of and can carry that higher degree of risk.
Focusing on this market means we can offer a slightly different product and we’ll look to acquire assets that have value-add opportunities, as we can raise wholesale capital more readily. Once re-positioned, we will then look to sell these assets into our retail Funds when market conditions improve. As always, our investment horizon remains long-term.
When talking about 'value-add opportunities', we refer to assets that are currently undervalued but have the potential to generate higher returns later. We are seeing several opportunities coming to the market where vendors have taken on too much risk and are being forced to sell.
This could be a property where vacancy has increased due to economic conditions and is currently undervalued, but with the benefit of good asset management, it is well-positioned to achieve long-term value. Alternatively, a property which needs re-development, but where the cost and programme variables of carrying out that development carries increased risk, but the possible returns following the development are substantially higher.
Secondary industrial space
As the economic environment changes, we see several distressed opportunities coming to the market. The industrial sector in general has performed strongly over the last five to ten years and rental growth has been significant.
The traditional ‘prime’ industrial space is expensive, highly contested and sought after and offers few value-add opportunities. However, secondary industrial rents are pushing up strongly due to a lack of supply in both the prime and secondary sectors. The latter is providing value-add opportunities with plenty of rental potential and in some cases un-used development rights which PMG will seek to exploit in the near term.
Large-format retail sector
The large-format retail sector which traditionally has an anchor tenant like a supermarket amongst other retail stores also offers opportunity.
Having the expertise to reposition and redevelop within an operating retail environment can offer a lot of potential value, like we are currently
seeing in Bethlehem Town Centre.
Office sector
There has been quite a bit of anti-office sentiment since the pandemic, but PMG has a long-term positive outlook for the office sector. There has
certainly been a gravitation of tenants toward buildings which provide a high level of amenity such as collaboration spaces, end-of-trip services, cafes and bookable meeting rooms.
The “tenant experience” is now front of mind and landlords must embrace this change. PMG will actively re-position its office portfolio to ensure it is well positioned for the future.
Risk and reward
As we all know, with risk comes reward and we’re committed to ensuring we are both managing risk as market conditions change and capitalising on those new opportunities that arise as well.
