UpdateJUNE 2021 - Oyster Property Group
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OYSTER UPDATE | 1
update
JUNE 2021
IN THIS ISSUE
01. CEO Update 04. High Demand for Large 08. Liquidity Made Easy
Format Retail
02. The Investor Team: 09. Tax: How does it work?
Growing with Demand 06. The Remarkable Recovery
ramps up as businesses adapt 09. Staff Profile:
03. Single Asset vs. Sharon Campbell
Multi-Asset Funds
OYSTER UPDATE | 1
Welcome to
Oyster Update.
A note from Mark Schiele,
Chief Executive Officer
as we approach mid-2021, we are pleased to see the Across all of our properties leasing is a key area of
continued demand for investments in quality commercial focus with the current environment providing occupiers
property assets. We successfully completed the second a range of options. A couple of examples of recent leasing
equity raise for Oyster Industrial Limited earlier this year, transactions that our team has successfully secured
purchasing three additional industrial properties to add in Auckland include St John for 2,000+ m 2 of space at
to its portfolio. In addition, we launched the Oyster Large Millennium Centre, and with Cin 7 for 1,700m 2 at 60
Format Retail Fund to acquire the Albany Lifestyle Centre Khyber Pass, commencing in April 2021. Both tenants
in Auckland. have chosen to make Oyster’s buildings their national
The investment performance of both industrial and headquarters.
large format retail properties over the past few years has On behalf of the Oyster team, we thank you for your
been incredibly solid, and the resilience of these asset ongoing commitment to Oyster and look forward to
classes was proven throughout New Zealand’s Covid-19 presenting you with new investment opportunities over
lockdown disruptions. Oyster’s continued targeting of the balance of the year.
investments in these asset classes is supported by strong
property fundamentals such as low vacancy rates, long
lease terms to quality occupiers and significant land
holdings in sought-after locations.
The Oyster Direct Property Fund is approaching its
fifth-year anniversary and re-opened for investment from
1 April 2021. We are pleased to report that the fund again MARK SCHIELE
performed well in the 2021 financial year, providing an Chief Executive Officer
annualised total return of 22.51% for the 12 month period
to 31 March 2021.
2 | OYSTER UPDATE
THE INVESTOR TEAM
Growing
with Demand
as a direct response to investor demand and in order the re-sale requirements for existing investors to
to provide the best service possible to our investors, the promote these via Oyster’s secondary market.
Oyster Investor Team has grown significantly over the The Investor Relations Team manages a wide range
past year. of investor communications and queries; this includes
The Investor Team is the main point of contact quarterly and end-of-year investor reporting, transfer
for Oyster investors and is responsible for providing a of investment entities, ongoing AML compliance, and
seamless experience throughout the various stages of coordinating Annual General Meetings, as well as ad
the investment process, as well as maintaining steady hoc investor meetings.
communications and reporting on various property The expansion of the Oyster Investor Team is a
funds. direct result of our growing investor base, so we thank
The Equity Raising Executives are tasked with you for your ongoing support for our investments.
discussing current investment offerings with new and We look forward to strengthening our relationships
existing Oyster investors and managing the onboarding with you throughout the remainder of 2021 and beyond.
process for a new investment. The team also manages
OYSTER UPDATE | 3
BY RICH LYONS
Capital Sourcing Manager
Single-Asset vs.
Multi-Asset Funds
we continue to receive a range of queries from weighted average lease term. Often these investors
investors regarding their preferences to invest in have funds readily available throughout the year
either a single-asset fund or a multi-asset fund. and are comfortable making a prompt decision to
In short, it is down to investor preference; every invest in a single-asset fund when an opportunity
investor typically will have their own reasons why arises.
they prefer one fund type over another or in some Multi-asset funds can offer different
cases, they are happy to invest in both. entry points with some funds starting with a
For the last few decades, single-asset funds minimum investment of just $10,000 through to
have typically been the investment of choice; approximately $50,000. These funds can target
however, over the last five years, we have seen a a specific asset class or a spread of assets classes
shift by property fund managers towards multi- and are structured to invest in further property
asset funds. over time; this provides investors with the ability
to diversify their exposure. Through this type
of investment, single property and tenant risk,
vacancy risk or unforeseen capital expenditure
“Over the last five years, we have seen can be spread across a portfolio of property
investments and provide investors with comfort
a shift by property fund managers around their investment; this usually eases any
towards multi-asset funds.” concerns regarding the performance of a specific
property or tenant under a single-asset fund.
Further acquisitions and divestment of properties
within a multi-asset fund is the responsibility
of the manager. Investors should always ensure
In Oyster’s view, there is a place in the market they invest with a manager who has a strong track
for both and the fundamental difference between record and a well-defined investment strategy for
the fund types is largely the spread of risk through the fund.
diversified investment. Oyster continues to focus on offering a range of
Investors who prefer single-asset funds property investment funds, both single-asset and
typically require a higher minimum investment multi-asset funds, to our investors whilst adhering
of $50,000 or more. Generally, they have a to our investment philosophy of targeting well-
stronger preference to make their own investment located quality properties with strong tenant
decisions concerning the property’s location, asset covenants and long lease terms.
class, construction type and age, tenant mix and
BY IAN LITTLE
Associate Director, Colliers Research
High Demand
for Large Format Retail
Lift in spending bolsters support time spent at home during lockdowns, this resulted in a
significant lift in spending on new furniture, homewares
for the large format retail sector
and hardware. Consumer confidence has been bolstered
New Zealand’s total core retail spending over the six by better economic prospects, job security, low interest
months to March 2021 increased by 5.3% compared rates and the wealth effect resulting from house values
with the corresponding period ending in March 2020, reaching new record highs. This confidence has seen
reaching $43.1 billion, according to Stats NZ’s latest consumers continuing to spend more within large
figures. format stores.
Strong tenant demand
““W
With
ithoverseas
overseasholiday
holidayplans
plans minimises vacancy
suspended
suspendedandandmore
moretime
timespent
spent Vacancy rates lifted across the retail sector over the
at
athome
homeduring
duringlockdowns,
lockdowns,thisthis course of 2020, with the exception of the large format
retail sector which experienced little change, remaining
resulted
resultedin
inaasignificant
significantlift
liftin
in near their extremely low levels, according to the results
spending
spendingononnew
newfurniture,
furniture, of Colliers’ Auckland retail vacancy survey. Vacancy
within Auckland’s large format sector ended 2020 at just
homewares
homewaresand andhardware.”
hardware.” 1% compared with 3% within shopping centres and a strip
retail vacancy rate of 8.5%.
Large format vacancy rates have moved within a
tight band over an extended period, reflecting high
While consumers were out spending across many levels of demand from occupiers and a limited turnover
retail sectors, it was the large format stores – DIY/ of tenancies.
hardware stores, recreational goods outlets, electrical Changing shopping habits and the growth of online
and electronic goods retailers and supermarkets – that retailing have had a significant impact upon secondary
garnered significant support from consumers. National shopping locations and strip retail precincts; however,
retail spending in this category totalled $22.6 billion large format retail premises, both standalone and
over the six months to March 2021, up 7.1% on the figure centres, which offer a wide range of products and
recorded for the same period last year. convenience, have retained high levels of consumer
With overseas holiday plans suspended and more appeal.
OYSTER UPDATE | 5
INDUSTRY INSIGHT
Strong fundamentals underpin competition for large format retail assets over recent months
has resulted in additional yield compression, and in turn, an
investment demand and returns
increase in capital values and total returns.
While low interest rates are assisting purchasers reach The latest figures released by MSCI show the large
new pricing heights, the importance of risk mitigation format
10.0%retail sector
LFRgenerated totalCentre
Shopping returns of 22.4
Strip % over
amongst investors has been amplified by the disruption and the8.0%
year to March 2021. This sharp increase in returns
uncertainty following the COVID-19 pandemic. compares favourably with both the industrial and office
6.0%
Investors are targeting the large format retail sector, sectors.
as it offers sound investment fundamentals including high Under current forecasts, it is likely that the positive
4.0%
levels of consumer spend, strong occupier demand, low economic
2.0% and financial fundamentals witnessed in the retail
vacancy and limited additional supply. sector will continue and lead to further property value gains
0.0%
The rising appeal of the sector has also meant that over the remainder of 2021.
Dec-15
Dec-13
Dec-14
Dec-16
Dec-17
Dec-18
Dec-19
Dec-20
Auckland Retail Vacancy Rates Total Investment Return
Rolling Annual Total Return %
10.0% LFR Shopping Centre Strip 25.0
Office LFR Industrial
8.0% 20.0
Vacancy Rate
6.0% 15.0
4.0% 10.0
2.0% 5.0
0.0% 0.0
Dec-15
Dec-13
Dec-14
Dec-16
Dec-17
Dec-18
Dec-19
Dec-20
Mar-10
Mar-11
Mar-12
Mar-13
Mar-14
Mar-15
Mar-16
Mar-17
Mar-18
Mar-19
Mar-20
Mar-21
Date 12 Months Ending
Source: Colliers Research Source: MSCI
25.0
Office LFR Industrial
20.0
15.0
INDUSTRY INSIGHT
The Remarkable
Recovery Ramps up
as Businesses Adapt
the kiwi economy recorded a remarkable 1.6% gain in the Residential construction has also been fuelled by record
first quarter of 2021. You’d be forgiven for thinking that was low mortgage rates and rapid house price gains. Building
the annual rate. But the annual rate was 2.4% - compared consent data indicate that construction will continue
to consensus expectations of 0.9%. Following the sharp to underpin growth this year – so long as we have the
decline in the December quarter, the Kiwi economy more tradies to do the work. Labour shortages are hindering
than dodged a double-dip recession. We’ve outrun it. A some work in the construction sector. The best, positive,
solid rebound in construction activity and strong domestic surprise was the lift in business investment. Confidence
spending have more than offset the loss of international has returned to SME business. The Kiwi economy
tourism typical over summer. survived the summer without tourists. So we begin
the year on a much firmer footing. Looking ahead, the
we are spending and building our way out of the hole recovery in economic activity is expected to continue.
that Covid created. Household consumption was
surprisingly strong. Household confidence has grown, the closed border will continue to distort the
and the inability to travel offshore has funnelled picture. But the Aussie bubble is certainly helping.
spending locally. The strength in consumption also The rampant housing market should fuel momentum
reflects a healthy labour market. Construction was in the construction sector. However, it may be harder
the largest contributor to growth. Much of the jump for industries already bumping up against capacity
was driven by residential construction, as the building constraints - including construction and manufacturing
industry responds to our chronic housing shortage. - to eke out growth given the ongoing supply chain
“A solid rebound in construction activity
and strong domestic spending have more
than offset the loss of international tourism
typical over summer.”
OYSTER UPDATE | 7
BY JARROD KERR
Chief Economist, Kiwibank
disruptions. The demand is there, but supply is harder
to pin down in this Covid world. Until the issues at the
ports are resolved, shipping delays might see these
industries post softer growth in the coming months.
In terms of the interest rate outlook, we are
expecting rate hikes to come early in 2022. If data
continues to paint a healthy picture of the economy, our
forecast May ’22 hike start date looks increasingly likely.
From our viewpoint, all wholesale interest rates look
too low. Wholesale interest rates have risen, and so have
some lending rates. We expect to see all lending rates lift
into next year, but remain very low on a historical basis.
And the Kiwi currency also looks very low. We expect to
see the NZD/USD push higher towards 75 to 77 cents.
One key downside is of course another covid
community outbreak. Until herd immunity is achieved,
the primary threat to the Kiwi economy will continue to
be an outbreak of the virus, necessitating a tightening in
alert levels.
Kiwibank Forecast OCR,
2-year Swap Rate and NZD
2-yr swap rate RBNZ OCR NZD Currency NZD/USD
5.0 0.90
Kiwibank
Forecast 0.85
4.0
0.80
3.0
0.75
2.0 0.70
0.65
1.0
0.60
0.0 0.55
13 14 15 16 17 18 19 20 21 22 23 24
8 | OYSTER UPDATE
Liquidity BY BRODIE PRITCHARD
Equity Raising Executive
Made Easy
Oyster understands that our investors’ circumstances can change from time to time,
and investors often ask about the liquidity of our investments to better understand
our re-sale process. Oyster aims to create a resale process that is seamless, easy to
understand and timely.
Upon request, Oyster can provide re-sale analysis summary
to assist an investor who is looking to exit their investment
with Oyster.
Re-sales Once an asking price for their investment and a settlement
from 1 July 2020 to 30 June 2021 timeframe has been determined by the investor, Oyster can
consider marketing the re-sale to our extensive database of
existing and prospective investors in the following ways:
3.5 days 1. market to all existing Oyster investors within the fund;
2. market to select Oyster investors or prospective investors
AVERAGE COMMITMENT TIMEFRAME
(without formal advertising) who have previously
expressed their interest to invest in the fund or a similar
118
fund; and/or
3. market to all existing Oyster investors outside of the
NUMBER OF INTERESTS OR SHARES RE-SOLD
scheme and all prospective investors who subscribe to
Oyster’s new offers and re-sales.
$13.74m Oyster strives to create an investor re-sale process that
provides timely communication, full disclosure of the
TOTAL RE-SALE VOLUME FOR THE PAST 12 MONTHS most recent investment performance and key property and
financial reporting to ensure prospective investors can make
an informed decision to invest.
26% We are pleased to report that Oyster has facilitated 118 re-sale
transactions for the 12-month period ending 30 June 2021,
TOTAL CAPITAL GAINS SINCE ORIGINAL INVESTMENT
providing a combined re-sale value totalling $13.74M and an
average re-sale commitment timeframe of 3.5 days.OYSTER UPDATE | 9
Tax: How BY RACHEL BARR
Chief Financial Officer
Does it Work?
oyster has a range of unlisted property funds with all investors after each financial year ending 31 March.
different approaches to dealing with tax. Oyster also structures proportionate ownership
Our multi-asset funds include the Oyster Direct schemes; these are typically for single assets only. Returns
Property Fund, Oyster Industrial Limited and the Oyster are still paid monthly; however, Oyster pays the gross
Large Format Retail Fund; these funds are PIE structured return to investors and provides investors with the audited
and provide the potential for tax advantages due to the financial statements after each financial year ending
highest prescribed investor rate of 28%. Returns are paid 31 March. The financial statements provide a schedule of
monthly less the nominated PIR (Prescribed Investor Rate) taxable income, including a breakdown of tax deductions,
provided by the investor, and investors receive monthly for the investment. Investors generally provide this to their
returns after tax. An Annual Tax Certificate is provided to accountant or tax agent to complete their tax return.
TEAM PROFILE
Sharon Campbell
AML Compliance Manager
as aml compliance manager, commercial real estate, legal and
Sharon is responsible for supporting information technology.
the AML Compliance Officer by
developing, implementing and Prior to joining Oyster, Sharon
administering Oyster’s AML was the AML Compliance Officer
Compliance Programme, with at Colliers New Zealand, where
primary focus on managing she played a key role in the
the reporting, compliance and implementation of the Phase 2
quality assurance of Oyster’s AML requirements for the Anti-Money
regulatory affairs. Laundering and Countering
Financing of Terrorism Act 2009.
Sharon is an experienced finance Sharon is a Chartered Accountant
professional with a broad range and in 2020 earned the Certified
of accounting and compliance Anti-Money Laundering Specialist
experience. She has worked in (CAMS) designation.
a variety of industries includingLARGE FORMAT RETAIL FUND
5.0 %
Forecast pre-tax cash distribution1
p.a.
Payable monthly | Minimum investment $50,0002
Oyster Management Limited is the manager and issuer.
Invest in the property asset class which has achieved the
highest annualised total returns for the period to 31 March
2021, outperforming the industrial and office sectors.3
Contact us to register your interest and for a copy
of the Product Disclosure Statement.
Brodie Pritchard 021 104 7244 Brodie Pritchard 021021
Abby Rowling 104045
7244
8490
brodie.pritchard@oystergroup.co.nz brodie.pritchard@oystergroup.co.nz
abby.rowling@oystergroup.co.nz
1
The return is only an indicative forecast pre-tax cash distribution and is for the financial period ending 31 March 2023.
2
The minimum investment is $50,000 for 50,000 units at $1.00 per unit.
3
The total return data reflects a nationwide portfolio with a 70% weighting to Auckland for the twelve-month period to 31 March 2021.
Source: MSCI
The Product Disclosure Statement contains details of how the forecast return on investment is calculated. The forecast return is based on
any principle assumptions and methods of calculation described in the Product Disclosure Statement. This offer is made in accordance
with the Financial Markets Conduct Act 2013. Past performance is no indication or guarantee for future performance. Prospective
investors are recommended to seek professional advice from a financial advice provider which considers their personal circumstances
www.oyster-lfr.co.nz
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