Announcement
Collapse
No announcement yet.
Ground Rent Rises for Apartment Block
Collapse
X
-
Hi CC,
So what do the investors get for their $70 million investment?
Can you explain what " ...to buy the underlying freehold interest and to sell it in $500,000 leasehold parcels to investors." means in simple terms?
Is this where they don't own the land but have permanent control over it?
thanks
Comment
-
Hi Tricky,
Ok.
You realise that Beaumant Quarter is almost fully developed with the last stage under construction? The project has won heaps of design awards.
Originally it was the Enerco Gas Works. Nigel McKenna bought the land freehold. www.melview.co.nz He retained the freehold then built townhouses and apartments and sold them as Leasehold. The terms are: rent is 7% (or is it 6%) of underlying land value; fixed rent then for seven years with a review of value (based on the undeveloped value of the land, this is v important-its the fairest way)and hence rent at that time. The term of the lease is 21 years but perpetually renewable. Very common arrangement.
So, the lands gone up, rent review time so McKenna sells the whole land with all the Leases to the new group.
Because they write the big cheque they got a discount.
What they will now do is form a company to sell off chunks (unit trusts, shares? we will see) as a form of Property Fund to individual investors.
They will take advantage of;
1. The discount
2. The new lease
3. Peoples acceptance of lower return on investment because it is so safe
to make a profit margin of probably quite a few million.
At 500 k and above I dont think they have to issue a prospectus either.
Good deal but as Muppet will tell you, pales into comparison with what the Viaduct Harbour boys did with all that forestry land around Tokoroa.
Bought cheap off the Crown, sold the wood, then convert to dairy. Its a couple of billion upside. No typo-thats billion.Last edited by captaincrab; 29-11-2007, 10:34 PM.
Comment
-
-
I reckon its a brilliant "buy and forget". We are always told land goes up not houses. Well heres the land, and with a bullet proof income.
I'm interested to see how it looks when they release it.
Re Saffron. Well I dont know. Mr Fong was promoting it awhile ago but couldnt or wouldnt answer questions about it. Oh ok, I'll go out on a limb. Saffron is a dog.
Comment
-
I saw similar problems with the leasehold land with houses around one tree hill.
The problem is that the development value underlying the revised rent ignores the actual buildings on the land. Affordability is not the issue here, it's just a consequence of the way ground rent is calculated.
The same land can charge the maximum ground rent, regardless of whether there's a single level house or 20 storey tower on the site or whether someone could legally build a 200 storey tower on the land.
Grossly unfair, I anticipate that the law will change to take into account the disparity, landlording landowners take note!
Comment
-
Originally posted by pooomba View PostWait till they do it to the poor sods at the Docks. They are already losing a fortune.
I never could understand why anyone would ever buy residential on leasehold land without a guaranteed buyout available. Looked at a home in Lynfield in 1986...was $175,000 on lease land with the lease available to freehold from Harbour Board anytime in next 10 years for $30,000. Trouble was the house only valued up to $195,000 assuming it was freehold.
Certainly challenge the valuation...that's all they can do.
Ged1
Comment
Comment