Tue, 01 Feb 2011
Members of the TOWER KiwiSaver Scheme can invest across a diverse range of asset classes – New Zealand cash, fixed interest, property, and shares, and international fixed interest and shares. The percentage of their investment into each class depends on the fund they choose to invest in.
When we talk about property we mean commercial, not residential. Commercial property includes factories, warehouses, shopping complexes and office buildings that are used for business purposes.
With commercial property, the key is to get reliable business tenants who sign up to long leases and pay the owners rent. Thus commercial property investors are landlords. The other return commercial property investors can achieve apart from rent is capital gain as land values rise. Also future rental earning power can be increased by making improvements such as upgrades or expansion of their real estate.
As these sorts of “big ticket” properties are usually expensive to buy, it makes sense for investors to pool their resources and invest together through a property fund. TOWER KiwiSaver Scheme funds that have a property allocation are invested in the TOWER Property Fund*, which specialises in buying and managing high quality New Zealand commercial property.
Depending on the TOWER KiwiSaver Scheme fund you are invested in, your property allocation may vary. The table below shows the current benchmark allocations (i.e. the proportion invested) of the TOWER KiwiSaver Scheme funds to New Zealand commercial property (via the TOWER Property Fund), ranked from most to least:
Table 1: Property Benchmark Exposures in TOWER KiwiSaver Scheme Funds
Fund Name Property Allocation TOWER KiwiSaver Balanced Fund 10% TOWER KiwiSaver Conservative Fund 6% TOWER KisiSaver Growth Fund 5% TOWER KiwiSaver Cash Enhanced Fund 4% TOWER KiwiSaver Preservation Fund 0% TOWER KiwiSaver Equity Fund 0%
Commercial Property Case Study: The Bayfair Shopping Centre Upgrade
Photo: Bayfair in Tauranga
The TOWER Property Fund owns 50% of the Bayfair Shopping Centre, a major retail shopping mall in Tauranga. In 2010 a $15 million upgrade was completed for Bayfair in order to increase its size and improve its appearance.
A key reason behind the decision to upgrade was that Bayfair serves an important role in the wider community as a major shopping destination for the Tauranga region, which is one of New Zealand’s most dynamic provincial economies and experiences huge seasonal surges in tourism.
Statistics New Zealand figures for the June 2010 year found that Tauranga was one of the fastest growing urban areas (up 1.5 percent). As the region grows, the TOWER Property Fund will potentially participate through its investment in Bayfair, and the mall’s refurbishment is part of future-proofing for that growth.
Current leading tenants in Bayfair include Woolworths, Whitcoulls and ANZ Bank, with new additions including JB Hi-Fi, 123 Mart and Chii Health and Beauty.
Members of TOWER KiwiSaver Scheme funds that have an allocation to New Zealand commercial property are partly invested in the Bayfair Shopping Centre.
Next time you’re in Tauranga, don’t forget to call into Bayfair, a high-grade property asset working hard for the TOWER Property Fund and the TOWER KiwiSaver Scheme!
Thank you for investing with TOWER.
Sam StubbsChief Executive OfficerTOWER Investments
Quick facts: TOWER KiwiSaver Scheme statistics to December 31, 2010
Total Scheme Membership 89,930 members Total funds under management $540,735,238 Million Average member account balance $5,012 member
*The TOWER Property Fund is an institutional managed fund and is not offered directly for investment by members of the general public.