Simplicity Living says it has bought 1.4 hectares of land adjacent to Auckland's Ellerslie Racecourse and plans to construct 330 build-to-rent homes.
Simplicity Living's statement announcing the land purchase didn't state a purchase price, nor a construction cost estimate. Construction is expected to start in 2024, with completion by late 2026.
The land was sold by Auckland Thoroughbred Racing Inc (ATR), the owner of Ellerslie Racecourse.
Simplicity Living is owned by KiwiSaver and investment funds managed by default KiwiSaver provider Simplicity NZ Limited (Simplicity).
Earlier this year Simplicity Living announced its intention to build 10,000 "quality homes" for rent across New Zealand.
It has already completed and rented 159 homes in Auckland's Onehunga and Point England, with 345 to be under construction by the end of this year, and another 800 in development.
“We’re on a mission to provide thousands of Kiwis what’s already common overseas - quality, long-term homes for rent,” Simplicity Living managing director Shane Brealey said.
The newly purchased site is a five-minute walk to Greenlane’s train station and retail shops.
“The location is impeccable for quality, long-term rental homes,” Brealey said.
Managing director of Simplicity Sam Stubbs said: "Quality homes for long term rent is exactly what KiwiSaver should be helping build."
56 Comments
You use Chinese rebar and concrete. And unqualified Chinese tradesmen. Then you end up with this https://www.dailymail.co.uk/news/article-9495101/Sydneys-sinking-Mascot…
I'm thinking about the net yield returns an institutional investor is likely to want from a project like this. Risk free right now is 6% on TD, that's net. So gross about 10%. Assume it costs $600k per unit to build (including land, council, services, funding etc... I might be conservative). 10% gross is $60K pa or $1153 pw. 9% gross is $1052pw.
Most residential properties rent for 5-6%, if that, in Auckland. Simplicity will need the cost of rent to go up by at least a third.
I don't know the numbers, but I suspect they are willing to accept a lower return due to inflation adjustment, low and different risk profile to the rest of the cash/bond part of this portfolio, and the good PR/social benefits.
Probably also a suspicion that in a few years we may not have bond and cash saving rates like we do now, while these will be chugging along with returns increasing with inflation.
You can buy government inflation linked bonds.
I just don't think this sort of stuff is appropriate for a Kiwisaver portfolio, like their mortgage portfolio in their conservative fund. Highly concentrated, illiquid and riskier products where it's not clear who's getting paid. Simplicity should stick to passive index funds not direct investments with a tinge of impact investing.
Yes, you can. The real returns are low and you get taxed on the inflationary component too in New Zealand.
This represents a little dabbling around the edges of the portfolio, likely to generate a higher return but not betting the house, as it were. Plenty of other options out there with simple passive index funds if that's all you want.
That's what Simplicity was set up to do, passive, liquid, diversified, low cost. Now they're injecting their own social housing investments and 250 FHB mortgages (15% of defensive fund) that they've accessed into the mix. We're not talking about multiple super senior tranches of AAA mortgages with 1000's of underlying obligors. That's not dabbling in my book. Risk and return.
NB: you'll also get taxed on the inflation component of inflation adjusted rents too.
Simplicity in Point England charge $415-$425 per week for 1 bedroom, $515-$525 2 bed and $590-$600 3 bed. Making an assumption that Greenland will be similar, and assume a gross yield of a miserly 4%, that equates to around $767k for a 3 bed place. Therefore, they will be cheap, nasty dumps that will look good new, but deteriorate quite quickly. In 10 years it will be an English style housing estate with the attendant issues.
Thats quite achievable, I hear you can fit 32 people into a 3 bedroom place. Or 20 into a 2 bedroom with lounge. They don't market these build to rents to New Zealanders.
"The first Simplicity Living residence, Kupenga, in Point England, opened last month, with 69 apartments already home to more than 150 residents across all age groups and 24 nationalities."
Simplicity Living is a little over 1% of my Growth fund at the moment - hardly a systemic risk. I don't expect the returns from this component to be world-beating, they are intended to play the role of low volatility bond/cash deposits while providing a social good. Equities are still doing the heavy lifting.
Shouldn't be there at all in my opinion. Should be a discretionary investment outside of Kiwisaver i.e. up to you if you want to potentially forgoe returns for social good.
I ask, is Simplicity living truly the best product available for the risk and return it brings or is it in there because it just so happens to be the fund operated by simplicity itself and to meet Sam Stubbs personal "social good" agenda?
If you don't think the risk-adjusted returns it brings are worth it then there are other KiwiSaver providers. The business case seems reasonably sound to me and it's a minor part of the portfolio so I have no issues using Simplicity for KiwiSaver. There's plenty of choice in the market right now though.
Yes I do have choice but I am informed and to me its a pity they've gone down this path as otherwise i would invest with them. Does the average punter know about this stuff though (and respecting people might disagree) and therefore also make an informed decision?
Simplicity also give 15% of their fees to charity, if you are really against doing good things for the community it is best to invest elsewhere. Plenty of options for your fees to go to fund manager bonuses, instead.
According to Canstar, the Simplicity growth fund is the 3rd best performer over the past 5 years, with fees a quarter of funds with similar returns (these two numbers obviously being related). I'm a happy customer.
100% agree. Australia is currently raising the issue of unlisted assets being held within super funds. But at least Australia has an enormous and well diversified super industry. NZ is small and concentrated, and this would constitute a large chunk of their business. Not to mention that their focus should be on running a super fund, not property development. Maybe there arent enough booze ups in the fund management industry these days, and they all aspire to own yachts and fly private jets like the Williams Corp boys.
A 3-4% gross yield might have been ok a few years ago with low interest rates, but now the expectation for any commercial property fund is at least 7% (should be above the risk free rate of Govt bonds and bank deposits due to RISK).
Simplicity investors are simply funding Sam Stubbs quest for a knighthood for "services to NZ". Personally, I expect commercial returns from my investments, not feel good vibes. If I wanted that, I'd go donate directly to my local women's refuge or pet rescue centre.
The perspective provided is reminiscent of many I observed in Europe, especially Belgium and Netherlands. Comfortable and modern. So long as they are not turned into slums by the occupants, I see no reason why this could not succeed. But as others have said, I would expect that there be an option for vehicle parking/storage. A friends apartment in a tower (30 floors) in Hawaii has an attached multilevel parking garage for occupants. a good solution.
I lived opposite this site (Greenlane side of the motorway though) for a few years and did fine without a car as I was working in the CBD. I personally like the option of not having to buy/rent a carpark if you don't want it. I'm sure there will be parking incorporated, just maybe not at a 1:1 ratio. Hobsonville Pt manages to do this.
This is the whole point, do you feather the nest of the S&P500 or do you actually help the very country you live in? At least he's trying and managing risk. What do you think the Australian super fund invests in, Berkshire Hathaway and Facebook? No they invest in themselves. So if we do not do this we bumble along and moan that house prices are too high. Stop tinkering and get on and build.
Actually they do invest in Berkshire Hathaway and Facebook.
But yes, many of these superfunds however also have built internal management teams to directly own illiquid and concentrated property and infrastructure as a small portion of their portfolio. It might be sensible, on the face of it, but inherent illiquidity can hide poor performance and therefore entrench empire builders - since at the end of the day, these Super Funds are not particularly competitive, there is not a lot of switching going on to keep them honest.
Yes was a bit flippant there. However is that illiquidity so bad when these funds are locked in til 65..66...67......? Also is that an issue when the % of a fund is say %1-5?
I guess one could invest in a RE fund but I'm unsure if any in say investnow are residential funds rather than commercial.
That's the valid argument of course about not needing liquidity. Albeit in an open ended fund, how do you feel that the oldies are cashing out with all the liquid, mark-to-market stuff when you might be holding a few unknowns? Anyway, my point is that Simplicity is doing this themselves with your money should raise some eyebrows and whether you might find more of your money gets allocated into these schemes over time.
Didn't we see an example of that when covid kicked off with lots of switching from growth to conservative funds? Was that devastating to retirees? Those that could would have left KS alone those that couldn't would have limited withdrawals as much as poss until valuations once again improved. Certainly nobody bailed in or taking a haircut or impacted by any other funny bank run carry on designed to protect banks not you and I.
I already invest in this so why should you be using my kiwisaver to repeat . Looks like Simplicity is just like the rest of them all aline their pockets with fees and go about stating what a good job they are doing with the funds that company has donated. O please go suck a Sweet
We welcome your comments below. If you are not already registered, please register to comment.
Remember we welcome robust, respectful and insightful debate. We don't welcome abusive or defamatory comments and will de-register those repeatedly making such comments. Our current comment policy is here.