Following the global financial crisis, CapitalGroup formed a strategic alliance with Steele Limited to identify high quality real estate assets which may be brought to the market under distressed circumstances. This was as a result of the overall deleveraging of the real estate markets which was being driven by the banking sector.
CapitalGroup and Steele brought together two key ingredients in this regard. CapitalGroup's strong banking and equity funding capability and Steele's excellent strategic property expertise.
In late 2008 we became aware of
a large portfolio of supermarkets which an Australian fund was seeking to divest. Initially the fund was seeking to sell the portfolio into the market on an individual property basis and had achieved some success in this regard.
However due to the size of the portfolio and the extremely tight market conditions, the fund was struggling to exit the whole portfolio in the required timeframe.
CapitalGroup and Steele concluded that we could negotiate a favourable acquisition value if we were to acquire the remaining portfolio of nine supermarkets and enable the fund to execute in one line. This proved to be the case and we settled the portfolio in May 2009 which at the time had a market value of circa $80m. This was the largest commercial real estate transaction completed in NZ during 2009.
Why did CapitalGroup Invest?
In the current uncertain economic times Supermarkets are an excellent asset class. They combine excellent financial risk (due to the quality of the tenant and the long leases) with significant landholdings in high value locations.
Since acquisition we have spent considerable time improving the portfolio's strategic value. This has been achieved through completing several unresolved rent reviews and a significant refurbishment programme which has been completed in conjunction with the tenant, Progressive Enterprises. In this regard our partner Steele Limited has added significant value. The portfolio will be sold down in an orderly and strategic manner.