YIJU New Zealand previously reported(link to the article dated 4 October 2021) New Zealand billionaire Graeme Hart spent NZ$189,000,000 acquiring several commercial property sites in South Auckland, generating substantial property investment returns for his business empire within just a few years. In this article, YIJU takes another look at how New Zealand’s richest man is pursuing his expansion strategy, hoping our analysis will offer investors further inspiration.
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First, New Zealand’s richest man has reason to take pride in his three-pronged business expansion strategy:
1
Buying a series of residential property projects in Auckland
2
Developing and building industrial warehousing centres
3
Further advancing his investments in the food industry
Records on New Zealand’s Companies Office website show that Hart has registered 24 new companies since 2019, providing a clear indication of the future direction of his business.
Hart’s Rank Group
Hart’s Rank Group is rapidly expanding its Auckland property portfolio, recently purchasing 12 properties, most of them residential. Rank is also an international trading business with a significant presence in packaging, consumer products and building materials for the construction industry. Its businesses include Carter Holt Harvey and nationwide retail chain Carters; Reynolds Consumer Products, which sells products such as aluminium foil and rubbish bags to US consumers; US food and beverage packaging company Pactiv Evergreen; and Graham Packaging, a plastic container manufacturer also based in the US. In 2006, Rank Group paid NZ$3,310,000,000 to acquire Carter Holt. Since then, Hart has sold the company’s forestry and farmland, along with its pulp and paper divisions, leaving a smaller business focused on wood products and building supplies. Following that acquisition, he completed a series of major deals to build a packaging empire, now part of the Pactiv Evergreen group. The latest full accounts show that, as at 31 December 2021, Pactiv Evergreen’s net revenue was US$5,400,000,000, up from US$4,700,000,000 the previous year.
Meanwhile, as Rank lays the foundations for continued growth, the company is focusing on executing its strategic priorities, including:
- Acquiring Fabri-Kai, an industry-leading manufacturer of foodservice and consumer packaging
- Divesting its 50% stake in Naturepak Beverage Packaging, which serves customers in the Middle East and Africa
- Divesting a coated paper business
- Divesting its carton packaging and filling machinery businesses in China, South Korea and Taiwan to SIG Combibloc Group, previously owned by Rank, for US$335,000,000
- Purchasing a non-participating group annuity contract from an insurer to transfer approximately US$1,260,000,000 in gross pension plan liabilities.
Hart’s expansion in the New Zealand market
Property currently accounts for only around 10% of its total business, suggesting considerable room for growth in this market. The company’s recent acquisitions include:
1
Purchasing run-down Auckland residential properties in lower-value areas through 12 newly registered companies. These areas include Mt Wellington, Glen Innes, Point England, East Tāmaki, Panmure, Penrose and Ellerslie. Although these are not top-tier, or ‘blue-ribbon’, suburbs, it is worth noting that large-scale apartment developments may soon be permitted in these areas under the Labour–National agreement on housing intensification in Auckland.
2
Purchasing and developing industrial land in South Auckland. These new buildings will be in very high demand among users involved in freight, postal services, online shopping, and goods storage and delivery. Experts say Hart expects each new warehouse developed by his company to deliver a development profit of up to 20%, alongside long-term leases of 8 to 10 years. He has already made considerable progress on new warehouses, and property agents have begun looking for tenants.
3
Expanding the food manufacturing and distribution businesses Hart and his son Harry own under the Walter & Wild brand, following last year’s acquisition of ice cream manufacturer Emerald Foods Group.
Summary and reflections
Taken together, property investment, warehousing and the food industry are the main areas of expansion for Hart’s current businesses. Given his success in business investment, every move he makes attracts close attention. NBR estimates his accumulated wealth at NZ$12,000,000,000. We note that his business strategies address the most basic needs of everyday life: clothing, food, housing and transport. These include warehouses to store goods and the food we need to eat. His purchases of multiple residential sites in Auckland will help him enter a new area of investment and, judging by the amount of land acquired, form part of a long-term plan for the years ahead. At the same time, Hart’s purchases have puzzled a number of property experts. They believe buying adjoining Auckland residential properties may make sense for apartment development, but is it necessary to buy them everywhere?
Hart’s investment in Auckland residential property
According to Companies Office website records, 12 new companies under Hart’s ownership have purchased residential properties in Auckland. These include:
- 54 Kawiti Ave Ltd
Incorporated on 31 March 2022, controlled by Rank Group
Property purchased: a residential site of 678 square metres in Point England
- 47 Elstree Ave Ltd
Incorporated on 18 November 2021, controlled by Rank Group
Property purchased: a residential site of 870 square metres in Glen Innes
- 21 Hillside Road Ltd
Incorporated on 18 November 2021, controlled by Rank Group
Property purchased: a residential site of 1012 square metres in Mt Wellington
- 131 Barrack Road Ltd
Incorporated on 18 November 2021, controlled by Rank Group
Property purchased: a home on 1176 square metres of land in Mt Wellington
- 332 Panama Road Ltd
Incorporated on 18 November 2021, controlled by Rank Group
Property purchased: a home on 675 square metres of land in Mt Wellington
- 3 Stewart Avenue Ltd
Incorporated on 10 August 2021, controlled by Rank Group
Property purchased: a home on 1454 square metres of land in Panmure
- 17 Gavin Street Ltd
Incorporated on 10 August 2021, controlled by Rank Group
Property purchased: a home on 1353 square metres of land in Ellerslie
- 12 Mataroa Road Ltd
Incorporated on 10 August 2021, controlled by Rank Group
Property purchased: a home on 1330 square metres of land in Mt Wellington
- 5 Mataroa Road Ltd
Established on 10 August 2021, controlled by Rank Group
Property purchased: a home on 693 square metres of land in Mt Wellington
- 233 Penrose Road Ltd
Incorporated on 10 August 2021, controlled by Rank Group
Property purchased: a home on 824 square metres of land in Mt Wellington
- Cebalo Place Ltd
Established on 10 August 2021, controlled by Rank Group
Property purchased: a home on 953 square metres of land in Mt Wellington
12 . 1 Accent Drive Ltd
Established on 18 February 2021, controlled by Rank Group
Property purchased: an industrial property in East Tamaki
Asked to comment on Hart’s purchase of these 12 promising sites, the Real Estate Institute of New Zealand (REINZ) said residential development and construction in New Zealand continued to reach new highs, despite market pressures and building material shortages facing the industry. As the national economy continues to develop, New Zealand will need more homes for sale. The government is actively supporting development through measures such as changes under the National Policy Statement on Urban Development to enable medium- and high-density housing, allowing more intensive new developments to proceed. These changes will make property development more attractive as a business and investment opportunity. Over time, we have seen more people and businesses enter this dynamic and important industry.