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$75m on the table from leading Auckland property financier

James Kellow

Auckland's largest non-bank property financier remains extremely confident in the region’s long-term future, saying well-designed and well-situated residential developments will always sell, and demand for affordable housing remains strong.

“Some developers are struggling to get capital, but we have plenty for viable pro-jects. In fact, we expect the quantum of our lending in the next couple of years will mirror the past few,” says James Kellow, Director of New Zealand Mortgages & Se-curities (NZMS).

With a lending book of about $200 million, NZMS has announced to Auckland’s residential development sector that it has $75 million of new lending available. This follows the private lender’s solid track-record in backing higher density townhouse projects.

“We’ve received $50.3 million in recent repayments from successfully completed projects and have a further $127.5 million due in from projects near completion. This means we’re ready to fund new projects and remain very confident despite current global circumstances.”

He says NZMS is well positioned to deal with any economic fall-out resulting from the global Covid-19 pandemic. Afterall, NZMS Directors have been committed to Auckland’s growth for over 40 years, lending through the 1987 share market crash and subsequent recession, and more recently the Global Financial Crisis (GFC).

Mr Kellow says it was through the GFC where he really experienced the resilience of the Auckland property market.

“I was processing loans and meeting with developers right through that period, fin-ishing projects, then starting greenfield subdivisions. As the market improved, it was apartments and townhouses. Many of our clients are counter-cyclical, so when the weaker developers stop - they grow their delivery.”

Auckland’s growth and scale, he says, gives them the confidence to lend again de-spite much wider economic uncertainty.

“Many lenders struggled with loan recoveries in GFC, but these were almost all in provincial areas. It is the critical mass of people living in Auckland that provides depth to the market and ongoing demand for better living environments.”

The residential developers financed by NZMS in recent years have enjoyed signifi-cant success in West and South Auckland, primarily with well-designed, affordable townhouse projects close to transport hubs.

Mr Kellow says affordable housing demand remains high helped by many Auck-land renters wanting to take advantage of record-low interest rates and the Reserve Bank removing its LVR restrictions, enabling first-home buyers to purchase a prop-erty with a lower deposit.

“We always get a kick out of delivering well-designed projects, but providing funding to projects for first-home buyers is extra rewarding. We have done some develop-ments with KiwiBuild and are very proud of fact that all to date have been matched with first-home buyers prior to completion.”

He says they have now given KiwiBuild an undertaking that NZMS will provide ap-provals on any project KiwiBuild is underwriting within 24 hours of receiving all the high-level information.

Any concerns about some KiwiBuild home buyers in Wellington facing lengthy construction delays and struggling to get their deposits out is certainly not NZMS’ experience, with safeguards for buyers into the scheme now in place from govern-ment.

“KiwiBuild gets a lot of criticism, but without doubt it has given many developers the confidence to get projects off the ground and is getting more people into housing. I would argue, that level of support is more important than ever.”

Mr Kellow says NZMS’s success is around backing picking project winners.

“We put our resources, connections, expertise and financial clout behind a devel-oper who has desire, drive, and vision. We love supporting small scale developers into much larger projects than they could otherwise have imagined.”

He believes clients soon see the benefit of dealing with a non-bank lender. They may pay more in interest, but they gain time, speed, and efficiencies and often re-quire much less equity from the outset. As a family owned business, backed by the strength of Mansons TCLM, NZMS has flexibility, and ultimately understands con-struction and how to make a project real.

“All our lending is a matrix of presales, equity, experience, location and product type. If one is weak, we can still do the deal by strengthening another element.

“We set a pretty high bar to becoming an NZMS borrower, but once on the team our clients become friends. We get a huge kick out of not just building homes but creat-ing new communities and shaping Auckland’s future. In that regard, nothing has changed in 2020,” says James Kellow.

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