Provincia Property Fund Ltd provides an alternative to direct ownership in commercial property, whilst maintaining most of the benefits of direct ownership.
Page updated 2 April 2020
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In the current economic environment our private investment clients are finding it difficult to secure their own commercial properties with suitable returns. Smaller commercial properties are very accessible and this sector of the market is therefore highly competitive.
There is less competition with mid- and large-sized commercial properties, and attractive opportunities are correspondingly easier to find.
Provincia Property Fund invests in quality mid-sized commercial properties, investing in growth areas with sound economics.
Our strategy is to provide the closest alternative to direct property ownership as possible, targeting a pre-tax cash yield in excess of 6% p.a. (on current share price) plus capital growth.
The fund currently pays investors a quarterly dividend of no less than 6% p.a., which is calculated on the current share price, which in turn is determined by the value of the fund. Actual ROI (return on investment) depends on the share price when the investment was originally made.
Actual ROI for Provincia investors is as high as 8.1% (for founding investors)…
- The share price when they invested was $1.00
- The share price is now $1.35
- The 6% dividend calculated on current share price of $1.35 is 8.1 cents per share
- A return of $0.081 on original investment of $1.00 = 8.1% ROI
- Additionally, they now enjoy a tax-free 35% capital gain on the value of their shares
We are unable to predict future returns, but hypothetically if the share price continues to increase, your ROI will continue to increase too – from a floor of 6% at entry to a high of ???
Investing through a diversified property fund gives private investors access to attractive borrowing terms, professional management, better returns and a spread of risk over a greater number of properties.
Our current portfolio has been very successful in providing investors with increased share value and secure future cashflow.
Substantial value was added to the properties through renovation and by securing quality tenants on long-term leases.
The areas the properties are located in have some of the lowest vacancy rates in New Zealand, which will make it easier to find new tenants in the future.
The property fund is currently maintaining a better than 6% return to investors despite the continuing drop in property yields. Auckland median commercial yields are now running at 5.5% and are currently on a downward trend.
How does it work?
Provincia is an unlisted limited liability company that invests in commercial property. Shareholders own shares in the property fund company, which in turn directly owns the properties.
New acquisitions are funded by a combination of bank funding and new shareholder funds.
The fund currently owns the following properties…
1. Airport Oaks…
38 Richard Pearse Drive, Airport Oaks, Mangere, Auckland
- Value: $6.2 million
- Rent: $407k
- Floor area: 3,051 m2
- Land: 4,858 m2
- Tenants: Storerite Logistics, Fitness 24/7, Active Physio.
2. East Tamaki…
19 Arwen Place, East Tamaki, Auckland
- Value: $6.3 million
- Rent: $374k
- Floor area: 2,919 m2
- Land: 10,504 m2
- Tenant: Northpower
785 Great South Road, Penrose, Auckland
- Value: $7.2 million
- Rent: $475k
- Floor area: 4,533 m2
- Land: 7,565 m2
- Tenant: Goodman Fielder
54 Tidal Road, Mangere, Auckland
- Value: $6.85 million
- Rent: $400k
- Floor area: 3,722 m2
- Land: 7,315 m2
- Tenants: Project Mechanical Ltd, Project Stainless Ltd, Southern Hospitality Ltd, TSS Workforce Ltd, Windows 2000 Ltd, Charity Clothing Collection Ltd.
5. East Tamaki…
1/30 Kerwyn Ave, East Tamaki, Auckland
- Value: $3.4 million
- Rent: $210k
- Floor area: 1,582 m2
- Land: Half share of 6,164 m2
- Tenants: Super Snack Ltd, Chasers Food Company Ltd.
6. Mt Wellington…
102A Carbine Rd & 4 Gabador Pl, East Tamaki, Auckland
- Value: $7.93 million
- Rent: $432k
- Floor area: 5,124 m2
- Land: 8,921 m2
- Tenants: Filtec Ltd, Gouk & Sullivan 1971 Ltd, Connect 8 Ltd.
Provincia Property Fund is not open to the general public. It is open to Wholesale Investors and Eligible Investors. To find out if you are eligible, please complete the form at the top or bottom of the page.
Minimum investment: The minimum investment is $50,000 (subject to meeting “Eligible Investor” criteria).
Provincial Property Fund Ltd (“Provincia” or “the Fund”) is an unlisted limited liability company governed by Provincia’s Constitution. In addition to the information in the Investment Statement (available upon request), important information can be found in the Application Form (also available upon request) and the Constitution of Provincia. You will find a copy of Provincia’s Constitution on the Companies Office website www.companies.govt.nz.
Dividend income: Shareholders own shares in Provincia and are entitled to receive dividends. Provincia’s current distribution policy is to pay quarterly dividends from distributable profits.
Capital growth: Shareholders also benefit from any increases in the value of the property portfolio, which is directly reflected in the value of the shares they hold.
Property fund objective
To invest primarily in commercial property located in New Zealand growth regions, subject to meeting acceptable yield returns.
Property fund investment strategy
To construct and manage a portfolio of New Zealand properties that provides an attractive rental yield and growth in value over the long term.
Provincia enables private investors to invest in larger, quality commercial properties in New Zealand. The fund focuses on growth areas with sound economics, and properties that have value-add opportunities in the short to medium term. The properties will be held long term for stable income and capital appreciation.
Investors are likely to be seeking to invest directly in commercial property but have found it difficult to secure individual properties and to achieve suitable returns.
Provincia’s strategy is therefore to provide the closest alternative to direct property investment as possible, targeting a pre-tax cash yield of no less than 6% p.a. for the years ended 31 March 2020 and 31 March 2021, and long-term capital growth.
What is the forecast pre-tax cash return on my investment?
The Fund is targeting a pre-tax cash yield of no less than 6% p.a. for the years ended 31 March 2020 and 31 March 2021.
The Fund’s forecast pre-tax cash yield is not guaranteed, and actual distributions may vary.
An increase in pre-tax cash returns over the forecast period does not guarantee further increases. The pre-tax cash returns following the forecast period may be higher, lower, or stay the same.
Provincia is a PIE fund, which has very favourable tax implications. The objective of the PIE tax rules is to ensure, as much as is possible, that Provincia shareholders are taxed in a similar manner as if they owned the Provincia investment properties directly. Therefore…
- Shareholders pay tax on their share of Provincia’s net taxable income (based on their shareholding percentage) at their prescribed investor rate (PIR), with a maximum PIR of 28%.
- Shareholders directly benefit from their share of Provincia’s tax deductions, including tax depreciation deductions.
- Tax is calculated and paid on your behalf by Provincia.
- No tax is payable on dividends.
- Should Provincia realise a capital gain in the future, this can be distributed to shareholders tax-free.