Classic Group has gone from a startup 25 years ago, based in Tauranga, to one of New Zealand’s largest residential builders, and a leader in mid-range, affordable new homes.
The group was originally set up with a social vision to get more Kiwis into warm, dry safe houses at a mid-market cost, with most properties geared towards the first-time buyer and investors.
Over the past quarter century, through several property cycles, a pandemic and even the global financial crisis, Classic has built more than 6500 homes and developed more than 4000 lots of land, with a current land supply exceeding 3000 sections.
In the past year alone, Classic built nearly 700 houses.
Joint venture with NZ Super
Also in the past year, the group entered a $300 million joint venture with NZ Super to acquire large areas of subdividable land, winning the deal against other big named organisations within NZ.
Classic Capital corporate investment manager Raymond Gatfield says Kaha Ake is aimed at driving transformational change through the enablement of large-scale development that both parties hope will bring momentum, help solve infrastructure issues, and deliver a future pipeline of housing supply for New Zealanders that is so desperately needed.
“It’s a big feather in our cap, to have a little old company based in Tauranga with a couple of directors with a huge vision, to come through with a significant joint venture like this,” says Gatfield.
The company also regards as a huge achievement the changes made to meet NZ Super’s stringent standards, including strengthening areas such as the company’s processes and security of information through nine months of due diligence.
Busier years to come
It’s been a big couple of years for the group, and they are working towards even busier years to come.
Classic Capital, the group’s investment arm, has opened its Land & Build fund to qualified wholesale and eligible investors, aimed at raising $30 million to fund the build of residential housing using first mortgage-backed loans. Minimum investment is $250,000.
“I think it’s a model that's very easy to understand,” says Gatfield. “We only lend on first mortgages. We don't have any banks that go in front of us and we don't have any mezzanine finance that sits behind there. So we are the only lender on houses that we, as a group, are building and know that we can build at that price.”
The fund, which has the option to build the raise up to $100 million, will enable Classic Group to sustain a building programme into the future.
Projects already rezoned and consented
The projects being funded will have already been through rezoning, resource consenting and subdivision into single dwelling lots prior to qualifying. Loans made from the Land & Build fund will be made against the build-ready land and the actual building work itself. Then, once the home is complete and settled with its new owner, the loans will be repaid back to the fund to start the cycle again.
While on the surface the fund may seem similar to many other developers raising capital to fund developments, Gatfield says the Land & Build Fund is more conservative.
“At 7.5 per cent, the return is lower, but what we are offering is a risk-adjusted opportunity, with the funds only being used to build dwellings on already consented and subdivided land. This takes away a number of the risks associated within the land development stage of building a new community,” says Gatfield.
“With supply chain uncertainty plaguing the wider industry, Classic remains somewhat sheltered given its scale and national supply agreements. Allowing us to build with confidence in a time of material shortages.
“This type of fund is a relatively stable investment alternative in the current uncertainties of the property and equity markets.”
He says a dropping property and share market means many investors with funds are sitting out for a year or two, waiting for the cycle to bottom out before re-entering.
“This fund suits the type of investor that just want to ride out the volatility. Someone who says I have a portfolio of houses and still like residential building as an asset class but, rather than buy more houses right now, I’ll move into the debt side of it for the next two or three years. Or, again, people have been in the share market for the last couple of years, they take the profits and ride out the volatility in something with a lower risk profile with capital surety.”
And for those who like a side helping of social responsibility, Gatfield says the fund not only provides a quality investment offering to clients, but it is helping bring forward the build of many homes that would otherwise be delayed or cancelled due to traditional funding restrictions. By enabling the construction of warm dry homes, Classic Group lives its purpose of ‘building a better life for people everyday’.
How to invest
If you are interested in investing in the Land & Build Fund, or you would like to learn more, you can download the full information memorandum for this fund here.
To get in touch with our Corporate Investor Manager about this opportunity, click here to register your interest.