Simplicity Living buys Ellerslie Racecourse land for 330 ‘build-to-rent’ homes

Property / news

Simplicity Living says it is 'on a mission to provide thousands of Kiwis what’s already common overseas - quality, long-term homes for rent'

30th Aug 23, 5:00am by David Hargreaves

A perspective of Simplicity Living's planned new development near Ellerslie Racecourse

Simplicity Living says it has bought 1.4 hectares of land adjacent to Auckland's Ellerslie Racecourse and plans to construct 330 build-to-rent homes.

Simplicity Living's statement announcing the land purchase didn't state a purchase price, nor a construction cost estimate. Construction is expected to start in 2024, with completion by late 2026.

The land was sold by Auckland Thoroughbred Racing Inc (ATR), the owner of Ellerslie Racecourse.

Simplicity Living is owned by KiwiSaver and investment funds managed by default KiwiSaver provider Simplicity NZ Limited (Simplicity).

Earlier this year Simplicity Living announced its intention to build 10,000 "quality homes" for rent across New Zealand.

It has already completed and rented 159 homes in Auckland's Onehunga and Point England, with 345 to be under construction by the end of this year, and another 800 in development.

“We’re on a mission to provide thousands of Kiwis what’s already common overseas - quality, long-term homes for rent,” Simplicity Living managing director Shane Brealey said.

The newly purchased site is a five-minute walk to Greenlane’s train station and retail shops.

“The location is impeccable for quality, long-term rental homes,” Brealey said.

Managing director of Simplicity Sam Stubbs said: "Quality homes for long term rent is exactly what KiwiSaver should be helping build."

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56 Comments

by Flying high | 30th Aug 23, 7:15am 1693336516

"5 minute walk to train station"... Code for almost no on-site parking, I'm picking. The land area averages 42 sqm of land each without allowing for any roading or outdoor amenity.

Good to see some 10 storey high rise in a central suburb

by nktokyo | 30th Aug 23, 7:53am 1693338827

If they can get a few shops on the bottom levels and a bike parking space it will work. Be good to see some electric car sharing.

by Final Account | 30th Aug 23, 8:29am 1693340973

100% this, if you're doing a development this large and aren't looking at mixed use then you're a mug.

by KH | 30th Aug 23, 2:21pm 1693362113

FH: Back of envelope.

10 stories so equivalent 420m3 meters. Similar ( or bigger ) than many stand alone house subdivisions.

And of course shared spaces etc yadda yadda.

Or: 330 homes at 100m3 = 33,000m3

Over 10 floors = 3,000 per floor. On 14,000m3 land.

by Oats | 30th Aug 23, 7:42am 1693338147

Glad I got out of simplicity kiwi saver. Could be a disaster trying to liquid these assets. Good location for the apartments though.

by nktokyo | 30th Aug 23, 7:51am 1693338718

Wait until they realize they need to charge $1000 pw to make a decent return for their investors.

by Flying high | 30th Aug 23, 7:57am 1693339073

Well put, but that would be for a 3 bedroom. There could easily be some 3 or 4 bedroom due to the large floor area over 10 stories.

by HouseMouse | 30th Aug 23, 8:21am 1693340471

Yes, rent is unlikely to be affordable, but:

- They will be warm: low heating costs

- good location: low transport costs

- good tenure security: avoids being turfed out and having to find another rental, which can be costly

by KH | 30th Aug 23, 8:33am 1693341188

nktoyko: Tell us your cost calculations. Remembering Simplicity partners with a very clued up builder.

by anothervoice | 30th Aug 23, 8:56am 1693342572

what builder do they partner with and what makes that builder 'clued up'?

when i hear someone say a builder is clued up i simply think they know work arounds to cut corners without breaking the law

by Pragmatist | 30th Aug 23, 9:59am 1693346346

Simplicity Living managing director Shane Brealey

Google is your friend

by HouseMouse | 30th Aug 23, 12:35pm 1693355752

They do most things in house. They have gained great efficiencies with their method and its why they are building apartments about 25-30% cheaper than everyone else.

The industry is lazy and full of ticket clippers. These guys are the opposite of that.

by K.W. | 31st Aug 23, 1:07pm 1693444045

You use Chinese rebar and concrete. And unqualified Chinese tradesmen. Then you end up with this https://www.dailymail.co.uk/news/article-9495101/Sydneys-sinking-Mascot…

by nktokyo | 30th Aug 23, 9:36am 1693345013

I'm thinking about the net yield returns an institutional investor is likely to want from a project like this. Risk free right now is 6% on TD, that's net. So gross about 10%. Assume it costs $600k per unit to build (including land, council, services, funding etc... I might be conservative). 10% gross is $60K pa or $1153 pw. 9% gross is $1052pw.

Most residential properties rent for 5-6%, if that, in Auckland. Simplicity will need the cost of rent to go up by at least a third.

by KH | 30th Aug 23, 9:54am 1693346094

Thanks nk.

by mfd | 30th Aug 23, 10:02am 1693346565

I don't know the numbers, but I suspect they are willing to accept a lower return due to inflation adjustment, low and different risk profile to the rest of the cash/bond part of this portfolio, and the good PR/social benefits.

Probably also a suspicion that in a few years we may not have bond and cash saving rates like we do now, while these will be chugging along with returns increasing with inflation.

by ACB | 30th Aug 23, 11:37am 1693352237

You can buy government inflation linked bonds.

I just don't think this sort of stuff is appropriate for a Kiwisaver portfolio, like their mortgage portfolio in their conservative fund. Highly concentrated, illiquid and riskier products where it's not clear who's getting paid. Simplicity should stick to passive index funds not direct investments with a tinge of impact investing.

by mfd | 30th Aug 23, 1:11pm 1693357906

Yes, you can. The real returns are low and you get taxed on the inflationary component too in New Zealand.

This represents a little dabbling around the edges of the portfolio, likely to generate a higher return but not betting the house, as it were. Plenty of other options out there with simple passive index funds if that's all you want.

by ACB | 30th Aug 23, 2:14pm 1693361686

That's what Simplicity was set up to do, passive, liquid, diversified, low cost. Now they're injecting their own social housing investments and 250 FHB mortgages (15% of defensive fund) that they've accessed into the mix. We're not talking about multiple super senior tranches of AAA mortgages with 1000's of underlying obligors. That's not dabbling in my book. Risk and return.

NB: you'll also get taxed on the inflation component of inflation adjusted rents too.

by HouseMouse | 30th Aug 23, 12:36pm 1693355818

No, see above. They are building at significantly lower cost due to their methods.

by In Vino Veritas | 30th Aug 23, 9:06am 1693343193

Simplicity in Point England charge $415-$425 per week for 1 bedroom, $515-$525 2 bed and $590-$600 3 bed. Making an assumption that Greenland will be similar, and assume a gross yield of a miserly 4%, that equates to around $767k for a 3 bed place. Therefore, they will be cheap, nasty dumps that will look good new, but deteriorate quite quickly. In 10 years it will be an English style housing estate with the attendant issues.

by Mr Ed | 30th Aug 23, 9:12am 1693343561

A 4% gross return ? 😂😂

it’s not 2021.

the rest of your comments have some validity

by HouseMouse | 30th Aug 23, 12:45pm 1693356359

No they don’t. They are totally ill informed.

Like you.

by HouseMouse | 30th Aug 23, 12:38pm 1693355911

Ill informed rubbish.

by HouseMouse | 30th Aug 23, 12:45pm 1693356314

I understand the build cost for the 3 bedroom apartments is circa 350k. So it’s a yield of about 8-9%.

by K.W. | 31st Aug 23, 1:05pm 1693443911

Thats quite achievable, I hear you can fit 32 people into a 3 bedroom place. Or 20 into a 2 bedroom with lounge. They don't market these build to rents to New Zealanders.

"The first Simplicity Living residence, Kupenga, in Point England, opened last month, with 69 apartments already home to more than 150 residents across all age groups and 24 nationalities."

by mfd | 30th Aug 23, 9:12am 1693343534

Simplicity Living is a little over 1% of my Growth fund at the moment - hardly a systemic risk. I don't expect the returns from this component to be world-beating, they are intended to play the role of low volatility bond/cash deposits while providing a social good. Equities are still doing the heavy lifting.

by ACB | 30th Aug 23, 11:41am 1693352496

Shouldn't be there at all in my opinion. Should be a discretionary investment outside of Kiwisaver i.e. up to you if you want to potentially forgoe returns for social good.

I ask, is Simplicity living truly the best product available for the risk and return it brings or is it in there because it just so happens to be the fund operated by simplicity itself and to meet Sam Stubbs personal "social good" agenda?

by BirdieNZ | 30th Aug 23, 1:36pm 1693359402

If you don't think the risk-adjusted returns it brings are worth it then there are other KiwiSaver providers. The business case seems reasonably sound to me and it's a minor part of the portfolio so I have no issues using Simplicity for KiwiSaver. There's plenty of choice in the market right now though.

by ACB | 30th Aug 23, 2:17pm 1693361836

Yes I do have choice but I am informed and to me its a pity they've gone down this path as otherwise i would invest with them. Does the average punter know about this stuff though (and respecting people might disagree) and therefore also make an informed decision?

by agnostium | 30th Aug 23, 4:31pm 1693369870

You're convincing me to move to Simplicity. Thanks.

by ACB | 31st Aug 23, 11:47am 1693439225

You're most welcome.

by mfd | 30th Aug 23, 1:47pm 1693360040

Simplicity also give 15% of their fees to charity, if you are really against doing good things for the community it is best to invest elsewhere. Plenty of options for your fees to go to fund manager bonuses, instead.

According to Canstar, the Simplicity growth fund is the 3rd best performer over the past 5 years, with fees a quarter of funds with similar returns (these two numbers obviously being related). I'm a happy customer.

by ACB | 30th Aug 23, 2:21pm 1693362086

That's great MFD, I agree that their after fees performance as a pure passive manager (until these sorts of investments were added) was a real attraction. And that you feel good about your decision is also important. The "simplicity" has however gone for me.

by K.W. | 31st Aug 23, 1:16pm 1693444565

100% agree. Australia is currently raising the issue of unlisted assets being held within super funds. But at least Australia has an enormous and well diversified super industry. NZ is small and concentrated, and this would constitute a large chunk of their business. Not to mention that their focus should be on running a super fund, not property development. Maybe there arent enough booze ups in the fund management industry these days, and they all aspire to own yachts and fly private jets like the Williams Corp boys.

A 3-4% gross yield might have been ok a few years ago with low interest rates, but now the expectation for any commercial property fund is at least 7% (should be above the risk free rate of Govt bonds and bank deposits due to RISK).

Simplicity investors are simply funding Sam Stubbs quest for a knighthood for "services to NZ". Personally, I expect commercial returns from my investments, not feel good vibes. If I wanted that, I'd go donate directly to my local women's refuge or pet rescue centre.

by HouseMouse | 30th Aug 23, 7:49am 1693338591

A rare shining light in NZ’s development sector.

by Mr Ed | 30th Aug 23, 9:13am 1693343625

FFS . The oracle is back

by HouseMouse | 30th Aug 23, 12:41pm 1693356063

Insightful as ever. So eloquent and you offer so much.

I guess you are a horse after all.

care to offer some insight?

thought not

by K.W. | 31st Aug 23, 1:17pm 1693444660

Based on your comments today, are you Sam Stubbs?

by nktokyo | 30th Aug 23, 7:50am 1693338641

Enough to house a couple of days worth of people migrating to New Zealand.

I'm pretty sure these are the guys who have said they'll never use Fletchers products again so I have a soft spot for them.

by murray86 | 30th Aug 23, 8:08am 1693339721

The perspective provided is reminiscent of many I observed in Europe, especially Belgium and Netherlands. Comfortable and modern. So long as they are not turned into slums by the occupants, I see no reason why this could not succeed. But as others have said, I would expect that there be an option for vehicle parking/storage. A friends apartment in a tower (30 floors) in Hawaii has an attached multilevel parking garage for occupants. a good solution.

by oscar87 | 30th Aug 23, 8:46am 1693341992

I lived opposite this site (Greenlane side of the motorway though) for a few years and did fine without a car as I was working in the CBD. I personally like the option of not having to buy/rent a carpark if you don't want it. I'm sure there will be parking incorporated, just maybe not at a 1:1 ratio. Hobsonville Pt manages to do this.

by Mr Ed | 30th Aug 23, 10:09am 1693346942

Everyone with a bit of money is a property expert .

Simplicity, just another Kiwi-saver fee Pirahana .

by mfd | 30th Aug 23, 9:14am 1693343642

Simplicity are a not-for-profit organisation and have a history of lowering fees as their costs come down. The fees are about as low as they come.

by Mr Ed | 30th Aug 23, 10:11am 1693347074

Thanks for the cheerleading. Smaller Piranhas then 😊

by Matt_09 | 30th Aug 23, 9:11am 1693343462

So much negativity on here! Build to rent is a sound business model offering a very good product to which there is a lot of demand. Shane Brierly is a seasoned, quality developer, the location is sound and I’m sure they’ll do a very good job.

by Sluggy | 30th Aug 23, 9:49am 1693345789

It's a massive threat to ma and pa Inc. Hence the negativity. I'm all for the institutional investors, it's the way forward.

by TronMVP | 30th Aug 23, 10:13am 1693347192

I agree it's the way forward, but I don't see it as a threat to ma and pa investors.

by HughJorgan | 30th Aug 23, 9:31am 1693344679

Will be great to see come density around a suburban train station for once!

by Hitch22 | 30th Aug 23, 10:34am 1693348450

This is the whole point, do you feather the nest of the S&P500 or do you actually help the very country you live in? At least he's trying and managing risk. What do you think the Australian super fund invests in, Berkshire Hathaway and Facebook? No they invest in themselves. So if we do not do this we bumble along and moan that house prices are too high. Stop tinkering and get on and build.

by ACB | 30th Aug 23, 11:47am 1693352848

Actually they do invest in Berkshire Hathaway and Facebook.

But yes, many of these superfunds however also have built internal management teams to directly own illiquid and concentrated property and infrastructure as a small portion of their portfolio. It might be sensible, on the face of it, but inherent illiquidity can hide poor performance and therefore entrench empire builders - since at the end of the day, these Super Funds are not particularly competitive, there is not a lot of switching going on to keep them honest.

by Hitch22 | 30th Aug 23, 3:03pm 1693364597

Yes was a bit flippant there. However is that illiquidity so bad when these funds are locked in til 65..66...67......? Also is that an issue when the % of a fund is say %1-5?

I guess one could invest in a RE fund but I'm unsure if any in say investnow are residential funds rather than commercial.

by ACB | 31st Aug 23, 11:51am 1693439519

That's the valid argument of course about not needing liquidity. Albeit in an open ended fund, how do you feel that the oldies are cashing out with all the liquid, mark-to-market stuff when you might be holding a few unknowns? Anyway, my point is that Simplicity is doing this themselves with your money should raise some eyebrows and whether you might find more of your money gets allocated into these schemes over time.

by K.W. | 31st Aug 23, 1:20pm 1693444827

I have a hunch that the next financial crisis will not be a run on the banks, but a run on super funds as people try to cash out or move their money before valuations crash. That will be devastating to retirees and those about to retire.

by Hitch22 | 31st Aug 23, 6:11pm 1693462298

Didn't we see an example of that when covid kicked off with lots of switching from growth to conservative funds? Was that devastating to retirees? Those that could would have left KS alone those that couldn't would have limited withdrawals as much as poss until valuations once again improved. Certainly nobody bailed in or taking a haircut or impacted by any other funny bank run carry on designed to protect banks not you and I.

by Mr Pink | 31st Aug 23, 12:09am 1693397356

I already invest in this so why should you be using my kiwisaver to repeat . Looks like Simplicity is just like the rest of them all aline their pockets with fees and go about stating what a good job they are doing with the funds that company has donated. O please go suck a Sweet