Nasfund says acquired property to keep value

Business, Normal

The National, Thursday 08th December 2011

THE Westpac Bank building purchased early this week by the National Superannuation Fund (Nasfund) in the main thoroughfare of downtown central business district is expected to maintain its value despite the likely down-turn in the property market in the years ahead.
Nasfund’s joint chief executive Ian Tarutia yesterday clarified that about K60 million of non-core secondary properties had been divested while it maintained “new and strategic properties” in Port Moresby.
He said growth of the property market had been phenomenal over the last decade, and this year it had seen stabilisation.
“Nasfund has tested the market with a number of properties this year and price gains from 2010 valuations have been negligible.
“It would seem that the market is showing signs of the price consolidation that we anticipated would occur a few years back.
“Increased supply is a large factor but also there are strong concerns with in the Papua New Guinean banking system that an almost ‘bubble’ size property market is about to burst, and hence a reluctance to lend on property assets,” he said.
“The better view in our opinion is that any correction in the property market will not be a ‘burst’ but more of a consolidation with minimal impact on the economy.
“The reason is that much of the major commercial and real estate holdings are held by large well-capitalised institutions and that in a downturn in property, the assets are generally held, not sold by these institutions.
“What we could see, however, is a slow-down in construction activity but this we believe will be gradual over the next three years as projects currently on line complete, and there are many — both residential and commercial,” Tarutia said.
He explained that the decision to purchase the Westpac building was made over a 12-month period in terms of negotiation and agreement to finalise the deal.
“It was not an overnight decision,” Tarutia said.
He explained that Nasfund owned the entire block facing Douglas St, Musgrave St and Champion Parade except for the Westpac parcel.
“Nasfund wanted this parcel to complete the entire ownership of the city block.
“This is important for any long-term redeve­lopment of the entire site which covers a land size of the current Deloitte Tower,” Tarutia said.
He did not disclose the price paid for the building, but said it was determined by a registered valuer-general and it constituted “half of 1% of members’ funds”.
“As you are aware, Nasfund is intending to move to Harbour City at the end of next year.
“It was our intention to set up a city branch in the old Westpac building. However we have now received a strong interest from a consortium to lease the Westpac building and that is our current preferred thinking,” he said.
“The Westpac site is a premium site being on the intersection of the main thoroughfare in town,” he said.
“Nasfund believes strongly that as the boom comes to an end, quality-located property would continue to command strong interest.
“Nasfund has divested nearly K60 million of non-core secondary property while maintaining new and strategically located property in Port Moresby.
“In any downturn, quality and location will be the key for maintenance of values,” he said.
Tarutia said the agreement to buy the Westpac property this week was signed by a board member with Westpac management.