Latest / Best of Business / Alex Cassels: property developer launches bid to repurpose Auckland commercial buildings into housing

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Alex Cassels: property developer launches bid to repurpose Auckland commercial buildings into housing · Best of Business

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  Speaker 1: It is twenty three to seven News Talk Zibby.
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  Speaker 2: All right, we've got a Wellington property developer who's calling
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  Speaker 2: on the Reserve Bank to make it easier to finance
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  Speaker 2: repurpose to rent developments. So these are vacant and underused
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  Speaker 2: commercial buildings that you can then convert into apartments. Alec
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  Speaker 2: Castle's has been doing a whole heap of these in
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  Speaker 2: Wellington and he wants to form a coalition of the
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  Speaker 2: will of the willing to ask the Reserve Bank to
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  Speaker 2: make it easier and cheaper to make this happen. So
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  Speaker 2: Alex Castle's joins me.
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  Speaker 3: Now, Alex, hi, there, how you going Andrew Good.
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  Speaker 2: Explain how can the Reserve Bank make a repurposing of
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  Speaker 2: commercial buildings cheaper?
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  Speaker 3: I just have to recollect my thoughts distracted by the
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  Speaker 3: bugly sorry, the budge smigglers. I don't see that one coming. No, no,
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  Speaker 3: So how can they make it cheaper? Well, there are
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  Speaker 3: various different sorts of lending and the so different forms
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  Speaker 3: of loan loans attract different interest rates. And why that's
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  Speaker 3: the case is a more risky loan like a commercial
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  Speaker 3: probably lie or a loan that's deemed more risky by
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  Speaker 3: the Reserve Bank by the regulator, requires the bank to
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  Speaker 3: hold more capital against that loan to safeguard against the fault.
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  Speaker 3: And as you get progressively less risky loans or loans
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  Speaker 3: that are perceived is less risky, that capital allocation, that
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  Speaker 3: amount of money that has to get held against the
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  Speaker 3: loan to safeguard against the fault, reduces and reduces, thereby
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  Speaker 3: allowing them to lend more of its money, put more
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  Speaker 3: of its money to work. That then allows the bank
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  Speaker 3: to charge a lower.
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  Speaker 2: Interest Right, So are you are you actually telling me
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  Speaker 2: that if you're wanting to build a twenty story apartment
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  Speaker 2: building from scratch, you can borrow that a sort of
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  Speaker 2: like at a residential rate, and that is cheaper. But
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  Speaker 2: if you want to take an already existing twenty story
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  Speaker 2: commercial building and convert it into apartments, it's going to
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  Speaker 2: cost you more to source your money.
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  Speaker 3: Not well, merely, it's not not exactly to be honest,
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  Speaker 3: all build to rent developments, whether they're a repurpose or
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  Speaker 3: a new build, would attract the commercial interest rate, and
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  Speaker 3: that that that comes if there comes, there comes a
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  Speaker 3: higher rate than residential or or possibly more more importantly
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  Speaker 3: like infrastructure. I think what we talking about here is
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  Speaker 3: the capacity or the ability for the build to rent
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  Speaker 3: and repurposing to be more of like a social infrastructure
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  Speaker 3: got where you building communities, building safety and cities and
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  Speaker 3: are providing long term tenure and affordable rents.
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  Speaker 2: So let's keep it simple. You know, the build to
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  Speaker 2: rent attracts a commercial rate. We know the government sees
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  Speaker 2: build to rent as a way of solving the housing crisis.
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  Speaker 2: So surely the government should actually get rid of the
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  Speaker 2: higher interest rates scenario if they could around build to rent.
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  Speaker 2: Can they do that or is this up to the
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  Speaker 2: Reserve Bank alone, because they're independent.
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  Speaker 3: It would be up to the Reserve that the Reserve
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  Speaker 3: Bank are independent, as you say, but I think, yeah,
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  Speaker 3: this this idea that we can view build to rent
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  Speaker 3: as a as a form of social infrastructure, and and well,
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  Speaker 3: I think the other thing is we're government or local
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  Speaker 3: government or community housing providers form part of a leasing
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  Speaker 3: arrangement that then makes the proposition safer. From a commercial perspective,
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  Speaker 3: that's another way that an interest rate could be driven
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  Speaker 3: down because that perceived risk. These capital locations all come
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  Speaker 3: down to perceive risk. If the risk is less, if
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  Speaker 3: the risk is lower, then there's a less chance of default.
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  Speaker 3: And obviously a mass number of defaults. And one lending
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  Speaker 3: categredits what we saw with the GFC too much easy lending.
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  Speaker 3: Who I guess people with out the credentials to have
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  Speaker 3: those loans. It's all about maintaining the security and the
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  Speaker 3: I guess the reliability of the financial system. But if
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  Speaker 3: we I think we're where we were looking at social
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  Speaker 3: infrastructure and particularly lease arrangements then involve chips or local councils.
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  Speaker 3: There's a degree of safety there and a range of
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  Speaker 3: outcomes that I think just by such.
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  Speaker 2: Loans absolutely, and I know I know you've done some
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  Speaker 2: of the things. I know you've done some of the
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  Speaker 2: things in Wellington, but without you know, the handy loan rates.
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  Speaker 2: But at the same time, if we look at Auckland,
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  Speaker 2: which has a midtown full of outdated commercial buildings that
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  Speaker 2: they find almost impossible to lease out. A town has
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  Speaker 2: moved north, basically down to the waterfront, and we have
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  Speaker 2: this you know, no man's land of all sorts of
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  Speaker 2: terrible buildings, and that's also attracting terrible people. That's a
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  Speaker 2: place that really desperately needs to be redeveloped.
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  Speaker 3: I agree with you entirely, and I think what we've
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  Speaker 3: seen in Wellington is, you know, there's some of these
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  Speaker 3: There was an article recently about some of the properties
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  Speaker 3: that we've done in Upper Willis Street, and you know,
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  Speaker 3: a reverends from from a nearby church made comments that
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  Speaker 3: the cohort of people in the area had changed quite
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  Speaker 3: significantly as a result of basically residentialization of a of
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  Speaker 3: a number of underutilized office buildings. And I think the
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  Speaker 3: same can happen in the christ and sorry not Christ
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  Speaker 3: com Crassis, but been in Auckland. I think even Queen's
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  Speaker 3: Pak Road, some of those areas that have kind of
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  Speaker 3: have reached an impass. Really could they could turn around
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  Speaker 3: quite quickly if residual populations were built up there and
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  Speaker 3: in communities. Really that's the most important, the communities that result.
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  Speaker 2: I get that. How I do have one one worry
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  Speaker 2: because more and more people have been talking to her
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  Speaker 2: a part of body corporates and et cetera, talk about
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  Speaker 2: the rate of failure in terms of where the tightness
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  Speaker 2: et cetera is far greater in a reuse building than
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  Speaker 2: a new build building.
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  Speaker 3: Would you agree, Oh, no, that depends entirely on the materials.
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  Speaker 3: I think there were a lot of In the early nineties,
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  Speaker 3: there was a lot of I guess the building materials
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  Speaker 3: in that period were sully more problematic. I think in
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  Speaker 3: a concrete building, you know, well well built concrete building,
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  Speaker 3: you'd be be pretty good. I don't think there will
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  Speaker 3: be an issue.
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  Speaker 2: Alex come to walklme. We need you and I thank
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  Speaker 2: you so much for your time today.
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  Speaker 3: Great nice to talk to you. Thank you.
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  Speaker 2: Alex Castle's he's a Wellington property developer. He's done these conversions.
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  Speaker 2: He's built to rents in the middle of Wellington and
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  Speaker 2: that could be an answer for Auckland's midtown. Still to come,
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  Speaker 2: Gavin Gray from the UK. Somebody also asked why are
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  Speaker 2: farm interest rates so high? It's all about, as he said,
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  Speaker 2: perceived risks. There's all sorts of perceived risks. I don't
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  Speaker 2: understand why some things I like.
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  Speaker 1: Build.
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  Speaker 2: I don't understand a lot of these perceived risks. But
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  Speaker 2: ask the people doing the perceptions. But they're the ones
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  Speaker 2: holding us back.
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