Hamilton: New Zealand ’s secret success story?
It could be New Zealand’s secret success story.
Though maligned by many, the former Waikato farming town has blossomed into a city centre of high-tech business, engineering, education and retail.
Sprawling new suburbs are springing up at its north and south ends, new ring-roads and expressways are being built and new jobs are planned by the thousand.
Central to this is a $3 billion inland port project at Ruakura on the eastern side of the city, next to the planned Waikato Expressway Hamilton bypass, a project that will also cement the role of Tainui, the local iwi, as a major player in the region’s economy.
However, that is not all. Recently elected mayor and newcomer to council politics, lawyer Julie Hardaker, is shaking up council planning procedures to give the city a more defined structure.
Mayor Hardaker also rattles off a list of projects – business, education and retail- planned or under way in the city.
“We are a really successful city,” she said.
Port plan puts Tainui on right track
While other iwi-based organisations have faced controversy over their business activities, Tainui Group Holdings has achieved respect from the Waikato region.
“They have an excellent leader in chief executive Mike [Pohio] and his team. They are definitely a very strategically focused organisation,” said Sandra Perry, chief executive of the Waikato Chamber of Commerce.
“Tainui Group Holdings is investing for the future. It is not investing and selling. It has long-term plans,” Ms Hardaker said.
Long-term planning and good governance seems a theme of Tainui Group Holdings. The iwi has turned its Treaty of Waitangi settlement of $170 million to assets of more than $650 million today, with expectations this will top $1 billion by 2020.
Such growth will stem from investments in the port, retail, property, forestry and other investments.
As the Base retail development at the north end of Hamilton nears completion, the inland port will be the central focus of Tainui Group, a multi-billion project that will take decades to complete.
The port is set to cover 500ha and will ultimately create 6000-10,000 jobs. Supported by Ms Hardaker, the chamber and other business groups, the mammoth project is currently going through the regulatory process.
Regional council hearings started in February and Tainui Group will submit the last evidence for its case early in May. Tainui Group has prepared social and economic analysis studies, with the city council also expected to announce its district plan later this year.
“It’s a big year for getting that regulatory approval,” said Mike Pohio, Tainui Group chief executive.
Another major part of the project is the necessary transport links.
Kiwi Rail is upgrading the East Coast Mail Line and the Waikato Expressway, including a Hamilton bypass, is due for completion by 2019.
“Securing the tenants will come once we have certainty from the regulatory outcomes,” Mr Pohio said.
Market planning is under way but Tainui Group plans a more structured approach over 30-50 years, with Mr Pohio citing the Goodman development at Highbrook in Auckland as an example to follow.
Though industrial turmoil at Ports of Auckland might present an opportunity for Ruakura, Tainui sees this conflict as raising the issue of the country being vulnerable to relying on few ports.
Ruakura is seen as complementing Ports of Auckland and Tauranga Port. There will be a small port of 30ha but the rest of the site will feature value-added activities, supply-chain logistics and warehousing, with early stages of development from 2014-15.
These businesses will use state-of-the-art technologies, with staff being skilled operators, using robotics for greatest efficiency, rather than the handpicking unskilled labour of the past.
Such a “step jump in productivity” coupled with lower land and labour costs, with Hamilton being “a great place to live” should be attractive to business, Mr Pohio said.
Altogether, the inland port is expected to cost $3 billion but the project will be built in stages, using a mix of equity, capital and leases to raise the cash, a similar process Tainui Group used to fund the $250 million Base shopping centre.
A Base for the future
It was once seen as a threat to Hamilton’s CBD.
But the Base shopping centre is now viewed as an attraction drawing in millions of dollars from outside the city, as well as providing hundreds of extra jobs.
And, it is acting as a catalyst for change within Hamilton’s inner city.
Tainui Group had clashed with Hamilton City Council over a council policy known as Variation 21, which covered what Tainui Group could build on the former army camp.
Mr Pohio had called on the Hamilton CBD to re-invent itself, focusing more on entertainment, boutique shops and restaurants.
Tainui won its battle and is now planning new development north of the Base with big box stores and the indoor Te Awa shopping mall.
A reinvention of Hamilton CBD is already under way.
The existing Base alongside SH1 covers 18ha, with 12ha still to be developed to the north. Tainui envisages more large format retail, offices, more car-parking and potentially a hotel and health facility.
Again, a phased start, starting this year, possibly with an “auto precinct” area for vehicle servicing. This 12ha development is expected to take five to seven years, depending on what it takes to attract tenants and complement the rest of the Base.
One hurdle to overcome is traffic volume. Hamilton’s northern end has grown rapidly and The Base added to the congestion. Thus, Tainui has contributed to projects such as widening nearby roads. Further development must also wait until the completion of the Te Rapa bypass in the coming year.
While it may have initially sucked some lifeblood out of Hamilton’s CBD, Tainui stresses its positive contribution to the local economy, which is now accepted by others.
The Base is a “supra-regional centre,” with an annual spend of $80 million a year coming from outside the city area, a figure likely to increase to $100 million next year. Previously, locals shopped outside Hamilton but now out-of-towners come to the Base, where 1600 are employed, pumping a further $40 million of wages into the local economy, Mr Pohio said.
Tribal investment and tribal support
Tainui Group has other business investments as well as TheBbase and the port.
It has been developing the Huntingdon suburb with Lugton Real Estate, a 650-section project. It owns the Ibis and Novotel hotels in Hamilton’s CBD, though it sold its shareholdings in Hamilton’s Sky City casino in 2005.
“We have substantial landholdings in the CBD including our office in Bryce St. We own the land and buildings. We own the land under Centreplace, land under Wintec, the police station, the court house,” Mr Pohio said.
“We bought land and buildings from the old post office in London St, which we will ultimately redevelop. The value of our investments in the CBD is still more than the Base. We are a substantial landholder in the CBD. We have a keen interest in encouraging its growth,” he said.
Tainui Group Holdings’ portfolio includes other industrial land, property, farming, forestry and fish interests and, more recently, Auckland International Airport’s Novotel hotel.
Tainui Group has sold its shares in Ryman Healthcare for $57 million, using the money to reduce debt.
“We have a debt facility of $250 million [Westpac and BNZ are our funding providers] and we have $100 million of headroom in those debt facilities. That allows us to increase our investment portfolio,” Mr Pohio explained.
Last year, Tainui reported assets of $658 million, with operating earnings of $14 million. Tainui Group expects this will grow to $1 billion by 2020.
“It will be great to be at that milestone but our care and due diligence is fundamentally important. We will continue to make our investment decisions so our balance sheet and earnings grow commensurately,” he said.
Such numbers will make Tainui recognised as as successful as the Ngai Tahu tribe of the South Island. It may be no coincidence.
“We work with Ngai Tahu and others. We certainly have shared our thoughts and aspirations. We have committed to a co-investment agreement. At a commercial level, Tainui and Ngai Tahu have shared aspects of our portfolio and aspirations, to accelerate our respective portfolios and strategy,” Mr Pohio said.
Working together also allows both tribes to draw on the skills of each other and develop confidence in each other’s decision-making. Their success has led other tribes to seek advice.
“We are more than happy to give insight, why we have structured ourselves. We don’t profess to have the ultimate model. This is how we have done it. There’s some learning you can take away. We can explain what we have done and why we have done it. We do let them know areas where we have had hurdles and how we have overcome them, show mistakes that may shorten the cycle. They can take our insight as observations that will help them with their decision,” he said.
As well as adding to this support for its iwi, comes the help given to the tribe’s social side such as an annual $10-11 million a year for community projects like marae upgrades and the annual Tainui Games.
But this pales into insignificance compared with Tainui’s total economic contribution. In addition to the wages and retail revenue from the base, Mr Pohio cited an annual $60 million a year of investment from his organisation.
“With this (region) being our home forever, we are very conscious of how our contribution is being made,” he said.
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Comments and questions7
The land that Te Awa and the base sit on was not a former army base. It was an AIRFORCE base. I should know, I spent from 1986 to 1989 at RNZAF Te Rapa. Apart from that, not a bad article.
cool story bro
actually,he's telling the truth. it was not an army base. it was an airforce base, and the buildings were on its right up until they started advertising the proposed "The Base" shopping centre
The city has completely changed, definitely a small metro city now. I go there often for work, and over the last 10 years have noticed the wealth of the city grow. There is a ton of business there, and it is business that is going to grow. Not sure how it happened, but IT sector is massive down there, they have always had a big research base, but there is definitely more hitech business down there now.
I visited NZ back in november 1997 and just quickly passed through the city whilst travelling round the country. It's great to see the city changing from a place you just pass through to becoming a destination in it's own right. On my next visit i will make sure to stop and explore this great little city.
If Iwas "given" $170 million I would be able to blossom and turn it into $1 billion.
This country is so racist
I also visit the city regularly for business from Sydney. I have always enjoyed staying in the city, but it is true, over the last 15 or so years I have been coming it has become a full little cosmopolitan city. Sure it's not big, think about 200,000, we would call that a suburb here, but it actually feels much bigger than it is, fantastic places to eat in the CBD as well. I try and get to Raglan in the summer once if possible to.
If I look at my clients there they have just gone from strength to strength over time. I haven't been to the Base but have driven past. Will have to do so next time.