10
Waikato-Tainui. These aremostly land
holdings, restored after the tribe’s 1995
settlement with the Crown. However,
it takesmany years to develop an
investment property before we earn any
revenue from it, and a large percentage
of the capital neededmust be borrowed.
At
, for example, we have
consents for the balance of the site
and we will carefully develop as
market demand and returns on
capital warrant further expansion.
Other potential property investments
are viewed similarly. Over the
medium termwe do not want to
affect our ability to pay an increasing
Shareholder dividend. We have
therefore decided to use the freed-
up cash to pursue a higher yielding
investment strategy.
There will be two parts to this new
approach.
The first is to identify property
development opportunities, selling
rather than retaining the investment
for the long term. We recognise
however that there could be lengthy
timeframes between development
concepts, locating the land, rezoning,
resource consenting, tenanting,
building and then exiting.
So the second is to invest in one ormore
medium to large private businesses
where the owner(s) are looking for fresh
equity, and where there is potential for
TGH to receive good cash flows after a
relatively short time. We will aim for
a few large stakes rather thanmany
smaller ones, and add value through our
governance andmanagement expertise.
This new investment strategy builds
on the fact that we still have capacity
as well as a strong, reliable earnings
stream. We also have the ability to
take onmore risk. We can accept a
maximumvolatility in earnings of
10% in any one year, and our current
rate is 7%. Together these factors
give us, our Shareholder, and the
investment community the confidence
that this new strategy is sound and
that we can continue to grow.
It also means we have now set a much
higher earnings threshold for all our
future property-based investments.
Tribal engagement
Ultimately what TGH does has to be
for the benefit of tribal members. To
achieve higher returns, without taking
undue risk, takes time, and for many
tribal members the wait is frustrating.
While in recent years the company has
reported regularly to its Shareholder,
it is fair to say that its main focus has
been on getting TGH operating well.
While the company has developed
its experience and expertise over the
last decade, it has beenmuch harder
on the Shareholder side to afford the
structures, training and resources
needed to execute tribal plans.
The result is that the combined people,
assets and resources of the tribe and its
commercial armhave been not been
consistently aligned.
If TGHwants to be a part ofWaikato-
Tainui, and reach the goal of delivering
amuch higher sustainable dividend, it
needs to engagemuchmore deeplywith
all the stakeholders ofWaikato-Tainui.
We need to take a holistic view and
have a much better understanding of
mutual expectations. We have made an
intensive effort over the last 12 months
to engage with the entire tribe, but this
is only the start of a process.
This new
investment
strategy builds on
the fact that we
still have capacity
as well as a strong,
reliable earnings
stream.
While the
majority of our
assets remain in
property, and will
continue to do so,
TGH’s strategy will
see us diversifying
into other
investments.
49%
Commercial
properties
21%
Crown
properties
11%
Rural
properties
10%
Hotels
5%
Fishing
2.7%
Agriculture
1%
Private equity
0.3%
Development properties
portfolio value by sector
TGH & WTFL
WTFL
TGH
2009 2010 2011 2012 2013
total assets
TGH & WTFL
484 516
645 680 725
14 13
13
13
13
$M
0
