A new intergenerational investment portfolio promises to make Napier City Council (NCC) assets like the Hawke’s Bay Airport and the Parklands property development into wealth creators for the future of Napier and its residents, and in time, offsetting a portion of rates.

The assets will be managed by Ahuriri Investment Management (AIM), a new Council Controlled Trading Organisation (CCTO) that became operational on August 1. 

In part a response to the cost-of-living crisis, the move appears to have struck a chord with the public. The decision to set up a CCTO was consulted on as part of the 2024-27 Three-Year Plan, before it got the green light.

Similar organisations operate in other councils across the country. Most notably HBRIC, Hawke’s Bay Regional Council’s investment arm and Quayside Holdings, owned by Bay of Plenty Regional Council. Last year, Quayside paid a $45m dividend to the Bay of Plenty, which the Council used to reduce general rates by an average of $380 per household.

In the case of AIM, the company will remain 100% owned by NCC, with management of the investment assets transferred to AIM.

“For the last 18 months we’ve been working through what it might look like for us in terms of identifying the investment assets we own that we could be managing in a way that gets a far better return and creates more longer-term wealth than what has been happening historically,” Mayor Kirsten Wise said.

Potential returns from actively managing Council’s investment assets are expected to be significant over the long term. Returns are expected to grow year on year, with around $8 million of income forecast from property and cash assets in 2034/35, as well as long-term growth of the overall investment portfolio. Along with Parklands property development, NCC’s 26% shareholding in Hawke’s Bay Airport, some selected surplus property and the commercial leasehold land portfolio make up the investment portfolio, worth about $160 million. Further commercial assets may be added in future. 

“We are a little bit different [from other CCTOs] in that we have retained the ownership within council. We just felt that it was probably a bridge too far for our community at the moment to transfer that ownership of intergenerational assets that we have been looking after for a very long time. And as such we have got some guardrails in place in terms of what AIM can and can’t do. At the same time we don’t want to hinder them. We will be working with them very very closely with good reporting requirements,” she said.

A management agreement is in place and a Statement of Expectation has been set out, which the board would respond to by generating a Statement of Intent in return.

Development of AIM kicked off in July last year, and this week the first three members of the board were announced, including Board Chair Hamish Bell, who has a long background in finance and investment management.

Former Airport board chair and Hawke’s Bay local Wendie Harvey, as well as Justin Kean, who has a background in property management, have been appointed as independent board members. Kean’s experience with property was a key reason for his appointment, as was Harvey’s expertise in strategic assets management. Bell said it was important too, that at least one board member was from the region. Two more directors will be appointed from the city Council post election-cycle.

Investment decisions belong to the board, and only decisions about the Airport – considered strategic infrastructure – will require public consultation. AIM does have the power to sell assets, because it’s the total value of the portfolio rather than individual assets that the council is trying to grow, Bell said.

“The aim is to protect the underlying value of it. Inflation adjusted value is being protected as a strategic asset, so part of that is around increasing value beyond inflation. And councils in the future can’t dip into that, and so the basic fund is being protected and deemed a strategic asset. Returns over and above that and the rate of inflation, can then be used to mitigate the burden on ratepayers in the future.”

This means if an asset were sold the proceeds must be reinvested in the portfolio.

“There is an expectation of an annual dividend from the portfolio to council. The intention is that would increase over time, along with the value of the portfolio,” Bell said.

Hamish said the board would be active in the community engagement space, especially because as AIM grows the investment base, it may want to partner with private investors, mana whenua, or even other councils.

For the remainder of the year the board will be carrying out due diligence and assessing options. It should have a strategic plan to present to ratepayers by Christmas.