Bank of New Zealand Property Finance General Manager Phil Bennett loves going through cities and seeing buildings he has helped fund.
“When I drive through Wellington, I think, ‘we funded that building’. You know who the tenants are, the work going into it, and how those buildings help create that sense of ‘city’.”
We've funded some amazing projects and acquisitions along the way, and the key thing that stands out is they all benefit supporting thriving cities and growth in the housing sector.
Phil says his role gives him great insight into how buildings shape communities over time, noting changes such as the shift to more apartment living in Auckland and Wellington.
“We are trying to do the right thing for New Zealand. Having thriving cities, supporting housing and supporting communities.”
Phil moved from general banking to BNZ’s Property Finance Unit about twenty years ago. He was drawn to the specialist team because of “the people and communities that thrive from property development and investment”.
With property, it is always something different. It is also very urgent because if someone decides to buy a building, from the time they look at it to the time they settle, it is only a matter of months.
“I have always found people in property to be very focused on what they want to achieve, and I really enjoy that.”
BNZ set up its Property Finance division in 2001 to provide professional and consistent funding for commercial property development. Today the bank has a nationwide team of specialist lenders that serve commercial property investors and developers.
As BNZ’s General Manager of Property Finance – Phil is responsible for all of the bank’s commercial real estate lending, from setting the strategic direction to the team’s various policy and appetite settings.
He is also part of the Corporate and Institutional Bank’s Leadership Team and sits on the NAB Group’s Commercial Real Estate Committee.
BNZ’s core values are to “serve our customers well and help our communities prosper”. For Phil, that means building relationships with property customers and “doing all we can” to help them to develop and thrive in their businesses.
Having worked across most banking functions over the past 40 years, Phil says, “we still talk about relationship banking”.
Phil especially enjoys getting out to visit customers and seeing them at the site of their projects.
Whether it's clambering over an office or apartment tower development, through to driving around land subdivisions – the passion and enthusiasm our clients have is contagious.
It is also the best way to see what motivates them and understand their business, challenges, and needs.
“It is when you see your customers in their most real environment, doing what they do.”
While he notes he is a banker, supporting the development of the building infrastructure is what gets him out of bed every morning. He is also very proud of the specialist Property Finance team and enjoys supporting them to “thrive and grow” – whether with BNZ or if they move on to other opportunities.
It keeps me 'running to work' daily, whether in Wellington, where I live, or Auckland and other parts of New Zealand where we have projects and clients.
Professionalism, regulation
Phil says the level of professionalism between the property industry and the finance sector has increased considerably over the past two decades.
Before 2001, developers would essentially take out a “big overdraft, come in with their invoices and get payments approved”.
“Now it’s very structured around cost-to-complete and loan-to-cost ratios.”
The whole sector has developed and matured. There's a lot more professionalism. I see part of our role is to help grow the professionalism and expertise of the sector and, to an extent, head away from some of the stigma attached to property owners and developers.
He believes that stereotype is a hangover from the less structured days in the 1990s.
“Whereas today, when you buy a building, the level of due diligence and expertise around how you run that building is generally much better than it used to be.”
“With that, I have seen real growth in the professionals involved in the sector; quantity surveyors, project managers, and engineers. We all have a significant part to play, and it’s awesome to see the sector grow along the way.”
Having property finance specialists in banks and the private financing sector also makes his industry “much more professional than it was 20, 30 or 40 years ago”.
Alongside that, there has been a considerable amount of regulatory change, requiring banks to consider much more information on customers and projects.
I get it, he says. But it then adds costs to what we do, what the councils do, and everything else.
Phil says anyone starting in property banking must learn about the industry they are working with.
Learn the basics and the fundamentals of lending, ask plenty of questions and spend time thinking whilst also being well-read.”
“Anyone starting out in banking or any industry, take the time to ‘learn rope’ about the business you are in and also just think about the things that are going on and what will have an impact.”
Phil also says people should “not be in a hurry to be the CEO”. It takes time to gain knowledge and experience.
Plus – do what you say you will be when you say you will.
Working together
Phil notes that BNZ is the only bank that is a corporate member of the Property Council.
He says the membership supports BNZ’s goal of building a world-class Property Finance team. Everyone needed to increase their knowledge of the sector and surround themselves with the best participants in the market.
Being part of the Property Council has done that and keeps us informed around sector challenges, policy changes and access to education and latest sector statistics.
Members get the most out of their membership when they attend the meetings, establish relationships, and go to the Council’s events and conferences to gain insights.
He notes that membership allows the team to bring their banking perspective to the Council forum.
The Property Council’s events are also a great way to build and strengthen relationships across the different parts of the industry.
“It keeps you in the market, active and relevant.”
Phil says there are plenty of issues – the Resource Management Act, development levies and future Town and Zoning planning – where the property industry as a whole can and should work together.
He believes that an industry perspective in forward planning is necessary, especially in terms of longer-term planning.
Coping with our growth in a sustainable way is always going to be a challenge, which underlines the importance of working together. The industry, developers, financers, representative groups can be working constructively and collaboratively with local and central government, everyone playing to their strengths to help deliver long-term results.
Prepared for the cycle
Phil says the most significant challenge as a property banker is “managing through the cycles to ensure we are consistent in our processes and appetite and delivery”.
“It is important we signal any changes to those early and work with clients to achieve mutually beneficial outcomes.”
Phil notes the adage “property breaks banks”. Indeed, the industry’s boom and bust cycles caused a lot of pain for BNZ and the whole financial sector in 1987 and 2008.
He says the sector, and certainly BNZ, have learnt much more about minimising and managing risk.
As the economy – and the economies worldwide – start to contract again, he says BNZ has “picked the market and our appetite pretty well”.
It is very easy to have a knee-jerk reaction at the wrong time in the cycle and get it wrong for everyone. I want to show how our business understands the market, understands property and can manage through the cycles.
“We used to see those peaks and troughs in the market. I think we have peaked the cycle this time, and we are certainly going down the slope at the moment. But we are not seeing the ‘Olympic ski jump’; it’s more of a ‘rolling hills’ scenario. That is from everybody in the sector being more professional and having a better understanding.”
Global inflation and interest rates remain a concern, with the United States raising interest rates to counter inflation of around 15 per cent.
Inflation hasn't done with us yet, and I think we have some higher interest rates to come. That said, rates are still cheaper than in the late '80s and '90s.
Higher rates, rising insurance and power costs will impact both developers and investors.
Developers face uncertainty around construction costs, supply chain logistics, pre-sales ability, and even market prices, he says. Phil expects global events such as the conflict in Ukraine could compound supply and logistics disruption, even causing travel issues if things escalate further.
On the development front, we will see a bit of a 'holding pattern for a while as current projects focus on completion and developers look at feasibilities. They will use the next 6-12 months to work through these challenges and be ready for the next cycle. Investment transactions always struggle when interest rates are higher than yields – so we will likely see some movement there and a subsequent flow on to value.
Other challenges facing building owners around the country include the changes to earthquake requirements in the National Building Standards.
Phil says the “flight to quality”, which invariably happens during tighter economic cycles, is likely to be linked to rising demand for efficient, Green Star and NABERS-rated buildings and developments as tenants look to reduce carbon footprints and overhead costs.
This will put pressure on the older and under-performing stock. On top of this, there is likely to be massive disruption around infrastructure and access into cities as rail, road and water upgrades continue.
Overall, Phil is happy with his decisions and career to date.
“Hopefully, I still have a few years left in the tank.”
One regret was not buying an apartment in Auckland in 2013 – a time when he was doing a lot of work in the city, staying in hotels four days a week.
He looked at a Ponsonby apartment being marketed for about $500,000 but thought the price was too steep.
“It proceeded to sell for about $1.3 million, and I thought, ‘man, I wish I had known where the market was heading.”
About the City Shapers Series
The City Shapers Series is a collection of interviews with some of Property Council’s most prominent members. The series is about showcasing the people in property – the city shapers who lead extraordinary teams, develop exemplary projects and demonstrate the very best of the New Zealand property industry.
We aim to highlight the property industry’s role as an important contributor to New Zealand’s economy and our members as ‘city shapers’, building communities for Kiwis to live, work, play and shop.
Author: Felicity Wolfe
Image credit: Jason Mann Photography Ltd 2016