New Zealand Professional Investment Services Firm, Forsyth Barr

Forsyth Barr

New Zealand Professional Investment Services Firm

We are proud to be a New Zealand owned firm, with 21 offices throughout the country and over 300 employees. We assist personal, institutional and corporate clients providing a full range of investment services.

Forsyth Barr is a foundation New Zealand Exchange firm (NZX) and accredited market participant. We have been confirmed by the Financial Markets Authority as a Qualifying Financial Entity (QFE).

Research is the cornerstone of our advice. We have one of New Zealand's leading teams of analysts. Our global affiliations ensure comprehensive research coverage of all major investment markets.

Thematic (Sector/Industry)

<div><div><div><div><ul><li>March was a solid month for the listed property sector, making up some of the lost ground through January and February as talk of potentially higher interest rates subsided with the release of weak economic data.</li><li>Two property companies with a March balance date have released year end valuations that suggest flat values over 2H24, which we view as a little optimistic given our channel checks.</li><li>Our comparison of this property sector downcycle suggests we are through the worst, but we note that large interest rate cuts were required to stabilise the sector in the GFC. </li></ul></div></div></div></div>

March was a solid month for the listed property sector, making up some of the lost ground through January and February as talk of potentially higher interest rates subsided with the release of weak economic data.Two property companies with a March balance date have released year end valuations that suggest flat values over 2H24, which we view as a little optimistic given our channel checks.Our comparison of this property sector downcycle suggests we are through the worst, but we note that large interest rate cuts were required to stabilise the sector in the GFC. 

Real Estate Reflections - Marching Back Lost Ground

<ul><li>The listed property sector had a weak month in February, continuing a challenging start to 2024.</li><li>Listed property vehicles (LPVs) that reported in February came broadly in-line with expectations, with higher corporate costs and lower net interest costs being the key differences to our forecasts.</li><li>While operational metrics remain solid there were signs of slowing market rent growth. </li></ul>

The listed property sector had a weak month in February, continuing a challenging start to 2024.Listed property vehicles (LPVs) that reported in February came broadly in-line with expectations, with higher corporate costs and lower net interest costs being the key differences to our forecasts.While operational metrics remain solid there were signs of slowing market rent growth. 

Real Estate Reflections - A Challenging Start to the Year

<ul><li>For the first time in three years we are moving our WACC assumptions down.</li><li>This is driven by a modestly lower (-25 bps) interpolated 10-year interest rate assumption; our proxy for the risk free rate.</li><li>We also incorporate our C&amp;ESG ratings into our WACC assumptions. We do this on an overall neutral basis, with a scale of -25 bps to +25 bps added to the cost of equity. </li></ul>

For the first time in three years we are moving our WACC assumptions down.This is driven by a modestly lower (-25 bps) interpolated 10-year interest rate assumption; our proxy for the risk free rate.We also incorporate our C&amp;ESG ratings into our WACC assumptions. We do this on an overall neutral basis, with a scale of -25 bps to +25 bps added to the cost of equity. 

Equity Strategy - WACC Review; a Lower Rfr and Adding C&ESG

<ul><li>Following a torrid few months, a fall in long bond rates provided relief for the property sector in November.</li><li>1H24 results were generally uneventful, with the major surprise being Investore (IPL) cutting its dividend ahead of the tax changes next year.</li><li>We expect a few others will follow suit when guidance for FY25 is issued in May. On the positive side, Auckland Council approved the sale of the Downtown Carpark to Precinct (PCT). </li></ul>

Following a torrid few months, a fall in long bond rates provided relief for the property sector in November.1H24 results were generally uneventful, with the major surprise being Investore (IPL) cutting its dividend ahead of the tax changes next year.We expect a few others will follow suit when guidance for FY25 is issued in May. On the positive side, Auckland Council approved the sale of the Downtown Carpark to Precinct (PCT). 

Real Estate Reflections - On the Interest Rate Roller Coaster

<ul><li>It has been a bleak couple of months for the listed property sector.</li><li>The one-two punch of the proposed tax changes and higher for longer interest rates has seen the sector sell off -14% over the last three months.</li><li>This was the fourth largest three month correction since 1996, behind only the Asian debt crisis, the rapid rate hiking cycle in June last year, and the start of the COVID pandemic. </li></ul>

It has been a bleak couple of months for the listed property sector.The one-two punch of the proposed tax changes and higher for longer interest rates has seen the sector sell off -14% over the last three months.This was the fourth largest three month correction since 1996, behind only the Asian debt crisis, the rapid rate hiking cycle in June last year, and the start of the COVID pandemic. 

Real Estate Reflections - The Storm Before the Storm

New Zealand

Argosy Property Limited invests in and manages retail, commercial and industrial properties in New Zealand.

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Argosy Property (ARG NZ)

Real Estate Reflections - Marching Back Lost Ground

Two property companies with a March balance date have released year end valuations that suggest flat values over 2H24, which we view as a little...

Forsyth Barr

Real Estate Reflections - A Challenging Start to the Year

Listed property vehicles (LPVs) that reported in February came broadly in-line with expectations, with higher corporate costs and lower net...

Forsyth Barr

Equity Strategy - WACC Review; a Lower Rfr and Adding C&ESG

For the first time in three years we are moving our WACC assumptions down. This is driven by a modestly lower (-25 bps) interpolated 10-year...

Forsyth Barr

Real Estate Reflections - On the Interest Rate Roller Coaster

1H24 results were generally uneventful, with the major surprise being Investore (IPL) cutting its dividend ahead of the tax changes next year.

Forsyth Barr

Real Estate Reflections - The Storm Before the Storm

The one-two punch of the proposed tax changes and higher for longer interest rates has seen the sector sell off -14% over the last three months.

Forsyth Barr

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