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.

Equity Bottom-Up

<ul><li>Investore (IPL) reported a soft (as expected) 1H25 result. Adjusted funds from operations (AFFO) fell -12% in 1H25, as top line growth was more than offset by higher debt costs and a higher effective tax rate, as changes to building depreciation rules took effect.</li><li>IPL is taking steps to improve its portfolio, moving away from regional assets with higher capex requirements, towards newer Auckland assets with better growth profiles. However, gearing is above its target range.</li><li>As such, new acquisitions will need to be funded via divestment of non-core assets. While IPL is offering an attractive yield (8.8%) this remains in line with its historic relationship to long-term bond rates. NEUTRAL.</li></ul>

Investore (IPL) reported a soft (as expected) 1H25 result. Adjusted funds from operations (AFFO) fell -12% in 1H25, as top line growth was more than offset by higher debt costs and a higher effective tax rate, as changes to building depreciation rules took effect.IPL is taking steps to improve its portfolio, moving away from regional assets with higher capex requirements, towards newer Auckland assets with better growth profiles. However, gearing is above its target range.As such, new acquisitions will need to be funded via divestment of non-core assets. While IPL is offering an attractive yield (8.8%) this remains in line with its historic relationship to long-term bond rates. NEUTRAL.

Investore - 1H25 Result — No Change to the ’Store-Y

<ul><li>Investore (IPL) announced the sale of two regional supermarket assets and the purchase of Bunnings Westgate.</li><li>We view this transaction as positive, given: (1) the two assets sales were in line with current book values, (2) the portfolio is improved by swapping two older regional assets, with higher capex requirements, for a well-located new build with a more attractive lease structure, and (3) all with a minor impact on earnings. </li><li>The transaction does little to appease balance sheet pressure, but we are comfortable with higher gearing given the stage of the cycle. </li></ul>

Investore (IPL) announced the sale of two regional supermarket assets and the purchase of Bunnings Westgate.We view this transaction as positive, given: (1) the two assets sales were in line with current book values, (2) the portfolio is improved by swapping two older regional assets, with higher capex requirements, for a well-located new build with a more attractive lease structure, and (3) all with a minor impact on earnings. The transaction does little to appease balance sheet pressure, but we are comfortable with higher gearing given the stage of the cycle. 

Macroeconomics

<ul><li>November was a soft month for the property sector as interest rate volatility continued.</li><li>1H25 results were largely as expected with most companies seeing: (1) slight vacancy rise, softening tenant demand and slowing market rent growth, reflecting the economic backdrop, (2) debt costs beginning to decline, and (3) asset values and cap rates stabilising. We expect these themes will continue to play out over the next year.</li><li>While the property sector continues to trade at compressed spreads to long-bond yields, it is trading on wider yields than some defensive peers and a lower earnings multiple than the broader market. </li></ul>

November was a soft month for the property sector as interest rate volatility continued.1H25 results were largely as expected with most companies seeing: (1) slight vacancy rise, softening tenant demand and slowing market rent growth, reflecting the economic backdrop, (2) debt costs beginning to decline, and (3) asset values and cap rates stabilising. We expect these themes will continue to play out over the next year.While the property sector continues to trade at compressed spreads to long-bond yields, it is trading on wider yields than some defensive peers and a lower earnings multiple than the broader market. 

Real Estate Reflections - From One Cycle to the Next

Thematic (Sector/Industry)

<ul><li>October was a solid month for NZ listed property vehicles (LPVs).</li><li>The Fast-track Approvals Bill breathed some life into Winton's (WIN) Sunfield project, after having its initial approval pathway declined, while Kiwi Property's (KPG) Drury development and Precinct's (PCT) downtown carpark project were both included in the bill.</li><li>Six companies are reporting interim results in November, where we expect higher interest and tax bills to outweigh top-line rental growth across most of the sector. </li></ul>

October was a solid month for NZ listed property vehicles (LPVs).The Fast-track Approvals Bill breathed some life into Winton's (WIN) Sunfield project, after having its initial approval pathway declined, while Kiwi Property's (KPG) Drury development and Precinct's (PCT) downtown carpark project were both included in the bill.Six companies are reporting interim results in November, where we expect higher interest and tax bills to outweigh top-line rental growth across most of the sector. 

Real Estate Reflections - Fast Track to Reporting Season

<ul><li>Following a historically strong two months in July and August, the NZ listed property vehicles (LPVs) gave back some of their gains in September.</li><li>We continue to expect the sector to perform well in what is likely to be a period of sustained interest rate cuts.</li><li>There will be some bumps along the way, as prior cycles have shown weak economic activity eventually flows through to higher vacancy and lower rents. </li></ul>

Following a historically strong two months in July and August, the NZ listed property vehicles (LPVs) gave back some of their gains in September.We continue to expect the sector to perform well in what is likely to be a period of sustained interest rate cuts.There will be some bumps along the way, as prior cycles have shown weak economic activity eventually flows through to higher vacancy and lower rents. 

Real Estate Reflections - Snakes and Ladders

New Zealand

Investore Property Limited operates as a real estate investment company. The Company invests in retail property assets. Investore Property also provides leasing services. Investore Property serves clients in New Zealand.

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Investore Property (IPL NZ)

Investore - 1H25 Result — No Change to the ’Store-Y

Adjusted funds from operations (AFFO) fell -12% in 1H25, as top line growth was more than offset by higher debt costs and a higher effective tax rate

Forsyth Barr

Investore - A Bit of DIY

We have adjusted our forecasts for both this transaction and the lower forward interest rate track. We now forecast IPL to deliver c.+2% per year...

Forsyth Barr

Real Estate Reflections - From One Cycle to the Next

While the property sector continues to trade at compressed spreads to long-bond yields, it is trading on wider yields than some defensive peers and...

Forsyth Barr

Real Estate Reflections - Fast Track to Reporting Season

Our preferred LPVs are hospital landlord Vital Healthcare (VHP) and premium office owner PCT. We are also OUTPERFORM rated on Asset Plus (APL)...

Forsyth Barr

Real Estate Reflections - Snakes and Ladders

Following a historically strong two months in July and August, the NZ listed property vehicles (LPVs) gave back some of their gains in September.

Forsyth Barr

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