New Zealand Professional Investment Services Firm

Forsyth Barr

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.

New Zealand Professional Investment Services Firm, Forsyth Barr

Equity Bottom-Up

<h2>Kiwi Property Group 2H21 valuations add NZ$100m to KPGs portfolio value</h2>
Kiwi Property Group (KPG) has announced a 2H21 revaluation gain of NZ$100m which lifted its portfolio valuation to NZ$3.3bn. The solid 2H gains in office (+NZ$52m) and mixed use (+NZ$38m) values was partially offset by retail (-NZ$8m). Low interest rates have driven demand for property assets with secure cash flows underpinned by long lease terms to high quality tenants; as such cap rates firmed -28bp in KPG’s office assets taking full year cap rate firming to -47bp. KPG’s mixed use assets continued to see low single digit cap rate firming. While retail assets saw large cap rate declines, valuations continued to reduce due to lower market rental assumptions (valuations imply -5% in the 2H) and further seismic strengthening costs being incorporated. Valuers also removed material uncertainty clauses from their mixed-use valuations.
This revaluation gain is modest in the context of (1) strong gains in other subsectors, (2) KPG’s recent increase in FY21 AFFO guidance (+9-12%), (3) improving retail sales/operating environment, and (4) valuers removing uncertainty clauses from mixed-use valuations. KPG’s NTA lifts +6cps to NZ$1.35. KPG is currently trading at a -8% discount to its new NTA (vs. the sector at a +7% premium) reflecting market concerns around its retail portfolio which in aggregate (mixed-use + retail) did not see any valuation improvement over FY21.
FY21 revaluations
<figure class="editor-figure mceNonEditable"><img src="https://mail.google.com/mail/u/0?ui=2&amp;ik=f57c39853c&amp;attid=0.1&amp;permmsgid=msg-f:1695169953288027411&amp;th=1786741753a5fd13&amp;view=fimg&amp;sz=s0-l75-ft&amp;attbid=ANGjdJ9Qw0tZgFmgzV0zRXAUhpcMQWzlWJ5KnS0B-5vQIhDXLtMxi68GE6QoJWlr5poeFlax5w4kiqXQ5kAN3vlzuaRBg8-qwtl_UO5pbD2AKHAWVsAw_xXjsYPN7uY&amp;disp=emb" width="944" height="141" class="editor-image img-responsive" data-image-whitelisted=""></figure>
Source: Company reports, Forsyth Barr analysis
Rohan Koreman-Smit&nbsp; Senior Analyst, Equities
<figure class="editor-figure mceNonEditable"><img src="https://mail.google.com/mail/u/0?ui=2&amp;ik=f57c39853c&amp;attid=0.2&amp;permmsgid=msg-f:1695169953288027411&amp;th=1786741753a5fd13&amp;view=fimg&amp;sz=s0-l75-ft&amp;attbid=ANGjdJ8ylyH_dbOF1yehRzCkZacQNTLQW50mkQsvUfAAYMFlkFRNJ7OBg112g__3NCowizmiZKz14dxenQNmPLAu4jCCgp6NTq_vEYEfH0wctBwZDYaCViw27NtjzMU&amp;disp=emb" class="editor-image img-responsive"></figure>
 P: +64 9 368 0085 | TF: 0800 367 227&nbsp; Level 23, Lumley Centre, 88 Shortland Street, Auckland

Kiwi Property Group 2H21 valuations add NZ$100m to KPGs portfolio value
Kiwi Property Group (KPG) has announced a 2H21 revaluation gain of NZ$100m which lifted its portfolio valuation to NZ$3.3bn. The solid 2H gains in office (+NZ$52m) and mixed use (+NZ$38m) values was partially offset by retail (-NZ$8m). Low interest rates have driven demand for property assets with secure cash flows underpinned by long lease terms to high quality tenants; as such cap rates firmed -28bp in KPG’s office assets taking full year cap rate firming to -47bp. KPG’s mixed use assets continued to see low single digit cap rate firming. While retail assets saw large cap rate declines, valuations continued to reduce due to lower market rental assumptions (valuations imply -5% in the 2H) and further seismic strengthening costs being incorporated. Valuers also removed material uncertainty clauses from their mixed-use valuations.
This revaluation gain is modest in the context of (1) strong gains in other subsectors, (2) KPG’s recent increase in FY21 AFFO guidance (+9-12%), (3) improving retail sales/operating environment, and (4) valuers removing uncertainty clauses from mixed-use valuations. KPG’s NTA lifts +6cps to NZ$1.35. KPG is currently trading at a -8% discount to its new NTA (vs. the sector at a +7% premium) reflecting market concerns around its retail portfolio which in aggregate (mixed-use + retail) did not see any valuation improvement over FY21.
FY21 revaluations

Source: Company reports, Forsyth Barr analysis
Rohan Koreman-Smit&nbsp; Senior Analyst, Equities

 P: +64 9 368 0085 | TF: 0800 367 227&nbsp; Level 23, Lumley Centre, 88 Shortland Street, Auckland

Kiwi Property Group (KPG): Valuations Lift NTA +6cps