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Forsyth Barr

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New Zealand Professional Investment Services Firm, Forsyth Barr

Equity Bottom-Up

Precinct Properties New Zealand / Equity Bottom-Up

<h2>Precinct Properties Solid revaluations and ANZ Tower sale confirmed</h2>
Precinct Properties (PCT) has revalued its portfolio ahead of its 1H21 result on 25 February. This has resulted in a +NZ$149m or +5.1% increase (vs. -NZ$66m at 30 June 2020) in the value of its portfolio. Auckland asset valuations lifted +4% while Wellington was up +8% with the lift largely driven by cap rate compression (-40bps to 4.9%) following strong recent transactional evidence particularly in Wellington. Better market rent growth in non-Government leased Wellington assets and development progress at Bowen Campus Stage 2 also contributed. The revaluation outcome lifts NTA +NZ11cps to c.NZ$1.55. Including this revaluation gain and based on PCT’s last close price of NZ$1.68 we estimate the share price implies further cap rate compression of c.25bps.
PCT also confirmed the sale of its remaining 50% interest in the ANZ Tower for NZ$177m, consistent its 30 June 2020 book value of NZ$178m but slightly below the first 50% which sold for NZ$181m in mid-CY18. ANZ Towers flat valuation over the past three years reflects increased vacancy with some tenants relocating to Commercial Bay and ANZ reviewing its accommodation requirements in response to the pandemic. This transaction remains subject to regulatory approval expected April 2021 and PCT will not provide property management services going forward. Our forecasts already assume disposal of the ANZ Tower in FY21.
Including both the revaluation gain and the disposal of ANZ Tower, PCT’s gearing reduces to c.26%. Funds from the divestment will be recycled to Bowen Campus Stage 2 and potentially 1 Queen St (but we are still awaiting details on the scope of this development following its postponement in mid-2020). PCT is also advertising the final stages of its Wynyard quarter developments for lease with late CY23 as an indicative completion date although development of this is likely subject to tenant commitments.
We are Neutral rated on PCT.
Rohan Koreman-Smit&nbsp; Senior Analyst, Equities
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 P: +64 9 368 0085 | TF: 0800 367 227&nbsp; Level 23, Lumley Centre, 88 Shortland Street, Auckland

Precinct Properties Solid revaluations and ANZ Tower sale confirmed
Precinct Properties (PCT) has revalued its portfolio ahead of its 1H21 result on 25 February. This has resulted in a +NZ$149m or +5.1% increase (vs. -NZ$66m at 30 June 2020) in the value of its portfolio. Auckland asset valuations lifted +4% while Wellington was up +8% with the lift largely driven by cap rate compression (-40bps to 4.9%) following strong recent transactional evidence particularly in Wellington. Better market rent growth in non-Government leased Wellington assets and development progress at Bowen Campus Stage 2 also contributed. The revaluation outcome lifts NTA +NZ11cps to c.NZ$1.55. Including this revaluation gain and based on PCT’s last close price of NZ$1.68 we estimate the share price implies further cap rate compression of c.25bps.
PCT also confirmed the sale of its remaining 50% interest in the ANZ Tower for NZ$177m, consistent its 30 June 2020 book value of NZ$178m but slightly below the first 50% which sold for NZ$181m in mid-CY18. ANZ Towers flat valuation over the past three years reflects increased vacancy with some tenants relocating to Commercial Bay and ANZ reviewing its accommodation requirements in response to the pandemic. This transaction remains subject to regulatory approval expected April 2021 and PCT will not provide property management services going forward. Our forecasts already assume disposal of the ANZ Tower in FY21.
Including both the revaluation gain and the disposal of ANZ Tower, PCT’s gearing reduces to c.26%. Funds from the divestment will be recycled to Bowen Campus Stage 2 and potentially 1 Queen St (but we are still awaiting details on the scope of this development following its postponement in mid-2020). PCT is also advertising the final stages of its Wynyard quarter developments for lease with late CY23 as an indicative completion date although development of this is likely subject to tenant commitments.
We are Neutral rated on PCT.
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

Precinct Properties: Solid Revaluations and ANZ Tower Sale Confirmed