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>Property for Industry Carlaw Park Kicked to Touch</h2>
PFI has announced the sale of Carlaw Park, its largest non-core asset, for NZ$110m which represents a 6.25% passing yield and a 7% premium to its Dec-20 valuation. The divestment follows the completion of several asset management initiatives at the property and we calculate it reduces the non-industrial weighting in PFI’s portfolio to c.2% (with the largest remaining asset being Shed 22 in Wellington); since announcing its capital recycling strategy in 2019 PFI has now divested NZ$160m of non-core assets and acquired NZ$190m of industrial property.
Given the relatively high yield vs. low debt costs we estimate that the sale of Carlaw Park is c.6% dilutive to AFFO forecasts on a pro-forma basis but lifts NTA by 2cps (to NZ$2.24) given the premium to book achieved. This dilution partly reflects timing with PFI acquiring assets ahead of divestments and we calculate PFI can maintain distributions at current levels (FY20 guidance 7.65-7.70cps) despite this headwind. We also calculate this divestment reduces committed gearing to 27-28% which is probably at the lower end of managements target (PFI has a maximum gearing target of 40%). Given strong demand for industrial property, finding attractive acquisition opportunities may be challenging unless there strategic benefits such as properties adjacent to existing PFI assets with some marriage value. As such internal portfolio development opportunities likely present the best use of capital at the present time.
PFI reports its FY20 results on 22 February. We are NEUTAL rated on PFI.
Carlaw Park valuation and yield
<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:1691286099706912235&amp;th=1778a7bf32961deb&amp;view=fimg&amp;sz=s0-l75-ft&amp;attbid=ANGjdJ_Ycut6_1nw30a6sRFrvAVKqZd-ARoe9qgEX5ysC3B3SVdPj8p2z5GFhAR7RJV28cXBNpYm2IQ3Hvz6_5jLK873LhfmCZnv0QBJHGSLCeti-Shq34gDxIgguYk&amp;disp=emb" width="454" height="302" class="editor-image img-responsive" data-image-whitelisted=""></figure>
Source: Company reports, Forsyth Barr analysis
PFI gearing bridge
<figure class="editor-figure mceNonEditable"><img src="https://mail.google.com/mail/u/0?ui=2&amp;ik=f57c39853c&amp;attid=0.3&amp;permmsgid=msg-f:1691286099706912235&amp;th=1778a7bf32961deb&amp;view=fimg&amp;sz=s0-l75-ft&amp;attbid=ANGjdJ875gunItflruUcZkdOqKg2x565zTDpQdLoq5Fpi_G7LWyoewwglbbKSwesQ3Befs8WZ3S8ZVNPS5A6rAuAhfdETfzea3TNc7RKwou68a7r0PO0mhALkGETNww&amp;disp=emb" width="454" height="302" 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=0.4&amp;permmsgid=msg-f:1691286099706912235&amp;th=1778a7bf32961deb&amp;view=fimg&amp;sz=s0-l75-ft&amp;attbid=ANGjdJ_r94WG-cTi-oqA37uADlj8bLevV-rLGCSIgkRWFElS6M7pRGU6FmC0S-ges90v95x1MnW-NcGtwOygW2XnerAh9qDhsGHmGyAKVFXKrYMeitTONNyzcpn4gnY&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

Property for Industry Carlaw Park Kicked to Touch
PFI has announced the sale of Carlaw Park, its largest non-core asset, for NZ$110m which represents a 6.25% passing yield and a 7% premium to its Dec-20 valuation. The divestment follows the completion of several asset management initiatives at the property and we calculate it reduces the non-industrial weighting in PFI’s portfolio to c.2% (with the largest remaining asset being Shed 22 in Wellington); since announcing its capital recycling strategy in 2019 PFI has now divested NZ$160m of non-core assets and acquired NZ$190m of industrial property.
Given the relatively high yield vs. low debt costs we estimate that the sale of Carlaw Park is c.6% dilutive to AFFO forecasts on a pro-forma basis but lifts NTA by 2cps (to NZ$2.24) given the premium to book achieved. This dilution partly reflects timing with PFI acquiring assets ahead of divestments and we calculate PFI can maintain distributions at current levels (FY20 guidance 7.65-7.70cps) despite this headwind. We also calculate this divestment reduces committed gearing to 27-28% which is probably at the lower end of managements target (PFI has a maximum gearing target of 40%). Given strong demand for industrial property, finding attractive acquisition opportunities may be challenging unless there strategic benefits such as properties adjacent to existing PFI assets with some marriage value. As such internal portfolio development opportunities likely present the best use of capital at the present time.
PFI reports its FY20 results on 22 February. We are NEUTAL rated on PFI.
Carlaw Park valuation and yield

Source: Company reports, Forsyth Barr analysis
PFI gearing bridge

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

Property for Industry: Carlaw Park Kicked to Touch

Property For Industry

Property for Industry: Carlaw Park Kicked to Touch