Daily ShareChat: DNZ Property

By Jenny Ruth

Thursday 16th June 2011

DNZ Property Fund is indicating a level of frustration that its proposal to merge with Argosy Property is being side-lined by Argosy's independent directors who remain focused on internalising its management contract, says Jeremy Simpson, an analyst at Forsyth Barr.

The Argosy board has indicated "there is no need to rush into looking at strategic initiatives, including the approach from DNZ," Simpson says.

"What is clear, based on our numbers, is that DNZ has a lot to gain from a merger and can pay a premium and still make the transaction accretive," he says.

That's excluding other benefits including reducing the significance of DNZ's full-year 2012 lease expiry profile and substantially reducing its management expense ration (MER) to a more appropriate level and making funding of its proposed Johnsonville Shopping Centre redevelopment more achievable, Simpson says.

"Unless Argosy investors were given a premium price for their portfolio when the merger price was struck, DNZ shareholders look like they have more to gain."

Simpson says a combined DNZ/Argosy would have about $1.6 billion in assets, making it one of the largest listed property vehicles (LPV). "Having a large internally managed vehicle would be an interesting contrast in our market, give the other three large LPVs are all externally managed." The three are Kiwi Income Property Trust, Goodman Property Trust and AMP NZ Office.

Recommendation: Buy

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