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Daily ShareChat: DNZ Property Fund

By Jenny Ruth

Thursday 11th November 2010

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 Jenny Ruth

DNZ Property Fund has made some positive portfolio changes by selling two industrial properties and renewing a lease, says Marcus Curley at Goldman Sachs & Partners New Zealand.

The fund sold a Petone property for $13.6 million and an Albany property for $7.1 million with settlement dates of February 2011 and July 2011 respectively.

The sales replace the scheduled disposal of a Countdown store in Hamilton.

It has also renewed the lease at 132 Vincent Street, Auckland with Beca for a further two years through to March 2013. Curley says DNZ expects Beca will vacate the building by mid-2012, providing a reasonable opportunity for either a disposal or refurbishment.

“We believe the disposals provide a relatively positive message for DNZ, being a 4% premium to NTA (net tangible assets) coupled with greater-than-expected debt reduction (plus $13 million),” Curley says.

“The transactions also boost occupancy by about 1.6% with (the sold Albany property) being currently vacant,” he says.

“Our analysis suggests the disposals and extension of the Beca lease should boost distributable profit by close to 2% in financial 2012 with a small net reduction in rentals offset by lower interest payments.”

Curley has a 12-month price target of $1.27 per share and puts realisable NTA at $1.58 and says management is actively working on closing the gap.

Recommendation: Buy.

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