Hirequip clinches staged Pegasus Bay sale

By Chris Hutching

Friday 13th August 2004

Hirequip's "$30 million" sale of its Pegasus Bay township property is being staggered over several years with a down payment of $10 million to be paid in September.

Chairman Graeme Wong said he expected it might take up to six years to receive all the money, after selling the 338ha to developer Bob Robertson, whose company Infinity Developments has been active in Wanaka in recent years. Pegasus Bay, 20km north of Christchurch, has consent to build 1800 lots.

Hirequip's book value of Pegasus is $9.3 million, giving a pre-tax gain on sale of $13.7 million arising from the deferred sale. The "lowest price" of $23 million, for the purposes of sEH48 of the Income Tax Act, is the price that would have been paid at the time the deal was agreed.

It took Hirequip (formerly Southern Capital) seven years to obtain consents and in the process defeated Environment Canterbury, with the biggest court costs awarded in the history of the Environment Court of nearly $500,000.

Hirequip also sold the 45ha Waimakariri Employment Park property as one block for $1.5 million in June to a developer who intends selling lifestyle blocks.

The other main property assets still owned by the company include sections at Omaha, north of Auckland, and interests in some farms. Wong said the sales "substantially completes the transformation of the former Southern Capital into a business focused exclusively on the equipment hire industry through its Hirequip and Powerhire brands."

Ironically, one of the latest broker reports said that while Hirequip enjoys good management and is well positioned to enjoy a period of strong earnings growth, "... we believe this is now captured by the current share price. As a result we are reluctantly adjusting our rating from neutral to underperform ... consistent with our current house view that the New Zealand equity market is richly priced."

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