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NZ property near bottom of cycle, despite global turmoil


Wednesday 10th August 2011

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DNZ Property Fund chairman Tim Storey believes that despite worldwide market turmoil, the property market in this country remains around the bottom of its cycle and opportunities are available for the fund.

The board and management would continue to look at strategies to grow the business, Storey told the DNZ annual meeting today.

It was thought the fund should look, cautiously, to take advantage of the opportunities available to a well capitalised and well-managed company.

"This will mean a continuation of our policy of looking to acquire better quality assets and disposing of assets which have reached their maximum value."

Chief executive Paul Duffy said office buildings remained the most challenging sector, with many traditional markets having limited demand and over-supply, particularly in Wellington.

A 1.9 percent fall to $637.3 million in the year to March in DNZ's portfolio valuation was mostly in the Wellington office market. Indications were that the overall property market was now more stable, Storey said.

DNZ's portfolio included 40 percent office, 21 percent bulk retail, 12 percent retail, and 27 percent industrial.

Due to earthquakes in Christchurch, tenants were showing greater interest in the seismic ratings of buildings, and it was important to ensure assets within the portfolio had a good rating to ensure strong occupancy, Duffy said.

The portfolio was fully insured for full replacement and loss of rents, and while DNZ had managed to secure an advantageous insurance cost for this year, early indications were that premiums would rise significantly in 2012.

DNZ continues to monitor the position at Argosy Property Trust, after DNZ proposed the two should merge. The proposal was an alternative to Argosy's plan to internalise management of Argosy's properties.

Today Storey said there was an opportunity for significant short term and ongoing savings in combining the management of the portfolios.

But the proposal may not continue to benefit DNZ shareholders, particularly if the merger could not be considered ahead of the proposed Argosy internalisation as material benefits would be lost forever, Storey said.

DNZ would continue to monitor the situation in the lead up to the Argosy annual meeting on August 30.

The DNZ share price was $1.23 in early afternoon trade, after the company listed a year ago at 97c.

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