Sharechat Logo

Precinct Properties earns Morningstar upgrade on ANZ Centre deal

Friday 6th July 2018

Text too small?

Shares of Precinct Properties New Zealand earned an upgrade from Morningstar following the commercial property investor’s deal, announced last week, to sell 50 percent of the ANZ Centre in Auckland’s central business district for $181 million. 

Morningstar "slightly increased" rental growth expectations on upcoming lease renewals while it raised its fair value estimate for the stock by 4 percent to $1.37, up from $1.33 previously, analyst Tony Sherlock said in a July 5 note. The company's agreement on the ANZ Centre is a 12 percent premium to the last valuation in June 2017, Sherlock noted. 

Shares of Precinct rose 1.1 percent to close at $1.36 on Thursday. The stock has gained 15.1 percent in the year, compared with an 18.8 percent return for the country’s S&P/NZX 50 Index.  

“Office vacancy rates continue to fall in Auckland,” Sherlock noted. The prime-grade CBD office vacancy rate is 4.3 percent “and trending down, leaving few options for tenants and putting upwards pressure on rents in the near term.”

“The very low vacancy rate in the Auckland CBD market will benefit Precinct for an extended period as Precinct is both delivering and controlling the timing of much of the upcoming new supply,” according to Sherlock. 

He pointed to the company's new premium grade office at Commercial Bay, for which construction is set to complete in the second half of 2019, as the major new addition to Auckland's office stock. 

While Precinct has garnered commitments for 66 percent of the building, leaving some residual risk, Sherlock said he is confident the building's office component of the development "will be close to 100 percent committed" on completion.

"We see low risk of new competing supply mainly due to a spike in construction costs since Precinct commenced its major development at Commercial Bay," Sherlock said. "By extension, we forecast Precinct will lock in high rent of medium to long durations, with a low probability of oversupply putting downward pressure on rents in the medium term."

(BusinessDesk)

  General Finance Advertising    

Comments from our readers

No comments yet

Add your comment:
Your name:
Your email:
Not displayed to the public
Comment:
Comments to Sharechat go through an approval process. Comments which are defamatory, abusive or in some way deemed inappropriate will not be approved. It is allowable to use some form of non-de-plume for your name, however we recommend real email addresses are used. Comments from free email addresses such as Gmail, Yahoo, Hotmail, etc may not be approved.

Related News:

NZ dollar trades near 2019 low on Aussie rate outlook, China worries
Short window left to lock in good interest rates on term deposits
MediaWorks breakeven stymied by radio
Loan-to-value restrictions effective but have some drawbacks - RBNZ
Yili deal a timely cash injection for Westland farmers - ANZ
AFT interested in medicinal cannabis but says it's not commercially viable yet
Serko chalks up another year of 28% sales growth, profit dips on acquisition adjustment
NZ first-quarter retail sales grow 0.7%, slightly better than expected
SkyCity poised to enter online gaming space
AFT narrows net loss, turns cash flow positive

IRG See IRG research reports