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."


  General Finance Advertising    

Comments from our readers

No comments yet

Add your comment:
Your name:
Your email:
Not displayed to the public
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:

MARKET CLOSE: NZ shares gain as upcoming Fed meeting bolsters yield stocks; Sky TV gains
ESW reaches 90% of SLI Systems, moves to compulsory acquisition
NZ higher against USD as markets await the US Federal Reserve
Hawke's Bay council advances Napier Port IPO plan
Government outlines planned hikes in minimum wage
Chorus could lift its dividend post-UFB rollout but risks remain
T&G Global profit dented by cheaper tomatoes, small grape harvest
NZ posts widest current account deficit since 2009, in line with expectations
Heartland says new bank capital rules won't hurt as much as the market thinks
ISS supports Vital Healthcare's rebel investors

IRG See IRG research reports