Archive | Property For Industry

IRD makes tax ruling relating to PFI internalisation

Inland Revenue has issued a binding ruling affecting Property for Industry Ltd’s plans to internalise management.

The independent directors of the NZX-listed company said yesterday the binding ruling confirmed that the proportion of the payment to present manager PFIM Ltd relating to the proposed termination of its management contract would be deductible for income tax purposes.

The internalisation agreement remains conditional on approval by PFI shareholders at the company’s annual meeting on Thursday 22 June.

The company expects to send shareholders the notice of meeting in early June, including Northington Partners’ independent appraisal report on the merits of the internalisation.

Earlier story:
3 April 2017: PFI proposes internal management after 6 years of external

Attribution: Company release.

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PFI sells one & leases 3 of 5-property Penrose portfolio

Property for Industry Ltd has sold one vacant Penrose property out of a portfolio of 5 it bought from Sistema Plastics Ltd in 2015, and has leased 3 others.

General manager Simon Woodhams & chief financial officer Craig Peirce said today PFI had sold the vacant 65 Hugo Johnston Drive (pictured) to an owner-occupier for a gross $14.25 million after an unsolicited offer, with settlement due on 21 June. The price represented a 17.8% premium over current book value and 29.4% over the initial purchase price.

PFI paid $28.5 million in 2015 for the 5 properties – 4, 6 & 10 Autumn Place and 65 & 80 Hugo Johnston Drive.

Motat (the Museum of Transport & Technology) recently leased 9364m² at 6 & 10 Autumn Place.

Boxkraft Ltd signed up last October to lease 3872m² at 80 Hugo Johnston Drive, starting in January, 6 weeks after Sistema’s departure.

The 2 leases, for an average term of 6.7 years, are worth a total $1,269,647/year to PFI.

4 Autumn Place, the smallest property in the portfolio, is still vacant, but PFI said it represented just 6.5% of the total lettable area originally bought.

Attribution: Company release.

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PFI proposes internal management after 6 years of external

Property for Industry Ltd’s independent directors have reached a conditional agreement with the NZX-listed landlord’s external manager, PFIM Ltd, to internalise management.

PFIM has managed PFI & its portfolio for 6 years. Assuming shareholder approval in June, the same team will carry on running the business.

The agreement is subject to shareholder approval at a special meeting to be held in June and receipt of a binding ruling from Inland Revenue relating to the tax treatment of the internalisation.

The independent directors believed internalisation would be accretive to earnings/share, ensure the continuity of PFI’s management team & strategy and ensure continued alignment of shareholder & management interests.

They said they expected to achieve significant cost savings and, post-internalisation, PFI to have one of the lowest management expense ratios in the New Zealand listed property sector.

Key features of the internalisation:

  • A payment of $42 million (implying a net cost for internalisation of $30.3 million post-tax deductibility and before transaction costs) to PFIM as consideration for the termination of the management contract and the acquisition by PFI of the business & certain assets of PFIM
  • Greg Reidy will continue to act as managing director, Simon Woodhams as general manager and Craig Peirce as chief financial officer under independent service contracts with PFI, and
  • The offer of employment by PFI to other employees of McDougall Reidy & Co Ltd (which PFIM currently subcontracts its management function to), who will continue to provide the same services currently provided to PFI.

PFI has 5 directors, 4 independent. They are the chair, Peter Masfen, and Anthony Beverley, Humphry Rolleston & Susan Peterson. The fifth director, Greg Reidy, represents the manager.

The independent directors commissioned Deloitte to examine the valuation matters associated with the internalisation agreement. Deloitte has concluded that the internalisation is expected to be earnings/share accretive and accordingly is expected to provide a material net present value gain to shareholders. Deloitte has also determined that the purchase price is fair, taking into account the very limited rights of termination in the existing management contract and the value benefits for shareholders from the transaction.

PFIM has provided management services for PFI since late 2011 and has overseen growth in the value of properties under management to $1.1 billion, while also delivering growth in earnings/share, dividends/share & net tangible assets/share.

PFI will fund the payment to PFIM by an expansion of its bank facilities, which will result in pro forma drawn bank debt of $364.7 million as at 31 December 2016, which implies a pro forma gearing ratio of 33.7%. To this end, the company has established a $50 million institutional credit facility with ANZ Bank, which expires on 31 July 2018 and ranks alongside PFI’s existing syndicated bank loan facility.

The independent directors have appointed Northington Partners Ltd to prepare an independent appraisal report on the merits of the internalisation agreement. That & the notice of meeting will be sent to shareholders in early June.

Earlier stories:
19 February 2014: PFI sees numerous benefits from Direct Property merger
24 January 2012: PFI management handover confirmed
1 November 2011: PFI looks dismal on AMP Capital’s exit – great scope for new manager
30 September 2011: AMP sells PFI management back to McDougall & colleagues

Attribution: Company release.

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PFI buys one, sells one in East Tamaki

Property for Industry Ltd has bought an industrial property at 11 Turin Place and settled the sale of another one at 27 Zelanian Drive, both in East Tamaki.

11 Turin Place has 6936m² of warehouse, 1072m² of breezeway canopies and 457m² of office & amenities on a 1.9ha site, and is leased for 15 years to Thermakraft, supplier of building & wall wrap, roofing underlay & window flashing tape. The lease provides fixed rental growth of 4.55% every 2 years.

PFI bought the property in a sale & leaseback transaction for a net $14.2 million, representing a yield on purchase of 6.5%.

The company announced its sale of the vacant industrial property at 27 Zelanian Drive, for a net sale price of $8.3 million, on 13 December.

Attribution: Company release.

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PFI sells vacant East Tamaki property

NZX-listed Property for Industry Ltd has sold the vacant 27 Zelanian Drive, East Tamaki, to an owner-occupier for a gross $8.475 million.

General manager Simon Woodhams said yesterday the price represented a yield on market of 6.95% and was above current book value. The transaction is due to settle on 1 February.

“PFI has sold around $45 million of property over the last 3 years, taking advantage of high levels of demand from both investors & owner-occupiers. The funds from the sale of PFI’s property at 27 Zelanian Drive will be recycled into new capital projects.”

Attribution: Company release.

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Revaluations lift PFI portfolio by 9%

Property for Industry Ltd said on Friday independent valuations lifted the value of its property portfolio by 9% ($88 million) to $1.09 billion.

PFI’s portfolio of 84 properties was valued at $987 million a year ago. On top of the valuation lift, capex & property-related prepayments added $16 million.

General manager Simon Woodhams said: “Demand for industrial property from both investors & owner-occupiers remains high, spurred on by low interest rates. Rental growth, both forecast & already achieved, is also supporting values.”

Independent valuers CBRE, Colliers International, Jones Lang LaSalle & Savills carried out the valuations, which remain subject to finalisation & audit. The final independent valuation outcome will be confirmed in the results for the December year to be announced on Monday 13 February.

Attribution: Company release.

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Fewer revaluations cut PFI profit

Property For Industry Ltd’s first-half profit after tax has fallen 38%, from $36.4 million last year to $22.5 million, after allowing for non-operating income & expenses and deferred tax.

Chairman Peter Masfen said this week the main driver of the decrease in profit after tax was a return by the company in 2016 to its usual approach for the valuation of investment properties at the end of each half year.

In the first half of 2015, all investment properties were revalued and the fair value gain was $25.6 million; in the first half of 2016, only 8 properties were revalued and the fair value gain was $10.6 million.

The company increased first-half operating revenue by 9.7% to $35.2 million ($32.1 million), but said increases due to acquisitions ($1.7 million), completed developments ($0.4 million) & positive leasing activity ($1.2 million) were partially offset by decreases due to disposals ($0.2 million).

Reductions in interest expense & bank fees driven by a lower weighted average cost of debt reduced the ratio of operating expenses to operating revenues from 47.7% to 39.9%. The company’s ratio of current tax:operating earnings fell from 18.8% a year ago to 18.4%.

Profit after tax amounted to 5.01c/share and distributable profit rose 12.3% to 3.77c/share (3.36c).

For the full year, the company has increased distributable profit guidance to 7.7c/share before management performance fees, 7.4c/share after those fees.

The revaluation increased net tangible assets by 1% to 141.9c/share (140.5c).

32% of contract rent varied, leased or reviewed during the first half, portfolio occupancy was at 99.5%.

Property For Industry lifted its portfolio value from $930 million at June 2015 to $987 million in December and to $1.01 billion at June 2016.

Gearing was at 33.4%, the interest cover ratio 3.5 times.

It cut the portfolio passing yield from 7.3% in December to 7.2%.

The company’s $25.9 million development of 4 pre-leased bulk store facilities at 124 Hewletts Rd, Mt Maunganui, was completed in June  ahead of schedule & under budget. A new $1.9 million warehouse at 54 Carbine Rd & 6A Donnor Place, Mt Wellington, was also completed and the company is also at advanced stages of planning for a $5 million industrial development on a portion of the remaining land at 212 Cavendish Drive, Manukau.

Attribution: Company release.

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Propbd on Q W16Dec15 – listeds: hotels exit franchise, Highbrook deal finalised, PFI lift, Zara coming to NZ, Rainbow tick, Eastgate leases

2 hotels sold out of Millennium & Copthorne franchise
Goodman completes 2012 Highbrook acquisition
PFI gets 5% valuation lift
Zara the next big name for Sylvia Park
Fletcher Building scores the Rainbow tick
3 Eastgate lease agreements go unconditional

2 hotels sold out of Millennium & Copthorne franchise

Millennium & Copthorne Hotels NZ Ltd said yesterday its franchise & management arrangements for the Kingsgate Hotel Hamilton & Kingsgate Hotel Whangarei would end in 5-7 weeks. Managing director BK Chiu said: “Both of these have been owned by the Butcher family, who have been Millennium & Copthorne’s franchise partners for over 18 years. The family made the decision that the time was now right for them to sell the hotels and agreement has been reached with a new owner.

Therefore, Millennium & Copthorne will no longer represent these hotels at the conclusion of the respective franchise agreements on 25 January for Kingsgate Hotel Whangarei and 11 February for Kingsgate Hotel Hamilton.”

Goodman completes 2012 Highbrook acquisition

NZX-listed Goodman Property Trust issued 37,335,624 units to ASX-listed Goodman Group at $1/unit on Monday to complete payment for the $186.6 million December 2012 acquisition of partners’ interests in the 17.5ha Highbook Business Park.

Goodman Group took all its payment in units, half deferred. Fisher (interests associated with the estate of the late Sir Woolf Fisher, headed by Sir Noel Robinson) took $56 million in cash, the rest in units.

The trust bought 50% of Highbrook Development Ltd from Goodman Group and Fisher (25% each), and 25% of HBPL Properties from Fisher.

Since 2012, the trust has announced 15 new projects at Highrook costing a total $158.7 million, adding over 80,000m² of rentable area to the estate and generating $60 million in valuation gains.

The business park has over 70 businesses occupying 340,000m² in over 40 buildings. Its present value is $850million, with $60 million more work in progress.

PFI gets 5% valuation lift

Property For Industry Ltd said yesterday independent annual valuations were expected to increase the value of its portfolio by 5% ($47 million) to $985 million, and it confirmed earnings & dividend guidance.

PFI began the year with a portfolio of 79 properties valued at $876 million. It acquired 6 properties for $58 million and will have disposed of one property with a carrying value of $9 million (unconditional at 31 December, settlement 31 March 2016). Capex & property-related prepayments added $13 million.

CBRE, Colliers International & Jones Lang LaSalle carried out the valuations, which remain subject to finalisation & audit. The company will release its full-year results on Monday 15 February.

Zara the next big name for Sylvia Park

Kiwi Property Group Ltd said on Monday international fashion giant Zara would open its first New Zealand store at Sylvia Park late next year.

In October, Kiwi said another international fashion retailer, H&M, would also open at Sylvia Park late next year.

Zara has over 2000 stores in 88 countries. H&M is one of 6 brands developed by H&M Hennes & Mauritz AB of Sweden, which has 3700 stores around the world.

Chief executive Chris Gudgeon said Kiwi Property would invest $11.5 million to accommodate Zara in a new ground-level store in the mid-mall area.

He said the company was evaluating a $150 million 20,000m² retail expansion of Sylvia Park and was considering a range of options, including adding further international retailers, more specialty retail stores, department stores & parking. It’s in the predevelopment phase, which includes design, consenting & pre-leasing. Mr Gudgeon said construction could start in 2017 for a possible 2018 completion.

The company is also investigating a potential office development at Sylvia Park, as part of its town centre vision for the site.

Fletcher Building scores the Rainbow tick

Fletcher Building Ltd said on Monday it had scored the Rainbow tick – certification demonstrating it’s a business that’s inclusive for people who are lesbian, gay, bisexual, transgender, takatapui or intersex.

Chief executive Mark Adamson said Fletcher was New Zealand’s first construction & building materials company to achieve the Rainbow tick.

Rainbow Tick’s Michael Stevens said: “We were surprised when Fletcher Building contacted us as we hadn’t thought to approach a construction company, which shows even at the Rainbow Tick we need to challenge our own stereotypes of what sort of organisations want to be inclusive.”

3 Eastgate lease agreements go unconditional

NPT Ltd said yesterday 3 lease agreements at the Eastgate Shopping Centre in Christchurch have gone unconditional.

They are:

  • 900m² on the upper level to be occupied by Linwood Avenue Medical Centre in a new purpose-built integrated family health centre, in part of the space vacated by Farmers after the 2011 earthquake. The lease is for an initial term of 9 years from construction completion
  • 1200m² in the balance of the area vacated by Farmers, to be occupied by a cluster of social services providers that will co-locate into new office space, including Aviva, Barnardo’s, Family Help Trust, Red Cross & He Waka Tapu. The lease is for an initial term of 6 years from construction completion
  • A new standalone Restaurant Brands outlet at 283 Linwood Avenue, to be built on a site previously occupied by a house demolished this year. The lease is for an initial term of 12 years from construction completion.

NPT managing director Kerry Hitchcock said Hawkins Construction Ltd had been appointed for the works on the upper level. All 3 projects will start in January for completion in mid-2016.

NPT estimated the combined capex would be $7 million and would provide an annualised yield on cost of 9.25%. NPT will fund these developments from its existing bank facility.

Attribution: Company releases.

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Propbd on Q Th26Nov15 – Council on demolition dogs & the north; auctions, Goodman settles, PFI pleased

Council action on heritage demolition, dog access, northern breakaway, Kaipara Harbour
5 apartments sell at Ray White auction
14 “intensive living” units, 2 sections & a showroom sell at Barfoots
4 apartments & a farm sell at Bayleys
All 4 sell at City Sales auction
Goodman settles 2 Addington sales
PFI pleased to exit Cavendish Drive property

2.40pm:
Council action on heritage demolition, dog access, northern breakaway, Kaipara Harbour

Auckland Council’s governing body:

  • Will get a report back in February on a proposal from Orakei board member Troy Churton seeking amendment to governing body resolution regarding the process for determining notifications for demolition of pre-1944 buildings
  • Agreed today to change the dog access rules in the Albert-Eden ward (since 2013, local boards have been able to use different summer times or seasons from the standard bylaws, which required governing body approval), and
  • Endorsed a response to the Local Government Commission on a proposal from the Northern Action Group for a North Rodney unitary council (the commission sought views on impacts, not a view on the action group’s proposal); Cllr George Wood added a number of extra difficulties the proposed unitary council might encounter.

The council also considered a memorandum of understanding on establishing a joint working party on the Kaipara Harbour in the confidential section of its agenda because of some confidential information from the Government, but expected to release its resolutions publicly.

5 apartments sell at Ray White auction

5 of the 8 apartments auctioned at Ray White City Apartments today were sold under the hammer. Auction results:

Chatham, 70 Pitt St, unit 502, sold for $260,000 + gst, Aileen Wu
Waldorf Bankside, 8 Bankside St, unit 10E, sold for $261,500, Judi & Michelle Yurak
Tetra House, 85 Wakefield St, unit 508, sold for $265,000, James Mairs
Focus on Anzac, 99 Anzac Avenue, unit 3H, passed in at $460,000, Ryan Bridgman & Mitch Agnew
Grey Lynn, Méditerranée, 10 Crummer Rd, unit 1A, sold for $400,500, Leo Zhu
Westmount, 23 Upper Queen St, unit 1A, passed in at $350,000, Damian Piggin, Daniel Horrobin & Simon Harrison
Eden Terrace, Memphis, 9 Charlotte St, unit GA, sold for $210,000, James Mairs
Uptown Apartments, 14 Upper Queen St, unit 6A, passed in after one bid at $380,000, vendor indication at $400,000, Krister Samuel

14 “intensive living” units, 2 sections & a showroom sell at Barfoots

Of the 32 “intensive living” properties on yesterday’s auction list, 12 were sold at the auction, one prior and one post.

2 sections targeted for their land were sold, one on Point View Drive above Flat Bush and the other in Mt Roskilll, and a showroom/warehouse property in New Lynn was sold. Auction results:

Tower Hill, 1 Emily Place, unit 11D, one-bedroom apartment, sold for $623,000, Livia Li & Alan Guo
Remuera, 16 Belmont Terrace, unit 5, one-bedroom apartment, sold for $434,000, Sarah Garlick & Estee Zeng
Lorne St Lofts, 4 Lorne St, unit 2G, one-bedroom apartment, sold for $442,500, Rita Herceg & Alastair Brown
207 Federal St, unit 406, passed in, 2-bedroom apartment, Stephen Shin & Yasu Ka
Parnell, 26B Takutai St, sold for $1.4 million, Silvia Poletti
Harbour Green, 11 Union St, unit 807, 2-bedroom apartment, no bid, Livia Li & Alan Guo
Glendowie, 43 Karaka Park Place, cross-lease, passed in, Grant Marshall
Glendowie, 123 Riddell Rd, unit 3, cross-lease unit, sold for $710,000, Margot Torrance
St Heliers, 91 Long Drive, unit 2, cross-lease unit, no bid, Helen Clelland
Parnell, 22 Windsor St, cross-lease, passed in, Jill Jackson
Hobson Gardens, 205 Hobson St, unit 8H, apartment, auction postponed, Stephen Shin & Yasu Ka
Meridian, 11 Howe St, unit 1F, studio, no bid, Stephen & Leo Shin
Waldorf Celestion, 19 Anzac Avenue, unit 1305, apartment, no bid, Jason Buckwell
Silo Apartments, 23 Emily Place, unit 9J, studio, no bid, Annie Xu & Sean Zhang
Fiore, 152 Hobson St, unit 408, apartment, sold prior, Stephen Shin & Yasu Ka
St Johns, 6 Lush Avenue, unit 5, cross-lease unit, passed in, Mike Dolan
Mt Wellington, 11 Burt Rd, unit 2, cross-lease unit, no bid, Jane Wang & Dragon Zhou
Grey Lynn, 199 Surrey Crescent, unit 504, apartment, sold for $910,000, Mike Dolan
Meadowbank, 44 Hawkins St, cross-lease, sold for $900,000, Maree Church
Mt Albert, 55 Sainsbury Rd, unit 5, withdrawn from auction, Duane Mullooly
St Heliers, 20B McArthur Avenue, cross-lease, no bid, Sharlene Huang
Mt Wellington, 172 Ireland Rd, cross-lease, no bid, Mike Dolan
Mt Wellington, 12 Motu Place, unit 1, sold for $610,000, Alex Wu & Ben Feng
Avondale, 316 Blockhouse Bay Rd, 9 units, sold for $2.32 million, Sue Allan & Aken Yuan
Mt Eden, 22 Normanby Rd, unit 44, apartment, sold for $662,000, Ryan Harding & Matt O’Rourke
Grey Lynn, 29 Scanlan St, unit M2, apartment, sold for $615,000, Neil Dayal & Louise Stringer
Onehunga, 10 Inkerman St, unit 2, sold for $635,000, Dennis Law
Mt Eden, 101 Balmoral Rd, unit 3, passed in, Alex Yang
Grey Lynn, Turing building, 2 Ariki St, unit GO7, apartment, no bid, Thornton & Felicity Scott
Epsom, 116 The Drive or 41 Empire Rd, unit 2 either way, withdrawn from auction, Robert Thompson
Remuera, 90 Remuera Rd, unit 18, apartment, sold post-auction, Rick Thevenard & Leonie Stabler
Remuera, 90 Remuera Rd, unit 16, apartment, passed in, Rick Thevenard & Leonie Stabler

Land sales:

East Tamaki, 67 Point View Drive, lot 1, 800m² section sold for $1.005 million, Robben Li & Peter Young
Mt Roskill, 14 Invermay Avenue, 1930s bungalow on 828m² section, sold for $1.54 million, Repeka Lelaulu

Commercial:

New Lynn, 26 Portage Rd, unit 1, sold for $975,000, Neil Wooldridge & Peter Jeromson

4 apartments & a farm sell at Bayleys

4 of the 7 apartments auctioned at Bayleys yesterday were sold under the hammer.

A Kaukapakapa farm with a range of potential conversions, including subdivision, was also sold. Auction results:

Grey Lynn, 45 Millais St, 3 flats in bungalow, sold for $1.5 million, Blair Haddow
Hillsborough, 80 Carlton St, cross-lease, passed in, Chris Reeves
Ellerslie, 32 Michaels Avenue, flat 2, cross-lease, sold for $495,000, Lisa Smyth & Helen Byford
Stamford Residences, 26 Albert St, unit 1209, apartment, no bid, Blair Haddow
Matakatia, 64A Matakatia Parade, cross-lease, passed in at $1.01 million, Sue & Charles Donoghue
Parnell, Stonemasons, 27 Falcon St, unit 2B, apartment, sold for $565,000, Chris Reeves
Scene 1, 2 Beach Rd, unit 611, leasehold apartment, sold for $95,000 at mortgagee auction, Tony Bayley

Rural:

Kaukapakapa, 158 Hellyer Rd, 400ha farm, passed in at $4.2 million, Karen Asquith & Graeme Mann

All 4 sell at City Sales auction

All 4 apartments auctioned at City Sales yesterday were sold under the hammer. Auction results:

Takapuna, Spencer on Byron, 9-17 Byron Avenue, unit 312, sold for $216,000 at mortgagee auction, Gabrielle Hoffmann
Sapphire, 76 Wakefield St, unit 303, sold for $271,500, Chris Bell
The Quadrant, 10 Waterloo Quadrant, unit 1112, sold for $425,000, Maryanne Wong
Eden Terrace, 3 Ngahura St, unit 15, sold for $445,000, Jake Hayward & Iona Rodrigues

Goodman settles 2 Addington sales

Goodman Property Trust’s manager, Goodman (NZ) Ltd, confirmed yesterday that the $33.2 million sale of the amenity & IAG buildings at 12 & 14 Show Place in Addington, Christchurch, to local investors has been settled.

PFI pleased to exit Cavendish Drive property

Property For Industry Ltd said yesterday its sale of a non-core property at 85 Cavendish Drive, Manukau, for a gross $10 million was due to settle on 31 March 2016. General manager Simon Woodhams said the sale, to a neighbouring investor at a Colliers auction last week, concluded a long-term strategy to sell this property, and it was above the December 2014 book value of $8.65 million.

Earlier story:
18 November 2015: Cavendish Drive property sells $750,000 above June book value

Attribution: Council, auctions, company releases.

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Cavendish Drive property sells $750,000 above June book value

NZX-listed Property For Industry Ltd sold a Manukau commercial property to a local investor for $10 million at Colliers’ auction today. The property was in PFI’s books at 30 June with an independent valuation of $9.25 million.

South

Manukau

85 Cavendish Drive:
Features: 11,549m² site, 90.9m road frontage, 3893m² net lettable area + canopies, weighted average lease term 6.7 years, 3 tenants (Big Save Furniture, Reece Plumbing & Smart Marine), over 150 parking spaces
Rent: $714,436/year net + gst, outgoings $96,497/year
Outcome: sold for $10 million at a 7.14% yield
Agents: Gareth Fraser, Charlie Oscroft, Leroy Wolland & Jeremy Barnett

Attribution: Auction, PFI interim report.

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