Archive | Securities – NZ

Precinct working on ANZ Centre deal, has conditional Wellington sale

Precinct Properties NZ Ltd says it’s working with one party on the sale of a 50% interest in the 39-storey ANZ Centre in Auckland and has an agreement to sell the quake-damaged former Deloitte House in Wellington (pictured) at a huge markdown.

Precinct chief executive Scott Pritchard said yesterday: “The half-share interest in the ANZ Centre has received very strong interest and we look forward to forming a long-term relationship with the preferred bidder.

“With several options for 10 Brandon St having been assessed to date, we believe the sale of this asset represents the best option for Precinct. Progressing these asset sales will enable Precinct to focus on and recycle capital into its future development opportunities.”

The company sought expressions of interest this year in a 50% interest in the ANZ Centre on Albert St in Auckland. The campaign has closed, and Mr Pritchard said pricing indications were at a premium to the June 2017 valuation of $324 million.

Precinct spent $76 million refurbishing the whole of the ANZ Centre after the bank committed to a new long-term lease in 2011. The building has a net lettable area of 33,520 m² and a weighted average lease term of 8.6 years.

Mr Pritchard said there’d been strong interest in the opportunity to take a 50% interest in the building. “Precinct has agreed to a period of exclusivity for one party to complete due diligence and enter into a binding sale & purchase agreement. At this stage there is no binding agreement for the sale & purchase of the property.”

Changing fortunes on Brandon St

Precinct took the former Deloitte House at 10 Brandon St, Wellington, out of its investment portfolio last year, when its value had already plummeted, and called it a development property. Then the company abandoned the idea of fixing it up itself and looked for a buyer.

It’s found one at $10.2 million, conditional on ground lessor approvals, and the sale is due to settle in August.

Deloitte House was valued at $62 million in 2008 but had dropped to $49.3 million, with a carrying value of $45 million, in 2015.

Following the November 2016 Kaikoura earthquake, the building needed to be remediated & seismically improved, and the valuation (and carrying value) dropped in 2017 from $49 million to $26.1 million, and the some more.

In Precinct’s report in March on the December 2017 half-year, the company said it had written the valuation down from $20.2 million in June to just $7 million in December.

The building had 14 storeys when it was constructed in 1983 and had 2½ new floors added during a retrofit in 2005-06. It also now has 34 basement parking spaces & ground-floor retail, and a total lettable area of 12,972m².

Attribution: Company release.

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Metlifecare unconditional on Hobsonville site

Metlifecare Ltd said last week it had gone unconditional on its purchase of a 5.3ha waterfront site at Orion Pt in Hobsonville. Settlement is expected by June.

The retirement village company plans to spend $200 million building over 264 units, including a 36-bed care home, on the north-facing coastal site.

Chief executive Glen Sowry said the village would provide the full continuum of independent living & care options, including exclusive waterfront villas, serviced apartments & hospital-level care: “We will make the most of this exceptional site, with its expansive harbour views as well as direct access to the adjoining coastal walkway and 11ha nature reserve at Bomb Pt.”

“Our research & analysis indicates that we can expect strong demand for this offering in Auckland’s north-west, where the 75+ age demographic is projected to treble in size over the next 20 years.”

Mr Sowry said the company expected the village to generate a development margin for its independent living units & apartments above its 15% hurdle rate and a positive cash margin net of the costs of the common & care facilities.
Mr Sowry said design & consenting were well advanced and construction was planned to start in the second half of 2018. He said the village would be built over 4 stages, with the first delivered in 2020.

The new site takes Metlifecare’s total village sites to 28, of which 18 are in the Auckland region.

Attribution: Company release.

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Summerset takes greenfield sites to 7

Summerset Group Holdings Ltd has bought a 9ha property at Eriksen Rd, Te Awa, for its second retirement village in Napier & fourth in Hawke’s Bay.

Chief executive Julian Cook said the village would have about 320 homes, including 2- & 3-bedroom villas and one-bedroom serviced apartments. There will also be rest-home and hospital level care as well as Summerset’s first memory care centre (for people with dementia) in Hawke’s Bay.

Mr Cook said Summerset was on track to build 450 retirement units this year. It now has 7 greenfield sites. The others are Richmond (Nelson), Avonhead (Christchurch), St Johns & Parnell (Auckland), Kenepuru (Wellington) & Boulcott (Lower Hutt).

Attribution: Company release.

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Institutional bookbuild puts $1.35 premium on Fletcher shares

Fletcher Building Ltd shares resumed trading today after the institutional shortfall bookbuild of the company’s $750 million fully underwritten pro rata accelerated 1:4.46 entitlement offer of new shares.

The clearing price under the shortfall bookbuild of 2.2 million entitlements was $6.15/share, a $1.35 premium over the entitlement offer price of $4.80, and a premium over the theoretical ex-rights price of $6.

Following ongoing shareholder reconciliations, the gross proceeds (excluding the premium) raised in the institutional entitlement offer & institutional bookbuild has increased from the expected $500 million to $515 million.

The retail entitlement offer, at the same offer price & offer ratio as the institutional entitlement offer, will open on Monday 23 April and close on Friday 11 May.

Earlier stories:
18 April 2018: Big Fletcher fundraiser plus divestments intended to stabilise construction’s fallen giant
4 April 2018: Lenders give Fletcher Building 2-month waiver extension

Fletcher links:
News: 1:4.46 entitlement offer
Offer document

NZX documents:
Investor presentation
Offer document
NZX appendix 7
ASX appendix 3B

Attribution: Company releases.

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Big Fletcher fundraiser plus divestments intended to stabilise construction’s fallen giant

Fletcher Building Ltd announced a fully underwritten $750 million equity-raising yesterday.

It will open next Monday, 23 April, and close on Friday 11 May.

The offer price of $4.80/share represents a 23.4% discount to the closing price on Monday and a 20.0% discount to the theoretical ex-rights price of $6. The underwriter is Macquarie Securities (NZ) Ltd.

As a rescue or stabilisation issue, those are hefty discounts. But if you compare the $4.80 price with Fletcher Building before its troubles were unveiled, it’s a steal (assuming it rights itself): $4.80 is a 56% discount to the opening price in January 2017, $10.80.

The company’s shares – which have taken a drubbing since the first revelations of extraordinary Building + Interiors division losses way back in March 2017 – gained 50c to $6.34 at the end of last week on news that Australian company Wesfarmers may have taken a stake in Fletcher (which turned out to be held by an enterprising Australian investor). The price was back at $6.27 at the close yesterday.

The shares were up at $11.02 in September 2016 but declined steeply in February 2017 as rumours came out of construction losses, were at $8.64 at the start of May last year and $7.56 at the end of that month, and were at $5.78 on 4 April, immediately after Easter.

In a long list of points about the fundraiser, the troubled building sector company said it had a new $500 million standby bank facility and could redeem all the US private placement (USPP) notes if required.

As predecessor Fletcher Challenge did after the 1987 sharemarket & property sector crashes, Fletcher Building also noted its intention to pull back from its internationally expansive tendencies. In the 1980s, Fletcher Challenge had interests in 3 broad sectors – construction, forestry & energy – but started the pullback by withdrawing from overseas construction, and continued in the 1990s by exiting its North American forest interests and separating the pulp & paper sector, and also exiting energy.

In this round, it will start the divestment process for its Formica and Roof Tile Group businesses.

Key principles

Chief executive Ross Taylor & chief financial officer Bevan McKenzie said in the company’s online presentation yesterday: “While work remains to be done to complete the strategic review that the company has been undertaking, the board has approved the following key principles:

  • A focus of the group’s activities on New Zealand & Australia
  • In New Zealand: – actively defending & growing the Building Products & Distribution core – vertically integrating around this core where this provides the group with: competitive advantage, stronger growth & better outcomes for customers. As such, the group’s positions in the Concrete value chain and in Residential Development remain an essential part of its overall NZ strategy; – stabilising the Construction business and returning it to sound operating performance
  • In Australia: improving the performance of the Australian businesses through greater focus, synergies & investment, such that the company can maintain & grow leading positions in the Building Products & Distribution core
  • This focus on New Zealand & Australia means the company will undertake divestment processes for its Formica & Roof Tile Group businesses.

What you can see, and where

There are some peculiarities to the announcement. You can open the offer document directly on the NZX website, but on Fletcher Building’s website you have to go through a process of confirming you’re not in the US and won’t release the document over there.

The company’s investor presentation can be opened directly on the NZX website, but I can’t find it on the company website. It doesn’t count as news yet on the company website – last entry in that section was chair Sir Ralph Norris’s letter to shareholders on 28 February.

In a release headed Fletcher Building Ltd moves to strengthen balance sheet and focus portfolio, the company said it was “undertaking actions to strengthen its balance sheet and better enable it to execute its immediate & longer-term strategic objectives”.

Key points:

  • Raising $750 million through a fully underwritten pro rata 1:4.46 accelerated entitlement offer at $4.80/share
  • Institutional & retail entitlement offers with bookbuilds for any shortfall
  • The company will use proceeds from the offer to repay debt
  • Commitments obtained from the required majority of lenders to a permanent solution of the current breach under the syndicated facility agreement
  • New standby banking facility of $500 million established with ANZ, MUFG Bank (Mitsubishi UFJ Trust & Banking Corp) & Westpac
  • Discussions with the USPP noteholders are ongoing and Fletcher Building’s objective & expectation are that it will achieve a mutually acceptable outcome
  • While not expected to be needed, proceeds from the offer & standby facility are sufficient to redeem all USPP notes and pay associated costs if required
  • Key principles of group strategy approved by the board: focus activities on New Zealand & Australia, with divestment processes to be undertaken for the Formica & Roof Tile Group businesses
  • No change to estimated 2018 financial year group ebit (excluding Building + Interiors & significant items) of $680-720 million and estimated loss for B+I of $660 million.

Company expects to cut leverage

Mr Taylor said the company expected normalised leverage (excluding the Building + Interiors business) to reduce to 1.6x, at the lower end of its revised target range of 1.5-2.5x.

He said discussions with the USPP noteholders were ongoing, and Fletcher Building’s “objective & expectation is that it will achieve a mutually acceptable outcome by 31 May”. While the company didn’t expect it would need the standby facility, it had been put in place to ensure that, together with the net equity proceeds of the offer, the company would be able to redeem all USPP notes and pay associated costs if required.

Mr Taylor said the company’s strategic review was progressing well and he expected to announce it in full in June.

Trading update discloses no margin on highway job

In a group trading update, Mr Taylor warned that Fletcher Building expected to get no profit margin from one infrastructure project, The Puhoi-Warkworth (P2W) project – the road of national significance extending the motorway-style State Highway 1 closer to Northland – where Fletcher Construction is in a 50:50 joint venture with Spanish company Acciona SA.

“The reset of the Construction business continues and regular internally led project reviews are now established across the business.

“With respect to the B+I business, there is no change to the project provisions announced in the 14 February trading update, and no change to the estimated FY18 B+I ebit loss of $660 million.”

Of the 16 key projects identified in that trading update:

  • 5 projects now complete, including the Justice Precinct in Christchurch – all completed within 14 February provisions
  • 7 projects targeting completion by end of calendar 2018 – all currently operating within 14 February provisions
  • 4 remaining projects including NZ International Convention Centre & Commercial Bay – all currently operating within 14 February provisions.

The announcement is on the Fletcher Building website, but you won’t find it, or the presentation sent to the NZX, instantly. The company hasn’t updated its announcements on the website since chair Sir Ralph Norris’s letter to shareholders on 28 February.

Fletcher links:
News: 1:4.46 entitlement offer
Offer document

NZX documents:
Investor presentation
Offer document
NZX appendix 7
ASX appendix 3B

Attribution: Company release, presentation, offer document.

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Michael Hill sets US closure date, still reports sales growth

Jewellery retailer Michael Hill International Ltd will close all 9 of its US stores around 30 April at an estimated cost of $US4.5 million ($NZ6.1 million).

The company (which is based in Brisbane, hence its main reporting currency is the $A) said on Wednesday it had sought a buyer in parallel with negotiating lease exits, but got no satisfactory offers: “The company has therefore negotiated non-binding in-principle lease exit terms with all US landlords and will now proceed to negotiate binding formal documentation with those landlords.”

The cost estimate covers lease termination & employee severance.

Michael Hill announced its intention to withdraw from the US and review the future of its 30-store Emma & Roe chain in January.

Combined, the US and Emma & Roe represented 11% of stores at the end of 2017, but accounted for only 5% of total annual group revenues and contributed an $A12 million loss before interest & tax.

9-month group update

In a financial update on Thursday, for the 9 months to 31 March, Michael Hill said that despite the US and Emma & Roe problems, it grew same-store revenue by 0.4% to $A429.3 million.

The Michael Hill brand, excluding the US, delivered total store sales growth of 4.9% to $A441.6 million and same-store sales growth of 1.0%. Michael Hill same-store sales improved 3.7% in New Zealand and by 4.1% in Canada, but Australian same-store sales declined by 0.3%.

US same-store sales fell 13.9%, and all-store by 17.7%, to $A10.2 million in both cases.

Emma & Roe same-store sales fell 5.8% to $A9.37 million, but all-store rose 16.3% to $A13.7 million.

The company added 15 Michael Hill stores and one Emma & Roe store, and closed 4 Michael Hill stores, taking the total at 31 March to 344 stores trading at 31 March, made up of 314 Michael Hill stores and 30 Emma & Roe stores. Ecommerce sales increased by 62.8% to $8.2 million, representing 1.8% of total sales for the group.

Earlier stories:
9 February 2018: Michael Hill sees $A25 million cut from store exits
31 January 2018: Hill concedes defeat in US, will reposition second brand
14 January 2018: Michael Hill lifts sales but US concerns continue

Attribution: Company releases.

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Adelaide family makes Porirua mall its second NZ purchase

Kiwi Property Group Ltd has agreed to sell the North City Shopping Centre in Porirua to the Angaet Group of Adelaide for $100 million – $12.4 million short of book value. The transaction is due to settle in July.

It’s Angaet’s second New Zealand purchase following its acquisition of the WestCity mall in Henderson from the manager of Westfield Group’s New Zealand malls, Scentre (NZ) Ltd, settled last July.

In both cases, mall management has moved from the big portfolio owners and into the hands of real estate company Colliers.

Kiwi chief executive Chris Gudgeon said on Wednesday: “North City had been identified for sale as part of our capital recycling programme designed to fund current investment priorities. Proceeds from the sale will be used to pay down bank debt and provide further balance sheet flexibility.”

North City was on Kiwi’s books (at September 2017) at $112.4 million, with a cap rate of 7.63%. Kiwi has owned it since 1993, the year the company’s forerunner, the Kiwi Income Property Trust, was floated on the NZX.

The DiMauro family, under the leadership of Nick DiMauro & his son Michael, owns the whole of Angaet’s portfolio, which includes 25 shopping centres around Australia.

Nick DiMauro said yesterday New Zealand was an attractive investment location, and North City was a vibrant asset. The 3-level regional shopping centre has 98 tenants in a net lettable area of 25,439m² and 1102 parking spaces, and is anchored by Kmart, Farmers & a Reading Cinemas complex. It has 68 specialty retail tenants, 11 kiosks, 11 foodcourt tenants, and 8 office suites on the third floor.

The mall at 2 Titahi Bay Rd, Porirua, was built in 1990 and refurbished & extended in 1997 & 2004.

Attribution: Kiwi & Colliers releases.

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Summerset has slower start to year

Retirement village developer, owner & operator Summerset Group Holdings Ltd started 2018 well short of its performance in the first quarter last year – 143 sales, down from 171.

Resales held up (75 this time, 74 last time) but sales of new retirement village units fell from 97 to 68 for the quarter.

Chief executive Julian Cook said on Friday serviced apartments, whose occupancy was more needs-based, made up a large proportion of the retirement units held at year end, and these typically had a slightly longer selldown period than villas & apartments.

“Retirement unit deliveries for 2018 are weighted towards the second half of the year, with new sales volumes throughout the remaining quarters of 2018 expected to progressively increase as we deliver new homes for which we will sell occupation rights. We are on track to deliver 450 new homes over 2018.

“We are seeing good volumes of resales across our villages, and have seen settlements track at normal levels for the first quarter.”

New sales & resales for last 5 quarters:

Attribution: Company release.

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Kiwi Property gets 1.1% portfolio rise

Kiwi Property Group Ltd has reported a 1.1% ($34 million) net fair value gain on its portfolio of shopping centres and office buildings for the March year, lifting the total portfolio value to $3.1 billion.

The company’s biggest asset, the Sylvia Park retail centre (now having an office component added) is worth $835 million – $3.8 million more than the whole office portfolio. It also carries the strongest cap rate, which tightened by 50 basis points to 5.38%.

The Vero Centre on Shortland St in Auckland firmed 25 points to 5.5% and ASB North Wharf in the Wynyard Quarter firmed 13 points to 5.63%.

Chief executive Chris Gudgeon said on Thursday: “Kiwi Property’s portfolio has benefited from generally positive property market conditions, with the investment portfolio weighted average capitalisation rate firming to a record low. New leasing deals, strategic development works, strong sales at our key Auckland retail centres and strong tenant demand for our office properties have assisted value growth.

“This has been partially offset by the cost of seismic strengthening activities, predominantly at assets in regions with higher seismic risk, and related increases in insurance costs.”

Mr Gudgeon said the weighted average cap rate for the investment portfolio firmed 27 basis points to a record low of 6.10%, and the valuations indicated that, overall, the portfolio rental levels were essentially at market.

The company will confirm the valuations when it announces its annual results on 21 May.

Summary of portfolio valuations:

Attribution: Company release.

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Second parcel of Finance Centre sale settles

Augusta Capital Ltd confirmed last Thursday that its sale of the retail title at the Finance Centre in downtown Auckland settled that day.

The remaining 2 titles at the Finance Centre that Augusta still owns – the podium & the carpark – are contracted to settle on 1 April 2019.

Augusta managing director Mark Francis said the company had applied $18 million of the $25 million retail title sale price towards debt repayment, but overall facility limits had only been reduced by $10 million: “Drawn debt is now $42.4 million, which represents an effective loan:value ratio of 30%. The sale proceeds will provide further balance sheet capability in respect of Augusta’s strategic objectives for its funds management business.”

The first sale settled, of the 4 parcels Augusta Capital agreed to sell in 2016 for $96 million, was the $30 million sale of Augusta House on Victoria St to Heng Yue Ltd (David (Duoyu) Bei) in July 2017.

The sale excludes the original Finance Centre office tower at 191 Queen St, now owned by Sir Bob Jones’s Robt Jones Holdings Ltd.

Earlier story:
25 July 2017: Augusta confirms first sale in Finance Centre package settled

Attribution: Company release.

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