New Zealand Professional Investment Services Firm, Forsyth Barr

Forsyth Barr

New Zealand Professional Investment Services Firm

We are proud to be a New Zealand owned firm, with 21 offices throughout the country and over 300 employees. We assist personal, institutional and corporate clients providing a full range of investment services.

Forsyth Barr is a foundation New Zealand Exchange firm (NZX) and accredited market participant. We have been confirmed by the Financial Markets Authority as a Qualifying Financial Entity (QFE).

Research is the cornerstone of our advice. We have one of New Zealand's leading teams of analysts. Our global affiliations ensure comprehensive research coverage of all major investment markets.

Thematic (Sector/Industry)

<ul><li>1H23 listed property results highlighted solid operational outcomes, but we are starting to see higher interest rates impact forward earnings expectations and capital management strategies</li><li>Development is being delayed, non-core assets sold and distribution growth moderated</li><li>While results were generally in line with our expectations, we lowered our earnings and dividend forecasts for most of the sector</li></ul>

1H23 listed property results highlighted solid operational outcomes, but we are starting to see higher interest rates impact forward earnings expectations and capital management strategiesDevelopment is being delayed, non-core assets sold and distribution growth moderatedWhile results were generally in line with our expectations, we lowered our earnings and dividend forecasts for most of the sector

Real Estate Reflections: Adjusting to a Higher Rates Environment

<ul><li>High interest rates and low transactions volumes has created uncertainty around commercial property valuations</li><li>Our analysis suggests that most property balance sheets can withstand a significant decrease in asset values with Argosy (ARG), Goodman Trust (GMT), and Property for Industry (PFI) the most resilient given low current gearing and/or limited capital commitments.</li><li>Kiwi Property (KPG), Stride (SPG), and Vital Healthcare (VHP) have the least resilient balance sheets owing to either higher initial gearing and/or significant capital commitments</li></ul>

High interest rates and low transactions volumes has created uncertainty around commercial property valuationsOur analysis suggests that most property balance sheets can withstand a significant decrease in asset values with Argosy (ARG), Goodman Trust (GMT), and Property for Industry (PFI) the most resilient given low current gearing and/or limited capital commitments.Kiwi Property (KPG), Stride (SPG), and Vital Healthcare (VHP) have the least resilient balance sheets owing to either higher initial gearing and/or significant capital commitments

Equity Bottom-Up

<ul><li>ARG's 1H23 earnings were boosted by one-offs but we estimate underlying adjusted funds from operation (AFFO) actually declined on the prior period largely due to increased debt costs</li><li>Despite solid tenant demand for its green assets, ARG's sector high interest costs are a headwind to both near-term earnings and accretive returns from its value-add development pipeline</li><li>We now forecast flat distributions over FY23 to FY25</li></ul>

ARG's 1H23 earnings were boosted by one-offs but we estimate underlying adjusted funds from operation (AFFO) actually declined on the prior period largely due to increased debt costsDespite solid tenant demand for its green assets, ARG's sector high interest costs are a headwind to both near-term earnings and accretive returns from its value-add development pipelineWe now forecast flat distributions over FY23 to FY25

Argosy: 1H23 Result — Sailing into the Wind

<ul><li>Argosy (ARG) has delivered a solid 1H23 result with adjusted funds from operations (AFFO) +25% to NZ$32.0m</li><li>RG’s debt hedging has reduced to 51% and weighted average interest rate has to 5.0%</li><li>ARG continues to progress its internal value-add development pipeline with 105 Carlton Gore now 50% leased for an expected yield on cost of 5.3%</li></ul>

Argosy (ARG) has delivered a solid 1H23 result with adjusted funds from operations (AFFO) +25% to NZ$32.0mRG’s debt hedging has reduced to 51% and weighted average interest rate has to 5.0%ARG continues to progress its internal value-add development pipeline with 105 Carlton Gore now 50% leased for an expected yield on cost of 5.3%

<ul><li>Cap rates expanding, NAVs rebased: Interest rates continue to place upward pressure on cap rates and downward pressure on asset values and NTA</li><li>Looking forward to the reporting season: Six LPVs will be reporting interim results in September</li><li>LPVs had a mixed month in the market: The NZ LPV sector was down -2% in October, and underperformed the broader market by 4%</li></ul>

Cap rates expanding, NAVs rebased: Interest rates continue to place upward pressure on cap rates and downward pressure on asset values and NTALooking forward to the reporting season: Six LPVs will be reporting interim results in SeptemberLPVs had a mixed month in the market: The NZ LPV sector was down -2% in October, and underperformed the broader market by 4%

Real Estate Reflections Time for a Check Up

New Zealand

Argosy Property Limited invests in and manages retail, commercial and industrial properties in New Zealand.

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Argosy Property (ARG NZ)

Real Estate Reflections: Adjusting to a Higher Rates Environment

1H23 listed property results highlighted solid operational outcomes, but we are starting to see higher interest rates impact forward earnings...

Forsyth Barr

Listed Property Insights: In the Balance

High interest rates and low transactions volumes has created uncertainty around commercial property valuations, which has manifested in the NZ...

Forsyth Barr

Argosy: 1H23 Result — Sailing into the Wind

ARG's 1H23 earnings were boosted by one-offs but we estimate underlying adjusted funds from operation (AFFO) actually declined on the prior period...

Forsyth Barr

Argosy: 1H23 Result – Initial Thoughts

Argosy (ARG) has delivered a solid 1H23 result with adjusted funds from operations (AFFO) +25% to NZ$32.0m, which was largely due to a one off...

Forsyth Barr

Real Estate Reflections Time for a Check Up

It was another roller coaster month for the listed property sector - the sector sold off as long bond yields peaked at 4.7% mid-month before a ...

Forsyth Barr

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