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>Following a torrid few months, a fall in long bond rates provided relief for the property sector in November.</li><li>1H24 results were generally uneventful, with the major surprise being Investore (IPL) cutting its dividend ahead of the tax changes next year.</li><li>We expect a few others will follow suit when guidance for FY25 is issued in May. On the positive side, Auckland Council approved the sale of the Downtown Carpark to Precinct (PCT). </li></ul>

Following a torrid few months, a fall in long bond rates provided relief for the property sector in November.1H24 results were generally uneventful, with the major surprise being Investore (IPL) cutting its dividend ahead of the tax changes next year.We expect a few others will follow suit when guidance for FY25 is issued in May. On the positive side, Auckland Council approved the sale of the Downtown Carpark to Precinct (PCT). 

Real Estate Reflections - On the Interest Rate Roller Coaster

Equity Bottom-Up

<ul><li>Investore's (IPL) 1H24 distributable earnings was broadly in line with expectations.</li><li>The key surprise in the result was a reduction in dividends, with FY24 guidance reduced -9% to 7.2cps and FY25 implied distributions of at least 6.5cps.</li><li>With non-core asset sales taking longer than expected and interest rates remaining elevated, the motivation to cut distributions is twofold: (1) to retain capital and reduce gearing which is at the top end of its target range, and (2) to get ahead of higher tax to be paid and the lift in interest costs as hedging rolls off. </li></ul>

Investore's (IPL) 1H24 distributable earnings was broadly in line with expectations.The key surprise in the result was a reduction in dividends, with FY24 guidance reduced -9% to 7.2cps and FY25 implied distributions of at least 6.5cps.With non-core asset sales taking longer than expected and interest rates remaining elevated, the motivation to cut distributions is twofold: (1) to retain capital and reduce gearing which is at the top end of its target range, and (2) to get ahead of higher tax to be paid and the lift in interest costs as hedging rolls off. 

Investore - 1H24 Result—Getting Ahead of the Curve

<ul><li>It has been a bleak couple of months for the listed property sector.</li><li>The one-two punch of the proposed tax changes and higher for longer interest rates has seen the sector sell off -14% over the last three months.</li><li>This was the fourth largest three month correction since 1996, behind only the Asian debt crisis, the rapid rate hiking cycle in June last year, and the start of the COVID pandemic. </li></ul>

It has been a bleak couple of months for the listed property sector.The one-two punch of the proposed tax changes and higher for longer interest rates has seen the sector sell off -14% over the last three months.This was the fourth largest three month correction since 1996, behind only the Asian debt crisis, the rapid rate hiking cycle in June last year, and the start of the COVID pandemic. 

Real Estate Reflections - The Storm Before the Storm

<ul><li>It hasn't been a great couple of months for the property sector. After being hit with political promises of higher taxes in August, rising interest rates saw the sector sell off in September.</li><li>With the NZ 10 year Government bond yield now c.5.5%, sector valuation metrics, which already looked full versus history, have come sharply back into focus.</li><li>Persistently high interest rates remain a headwind for the sector, particularly given higher taxes and interest costs are likely to see dividends cut (we forecast -3% on average by FY26). </li></ul>

It hasn't been a great couple of months for the property sector. After being hit with political promises of higher taxes in August, rising interest rates saw the sector sell off in September.With the NZ 10 year Government bond yield now c.5.5%, sector valuation metrics, which already looked full versus history, have come sharply back into focus.Persistently high interest rates remain a headwind for the sector, particularly given higher taxes and interest costs are likely to see dividends cut (we forecast -3% on average by FY26). 

Real Estate Reflections - Here We Go Again?

<ul><li>After seven months of outperforming the broader NZ market, the listed property sector experienced a sharp correction in August.</li><li>This was driven by both National and Labour proposing to remove structure depreciation for commercial landlords to part fund their respective election promises.</li><li>Given the depreciations changes are proposed by both major political parties, we have lowered our forecasts to reflect the high likelihood that the sector will be paying more tax from 1 April 2024. </li></ul>

After seven months of outperforming the broader NZ market, the listed property sector experienced a sharp correction in August.This was driven by both National and Labour proposing to remove structure depreciation for commercial landlords to part fund their respective election promises.Given the depreciations changes are proposed by both major political parties, we have lowered our forecasts to reflect the high likelihood that the sector will be paying more tax from 1 April 2024. 

Real Estate Reflections - Tax Man Coming for Commercial

New Zealand

Investore Property Limited operates as a real estate investment company. The Company invests in retail property assets. Investore Property also provides leasing services. Investore Property serves clients in New Zealand.

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Investore Property (IPL NZ)

Real Estate Reflections - On the Interest Rate Roller Coaster

1H24 results were generally uneventful, with the major surprise being Investore (IPL) cutting its dividend ahead of the tax changes next year.

Forsyth Barr

Investore - 1H24 Result—Getting Ahead of the Curve

The key surprise in the result was a reduction in dividends, with FY24 guidance reduced -9% to 7.2cps and FY25 implied distributions of at least...

Forsyth Barr

Real Estate Reflections - The Storm Before the Storm

The one-two punch of the proposed tax changes and higher for longer interest rates has seen the sector sell off -14% over the last three months.

Forsyth Barr

Real Estate Reflections - Here We Go Again?

It hasn't been a great couple of months for the property sector. After being hit with political promises of higher taxes in August, rising interest...

Forsyth Barr

Real Estate Reflections - Tax Man Coming for Commercial

After seven months of outperforming the broader NZ market, the listed property sector experienced a sharp correction in August.

Forsyth Barr

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