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>The listed property vehicle (LPV) sector has had a difficult first five months of the year, materially underperforming the broader market.</li><li>Sticky inflation and higher-for-longer interest rates, index removals, being guided to lower distributions, and weakening tenant demand backdrop have all been weighing on sector performance.</li><li>A silver lining is that sector valuations are looking more fair than they have done for some time, with a simple average gross yield spread to long bond rates closing in on its five-year average. </li></ul>

The listed property vehicle (LPV) sector has had a difficult first five months of the year, materially underperforming the broader market.Sticky inflation and higher-for-longer interest rates, index removals, being guided to lower distributions, and weakening tenant demand backdrop have all been weighing on sector performance.A silver lining is that sector valuations are looking more fair than they have done for some time, with a simple average gross yield spread to long bond rates closing in on its five-year average. 

Real Estate Reflections - Looking for a Silver Lining

<ul><li>April was a tough month for listed property vehicles (LPVs) as sticky inflation once again sent interest rates higher.</li><li>The NZ 10 year swap rate is currently c.4.5%, but is in the middle of its 100 bp trading range for the past 18-months.</li><li>The yield curve continues to suggest short-term rates will decline, but  longer term rates (the more important for NZ listed property valuations) continue to be anchored at 4% to 5%. </li></ul>

April was a tough month for listed property vehicles (LPVs) as sticky inflation once again sent interest rates higher.The NZ 10 year swap rate is currently c.4.5%, but is in the middle of its 100 bp trading range for the past 18-months.The yield curve continues to suggest short-term rates will decline, but  longer term rates (the more important for NZ listed property valuations) continue to be anchored at 4% to 5%. 

<div><div><div><div><ul><li>March was a solid month for the listed property sector, making up some of the lost ground through January and February as talk of potentially higher interest rates subsided with the release of weak economic data.</li><li>Two property companies with a March balance date have released year end valuations that suggest flat values over 2H24, which we view as a little optimistic given our channel checks.</li><li>Our comparison of this property sector downcycle suggests we are through the worst, but we note that large interest rate cuts were required to stabilise the sector in the GFC. </li></ul></div></div></div></div>

March was a solid month for the listed property sector, making up some of the lost ground through January and February as talk of potentially higher interest rates subsided with the release of weak economic data.Two property companies with a March balance date have released year end valuations that suggest flat values over 2H24, which we view as a little optimistic given our channel checks.Our comparison of this property sector downcycle suggests we are through the worst, but we note that large interest rate cuts were required to stabilise the sector in the GFC. 

Real Estate Reflections - Marching Back Lost Ground

<ul><li>The listed property sector had a weak month in February, continuing a challenging start to 2024.</li><li>Listed property vehicles (LPVs) that reported in February came broadly in-line with expectations, with higher corporate costs and lower net interest costs being the key differences to our forecasts.</li><li>While operational metrics remain solid there were signs of slowing market rent growth. </li></ul>

The listed property sector had a weak month in February, continuing a challenging start to 2024.Listed property vehicles (LPVs) that reported in February came broadly in-line with expectations, with higher corporate costs and lower net interest costs being the key differences to our forecasts.While operational metrics remain solid there were signs of slowing market rent growth. 

Real Estate Reflections - A Challenging Start to the Year

<ul><li>For the first time in three years we are moving our WACC assumptions down.</li><li>This is driven by a modestly lower (-25 bps) interpolated 10-year interest rate assumption; our proxy for the risk free rate.</li><li>We also incorporate our C&amp;ESG ratings into our WACC assumptions. We do this on an overall neutral basis, with a scale of -25 bps to +25 bps added to the cost of equity. </li></ul>

For the first time in three years we are moving our WACC assumptions down.This is driven by a modestly lower (-25 bps) interpolated 10-year interest rate assumption; our proxy for the risk free rate.We also incorporate our C&amp;ESG ratings into our WACC assumptions. We do this on an overall neutral basis, with a scale of -25 bps to +25 bps added to the cost of equity. 

Equity Strategy - WACC Review; a Lower Rfr and Adding C&ESG

New Zealand

Kiwi Property Group Ltd is a property trust that invests in, manages and develops a portfolio of diversified properties throughout New Zealand. The Trust's properties include office, retail and industrial properties.

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Kiwi Property (KPG NZ)

Real Estate Reflections - Looking for a Silver Lining

The listed property vehicle (LPV) sector has had a difficult first five months of the year, materially underperforming the broader market.

Forsyth Barr

Real Estate Reflections - Taxing Times

April was a tough month for listed property vehicles (LPVs) as sticky inflation once again sent interest rates higher. The NZ 10 year swap rate is...

Forsyth Barr

Real Estate Reflections - Marching Back Lost Ground

Two property companies with a March balance date have released year end valuations that suggest flat values over 2H24, which we view as a little...

Forsyth Barr

Real Estate Reflections - A Challenging Start to the Year

Listed property vehicles (LPVs) that reported in February came broadly in-line with expectations, with higher corporate costs and lower net...

Forsyth Barr

Equity Strategy - WACC Review; a Lower Rfr and Adding C&ESG

For the first time in three years we are moving our WACC assumptions down. This is driven by a modestly lower (-25 bps) interpolated 10-year...

Forsyth Barr

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