Archive | Argosy Property

Argosy gets 13% premium in St Lukes sale

Argosy Property Ltd has settled the sale of a Wellington property and entered into an unconditional agreement to sell the bulk retail centre it owns in St Lukes, Auckland.

The agreed price of $31 million for 7 & 7A Wagener Place, St Lukes, is a 13% premium on its 28 February book value of $27.4 million. Settlement is scheduled for July.

The St Lukes property – across Wagener Place from the Westfield St Lukes mall – has a net lettable area of 7056m². It began trading in 2006 in a converted 1960s industrial building. A new building for The Warehouse was added in 2010.

The sale of 14 Tunnel Grove in Wellington was for $2.825 million.

Argosy chief executive Peter Mence said of the St Lukes deal: “The market for commercial real estate remains attractive for long-term investors divesting real estate. The sale presents an opportunity to reduce our retail exposure in an area where there will be increasing competition. It allows us to keep delivering on our strategy and we will reinvest the proceeds into other brownfield development opportunities across the portfolio.”

Attribution: Company release.

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Argosy chief warns yield firming near end of cycle

Argosy Property Ltd chief executive Peter Mence warned yesterday that commercial property’s yield-firming cycle was coming to an end.

Mr Mence told shareholders at Argosy’s annual meeting that increasing construction costs, solid net absorption of vacant space and a decrease in developers were all factors which would benefit the environment for rental growth.

On the outlook, he said: “We are still faced with globally uncertain times. However, the economy, and thus the property market, in New Zealand remains solid with good economic growth expected to continue.

“There is potential for rental growth to be stronger than recent years. The improved quality of our diversified portfolio will allow us to make the most of the current market conditions. We will remain focused on addressing near-term expiries within the portfolio and ensuring that the tenant retention rate remains high and the fundamentals of the portfolio remain strong.”

Investment strategy amended

Argosy has amended its investment strategy, raising its industrial property target and lowering the office target range to take tighter conditions at the top of the property cycle into account.

“We have extended the permitted range of core properties to between 75-90% of the portfolio by value (increased from 75-85%). Our investment policy has also changed, with an amendment to the sector band parameters. Our industrial target will increase to 40-50% of the total portfolio by value (previously 35-45%) and office will reduce to 30-40% (previously 35-45%). Retail remains unchanged at 15-25%.”

The company paid 6.1c/share in dividends for the year just finished and expects to pay 6.2c/share for the 2018 financial year. It announced a 1.55c/share first-quarter dividend yesterday, with imputation credits of 0.366464c/share attached.

New measure coming in for dividends

Argosy will also move, “over the medium term”, to an amended dividend policy, based on adjusted funds from operations (AFFO) earnings. Company chair Mike Smith said the board expected, based on current projections, that the cash dividend would be at least maintained over the transition period.

US property entities have long expressed their earnings in funds from operations. Argosy told shareholders at its investor roadshow in May and at yesterday’s annual meeting, that the adjusted version is “an alternative performance measure used to assist investors in assessing the company’s underlying performance and to determine income available for distribution”.

What’s not clear from its presentations is how dividends will change, or why, beyond following guidelines from the Property Council of Australia for disclosing the measure, which didn’t jump out at my face from its website.

According to Investopedia, adjusted funds from operations is a more precise measure of residual cashflow available to shareholders than plain funds from operations, and therefore a better “base number” for estimating value – for example, applying a multiple or discounting a future stream of funds. Secondly, because it’s true residual cashflow, it is a better predictor of the entity’s future capacity to pay dividends.

Investopedia says AFFO doesn’t have a uniform definition, but the most important adjustment made to calculate it is the subtraction of capital expenditures.

Link: Investopedia on AFFO

Attribution: Annual meeting, company release, Investopedia.

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Argosy sells Napier warehouse

Argosy Property Ltd said on Monday it had sold the mostly vacant property at 1 Pandora Rd in Napier to an owner-occupier for $7.7 million.

Chief executive Peter Mence said this was a premium to the current book value of $7.5 million. Settlement was expected in August.

Mr Mence said the property had been partially occupied on monthly tenancies, yielding only a 1.2% return. The sale was in accordance with Argosy’s strategy of divesting non-core properties.

The medium-stud warehouse has a net lettable area of 18,269m². Fonterra Group was using part of it as a milk powder distribution facility.

Attribution: Company release.

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Argosy completes solid year

Argosy Property Ltd lifted its portfolio by $84 million to $1.46 billion in the year to March on a solid operating performance, a revaluation gain and with repositioning of the portfolio.


  • Earnings/share 12.78c (9.79c)
  • Gross distributable income/share increased up 5.7% to 8.03c(7.6c)
  • Net distributable income/share up 4.6% to 6.64c
  • Dividends for year up 1.2% to 6.1c/share
  • Net tangible assets up 6.7% to 106.4c/share
  • Valuation gain of 3% on book values to $42.3 million
  • Acquisitions totalling $32 million, including 240 Puhinui Rd and land at Highgate in Auckland
  • Divestment of non-core properties totalling $31.1 million (including properties yet to settle at balance date)
  • Net property income up 1.2% to $99.5 million
  • Weighted average lease term increased to 5.59 years
  • Occupancy (by rental) remains high at 98.6%.

Net property income increased 1.2% ($1.1 million) to $99.5 million ($98.4 million) due to increases in income from acquisitions, offset by lost income from sales of non-core assets.

Profit before finance costs, property revaluations & tax increased 0.9% to $90.2 million ($89.4 million).

Profit before tax increased 44.1% to $120.4 million ($83.6 million), after allowing for the non-cash impact of interest rate swaps & property revaluations.

Gross distributable income increased 7.1% to $65.6 million ($61.3 million), equating to a 5.7% gain/share to 8.03c/share (7.6c/share).

Net distributable income increased 4.6% to 6.64c/share (6.35c/share).
Argosy’s debt levels, excluding capitalised borrowing costs, were 36.3% of total assets (36.7%).

Argosy Property results pages

Attribution: Company release.

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Argosy restructures debt

NZX-listed Argosy Property Ltd has restructured its syndicated bank facility with ANZ Bank NZ Ltd, Bank of NZ Ltd and Hongkong & Shanghai Banking Corp.

Chief executive Peter Mence said today:

  • The expiry of tranche A ($275 million) has been extended to 31 October 2021
  • Expiry of tranche B (also $275 million) remains at 30 September 2020
  • An additional tranche (tranche C) of $25 million has been added to the facility with an expiry date of 31 October 2021. The total facility is now $575 million.

As at 31 May, Argosy’s weighted average cost of debt, including line fees, margin & interest rate swaps, is expected to be about 5.1%/year and the weighted average debt expiry will be 3.9 years.

Attribution: Company release.

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Panuku to move to former IBM space on Wyndham St

Argosy Property Ltd has reached an agreement to lease 2657m² on the ground & first floors of the former IBM building at 82 Wyndham St in central Auckland to Auckland Council’s property arm, Panuku Development Auckland, which has been based at Westhaven.

The 9-year lease term will start in August and has a break clause (with penalty) at 6 years.

Long-term tenant Boffa Miskell occupies the top floor on a recently renewed lease, leaving one 1575m² floor still available. Argosy chief executive Peter Mence said yesterday the company had had good inquiry from marketing of the remaining floor, which will be available for occupation in 2018.

Argosy is completing an extensive $9 million refurbishment of the entire Wyndham St building to a minimum 4 green star built rating and is targeting a 4 star Nabers NZ energy efficiency rating.

Following the upgrade, Mr Mence said the building would provide very efficient, cost-effective space and an attractive working environment for tenants: “New services will include facilities to encourage cycling to work, an increase in the building’s fresh air supply, a smart lighting system linked to automatic blinds, a window film that improves solar conversion, a variable refrigerant flow air-conditioning system and the latest water-saving & metering systems to enable usage to be measured for Nabers NZ.

Panuku chief executive Roger MacDonald said one objective of the move was to be closer to the Auckland Council headquarters on Albert St: “Currently the Panuku offices at Pier 21 on Westhaven Drive are about 25 minutes away by foot.”

He said Panuku would make a number of long-term savings from moving into a refurbished building.

IBM has moved to 2 floors in the new Bayleys House at 30 Gaunt St in the Wynyard Quarter, behind Fonterra Group Ltd’s Fanshawe St premises and a block from the GridAKL innovation hub.

The Fonterra & Bayleys buildings are in the Wynyard Precinct Holdings Ltd portfolio held by a joint venture between the Goodman Property Trust & Singapore sovereign wealth fund GIC.

Attribution: Argosy & Panuku releases, Goodman website.

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Corrected: Argosy sells Dalgety Drive property to owner-occupier

Published 21 March 2017, yield detail added 22 March 2017
Argosy Property Ltd has disposed of the industrial property at 67 Dalgety Drive in Wiri for $6.85 million, which the company said was a 44% premium to its most recent book value.

The company did an interim revaluation of its portfolio last September, for the first time since 2009, and that valuation of $4.45 million put the passing yield at 8.38%. The sale price is 54% up on that. The building has a net lettable area of 3698m².

Chief executive Peter Mence said yesterday Argosy classified the property as non-core. The buyer is a private company which will operate from the site once the lease of the current tenant, RLA Polymers Ltd, expires on 31 March.

Attribution: Company release, calculator.

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Argosy says delayed quake insurance payout won’t hurt dividend

Argosy Property Ltd said on Friday it had a $50 million estimate of the cost of reinstating the quake-affected NZ Post House in Wellington, based on a preliminary scope of works.

The building at 7-27 Waterloo Quay sustained damage to building services in the 7.5-magnitude Kaikoura earthquake on 14 November 2016. Argosy chief executive Peter Mence said independent engineers had confirmed that the building remained structurally sound, but significant replacement of fitout & services was required. NZ Post has reoccupied the ground floor & 4 other levels.

Mr Mence expected the damage to the building services & fitout to levels 1-4 & 7 would be repaired during the next financial year. Argosy has lodged a claim for the reinstatement cost & associated loss of rents under its material damage & business interruption insurance policy (less a $4.8 million deductible).

Under New Zealand accounting standards, Argosy can’t include expected insurance proceeds in its financial results until the proceeds are quantified & agreed. Mr Mence said that if they weren’t included, the loss of rents for the current year would have a net after-tax impact of about $1.85 million, or 0.23c/share in the period to 31 March 2017.

“This will have no impact on the March 2017 full-year dividend, which as previously announced is expected to be 6.1c/share and be fully paid from net distributable income for the year.”

Attribution: Company release.

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Argosy sells land next to Albany Mega

Argosy Property Ltd has entered into an unconditional agreement to dispose of about 14,600m² of vacant land at 258 Oteha Valley Rd in Albany for $11.65 million.

The land sits next to the Argosy-owned Albany Lifestyle Centre (the Centre), a 25,000m² split-level bulky goods retail centre.

Chief executive Peter Mence said today settlement was expected to occur in late February.

Argosy has also extended the lease of the Mitre 10 Mega store in the Centre by a further 8.5 years, taking the expiry of this lease out to 2032. As part of the lease extension, Argosy has committed to spending $3.1 million to extend the existing Mitre 10 Mega store into the garden centre and provide about 405m² of extra retail space on the upper level of the Centre.

Attribution: Company release.

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Argosy settles Wiri purchase

Argosy Property Ltd has settled its acquisition of the industrial property at 240 Puhinui Rd, Wiri.

Chief executive Peter Mence said on Friday the new design/build property had identical design & specifications to the very high modern standard of the adjacent Argosy-owned property at 19 Nesdale Avenue.

Both properties are occupied by Cardinal Logistics Ltd, with matching 15-year leases in place.
Argosy signed to buy 240 Puhinui Rd in November 2015 for $22.6 million on completion of the new design/build facility for Cardinal.

Earlier story:
30 November 2015: Argosy buys twice in Wiri

Attribution: Company release.

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