23 Sep DNZ acquires Antipodean Supermarkets Portfolio
DNZ acquires Antipodean Supermarkets Portfolio, Undertakes Capital Raising and Increases Dividend Guidance. NOT FOR RELEASE OR DISTRIBUTION IN THE UNITED STATES – For immediate release. 23/09/2015
Acquisition of Antipodean Supermarkets Portfolio
DNZ Property Fund Limited (DNZ) advises that it has entered into an agreement with Antipodean Supermarkets Limited and Antipodean Properties Limited to acquire 19 large format retail assets properties for an aggregate purchase price of $287.0 million. All supermarkets are leased to General Distributors Limited, the operator of Countdown supermarkets in New Zealand and an ultimate subsidiary of Woolworths Limited, under terms ranging from 9 to 19 years remaining. The sale and purchase agreement is unconditional and settlement is expected to take place between 28 October and 12 November 2015. Transfers of three of the properties (having a total value of $33.9 million) are subject to third party consents. While these consents may not be available at the time of settlement of the transfer of the other properties, DNZ expects the consents to be obtained and the transfer of each to be completed within the following 12 months in accordance with the sale and purchase agreement.
The Antipodean portfolio highlights include:
- Nationwide portfolio of 19 large format retail assets in established catchment areas with exposure to the non-discretionary take-home food, packaged liquor and groceries sector;
- High quality tenant in General Distributors Limited, the operator of Countdown supermarkets in New Zealand and an ultimate subsidiary of Woolworths Limited, accounts for 96% of gross portfolio income;
- 100% occupancy;
- Long weighted average lease term (WALT) of 18 years;
- An initial yield of 6.5%;
- Dependable income streams, an aggregate of $18.7 million net passing yield, due to the long lease term and the creditworthiness of the tenant;
- Limited on-going incentives and associated re-leasing costs; and
- High creditworthy tenant and long-term WALT supports higher leverage at a lower cost of capital.
The Antipodean portfolio adds to DNZ’s investment portfolio and provides scale and opportunity for DNZ to grow its Real Estate Investment Management business. DNZ sees this portfolio as an opportunity to establish a new, specialist investment product with a higher than average leverage and income yield. DNZ will update the market at the appropriate time, if and when, a decision on this opportunity has been made.
DNZ Chairman Tim Storey said “It is rare in the New Zealand market to see a portfolio with the credit quality and weighted lease term that this acquisition provides. This is a strong investment and delivers our shareholders an increase in dividend. It provides DNZ with an opportunity to grow its Real Estate Investment Management business with a separate specialised investment product.”
DNZ Chief Executive Peter Alexander added “This portfolio complements DNZ’s existing $168 million portfolio of large format retail assets, which includes supermarkets, hardware outlets and a discount department store. We anticipate that the combined portfolio will deliver very reliable returns.”
DNZ intends to fund the acquisition through a mix of debt and equity funding, with an underwritten placement to eligible shareholders and investors to raise approximately $114 million commencing today. A trading halt has been sought from NZX and granted pending completion of the placement. In accordance with a waiver granted by NZX Regulation from Listing Rule 7.11.1 (which ordinarily requires that shares be allotted within five business days after the latest date on which applications close), shares allocated under the placement will be allotted on the settlement date of the placement. This is expected to take place on or about 7 October 2015.
Goldman Sachs New Zealand Limited has been appointed as sole lead manager, placement agent, bookrunner and underwriter for the placement.
The placement will be followed by a share purchase plan offer to New Zealand shareholders of up to $15,000 per shareholder to raise up to $15 million. The share purchase plan is not underwritten. The price payable for shares under the share purchase plan will be the lesser of the price paid by investors under the placement and the average end of day market price of the shares over the five business day period prior to the Closing Date. The record date to determine New Zealand holders eligible to participate in the share purchase plan is 5:00 p.m. (NZ time) on 2 October 2015, with the offer document to be distributed, and the offer expected to open, on or about 9 October 2015. The share purchase plan will be open for not less than 12 business days and is expected to close at 5:00 p.m. (NZ time) on 28 October 2015.
The balance of the $161.4 million funds required to complete the acquisition will be provided by bank debt from existing lenders on similar terms to current facilities.
DNZ expects that the acquisition will be accretive to distributable profit per share, by between 1.3% and 1.8%¹ in the first three full financial years.
FY16 Second Quarter Dividend and Increased Dividend Guidance
The Board of Directors has declared a cash dividend for the second quarter (1 July 2015 – 30 September 2015) of 2.625 cents per share. This dividend will be paid on 6 October 2015 with the record date being 5:00 p.m. (NZ time) on 1 October 2015. This dividend will carry imputation credits of 0.8746 cents per share. A supplementary dividend of 0.3969 cents per share will be paid to non-resident shareholders. This dividend is being paid earlier than it ordinarily would be, as it is intended that current shareholders should be the beneficiaries of distributable profit for the almost complete second quarter. The Dividend Reinvestment Plan remains suspended for this dividend.
DNZ has increased its guidance for the cash dividend for the full year to 31 March 2016 (FY16) from 10.50 cents per share to 10.75 cents per share, an increase of 0.25 cents per share. Additionally, DNZ is targeting a cash dividend of at least 11.25 cents per share for FY17, an increase of 4.7% on revised FY16 guidance. The next dividend payment after the dividend announced today is not scheduled to be paid until March 2016.
NZX Regulation has granted a waiver from Listing Rule 7.12.2 (which ordinarily requires that at least 10 business days’ notice of the record date for a dividend be given to NZX) for this dividend declared by the Board of Directors on the conditions that:
- the record date for the dividend is no less than six business days after the dividend is announced;
- the dividend is paid prior to the first allotment under the placement; and
- the implications of the waiver are disclosed in this announcement.
This waiver was sought so that the dividend can be payable only in respect of shares on issue prior to allotment of shares under the placement and so that payment can take place prior to that allotment. The implications of the waiver are that DNZ shareholders and other investors will receive less notice of the dividend than usual and any on-market sale or purchase of DNZ shares would need to take place before the Ex Date of 29 September 2015 in order to be recorded in the share register on the record date for the dividend.
DNZ is due to issue its interim report for the six months to 30 September 2015 on 12 November 2015. Year-to-date trading for the five months to the end of August 2015 is in line with DNZ’s expectations with:
- Net Property Income for the six month period to 30 September 2015 expected to be approximately $28 million; and
- Distributable Profit² for the six month period to 30 September 2015 expected to be in the range of $15.0 million to $15.6 million.
Real Estate Investment Management
DNZ is the manager of Diversified NZ Property Fund Limited, a wholesale property fund that owns approximately $118 million of properties throughout New Zealand. DNZ is in the process of restructuring that fund in consultation with its investors. This restructure is currently scheduled to complete by the end of calendar year 2015.
DNZ has signaled its intention to expand its Real Estate Investment Management business more broadly and is currently evaluating opportunities which could increase funds under management.
These opportunities are at a very early stage, are non-binding and there is no certainty that any transactions will take place or on what terms.
DNZ expects to update the market further later in this financial year when it expects to have more certainty regarding these new Real Estate Investment Management opportunities.
NorthWest Two Development
On 9 September 2015 DNZ provided an update to the market on the approximately $37 million development of NorthWest Two and the arbitration with Westgate Town Centre Limited (WTCL) regarding the size of one of the four NorthWest Two buildings. As already advised, WTCL has withdrawn its dispute about the validity of DNZ’s step-in and the parties have moved to arbitration on the aspect of design. If DNZ is unsuccessful at the arbitration, DNZ expects that it could incur additional construction costs to meet its timetable for building NorthWest Two. DNZ may also need to seek amendments to timing conditions in the relevant resource consent. The cost of this potential event remains unknown but it could impact the yield for NorthWest Two in the short term and could create an oversupply of office space at the Westgate Town Centre pending leasing of that additionally constructed space. However, DNZ remains confident that the current plans meet all relevant requirements, including those under the arrangement with WTCL, and that a commercially satisfactory position will be reached.
With effect from 25 September 2015, DNZ will change its name to Stride Property Limited and it will be listed on the NZX Main Board under the ticker code STR. All other details remain the same.
1. Based on underwritten capital raise price and would increase if the placement price increases.
2. Distributable Profit is a non-GAAP financial measure adopted by DNZ to assist DNZ and investors in assessing DNZ’s profit available for distribution. It is defined as net profit/(loss) before income tax adjusted for non-recurring and/or non-cash items and current tax. For a reconciliation of Distributable Profit for the year ended 31 March 2015 against net profit before income tax, see note 6 to DNZ’s financial statements for the year ended 31 March 2015.
Attachments provided to NZX:
For Further Information Please Contact:
Tim Storey, Chairman, DNZ Property Fund Limited
Mobile: 021 633 089 – Email: [email protected]
Peter Alexander, Chief Executive Officer, DNZ Property Fund Limited
DDI: 09 913 1154 – Mobile: 0275 443 678 – Email: [email protected]
Jennifer Whooley, Chief Financial Officer, DNZ Property Fund Limited
DDI: 09 913 1150 – Mobile: 021 536 406 – Email: jennifer.[email protected]
DNZ Property Fund Overview
DNZ Property Fund Limited (“DNZ”) owns one of New Zealand’s largest diversified investment property portfolios with $890.9 million (as at 31 August 2015) of commercial office, retail and industrial properties located in the main urban areas throughout New Zealand. As at 31 August 2015, DNZ owned 42 properties with 294 tenants, a weighted average lease term (WALT) of 5.3 years and an occupancy rate of 99.6% over a net lettable area of 338,504m².
DNZ Property Fund Limited is a Portfolio Investment Entity in which investors hold shares and is managed by its own internal management team. DNZ is also the manager of Diversified NZ Property Fund Limited, a $118.4 million (as at 31 March 2015) commercial property fund.
DNZ’s top 10 tenants as at 31 August 2015: Bunnings, Progressive Enterprises (Countdown), Foodstuffs (PAK’nSAVE & New World), ASB, NZ Government, The Warehouse, Fletcher Building, Westpac, Meridian and Lion. These 10 tenants represent 50% of DNZ’s total contract rental.