Originally Posted by
Scrunch
It will be very interesting to see what this goes for. Back in March 2019 the estimated value was $207m at a 7.38% capitalisation rate (when 10-yr bonds were at 2%).
The current $170m value was done as at 31 March 2020 so may have been done or refined during NZ's level 4 lockdown. It was technically based on a 8.25% capitalisation rate, but would appear to be a rate nearer 10% based only on the net rentals of $17.0m quoted in the 2020 annual report presentation.
This $17.0m of net rental was up from $16.8m the year before with a quoted 100.0% occupancy, so the $37m valuation decline was based on stable vacancy and a slight increase in net rental. The valuer therefore looks to have applied significant conservatism within the valuation, which is arguably appropriate when valuing during a national lock-down.
Last time I checked a 8.25% rental on $170m was $14.0m/yr so the March2020 valuation appears to assume a $3m/yr loss of existing rental income and the applicable yield being higher than last yr (which would be appropriate if occupancy was collapsing). Stuff are quoting its nearly fully leased and potential net income of $16.7m so the valuer's negative assumptions don't appear to have come to pass.
I'm not sure exactly how valuers get their capitalisation rates, but I suspect there are links back to margins over government stock. If the applicable valuation was a repeat of March2019 but phrased as a 5.4% margin over 10-yr government bonds, the new capitalisation would be 6.0% (10-yr govt bonds are now 0.57%).
$16.7m/0.06 = $278m. While I'd be surprised if it went for quite this much, something well in excess of $170m is likely. There could be a high gain on sale in the Mar2021 full year report.
Disc holding.