Investor Update March 2017

Investor
Update
MARCH 2017
IN THIS ISSUE
P.P.P.P.
1423
GREEN STAR
UPGRADE OF
82 WYNDHAM STREET
IN AUCKLAND
PORTFOLIO UPDATE
Key portfolio metrics and
performance figures
CEO COMMENT
Peter Mence provides
an insight into the
property market
OTHER
PORTFOLIO
NEWS
GREEN STAR UPGRADE OF
82 WYNDHAM STREET IN AUCKLAND
A
rgosy’s property at 82 Wyndham
Street in Auckland’s CBD is currently
undergoing a makeover, incorporating
Green Star and NABERSNZ ratings.
The four-level 6,199m
2
building, with three
levels of offices and basement parking was
constructed in the 1990s as part of the
redevelopment of a large block of land that
also included the old Farmers Department
store building, now the Heritage Hotel.
Argosy is taking the opportunity to undertake
a complete refurbishment of all the building’s
base services which will be upgraded to a
minimum 4 Green Star built rating, with a
4 Star NABERSNZ energy efficiency rating
also being sought.
New services will include:
• An “end of trip” facility to encourage cycling
to work with bike racks and showers.
• A Variable Refrigerant Flow (VRF) air
conditioning system with heat recovery
allowing for substantial energy savings in
partial-load conditions.
• An increase in the building’s cooling and
fresh air supply so it can cater for a density
of one person per eight square metres.
• A “smart” lighting system linked to
automatic blinds.
• All the latest water saving and recovery
services including metering to enable
usage to be measured for NABERSNZ.
“It’s one of the few buildings in its class in
the Auckland CBD with floor plates over
1,500m
2
and also provides an attractive
3.3 metre ceiling stud height, so it’s already
a very efficient building,” says Argosy asset
manager Saatyesh Bhana. “Adding these new
green services means we will end up with a
good quality, very energy efficient A Grade
building which will provide great value for
money for tenants.
“A 4 Green Star built rating is very good for
an existing building however this will be
reviewed during the construction process
and, if it is feasible, we will upgrade to a
5 Star built rating as we have done with other
recent Argosy refurbishments projects, such
as at Te Puni Ko
-
kiri House in Wellington.
Saatyesh says tenants often don’t understand
the difference between a design and a built
Green rating. A high design rating is often used
to assist with tenant commitment to long-term
leases before the project commences.
“However, it doesn’t necessarily mean that
the design standards are actually achieved.
Commitment to a built rating, which is
independently verified by the New Zealand
Green Building Council after project
completion, gives occupants assurance that
what the landlord says will be built is what
is delivered.”
Saatyesh says NABERSNZ is a useful tool
for an owner to understand how energy is
used in a building and to be able to improve
its performance. “By using this information,
energy-management strategies can be
instigated to make operational
improvements and reduce energy
consumption, which is what we will be
doing at 82 Wyndham Street.”

People
Kay McGoram, Argosy’s longest serving
property manager, is about to say goodbye
to the Argosy team as she heads off on her
retirement. Kay was first introduced to the
world of property management when she
was recruited by Waltus Investments in 2002
to manage the Trafalgar Square Centre in
Whanganui. Since then, Kay has seen many
changes to the business and for the past
10 years has been working at Argosy’s head
office in Auckland.
Kay says “the time has come for me to retire
from a most exciting position where one
never knows what is about to occur from one
day to the next. I have experienced many
interesting incidents, including a burglar
being locked in one of the retail centres while
being tracked down by Police dogs where he
was found hiding behind a food outlet counter
and a cyclone at the Albany Mega Centre
which tore off roofing leaving Pink Batts
strewn around the site like pink snow.
I have had the good fortune to deal with
great tenants and contractors as well as the
awesome team at Argosy. Thank you for a
wild ride!”
Puhinui Road
Acquisition
Argosy recently settled the acquisition of the
brand new A Grade industrial property at
240 Puhinui Road in Wiri, Auckland. The new
design/build property has the identical
design and specifications to the very high,
modern standard of the adjacent Argosy
owned property at 19 Nesdale Avenue.
Both properties are occupied by Cardinal
Logistics, with matching 15 year leases
in place.
Cardinal Logistics, a 100% New Zealand
owned and operated business and one of
Argosy’s largest tenants, now occupy more
than 38,000 square metres of net lettable
area across the two properties.
KAY MCGORAM
PROPERTY MANAGER
SNAPSHOTCEO COMMENTSNAPSHOT
T
he year ahead looks fairly bright for
New Zealand property vehicles as
the industry continues to respond to
an economy that looks to be solid and
better diversified than it has for a number
of economic cycles.
The New Zealand dollar, at a more modest
level relative to our trading partners, is
providing a small tail wind to international
earnings. Tourism continues to grow and in
the international context New Zealand is a
relatively better place to visit than other
destinations. Dairy is recovering, albeit from
what may have been an unsustainable low
base, and the “knowledge economy” has
scored some very creditable goals over the
last few years. The potential for increased
protectionism in the US and Great Britain’s
exit from the European Union may have
some future benefit to New Zealand as trade
relationships settle to the new normal.
Looking at the expected economic moves
in the years ahead, we can see increased
funding costs for business and probably an
end to the recent firming capitalisation rate
trend. That is not to say that capitalisation
rates will necessarily soften significantly, but
that stabilisation will be an end to the
firming trend of recent years.
This stability will mean that increased costs
of construction, compliance and probably
also land prices will necessarily be passed
on to occupiers, in the form of increased
rentals. The changes in banking security and
liquidity requirements too are likely to see
decreased availability and increased costs of
debt. In addition to the upward influence on
development and construction costs, this
decreased access to funding is likely to reduce
the number of developers and developments
that are presenting stock to the market.
With the domestic economy expected to grow
respectably during the year ahead it should
also be expected that the amount of new space
that the economy needs will continue to grow
also. Net absorption should continue to be
positive and at fairly solid levels.
While the above all bodes well for the real
estate investment market and rental growth
has been both eagerly awaited and constrained
by the firming capitalisation rate cycle, there is
also a threshold of affordability for businesses
which has the potential to limit achievable
rental growth. In a normal cycle this would be
balanced by the quality and location range
available in the market, however at this point
the firming capitalisation rates over an
extended period have created quality
expectations and stock volume restrictions
that have potential to create issues. It is
possible that some businesses will find that
they are unable to meet the occupancy costs of
their planned expansion, particularly in lightly
capitalised retail businesses, which would
likely also be affected by a slower housing
market eroding the perceived opulence from
growth in house values.

PETER MENCE
CHIEF EXECUTIVE OFFICER
Rental growth
on the horizon?
Leasing Update
Leasing activity in the portfolio has
remained very busy, especially in the lead up
to Christmas which is often seen as a quiet
time in the leasing market. Argosy
announced that it successfully leased the
entire 1,150 square metres of previously
vacant space across two levels at 308 Great
South Road in Greenlane, Auckland to
Housing New Zealand until mid-2020. This
space had been fully refurbished following
the relocation of Pacific Brands to Argosy’s
neighbouring building. We also announced
that the entire 11,675 square metres of
warehouse space at 320 Ti Rakau Drive has
been leased to Target International NZ
Limited and Gunnersen Limited, each for
10-year lease terms
As at 31 January 2017, 2.9% of the portfolio’s
leases (by rental income) were due to expire by
the end of the financial year. Good progress is
being made on releasing this space, including
the 4,154 square metres of office space at
82 Wyndham Street in Auckland City that has
recently been vacated by IBM New Zealand.
We hope to be able to report some positive
outcomes for this space in the very near future.

Argosy’s Commitment to the Community
2017 Investor Roadshow
OTHER PORTFOLIO NEWS
As part of Argosy’s commitment to corporate
social responsibility, we have made the pledge
that “Argosy will actively engage with the
communities in which we operate.” In 2013,
Argosy identified surf life saving as an
excellent charity to partner with as we
recognise the contribution that lifeguards
provide in keeping us and our loved ones safe
in the water each year.
Since then Argosy has held a very successful
relationship with the Red Beach Surf Life
Saving Club.
This year Argosy has decided to extend its
social responsibility programme and is
seeking to identify three further surf life
saving clubs around New Zealand to assist.
We are currently busy identifying clubs
around the country with worthwhile projects
and will provide further information on the
initiative in the 2017 Annual Report.
Argosy is also proud to sponsor two teenagers
to participate in the 10-day development
voyage on the Spirit of New Zealand, through
the Spirit of Adventure Trust. This
development programme has been building
generations of young kiwis with confidence,
resilience and self-esteem since 1972. Argosy
is extremely happy to be supporting this
programme, especially as NZ Ministry of Youth
Research has found that too many young
people are arriving at adulthood ill-prepared
to contribute productively as citizens of
New Zealand and as future employees.
Further information about the Trust can be
found at www.spiritofadventure.org.nz.
Snickel Lane –
Auckland’s
Exciting New
Eating Experience
Progress on Argosy’s new retail offering
known as Snickel Lane is going well with a
launch date expected to be during April 2017.
Tucked in between Fort Lane and Commerce
Street in Auckland City, Snickel Lane is a
brand new shared eating experience, catering
for those who work and play in the city.
With it’s all weather design, free Wi-Fi and
a cluster of innovative cafés and restaurants
it’ll be the perfect place to escape the
hustle and bustle of the CBD and to catch
up with friends!
A new website will be launching very soon
detailing the retailers and their respective
menus at www.snickellane.co.nz.
Argosy’s investor roadshow will be held
from late May through to mid-June 2017
after the annual results have been released.
Senior management will tour the length of
the country to present Argosy’s 2017 annual
financial results and provide an update on
strategy and recent activity within the
portfolio. We encourage you to take the
opportunity to attend and catch up with
members of the management team.
The roadshow venues and dates are listed
below. Look out for an invitation to the
event which will contain further
information either in your inbox or post box
and let us know if you would like to attend.
LocationDate
WellingtonMonday 29 May
MastertonTuesday 30 May
Palmerston NorthTuesday 30 May
New PlymouthWednesday 31 May
TaurangaThursday 1 June
HamiltonThursday 1 June
AucklandFriday 2 June
NapierWednesday 7 June
WhangareiFriday 9 June
InvercargillTuesday 13 June
DunedinTuesday 13 June
ChristchurchWednesday 14 June
NelsonThursday 15 June

TOTAL PORTFOLIO VALUE
BY SECTOR
PORTFOLIO MIX


21% Retail
39% Office
40% Industrial

88% Core
9% Value Add properties
3% Properties and land to divest
TOTAL PORTFOLIO VALUE
BY REGION

68% Auckland
26% Wellington
6% North Island regional
and South Island
$1.43b
PORTFOLIO
OCCUPANCY
98.9%
5.36yrs
PROPERTIES
65
TENANTS
186
WA LT
Total portfolio value of
$1.43 billion
Occupancy (by rent) of 98.9%Weighted average lease term
of 5.36 years
IMPORTANT DATES
QUARTER 3 DIVIDEND PAYMENT
30 March 2017
ANNUAL RESULTS ANNOUNCEMENT
25 May 2017
QUARTER 4 DIVIDEND PAYMENT
September 2017
QUARTER 1 (FY18) DIVIDEND PAYMENT
December 2017
CONTACT
t/ 0800 653 653 t/ +64 9 304 3400
f/ +64 9 302 0996
39 Market Place, Auckland 1010,
PO Box 90214, Victoria Street West,
Auckland 1142, New Zealand
www.argosy.co.nz
REGISTRAR
To find out about more about your
investment, please contact Computershare:
t/ +64 9 488 8777 f/ +64 9 488 8787
enquiry@computershare.co.nz
www.computershare.com/InvestorCentre
Dividend
The THIRD QUARTER DIVIDEND for the
2017 financial year of 1.525 cents per
share, with imputation credits of
0.427459 cents per share attached, will
be paid on 30 March 2017, with the
record date being 16 March 2017.
As indicated by the Board last year,
a dividend of 6.10 cents per share is
expected to continue for the year to
31 March 2017.
PORTFOLIO UPDATE AS AT 31 JANUARY 2017