New NZX floats, big capital raising deals and high dividends are likely hallmarks of the NZX listed property sector this year.
Analysts Jeremy Simpson, Matthew Leach and Angus Simpson of Forsyth Barr yesterday issued an in-depth examination of the nine listed trusts and companies, recommending investors buy five and hold the rest because of good returns.
They expect a recovering real estate market and better returns than other businesses to drive this sector throughout the year.
But they say any new float will not come without problems.
"The challenge for new floats is that there is now increased attention by investors on the nature of management contract structures, given the preference for internalised management, and there is significantly higher scrutiny of management performance in the listed market," they said.
With available bank funding, very low interest rates and a keen appetite for yield by investors, they expect more capital raisings or possibly new property-related floats this year, they said.
The sector has special qualities that will see it continue to draw investors.
"The defensive quality of the sector's cash flows relative to the broader equity market also continues to appeal," they said.
But they warned against expecting big share or unit price jumps.
"Returns over the next 12 months are likely to be more centred on dividends rather than capital gains," they said.
Argosy Property, DNZ Property Fund and Precinct Properties NZ are their top picks.
Argosy is expanding its portfolio, has sold smaller assets and land and restructured its joint venture exposures, reducing its lease expiry risk.
DNZ is maintaining high occupancy rates, has an attractive weighted average lease term and already predicted solid dividend growth this year, the analysts said.
Precinct has a well-positioned portfolio of prime office assets and a strong balance sheet and the analysts said they were confident it could lease its vacant space because supply in Auckland and Wellington was tightening.