Downer selling property to free up capital

Downer EDI has 22 properties in New Zealand for sale, including this one at Mt Maunganui.

Downer EDI Works, the listed national infrastructure business, is advertising 22 properties in a big sale-and-leaseback deal.

Cos Bruyn, Manukau-based chief executive, said Downer wanted to free up capital and get out of real estate so it could expand the business into new areas.

The diversified engineering and services group is offering to lease back its big works depots and provincial bases for 10 to 20 years, paying new owners so it can continue to operate from the same sites.

Downer will pay an annual rent on each property of from $12,000 to $1.17 million. It operates here as a subsidiary of the Australian business but is listed on NZX.

Six large regional depots are being advertised for sale by private treaty closing on November 26, to be leased for 20 years. They are the 2.4ha block at 645 Great South Rd in Penrose, 2.1ha in Hastings' Omahu Rd, 1.9ha in Hamilton's Manchester Place, 0.7ha on Mt Maunganui's Totara St, 3.4ha in New Plymouth's Devon Rd and 0.2ha on Main South Rd in Dunedin.

The other 16 properties will be leased on decade-long terms with four rights of renewal for five years. Those will be offered at two auctions.

Nine South Island properties will go under the hammer on November 25 at Dunedin's railway station. These are Balclutha, producing $42,195 annual rent, Gore $22,887, Invercargill $182,906, Lawrence $32,641, Lewis Pass $74,350, Lumsden $13,550, Palmerston $19,983, Te Anau $102,616 and Twizel $60,553.

Seven North Island properties will be sold at the Hilton Lake Taupo the next day. They are Gisborne, producing annual rent of $156,875, Hawera $79,090, Raetihi $29,989, Taumarunui $107,457, Thames $52,870, Wairoa $62,810 and Whangamomona $12,000.

Charles Cooper, Colliers International's Queen St-based national industrial director, said the agency had been involved in sale-and-leaseback deals this year for NZ Post, Fisher & Paykel Appliances and Farmlands.

Downer said its New Zealand business generated annual sales of $750 million-plus and that it had a large number of infrastructure and public works jobs.

In August, the Australian parent said it had delivered record annual earnings, secured new projects and extended and renewed contracts with clients. Last month, the Australian business raised A$150 million ($189 million) in a notes issue. More than 70 per cent of Downer's turnover here and in Australia comes from national, state and local government work.

Downer EDI is an ASX-listed top-100 company which issued guidance of net profit growth of about 5 per cent for 2009-10 and said solid opportunities should support strong demand for its services. The Australian business has annual revenue of A$5.9 billion, operating earnings of A$304.8 million and net after-tax profit of A$189.4 million.

In May, Downer EDI bought Australian Pavement Management Systems.

Also that month, Downer in New Zealand said it was pondering an initial public offering of fixed interest, unsubordinated, unsecured bonds maturing in September 2012. The issuer would be its wholly owned subsidiary Works Finance (NZ), it said. Nothing has been announced since.

Last month, Downer began a $2.7 million five-month project to reseal 70km of roads in the Far North but lost the Far North District Council's town maintenance and community services contract to the Takapuna-based Recreation Services.

Design and cost estimates on Whangarei's second harbour crossing and various state highway building and maintenance projects are also part of the firm's work here.

This month, Vodafone New Zealand signed a three-year national maintenance service contract with Downer EDI. The deal has a two-year right of renewal.