NZ & Aus Today E-Road announced it had completed its retail bookbuild. 1.5 million shares were taken up in the retail bookbuild by broker firms, with the remaining ~20 million shares being distributed to institutionals who sub-underwrote the offer. There was not a lot of demand. E-Road now trades at 70 cents (remember, prior to dilution, Volaris offered $1.30 per share for E-Road). As we have written before, this whole capital raise feels very much like a “poison pill” to disincentive Volaris/Constellation from purchasing the company outright. Not enough has been made in the NZ media of Constellation’s prodigious capital allocation skills. It is run by Mark Leonard, whose record at Constellation is perhaps rivaled by only Buffett. Here’s a chart:
It’s hard to disagree than E-Road would find a better home at a highly resourced, highly competent conglomerate rather than in its current position. Or at least, it’s a much harder path the company has embarked on as it stands. As of now the company continues to run at a loss, and shareholders may do well to wonder how fast that $50 million raised lasts for.
Little newsflow for the NZX. It is a quiet week and should remain so. ANZ is projecting house prices will now lift 4% over the second half of this year. This is up 1% from its previous forecast of 3%. In its latest Property Focus, the ANZ says house prices will rise at their current pace until autumn next year. Feels a little too optimistic.
Trucks > ANZ Bank’s heavy traffic index for August rebounded 6.2 percent on the month prior, after data from the previous month showed activity was threatening to fall into into recessionary territory. Meanwhile the light traffic index, often indicative of consumer demand, rose 1.6 percent month-on-month. Chief economist Sharon Zollner said volatility remained the theme of current economic data, with the light traffic index showing a mild upward trend. Good read-through for our favourite in the space, Mainfreight.
US
Here is a quote from a recent article. If you are a guessing person, try and guess what company is being referred to:
“In my 20 years, I can’t think of a tenant paying [so much] to give back space they don’t occupy,” said Matthew Saperia, analyst at Peel Hunt”
How much did they pay? £149mn. And who was the tennant? If you guessed Meta you’d be right. The company formerly known as Facebook recently paid £149mn to break the lease at 1 Triton Square in London. It never even moved in to the premises, despite owning the lease since 2021. The company has never relinquished close to 1 mn square ft of office space across Europe as it sees more employees working from home in a post-Covid environment. Echos what we are seeing across the board — commercial RE, long considered rock-solid, is experiencing a secular shift — companies are actively paying to get out of real estate leases. It’s worth noting working from home is primarily an American phenomenon and the exodus of workers from the office is too, and yet the effect is felt across the world — shares in UK listed British Land, which leased the space out to Meta, are down ~20% YTD. At this point – this far on from Covid – it feels like less of a short-term blip and more of a restructuring of how people work, and commercially focused REITs may be feeling the effect for some time to come. This is why we still find it hard to get excited about KPG, Precinct, etc at this point.. still too soon.
