StockTalk

KPG announced today they will start paying dividends on a quarterly basis staring 21 September 2022.

https://www.nzx.com/announcements/397867

Puts them on the same footing as Precinct and Argosy. Could attract a few more retiree investors.

Market seems to like the idea. 

Quote from: Arbroath on Aug 30, 2022, 12:29 PMPuts them on the same footing as Precinct and Argosy. Could attract a few more retiree investors.

I bought a few yesterday cum dividend.  The main thing that attracted me was the yield and the new quarterly payments.  Works out to 8.5% gross for 33% taxpayers.  Not expecting anything value add to come from their proposed divestment or building programs and not expecting the discount to theoretical NTA to close either.  Just a diversification of my strategy to find what is hopefully, sustainable yield.  Small position < 2%.

Quote from: Basil on Sep 02, 2022, 01:13 PMI bought a few yesterday cum dividend.  The main thing that attracted me ...

Have you changed your mind on management?  Or, do you think this will govern the share price performance less significantly?

I am still pissed that they stopped divvies when everyone panicked about a flu that went around.

Quote from: arekaywhy on Sep 02, 2022, 01:46 PMHave you changed your mind on management?  Or, do you think this will govern the share price performance less significantly?

I am still pissed that they stopped divvies when everyone panicked about a flu that went around.

No not really and you are right to be annoyed because they came out of that okay and management still paid themselves very handsomely. The shift to quarterly dividends is the first truly shareholder centric thing I have seen them do in years.  Maybe I am a little bit hopeful that they actually care about looking after shareholders or maybe I am delusional and they still place all other stakeholders including all things ESG on an equal level ?  Time will tell.

I think they will muddle along and I will collect what for me on a 33% tax rate is the equivalent of an 8.5% gross yield.  Those hoping for a meaningful closing of the gap to the theoretical NTA are probably going to be disappointed.  My thesis, (which is not a strong one), is there should be at pretty good chance the current dividend is sustainable going forward and I will simply collect 8.5% gross and they will make a lot of noise about this that and the other, none of which in my opinion is likely to be eps accretive to shareholders.  Maybe with less Covid assistance to tenant's, earnings, dividends and the share price can go up a bit in FY24 ?  Not expecting anything wonderful in terms of capital gains, (if any).  It's simply a yield thing for me in my semi-retirement.
I think you can tell that this is not a high conviction position for me LOL

Quote from: arekaywhy on Sep 02, 2022, 01:46 PMHave you changed your mind on management?..........

I had a similar thought. 😆

The fundamentals haven't really changed much (yet) but the minor shift to be more shareholder friendly is welcoming. Perhaps more to come? But the share price has been hanging around the low end for the past 6 months compared to the years prior. Also in line with the general sharemarket sentiment around the world. And with that a reasonably high dividend yield now paid quarterly makes it a bit more attractive as an income providing stock.

An impressive looking presentation from KPG today.

https://www.kiwiproperty.com/corporate/investor-centre/#our_announcements

(6 Sept 2022)

http://nzx-prod-s7fsd7f98s.s3-website-ap-southeast-2.amazonaws.com/attachments/KPG/398429/378590.pdf

Conditional sale of Northlands property for $160m.
Anyone know what the carrying value is as at last balance date.  I had a brief look at the accounts and they don;t make it that obvious.  Maybe in the fine print somewhere ?

Properties held for sale were on Balance sheet at $207m - included Northlands and land sold to Ikea

5 The fair value at 31 March 2021 includes The Plaza, Northlands and 50% of Centre Place North and an adjoining property. The 50% share of Centre Place North and adjoining
property was disposed of as part ofthe Centre Place North Joint Venture transaction referred to above. The Plaza has been reclassified to the other properties asset class above
as it is no longer being actively marketed for sale. The fair value at 31 March 2022 includes Northlands and certain adjoining properties located at Sylvia Park in relation to the
sale of land to IKEA. Northlands is carried at the value determined by external valuation and the IKEA adjoining properties are carried at contract price.

Thanks Poet.  Forgive me, what was the IKEA sale price ?  From very vague memory something in the late $20'sm ?

P.S. Just reviewed 5 news items about the sale and price wasn't mentioned once.

Official news release didn't mention price either
http://nzx-prod-s7fsd7f98s.s3-website-ap-southeast-2.amazonaws.com/attachments/KPG/384028/360912.pdf

As you suggested elsewhere today I think Northlands has been sold at a discount to its currently held value as if it was sold at a profit the news release would have included the usual self-congratulatory back slapping.  That said the discount could be at a lower rate than the share price is to theoretical NTA so maybe some positive reaction when analysts crunch their numbers ?

You have to "love" how opaque they have been about this...

Quote from: Basil on Sep 07, 2022, 05:20 PMThanks Poet.  Forgive me, what was the IKEA sale price ?  From very vague memory something in the late $20'sm ?

P.S. Just reviewed 5 news items about the sale and price wasn't mentioned once.

I'm not sure sorry

QuoteI think it is fair to say the purchasers of Northlands got a good deal, with an asset that was priced at a very high yield north of 12% (Northlands had $19.1m in operating income in 2019) - in return for the seismic risk inherent with any Christchurch property.

Kiwi took a loss on book value with that sale price - although it looks a lot better with that $23m worth of the unspent seismic insurance payout that they are keeping LEK.

Posted somewhere else.
I struggle to get my head around managements execution of their shift in strategy.  Yeah,  I get what they are trying to do but if in the execution process they're selling quality assets at a 12% yield and reinvesting those funds in their new buildings at somewhere around half that yield It's very dubious this adds value in the medium term.

If in the process of execution, they destroy income like this I wonder if management have lost sight of their real purpose (to maximise income to shareholders).  One wonders if they have ever really known this is their purpose with their endless ESG posturing and extremely regular references to other stakeholders ?

If the cost to execute their strategy remains like this one wonders if in doing deals with other parties to develop Drury, management aren't going to get shareholders "run over" by third parties far smarter than management are ?

I'm in for the 8.5% yield for a while, how long I cannot say because over the long run management have a VERY poor track record of adding value and every other listed property company has outperformed them over the long run.  Maybe "this time its different"...but I heard one expert on CNBC this morning say that phrase is the most dangerous one known to many in terms of potential capital destruction in investment circles.

Time will tell...but I am not adding to my very modest 1.7% position.

I still find it immensely bothersome that they will commit money to BTR on the expectation of ~5% yield when they could buy their own shares back and receive more than that plus NTA accretion. The current discount to NTA is immense, so clearly they expect big valuation uplifts/synergies on their adjacent properties from adding these BTR developments. A buyback would deliver instant low risk gains to both EPS and NTA, compared to these inherently risky development projects with return rates built upon assumptions applying to decades of future operations. Do you trust management to make predictions 10, 20, 30 years into the future?

I had hoped the Northlands sale announcement would lift the share price a bit closer to NTA, but as it seems they are going to throw it all at BTR/Drury I guess that isn't going to happen. Only sticking around for the dividend, even that is tenuous...

Paywalled  https://www.nzherald.co.nz/business/why-would-kiwi-property-sell-northlands-at-papanui-for-87m-less-than-2019-valuation/E6OAYBDRJP3MH6OX6HVYITLT2A/  I think its crystal clear who got the better end of the deal.

My view on the discount to NTA is that its really an illusion and the discount is "apparent" in nature only and realistically not realizable in the current market.
If KPG was to try and liquidate other assets they'd probably get a similar outcome.
Anyone who thinks they can sell their office assets into a new J.V. fund at book value or very close to that in the current market is probably kidding themselves.

Same applies to OCA with many of their assets compromised by lack of adequate return on many of their older care focused facilities giving a woefully inadequate ROI.

At least with KPG you get a decent quarterly return.

Craig's have dropped target price to neutral $1.02

As highlighted below KPG last traded at a P/NTA of 70% (sector avg. 77%) and 12 month forward cash yield of 5.6% (sector avg. 4.0%). Although KPG screens inexpensively relative to the NZLPV sector, it needs to prove up its ability to divest lower quality assets and reinvest into its development pipeline, including its build to rent opportunities. Having last traded ($1.02) in line with our updated target price we maintain our rating of Neutral

Craigs analysis seems fair to me.  Net yield of 5.6% has its attractions, (which is why I bought a very modest stake), but anyone expecting great things as they re-jig their portfolio might like to reconsider their expectations.

Ah well now they have been in the high 80s for a while Friday  did you bag a few or is it still knife juggling territory  ;) who knows 

Sitting tight through this ugly and painful process.  Probably another rough quarter coming up I reckon.  US REIT's index down 12% in the Sept quarter so declines in this sector are not specific to N.Z.  If she gets down to 85 cents I might put my hand up for a few more.  Same applies to ARG at $1.10.  Disinclined to buy more unless these or ARG get to those extreme bargain level's.  US Federal Reserve tried to start their QT (quantitative tightening) process this week and they have trillions of bonds to sell.  First attempted auction of 5 year treasuries was an abject failure, hardly any buyers.

Its far from clear how high interest rates could go and the effect on interest rate sensitive shares is really an unknown.

I am not convinced this is a good time to deploy cash reserves into risk assets and I think the S&P 500 could be headed for 3,000 and NZX50 for 10,000.
This Bear is for real and its claws and teeth are BIG and SHARP.  I'm doing my best to minimize how badly its biting and clawing me (September really hurt).  Staying in my kennel with plenty of wounds to lick.

Decided to put my hand up for a few more at the close yesterday at 86 cents.  My thinking here is that another quarterly 1.425 cps tax free, (these are a PIE) divvy is due before Christmas and seeing as I have a fair bit of money on call that will earn me stuff all between now and then I have somewhat creatively taken the forthcoming divvy off my purchase price to arrive at a net price of 86-1.425 = 84.575 cps...(yes I know this is creative accounting 101 but ask me if I care lol)

Anyway...I don't think the end of the world is coming for retail, so I am basically buying 2023 income of a minimum of 5.7 cents per share, (hope they pay a bit more) which on a net effective price of 84.575 = 5.7 / 84.575 = 6.74% net.  For 33% taxpayers like me that the same as 6.74 / 0.67 = 10.06% Gross.

10% is the magic gross yield that drove this top up.  That and the discount to revised NTA 84.575 / $1.32 = 36% discount to very latest valuation.

The dividend is great no doubt about that. I still question the motivations behind investing all this money in build to rent. They reckon it will generate ~5% yield or something similar from memory, plus there will likely be some immediate capital gain vs the construction price to the apartments themselves and Sylvia park. But I wonder, assuming NTA is accurate, they can buy KPG shares for $0.86 each and get $1.32 of assets - an immediate 53% gain. AND those same shares yield well over 5%. Either NTA is bogus, I am missing part of the picture, or management are more interested in endless capital recycling than producing shareholder value.

I think you make a fair point Plata, especially about the fact that they could in theory make a 53.49% gain buying back their own units.  I have very little doubt about the veracity of their latest valuations, but I think the market is concerned by their "Magpie" approach to obtaining shiny new things when there is quite obviously a better way to build shareholder value buying their own shares back.  It's not like their development margin is 53% is it !
While a forecast 5% yield might have been satisfactory a year ago on a new project it certainly isn't now!

Some more realism and shareholders centric focus at the board level wouldn't go amiss instead of their endless ESG grandstanding and annunciations regarding other stakeholder interests. 

you could make the same criticism of all the property stocks as they are all trading well south of their NTAs.  Hard to manage a longer-term strategy though if whenever the stock trades at a discount you stop projects to buy your own stock...

Buy-backs are limited under NZX rules to 5% of a company's shares in any one 12 month period.
In exceptional circumstances, like what exists now I think it's incumbent upon the directors to ask what is the best use of our cash resources to drive shareholder value accretion ?  There are discounts to NTA and then there are extreme discounts to NTA, we're in the latter situation in regard to KPG.  I believe one of the listed property stocks has already announced a buy-back, sorry forget which one.

Investore are doing a 5% buyback...it's a fair point at 35% discount to NTA Kiwi could buy back 5% for about $65-70m and their gearing would only rise from 33% to 35% but NTA would rise about 3c to $1.35.

PFI is also doing a buyback.

Yield apparently over 10% now as share price collapses

must be BUY OF THE CENTURY

even if it is a case of averaging down big time - make them all cheaper as many must be looking at capital losses right now

I can not stop myself to top up

Quote from: winner (n) on Oct 17, 2022, 03:32 PMYield apparently over 10% now as share price collapses

must be BUY OF THE CENTURY

even if it is a case of averaging down big time - make them all cheaper as many must be looking at capital losses right now

Probably a good thing I was out today.  Doubt I would have been able to resist buying more at 82 cents.
How low can it go for goodness sake ?

(AS OF LAST FULL YEAR) Northlands contributes nearly $20 million to net rental income. The loss of this income reduces NRI by 11% from $180 to $160 million. I don't know what net rental income actually means exactly (what expenses is it net of?), but lets say that hypothetically all of this decrease is reflected in AFFO, taking AFFO from ~$100 million to ~$80 million. That takes AFFO per share from 6.36 cents to 5.1 cents. Basically what I'm wondering is, is this price action a combination of market conditions (bond yields rising etc) AND movement to reflect increased risk of dividend cuts.

I think the market is saying we have little confidence that your plans to recycle capital from Northlands (which had an incredible yield of 12%) into new projects with a much lower yield is value accretive to shareholders.

Market also appears to have little confidence that they can execute on their strategy to sell half their office assets into a JV company that KPG will manage and also appears to be skeptical that anything they do with Drury will add value.

Not going to get too big in these no matter what the yield.  Other companies' management have earned my respect...this one...the directors have a huge task to convince me they know what they're doing.  I only bought for the yield.

KPG
03/11/2022 11:02
GENERAL
NOT PRICE SENSITIVE
REL: 1102 HRS Kiwi Property Group Limited

GENERAL: KPG: Kiwi Property secures Drury private plan change

Kiwi Property today advised that its Drury private plan change application
has been approved by the Environment Court. The company's 53-hectare Drury
site will now be re-zoned as a metropolitan town centre, providing the
ability to be intensified up to a height of 72 metres.

Kiwi Property GM Development, Ian Passau, said the successful outcome would
unlock a range of exciting opportunities and enable the company to move
forward with its plans to create a sustainable mixed-use community south of
Auckland, over time.

"Drury is expected to become home to around 60,000 people in the next 30
years, providing a unique opportunity to build a city from the ground up.
Today's ruling confirms Kiwi Property's site as the location for the future
town centre and a nexus for development in the area over the coming decades.

"The successful plan change outcome will help generate value and enable us to
move forward with stage one earthworks. We're looking forward to developing a
thriving community where people from across the region will live, work, play
and stay."

ENDS

Always good to print 'robust operating results' and 'driving long term shareholder returns'

And just look at that AFFO - up 36% on pcp

http://nzx-prod-s7fsd7f98s.s3-websit...115/384458.pdf

and the pretty pictures version

http://nzx-prod-s7fsd7f98s.s3-websit...115/384459.pdf

Yes the payout ratio of AFFO (adjusted funds from operations) is only 69% but still gives a gross yield of 9.3% (for 33% taxpayers).  That and the 40 cent discount (30.5%) to NTA means as far as I am concerned its a sound hold for yield.  One would hope their development activities at Drury and Sylvia park will be value and income accretive.  http://nzx-prod-s7fsd7f98s.s3-website-ap-southeast-2.amazonaws.com/attachments/KPG/403115/384459.pdf
I always prefer the "pretty pictures" version Winner, especially when it's a Hallenstein Glassons report or website 😁
Ex divvy date is 5 December so get in quick if you want your December dividend payable 21 December.

Now since MR B has bought some mroe ARG and apparently the Seat of GOVT MINT is going to be shifted to wait for it .... long pause like in the ART channel programs for artist of the year ...

and the WINNER issss ...... HAMILTON!!!!!

https://www.stuff.co.nz/national/300771434/why-wellington-should-no-longer-be-the-capital-of-new-zealand

and this is just one of many articles over the last 5 years on this subject.

Now imagine if it actually happend and all those departments suddenly had to leave wellington and relocate to a  ..... HAMILTON!!!!

which company has the connection in the town of Hamilton along with IWI to suddenly put up some new buildings to house the relocated buuuueeerockracy....

or will the GOVT realise it cant possible relocate as the town is far to small.....

will this be the moment an ACT government lists all government departments on the stock market .....

..........playing the long game.....

it obvious KIWI will be in the box seat to house the GOVT of New Zealand in ..... wait for it ...

HAMILTON.......

and in 20 years time the long suffering shareholders of KIP will be rewarded .... possible sooner if the rattles keep coming...

You have to love companies like KPG which remain resilient through a potential future downturn, and position it for growth in the period that follows."

Cool stuff

And don't forget 4 divies a year

http://nzx-prod-s7fsd7f98s.s3-website-ap-southeast-2.amazonaws.com/attachments/KPG/405701/387401.pdf

Good to see Kiwi tenants growing their sales so much over the last few years (up 26% from 2019) ......but Shareholders getting less dividends than a few years ago

Doesn't seem fair

Suppose management salaries have increased quite a lot in same period as well.

Quote from: winner (n) on Jan 24, 2023, 09:15 AMGood to see Kiwi tenants growing their sales so much over the last few years (up 26% from 2019) ......but Shareholders getting less dividends than a few years ago

Doesn't seem fair

Suppose management salaries have increased quite a lot in same period as well.

The note, tucked away at the very end, is a bit cute. This release relates only to their "mixed-use shopping centres" (Sylvia Park, LynnMall, Te Awa) and excludes "large format retail"  (Northlands, The Plaza and Centre Place.)  They say this is in order to have, "consistency with Kiwi Property's FY22 annual and FY23 interim reporting treatment,"  which the uncharitable might unpack in to two words: cherry picking. I wonder what those "large format retail" stats look like by comparison?

One only tells good stories Hector ...you know the ones that give management the warm fuzzies

Almost seems an ego trip to me

Nice to know though

Quote from: winner (n) on Jan 24, 2023, 09:41 AMOne only tells good stories Hector ...you know the ones that give management the warm fuzzies

Almost seems an ego trip to me

Nice to know though

Yup, everyone loves a good yarn.  The note also states, "Sales information is based on data obtained from third parties or estimated by Kiwi Property where this data is unavailable. Sales information has not been independently verified."  That's not a very scientific sounding set of data for their story.  Third party sources and estimates (aka guesses) maybe the story writer was tabloid press trained?  Perhaps they could add a few related comments from Twitter to future announcements too.

who ever bought back in NOV and backup the truck wil be happen.. chart looks pretty good now ...

Over many years there has been a reasonably strong correlation between KPG share price and 10 year govt stock.

Right know the share price is on the trend line / line of best fit

Believe that and KPG is 'fairly priced'

Spooky eh

Yes but WINNER() everyone on CNBC has been saying that for months, years..

But this week the local COMP PROPS did a strange thing...

They Rallied with huge rebalancing volumns...

Maybe only less than 12 months left at these Bargain prices...

Unless the government taxes the hell out of the Polis...

draining the money from SHAZ and retail... that could cause a recession along with HIGH rates and that hard lands the economy..

The Govt is stuck between a Rock and an East Coast flood plain.....

Credentials of the two new directors appointed, look good to me. https://www.nzx.com/announcements/410034

Today's result seems satisfactory.
Dividend guidance remains at 5.7 cps which is a little bit disappointing although not unexpected given the increase in their interest costs.
9.5% gross yield.  I hold a few for the yield. 
http://nzx-prod-s7fsd7f98s.s3-website-ap-southeast-2.amazonaws.com/attachments/KPG/411747/394737.pdf

YES, hallelujah, at last - I have just heard from watching Q&A on TV1, the first National election policy announcement from Chris Bishop, Housing spokesperson that presents a serious attempt to address long term housing affordability.

It involves forcing councils with a billion $ money pot incentive to rezone land outside their current residential zones to residential status to force down the cost of house sections to within a reasonable multiple of a mortgage borrower's income.

This policy will see more new townships like Drury and Pokeno spring up in the Auck-Hamilton-Tauranga triangle where there is ample land available but where councils are currently frozen in the headlights and unwilling to address re-zoning.

I see KPG as a front runner in these new township developments with their experience with developing Drury, along with others like ARG & GMT.

It may be a reversal of previous policy but who cares if it addresses the fundamental issue of land unaffordability, especially for young people who need houses.

 Sing it out!!!

https://www.youtube.com/watch?v=aplWTXEcY70

Just a reminder that today is the last day KPG trades cum dividend and that they have reinstated their DRP which enables shareholders to get a 2% discount and for the number of shares to grow on a quarterly compounding basis.  Not made clear by the company without looking at the distribution notice is that the election notice for participation in the scheme, to be effective for this dividend must be filed with Link Market Services on or before 8 June 2023.
You'll need to update your preference electronically on Link's website or use the form here
https://kp-wordpress.s3.ap-southeast-2.amazonaws.com/wp-content/uploads/sites/11/Kiwi-Property-DRP-Booklet-20231.pdf

Based on my calculations, (taking off the near term 1.425 cps dividend for FY23 Q4 and treating this as a partial return of the purchase price), at 91 cents less 1.425 cps = net capital invested per share 89.548 cps, the 5.7 cps forecast for FY24 gives a net of tax paid PIE yield of 6.365%.
To a 33% taxpayer this is worth 6.365 / 0.67 = 9.5% gross. (Worth 10.43% gross to a 39% taxpayer).
If you take shares in lieu of dividend this grows to 9.5 / 0.98 = 9.694% forecast gross FY24 yield. (Worth 10.64% gross to a 39% taxpayer)

I really can't say with any degree of confidence one way or the other whether I think their current projects will be value add or otherwise, but that sort of yield from property investment is very good so I hold some solely for that reason.  I think most property classes are more closely aligned than many suspect and will move up and down with the winds of economic change and interest rates.  Decent discount to current NTA of 26% is also noted but unlikely to close much until they can prove their current projects are eps accretive, in my opinion.  KPG management and directors have a huge amount of work to do to prove to shareholders they can grow earnings per share, in my opinion.  Until otherwise proven, I think this is best viewed as a no growth company with very good yield based on the current share price.  Maybe as interest rates go down in the next 2-3 years, shareholders will be impressed enough with the above yields, the share price will move up a bit?  I suppose while enjoying these yields we can live in cautious hope...

http://nzx-prod-s7fsd7f98s.s3-website-ap-southeast-2.amazonaws.com/attachments/KPG/412772/396174.pdf

Looking like a good trading stock ... 600 day MOV AVE is huumm  1.069296096

Quote from: Waltzing on Jun 08, 2023, 07:49 PMLooking like a good trading stock ... 600 day MOV AVE is huumm  1.069296096

It's also a good long term buy/hold, income investment stock, trading well under NTA with compelling gross dividends, paid quarterly with DRP as well.

As the economy bottoms, property bottoms and comes back into favour, which it will, we might look back on the attractive long term discount these property plays are presenting, right now. A compelling shift in their investment strategy and long term build profile is encouraging as well, I like them a lot.

Definitely worth having a balanced % of portfolio. Not trading these, happy to hold for as long as they're making bank.

Price for KPG back in  ...  price today ....

someone pass the TUI.....    No capital growth in the SP since they built  DJOSER

wonder how much the fees of management have increased...

 https://en.wikipedia.org/wiki/Pyramid_of_Djoser

https://www.kiwiproperty.com/corporate/property/56-the-terrace/
http://nzx-prod-s7fsd7f98s.s3-website-ap-southeast-2.amazonaws.com/attachments/KPG/412772/396174.pdf
Selling prime central Wellington property fully leased to the Govt for a whopping 13.5% discount to 31 March 2023 valuation. 
Hmmm    I hope these guys know what they are doing.
There's a lot of pretty pictures in their annual reports over the years and the word growth is spread liberally in every report you care to read so you'd be expecting that would be reflected in their distributions, right ?
So let's have a look over the last 10 years and see how all this growth talk has manifested itself into improved returns for shareholders from 2014 to 2023
6.4 cps, 6.5 cps, 6.6 cps, 6.75 cps, 6.85 cps, 6.95 cps, 3.53 cps, 5.15 cps, 5.6 cps, 5.7 cps.  Forecast for FY24 is 5.7 cps.  Wow, that's quite some track record.
I think its best take all their talk of growth with a pinch of salt.  It's a no growth stock with a good yield based on the current share price and let's just hope the dividend payouts don't decline further.
Disc: I have a pretty decent sized stake held for yield.

crickey Mr Beagle I was thinking the same thing, 13.5% discount to the already  recently reduced value on the March books.
But do remember they are trading at a 30% discount to NAV

So Basil, kpg a good yielding stock ...ideal for punters who wish for a regular income ......possibly a lot of retirees amongst that lot.

So if one bought 100,000 shares in KPG for this purpose in 2014 they would have got $6,400 to spend ......but this year they're only getting $5,700 ..ouch

Using your favourite inflation calculator that $6,400 in 2014 needs to $8,000 if it had kept up with inflation

So can't buy as many things as one used to with your KPG divie

From Morningstar data a $100 invested in KPG in mid 2014 is now worth $93.67 .....that's TSR with all dividends reinvested.

Not much of an invested ......and that's not inflation adjusted

Quote from: winner (n) on Jun 09, 2023, 12:57 PMSo Basil, kpg a good yielding stock ...ideal for punters who wish for a regular income ......possibly a lot of retirees amongst that lot.

So if one bought 100,000 shares in KPG for this purpose in 2014 they would have got $6,400 to spend ......but this year they're only getting $5,700 ..ouch

Using your favourite inflation calculator that $6,400 in 2014 needs to $8,000 if it had kept up with inflation

So can't buy as many things as one used to with your KPG divie

Go back another decade to 2004 and they paid 8.57 cps in dividends.
Can you understand why I can't stomach attending the annual meeting and hearing all their talk about growth ?  No brand of anti-nausea tablets would be strong enough.   Just as well it's going to be different going forward...or is it ?

Quote from: winner (n) on Jun 09, 2023, 12:57 PMSo Basil, kpg a good yielding stock ...ideal for punters who wish for a regular income ......possibly a lot of retirees amongst that lot.

So if one bought 100,000 shares in KPG for this purpose in 2014 they would have got $6,400 to spend ......but this year they're only getting $5,700 ..ouch

Using your favourite inflation calculator that $6,400 in 2014 needs to $8,000 if it had kept up with inflation

So can't buy as many things as one used to with your KPG divie

Which is a good thing. Remember - Adrian Orr wants us to spend less!

Quote from: winner (n) on Jun 09, 2023, 01:08 PMFrom Morningstar data a $1,000 invested in KPG in mid 2014 is now worth $93.67 .....that's TSR with all dividends reinvested.

Not much of an invested ......and that's not inflation adjusted

Are you sure, you got the decimal point in the right place? Sometimes small things can make big differences :) ;

Quote from: BlackPeter on Jun 09, 2023, 03:36 PMAre you sure, you got the decimal point in the right place? Sometimes small things can make big differences :) ;

decimal point in right place ...just too many 0s and an unnecessary comma

$100 to $93.67

Thanks for correcting me

Just how much rstoration work is needed on DJOSER...

Kiwi Property turns Sylvia Park into '20 minute city'

https://www.stuff.co.nz/business/pro...20-minute-city

http://nzx-prod-s7fsd7f98s.s3-website-ap-southeast-2.amazonaws.com/attachments/KPG/413805/397286.pdf

Growth in dividends in the future.  Hmmm....I'll believe that when I see it.  In the meantime, the 9.5% gross yield for 33% taxpayers is probably as good a place to hide in this recession as most other places.

Good AGM today. I am pleased that I ask them about whether they benefit from the increased sales of their retailers, and not just from base rents- which it turns out that they do. The answer was that the contract includes:

1) Base rent
2) An annual Increase
3) A metric to benefit from increase sales

It does not seem to be something that they publicize.

They have had a rough run, having seen some real damage to shareholder returns, even if it was not entirely their fault ($250,000,000 spent on seismic strenghting of buildings, with zero return, as well as the Covid trend to move from offices to WFH).

It looks like they have some good long-term prospects, but I think it will be a few years until the economic climate truley changes and they see any significant increase to their share price.

YEEEeees...

SP last seen in 2001.... amazing...

Quote from: Waltzing on Jun 28, 2023, 12:24 PMYEEEeees...

SP last seen in 2001.... amazing...

You're kidding .....must be a losers stock if true

Great divie though

Oh !  ok shall we try and load the data then? havnt tried to load that many stock prices on an SP before..

are there enough rows? or will have to split the Query up into years..

great what?

Quote from: Alekhine on Jun 28, 2023, 12:08 PMGood AGM today. I am pleased that I ask them about whether they benefit from the increased sales of their retailers, and not just from base rents- which it turns out that they do. The answer was that the contract includes:

1) Base rent
2) An annual Increase
3) A metric to benefit from increase sales

It does not seem to be something that they publicize.

They have had a rough run, having seen some real damage to shareholder returns, even if it was not entirely their fault ($250,000,000 spent on seismic strenghting of buildings, with zero return, as well as the Covid trend to move from offices to WFH).

It looks like they have some good long-term prospects, but I think it will be a few years until the economic climate truley changes and they see any significant increase to their share price.

Welcome to the forum, an excellent first post.

Quote from: Waltzing on Jun 28, 2023, 12:24 PMYEEEeees...

SP last seen in 2001.... amazing...

Actually Jan 2000 according to Google, and that's as far back as Google goes.  What on earth happened to it?

Not alone though, Argosy is at its 2004 share price.   Boy, you really dont invest in the NZX for capital growth do you?

Jeee ....  KW.... i dont think we are supposed to have noticed... does it say something about management and that they dont think anyone is noticing....

all those incentive packages... well havnt actually checked if they have them but they are probably there as think GMT has them..

think you will find that 2001 sept had a 88 or something. Havnt loaded the data tables with a date that far back....as i dont think its supported..

Quote from: KW on Jun 28, 2023, 03:05 PMActually Jan 2000 according to Google, and that's as far back as Google goes.  What on earth happened to it?

Not alone though, Argosy is at its 2004 share price.   Boy, you really dont invest in the NZX for capital growth do you?

Well, actually - you do. The trick is to buy cyclicals at their respective lows (something like now) and sell them some years later before they lose too much of their cyclical gains.

Predicting the cycles of REITS, btw - is pretty easy: When interest rates are high, REITS are cheap. when interest rates are low, REITS are dear.

Amazing thing is - you don't even need to do a lot of TA. Just look into the newspaper to check what the RB does to the interest rates.

Discl: Currently buying REITS :) ;

Quote from: BlackPeter on Jun 28, 2023, 05:24 PMWell, actually - you do. The trick is to buy cyclicals at their respective lows (something like now) and sell them some years later before they lose too much of their cyclical gains.

Predicting the cycles of REITS, btw - is pretty easy: When interest rates are high, REITS are cheap. I interest rates are low, REITS are dear.

Amazing thing is - you don't even need to do a lot of TA. Just look into the newspaper to check what the RB does to the interest rates.

Discl: Currently buying REITS :) ;

Yup, I had a 5 year run of owning AREITs where I made 30% pa.  Those were the days  ;D
I'm thinking of doing it again too, just to lock in a decent income stream at high yields.  Cap gains a bonus.

Quote from: KW on Jun 28, 2023, 06:06 PMYup, I had a 5 year run of owning AREITs where I made 30% pa.  Those were the days  ;D
I'm thinking of doing it again too, just to lock in a decent income stream at high yields.  Cap gains a bonus.

KPG has completely revised their strategic direction, which in plain english translates to a development profile that is ambitious and sets up a whole new revenue stream, in a different market ... think Drury, but it's still property.

Though it will take a few years to realise and expand, it is a growth strategy, this in itself is different for the company, and I think they have the nous and expertise to make it work. That's the gamble on growth that an investor in KPG has to factor into their assessment of them as a part of their portfolio.

They are also a very large property company with recurring revenues on an established long term asset base. With pricing power. This part is already known, and has returned decent dividends for investors for a long time, but has never been seriously re-rated by the market for the growth that it has achieved.

You might say KPG has always been a good buy for income, but has never realised significant capital gains on their share price. It may be some time, perhaps longer than those with short or even medium term horizons (even though handsomely rewarded in the meantime), that KPG finally is recognised for it's return on assets and capital value re-rated.

They have a lot of shares on issue as well, and I'd prefer that their ambition is not encumbered by further capital raises, which has been a factor in suppressing their share price. Growth funded by profit, great, even if it reduces the returns to shareholder on income.

In any event, whether a re-rate ever occurs or not, that's probably not the reason many investors have a position in the first place, it would just be an unrealisable bonus to have a re-rated SP as realising that by selling would of course cut-off the purpose of holding the stock for income.

Anyway, this is most certainly not and has never been an attractive capital traders stock, it is and can only be attractive to income investors. That might change but for the foreseeable future it most likely won't change and that's alright with me. I'm happy to park a sensible % of portfolio into KPG and at this time use the recently re-instated DRP to grow my holding.

If the time ever comes that the market re-rates, maybe then I'll consider whether the capital gains vastly exceed the earnings (like 'x' years earnings), at which time I might consider just quitting it and taking the capital gain and forego the earnings.

Honestly, KPG is the absolute least worry of my portfolio, it does what it's always done and one day, with the new strategy, it might present some incremental value that I had not expected when I bought it. Then and only then, I'll have to consider my position and make a decision whether to remain an investor, or not.

Focus on the SP is, at this point and in the past, folly, except getting a good entry or accumulation price, for the projected returns. It has never been a SP market play. It may be one day, but it's not now and has really never been. This belongs in your solid foundation income earner portion of a portfolio. Nothing more, nothing less.

Any other expectations lead to disappointment.

Quote from: KW on Jun 28, 2023, 06:06 PMYup, I had a 5 year run of owning AREITs where I made 30% pa.  Those were the days  ;D
I'm thinking of doing it again too, just to lock in a decent income stream at high yields.  Cap gains a bonus.

Can't speak for Australian REIT's but if you can nick some of these at 88 cents that's 6.48% tax free PIE income and if you take the DRP that rises to 6.48 / 0.98 = 6.612% Net, worth the equivalent of 9.87% gross to 33% taxpayers and 10.84% to 39% taxpayers.
Not too shabby but probably best not to hold your breath waiting for the dividends to grow  ;)

Its probably timely here to mention the difference between a REIT and a property company.  Its my understanding that KPG converted from a trust structure to a corporate one some time back.  Trusts have to pay out their operational earnings in order to retain their tax free status, so dividends are pretty much guaranteed.  Whereas a corporate property company can cut the dividend whenever it likes and use the money for development purposes (so not guaranteed).  

In Australia the AREITs get round this by maintaining a stapled structure - you get one Trust share and one Corporate share.  The Trust pays out the dividends from rents, the corporate does the development work and pays out when there are profits.  

In a time when no one has confidence in the economy will it be only the instos that buy this stuff as the retail investor heads for TD's

Interesting day for volume.  5m crossed this morning at 90 cents and total volume for the day of 6.8 million.

Intso's likely not the average mum and dad SHAZ... GMT up in VOL and its been repeating for a few months including the rebalancing.

The doyen of the investing world Fraser Hunter at Chris Lee and Partners thinks KPG a good bet

In terms of preference, KPG and ARG are beginning to look attractive, offering a significant discount to NTA and an appealing dividend yield, provided they can maintain it. On the other hand, GMT, PFI, and VHP, though quality operators with strong outlooks, are trading at valuations and yields that suggest an overly optimistic future. Investors with large or outsized positions in these companies might consider trimming their holdings.

https://www.chrislee.co.nz/taking-stock

Quote from: winner (n) on Jul 01, 2023, 09:44 AMThe doyen of the investing world Fraser Hunter at Chris Lee and Partners thinks KPG a good bet

In terms of preference, KPG and ARG are beginning to look attractive, offering a significant discount to NTA and an appealing dividend yield, provided they can maintain it. On the other hand, GMT, PFI, and VHP, though quality operators with strong outlooks, are trading at valuations and yields that suggest an overly optimistic future. Investors with large or outsized positions in these companies might consider trimming their holdings.

https://www.chrislee.co.nz/taking-stock

Good article, worth a read for anyone with property sector exposure or looking at opportunities. Was interesting that he touched on the healthcare property sector but consider there to be only one company, VHP which amongst other things provides aged care facilities. I would've thought the commentary to be better balanced had he included all the listed RV's.

Back to KPG, he also said

QuoteThe outlook for the retail sector is mixed, with rents and occupancy rates tied to retail sales, which can be vulnerable in a recession. However, KPG trades at one of the highest discounts to asset backing in the sector, suggesting a potential further significant fall in property values. Despite the risks, KPG stands to benefit from long-term population growth in the Auckland region, which should underpin future success. Long-term development projects have proven successful in other regions and can weather most business cycles due to their ability to adjust development speed based on demand.

QuoteIn terms of debt issuance across the property sector, the biggest issuers are GMT, KPG and PCT. GMT ($100m) and KPG ($125m) have bonds maturing later in the year. Both were issued at a 4% yield which, based on current rates, could potentially be re re-issued above 7%. GMT, KPG, PCT, IPL & PFI all have bond issues maturing in 2024.

QuoteOne risk facing the shareholders in the sector is that of a discounted capital raising. KPG, IPL, SPG and VHP appear the most at risk due to their high committed gearing levels, the sectors they operate in and their sensitivity to cap rate rises or valuation falls which could put their covenants at risk.
Capital raises at such a big discount to NTA would be a bad result for investors, so it would not be a surprise for companies to try to avoid this via the sale of properties (as KPG announced recently) or capital management strategies (discounted DRP's).

Quote from: winner (n) on Jul 01, 2023, 09:44 AMThe doyen of the investing world Fraser Hunter at Chris Lee and Partners thinks KPG a good bet

In terms of preference, KPG and ARG are beginning to look attractive, offering a significant discount to NTA and an appealing dividend yield, provided they can maintain it. On the other hand, GMT, PFI, and VHP, though quality operators with strong outlooks, are trading at valuations and yields that suggest an overly optimistic future. Investors with large or outsized positions in these companies might consider trimming their holdings.

https://www.chrislee.co.nz/taking-stock

Thanks for sharing.  I think the article is on the money. I hold both and no other REIT or retirement village company as in my view the yields on all the others don't justify holding them.  The performance of all asset classes in the property sector tend to be pretty strongly correlated, (notice how commercial property, residential property, REIT's and retirement village companies are all depressed), so you might as well own property stocks that pay you a decent 6-6.5% tax paid yield.  By stark contrast the yields in the retirement sector are 2.3-4.1% before tax, worth 1.5% - 2.7% after tax to 33% taxpayers.

Quote from: Buzz on Jul 01, 2023, 10:23 AMGood article, worth a read for anyone with property sector exposure or looking at opportunities. Was interesting that he touched on the healthcare property sector but consider there to be only one company, VHP which amongst other things provides aged care facilities. I would've thought the commentary to be better balanced had he included all the listed RV's.

Bit difficult to get a 'balanced commentary' by including all RVs

Listed property and RV different business models ......listed property make decent profits (before revaluations) which enable event dividends whereas RV hardly make  any profit if not losses before revaluations so in general never really comparing apples to apples.

One reason why yields across sector that Basil pointed out are so different

Quote from: winner (n) on Jul 01, 2023, 12:34 PMBit difficult to get a 'balanced commentary' by including all RVs

Listed property and RV different business models ......listed property make decent profits (before revaluations) which enable event dividends whereas RV hardly make  any profit if not losses before revaluations so in general never really comparing apples to apples.

One reason why yields across sector that Basil pointed out are so different

If he had explained that, as you have, as the reason he omitted the other RV's from his 'property market' assessment, that would have imo been more balanced commentary. Anyway, just a thought as I suspect many investors consider RV's as property investments; which can be seen in how the RV SP's have moved with the physical property market and other property equities.

Good to see he thinks there's some potential with KPG, I've been accumulating over the past 6 months or so adding to a holding I've had for a while now.

According to the experts on this stock its going to hit the "After Burners"...

It has put in a triple bottom over the last 12 months....

it could be a case of OCA

occasionally Accumulate?

Depends on  can those towns make some money?

or are the management of this company just the same old bunch of round the room with the same old song....

https://www.youtube.com/watch?v=FqtttbbYfSM

No SP growth since when?

Is this where the demand for the new developments? If so then KPG may be on to a new income stream along with FBU.

Only the big players can survive the down turns and keep calm and carry on building houses..

https://www.stuff.co.nz/business/opinion-analysis/300940803/heres-why-house-prices-will-rise-again-and-soon

 Hope it wasnt good vege patch land .... oh well its progress ...

https://www.nzherald.co.nz/business/the-front-page-why-drury-east-is-already-thinking-decades-into-the-future/ZBZ3WDI7YRHI3HLENSESDMWO7M/

can always green the roofs ...

Quote from: Whome on May 28, 2023, 10:41 AMYES, hallelujah, at last - I have just heard from watching Q&A on TV1, the first National election policy announcement from Chris Bishop, Housing spokesperson that presents a serious attempt to address long term housing affordability.

It involves forcing councils with a billion $ money pot incentive to rezone land outside their current residential zones to residential status to force down the cost of house sections to within a reasonable multiple of a mortgage borrower's income.

This policy will see more new townships like Drury and Pokeno spring up in the Auck-Hamilton-Tauranga triangle where there is ample land available but where councils are currently frozen in the headlights and unwilling to address re-zoning.

I see KPG as a front runner in these new township developments with their experience with developing Drury, along with others like ARG & GMT.

It may be a reversal of previous policy but who cares if it addresses the fundamental issue of land unaffordability, especially for young people who need houses.

Wouldn't it be more of a hallelujah for young people and families if National stuck to their original bi-partisan agreement to do this stuff in brownfields areas close to where these people work and where the jobs will be?
Council forecasts that the vast majority of job creation in the next 20 years will occur on the central isthmus:
https://www.aucklandcouncil.govt.nz/plans-projects-policies-reports-bylaws/our-plans-strategies/auckland-plan/transport-access/Documents/map-8-ta-access-to-jobs-public-transport.pdf

Sounds more like a hallelujah for retired boomers squatting on villas in the commuter belt who are acting like the troll under the bridge stopping anyone from building more houses around them (and incidentally where all the existing & proposed amenity is & will be).
We're spending $5b on an underground rail loop that will underserve Auckland because militant NIMBYs stand in the way of intensifying central suburbs.

Unless you think young families like the idea of commuting hours in each direction daily and never seeing their kids.  If Greenfields is such a great idea it should be the oldies who rave about it as the answer shipping further out and making way for the current net taxpayers in this country.

Mt Eden should have a height limit of 72m well before Drury.

I tend to agree with you Whacc about Auckland, however just take a look at the dedicated township that Sleepyhead are building between Rangiriri and Huntly. Waikato Regional Council opposed and held up development of that for years.

The Fisher & Paykel Healthcare move to Karaka will enable huge expansion of that company's facilities and the development of relevant surrounding infrastructure. Neither of these would have happened if they waited for politicians to decide, local or central govt. It is election time so no better time to get a politician to hop on board.

Large companies like FPH have the ability to grow the export receipts that NZ needs and other NZ companies need to be encouraged to follow their lead. The Central Auckland isthmus has high land prices and restrictive regulations that discourage large company development so it makes sense to go greenfield development.

There will be jobs created in central Auckland as a result of this move but they will be support roles to the main developments, such as IT.

By the way, the 'hallelujah' font did come out a bit bigger than planned.

Well yeah, it makes sense in those instances because there is a defined & distinct large employer building housing with their employees in mind.  The benefit is those employees get to live close to where they work.
They are isolated examples.
Why can't we have a thriving metropolis?  Just one?

That isn't what National is proposing.
It's a little rich to say IT & WFH people can just move out there.

You & I both know that's not the intent here and it won't be the outcome either.
The soundbites (repeated by you in your original post) all centre on it being an appropriate solution for young people/families and those in lower socio-economic demographics.  They are, by-&-large, not typically IT professionals or in similar vocations.
It's a policy that is shamelessly substituting greenfield for intensification in brownfield locations (where all the infrastructure, amenity & transport links are) to placate & sop to the NIMBY vote.

The likes of Sleepyhead and FPH are isolated.
There are less than a handful of employers in this country capable, let alone willing, to establish their own towns.
Most are and will be reliant upon support services from other industries.  That's why we have cities.
A better analogy is Pokeno, Flatbush, Swanson or Silverdale. 
People who advocate for greenfield over brownfield rarely venture out to see how this is playing out already.

In Ormiston/Flatbush we have unbridled sprawl with limited amenities.
Rows and rows of housing without even so much as a dairy for kilometres.  Provisioning of infrastructure and public transport becomes a nightmare.
People are beholden to their cars to do anything and will continue to be for decades.

If it was greenfields & brownfields and the greenfields included provisioning for more intense amenity (a.l.a. Hobsonville) then I wouldn't be so cynical. 
But it isn't, it's a sop to the NIMBY vote.  Bishop & Willis sold out their principles.

Quote from: Whome on Aug 09, 2023, 10:31 AMThe Central Auckland isthmus has high land prices and restrictive regulations that discourage large company development so it makes sense to go greenfield development.

The "restrictive regulations" are a solvable problem.
We had a solution that everyone agreed with and National walked away from it.

Land prices are high because it's desirable.  More people want to be there.
It's a market signal - our market is broken because we put restrictions in the way of these signals.

We live in, what I assumed was, a free market. 
But the two parties that I've always placed faith in to uphold free market ideals are the ones most prominently advocating for retaining restrictions.
The 'libertarian' party, whose founding principles I associated strongest with, is the worst of the lot.
We've been strangled by and humoured NIMBYs for far too long in this country.  It has to come to an end.  There is no veto right over private property owned by others.  If you want to stop development on your neighbour's property then bloody buy it yourself.

Yes the town close to the factory ... well that was https://en.wikipedia.org/wiki/Bournville

still going strong today...

KPG could well be the new town builder.

"a free market. "

no such thing today as societies have regulated markets and even if you list all market facing GOVT ministries on markets you would need an army of auditors.. and open new courts to deal with the fall out.

Not that the model might not work.

KPG doing something that may well be the "way of the future" from a previously well tried model from the past..

https://www.youtube.com/watch?v=4_Pbx9mvWPY

Nationals plan to stop depreciation on commercial properties is going to have an impact on all the Reits.

Sold most of mine some time ago.

Quote from: Shareguy on Aug 30, 2023, 12:12 PMNationals plan to stop depreciation on commercial properties is going to have an impact on all the Reits.

Sold most of mine some time ago.

In practice though won't the only effect on kpg be that we will get fully imputed dividends rather than partially imputed ones?
So kpg pays more tax and shareholders pay less.

Yes but depreciation acts as a 'tax shelter' by reducing the taxable income of investors is how I see it.. Good news for residential property though in that Labour's gradual reduction in interest deductibility  to zero will be stopped from next year, also with full deductibility back in place after 3 years.  Adds up to about $5000 to $6500 per property on average according to my accountant.

Nicola Willis said

In 2025, interest deductibility will lift to 75 percent, and by 1 July 2026, interest deductibility will be fully restored." She said the party would also bring the bright line test back to two years.

 Well thats the reason for the HIT...

https://www.nzherald.co.nz/business/market-close-property-stocks-dive-after-national-swings-axe-on-depreciation-tax-breaks/RYOWMIEERRGP3GU7OG7JLTIWU4/

Elsewhere, LaserEyeKiwi referred to the impact of MMP and post election negotiations with other parties eg ACT may provide a 'reason' to reverse this stated policy.

Wait and see....

Yes does MS W know a profit and loss from a property lease...

Its all just numbers right?

That one is an ACT Vote winner? and business asks whats next ?

Depreciation ? you cant touch this?

https://www.youtube.com/watch?v=otCpCn0l4Wo

Depreciation is not a "tax break".  Calling it that is disingenuous given it is a legitimate business expense.

Quote from: Ferg on Aug 31, 2023, 08:39 AMDepreciation is not a "tax break".  Calling it that is disingenuous given it is a legitimate business expense.

I couldn't agree more.  To suggest that buildings never wear out and require replacing is contemptuous.
2% per annum suggests buildings should last 50 years, many don't.

Quote from: Basil on Aug 31, 2023, 09:44 AMI couldn't agree more.  To suggest that buildings never wear out and require replacing is contemptuous.
2% per annum suggests buildings should last 50 years, many don't.

...and a Herald article this morning almost saying there could be a few ghettos around the place one day in the future

KPG build to rent not affected is it?

https://www.nzherald.co.nz/business/election-2023-property-council-hits-out-at-policy-proposals-to-remove-depreciation/TZOG4LGOONFJVDCBJN4R4ZG2MI/

Build to rent not affected?  Good question, it would seem not from that article.  Further as that article points out the treatment has been very inconsistent over the years.

Nevertheless, dealing with what's right in front of us now as I have some ARG and KPG I calculate the following effect of removal of the right to claim depreciation.
KPG eps reduces 0.24 cps, suppose you could say fair value reduced about 2.4 cps capitalising that at a PE of 10.
ARG eps reduces 0.32 cps, fair value reduced 3.2 cps.

This assumes they don't recover any of this from tenants over time through increased rent.

"Thanks" National, I really "needed" to swallow that dead rat after what has already been a tough month in the market.  That said, I'd rather they get in because another 3 years of a Labour led coalition of chaos will be extremely bad for the N.Z. economy and the quantity of dead rats that involves me swallowing is a frightening prospect to contemplate.

Quote from: Basil on Aug 31, 2023, 10:16 AMBuild to rent not affected?  Good question, it would seem not from that article.  Further as that article points out the treatment has been very inconsistent over the years.

Nevertheless, dealing with what's right in front of us now as I have some ARG and KPG I calculate the following effect of removal of the right to claim depreciation.
KPG eps reduces 0.24 cps, suppose you could say fair value reduced about 2.4 cps capitalising that at a PE of 10.
ARG eps reduces 0.32 cps, fair value reduced 3.2 cps.

This assumes they don't recover any of this from tenants over time through increased rent.

"Thanks" National, I really "needed" to swallow that dead rat after what has already been a tough month in the market.  That said, I'd rather they get in because another 3 years of a Labour led coalition of chaos will be extremely bad for the N.Z. economy and the quantity of dead rats that involves me swallowing is a frightening prospect to contemplate.

Yes agree, Labour had already stated they were going to remove it. So that's it I guess.

Some pushback to the proposals in mainstream media too:

Property Council hits out at policy proposals to remove depreciation

https://www.nzherald.co.nz/business/election-2023-property-council-hits-out-at-policy-proposals-to-remove-depreciation/TZOG4LGOONFJVDCBJN4R4ZG2MI/

They must be assuming that capital gains out weight the need for depreciation and maybe some brilliant economist with one of those amazing theories that dont involve any accounting suggested that its no longer needed...

forget the accounting and just model the market ..

The amazing capital gain model will allow the balance sheet to absorb the extra debt required to be carried for R&M or are profits to be cut and shareholders take the hit...

if thats the case it bail from these stocks and just trade them for peanuts...

There are better destressed assets out there to invest in.. heck second hand car auction houses would be a better bet..

Ze visdom (below)

Quote from: Basil on Aug 31, 2023, 10:16 AMNevertheless, dealing with what's right in front of us now as I have some ARG and KPG I calculate the following effect of removal of the right to claim depreciation.
KPG eps reduces 0.24 cps, suppose you could say fair value reduced about 2.4 cps capitalising that at a PE of 10.
ARG eps reduces 0.32 cps, fair value reduced 3.2 cps.

This assumes they don't recover any of this from tenants over time through increased rent.

Ze calculated effect on 'annual earnings per share' vrom removing depreciation (depreciation and number of shares on issue from respective 2023 Annual Reports)

KPG: (0.28)x $13,539,000/ 1,571,171,548 = 0.24cps

ARG: (0.28) $9,597,000/ 846,723,985 = 0.32cps

RB

It almost a capital gains tax charged per annum.

Just called a tax Loop hole... right... now National hasnt got anyone that understands the basics of accounting..

Shes a lawyer right?  Perhaps ACT should now be considered the only party that is PRO business after all.

What is next on the chopping block to get elected..

Yeah you'd think with Chris Luzon's background he would understand that planes wear out and aircraft hangers and other buildings do too. I guess it shows what a terrible state N.Z. Inc's books are in that they have to resort to "creative" measures like this.  Cancelling depreciation on a building under the guise they are closing a loophole is no different to the spin we got out of "Spindy". 

Quote from: Red Baron on Sep 01, 2023, 09:08 AMZe calculated effect on 'annual earnings per share' vrom removing depreciation (depreciation and number of shares on issue from  2023 Annual Report)

KPG: (0.28)x $13,539,000/ 1,571,171,548 = 0.24cps

RB

It ztrikes me that the $13,539,000 figure listed as 'depreciation', under the zection 2.3 'Tax Expense' in the Annual Report, eez actually already an 'adjustment for depreciation', as it appears under the sub-header 'Adjusted for'.   This vould imply the full depreciation annual expense, assuming a tax rate of 28%, eez:

$13,539,000/0.28 = $48,353,571

That in turn means the Nat/Lab 'tax grab' disallowing depreciation applied to the FY2023 rezult, vould have reduced 2023 profit by:
$13,539,000/ 1,571,171,548 = 0.86cps

It also meanz the ongoing effect of such a policy, using a PE of 10, vould nominally reduce the value of each KPG share by 8.6c, not 2.4c as advocated by Bazil.

Thoughtz?

RB

Heh, "Spindy"

Yeah a civilisation in decline will faff about with how they tax the proles and find new and cleverer ways to make sure people are paying the correct tax to the 5th decimal place...

Truely strong societies don't worry about that, rather, they will look at how we can make more stuff to sell

Yes well said...

it smacks of the french revolution... stoked by forces that want to take Utu ...

Cant imagine Chris L will find the property CEO's back slapping him on this one...

Quote from: Red Baron on Sep 02, 2023, 11:21 AMIt ztrikes me that the $13,539,000 figure listed as 'depreciation', under the zection 2.3 'Tax Expense' in the Annual Report, eez actually already an 'adjustment for depreciation', as it appears under the sub-header 'Adjusted for'.   This vould imply the full depreciation annual expense, assuming a tax rate of 28%, eez:

$13,539,000/0.28 = $48,353,571

That in turn means the Nat/Lab 'tax grab' disallowing depreciation applied to the FY2023 rezult, vould have reduced 2023 profit by:
$13,539,000/ 1,571,171,548 = 0.86cps

It also meanz the ongoing effect of such a policy, using a PE of 10, vould nominally reduce the value of each KPG share by 8.6c, not 2.4c as advocated by Bazil.

Thoughtz?

RB

I think you are right.......Beagle is normally accurate with his posts.
Reality is this just a capital gains tax on commercial property investments dressed up.
Unfortunately it appears it will be implemented whether National or Labour get in.
Hate to say it but given the sort of people who generally own commercial property investments one could also consider it a wealth tax as well.
Expect a rerate lower to KPG shares......82cps on the cards

Quote from: snapiti on Sep 04, 2023, 05:34 PMI think you are right.......Beagle is normally accurate with his posts.
Reality is this just a capital gains tax on commercial property investments dressed up.
Unfortunately it appears it will be implemented whether National or Labour get in.
Hate to say it but given the sort of people who generally own commercial property investments one could also consider it a wealth tax as well.
Expect a rerate lower to KPG shares......82cps on the cards

As you say, both parties will implement it but maybe Act will reign in National to some degree so gives me a reason to party vote Act for a change

Managed to squeeze in a proper review of this into my hectic schedule today.  Disappointed my effort last week with a quick 2-minute back on an envelope review is incorrect and sad to say I can confirm Red Barron's calculations are correct.

Haven't got as far as fully assessing whether the 0.86 cps cash impact will impact KPG's ability to pay 5.7 cps in divvy's in FY25.  On one hand it was only 77% of FY23 AFFO (adjusted funds from operations), eps last year but on the other hand they state their 5.7 cps in forecast FY24 distributions is within 90-100% range of AFFO eps in FY24?  Not sure why AFFO earnings are forecast to drop so much in FY24 and whether they can grow a little in FY25 or not?  Need to look into that deeper when I have more time.  Some doubt divvy is maintainable in FY25 with KPG is where I got to today.

Preliminary calculations on ARG show cash flow affected by a more material 1.13 cps and there appears to be material risk to their ability to continue 6.65 cps dividends in FY25 and beyond.

Looking further out, both companies are enjoying some tailwinds from previous funding locked in at much lower rates, (corporate bonds), than what's prevailing today and accordingly there would appear to be medium term risk to dividend distributions in respect of funding costs normalizing in due course.

This suggests to me the best-case scenario and sadly that appears less likely in ARG's case, is dividends to remain the same in the foreseeable future.  I rebalanced my portfolio holdings on these two today on the basis that this isn't really a satisfactory forward-looking scenario with inflation running where it is, notwithstanding its likely to reduce a little from here in the medium term.

It's really annoying that neither of the main political parties want to accept depreciation is a legitimate business expense recognising that buildings do wear out over time.

Please note both the above companies are PIE's (portfolio investment entities) so for most taxpayers the amount of tax they pay does not change their tax situation as all distributions are tax free in shareholders hands, other than those earning under $48,000 who may get a small advantage from the higher level of imputation credits they can optionally select to include in their income tax returns.  Tax payment do however affect the cash flow of the companies which potentially impacts their ability to make dividends payments.

Is it a form of wealth tax?  Not really in my view, but it is putting a headwind on the sector that's not really fair and reasonable.  An interesting parallel can be drawn with the deliberate underfunding of the healthcare sector so retirement companies are unfairly taxed in the form of having to run their villages at a loss to cover the underfunding of residents in care.  You could make the case the entire property sector, including residential property with the lack of depreciation, is being subjected to anti-capitalist headwinds / costs in lieu of some other form of tax like capital gains tax.  Pretty distasteful stuff hence me reducing my allocation to this sector....end of rant from VERY grumpy Beagle.

given the 10 year price performance has been a capital loss of 25% I think it is fair to say most/all investors hold KPG for it's divi yield.
Given the tax changes indicated and the likely effect on the after tax profits therefore divi yield I suspect the new normal will be about 80cps.
I doubt ACT will be the saving grace.
KPG trading x dividend tomorrow, given the political will is to win over the middle class and not put a capital gains tax in place I think we are stuck with the removal of depreciation and KPG sher's (me included) will see a lower SP.     

Quote from: snapiti on Sep 04, 2023, 07:46 PMgiven the 10 year price performance has been a capital loss of 25% I think it is fair to say most/all investors hold KPG for it's divi yield.
Given the tax changes indicated and the likely effect on the after tax profits therefore divi yield I suspect the new normal will be about 80cps.
I doubt ACT will be the saving grace.
KPG trading x dividend tomorrow, given the political will is to win over the middle class and not put a capital gains tax in place I think we are stuck with the removal of depreciation and KPG sher's (me included) will see a lower SP.     

Cheer up mate.  It could be worse.  If you had of owned ARG as well like me, you have had to swallow 2 dirty big dead rats instead of one.  Sometimes in a slightly depressing moment I like to reflect on others less fortunate than myself, for example someone diversified enough to have half a dozen or so property companies and they've had to swallow 6 big dead rats.  Difficult to come to terms with the National party doing this to us when this is the usual sort of misinformed misinformation and garbage Spindy used to serve us up.  I thought National was better than that.  Maybe I should vote ACT ?

I guess if you own KPG you do so for the sustainable dividends, any company paying out this % is unlikely to enjoy much SP capital growth, but you knew that already. So apart from what you already own and what you paid for it, you'd maybe see the current SP as a good opportunity to load up some more of those oversized dividend gains.

Having owned KPG for a while now, my net position is well covered by dividend returns and the SP has become largely irrelevant as I don't own it to sell it at a higher capital price, unless it gets stupidly overpriced which looks very unlikely given it's history.

Let's face it, the recent announcement of depreciation not being claimable against expenses is just a return to the recent status quo (assuming the right get voted in). It will have a minor effect on returns to shareholders. I repeat, anyone who buys something like this with some aspiration for a capital SP gain is misguided, it's just not one of those kinds of companies. And medium longer term, it will pay you back your entire capital investment, and the rest is cream on top.

Recalibrating ones thinking to long term earners bought at the best you can get capital price, without consideration for ever selling a solid reliable earner, is a far cry from momentum trading capital SP gains and takes a while to get your head around, in my experience.

Once locked in though, the day to day capital SP has become quite unimportant, except for getting a few more from time to time when the market hates it. Now might be the time to get a few more, or soon.

Quote from: Buzz on Sep 04, 2023, 08:29 PMI guess if you own KPG you do so for the sustainable dividends, any company paying out this % is unlikely to enjoy much SP capital growth, but you knew that already. So apart from what you already own and what you paid for it, you'd maybe see the current SP as a good opportunity to load up some more of those oversized dividend gains.

Having owned KPG for a while now, my net position is well covered by dividend returns and the SP has become largely irrelevant as I don't own it to sell it at a higher capital price, unless it gets stupidly overpriced which looks very unlikely given it's history.

Let's face it, the recent announcement of depreciation not being claimable against expenses is just a return to the recent status quo (assuming the right get voted in). It will have a minor effect on returns to shareholders. I repeat, anyone who buys something like this with some aspiration for a capital SP gain is misguided, it's just not one of those kinds of companies. And medium longer term, it will pay you back your entire capital investment, and the rest is cream on top.

Recalibrating ones thinking to long term earners bought at the best you can get capital price, without consideration for ever selling a solid reliable earner, is a far cry from momentum trading capital SP gains and takes a while to get your head around, in my experience.

Once locked in though, the day to day capital SP has become quite unimportant, except for getting a few more from time to time when the market hates it. Now might be the time to get a few more, or soon.

not sure I completely understand or agree with your post, no cream on top with these real returns......if you bought 10 years ago you would have lost 25% of your capital.......that's equiv to about 1/3 of the dividend making total annualized average returns for the 10 year period of about 3.5% net. In the mean time inflation has eroded your measley gains to nothing.
But it gets way worse for anyone purchasing between 5 to 8 years ago......they have lost 40% of their capital and after divi's have a paper loss.
I think it is not much better if you purchased 2 years ago after a capital loss of 20% you still have a paper loss.
I can see the new tax rules  help further the loses.
Fair to says most investors purchasing in the last decade would have been much better off with money in term deposits

Yeap, you'd have to have had extremely fortunate timing to pull any decent returns out of KPG.  Just as well it's all going to be different going forward....or so the directors tell us.

I get it that the tax free PIE yield is good, 5.7 / 87 cents is 6.5% tax free and nearly 10% gross for those of us on a 33% tax rate but is it sustainable going forward with 0.86 cps extra tax to pay per annum and higher funding costs coming down the track?  That's the really hard question.  There is no question about capital gains or not, frankly if you're chasing those then this is definitely the wrong stock to own.

Quote from: Basil on Sep 04, 2023, 10:23 PMYeap, you'd have to have had extremely fortunate timing to pull any decent returns out of KPG.  Just as well it's all going to be different going forward....or so the directors tell us.

I get it that the tax free PIE yield is good, 5.7 / 87 cents is 6.5% tax free and nearly 10% gross for those of us on a 33% tax rate but is it sustainable going forward with 0.86 cps extra tax to pay per annum and higher funding costs coming down the track?  That's the really hard question.  There is no question about capital gains or not, frankly if you're chasing those then this is definitely the wrong stock to own.

agree totally, by higher funding costs you mean higher interest rates? not to mention the development money they will need going forward, I for one are going to be factoring in a lower divi....suspect the market will too, hope you had alcohol with those rats you ate mate.

As Basil has pointed out there is a risk to the divi going forward. I think with the capital needed to fund all the planned developments that a lower dividend makes sense. Why did the Aurora sale fall over I wonder? The transaction price represents a 13.5% discount to the asset's March 2023 valuation according to KPG.

So what's the share worth currently? Current price $.86. Craigs have a target price before the latest depreciation changes of $.88. Basil says  "that KPG eps reduces 0.24 cps, suppose you could say fair value reduced about 2.4 cps."


Disc Not a holder

Just to be clear, net profit after tax reduces by 0.86 cps due to having to pay that amount of extra tax due to the pending disallowance of the right to claim depreciation. (My 2 minute back of the envelope calculation last week was rushed and is incorrect). If we use a PE of 10 the fair value per share reduces 8.6 cps, (11.3 cps for ARG).  A lot of that price reduction has already happened and is fully justified in my opinion.

As others have noted they have a big development book ahead of them.
Selling a prime asset with a Govt tenant at a 13.5% discount to valuation, (before transaction costs) when interest rates are close to a peak makes no sense to me unless you are really desperate for the funds.  Who says for sure the developments they are going to build using that money are going to give better returns than that ?  I am very skeptical and would prefer they keep it and slow their development program down accordingly. 

How many times have we seen this movie before.  Highly paid executives with little or no skin in the game overanxious to make their mark with acquiring shiny new things (like a Magpie) that stroke their ego with scant regard for how it impacts what really matters to shareholders, earnings per share and in this case dividends per share. 

I'm not the only one who is skeptical and reducing their stake.  http://nzx-prod-s7fsd7f98s.s3-website-ap-southeast-2.amazonaws.com/attachments/KPG/417652/402247.pdf

Kpg share price must be getting close to an all time low

Can't be just that depreciation chatter ....punters really falling out of love with it seems

And the presos are so full of fantastic times in the future

KPG going to have it's earnings trimmed, no brainer market is going to trim the SP as well given it's a proven no growth stock and a pure divi play.
   

I wonder if the markets are also concerned about the retail space demand going forward.
I work for a very large retailer and we are seeing a 25% yoy fall in revenue, bit of a margin squeeze going on as well. Now given retail prices are well up on 12 months ago I would suggest that 25% decline in revenue is more like 35%.
4 season's stores in receivership today as well.

Quote from: snapiti on Sep 05, 2023, 05:53 PMKPG going to have it's earnings trimmed, no brainer market is going to trim the SP as well given it's a proven no growth stock and a pure divi play.
   

Actually - not everything people spread over the internet is true ... even if it feels like consensus in the rabbit hole :) - Oops - did I say that?

Anyway - I do see for KPG some significant opportunities (related to their holding in Drury, but as well to their new strategy of build to rent), but I see as well some significant risks (related to an "opportunity" to perform the build to rent strategy in a bad way).

On top of that - long time SP trends make for a stock with such high reliance in interest rates only sense if you normalise the stock price with the respective interest rate.

What I try to say - no matter what their past was, I think the game is changing and there are significant opportunities for them to improve in the mid term future and some (I think smaller) risks for them to deteriorate ... Which one it will be, who knows?

Discl: holding a small parcel;

Quote from: winner (n) on Sep 05, 2023, 03:43 PMKpg share price must be getting close to an all time low

Can't be just that depreciation chatter ....punters really falling out of love with it seems

And the presos are so full of fantastic times in the future

Low last year was 82 cents. 
A few things have happened since then and none of them good.
1. We're now officially in a recession and blind Freddy can tell you retail is doing it extremely tough this year.  As others have noted that's sure to lead to more store closures.
2. 10 year Govt stock rate is now significantly higher than last year, (circa 1% more) and as this is a bond proxy, (anyone thinking there is any long-term capital growth here is delusional), so that affects the share price.
3. Last but not certainly least, the pending tax change will reduce after tax eps by 15%, (0.86 cps).
In addition, they have just gone ex divvy so where's fair value now?

Throughout this thread I have often expressed my reservations about whether their new strategy will reap benefits.  I am deeply skeptical they can grow dividends in the future because their long-term track record makes a profound statement they can't, and looking forward there's simply no logic selling assets like they did last year on a 12% yield to fund build to rent on a 5% yield.

I think realistically in the current environment, the best shareholders can hope for is the current dividend level being maintained.  That's looks a LOT more challenging after the 15% hit to after tax eps with the pending depreciation tax change which is why I have substantially reduced my stake.

Correct me if I'm wrong but it seems to me that the cash flow to most investors won't change much
If the company pays more tax because depreciation not deductible then it will pass more imputation credits with the dividend and hence the recipient of the dividend will pay less tax.
And since kpg pays out a large proportion of profit as dividend, the overall cash flow and effective overall tax (ie shareholder tax paid plus company tax paid) should be about the same.
Which also means that the government claimed extra tax probably isn't accurate either

Its a PIE.

Quote from: Basil on Sep 06, 2023, 11:40 AMIts a PIE.

Hmmm, it's a bit more complicated than that isn't it?

The internet says

'A PIE distribution may contain both a fully imputed component and an excluded (unimputed) distribution component'

KPG is a listed PIE which is somewhat different to an unlisted PIE.

KPG doesn't fully impute its PIE dividends so there is a portion of those dividends that are taxable in the shareholder hands. Hence an increased tax paid by KPG directly, leads to a reduced tax to most of the investors. Net effect is more or less neutral, not the armageddon that you imply above.

You're incorrect with your tax interpretation and use of the adjective "Armageddon" is well beneath your usual high standard of well-considered posts.

Firstly, on the PIE thing, All PIE distributions are able to be excluded from shareholders tax returns.  People on a tax rate lower than 28% can optionally elect to include the imputed part of the distribution if they wish to.

KPG have said the current years dividend of 5.7 is within their target range of 90-100% of AFFO eps, (do some homework on what is meant from AFFO earnings from their presentations if you need to).  If we assume it's at the midpoint, 95% of AFFO eps then their current year AFFO eps is only 5.7 / 0.95 = 6 cps, well down on FY23...I guess that's what happens when you sell assets earning a 12% yield and throw the capital into BTR apartments currently earning nothing.

AFFO eps is after tax so when they pay an extra 0.86 cps in tax in FY25 with the depreciation change that reduces to only 5.14 cps in FY25 plus or minus changes to income that would otherwise occur.  You would hope BTR will start generating something in FY25 so maybe they can maintain the 5.7 cps distributions or maybe not given all their other development plans.  Not Armageddon but for those investing for yield, who like me, think all the talk of growth and development over the last 25 years has been nothing but a load of hot air, (recall the share price was higher 23 years ago in 2000 and distributions were 9.5 cps back then), then the prospect of distributions dropping is something to think hard about especially in light of inflation currently running at 6%.

I think when you zoom out and look at the big picture there's also a tale of serious caution to be told.  $1 of assets in 2000 according to the Reserve Bank inflation calculator "housing index" should now be worth $4.81, not 85 cents.  9.5 cps distributions in 2000 with general inflation should now be 16.83 cps, not 5.7 cps.

The mind boggles to think about how many times over the last 23 years the directors have talked about growth in all their reports over the years.  KPG has been a really, really terrible investment long term.  Just as well it's all going to magically come right going forward eh....well that's what they tell us...but they have been saying that for a very long time.

Like I have said on regular occasions throughout this thread, I was only ever in it for the yield and had no illusions about any prospect of capital growth,  Now the yield is under threat I have taken steps to proactively manage the risk to my portfolio and reduce the risk by reallocating capital into companies with far better prospects of dividend growth in the years ahead.  I think that's what a sensible prudent investor does but each to their own and if you think there's enormous prospects for gains and dividends here then good luck.  It wouldn't surprise me to see the share price with a 7 handle at some stage.
Disc, now less than 1% portfolio position.

I think you will find beagle is correct.....I sought professional advice over the benefits of investing in PIE funds earlier this year due to my earnings and tax position....this advice supports what beagle is saying

All financial institutions are now required to report income and when you go into the My IR system of the IRD website to do your tax return, interest and dividend information is already summarized and pre-populated in your tax return.  Makes doing tax returns for individual investors a lot easier these days.
None of my PIE dividends from KPG, ARG, BRM, KFL or MLN have ever shown up in there and none for any of my clients for any of their PIE's either.  Seem this more than 101 times now.
Here's what Kingfish have to say about it https://kingfish.co.nz/investor-centre/faqs/  Click on what does a PIE mean.
Extract "Natural person Shareholders or Trustees do not have to include dividend income from Kingfish in their tax return (although they can elect to include such dividends, which may be a benefit if the taxpayer is on a marginal tax rate that is lower than 28% and wants to claim imputation credits attached at the higher rate of 28%)."

Quote from: Basil on Sep 06, 2023, 12:43 PMAll financial institutions are now required to report income and when you go into the My IR system of the IRD website to do your tax return, interest and dividend information is already summarized and pre-populated in your tax return.  Makes doing tax returns for individual investors a lot easier these days.
None of my PIE dividends from KPG, ARG, BRM, KFL or MLN have ever shown up in there and none for any of my clients for any of their PIE's either.  Seem this more than 101 times now.
Here's what Kingfish have to say about it https://kingfish.co.nz/investor-centre/faqs/  Click on what does a PIE mean.
Extract "Natural person Shareholders or Trustees do not have to include dividend income from Kingfish in their tax return (although they can elect to include such dividends, which may be a benefit if the taxpayer is on a marginal tax rate that is lower than 28% and wants to claim imputation credits attached at the higher rate of 28%)."

I stand corrected, you are right, no tax payable on PIE income, either imputed or unimputed.

Quote from: Basil on Sep 06, 2023, 12:03 PMYou're incorrect with your tax interpretation and use of the adjective "Armageddon" is well beneath your usual high standard of well-considered posts.

Firstly, on the PIE thing, All PIE distributions are able to be excluded from shareholders tax returns.  People on a tax rate lower than 28% can optionally elect to include the imputed part of the distribution if they wish to.

KPG have said the current years dividend of 5.7 is within their target range of 90-100% of AFFO eps, (do some homework on what is meant from AFFO earnings from their presentations if you need to).  If we assume it's at the midpoint, 95% of AFFO eps then their current year AFFO eps is only 5.7 / 0.95 = 6 cps, well down on FY23...I guess that's what happens when you sell assets earning a 12% yield and throw the capital into BTR apartments currently earning nothing.

AFFO eps is after tax so when they pay an extra 0.86 cps in tax in FY25 with the depreciation change that reduces to only 5.14 cps in FY25 plus or minus changes to income that would otherwise occur.  You would hope BTR will start generating something in FY25 so maybe they can maintain the 5.7 cps distributions or maybe not given all their other development plans.  Not Armageddon but for those investing for yield, who like me, think all the talk of growth and development over the last 25 years has been nothing but a load of hot air, (recall the share price was higher 23 years ago in 2000 and distributions were 9.5 cps back then), then the prospect of distributions dropping is something to think hard about especially in light of inflation currently running at 6%.

I think when you zoom out and look at the big picture there's also a tale of serious caution to be told.  $1 of assets in 2000 according to the Reserve Bank inflation calculator "housing index" should now be worth $4.81, not 85 cents.  9.5 cps distributions in 2000 with general inflation should now be 16.83 cps, not 5.7 cps.

The mind boggles to think about how many times over the last 23 years the directors have talked about growth in all their reports over the years.  KPG has been a really, really terrible investment long term.  Just as well it's all going to magically come right going forward eh....well that's what they tell us...but they have been saying that for a very long time.

Like I have said on regular occasions throughout this thread, I was only ever in it for the yield and had no illusions about any prospect of capital growth,  Now the yield is under threat I have taken steps to proactively manage the risk to my portfolio and reduce the risk by reallocating capital into companies with far better prospects of dividend growth in the years ahead.  I think that's what a sensible prudent investor does but each to their own and if you think there's enormous prospects for gains and dividends here then good luck.  It wouldn't surprise me to see the share price with a 7 handle at some stage.
Disc, now less than 1% portfolio position.

you raise another interesting point about how inflation effects divi's over the long term.....something broken about the KPG model as over the last 10 years commercial property had increased significantly along side commercial rents yet KPG is earning less and had a decreasing SP

Quote from: BlackPeter on Sep 06, 2023, 08:35 AMActually - not everything people spread over the internet is true ... even if it feels like consensus in the rabbit hole :) - Oops - did I say that?

Anyway - I do see for KPG some significant opportunities (related to their holding in Drury, but as well to their new strategy of build to rent), but I see as well some significant risks (related to an "opportunity" to perform the build to rent strategy in a bad way).

On top of that - long time SP trends make for a stock with such high reliance in interest rates only sense if you normalise the stock price with the respective interest rate.

What I try to say - no matter what their past was, I think the game is changing and there are significant opportunities for them to improve in the mid term future and some (I think smaller) risks for them to deteriorate ... Which one it will be, who knows?

Discl: holding a small parcel;

opportunities you say, they have mentioned the same thing in many annual reports over the last 20 years.....interesting to note on this day 20 years ago the SP was trading 25% higher than it is today. 
Crickey my dad sold his commercail building last year for 3.5 times what he paid for it 22 years ago.
Of course KPG might have increased their dividend with all these opportunities over the last 20 years, but wait the yearly dividends are actually less than 20 years ago, I think I was still paying under $10 for a dozen beer 20 years ago

Quote from: snapiti on Sep 06, 2023, 06:38 PMopportunities you say, they have mentioned the same thing in many annual reports over the last 20 years.....interesting to note on this day 20 years ago the SP was trading 25% higher than it is today.

Yes, since the high SP $1.69 Sept 2019, and then the 2020 Covid crash, the SP has certainly struggled. Over those 20 years (or my data goes back to 22Dec 2014) it's a pitiful 2.66% p.a. total return after real paid out dividends, and unrealised capital losses. An investor that wasn't too worried about unrealised capital losses would have received $5,256 6.03% p.a. dividends on a $10,000 investment.

It's like buying an ATM machine that spits out money every 3 months ad infinitum, so it makes no sense to be worrying about what you'd sell the ATM machine for at any given point in time, as doing so would stop the machine spitting out money.

Quote from: Buzz on Sep 06, 2023, 07:04 PMYes, since the high SP $1.69 Sept 2019, and then the 2020 Covid crash, the SP has certainly struggled. Over those 20 years (or my data goes back to 22Dec 2014) it's a pitiful 2.66% p.a. total return after real paid out dividends, and unrealised capital losses. An investor that wasn't too worried about unrealised capital losses would have received $5,256 6.03% p.a. dividends on a $10,000 investment.

It's like buying an ATM machine that spits out money every 3 months ad infinitum, so it makes no sense to be worrying about what you'd sell the ATM machine for at any given point in time, as doing so would stop the machine spitting out money.

interesting.... call me somewhat cynical but purchasing an asset that eat's your capital yet spits out cash leaving you with real return less than inflation seems counterintuitive to why invest capital in the first place 

Quote from: snapiti on Sep 06, 2023, 07:51 PMinteresting.... call me somewhat cynical but purchasing an asset that eat's your capital yet spits out cash leaving you with real return less than inflation seems counterintuitive to why invest capital in the first place 

It takes a shift in mindset, that's for sure.

If you don't realise those capital gains, or losses, and have no intention to do so ... ever ... and see the SP lows as another opportunity to buy more of your ATM spitting out money (increasing your dividend yield), while avoiding trading fees and the potential for the IRD to question and tax your capital gains (or admittedly deductions on capital losses), then it's just a machine that churns out money every quarter, ad infinitum.

The price of the ATM is irrelevant at any given point in time. Long term investment, truely long term with no intention to ever sell, in ATM's that reliably and consistently spit out money, isn't about what the ATM costs to buy or sell at any point in time. Maybe if you're not happy with the reliability or consistency to spit out money, then for sure, sell and buy a different ATM.

Conjoining unrealised capital gains or losses to realised dividends, at any point in time, skews your investment 'paper' returns to whatever the market thinks your ATM is worth at that point in time. It doesn't affect at all what your ATM actually spits out.

I would have no issue whatsoever with your analogy with the ATM machine if it kept spitting out the same amount of money over and over again.  Case in point the 9.5 cps they used to pay in 2000 should now be over 16 cps per annum if it had of kept pace with inflation. (Google Reserve Bank inflation calculator and have a play around with that)

Quote from: Basil on Sep 06, 2023, 09:28 PMI would have no issue whatsoever with your analogy with the ATM machine if it kept spitting out the same amount of money over and over again.  Case in point the 9.5 cps they used to pay in 2000 should now be over 16 cps per annum if it had of kept pace with inflation. (Google Reserve Bank inflation calculator and have a play around with that)

totally agree and of course not forgetting this ATM gobbles up some of the after tax cash flow to maintain itself in working order albeit still slowly deteriorating.

Quote from: Buzz on Sep 06, 2023, 08:56 PMIt takes a shift in mindset, that's for sure.

If you don't realise those capital gains, or losses, and have no intention to do so ... ever ... and see the SP lows as another opportunity to buy more of your ATM spitting out money (increasing your dividend yield), while avoiding trading fees and the potential for the IRD to question and tax your capital gains (or admittedly deductions on capital losses), then it's just a machine that churns out money every quarter, ad infinitum.

The price of the ATM is irrelevant at any given point in time. Long term investment, truely long term with no intention to ever sell, in ATM's that reliably and consistently spit out money, isn't about what the ATM costs to buy or sell at any point in time. Maybe if you're not happy with the reliability or consistency to spit out money, then for sure, sell and buy a different ATM.

Conjoining unrealised capital gains or losses to realised dividends, at any point in time, skews your investment 'paper' returns to whatever the market thinks your ATM is worth at that point in time. It doesn't affect at all what your ATM actually spits out.

Always enjoy your posts, Buzz, here and elsewhere. But playing devil's advocate for a minute, that same rationale could have been used 10-15-20 years ago (take your pick) on the Warehouse (by way of quick example), or other similar companies who regularly spit out dividends, but have a poor track record of growing total shareholder returns and growing dividends enough to offset the depreciation in capital value. Framed in that view, it's worth testing the argument.

I think the best analogy you are speaking to is to pair that philosophy to a term deposit or hold to maturity bond. Sure, the interest rate and fair market value of the bond might fluctuate in between subscribing for the bond and any eventual realisation, but if you were happy with the coupon at that point of time, so be it and fair enough. But in that analogy, your total cumulative returns are always north of zero.

But that said on the equity risk component, while the intention may be to hold the investment for the long term/forever, and simply accept the dividend without giving regard to the long term dynamics of the capital value, in my view misses many things. While the dominant purpose of your investment may have been dividend income, its not inconceivable you may want/need to sell it to fund something in the future (healthcare, a child/grandchild's education, unforeseen expenses in retirement, etc), so a rational person in my view would want the capital value to be at least protected (so that the cumulative total shareholder returns including dividends are always positive - otherwise what's the point??) in that event. Or simply with just a view to leaving a bigger pile to your decedents.

That second consideration may not be the dominant purpose of one's investment but its still worthy of plenty of consideration.

While investing for that long dividend profile (stability, consistency and/or growth) and hopefully at least protecting ones capital value (so that total shareholder returns remain positive with cumulative net cash dividends offsetting any depreciation in capital value) there is the question of if there is a higher and better use of that capital, fulfilling the needs of consistency and growing dividends and protecting/growing capital value. No one likes to take a capital loss on the chin, but if in the grand scheme of things say that investment continues to dwindle in capital value, or things come right in the medium term, is that outweighed by what one could achieve by placing that capital elsewhere? Framed a different way - when things go sour, one could think about holding an investment at a particular spot price as investing into that business for the first time, and how that yield and capital protection/growth profile compares to alternative invests that you could have invested into had you divested the asset. Taking into account fees, and assuming the investor stays on the correct side of the ledger with the IRD, is there harm in divesting an investment that will produce X% returns and rolling that into an investment that will produce x + 1 returns?

I hear you on the transaction fees. A meaningful consideration for a momentum trader (particularly in NZ where fees are high), a big deal for a day trader, but  meaningful for an investor? An aside, I used to get hung up on FIF. Then many years ago I started investing into US equities/indices and I can say the additional drag of FIF has been happily worth it.

And to some extent I hear you on the risk of being classed as a trader/on revenue account. I'm a bit of a bed wetter when it comes to tax risk but I also don't accept once you buy something producing an income stream that means you are wedded to it in perpetuity (based on a large swath of tax advice and case law of which won't be giving any form of advice).

I know that's not  necessarily the point you have laboured in your posts and its more the mindset that one should adopt when investing into yielding companies with the potential for capital volatility and I think it's an excellent thought.

Anyway it's a worthy discussion. and a bit of devils advocate thought from me...I tend to be quite conservative but do find it useful to test these ideas from time to time.

I also thought Basil's analysis was very good. I'm not a holder of any LPT stocks but gave for an interesting read none the less.

edit: lots of typos. fixed.

Quote from: snapiti on Sep 06, 2023, 06:38 PMopportunities you say, they have mentioned the same thing in many annual reports over the last 20 years.....interesting to note on this day 20 years ago the SP was trading 25% higher than it is today. 
Crickey my dad sold his commercail building last year for 3.5 times what he paid for it 22 years ago.
Of course KPG might have increased their dividend with all these opportunities over the last 20 years, but wait the yearly dividends are actually less than 20 years ago, I think I was still paying under $10 for a dozen beer 20 years ago

Hi snaps ... I don't think we disagree, we just talk about different things.

You are commenting on KPG's past performance. While you don't correlate their SP with the Interestrates of the day - I agree, that their performance over the past decades was not stellar (but there are different shades of grey :) ; Just talking your two decades comparison of the SP: Interest rates (mortgage) in 2003 have been around 4% ... today they are higher, which is a quite logical explanation why the SP today is lower (higher interest rates cause lower property prices).

I was highlighting some future opportunities - and risks.

And of course, the fact that they did depending on some arbitrary dates either shrink or at least not grow their shareholders capital (though always paying good dividends) is not flash. I am just saying, it is no evidence either that things will stay that way.

They do own some interesting land in Drury (with plenty of potential to increase in value) ... and their build to rent strategy as well as their colocation strategy (work, live, shop, entertain) may or may not get right.

Anyway - KPG is not an important enough part of my portfolio to spill too much heartblood (or invest too much analytical effort). I just noticed that we (and that's not pointing to you, its just the nature of these discussion forums) tend in many threads to slip fast into some GroupThink habit where we often take the last 2 pages of posts as consensus and reinforce their message without further diligence.

Similar to reinforcing the words of the priest in church or the chant of the mullah in the mosque without thinking. There might be a place for that in any religion (actually, this is the heart of any religion, but this is a different theme) - but ... its meant to silence any discussion instead of enabling it.

Given their history and record over the years, the best thing they could do would sell all the properties and wind it all up. Currently trading at a 43% discount to NTA.

That will happen......right??  ;) 

Quote from: BlackPeter on Sep 07, 2023, 09:53 AMHi snaps ... I don't think we disagree, we just talk about different things.

You are commenting on KPG's past performance. While you don't correlate their SP with the Interestrates of the day - I agree, that their performance over the past decades was not stellar (but there are different shades of grey :) ; Just talking your two decades comparison of the SP: Interest rates (mortgage) in 2003 have been around 4% ... today they are higher, which is a quite logical explanation why the SP today is lower (higher interest rates cause lower property prices).

I was highlighting some future opportunities - and risks.

And of course, the fact that they did depending on some arbitrary dates either shrink or at least not grow their shareholders capital (though always paying good dividends) is not flash. I am just saying, it is no evidence either that things will stay that way.

They do own some interesting land in Drury (with plenty of potential to increase in value) ... and their build to rent strategy as well as their colocation strategy (work, live, shop, entertain) may or may not get right.

Anyway - KPG is not an important enough part of my portfolio to spill too much heartblood (or invest too much analytical effort). I just noticed that we (and that's not pointing to you, its just the nature of these discussion forums) tend in many threads to slip fast into some GroupThink habit where we often take the last 2 pages of posts as consensus and reinforce their message without further diligence.

Similar to reinforcing the words of the priest in church or the chant of the mullah in the mosque without thinking. There might be a place for that in any religion (actually, this is the heart of any religion, but this is a different theme) - but ... its meant to silence any discussion instead of enabling it.

Quote from: BlackPeter on Sep 07, 2023, 09:53 AMHi snaps ... I don't think we disagree, we just talk about different things.

You are commenting on KPG's past performance. While you don't correlate their SP with the Interestrates of the day - I agree, that their performance over the past decades was not stellar (but there are different shades of grey :) ; Just talking your two decades comparison of the SP: Interest rates (mortgage) in 2003 have been around 4% ... today they are higher, which is a quite logical explanation why the SP today is lower (higher interest rates cause lower property prices).

I was highlighting some future opportunities - and risks.

And of course, the fact that they did depending on some arbitrary dates either shrink or at least not grow their shareholders capital (though always paying good dividends) is not flash. I am just saying, it is no evidence either that things will stay that way.

They do own some interesting land in Drury (with plenty of potential to increase in value) ... and their build to rent strategy as well as their colocation strategy (work, live, shop, entertain) may or may not get right.

Anyway - KPG is not an important enough part of my portfolio to spill too much heartblood (or invest too much analytical effort). I just noticed that we (and that's not pointing to you, its just the nature of these discussion forums) tend in many threads to slip fast into some GroupThink habit where we often take the last 2 pages of posts as consensus and reinforce their message without further diligence.

Similar to reinforcing the words of the priest in church or the chant of the mullah in the mosque without thinking. There might be a place for that in any religion (actually, this is the heart of any religion, but this is a different theme) - but ... its meant to silence any discussion instead of enabling it.

you have a slightly twisted mind.....I like it

I have a suspicion, given the underlying performance of commercial property and rents over the last decade that KPG meaningful underperformance has a lot to do with far too many snouts in the trough

Quote from: snapiti on Sep 07, 2023, 05:53 PMI have a suspicion, given the underlying performance of commercial property and rents over the last decade that KPG meaningful underperformance has a lot to do with far too many snouts in the trough

Tend to agree with you there snaps .......along with questioning whether management is up to it

You'd have to think there's a huge execution risk as well .....can they deliver on new strategic direction that is beautifully outlined in glossy presentations ...that's questionabl

there was nothing wrong with the last 10 year plan/strategy which had lots of tailwinds, plenty of demand, rising commercial property values rising rents and favorable servicing costs (interest rates), KPG failings come down to poor execution and to many snouts in the trough, if you can't perform and execute in the good times

Pretty sure I recall many years ago at great cost they "internalized" the management of KPG rather than paying an external manager.  This was supposed to result in significant benefits to the company.
Questions presenting.
Where have those benefits gone?
Why have dividends shrunken so badly in recent years compared to the 9.5 cps they paid 23 years ago and this against a backdrop in recent years of once in a lifetime low interest rates / funding costs and recently favorable tax treatment of depreciation?
Why should we believe their current developments will deliver growth in eps to shareholders when nothing they have done in the past has?
Are management even up to executing the Drury development given their lack of any track record of delivering eps growth in the past?

Sadly I see many parallels with OCA here.  Management extolling all the virtues of all the wonderful new facilities they have built for other stakeholders and how other stakeholders are benefiting so much from this and how wonderful all their ESG initiatives are.  Look how much our assets have grown in the last XYZ years, aren't we doing a fabulous job with our growth...and all the while eps languishes and shareholders gain nothing, in fact go backwards in real eps and dps inflation adjusted terms.

It's impossible to make any case for holding this beyond the yield argument.  But holding for great yield is one thing and thankfully in that respect this differentiates itself very well from OCA,, but at what cost in the medium to long-term looking ahead?...that's the biggest question.

I'd hazard a guess that even the, most loyal of proponents must be getting a bit peeved at where the share price is heading ....and probably starting to realise management is the problem.

no sure how credible KPG 2.4% loss in NTA for the 6 months, but I suppose that is why they trade at a large discount already

Quote from: snapiti on Sep 25, 2023, 04:16 PMno sure how credible KPG 2.4% loss in NTA for the 6 months, but I suppose that is why they trade at a large discount already

NTA down to $1.18 .....was $1.45 only 18 months ago

Articles that house prices are heating up again...

DISC: slightly political statement follows:
change of govt looking very likely now and even with a chaotic centre right they are all going to want to get the market moving again... looks like the country no longer wants the LABOURED LEFT... it wants to get rich after all...

all that Hokie Dokie Wonkie stuff has gone out the door .... money talks...

China green what evere there name is cant offer any more bonds to sell....

Is this china thing going to cause trouble in little china?

That will hit the NZ export market for sure if it does... and that will effect balance trade... economic slow down now predicted to last ... the rest of the decade?

SH....t

what does a CEO do to get back in  the black... cut baby cut... and is that what the Nats really have planned but they dont want to tell you...

Could Luxon actually be a smiling killer after all ?

taking bets...

could government departments about to enter  a new phase in there life cycle... a cut to ribbons cycle..

 

Quote from: Waltzing on Sep 25, 2023, 09:45 PMArticles that house prices are heating up again...

DISC: slightly political statement follows:
change of govt looking very likely now and even with a chaotic centre right they are all going to want to get the market moving again... looks like the country no longer wants the LABOURED LEFT... it wants to get rich after all...

all that Hokie Dokie Wonkie stuff has gone out the door .... money talks...

China green what evere there name is cant offer any more bonds to sell....

Is this china thing going to cause trouble in little china?

That will hit the NZ export market for sure if it does... and that will effect balance trade... economic slow down now predicted to last ... the rest of the decade?

SH....t

what does a CEO do to get back in  the black... cut baby cut... and is that what the Nats really have planned but they dont want to tell you...

Could Luxon actually be a smiling killer after all ?

taking bets...

could government departments about to enter  a new phase in there life cycle... a cut to ribbons cycle..

 

You are right - we are getting political and better should discuss this on the political thread. Having said that, I think there is a strong likelihood for austerity policies to reign if a coalition of ACT and National runs the show for the coming three years. We don't need to look further than the UK to see what the outcomes will be - well ... austerity! Rich getting richer, poor people getting poorer and the economy is lingering at best and strangled at worst.

Back to KPG - I would not see this scenario (austerity policies) as particularly positive for any of our property funds. Austerity would most likely end up in stagflation and reduced economic activity and I can't see how this would be good for any property fund.

Ah yes, maybe we can keep ACT out of the picture, but still - I am pretty sure we will get a change, but whether its a change for the better, we will see.

Not too fussed about election outcome. By far the biggest impact on Listed Property entities will be interest rates, which will be determined by inflation of course, which is mostly out of the hands of NZ politicians and driven by international macro forces.     

Inflation slowly retreating globally, which means at some point in the not too distant future we will see interest rates start to retreat and cap rates for property sector improve, maybe late 2024, probably 2025.

KPG specific: was encouraged by their update yesterday which mentioned strong rental income growth. With their "Mixed use" assets holding value now (valuation down just 1% over 6 months), while their shrinking pool of office assets revaluation driving the bulk of fall.   

LEk... thanks for that update ...

Interesting seeing how the listed property companies have performed this year.

The operational fundamentals:

Interest costs: Have of course gone higher on any new debt rolling over, new issuance etc. Will remain high during high inflation/interest rate environment (Obviously). Will fall as inflation/interest rate lowers.

Rental revenue: Significant Increases. Unlikely to decrease in future, rather will continue yearly increases.

Occupancy: Occupancy rates have remained high, 99%+ - no sign of any danger here yet anywhere, despite the WFH trend for office market.

Cashflow: companies have restarted Dividend Reinvestment Plans, increasing cash on hand (with the downside of share count increase / dilution). Some companies have sold / attempted to sell off surplus assets to decrease debt and/or provide cheaper funding for development projects.

==========

Non-operational factors:

Portfolio valuations: Have fallen significantly, despite the assets earning more rental revenue, and no increase in vacancies. Cap rates used in valuations the reason.

Share prices: Continue to trade well below even the significantly reduced net asset values.

Yields: have increased, as dividends that have remained static or slightly increased amid share price falls. (However bank term deposit interest rates sitting at 6% now have made some of the skimpier yields from some listed property names look rather pathetic)     
     

KPG testing the lows......is anyone surprised given the likelihood that commercial property investors profits are on the chopping board to pay for all the sweeties the politicians are promising....sentiment swing from interest rates have peaked to look out they are going higher seems to be weighing somewhat.....happy to step in here and start to bank a few

No hurry I reckon, could easily have a share price with a 7 in front in due course in my opinion.

Quote from: Basil on Sep 28, 2023, 05:57 PMNo hurry I reckon, could easily have a share price with a 7 in front in due course in my opinion.

tend to agree Mr Beagle but happy to "start" to bank a few @ 82cps and below........pure divi play.....given the companies history only a fool would back them to produce capital gains

Quote from: snapiti on Sep 28, 2023, 06:11 PMtend to agree Mr Beagle but happy to "start" to bank a few @ 82cps and below........pure divi play.....given the companies history only a fool would back them to produce capital gains

Yeah, a nice gross div% and getting better with each SP bashing. $0.74 was the Covid low, with $1.70 not too long before that. Right here $0.82 is the double bottom from recent malaise. I have a plan to at least double my current holding for a long hold, and the window has opened to do that, $0.7's would be a gift imo. Happy to average in. A quick TA note, KPG very rarely has a low RSI on the chart and it's there now, it never lasts very long, literally only a few days, only the Covid low lasted a month. History apparently is the best indicator of the future. I won't be mucking around getting my top-up fill, even if I miss out on a few cents lower, but I'll be averaging in to minimise the risk of future returns.

Yeap, fair enough guys, appreciate your thoughts.  If they can maintain 5.7 cps, (not sure that's a given with the loss of depreciation claim from FY25), that's 5.7 / 82 = 6.95% net PIE yield, worth 10.37% gross (10.58% gross effective yield with 2% discount of DRP) for 33% taxpayers and those poor unfortunates paying the top envy tax rate of 39% its worth 11.39% (11.62% gross with DRP).

Quote from: Basil on Sep 28, 2023, 06:48 PMYeap, fair enough guys, appreciate your thoughts.  If they can maintain 5.7 cps, (not sure that's a given with the loss of depreciation claim from FY25), that's 5.7 / 82 = 6.95% net PIE yield, worth 10.37% gross (10.58% gross effective yield with 2% discount of DRP) for 33% taxpayers and those poor unfortunates paying the top envy tax rate of 39% its worth 11.39% (11.62% gross with DRP).

Cheers, I'd not thought of myself as poor or unfortunate, but annoyingly a 39% taxpayer, so those gross % returns are pretty enticing.

Agree, no guarantee the div is sustainable but, you know, KPG is a story of two halves, one side is the 98% occupancy leveraging existing assets that drives the sustainable cashflows -> profit and dividends. The other is the development business.

I see people confusing these and worrying about the former, though I think that's rock solid. It's the later than gives pause for thought, that's where the risk is .. if they win, they win oh so big, but if not it just doesn't work out, but it doesn't kill the former.

These are complex companies with heaps of moving parts, but for me at least I like to differentiate between the sustainable leverage on assets which is paying out to investors, vs the longer term development ambitions which imo for KPG are well thought out and they have the ability to execute on it, exciting and adds some spice to long term investment.

Things like Costco buying the property at Drury, just one example of how serious the potential is on the development side.

Meanwhile I'm enjoying a regular above average income and recycling all of it back into more equity. Well, that's the plan until I need the income for cashflow. So far it's working out pretty well, better than money in the bank, though I have accumulated a lot of that (relatively) as well and need to find a better place to put it.

Quote from: Basil on Sep 28, 2023, 06:48 PMYeap, fair enough guys, appreciate your thoughts.  If they can maintain 5.7 cps, (not sure that's a given with the loss of depreciation claim from FY25), that's 5.7 / 82 = 6.95% net PIE yield, worth 10.37% gross (10.58% gross effective yield with 2% discount of DRP) for 33% taxpayers and those poor unfortunates paying the top envy tax rate of 39% its worth 11.39% (11.62% gross with DRP).

I don't believe they can maintain the current dividend, with loss of depreciation claim it will instantly undermine the current dividend payout......hence awaiting a SP correction to align with payout going forward.......82cps is the top end of what I see is fair value....happy to pay less

QuoteThese are complex companies with heaps of moving parts, but for me at least I like to differentiate between the sustainable leverage on assets which is paying out to investors, vs the longer term development ambitions which imo for KPG are well thought out and they have the ability to execute on it, exciting and adds some spice to long term investment Buzz.

Good post but I have real concerns about whether they can execute their future development plans in a value accretive way.  There is no evidence to date that any development work they have done in the past is either eps or NTA accretive and compounding that when you start selling assets like they did last year at up to a 12% yield to develop rent to build at a 5% yield in the current yield environment with the cost of capital where it currently sits, this makes no sense to me in fact you'd be forgiven for wondering if the board have lost the plot or has no vision other than to provide new buildings that benefit other people than shareholders.  You can definitely put me in the camp of I'll believe their current development program is value accretive when I see it.  To me it's a yield story and it ends there and anyone hoping this will deliver capital gains over the long term might like to consider their share price performance over the last 25 years, especially relative to other property classes.

Disc: I have recently reduced to a "nursery" sized portfolio position, < 1% and will reevaluate in due course.  I am not sure the inexorable march higher in interest rates is done yet by any means and interest rate sensitive stocks trading primarily for their yield face further possible downside pressure from higher rates, especially if there's a dividend cut.

Quote from: Basil on Sep 29, 2023, 12:29 PMGood post but I have real concerns about whether they can execute their future development plans in a value accretive way.  There is no evidence to date that any development work they have done in the past is either eps or NTA accretive and compounding that when you start selling assets like they did last year at up to a 12% yield to develop rent to build at a 5% yield in the current yield environment with the cost of capital where it currently sits, this makes no sense to me in fact you'd be forgiven for wondering if the board have lost the plot or has no vision other than to provide new buildings that benefit other people than shareholders.  You can definitely put me in the camp of I'll believe their current development program is value accretive when I see it.  To me it's a yield story and it ends there and anyone hoping this will deliver capital gains over the long term might like to consider their share price performance over the last 25 years, especially relative to other property classes.

Disc: I have recently reduced to a "nursery" sized portfolio position, < 1% and will reevaluate in due course.  I am not sure the inexorable march higher in interest rates is done yet by any means and interest rate sensitive stocks trading primarily for their yield face further possible downside pressure from higher rates, especially if there's a dividend cut.

I agree for the same reasons. If they are a good buy why are the executives and board members not loading up.  I sold out some time ago.

maybe KPG has got it right as commercial centres struggle to keep workers coming into the office...

https://www.cnbc.com/2023/10/06/the-urban-doom-loop-threatening-cities-like-new-york-and-san-francisco.html

So Kiwi wanted to raise gearing ratio from 45% to 50% but needed 25% of bond holders to agree

They decided to bribe bond holders offering them 0.5% of the face value of their bonds to those who voted in favour at the meeting so long as the resolution was passed.

Seems holders of $263m of bonds voted yes please

Suppose $1.3m plus admin/handling fees well spent

Jenny Ruth has full story
https://justthebusinessjennyruth.substack.com/p/high-yielding-kiwi-property-readies?publication_id=1827355&utm_campaign=email-post-title&r=1rwf26


PS ...suppose bribery allowed in good ESG practices

Another example of KPG directors working actively to destroy shareholder value.
I have sold out now. When you look at the history of how KPG have destroyed shareholder capital over the years relative to any other form of property investment, this company is an unmitigated disaster.
Woefully bad financial performance over the long run which they try and hide behind a thick facade of ESG pretentiousness.  Management are vastly overpaid Muppets.  Relying on them to add value with their Drury development is a fool's errand as they have never succeeded in adding real NTA or eps with any of their other developments in the last 25 years.  Holders will be hoping this "time its different"...(the most dangerous expression in capital markets)..

KPG share price in 70's

Think this is all time low

Suppose records are meant to be broken ...maybe Kiwi now officially a real dog stock

Quote from: winner (n) on Oct 31, 2023, 01:14 PMKPG share price in 70's

Think this is all time low

Suppose records are meant to be broken ...maybe Kiwi now officially a real dog stock

activate hoover mode under 80cps....dont mind saying I am buying plenty especailly under 80cps

beagle you are a smart cookie.....whats the current KPG gross dividend based on 33% tax rate @ 78cps, must be over 10% maybe even closer to 11%....yes I know this might change based on the proposed depreciation rules

I did the numbers and based on 33% tax rate I think it is a gross yield of 10.75% given 78 cps

5.7 / 0.67 = 8.5075 cps gross for those on a 33% tax rate
8.5075 / 77 = 11.05% Gross.
GNE is 10.7% Gross based on 17.8 cps fully imputed @ $2.31.

Too good to be true so that must beg the question for both companies, Is the current dividend rate maintainable or are these a dividend trap?
One thing these two companies have in common is the way they wax lyrical about all things ESG.

I used to own both.  I think it's really telling on a day the market bounced back and had it strongest day in 10 weeks, both these stocks plumbed fresh new multi-year lows.

Quote from: snapiti on Nov 01, 2023, 12:26 PMactivate hoover mode under 80cps....dont mind saying I am buying plenty especailly under 80cps

Great yield snaps me old mate

But more to come ...everybody says interest rates going to fall to past Levels pretty quickly

So if punters happy with 4%/5% points less share price of 120/130 could happen sooner than later

So you get your yield and big capital gains

(This is not intended to be financial advice)

Change in depreciation will wipe about 1 cps earnings off.
Can they maintain 5.7 cps?  If you believe yes then its probably a buy.
If not what's the new maintainable yield ?  4.7 cps ?, in which case the yield becomes about 9% with is nothing special.

Yep fully adjusted my fair value and buy price to take into account a lower divi, happy with the 9% should the depreciation rules change but very happy to collect attractive 11% gross divi until the new rules are implemented(if ever), get the feeling sometime over my 10 year prospective hold that 9% will look very attractive against any interest rate decline causing, perhaps artificially, some capital gain, even a little will be cream on top of large gross yield   

US yields backing off highs and if this bunch of no hopers who do actually build stuff... can make something work it might stay in business and keep paying a DIV... you would hope...

NZ needs every company that can make a profit ... even the bad ones..

Quote from: winner (n) on Nov 02, 2023, 08:43 AMGreat yield snaps me old mate

But more to come ...everybody says interest rates going to fall to past Levels pretty quickly

So if punters happy with 4%/5% points less share price of 120/130 could happen sooner than later

So you get your yield and big capital gains

(This is not intended to be financial advice)

no hurry for the cap gains......I believe they will come sometime over my 10 year window.....for the record I have no faith in the company doing anything to help with capital gains.....it will purely be an interest rate yield driven gain.....I really do think 78 cps is a no brainer for part of a divi portfolio, have to admit I have been somewhat greedy at 78cps and KPG has now blown out to be 55% of my divi portfolio.
With all that said I do have some hope that the companies DURY plans will yield good early results from selling some of the site partially developed to other developers......anyone on here up with the play with the new(March this year) country wide blanket development band on LUC land rated 1,2,3....this is a monster of a development decision and under these new rules Dury could not happened so kudos to KPG for having all the rezoning done already.....I think there will be some market surprise with the prices KPG achieve for parts of the Dury land they choose to sell   

very pleased I got greedy @ 78cps, 10% cap gains in 10 days.......bonus

Huge and very surprising ~ 26.7% drop in operating earnings and 25%+ drop in the all-important, (because it's used to measure their capability to pay dividends) adjusted funds from operations.  Makes me really wonder with the change in non-deducibility of depreciation next year if they can maintain their dividend going forward, very unlikely in my view.
They keep selling very high yielding assets and investing in BTR at a miserable projected 5%, makes no sense to me whatsoever.
Directors are confident that their transformation program with deliver better returns to shareholders in the future.  It is too early for a Tui ?  The only thing missing was the infamous "point of inflection." 

Just as well it's all going to be brilliant going forward and we can be so confident of this because the company has been so successful with tis developments in the past.  https://announcements.nzx.com/detail/422375

you are being a little mischievous Mr Beagle, whilst adjusted funds from operations is very important surely one should use the like for like as a better gauge because this takes into account sale and purchase of properties during the year.....I see this like for like is -0.2% and earnings before tax -1%........hardly alarmist.
I do tend to agree the BTR is somewhat of a poor strategy and new tax deductibility rules will mean they will struggle to maintain dividend, still happy to up as may as I can afford should they slip back to 78cps again (offering a 11% gross yield and a 35% discount to NTA)

Buying into their like for like, you are in effect accepting their strategy that selling assets yielding 9-12% and replacing them with assets like BTR returning 5% is a value accretive process.  At the end of the day they're only going to be able to payout in the future based on adjusted funds from operations after tax and I see that heading down in the years ahead.  Been there and done that with theoretical discounts to NTA.  Buying stocks for yield, all that matters in my book is what they can pay you.  Enjoy the 5.7 cps this year, while it lasts.  (Its 10% gross yield and 29% discount to NTA at 84 cents...certainly not worth that in my opinion)

Quote from: Basil on Nov 27, 2023, 10:30 AMBuying into their like for like, you are in effect accepting their strategy that selling assets yielding 9-12% and replacing them with assets like BTR returning 5% is a value accretive process.  At the end of the day they're only going to be able to payout in the future based on adjusted funds from operations after tax and I see that heading down in the years ahead.  Been there and done that with theoretical discounts to NTA.  Buying stocks for yield, all that matters in my book is what they can pay you.  Enjoy the 5.7 cps this year, while it lasts.  (Its 10% gross yield and 29% discount to NTA at 84 cents...certainly not worth that in my opinion)

I guess you are right. From the point of view of a trader I would see in the coming months (potentially years) not a lot of gains and the risk of lower dividends. As long as Interest rates stay high and property prices are improving along an  "L"-shaped curve things will be tough.

If you look at it however with the eyes of a long-term investor things are quite different.

Their strategy to combine places to work, to live and to shop will be in my view a long term winner. People are sick to spend hours on the roads (and dearly pay for it) and climate change (less driving is better) adds another huge tailwind to support this strategy.

BTR might provide in the short term a lower return, but it provides as well the people needed by the leaseholders in the near shopping mall as customers, and it provides as well the workforce required by the companies close by who are leasing KPG's storehouses. Its not a loss leader, but having easy access to nearby customers and workers makes it more attractive for potential clients to lease a shop in their shopping mall or office space in their office buildings. Guess what happens to the lease income from shopping space and office space in prime locations?

Their property in Drury can only increase in value. The country needs space for more people in the Auckland area, and ideally without adding a lot more pressure on the traffic front. Great if they come in and maybe don't even need a car to go shopping or to work, isn't it?

Ah yes, and the old link between interest rates and real estate stll applies. Interest rates up, real estate down. Interest rates down, real estate up. Now - I agree, interest rates probably won't drop over night, but I'd say the odds that they will be in 2 years from now lower are better than the odds that they will go further up. Wouldn't you say so as well?

I do see property as an essential component of any portfolio, and the time to buy property (as anything else) is when the respective prices are down.

On top of that - I see KPG as an investment into a better future for all of us. We do need property companies helping to break the vicious circle linking economic growth with increased traffic. Our roads are full.

Good post BP and you make a robust case when you include the various ESG aspects.
Strip out all the ESG stuff however, and in my view your case is less convincing and is predicated upon the assumption that by pursuing ESG objectives this will be value and earnings accretive to shareholders in the long run.  I am not so sure.

So how have they gone in the last 10 years https://storage.googleapis.com/kp-corporate-production-web-assets/public/document-feed/KPG_2014-2013-11-11-b.-interim-result-presentation-six-months-ended-30-Sep-13.pdf seeing as they've been on this whole ESG goal pursuit for quite some time?  10 years ago, NTA was $1.16, higher than it is today and annual dividends 6.4 cents, again, higher than today.  Go back even further and I can recall them paying 8.5 cps and NTA being ~ $1.40.  This despite a booming property market for most of the last decade.  Hmmm

It all comes down to whether you believe it's going to be different going forward in the next decade but nothing, absolutely nothing the company has done in the past 20 years has been NTA or eps accretive.  I wonder how many times over the last 10 years, with NTA and dividends going nowhere or downwards, management have used the word "growth" in their presentations.  Hmmm

Quote from: Basil on Nov 27, 2023, 12:08 PMGood post BP and you make a robust case when you include the various ESG aspects.
Strip out all the ESG stuff however, and in my view your case is less convincing and is predicated upon the assumption that by pursuing ESG objectives this will be value and earnings accretive to shareholders in the long run.  I am not so sure.

So how have they gone in the last 10 years https://storage.googleapis.com/kp-corporate-production-web-assets/public/document-feed/KPG_2014-2013-11-11-b.-interim-result-presentation-six-months-ended-30-Sep-13.pdf seeing as they've been on this whole ESG goal pursuit for quite some time?  10 years ago, NTA was $1.16, higher than it is today and annual dividends 6.4 cents, again, higher than today.  Go back even further and I can recall them paying 8.5 cps and NTA being ~ $1.40.  This despite a booming property market for most of the last decade.  Hmmm

It all comes down to whether you believe it's going to be different going forward in the next decade but nothing, absolutely nothing the company has done in the past 20 years has been NTA or eps accretive.  I wonder how many times over the last 10 years, with NTA and dividends going nowhere or downwards, management have used the word "growth" in their presentations.  Hmmm

As we discussed already before - I don't see ESG as a four letter word. While I agree with you that many companies use it as a figleaf to cover up for their bad performance (which is not good), I still can't see any company being long term successful without considering and adapting to societal changes and values.

I realise as well that your extrapolation method mainly seems to be linear (the past is the best guidance to the future). And actually, this might be for a trader a quite appropriate way to do it. Links perfectly into the old adage "The trend is your friend", which gives you typically in random scenarios something like a 60% plus success rate.

Its just - I always try to see what's behind the next corner - and I do see long term huge opportunities for KPG's strategy. Having said that - you could argue as well that no opportunity is big enough that it can't be screwed up by bad management, and this is true as well.

I guess we will need to wait how it plays out - and I assume that we both might use different time windows to assess that.

Quote from: Basil on Nov 27, 2023, 09:28 AMThey keep selling very high yielding assets and investing in BTR at a miserable projected 5%, makes no sense to me whatsoever.
Directors are confident that their transformation program with deliver better returns to shareholders in the future.  It is too early for a Tui ?  The only thing missing was the infamous "point of inflection." 

This is exactly why I invest in ASX property stocks and not Kiwi ones.  This makes zero sense to me either.  I thought they were nuts when they sold Northlands Mall in Christchurch.  Its clear that CBD shopping is dying, and smaller secondary malls aren't doing as well either, while shoppers en masse are being driven to the big malls.  In Christchurch this means the big two - Riccarton and Northlands.  Why sell the creme de la creme of Christchurch shopping sites?

Ditto for IKEA.  Who in their right mind would sell off the IKEA site? I would consider that a gem in terms of retail property.  Instead they are focusing on Drury (povvos out in the sticks are not the most lucrative market) and Build to Rent?  

Reminds me  of "how do you make a million dollars?  Start with a billion and blow it on bad deals". 

Meanwhile, Vicinity in Australia are investing $620M in their Chatswood Chase mall in Sydney, after having bought the other half they didnt already own.  They know what they are doing.  And I know which one I'd rather own.

Quote from: BlackPeter on Nov 27, 2023, 11:24 AMTheir strategy to combine places to work, to live and to shop will be in my view a long term winner. People are sick to spend hours on the roads (and dearly pay for it) and climate change (less driving is better) adds another huge tailwind to support this strategy.

I would disagree, and say that the opposite trend is true.  People are being driven from CBD and small suburban shopping malls to the large shopping malls.  Small suburban malls do not have enough traffic to support specialty stores, so people still have to trek to the larger malls - and while there they will do the rest of their shopping.  Only need to look at the traffic heading to the Westfields the last two weeks. 
 
Small malls in Christchurch are dying while Riccarton and Northlands just keep getting bigger and bigger.  Since rents are usually tied to shop revenues, then the more turnover a store does, the higher the rent.  Shops in malls with low turnover will pay less.  Suburban shopping malls are only good for the basics - supermarket, chemist, cafe, a Warehouse, liquor store, etc.  But you want the Costco's, the IKEA's, the KMarts, the stores that drive traffic not just to themselves, but to everyone located around them.

I suppose you can hope that the concept of a 15 minute city actually does happen, where we are all locked into our local areas and not allowed to leave.  But I'm still optimistic that people will rebel against the concept.  And if not, they'll simply pack up and move to Australia (which will probably be the last bastion of non-wokeness lol)

market seems to like it.....Sp 86cps....I will buy more when Sp is 78cps again

Quote from: KW on Nov 27, 2023, 01:47 PMThis is exactly why I invest in ASX property stocks and not Kiwi ones.  This makes zero sense to me either.  I thought they were nuts when they sold Northlands Mall in Christchurch.  Its clear that CBD shopping is dying, and smaller secondary malls aren't doing as well either, while shoppers en masse are being driven to the big malls.  In Christchurch this means the big two - Riccarton and Northlands.  Why sell the creme de la creme of Christchurch shopping sites?

Ditto for IKEA.  Who in their right mind would sell off the IKEA site? I would consider that a gem in terms of retail property.  Instead they are focusing on Drury (povvos out in the sticks are not the most lucrative market) and Build to Rent? 

Reminds me  of "how do you make a million dollars?  Start with a billion and blow it on bad deals".

Meanwhile, Vicinity in Australia are investing $620M in their Chatswood Chase mall in Sydney, after having bought the other half they didnt already own.  They know what they are doing.  And I know which one I'd rather own.

"Land ownership is typical of IKEA stores worldwide, demonstrating their long-term commitment to the local communities in which they operate. This also enables IKEA to oversee the quality of the store and overall shopping experience." https://www.ikea.com/nz/en/newsroom/corporate-news/ikea-purchase-of-land-at-sylvia-park-complete-pub086f7a70#:~:text=This%20arrangement%20was%20mutually%20agreed,communities%20in%20which%20they%20operate.

So, if you want IKEA to bring foot traffic you sell them a chunk of land. Also, KPG owns all adjacent land and plans extend their Sylvia park shopping mall (which is already biggest in the country and bigger than Chatswood Chase mall in Sydney) to capitalize on IKEA presence

Quote from: Basil on Nov 27, 2023, 09:28 AMHuge and very surprising ~ 26.7% drop in operating earnings and 25%+ drop in the all-important, (because it's used to measure their capability to pay dividends) adjusted funds from operations.  Makes me really wonder with the change in non-deducibility of depreciation next year if they can maintain their dividend going forward, very unlikely in my view.
They keep selling very high yielding assets and investing in BTR at a miserable projected 5%, makes no sense to me whatsoever.
Directors are confident that their transformation program with deliver better returns to shareholders in the future.  It is too early for a Tui ?  The only thing missing was the infamous "point of inflection." 

Just as well it's all going to be brilliant going forward and we can be so confident of this because the company has been so successful with tis developments in the past.  https://announcements.nzx.com/detail/422375

Incorrect. If you listened to the conference call today they said the elimination of commercial building depreciation will have future annual impacts of between $4.5m-$5m on AFFO. This is less than the extra net income that they will generate from BTR 1 Sylvia Park alone, without even including regular rent review increases and completing leasing of 3 te kehu way.

So nope, no danger to dividend. They even turned off DRP this quarter because they said they dont require the extra capital currently.

Also said Drury will start to contribute significantly to AFFO from FY25/26 (from residential superlot sales to developers) - a lot earlier than many expected. This could actually lead to dividend increases in those coming years if they maintain the 90-100% AFFO payout ratio.       

Quote from: LaserEyeKiwi on Nov 27, 2023, 04:09 PMIncorrect. If you listened to the conference call today they said the elimination of commercial building depreciation will have future annual impacts of between $4.5m-$5m on AFFO. This is less than the extra net income that they will generate from BTR 1 Sylvia Park alone, without even including regular rent review increases and completing leasing of 3 te kehu way.

So nope, no danger to dividend. They even turned off DRP this quarter because they said they dont require the extra capital currently.

Also said Drury will start to contribute significantly to AFFO from FY25/26 (from residential superlot sales to developers) - a lot earlier than many expected. This could actually lead to dividend increases in those coming years if they maintain the 90-100% AFFO payout ratio.       

I very much suspect there will be a very pleasant surprise when we get to see the price achieved for any Drury residential super lot sale given the rezoning that KPG have secured for Drury and the crazy LUC 1,2 & 3 rules now in place

Craig's dont like the result

KIWI PROPERTY GROUP (DOWNGRADE TO UNDERWEIGHT) – 1H24 AFFO dropped -25.4% to NZ$48.6m although this was primarily driven by asset disposals over the past year or so. While KPG reaffirmed dividend guidance for FY24e at 5.7cps, Hill remains more cautious on the medium-term outlook, with KPG's Build to Rent project at Slyvia Park targeting a relatively skinny yield on cost (4.5-5.0%) - on ambitious although not impossible rental price points. On a yield plus growth (to FY27e) analysis KPG now screens at the bottom of the pack in terms of sector returns at 0.3% (sector +5.3%) and in conjunction with a small lift in his equity beta this drives a 5cps reduction in his TP to 78cps. Downgrade to Underweight accordingly.   

Broker speak translated into English.
Strong Buy = BUY
Buy = Accumulate
Overweight = Hold or accumulate if you don't have enough
Hold = Reduce
Underweight = SELL

I think those rental price assumptions for BTR are very optimistic, as is the very modest net yield.  I predict they will be very slow to fill the apartment block and costs for things like methamphetamine contamination will be much higher than they are forecasting.

Exciting times ahead for two of most discussed and loved stocks

Resido on one hand and The Helier on the other

Quote from: Basil on Nov 28, 2023, 11:49 AMBroker speak translated into English.
Strong Buy = BUY
Buy = Accumulate
Overweight = Hold or accumulate if you don't have enough
Hold = Reduce
Underweight = SELL

Agree............... SELL

Quote from: winner (n) on Nov 28, 2023, 11:50 AMExciting times ahead for two of most discussed and loved stocks

Resido on one hand and The Helier on the other

Lose 30% on a $3.3m apartment ($1m) and opex is $550 per week. What a deal !
Makes renting a penthouse apartment at the Resido look very cheap lol

FB not keen either

While KPG maintained FY24 DPS guidance, we forecast this to be cut in FY25 and remain at these levels medium term, largely due to: (1) higher tax, (2) continued interest cost pressure, and (3) low initial returns from developments

Quote from: Shareguy on Nov 28, 2023, 11:44 AMCraig's dont like the result

KIWI PROPERTY GROUP (DOWNGRADE TO UNDERWEIGHT) – 1H24 AFFO dropped -25.4% to NZ$48.6m although this was primarily driven by asset disposals over the past year or so. While KPG reaffirmed dividend guidance for FY24e at 5.7cps, Hill remains more cautious on the medium-term outlook, with KPG's Build to Rent project at Slyvia Park targeting a relatively skinny yield on cost (4.5-5.0%) - on ambitious although not impossible rental price points. On a yield plus growth (to FY27e) analysis KPG now screens at the bottom of the pack in terms of sector returns at 0.3% (sector +5.3%) and in conjunction with a small lift in his equity beta this drives a 5cps reduction in his TP to 78cps. Downgrade to Underweight accordingly. 

Has nobody told them that Term Deposits are paying 6%?  All these property companies chasing 4% returns in a world where the cost of finance exceeds 8% are not doing their shareholders any favours.

Quote from: KW on Nov 28, 2023, 12:56 PMHas nobody told them that Term Deposits are paying 6%?  All these property companies chasing 4% returns in a world where the cost of finance exceeds 8% are not doing their shareholders any favours.

They'll never admit this but they've got themselves caught out in a yield trap.  When they were planning and consenting this a few years ago 5% looked like a half decent return assuming, (I don't), you believe all the ESG nonsense and claimed synergies and value add having these apartments next to Silvia Park brings in terms of extra customers shopping there.   According to KPG they are following the best international trends with these BTR right next to a mall that allegedly have been very successful overseas.  (No doubt fueled by some of the United Nation's agenda around carbon emissions). I guess once they pressed the button on approving the build contract there was no going back.

I think more important than this mistake is that nothing they have ever done before has been value or earnings accretive over the last 30 years.  Really, you have to question what's driving the board and management.  There seems a very heavy woke agenda driving ESG stuff but at what price to shareholders. Selling assets yielding as much as 12% and investing in build to rent that will be lucky after real costs to net 4% is ESG madness run amuck in my book.  I did a comparison of how this has compared to the property index a while back, (not inflation index).  Residential property index is up a whopping 600%+ in the last 30 years and this has gone nowhere. Really that's a shocking inditement on their business model. The only strong growth over time with this has been in management's fat salaries.

Investing in KPG is analogous to being on a road to nowhere.   Holders seem to believe it's all going to be different going forward and KPG's decades long history of declining NTA and dividends in real terms was somehow an aberration. 

folks, I realize that it must be property fund bashing time, and whoever wants can have a go. No investment experience required.

I assume everybody else understands that its not the role of property investment funds to duplicate Berkshire Hathaway and accumulate heaps of wealth without ever paying  dividends. They are (at least in NZ) organised to act as tax efficient pseudo bonds.

Quote from: KW on Nov 28, 2023, 12:56 PMHas nobody told them that Term Deposits are paying 6%?  All these property companies chasing 4% returns in a world where the cost of finance exceeds 8% are not doing their shareholders any favours.

Do you realise that you need to deduct your personal taxes from the 6% bond yeild youmentioned, leaving, if you are lucky 4%for yourself. KPG's dividend however comes out of a PIE - taxes are already paid. I prefer to receive the 7% tax free KPG currently pays compared to the 6% from your star bond which needs to be taxed, but each to their own.

Quote from: Basil on Nov 28, 2023, 01:13 PM...

Investing in KPG is analogous to being on a road to nowhere.   Holders seem to believe it's all going to be different going forward and KPG's decades long history of declining NTA and dividends in real terms was somehow an aberration. 

OK, lets see ...

I assume you realize that property is over the long run appreciating with something like 6% to 8% p.a?

If you look at KPG, they paid over the last decades something like that amount basically taxfree to their investors year after year. So - why would we expect that their value appreciates on top of the dividend? Would a bond paying interest appreciate (other than thee usual link into interest rates)?

In a diversified portfolio there are a lot of good reasons to add Property funds like e.g. KPG to the mix. If you do your numbers, then you will find that over the long term the return from them is better (and - depending on your personal tax situation - often more tax efficient) than the return from bonds ... and the risks are lower than with most other shares. Sure - they are cyclical as well, and whoever wants to further improve their return will buy them when low (like now) and sell them when high.

Remember - they are cyclical, i.e.you can rinse and repeat.

However - as we have seen, they are not just nice little money spinners, but some people who don't understand them really love to bash them, which keeps the SP down.

Win-win.

Peter . I think KW statement was about Kiwi getting a 4%/5% rental yield on these BTR things

Quote from: BlackPeter on Nov 28, 2023, 02:01 PMDo you realise that you need to deduct your personal taxes from the 6% bond yeild youmentioned, leaving, if you are lucky 4%for yourself. KPG's dividend however comes out of a PIE - taxes are already paid. I prefer to receive the 7% tax free KPG currently pays compared to the 6% from your star bond which needs to be taxed, but each to their own.

No, I was making the point that they would be better off putting their own money into the bank on term deposit, rather than investing it in a 4% return project. 

Just for comparative purposes, a few suburban "convenience malls" (as the Aussies call them) have traded recently, on 5.5%-5.75% yields.  One in a tiddly town in QLD sold for 7.7% yield but thats probably an outlier.  So if they wanted to recyle their IKEA sale capital there are plenty of good commercial opportunities going.  Note that TD rates in Aus are 5.10% currently.

And I'm not property bashing.  In fact, I'm buying AREITS at the moment.  But good quality ones, that have longevity in a high interest rate world.  Because if you cant cover your financing costs over the long term you're in trouble.

So management think people will be rushing to rent at Sylvia Park and pay $800 PW average price

I guess they think the quality and location will sell it (and that may be the case). Long leases not so sure.

We have been landlords for a long time. My experience is that renters do not want to sign long leases. They want the ability to move out when they want to, but they don't want to be locked into long leases. The most I can get a tenant to sign on a fixed term contract is two years and even that is hard work sometimes. Most are on 1 year.

It will all come down to the lease and what they offer. Car parks for example. To work it will have to have an out for tenants to be a success. Standard BTR have 56 days for a 10 year lease.

No question the location is first class. The shops, restaurants, bars below will be a big drawcard as well as the train station and access to the motorway.

A check on Trademe has the highest price properties in Mt Wellington as

1 bed $470
2 bed $720

No question the rents are going up and yes lots of demand. At the end of the day the price people can pay is determined by their income so I guess will see.

QuoteI assume you realize that property is over the long run appreciating with something like 6% to 8% p.a?

If you look at KPG, they paid over the last decades something like that amount basically taxfree to their investors year after year. So - why would we expect that their value appreciates on top of the dividend?
Blackpeter

I wasn't comparing KPG to bonds.  To be crystal clear, what I was saying is that the residential property index has gone up 600%+ in the last 30 years and KPG have not gone up at all.
Sure KPG have always paid out most of the income earned each year but a residential property would also have provided a yield all those years too and here's where I have a problem with KPG's development strategy.  If you go back 15 years they paid out 8.5 cps, next year they will struggle to meet this years 5.7 cps.  How on earth is that possible that in real inflation adjusted terms dividends now are only a fraction of what they were ?  Can you please explain that to me ?

Perhaps a worked example would help illustrate my point.   If I had of kept my first home as a rental 30 years ago it would have gone up about 600%, houses in Glen Eden Auckland are about $1m now and I paid $139K for it in 1991, ~ 7.2 times my money, but it would now be returning me 24% gross yield on initial cost, i.e. the yield on cost goes up over time not down.  It's remarkable that not only do KPG assets go down in real inflation adjusted terms over time but so do their dividends.  How on earth has that happened ?
Management have to be a very special breed of Muppets to achieve such "remarkable success".

I assume you've heard of the term "dividend trap"  Well, guess what, you're in a classic dividend trap with KPG with both the real inflation adjusted value of your assets and earnings declining over time.  Just as well the last 30 years are an unfortunate aberration (despite almost all being boom property years) and it's all going to be so much better going forward...or so KPG management would have you believe.

Quote from: Basil on Nov 28, 2023, 03:56 PMI wasn't comparing KPG to bonds.  To be crystal clear, what I was saying is that the residential property index has gone up 600%+ in the last 30 years and KPG have not gone up at all.
Sure KPG have always paid out most of the income earned each year but a residential property would also have provided a yield all those years too and here's where I have a problem with KPG's development strategy.  If you go back 15 years they paid out 8.5 cps, next year they will struggle to meet this years 5.7 cps.  How on earth is that possible that in real inflation adjusted terms dividends now are only a fraction of what they were ?  Can you please explain that to me ?

...

Actually - its not that hard.

There is a good reason people call them quasi bonds.

You put in one dollar, you get out your interest rate every year of say 6 to 8 cents, and whatever is left the manager needs to use to pay for maintenance. You realise that it does cost money to maintain the value of any property, do you? And I suppose the manager wants some return as well, he is not a welfare organisation, either. Fair enough.

If you get out, you get your dollar back, and same as with bonds it might be a bit more (when interest rates are low) or a bit less (if interest rates are high).

Same as a bond ... or do your bonds deliver capital gains?

I am sure you understand the basics of investment and property management, don't you?

Ever thought about how much money the owner of a house needs to spend before they can enjoy their 600% "return"? Of course you need to deduct rates, insurance payments, maintenance repairs, mawing the lawns and many other things. Still sure they can cash in 600% - or is this just the payment they get to cover all the expenses they had accumulating over several decades??

As an owner of KPG shares all these things are taken care off, but of course - there is no free lunch.

So you get your dollar back after 30 years and its worth about 40 cents after inflation has eaten away at it.
Sounds too good to be true.

Interesting to compare Vicinity's redevelopment metrics for Chatswood Chase with KPG's BTR development

Chatswood Chase redevelopment metrics on 100% ownership basis 
• Development cost: $620 million 
• Commencement of main construction works: March 2024 
• Completion: October 2025 
• Expected returns: Stabilised yield of >6.0% and Internal Rate of Return of >10.0% 
• Forecast valuation on stabilisation5 : approximately $1.5 billion, representing an estimated development profit of >$200 million 
• Pre-leasing of major development is well progressed; >45% of income secured via heads of agreement

Quote from: Basil on Nov 28, 2023, 05:20 PMSo you get your dollar back after 30 years and its worth about 40 cents after inflation has eaten away at it.
Sounds too good to be true.

Look, as with any other investment you can choose whether you want to enjoy the income or whether you want to reinvest it.

If you put in your dollar and reinvest all returns over 30 years, than obviously you will end up (assuming 7% average dividends) with $7.61, which happens to be pretty close to the 600% return you boosted for housing over 30 years. Not even magic, it is just what any asset with around 7% annual return will deliver.

Obviously - for your house, I hope somebody else paid for your rates, for insurance, for maintenance  and for management otherwise you won't get the 600% you are dreaming off.

While I understand that people want to eat their cake and have it too - I found so far nobody who actually managed to achieve that.

So - enjoy the returns and get the principal back, or reinvest your returns and enjoy the big payment at the end (like with the house ...) - or pick something in between.

Investment 101.

Quote from: KW on Nov 28, 2023, 07:39 PMInteresting to compare Vicinity's redevelopment metrics for Chatswood Chase with KPG's BTR development

Chatswood Chase redevelopment metrics on 100% ownership basis
• Development cost: $620 million
• Commencement of main construction works: March 2024
• Completion: October 2025
• Expected returns: Stabilised yield of >6.0% and Internal Rate of Return of >10.0%
• Forecast valuation on stabilisation5 : approximately $1.5 billion, representing an estimated development profit of >$200 million
• Pre-leasing of major development is well progressed; >45% of income secured via heads of agreement

I know a lot of organisations who started with big dreams ... and most of them don't achieve them. Obviously - if they measure these big dreams using non standardised measurements (i.e. they can make up the result on the go), than this makes it for them still a bit easier to claim afterwards that they have achieved them.

But apart from that - you understand that the purpose of the BTR development might not be to squeeze maximum dollars out of the rent? It well might be to increase the value of the other venues they are leasing out - providing close by workforce for the office buildings and close by customers for the malls. 

it is flogging a dead horse to attempt to justify KPG as a great investment, reality is as a long term investment this has turned out to be a dog, just look at the divi's minus the capital loss over the last 10 years, I think after tax and minus capital loss it is equal to an average 3.5% overall yearly return.
In saying that I am happy buying under 80cps as the property part of my divi portfolio, suspect when it trades ex divi next week a chance to add under 80cps again will eventuate

Jenny Ruth on property investments

Has a bit about how analysts reckon KPG will be cutting divies next couple of years and also having doubts about the sucess of the BTR strategy

https://justthebusinessjennyruth.substack.com/p/investors-learn-the-perils-of-property?publication_id=1827355&utm_campaign=email-post-title&r=1rwf26In

Quote from: winner (n) on Dec 12, 2023, 08:05 AMJenny Ruth on property investments

Has a bit about how analysts reckon KPG will be cutting divies next couple of years and also having doubts about the sucess of the BTR strategy

https://justthebusinessjennyruth.substack.com/p/investors-learn-the-perils-of-property?publication_id=1827355&utm_campaign=email-post-title&r=1rwf26In

Mmh - the article appears to be a bit short sighted and a bit thin to me.

Sure - investing into KPG a couple of years ago (when it was at a cylical high) was probably not such a good idea, but this does not mean that it is a bad idea to do that now.

And nobody - not even the government forced people to buy into KPG at its highs  ... so what exactly is she complaining about?

A proper analysis of the sector and the company would look into

What are the likely dividends over the next say 20 years?
What is the likely share price in 20 years?

Obviously - nobody (including Jenny) does know, but she could have used at least some sensible long term values from the past, instead of just riding on the SP drop over the last couple of years (inversely correlated with the interest rates) and mentioning a potential short term reduction of dividends.

Real estate returns longterm (100 year plus window) something like 8% pa ... this is capital gains plus income (minus inflation) - and obviously if one takes any arbitrary smaller time window, one can design exactly the returns one wants to demonstrate to either trash or praise the industry.

Investors need to consider their tax situation. For many it is more tax efficient to get their income through a PIE fund (like KPG) then as interest or (normal) dividends. I like the tax efficiency of PIEs, and find it hard to understand that somebody analysing an investments performance is not even mentioning this point.

Real estate is cyclical (well, yes, she mentions that, but not how to use it), and the cycles are closely linked into interest rates. Buying REITS when interest rates are high and real estate is under pressure (like now) and selling them when the interest rate is low and Real estate prices are high makes a lot of sense. Drawing an arbitrary window across the stock and whinging about insufficent income makes not. 

Build to Rent works well in many countries around the world. I know a number of companies in Germany doing that for the last 100 years, and if it wouldn't pay, nobody would invest into them, right?

Sure - it is a new concept in NZ and we need to see how it develops. There clearly is a need for BTR, and where there is a need there is typically as well a reward. Just rubbishing BTR without providing any arguments is a bit thin.

So - I don't know either how the next couple of years will go, but I expect KPG to keep paying a sensible dividend (they do have an income after all). If it goes 10% or 15% down for a couple of years, so what?

I expect interest rates being currently at or close to peak, and I expect REITS to move upwards as soon as interest rates drop (this is just the pseudo bond effect). I see no reason why KPG should behave differently. No idea, where the SP will be in a year or two, but in (say) 5 years I expect it to be higher, and in the interim I still will have received a sensible (and tax-efficient) dividend.

Ah well, just my opinion, and I don't even plan to charge for that :) ;

Hill says his information is that Kiwi will be asking $660 per week rent for the one-bedroom and $830 for the two-bedroom units, and notes that other BTR developments in suburban Auckland are priced at up to 35% cheaper.

Unless immigration continues at a great pace (and that might happen) I fail to see how they can fill it up with those rents.  I do have concerns that KPG take the easy money and sub lease a good portion to social housing which will have big ramification's.

I do agree with BP and Snapiti that KPG is starting to look attractive. 

Disc.  Not a holder currently

Quote from: Shareguy on Dec 12, 2023, 02:02 PMHill says his information is that Kiwi will be asking $660 per week rent for the one-bedroom and $830 for the two-bedroom units, and notes that other BTR developments in suburban Auckland are priced at up to 35% cheaper.

Unless immigration continues at a great pace (and that might happen) I fail to see how they can fill it up with those rents.  I do have concerns that KPG take the easy money and sub lease a good portion to social housing which will have big ramification's.

I do agree with BP and Snapiti that KPG is starting to look attractive. 

Disc.  Not a holder currently

I don't know Hill, but whoever he is, he must have amazing insider knowledge into KPG and as well access to a secret source of affordable and new rentals in Auckland. Did he tell anybody?

So he says the KPG 2 bedroom units are $830 per week. I have no clue, whether this is true, but lets take it at facevalue.

He says other (I suppose comparable and new) rentals are 35% cheaper - which would be $540 per week for a new 2 bedroom unit in good location in Auckland.

That's what you would pay in rural Canterbury, but Auckland? Are we sure he isn't mixing up 2 bed room units with garages - or is this the same thing in Auckland?

Me ol mate Snapper is pretty cunning I reckon.  If you're going to buy this thing you need to get it dirt cheap, like when it screams cheep like a Budgie, 78 cents.
I think they are very optimistic with those rental prices and there's a good chance they are just as optimistic when it comes to the under budgeted level of tenant defaults and major damages.  To be fair BP, the article said up to 35% cheaper.  $830 for 2 bedrooms or $660 for 1 does sound like a lot to me.
Building and getting a 4-5% projected return, (assuming the project is completed on budget) is really a mistake with hindsight, (looked okay-ish at the time of project commencement), but will they really get even that very modest yield?

KPG might do an Oceania ....build heaps of rental units and then can't find 'tenants' for them ...rhetoric seems awfully similar

Quote from: winner (n) on Dec 12, 2023, 04:48 PMKPG might do an Oceania ....build heaps of rental units and then can't find 'tenants' for them ...rhetoric seems awfully similar

Are you saying we have already an oversupply of rentals in New Zealand? Its great to hear that our new government was that quick to fix the housing crisis ... now they just need to tell people.

I think the crux of the issue for both companies is do people want to pay those prices or perceive them as fair and reasonable for what's provided ?
$830 a week for 2 bedroom with KPG is not that dissimilar to OCA wanting 15% DMF fee on a $350K care suite, (works out to ~ $1000 per week).

Quote from: Basil on Dec 12, 2023, 05:49 PMI think the crux of the issue for both companies is do people want to pay those prices or perceive them as fair and reasonable for what's provided ?
$830 a week for 2 bedroom with KPG is not that dissimilar to OCA wanting 15% DMF fee on a $350K care suite, (works out to ~ $1000 per week).

Mr Stubbs and his Simplicity and other players seem to be pretty busy building rentals ....at muncher lower prices they say

Quote from: Basil on Dec 12, 2023, 05:49 PMI think the crux of the issue for both companies is do people want to pay those prices or perceive them as fair and reasonable for what's provided ?
$830 a week for 2 bedroom with KPG is not that dissimilar to OCA wanting 15% DMF fee on a $350K care suite, (works out to ~ $1000 per week).

I realise that you enjoy both to bash OCA as well as to wind people up, but this is still pretty strong tobac and skirting on misleading. From memory - the OCA DMF is 15% for year 1, 10% for year 2 and 5 % for year 3 ... any longer and no further DMF is due :); Makes these cost per month at an average stay time of 3 years looking significantly more friendly than as per your calculation, doesn't it?

Given that OCA occupancy rates are above 90% (and rising) I suppose they seem to find as well a good number of people happy with their terms.

I am sure KPG BTR won't be any different, so you try to enjoy the joy of bashing before any confirmed numbers are available, don't you?

Waiting for a bashing Christmas ...

I apologise for mentioning Oceania on this thread ....I should have known better

Please forgive me ...promise not to do it again

And no point in deleting the post as it's been 'quoted' in replies

not

Quote from: Basil on Dec 12, 2023, 03:54 PMMe ol mate Snapper is pretty cunning I reckon.  If you're going to buy this thing you need to get it dirt cheap, like when it screams cheep like a Budgie, 78 cents.
I think they are very optimistic with those rental prices and there's a good chance they are just as optimistic when it comes to the under budgeted level of tenant defaults and major damages.  To be fair BP, the article said up to 35% cheaper.  $830 for 2 bedrooms or $660 for 1 does sound like a lot to me.
Building and getting a 4-5% projected return, (assuming the project is completed on budget) is really a mistake with hindsight, (looked okay-ish at the time of project commencement), but will they really get even that very modest yield?

not so sure about cunning......I do have a good understanding of the capital wealth destruction this company has given it's investors over a long period of time so the price one pays has to reflect a high yield to compensate.......happy to buy under 80cps when offered

Quote from: snapiti on Dec 12, 2023, 06:54 PMnot not so sure about cunning......I do have a good understanding of the capital wealth destruction this company has given it's investors over a long period of time so the price one pays has to reflect a high yield to compensate.......happy to buy under 80cps when offered

Both eyes wide open, good for you mate.

Quote from: Basil on Dec 12, 2023, 03:54 PMMe ol mate Snapper is pretty cunning I reckon.  If you're going to buy this thing you need to get it dirt cheap, like when it screams cheep like a Budgie, 78 cents.
I think they are very optimistic with those rental prices and there's a good chance they are just as optimistic when it comes to the under budgeted level of tenant defaults and major damages.  To be fair BP, the article said up to 35% cheaper.  $830 for 2 bedrooms or $660 for 1 does sound like a lot to me.
Building and getting a 4-5% projected return, (assuming the project is completed on budget) is really a mistake with hindsight, (looked okay-ish at the time of project commencement), but will they really get even that very modest yield?

I have some KPG at a nice low average price, and really like the current business and future prospects, and the sustained quarterly dividends and yields.

I've deleted the rest of my post, on reflection I'm not worthy of an opinion having only posted occasionally, apparently.

 

Quote from: Buzz on Dec 12, 2023, 07:40 PMI have some KPG at a nice low average price, and really like the current business and future prospects, and the sustained quarterly dividends and yields.

I've deleted the rest of my post, on reflection I'm not worthy of an opinion having only posted occasionally, apparently.

 

Hi Buzz, I (and I think most of the readers here) do enjoy your contributions. While I don't remember (or know) what incident your concluding comment refers to - everybody is entitled to their opinion, and in your case I can't really remember that you ever expressed your opinion in an inappropriate way.

So - please ... let these posts come in!

Looks like someone likes them - decent volume both Friday and so far today.

Bond prices rising and yields falling (or have fallen) maybe has some influence.

Yes, Sylvia Psrk busy as

Boxing Day shoppers have also descended on Sylvia Park, causing stressed retail workers to burst into tears.

https://www.nzherald.co.nz/nz/boxing-day-sales-retailers-in-tears-as-crowds-descend-onto-sylvia-park/FJ5QXOMPEJCZFOD3ZCPWD7EILI/

I think this is a good move but would like to see the agreement in detail. KPG maybe have concerns about the rent prices they were expecting and issues with renting and demand. Otherwise why would you do this when they were promoting a community of long term renters with average rent of $800 Pw per unit from memory.


https://www.nzx.com/announcements/427017

I smell a rat, (with apologies to Woolworth Dunedin lol).  Lack of demand from tenants at their asking prices ?

Looks a good deal for both Urban Rest and KPG to me.

Quote from: Basil on Feb 28, 2024, 03:11 PMI smell a rat, (with apologies to Woolworth Dunedin lol).  Lack of demand from tenants at their asking prices ?

We own a 3 BRM 110 2m apartment under 10 years old in Panmure in gated complex with internal garage and get $700 PW.

Quote from: Shareguy on Feb 28, 2024, 04:04 PMWe own a 3 BRM 110 2m apartment under 10 years old in Panmure in gated complex with internal garage and get $700 PW.

Makes you think eh.  Friend rents a very large, suitable for his extended family, (~ $2m value) 4 bedroom home in West Harbour with city and sea views for $800 a week.  Does make you wonder why someone would pay $800 pwk for a 2 bedroom unit at Sylvia park.  Oh well, I suppose KPG's management know best after all their shares have been such an outstanding success being priced lower now than 25 years ago despite the real estate market being up ~ 500% in that time.
"Trust us we know what we are doing" Thanks, but no thanks lol

Quote from: Basil on Feb 28, 2024, 03:11 PMI smell a rat, (with apologies to Woolworth Dunedin lol).  Lack of demand from tenants at their asking prices ?

I am not surprised you imagine the smell of a dead rat in the ointment - fits well to your previous narrative. Do they call this conviction bias?

Obviously - with BTR only starting in NZ, one could see this as well as a sensible diversification strategy for their first big object - and as far as I can see, they do make money with it.

I'd see it as a sensible strategy to fill the object fast - without the need to do all the management by themselves, but hey - why would anybody assume that anything they might do could be sensible?

Kiwi Property valuations hold firm despite headwinds

4/4/2024, 9:56 am GENERAL

Kiwi Property today announced its draft valuations for the six months ended 31 March 2024, recording a 0.1% or $3.6 million increase in the fair value of its property portfolio, which was expected to be worth $3.2 billion at the end of the period.

Kiwi Property Chief Executive Officer Clive Mackenzie said: "It's encouraging to see the value of our diversified property portfolio holding firm, despite the slow economy and high interest rate environment.

"The sustained performance of assets such as Sylvia Park and The Base is a testament to their resilience and highlights the merit of our mixed-use strategy. While the market has seemingly priced-in further write-downs of our property portfolio, based on the latest valuations, those concerns may be overdone."

The draft valuations are expected to result in the following movements through the period:
• Mixed-use portfolio: +0.8% or +$16.0 million, underpinned by stable capitalisation rates and robust trading.
• Office portfolio [Note 1]: -1.9% or -$16.2 million, due to continued headwinds in the office sector.
• Retail portfolio: -0.4% or -$0.6 million, with valuations flat in aggregate.
• Other properties: +3.1% or +$4.5 million, reflecting the continued progress of earthworks at Drury.
• Net tangible asset backing per share: $1.17. No change.

Kiwi Property's draft asset valuations are subject to final independent audit, finalisation of year-end book values and will be confirmed in the company's annual results for the year ended 31 March 2024, due to be released on 27 May 2024.

ENDS

Note:
1. Includes assets held for sale.

Contact us for further information:

Campbell Hodgetts
Head of Communications and Investor Relations
campbell.hodgetts@kp.co.nz

Unfortunately the market seems to disagree, like with all the other reits. It really triggers me that they don't even open a buy back facility with this kind of discount. In theory buying and cancelling KPG shares gives an instant zero-risk 40% capital appreciation on any money spent doing so, as if any of the other stuff they want to build would offer that.

Disc: hold unhappily

Quote from: Plata on Apr 04, 2024, 09:19 PMUnfortunately the market seems to disagree, like with all the other reits. It really triggers me that they don't even open a buy back facility with this kind of discount. In theory buying and cancelling KPG shares gives an instant zero-risk 40% capital appreciation on any money spent doing so, as if any of the other stuff they want to build would offer that.

Disc: hold unhappily

If they had the cashflow to buy back shares wouldn't it be better to up the dividend. Or are you suggesting borrowing to buy back shares. Haven't higher interest rates already shown what a crock NTA is for the property companies?

Quote from: Plata on Apr 04, 2024, 09:19 PMUnfortunately the market seems to disagree, like with all the other reits. It really triggers me that they don't even open a buy back facility with this kind of discount. In theory buying and cancelling KPG shares gives an instant zero-risk 40% capital appreciation on any money spent doing so, as if any of the other stuff they want to build would offer that.

Disc: hold unhappily

Why unfortunately? It is normal that the market disagrees with various valuation methods, and as we know, sometimes the market turns out to be right and sometimes the valuation. Just one of these things that nobody can predict the future.

I guess it depends on your investment strategy. If you are one of these people who love to run with the flock (momentum investors), than clearly KPG is currently not a good buy for you (though it might be - it just touched the MA100).

If you are relying on fundamentals, than you would consider it as fortunate if the market
undervalues your target. I like to buy quality on special and never understand the people who only buy things if they are dear.

Just imagine being a wild horse in a herd of mustangs. Some run always with the herd and stampede where everybody goes. Obviously - this is sometimes a valid strategy (otherwise mustangs would not have survived for a long time), but sometimes it leads down the abyss (or into captivity).

Others look at the big picture and notice only with interest what the herd is doing. Results sometimes in disappointments, but at least you know that you are the master of your own destiny.

Re your other point (why don't they buy back), you might be right ... but obviously the question is  whether they can do better things with this money looking at the long run. KPG is a property company and I see it as positive if they find opportunities in this area instead of speculating with or against the market.

Anyway ... never good to be an unhappy holder. We don't you sell?

It's "unfortunately" because I have no desire to up my holding at the current price nor sell it for such a discount. Re the buyback I think about it like this. 1 dollar spent buying and cancelling shares at the current prices entitles you to $1.37 in net property assets that return around $0.082 per year. What property could you and I buy that would return that sort of money? If I knew that I'd be a property mogul by now. I think I did a post on this aaages ago and actually calculated the NTA and dividend accretion that a buyback could achieve. Regardless, KPG has never grown anything over the years despite capital raises, significant inflation in asset values and rents. The way I see it the only way this could occur is people making decisions have underestimated risks and overestimated returns on various investments.

I see it like so:
Borrow money, build something - Hopefully higher returns, investment case built on a wide range of forecasts 10+ years into the future. Predictions are hard, and KPGs performance over the last 20 years suggests they struggle at them.

Borrow money, buyback shares - Highly calculable returns, investment case built on forecasts of company costs, rental yields, asset valuations. Company costs for KPG can be predicted with reasonable accuracy given the simple nature of being a landlord, and with knowledge of all the rental agreements as landlord these can be predicted into the future too.

At this time I see daily the potential return the 2nd option could give, I have not seen any estimated returns for Drury. I feel that if the returns are even remotely comparable, given the risk differences, a buyback is the better choice for KPG. The only time I would say this is not the case, is if Drury is all or nothing. I.E. do drury and commit all liquidity into a hopefully income generating venture, OR buyback to the 5% limit then do nothing with the remaining liquidity because there isn't enough to proceed with Drury etc. They should be putting any spare liquidity (within the appropriate gearing range) into buyback and if there isn't enough for it, selling a property (so long as it isn't at a big discount to book value obviously)

Quote from: Plata on Apr 05, 2024, 07:55 PMIt's "unfortunately" because I have no desire to up my holding at the current price nor sell it for such a discount.

Thank you for your considered post. I have a different view, having accumulated a significant (relatively) portfolio position while the stock is in the doldrums, all the while enjoying an out-sized quarterly dividend.

My positon is 'well placed', imo, for a mid-long term outcome with sustained above average income while we wait for it to happen. Happy to hold as part of a currently well balanced portfolio.

Quote from: Plata on Apr 05, 2024, 07:55 PMIt's "unfortunately" because I have no desire to up my holding at the current price nor sell it for such a discount. Re the buyback I think about it like this. 1 dollar spent buying and cancelling shares at the current prices entitles you to $1.37 in net property assets that return around $0.082 per year. What property could you and I buy that would return that sort of money? If I knew that I'd be a property mogul by now. I think I did a post on this aaages ago and actually calculated the NTA and dividend accretion that a buyback could achieve. Regardless, KPG has never grown anything over the years despite capital raises, significant inflation in asset values and rents. The way I see it the only way this could occur is people making decisions have underestimated risks and overestimated returns on various investments.

I see it like so:
Borrow money, build something - Hopefully higher returns, investment case built on a wide range of forecasts 10+ years into the future. Predictions are hard, and KPGs performance over the last 20 years suggests they struggle at them.

Borrow money, buyback shares - Highly calculable returns, investment case built on forecasts of company costs, rental yields, asset valuations. Company costs for KPG can be predicted with reasonable accuracy given the simple nature of being a landlord, and with knowledge of all the rental agreements as landlord these can be predicted into the future too.

At this time I see daily the potential return the 2nd option could give, I have not seen any estimated returns for Drury. I feel that if the returns are even remotely comparable, given the risk differences, a buyback is the better choice for KPG. The only time I would say this is not the case, is if Drury is all or nothing. I.E. do drury and commit all liquidity into a hopefully income generating venture, OR buyback to the 5% limit then do nothing with the remaining liquidity because there isn't enough to proceed with Drury etc. They should be putting any spare liquidity (within the appropriate gearing range) into buyback and if there isn't enough for it, selling a property (so long as it isn't at a big discount to book value obviously)

Look, I do know and understand the theoretical case for BuyBacks. It's just in practise it doesn't seem to work that way. While we can find some examples where buybacks did (at least temporarily) lift the SP, there are various spectacular examples where Buybacks have been the last straw for the SP to tank. The outcomes of BuyBacks tend to be all over the place, and I have not seen any evidence yet that buybacks have regularly a positive outcome for shareholders (well, they have not).

I suppose this has something to do with nobody being able to predict the future, it is a prestige thing (hey this super board used other peoples money to support their share price and egos) and it has as well something to do with a huge hype component in ALL share prices (which just can't be predicted).

Personally I prefer if directors and management focus on the original purpose of their business and keep that growing and improving instead of diving into the world of smoke and mirrors, pretending to know when their share is undervalued (lots face it, they have not more clues than anybody else) and they can't see the future either.

Re Dury ... I do see this as a huge opportunity for KPG, and it is one of these things where you can't go in half-a*sed. Either they go in with all they've got and they can create the environment they think they need, or they are just one of many real estate brokers hoping for things working out to their advantage. If they do the latter, then, no doubt, somebody else will take the cream.

I prefer a company which is kicking (and using the appropriate amount of resources) instead of just spitting.

I don't care about it lifting the SP, although it would be nice. I want it to lift the dividend. And anyone can predict the future, its just that it is hard to do so accurately. Predicting your own company costs, rents and to some extent property valuations as a landlord is probably some of the easier predictions one can make.

Quote from: Plata on Apr 06, 2024, 11:37 AMI don't care about it lifting the SP, although it would be nice. I want it to lift the dividend.
...

I think this is one of these "have your cake and eat it too" exercises. Often tried, but never achieved.

Have a think about it. A buyback is only a good idea if the board knows that the shares will be in future more worth than they are now. Now - directors are only humans, so they don't know. An analysis of past Buybacks will demonstrate that to you.

If it doesn't - there is an easy solution ... if you do know that the shares will be more worth in future, than buy all the shares you can get and reap the benefits. No need to share them with fellow shareholders.

Quote from: Plata on Apr 06, 2024, 11:37 AM...
And anyone can predict the future, its just that it is hard to do so accurately. Predicting your own company costs, rents and to some extent property valuations as a landlord is probably some of the easier predictions one can make.

Correct - everybody can predict the future. My bad. What I obviously meant is while everybody can make predictions, nobody is able to get a statistically relevant sample of correct predictions.
 
Oh dear - and predicting property valuations easy as landlord? I invite you to find out which landlord (or analyst) predicted correctly the real estate price development over the last say 3 decades without the benefit of hindsight.

Similar related to costs ... Who would have predicted only two decades ago what GFC, later Covid and subsequent negative interest rates do to the money supply and to the development of wages and building costs?

Why would you think that the future development will be any less erratic than the past?

Better let them do their job running a property business ... we do need a good board, not another set of useless future tellers.

Eh. I guess it depends what you think the purpose of a buyback is. What do you think is harder? Forecasting KPG operating costs, income and asset valuations with no development vs forecasting the development costs, income + opex + valuation after completion of Drury. I know what I am picking.

You can't say that this is a general REIT problem, as the Aussie ones have almost closed the NTA discount gap in the last couple of months.  I'm up 21.6% on my SCG (Westfield) holding since December, in addition to the 5.5% dividend.  Currently trading at a 4.6% discount to NTA now.  The well managed REITS are roaring back, and the one's that havent are probably not well managed or hold low quality assets. 

Quote from: KW on Apr 07, 2024, 11:59 AMYou can't say that this is a general REIT problem, as the Aussie ones have almost closed the NTA discount gap in the last couple of months.  I'm up 21.6% on my SCG (Westfield) holding since December, in addition to the 5.5% dividend.  Currently trading at a 4.6% discount to NTA now.  The well managed REITS are roaring back, and the one's that havent are probably not well managed or hold low quality assets.

PFI also springs to mind. Admittedly industrial property is more in vogue than retail/mixed use.

GMT has liftt back also... ARG stayed at its average long run price levels... forming a base.

NZ comp props are refelecting the economy ? subdued?

 

The Auckland rental market is hot at the moment. Lots of recent immigrants looking for rentals. Several units at Sylvia park on Trade Me for rent. I sent them a enquiry four days ago about one of the units.  They must be really busy as have had no response. Good for them.

2 bedroom units from $890 and 1 BRM at $695. A lot for a shoe box without a car park. Gosh these immigrants must have plenty of money. Will have to review our own rental prices I guess.

With all the insider buying and large discount to NTA will have to look at adding this to my portfolio.

Quote from: Shareguy on May 07, 2024, 06:48 AMThe Auckland rental market is hot at the moment. Lots of recent immigrants looking for rentals. Several units at Sylvia park on Trade Me for rent. I sent them a enquiry four days ago about one of the units.  They must be really busy as have had no response. Good for them.

2 bedroom units from $890 and 1 BRM at $695. A lot for a shoe box without a car park. Gosh these immigrants must have plenty of money. Will have to review our own rental prices I guess.

With all the insider buying and large discount to NTA will have to look at adding this to my portfolio.

Is there any clarity yet on whether their FY24 dividend is sustainable going forward ?  I guess we have to wait for commentary with the annual result.
I think they will have their work cut out for them selling super lots of land at Drury to developers.  Not many developers walking around with tens of millions in their bank account at present.

As a matter of interest what was the $200m cap raise a few years ago for

Maybe another one due?

Quote from: Shareguy on May 07, 2024, 06:48 AMThe Auckland rental market is hot at the moment. Lots of recent immigrants looking for rentals. Several units at Sylvia park on Trade Me for rent. I sent them a enquiry four days ago about one of the units.  They must be really busy as have had no response. Good for them.

2 bedroom units from $890 and 1 BRM at $695. A lot for a shoe box without a car park. Gosh these immigrants must have plenty of money. Will have to review our own rental prices I guess.

With all the insider buying and large discount to NTA will have to look at adding this to my portfolio.

Had a look on site a few weeks ago, looks good.

I don't doubt they are priced above normal market rates, given all the extras you get. And they aren't shoeboxes, the smallest one bedroom unit is 50sqm + balcony - see image below - carpark is an extra $40 option. (Even the studio apartments are bigger than my first 1 bedroom apartment)

Extras you get over a normal apartment:
- Pre-furnished
- unlimited tenancy length (probably worth the most in extra rent premium to many)
- pets ok
- authority to redecorate as desired
- on-site 24 hour staffing
- numerous large shared facilities, including roof top BBQ decks, Gym, the large pavilion lounge/co-working space/screening room.
- literally steps away from the largest shopping mall in the country (admittedly can be a pro or a con depending on individual tastes)
 
KPG expect it will take 12 months+ to fully tenant BTR 1.
 
1 bedroom layout:

Quote from: Basil on May 07, 2024, 09:46 AMIs there any clarity yet on whether their FY24 dividend is sustainable going forward ?  I guess we have to wait for commentary with the annual result.
I think they will have their work cut out for them selling super lots of land at Drury to developers.  Not many developers walking around with tens of millions in their bank account at present.

They have said on more than one occasion that it's sustainable - what reason is there that it wouldn't be absent a major event? There operating income is increasing on like for like basis and operating cashflow is more than enough to cover dividend payments.   

And if they end up selling Vero centre? That could be very interesting for capital return possibilities.

Quote from: winner (n) on May 07, 2024, 10:04 AMAs a matter of interest what was the $200m cap raise a few years ago for

Maybe another one due?

Why? They have no active capital projects now, just some earthworks to be completed at Drury. No need for any large cash injection. They even let go their executive of development recently as he was surplus to requirements (literally nothing for him to do). They also have numerous "capital recycling" attempts under way, and they are significantly below their gearing ratio covenants.

Am impressed by the floor plan, good size not pokey. Is all the furniture included

Quote from: LaserEyeKiwi on May 07, 2024, 05:37 PMHad a look on site a few weeks ago, looks good.

I don't doubt they are priced above normal market rates, given all the extras you get. And they aren't shoeboxes, the smallest one bedroom unit is 50sqm + balcony - see image below - carpark is an extra $40 option. (Even the studio apartments are bigger than my first 1 bedroom apartment)

Extras you get over a normal apartment:
- Pre-furnished
- unlimited tenancy length (probably worth the most in extra rent premium to many)
- pets ok
- authority to redecorate as desired
- on-site 24 hour staffing
- numerous large shared facilities, including roof top BBQ decks, Gym, the large pavilion lounge/co-working space/screening room.
- literally steps away from the largest shopping mall in the country (admittedly can be a pro or a con depending on individual tastes)
 
KPG expect it will take 12 months+ to fully tenant BTR 1.
 
1 bedroom layout:

The rental market in Auckland is very hot at the moment so they should all be rented quickly.  Rents are rising and are taking up greater proportions of income. But there is limits,even in this market. The property is in a great location with transport, shopping and dinning at their doorstep.

We have lots of immigrants looking for accomodation currently but my experience is they are looking for larger properties to house family either now or down the track. A lot of these people are here for construction , trucking or healthcare related jobs in my experience. They are not bringing lots of money over, and can not afford high rental prices unless they have lots of working people in the dwelling.

I have been a property manager for a long time and my experience is that most tenants don't want to sign long leases. The most we could get is 2 years. The exceptions to this have been tenants that we did not want with bad credit or rental history. Under the residential tenancies act if the lease is over five years you are exempt from the Act provisions. People's situations change and they don't want to be locked in. What they really want is for the landlord to be locked in but tenants can leave when they want and importantly without penalty. I fail to see people paying a premium for something they don't want.


But hey they have already rented 12 percent to a company that offers short term rentals.  I'm surprised after stating early on how much demand there was and stating the advantages of having a community of long term renters to then go and lease 12 percent to what will be short term tenancies.  I would not be surprised to see this increased, especially if they have issues filling up the building.

Would be interesting to see what's in the lease and how many sign up for longer than a year. I wish them luck.

"The property is in a great location with transport, shopping and dinning at their doorstep".
Most probably suit retirees who do not want to move into a retirement village,or who do not have the capital for a retirement village unit.

KPG announced the conditional sale of the Vero Centre in Auckland to a Hong Kong-China based conglomerate for $458 million. The transaction price represents a 1.9% discount to the building's September 2023 valuation. Funds will be used to repay bank debt and invest in retail-led mixed-use centres

Results out and look really uninspiring. 
I think shareholders have every right to be disappointed that the dividend is being cut, yet again.
Outlook for only 5.4 cents in FY25. 
http://nzx-prod-s7fsd7f98s.s3-website-ap-southeast-2.amazonaws.com/attachments/KPG/431745/419411.pdf

Quote from: Basil on May 27, 2024, 09:02 AMResults out and look really uninspiring. 
I think shareholders have every right to be disappointed that the dividend is being cut, yet again.
Outlook for only 5.4 cents in FY25. 
http://nzx-prod-s7fsd7f98s.s3-website-ap-southeast-2.amazonaws.com/attachments/KPG/431745/419411.pdf

Good yield though lol .......while waiting for promised riches to become reality

For a property company I thought the result was fair to good.

Quote from: winner (n) on May 27, 2024, 09:23 AMGood yield though lol .......while waiting for promised riches to become reality

How many decades is it now that have shareholders been waiting for capital gains lol

Quote from: Basil on May 27, 2024, 09:27 AMHow many decades is it now that have shareholders been waiting for capital gains lol

Best return would be to sell all of the properties and return all funds to shareholders.....BANG! 40% return....!!

Craig's take

Hill currently has an Underweight recommendation on KPG as not only does it offer one of the lowest CIPe Yield + Growth returns in the sector  (2.8% vs sector median of 6.0%) but he sees a real risk to KPG's dividend over FY25-FY28 if kept at current levels (5.70cpu). This caution was underpinned by the risk KPG may not be able to successfully lease Sylvia Park BTR Stage 1 at its desired price points (which although not impossible we believe are ambitious) as well as the general exposure of its office and retail portfolios to the soft macro backdrop. This result has confirmed our expectations and U/W thesis as KPG has cut its forward dividend with FY25 DPS guidance provided of 5.40cps, which is down -5.3% on FY24 (5.70cps) and our own expectations (CIPe: 5.70cps). We expect the stock to trade down today on news of the cut in DPS. Now saying 12 to 18 months to rent out BTR in a hot market.....

Those asking prices for rent make little sense to me but even if achieved the net yield is projected to be about 5%, less than half the yield they were getting on assets sold to fund this change of strategy...go figure?  For mine, it's really difficult to fathom the logic in the way management go about things. 

I agree beagle......strange strategy indeed.....I see there ave debt is still mid 5% and the divi is already decreasing.
Have sold after purchasing under 80cps last time the SP went there....suspect it will go there again 

Quote from: Basil on May 27, 2024, 05:44 PMThose asking prices for rent make little sense to me but even if achieved the net yield is projected to be about 5%, less than half the yield they were getting on assets sold to fund this change of strategy...go figure?  For mine, it's really difficult to fathom the logic in the way management go about things. 

Is that projected yield across the fully occupied BTR plus existing properties still owned. Or, is the yield less development costs, or something else? Would you mind providing a source to this info? Thanks

Quote from: Buzz on May 27, 2024, 09:38 PMIs that projected yield across the fully occupied BTR plus existing properties still owned. Or, is the yield less development costs, or something else? Would you mind providing a source to this info? Thanks

Have a look at page 16 onwards
http://nzx-prod-s7fsd7f98s.s3-website-ap-southeast-2.amazonaws.com/attachments/KPG/431745/419411.pdf

I think this is destined to hit a multi year low (mid 70's)
Strategy going forward is capital intensive with poor yields on offer for a stock that poeple only buy for yield.
I can see their ave debt servicing cost rising substancailly above the current 5.5%.
Selling the Vero building a good thing and will substancailly lower debt and gearing.

Quote from: snapiti on May 28, 2024, 05:50 PMSelling the Vero building a good thing and will substancailly lower debt and gearing.

Only conditional on overseas investment office approval so probably will happen and getting gearing down to 27% in the current high interest rate environment is a good thing.  Gross yield at the new lower rate of 5.4 cents for 33% taxpayers is 10.1% (5.4 / 80) / 0.67 
Would be 10.75% at 75 cents.  An argument can be made for holding based on yield.  10% per annum better than most of the retirement companies are paying which is absolutely zilch!

The residential rental market is struggling in Auckland. Demand and rental prices are falling and it's happened quickly. Winter is always slow as people don't generally like moving and tend to hunker down, so it's early days. Retail, well we are all aware of how that's going.

Divi cut again and are told due completely to depreciation changes.  Management saying they have a plan to support the gap in their cashflows going forward to support the current new div.

Still a great dividend currently but insiders including the ceo have been selling.

https://api.nzx.com/public/announcement/433928/attachment/422066/433928-422066.pdf

Today's announcement that the Government to 'flood' cities with more housing by liberalising planning rules has the potential to affect the value of Drury and also their residential portfolio.

https://www.nzherald.co.nz/nz/politics/government-to-flood-cities-with-more-housing-by-liberalising-planning-rules/K4LYY3G54BF5TIDRWTUEEOGYEU/

Interesting times..

Quote from: Shareguy on Jul 04, 2024, 09:39 AMThe residential rental market is struggling in Auckland. Demand and rental prices are falling and it's happened quickly. Winter is always slow as people don't generally like moving and tend to hunker down, so it's early days. Retail, well we are all aware of how that's going.

Divi cut again and are told due completely to depreciation changes.  Management saying they have a plan to support the gap in their cashflows going forward to support the current new div.

Still a great dividend currently but insiders including the ceo have been selling.

https://api.nzx.com/public/announcement/433928/attachment/422066/433928-422066.pdf

Today's announcement that the Government to 'flood' cities with more housing by liberalising planning rules has the potential to affect the value of Drury and also their residential portfolio.

https://www.nzherald.co.nz/nz/politics/government-to-flood-cities-with-more-housing-by-liberalising-planning-rules/K4LYY3G54BF5TIDRWTUEEOGYEU/

Interesting times..

Well, yes - looks like a lot of executives seem to need money for a new deck :) - maybe time to invest into a deckbuilding company?

Not so sure, though about the dropping rents and the flooding of our towns with affordable living room.

How many Granny flats can you fit on a 300 sqm section which is already occupied by a main house covering with garage already 240 sqm or so?

While it is desirable to increase the housing supply, and while I hope that this new policy might somewhat reduce the pressure on people who currently need to live in cars and garages ... I would not expect that everybody will now move out of a nice apartment building at Silvia Park into the Granny flat their parents erected on their newly build deck.

KPG (and other REITS) will recover as soon as interest rates will start to drop. They always do :);

Deal to sell the Vero tower has fallen over, OUCH!  That was a key plank to their efforts to close the gap to NTA and reduce their gearing.
https://api.nzx.com/public/announcement/435500/attachment/423892/435500-423892.pdf
Headed back into the late 70's cent range ?

Gearing back up to 39 percent.

Still hope they can sell some of their office assets - this is two office sales in a row that have not completed (same thing happened to the Aurora Center sale).

Meanwhile the impacts of the cancelled deal, both pros & cons as follows:

- Rental Revenue: Net Rental Income from Vero is $25 million annually

Needless to say, overall company net rental income will increase by ~$25 million annually above what it would be without it.

For context the total company net rental income for the last year was $185m (this obviously included the Vero Center).

But retaining Vero means....

- Interest costs: Total net Debt(Cash) will be impacted by approximately the same amount as the now cancelled Vero sale price.

For context, the average net interest rate for KPG is in a similar ballpark to the net income yield of the Vero Centre. So while interest costs will be higher than what they would have been with the Vero sale, it is balanced out by the retention of Vero net rental income.

One possible silver lining is that interest rates appear to be reversing now, so as KPGs new bond issuance/bank lending facilities interest rates fall, Vero center (if still retained) will grow in profitability (from a net rental income less interest cost for holding), and its valuation may increase as cap rates improve with the falling interest rates.

- Developments: KPG had virtually no new developments in progress or ready to start in the near term. They had even let go of their development executive. Resido 1 (The first Build-to-rent apartment development) has been completed and tenancies have begun. The only other development related activity is the winding down of the end of the relatively low cost Stage 1 earthworks at Drury to be completed this year. I would not expect them to announce any new additional unexpected developments any time soon. The redevelopment of LynnMall is likely a long way away.

- Asset Sales: KPG has been trying to sell down its remaining standalone office assets for a few years now. It had floated the idea of a "co-investment" platform where it would offer other entities a way to buy stakes in its office assets. Perhaps that effort will be revived. Alternatively there may be opportunities to bundle them into another office focused listed fund.

Amongst its other assets, management has said the sale of Drury "Superlots" is on the table as an option to raise funds, and with significant profits resulting.

Oh and of course "The Plaza" mall remains to be sold.

=====================

Long Story short:

KPG tried to sell its biggest office asset at the bottom of the real estate cycle, and got what appeared to be a great offer. That offer fell through, which leaves a large net rental income generating asset on the books, but with the downside of no longer being able to eliminate a large chunk of debt. Overall no net change in net operating income financials (rental income balances out interest payments).

Pro: interest rates are falling, so medium term company may benefit from retaining Vero
Con: no longer reducing gearing to very low level, keeps any additional near term new developments probably off the table (some may actually see this as a "Pro")

Quote from: LaserEyeKiwi on Aug 02, 2024, 01:37 PMStill hope they can sell some of their office assets - this is two office sales in a row that have not completed (same thing happened to the Aurora Center sale).

Meanwhile the impacts of the cancelled deal, both pros & cons as follows:

- Rental Revenue: Net Rental Income from Vero is $25 million annually

Needless to say, overall company net rental income will increase by ~$25 million annually above what it would be without it.

For context the total company net rental income for the last year was $185m (this obviously included the Vero Center).

But retaining Vero means....

- Interest costs: Total net Debt(Cash) will be impacted by approximately the same amount as the now cancelled Vero sale price.

For context, the average net interest rate for KPG is in a similar ballpark to the net income yield of the Vero Centre. So while interest costs will be higher than what they would have been with the Vero sale, it is balanced out by the retention of Vero net rental income.

One possible silver lining is that interest rates appear to be reversing now, so as KPGs new bond issuance/bank lending facilities interest rates fall, Vero center (if still retained) will grow in profitability (from a net rental income less interest cost for holding), and its valuation may increase as cap rates improve with the falling interest rates.

- Developments: KPG had virtually no new developments in progress or ready to start in the near term. They had even let go of their development executive. Resido 1 (The first Build-to-rent apartment development) has been completed and tenancies have begun. The only other development related activity is the winding down of the end of the relatively low cost Stage 1 earthworks at Drury to be completed this year. I would not expect them to announce any new additional unexpected developments any time soon. The redevelopment of LynnMall is likely a long way away.

- Asset Sales: KPG has been trying to sell down its remaining standalone office assets for a few years now. It had floated the idea of a "co-investment" platform where it would offer other entities a way to buy stakes in its office assets. Perhaps that effort will be revived. Alternatively there may be opportunities to bundle them into another office focused listed fund.

Amongst its other assets, management has said the sale of Drury "Superlots" is on the table as an option to raise funds, and with significant profits resulting.

Oh and of course "The Plaza" mall remains to be sold.

=====================

Long Story short:

KPG tried to sell its biggest office asset at the bottom of the real estate cycle, and got what appeared to be a great offer. That offer fell through, which leaves a large net rental income generating asset on the books, but with the downside of no longer being able to eliminate a large chunk of debt. Overall no net change in net operating income financials (rental income balances out interest payments).

Pro: interest rates are falling, so medium term company may benefit from retaining Vero
Con: no longer reducing gearing to very low level, keeps any additional near term new developments probably off the table (some may actually see this as a "Pro")

I agree this could be a good thing. However high gearing and the amount of insiders selling has me staying on the side lines.

I dumped the very small stake I recently bought this morning at break even on cost. You win some, you lose some and sometimes you just break even.

Good post LEK.

Quote from: Basil on Aug 02, 2024, 11:03 AMDeal to sell the Vero tower has fallen over, OUCH!  That was a key plank to their efforts to close the gap to NTA and reduce their gearing.
https://api.nzx.com/public/announcement/435500/attachment/423892/435500-423892.pdf
Headed back into the late 70's cent range ?

Hmm - sounds like the buyer was a bit dodgy anyway. Not paying the deposit (as required by contract) and not even attempting to get OIO approval (as required by contract as well)?

Maybe they should have done due diligence of the suitor at an still earlier stage, but otherwise it sounds like they are better off without this suitor. Good riddance! Who knows - SP might go up :) ;

The Auckland rental market is the toughest I have seen it in a very long time. I would suggest that Resido will be struggling. 

The reviews on Reddit are interesting

Quote from: Shareguy on Sep 22, 2024, 02:11 PMThe Auckland rental market is the toughest I have seen it in a very long time. I would suggest that Resido will be struggling. 

The reviews on Reddit are interesting

https://www.google.com/url?q=https://www.reddit.com/r/auckland/comments/1cgntoa/resido_at_sylvia_park_overpriced/&sa=U&ved=2ahUKEwi7gvS7vdWIAxXVzDgGHYepA1EQFnoECBYQAQ&usg=AOvVaw3p1zFjezzwoEvhfyDji8p_

Jenny Ruth article this week headlined " Does build-to-rent stack up as an investment?"

She was pretty disparaging of Kiwi and commented "It appears all but certain the company would have dismissed the idea if it had known what was coming." ...referring to what they outlined in 2021 (probably what was in this preso  https://api.nzx.com/public/announcement/379455/attachment/355092/379455-355092.pdf

Quote from: winner (n) on Sep 22, 2024, 02:21 PMJenny Ruth article this week headlined " Does build-to-rent stack up as an investment?"

She was pretty disparaging of Kiwi and commented "It appears all but certain the company would have dismissed the idea if it had known what was coming." ...referring to what they outlined in 2021 (probably what was in this preso  https://api.nzx.com/public/announcement/379455/attachment/355092/379455-355092.pdf

Interesting. Kpg have been a serial under-performer for years. There is page after page of reviews on Reddit mostly negative. Can see why so many insiders have been selling.

Quote from: winner (n) on Sep 22, 2024, 02:21 PMShe was pretty disparaging of Kiwi and commented "It appears all but certain the company would have dismissed the idea if it had known what was coming."

Do tell - what is coming?

Quote from: Shareguy on Sep 22, 2024, 02:32 PMInteresting. Kpg have been a serial under-performer for years. There is page after page of reviews on Reddit mostly negative. Can see why so many insiders have been selling.

Have you got a link?  The only stuff I have seen on Reddit is complaints from avocado eating millennials commenting on exorbitant rent prices.

Quote from: Ferg on Sep 22, 2024, 02:47 PMDo tell - what is coming?

Referring to what has happened since their presentation of 2021 ....like if they knew back then what has happened they might have not gone ahead

Quote from: Ferg on Sep 22, 2024, 02:50 PMHave you got a link?  The only stuff I have seen on Reddit is complaints from avocado eating millennials commenting on exorbitant rent prices.

No Ferg. It does not work for some reason. But yes its mainly about the costs being too expensive and above the market rents and what people can afford.

What's changed.

Auckland rental market has gone from under supply to over supply in many areas.

Why?

1/Due to developers unable to sell finished property's have put them into the rental pool.

2/ Imigration is declining and the people coming in can't afford in many cases the rents that Resido are asking.

3/ The job market has changed so young ones are staying at home longer and people for the first time in years are worried about loosing their own jobs.

4/ The cost of living has gone up and income has not kept up in many cases.

Anyway here is an Auckland property managers review from July. Opes property management

Auckland – Leah Cockroft

I'm seeing a few things happening. Firstly, the number of rental listings on the market (the rental stock) is the highest it's been since 2018.

Auckland's rental stock has risen by 40% in the last 3 months (REINZ). This will soften rents as there are a higher number of properties looking for tenants.

However, my advice to investors is to keep rents at the market rate and allow for a longer vacancy. Don't drop your rent just to get a tenant in.

Over the year, you'll be better off. But you might need to get through a few weeks without rent.

I'm also seeing a few new builds coming up for completion. This comes with its own complications. Let's say you bought a New Build back in early 2023. As part of that, they would have gotten a rental appraisal.

Back then, the Auckland Floods wreaked havoc on the rental market.. Both owner-occupiers and tenants had to move.

There were lots of people looking for rentals, but there was not much supply. This pushed up rents.

Quote from: winner (n) on Sep 22, 2024, 03:00 PMReferring to what has happened since their presentation of 2021 ....like if they knew back then what has happened they might have not gone ahead

Yeah I read that the first time.  What specifically?

Quote from: Shareguy on Sep 22, 2024, 03:43 PMAuckland rental market has gone from under supply to over supply in many areas.

Why?

Thanks for the detailed reply ShareGuy.  It sounds like elements or assumptions in the business case have changed....almost the 'perfect storm' where there is an increased supply of rentals due to high mortgage/interest costs, combined with less demand from 3 angles, being less immigration, job insecurity & the rising cost of living relative to wages.

This is where the developer needs to temper demand by releasing product in batches and focus on the 3 most important elements being location, location & location.  I also wonder if the average Redditor should not be their target market.  Given the proximity to services and no need for a vehicle, it could suit older possibly retired folk looking to move back to the big smoke from the regions.

Quote from: Ferg on Sep 22, 2024, 04:19 PMThanks for the detailed reply ShareGuy.  It sounds like elements or assumptions in the business case have changed....almost the 'perfect storm' where there is an increased supply of rentals due to high mortgage/interest costs, combined with less demand from 3 angles, being less immigration, job insecurity & the rising cost of living relative to wages.

This is where the developer needs to temper demand by releasing product in batches and focus on the 3 most important elements being location, location & location.  I also wonder if the average Redditor should not be their target market.  Given the proximity to services and no need for a vehicle, it could suit older possibly retired folk looking to move back to the big smoke from the regions.

If I was KPG I would be trying to get Urban Rest, who agreed to rent 12 percent to take as much as possible to get through the next few years.

Not sure about Reddit have only just started looking at it, so you might be right there. 

Another issue for the future is that KĀINGA ORA have been buying and building at great speed around town centres and train stations(including Sylvia Park).

I note a Very low expected yield in the mid single digits even if they fill it at their asking prices, which is well below their cost of capital. Not only will they probably not get the asking prices for the rent there, but I also think repairs and maintenance and also methamphetamine decontamination costs will vastly exceed their estimates.  Maybe they will net about 3% after all costs, not unlike a lot of other residential property rental's in Auckland.

This comment by me in another thread is a fact.  "ARG also have a track record of on average, slowly growing dividends over time, unlike KPG who have a truly shocking track record of shrinking them over time".  KPG is an absolute disaster of a company in my view.  The shares were higher decades ago and at one point were paying 9 cps in annual dividends.  It's just one excuse after another after another over the years for their ongoing dividend declines.  The only growth here has been in management's exorbitant salaries for such appalling non-performance.  In my opinion, internalizing the management contract for this company years ago with all the cost that involved has proven over time to be complete failure.  KPG spend an awful lot of attention on ESG matters, trying to greenwash investors into thinking they're doing a good job.

Quote from: Shareguy on Sep 22, 2024, 02:11 PMThe Auckland rental market is the toughest I have seen it in a very long time. I would suggest that Resido will be struggling. 

The reviews on Reddit are interesting

11% vacancy rate at Resido currently.  And with immigration declining, demand will drop further as newly arrived immigrants who are unable to rent anything else (due to having no work or credit history, or references) are their core captive market.

Ignore Reddit - BTR apartments are NOT designed to provide affordable rental accommodation for New Zealanders. 

I take it Urban are paying Kiwi something like what Kiwi want

Urban seem to letting out about $230 a night for the 1 bedroom apartment (booking.com)

Quote from: KW on Sep 23, 2024, 11:10 AM11% vacancy rate at Resido currently.  And with immigration declining, demand will drop further as newly arrived immigrants who are unable to rent anything else (due to having no work or credit history, or references) are their core captive market.

Ignore Reddit - BTR apartments are NOT designed to provide affordable rental accommodation for New Zealanders. 

11 percent vacancy rate. I'm impressed where did you get that from KW?

Quote from: Shareguy on Sep 23, 2024, 03:41 PM11 percent vacancy rate. I'm impressed where did you get that from KW?

Their website :-)  (go to "Available" and count them)

Doesn't seem plausible to me and is probably a marketing strategy to make something look scarce, so as to appear to make it more desirable.  In their most recent presentation, they said they expected it would take 12-18 months to fill the building.  We're only a few months into this and other market evidence suggests the rental market is saturated with supply.

I'd take their claim with about the same credibility as a used car dealer telling you a Japanese vehicle import with extremely low mileage was only driven to Church each week by a little old lady who fastidiously maintained it every 6 months.  Look and see, it has a certificate issued in Japan certifying the low mileage, so the mileage must be genuine lol

Quote from: Basil on Sep 23, 2024, 05:56 PMDoesn't seem plausible to me and is probably a marketing strategy to make something look scarce, so as to appear to make it more desirable.  In their most recent presentation, they said they expected it would take 12-18 months to fill the building.  We're only a few months into this and other market evidence suggests the rental market is saturated with supply.

I'd take their claim with about the same credibility as a used car dealer telling you a Japanese vehicle import with extremely low mileage was only driven to Church each week by a little old lady who fastidiously maintained it every 6 months.  Look and see, it has a certificate issued in Japan certifying the low mileage, so the mileage must be genuine lol

If they have leased some apartments to a commercial provider, then the vacancy rate is higher than 11%.  I was just calculating the 32 apartments listed for rent, against the 295 in the building.  Its been 5 months since the building opened.

On the fast track list


 Kiwi Property Holdings No. 2
Ltd
Drury Metropolitan Centre -
Consolidated Stage 1 and 2 Auckland Housing and Land
Development
The project is to subdivide 53.2 hectares land and develop these sites for a commercial retail centre
(including 10,000m2 commercial, 56,000m2 retail and 2,000m2 community activities) and future
residential activities in accordance with the underlying Metropolitan Centre and Mixed-Use zones

Just anecdotal stuff for what it's worth.  I haven't been to KPG's New Lynn mall for quite some time but when I was in there today and had a good walk around, I was quite surprised by the number of vacant shops.  About half a dozen noted and I didn't walk through every part of the mall.  Noted Glassons store had expanded and taken extra space but wasn't very busy.  The Hallensteins store seemed to be doing good trade.

Quote from: Basil on Jan 08, 2025, 06:31 PMJust anecdotal stuff for what it's worth.  I haven't been to KPG's New Lynn mall for quite some time but when I was in there today and had a good walk around, I was quite surprised by the number of vacant shops.  About half a dozen noted and I didn't walk through every part of the mall.  Noted Glassons store had expanded and taken extra space but wasn't very busy.  The Hallensteins store seemed to be doing good trade.

How was Michael Hill looking ..... no robbers I hope

Quote from: Basil on Jan 08, 2025, 06:31 PMJust anecdotal stuff for what it's worth.  I haven't been to KPG's New Lynn mall for quite some time but when I was in there today and had a good walk around, I was quite surprised by the number of vacant shops.  About half a dozen noted and I didn't walk through every part of the mall.  Noted Glassons store had expanded and taken extra space but wasn't very busy.  The Hallensteins store seemed to be doing good trade.

LynnMall had an occupancy of 98.0% as of the last earnings report. I presume that is based on square meterage of total leasable space, so hard to judge without seeing the size of the vacant stores whether that percentage occupancy is less than 98%. Also though wouldn't be surprised post xmas if those "pop-up" holiday stores disappear.

Quote from: LaserEyeKiwi on Jan 09, 2025, 03:44 PMLynnMall had an occupancy of 98.0% as of the last earnings report. I presume that is based on square meterage of total leasable space, so hard to judge without seeing the size of the vacant stores whether that percentage occupancy is less than 98%. Also though wouldn't be surprised post xmas if those "pop-up" holiday stores disappear.

Thanks, that's interesting.  it certainly didn't feel that way but as you suggest, some stores for example, Woolworths, Farmers and Reading Cinema's to name just three, have a lot of space.  98% is very good.   Winner me ol mate, nothing untoward happening at Michael Hill while I was there, thankfully.  They've been hammered once there already that I know of, probably more than once.

I'm feeling the pain trying to rent properties at the moment so hate to think how Sylvia Park is going.

Quote from: Shareguy on Jan 10, 2025, 07:30 AMI'm feeling the pain trying to rent properties at the moment so hate to think how Sylvia Park is going.

No problem.   Just go to Sylvia Park and rent those properties zhat have been 'sticking around' yourself.  Vin vin!

RB

Solid result.  Guidance for 5.60 cps dividends in FY26 giving net yield of 6.22%, worth 9.3% gross to 33% taxpayers, (based on 90 cents share price) .
 Net rental income $194.1m (+5.0%)
• Operating profit before tax $116.2m (+7.4%)
• Net profit after tax $57.0m (+2,814.3%)
• Adjusted funds from operations $92.8m (-7.0%)
• Net tangible assets per share $1.14 (-2.0%)
• Full year dividend 5.40 cents per share (-5.3%)

Initial impressions.  The business has done well across the bottom of the economic cycle.
Leasing of Resido faster than I expected.
Management expense ratio has come down nicely but more work to do in my opinion.
Debt a bit higher than they would like but will come down with asset sales in Drury starting.
Good income stock with only very modest prospects for dividends to increase in the years ahead but the yield is very attractive and has PIE tax efficiencies.
Presentation https://api.nzx.com/public/announcement/452207/attachment/444132/452207-444132.pdf
Disc: I hold a few for income.   ~ 5% portfolio allocation.

Quote from: Shareguy on Jan 10, 2025, 07:30 AMI'm feeling the pain trying to rent properties at the moment so hate to think how Sylvia Park is going.

They seem to do allright. Not saying their rentals are better, but on the other hand - they say location is everything in real estate.

Quote from: Shareguy on Jan 10, 2025, 07:30 AMI'm feeling the pain trying to rent properties at the moment so hate to think how Sylvia Park is going.

They are renting them at 25% above market rate, and are leasing faster than expected, so not much to hate about how they are going.

Interesting that average age is only 36 so its clear its young people that value the seamless connectivity of it being adjacent to a transport hub and major shopping precinct. Allowing pets is another key differentiator whereas most landlords shun dogs in particular which is a shame because in my experience, people who love dog's are much more likely to be nice and decent people.

I think you hit nail on the head Basil...there's clearly a market of renters who will pay over the odds for the amenity

I heard a young fella on the radio the other day who rents there.

He said he's paying a bit more than previous rent but the quality and amenities was worth the extra to his mind
For example they cancelled gym memberships and use residio
Sold the car and use the trains etc

The pets allowed was good, said something about communal roof top bbq area for gatherings and was generally complimentary about how it was run and the communication from management.

I think in Auckland there is probably a reasonable market for young couples who probably have decided they won't or can't buy in Auckland but will pay a higher rent with lifestyle benefits.

I think KPG has done very well in a weak rental market...good for them and shareholders
My advice is don't let Kainga Ora anywhere  near it...ever..lol

Quote from: Turkey on May 26, 2025, 12:28 PMI think you hit nail on the head Basil...there's clearly a market of renters who will pay over the odds for the amenity

I heard a young fella on the radio the other day who rents there.

He said he's paying a bit more than previous rent but the quality and amenities was worth the extra to his mind
For example they cancelled gym memberships and use residio
Sold the car and use the trains etc

The pets allowed was good, said something about communal roof top bbq area for gatherings and was generally complimentary about how it was run and the communication from management.

I think in Auckland there is probably a reasonable market for young couples who probably have decided they won't or can't buy in Auckland but will pay a higher rent with lifestyle benefits.

I think KPG has done very well in a weak rental market...good for them and shareholders
My advice is don't let Kainga Ora anywhere near near it...ever..lol

The financials for home ownership vs renting are arguably now quite skewed towards renting for those without existing property already. But the non-financial negatives of renting (no security of tenure, no pets, little ability to redecorate, uneven maintenance and management performance etc) normally make people choose home ownership instead. However a corporate built-to-rent option like Residio minimizes or eliminates a lot of the negatives of renting, and I actually would consider living in one myself instead of my own home if I lived in Auckland.

A lot of "old" retired people like living with young people as neighbours.
I worked out living in a retirement village the DMF works out about $1,000 per week.
Cheaper to live at Silva Park.Near the shops,doctors, etc.Transport there too.

Oceania Resido
...making mixed age living cool again...$850/week  ;D


Seriously...not a bad idea there great Uncle Percy...why have all RV in the burbs?

DHB's providing a lot of in home care these days keeping resident in their homes as long as possible.  Food for thought.  What's the real cost of a retirement village unit per week if you invest the average of $1m and live there for 10 years.
1. You lose ~30% so that's 300,000 / 520 weeks =  $577 per week.
2. Weekly fee estimated at $200 per week
3. Opportunity cost, what you could have earned on that $1m invested in say KPG units paying 6.3% net = $63,000 per annum = $1,212 per week
True cost of average RV unit = $1,989 per week, call it $2,000.  On top of that KPG units might go up.

Maybe paying $850 per week for a 2 bedroom apartment with a  nice view and handy to everything really is quite a good alternative...could pay for it plus all utilities with your KPG dividends...that's pretty cool.  Only downside I can see, apart from noise is having to go somewhere twice a day to toilet your dog and pick up its droppings.

I am sure the grand children would much prefer to go and see you at Silva Park than some retirement village...lol.
Most probably take you down to Glassons to help them buy some new gear...

ps.Granddad may I borrow $600 to buy the lovely frock you so much liked me in.??

pps.I can see a certain granddad getting banned from being any closer than 50 metres from a Glassons store....lol

Quote from: lorraina on May 26, 2025, 03:38 PMps.Granddad may I borrow $600 to buy the lovely frock you so much liked me in.??

Are you kidding me, absolutely not, go to Glassons instead, here's s $50 gift card lol

Quote from: lorraina on May 26, 2025, 03:38 PMpps.I can see a certain granddad getting banned from being any closer than 50 metres from a Glassons store....lol

Its probably a good thing they don't sell underwear there lol

KPG closed at 87 cents and I bought a few more, why ?
You get 1.35 cents back in quick time with fourth quarter June divvy so looking at this for future income and treating the 1.35 cents per share near term divvy as part repayment of the purchase price the net purchase price is 85.65 cps.  Forecast to pay out 5.6 cps so 5.6 / 85.65 = 6.54% Net.  Its a PIE so to 33% taxpayers that's worth 6.54 / 0.67 = 9.76% gross and if you take shares in lieu of divvy at a 2% discount that becomes 9.76% / 0.98 = 9.96% gross, call it 10% paid quarterly.

I think there is some scope for a very small increase in divvy in the years ahead too.  Great income stock !

P.S. 27 May.  To my last point above. In a note released today Craigs see Dividends increasing to 5.8 cps in FY27 and 6.0 cps in FY28.

https://api.nzx.com/public/announcement/462272/attachment/456195/462272-456195.pdf

KPG just going from strength to strength. Looking forward to IKEA opening soon. Decent qtrly dividends and still SP trading under NTA

https://www.nzx.com/announcements/462281

Sylvia Park Lifestyle to be sold to new Mackersy LFR Fund

10/11/2025, 08:30 NZDT, GENERAL

Kiwi Property has entered into a conditional agreement to sell the property at 393 Mt Wellington Highway, Auckland, known as Sylvia Park Lifestyle ("SPL") to a new large-format retail fund to be established by Mackersy Property Limited (the "Mackersy LFR Fund") for $90 million, equivalent to the 31 March 2025 valuation. SPL is the large-format retail ("LFR") site adjacent to the Sylvia Park shopping centre. Further detail on the terms of the sale is set out at the end of this announcement.

Mackersy Property Limited (Mackersy) will be the Manager of, and the issuer of units in, the Mackersy LFR Fund. On establishment of the Mackersy LFR Fund, Kiwi Property will subscribe for 50% of the units in the fund as part consideration for the sale of SPL to the fund. Kiwi Property will also underwrite a further 25% of the units in the fund. Kiwi Property will continue to undertake property management and leasing in respect of SPL and will receive a fee for undertaking these services.

It is the intention of both Mackersy and Kiwi Property that the LFR Fund will continue to grow over time, and will look to acquire suitable LFR assets for this purpose.

Kiwi Property invested in Mackersy by way of a convertible loan in November 2024, and on completion, Kiwi Property expects to own 50% of Mackersy, with the other 50% owned by the existing shareholders of Mackersy, being employees or former employees of Mackersy (or entities associated with those persons). The parties are targeting a conversion of the Kiwi Property loan to equity in Mackersy on or around 1 December 2025.

Kiwi Property's CEO, Clive Mackenzie, said: "The sale of Sylvia Park Lifestyle into this new LFR Fund demonstrates the benefit of our investment in Mackersy, which provides a new source of capital to support our strategic objectives. Proceeds from the transaction will be used to fund some of the company's development projects and provide further balance sheet flexibility."

Mackenzie added, "By retaining a significant stake in the LFR Fund, we can continue to leverage our retail management and leasing capabilities to drive the performance of the asset on behalf of both Kiwi Property and LFR Fund investors, while releasing capital to reinvest in our strategic mixed-use assets. The LFR Fund may also provide a source of capital for future LFR developments at existing Kiwi Property sites."

Hamish Wilton, Mackersy's CEO, commented: "We are pleased to be creating a new fund for wholesale investors to have the opportunity to invest in large format retail, a class of assets which tends to be resilient in all market conditions, and which is entering a new phase of renewed momentum, driven by monetary easing and investor confidence. Our valued relationship with Kiwi Property has meant we have been able to secure Sylvia Park Lifestyle as the initial seed asset for the fund."  

KEY TERMS OF SPL SALE

The key terms of the sale of SPL to the Mackersy LFR Fund and the establishment of the Fund are set out below.

Sale price for SPL: $90 million

Condition for sale of SPL:
Capital raise by the Mackersy LFR Fund, expected to be satisfied by 19 December 2025 (which may change by agreement between the parties)

Expected settlement date if condition is satisfied:
Settlement is expected shortly after the condition is satisfied, currently anticipated to occur the first quarter of 2026

Consideration for sale of SPL: A combination of cash and 50% of the units in the Mackersy LFR Fund as consideration for the sale of SPL. Kiwi Property will also underwrite a further 25% of the units in the fund. This will result in Kiwi Property owning between 50% and 75% of the units in the fund on establishment, and receiving between $52.9 million and $65.3 million cash in consideration for the sale of SPL to the fund, depending on the level of equity underwrite required.

Craigs latest says

KPG and SPG are expected to continue to outperform
We believe sector investors may outperform on a relative basis by adopting a barbell approach to positioning. This involves anchoring an LPV portfolio in both low-yield but high-growth LPVs, and high-yield, pro-cyclical LPVs - with active calls in the latter (i.e. high yield) likely to outperform while the OCR is being cut. This strategy is based on back-testing trading approaches using P/NTA and D/P metrics, as evaluated in our sector notes The Gathering Storm (published Nov 2024) and Barbell Rings Again, KPG to OW (published Aug 2025). We continue to see this dynamic performing well in the current environment and maintain our Overweight recommendations for KPG and SPG, our preferred high-yield, pro-cyclical exposures.

Disc/Became a holder in September

Thanks for sharing Shareguy and welcome on board.
What level of dividends are Craigs forecasting for FY27 and FY28 ?

Thanks Basil

FY27 5.8  cps
FY28 5.97 cps

Craig's current number one pick in the sector.

KPG seems to be the flavour of the month amongst analysts and many on here

Have they thrown ARG the previous favourite out with the bath water

Whats up

For what its worth Winner I have quite significant holdings in both. About the same size, approx 13%-14% of my portfolio in each. I love the high tax free quarterly PIE dividends

have we seen a change in management performance with these new developments that will add shareholder value? after all its still the same company but has there been a large scale change in management... MILFORD there recently..

Quote from: winner (n) on Nov 10, 2025, 03:18 PMKPG seems to be the flavour of the month amongst analysts and many on here

Have they thrown ARG the previous favourite out with the bath water

Whats up

They seem to have pretty similar dividend yields at present. I don't follow ARG close enough to know how they compare in terms of future growth, but KPG has a lot of potential near-medium term upside from Drury to look forward to, starting off with the Superlot sales. Plus in terms of current assets, lots of scope for revaluation upgrades on core mixed use assets, and hopefully further divestment of other non-core assets as the market improves.

At least these prop comp stocks have DIV IMP Credits... AUS registered only stocks may end up if no cap gain being negative on your tax ledger ...

and they are highly defensive in a world arching back to the 16 th century....AI think NZ is a slow growth defensive investment story but thinks its highly exposed to china.

Its has modelled TW and the generated report is a shocker...

Maybe these stocks inside the next ten years are the new gold..

it also had a sell on Banks ...even though NZ ANZ was profitable but had a question mark over the ANZ GROUP which needs more processing time and report details... 

yeesh maybe KPG been hit a bit hard by the selldown required by investors to fund the VHP capital raise?

Quote from: Basil on Nov 10, 2025, 03:42 PMFor what its worth Winner I have quite significant holdings in both. About the same size, approx 13%-14% of my portfolio in each. I love the high tax free quarterly PIE dividends

Similar here but have 7 times more ARG than KPG. I like the numbers with ARG...nta $1.53, pe 8.4 etc. But have noticed plenty there selling at the moment if you want to pick up an extra 50,000 or so in both.

Big capital raise this week with VHP has temporarily sucked a lot of oxygen out of the room. Agree Seaweed that either is very good buying here.

Speaking of Drury Superlot sales!!!

 
https://www.nzx.com/announcements/462473

Kiwi Property agrees sale of Drury land to Costco

12/11/2025, 08:30 NZDT, GENERAL

Kiwi Property has reached a conditional agreement with Costco Wholesale to sell the retailer 6.4 hectares of land at its new Drury development, paving the way for New Zealand's second Costco store.

 Kiwi Property Chief Executive Officer, Clive Mackenzie, said the transaction marked a major milestone in the Drury development programme.

 Mackenzie said: "Costco has been a hit with Kiwi consumers since it opened its first store in Auckland and we're pleased to be working with them on this exciting opportunity to bring Costco further south."

 Chris Tingman, Costco Country Manager said: "We are very excited to be entering into this agreement with Kiwi Property in a location as great as Drury. Whilst still subject to planning and corporate approvals, our aim is to introduce our unique high-quality, low-cost merchandise to Drury, serving our significant membership base in the south of Auckland, as well as Hamilton and the Waikato region."

 The site is located at the southern end of Kiwi Property's 53-hectare landholding, adjacent to State Highway 1. 

6.4 Hectares is a BIG chunk of the 53 hectare Drury site.

In contrast the first piece of land sold to Foodstuffs was 1.2 Hectares.

This transaction will draw in other interest too. Agree, this is a VERY positive announcement.

yes I can't really think of two better anchor tenants (even if they aren't technically tenants) than IKEA & Costco, and KPG has managed to get one of them in both of its most important locations (IKEA at Sylvia park & now Costco at Drury).

Trying to think of who else will now be lining up to get into Drury with either a deal to buy land or to lease.

Already got New World going in.

Presumably one of either Mitre10 or Bunnings will be jostling to get in.

Homewares I presume a Kmart or a Briscoes.

Funnily enough I asked AI what are the most desired anchor tenants for new retail developments, and it gave me IKEA & Costco as the preeminent names.

The herald has more details on the deal. Costco saying the new location will serve both people in south Auckland as well as Hamilton and the wider Waikato region.

https://www.nzherald.co.nz/property/new-zealands-second-giant-costco-wholesale-to-be-built-at-drury/DSRQXPVDIZFJ3HEWX7PEYIPAZM/

Good seeing every NZ news site with headline saying "Auckland to get 2nd Costco store" and discussing KPGs Drury development.

Quote from: LaserEyeKiwi on Nov 12, 2025, 10:23 AMFunnily enough I asked AI what are the most desired anchor tenants for new retail developments, and it gave me IKEA & Costco as the preeminent names.

Nice work mate.  :)  I agree 100%, this is a MAJOR milestone in this development being really successful.
 

https://claude.ai/public/artifacts/bc283a94-6693-4cad-b5d3-d4acdfe782d1

Quote from: LaserEyeKiwi on Nov 12, 2025, 10:35 AMGood seeing every NZ news site with headline saying "Auckland to get 2nd Costco store" and discussing KPGs Drury development.

I think if this was announced in any other week where there wasn't a major capital raise underway, (VHP sucking ~ $200m out of the commercial property sector this week with its capital raise due for settlement on Friday 14th) it would have added a couple of cents to the share price as this really is a super positive milestone achievement for this development.  Other business's will flock to this development now as sure as day follows night.  I topped up with a few more today taking advantage of the price being temporarily suppressed with so much oxygen currently being sucked out of the room.

Craigs recently upgraded their target price to $1.18, (last last month before today's positive announcement) and its their #1 pick in the sector.  Interest rates headed lower with another RBNZ cut later this month, (26 November) makes this a real prospect to be $1.20+ in due course.  Noting also that KPG trades cum another quarterly dividend payable next month and their half year reporting is on 24 November.

Had another look at the correlation between KPG share price and 10 Year Govt stock since 2008. There is a strong correlation so worth while tracking

Currently with 10 Year stock at 4.19% the KPG share price is very slightly underpriced .... or if yiu consider the ranges neither overpriced nor underpriced

Bur Craigs love them so that's all that matters eh

I have been slowly adding to our holdings,as the last few positive announcements make good sense to me.
We also hold CDI.
Both companies are well managed and have sound strategies.

What Craigs highlighted is that KPG is the most likely in the listed commercial property sector to be able to grow distributable income in the years ahead.  Forecasting a CAGR in distributable income of ~ 3.5% per annum so its not necessarily all about the current yield..  For what its worth I added even more this morning.  Cash is returning almost nothing whereas for 39% taxpayers KPG is returning ~ 9% gross equivalent return, (will be somewhat lower effective gross return for taxpayers on lower tax rates), on its forecast next years distributable tax free income of 5.8 cps.  I also think we're probably at or close too the bottom of the retail cycle and KPG is best placed to capture additional income as the economy gradually recovers.

Quote from: Basil on Nov 14, 2025, 11:32 AMWhat Craigs highlighted is that KPG is the most likely in the listed commercial property sector to be able to grow distributable income in the years ahead.  Forecasting a CAGR in distributable income of ~ 3.5 so its not necessarily all about the current yield..  For what its worth I added even more this morning.  Cash is returning almost nothing whereas for 39% taxpayers KPG is returning ~ 9% gross equivalent return, (will be somewhat lower effective gross return for taxpayers on lower tax rates), on its forecast next years distributable tax free income of 5.8 cps.  I also think we're probably at or close too the bottom of the retail cycle and KPG is best placed to capture additional income as the economy gradually recovers.

Looks like easy buying at the moment with plenty of sellers. IRD still owe me $1000s for my imputation credits which will be carried forward to next year. LOL

Seems future dividend growth is going to be a lot better than the last 5 years

From a preso Assuming a 5.60 cps full-year 2026 dividend, the 2021-2026 dividend CAGR would be 1.7%



From 2021 to 2025 dividend growth was 1.2% pa
FYI Argosy numbers are 0.8% pa and 0.6% pa
Least they increasing but we need to see capital gains as well

Although we are a bit off recent highs, it's amazing seeing the inevitable rush back into high dividend yield paying REITs over the last couple of quarters as bank interest rates have plummeted.

And to think there was doubt when those of us were saying this at the bottom of the cycle when stocks like KPG were trading 30% lower not that long ago.

Patience really is one of the core qualities needed to be a successful investor.

(For what its worth I am still investing with the belief that retail is the next cycle to recover - and we will all be sitting here in a years time marveling out how cheap retail stocks were today given the retail recovery was inevitably going to occur eventually)

Quote from: winner (n) on Nov 14, 2025, 01:44 PMSeems future dividend growth is going to be a lot better than the last 5 years

From a preso Assuming a 5.60 cps full-year 2026 dividend, the 2021-2026 dividend CAGR would be 1.7%
From 2021 to 2025 dividend growth was 1.2% pa
FYI Argosy numbers are 0.8% pa and 0.6% pa
Least they increasing but we need to see capital gains as well

Makes sense when you consider we've been in a very deep recession since Covid hit more than 5 years ago.

Agree LEK, it was fantastic buying in the 80's cents range a while back but it's still good buying.

Quote from: LaserEyeKiwi on Nov 14, 2025, 02:30 PMAlthough we are a bit off recent highs, it's amazing seeing the inevitable rush back into high dividend yield paying REITs over the last couple of quarters as bank interest rates have plummeted.

And to think there was doubt when those of us were saying this at the bottom of the cycle when stocks like KPG were trading 30% lower not that long ago.

Patience really is one of the core qualities needed to be a successful investor.

(For what its worth I am still investing with the belief that retail is the next cycle to recover - and we will all be sitting here in a years time marveling out how cheap retail stocks were today given the retail recovery was inevitably going to occur eventually)

There's 411,012 working age people on a benefit LEK .... up 18,735 from a year ago. In spite of everybody'd efforts the number is still rising

A retail recovery is some eay off I fear ... maybe late 2027

Most data has been anything but stellar since RBNZ cut the cash rate by 50 bps a while ago.  Maybe they cut by another 50 bps on 26 November ?

Quote from: winner (n) on Nov 14, 2025, 05:00 PMThere's 411,012 working age people on a benefit LEK .... up 18,735 from a year ago. In spite of everybody'd efforts the number is still rising

A retail recovery is some eay off I fear ... maybe late 2027

yes its a crap fest for those impacted.

Mortgage holders however make up approximately 42.5% of retail spending in New Zealand, and the impacts of lower interest rates are ever so slowly trickling through now. This time next year things will I think be drastically different for retail. 

Looking forward to KPG reporting tomorrow. My sense is we are just past low tide and the tide is starting to come in. Usually catch bigger fish on an incoming tide, so they tell me so I have put a large net out and am cautiously hopeful.

They have a pathway to 6 cps dividends in the next few years, I reckon the risk reward here is pretty good. I think $1.2 by end of next year is a fair price, while we wait we get over 5% cash yield. Plus getting costco at the new flagship drury site was a big win. That place is a mecca of activity every time I've been.

6 cps tax free PIE yield for FY28 would be 5.5% tax free net yield at $1.09  9% gross for 39% taxpayers.  That's very attractive.

Kiwi Property delivering on FY26 strategic priorities
24/11/2025, 08:30 NZDT, HALFYR
Net rental income: $102.0m (+7.0%)
Operating profit before tax: $62.9m (+11.5%)
Net profit after tax: $9.8m (-77.3%)
Adjusted funds from operations: $51.9m (+7.2%)
Net tangible assets per share: $1.12 (-2.2% from FY25)
Interim dividend: 2.80 cents per share (+3.7%)

Key highlights:
• Strong leasing momentum: ASB North Wharf lease extended to 2040, Vero Centre occupancy up to 94.3%, and Resido (build-to-rent) now 99% leased.
• Establishment of the Mackersy Large Format Retail Fund (seeded with Sylvia Park Lifestyle) is expected to release at least $53 million in capital.
• Conditional sales of Drury land to Costco, Rebel Sport/Briscoes, and Harvey Norman means around 77% of large-format retail land at Drury is now conditionally sold, with total sales proceeds of $115 million to be received in FY27-FY29.

Div 1.4c/sh taking interim div to 2.8c/sh.

Looks like a really solid result to me in what we know has been a very challenging economic environment.  Payout as a percentage of AFFO down to only 88% now with solid growth in income so together with rental growth and improving economic conditions going forward there would appear to be strong prospects for dividend growth in the years ahead.  Broker estimates of 5.8 cps in FY27 and 6.0 cps in FY28 look easily achievable. Could be even more although I would be happy with that and expect to see 6.2 cps and 6.4 cps in FY29 and FY30 respectively.  Looks like the dividend reinvestment plan has been suspended ? 
https://api.nzx.com/public/announcement/463213/attachment/457436/463213-457436.pdf

Kiwi Property delivering on FY26 strategic priorities

24/11/2025, 08:30 NZDT, HALFYR

Net rental income: $102.0m (+7.0%)
Operating profit before tax: $62.9m (+11.5%)
Net profit after tax: $9.8m (-77.3%)
Adjusted funds from operations: $51.9m (+7.2%)
Net tangible assets per share: $1.12 (-2.2% from FY25)
Interim dividend: 2.80 cents per share (+3.7%)

Key highlights:
• Strong leasing momentum: ASB North Wharf lease extended to 2040, Vero Centre occupancy up to 94.3%, and Resido (build-to-rent) now 99% leased.
• Establishment of the Mackersy Large Format Retail Fund (seeded with Sylvia Park Lifestyle) is expected to release at least $53 million in capital.
• Conditional sales of Drury land to Costco, Rebel Sport/Briscoes, and Harvey Norman means around 77% of large-format retail land at Drury is now conditionally sold, with total sales proceeds of $115 million to be received in FY27-FY29.

Kiwi Property has announced its interim results for the six months ended 30 September 2025 (HY26), with Chair Simon Shakesheff noting that this result "highlights a robust business performance and demonstrates the strength of our strategy as broader economic conditions begin to stabilise."

Clive Mackenzie, Kiwi Property's CEO, added that the "portfolio continues to deliver solid net rental income growth, up 7.0% for the half-year and supported by the now-complete lease up of Resido." Operating profit before tax increased by 11.5% to $62.9 million, reflecting income growth and disciplined cost management. Net profit after tax was $9.8 million (down 77.3%), which included an unrealised fair value loss of $30.3 million during the period, compared with an increase in the prior period. AFFO increased by 7.2%, driven by the uplift in operating profit.

As at 30 September 2025, the total Kiwi Property portfolio was valued at $3.3 billion, incorporating a fair value movement of -0.9% since 31 March 2025. Net tangible assets were $1.12 per share, reflecting a decline of -2.2%.

Progress on strategic priorities

At the beginning of the financial year, Kiwi Property announced four strategic priorities intended to create value for shareholders. Strong progress has been made across each area:

1. Manage the balance sheet and free up additional capacity

"Maintaining a strong and flexible balance sheet is fundamental to our strategy", Mackenzie noted. "We continued the dividend reinvestment plan which funded our business-as-usual capital expenditure requirements, while reducing total capital expenditure by 49% compared to the prior comparable period. This has allowed us to keep gearing relatively stable at 38.5%, up 0.1% from March 2025."

Following the investment into the property funds management business Mackersy Property in November 2024, Kiwi Property announced on 10 November the establishment of a large format retail fund that will be managed by Mackersy Property. The fund will be seeded with Sylvia Park Lifestyle (the large-format retail property adjacent to Sylvia Park shopping centre) and Kiwi Property expects to maintain an interest of up to 50% over the life of the fund. The initial sale of Sylvia Park Lifestyle into the fund is expected to release at least $53m in funds to Kiwi Property.

The pro forma impact of this transaction reduces gearing to 37.5%.

2. Continue to drive rent growth

Despite a weak economy and a challenging leasing market during HY26, Kiwi Property delivered strong leasing outcomes across the portfolio, with total rental growth, including new leasing and rent reviews, of +3.5% [Note 1].

Office new leasing spreads were +3.4%, supported by the ASB lease extension and Mixed-use new leasing spreads were +3.2% [Note 1].

 "These results underscore the enduring appeal of our assets and the effectiveness of our leasing strategy in subdued market conditions. We are focused on ensuring our centres and office assets remain the destinations of choice for tenants, allowing us to maximise rental growth," said Mackenzie.

3. Maintain strong discipline on costs

Kiwi Property remains strongly committed to controlling costs and delivering operational efficiency. Through disciplined management and a culture of continuous improvement, employment and administrative expenses were down by 5% against the same period last year, when normalised for costs associated with the lease extension at ASB North Wharf and other one-off transaction costs.

To reduce interest costs, Kiwi Property has increased bank debt facilities by $135m and used these proceeds to refinance the KPG040 green bond series which matured recently. Mackenzie noted that "when combined with a lower interest rate environment, our weighted average interest rate has reduced from 5.30% in March this year to 4.89% as at 30 September.

These outcomes reflect the ongoing benefits of our cost initiatives and our focus on delivering value for shareholders."

4. Progress sell-down of Drury large format retail sites

Unlocking value from our Drury development remains a key strategic priority and major focus for the business.

Shakesheff commented: "We are pleased to confirm that additional land sales have been achieved, with the total large-format retail (LFR) land conditionally sold at Drury now around 77% of the LFR precinct." Proceeds from the land sales are expected in FY27-FY29.

Strong leasing progress across the portfolio

The extension of ASB's lease at ASB North Wharf during HY26 was a significant milestone, with the lease extended for a further nine years through to 2040. The lease extension at the award-winning, seven-level office building in Wynyard Quarter provides long-term income security and highlights the strength of Kiwi Property's partnership with ASB.

Strong progress on leasing space at the Vero Centre has also been made, with occupancy now at 94.3% (up from 92.4% at the end of FY25), with just under two floors remaining to be leased.

The initial leasing campaign for Kiwi Property's flagship build-to-rent (BTR) development, Resido at Sylvia Park, is now complete. As at 30 September Resido was 99% leased, in line with the original 12 to 18-month lease-up target. Mackenzie said that "this result validates the product offering and the attractiveness of well-located, amenity-rich rental accommodation."

Mixed-use sales marginally up with prospects for growth ahead

Sales (+0.2%) and foot traffic (+1.1%) across the mixed-use portfolio were marginally up in the twelve months to 30 September 2025, with stronger sales in the second half (+1.0%) signalling positive momentum.

Mackenzie said "sales appear to be recovering with catalysts for further growth expected, including interest rate cuts flowing through to consumer spending and the highly anticipated opening of IKEA adjacent to Sylvia Park in early December. The opening of IKEA is expected to act as a significant drawcard to the precinct. A short walk via a pedestrian walkway between IKEA and Level One of Sylvia Park will provide for the seamless integration of the two sites.

We anticipate that the opening of IKEA will drive additional consumer activity and reinforce the long-term value proposition of Sylvia Park."

Three conditional LFR land sales in October

The Drury development continues to gain momentum as a key driver of long-term value for Kiwi Property.

Confirming the conditional sale of 6.4ha to Costco Wholesale, a major international retailer, was pleasing and this will serve as a catalyst for further development and growth at the site. This sale, along with conditional sales to Rebel Sport/Briscoes and Harvey Norman, will provide capital for reinvestment and, together with the recent Stage 2 Fast-track approval, validates the strategic vision for Drury as Auckland's next major metropolitan centre.

Mackersy loan converts to equity; first fund to be established

Last year's investment into Mackersy Property has created value for Kiwi Property shareholders. The business has made strong progress over the last 12 months and increased earnings to meet the targets in the convertible loan agreement. This will result in the conversion of the original loan to equity in early December, at which point Kiwi Property will own a 50% shareholding in the investment management business, which currently has $2.2 billion in assets under management.

Mackenzie noted that: "We are very pleased with this progress and the strong working relationship we have with the Mackersy Property team. The strategy behind our investment in Mackersy Property was to support the growth of Kiwi Property by providing us with a new source of capital. The recently announced Mackersy Large Format Retail (LFR) fund, with Sylvia Park Lifestyle as the seed asset, offers us a potential future source of capital to develop LFR assets across existing KPG sites, providing us with greater balance sheet flexibility."

Some of the proceeds from the Mackersy LFR Fund will be used to fund key smaller-scale developments, including the new Pedestrian Plaza and addition of an Asian supermarket at Sylvia Park, and the further development of Level One at The Base.

Regulatory tailwinds supporting sector growth

Recent regulatory developments have provided a welcome boost for Kiwi Property and the property sector as a whole.

The proposed changes to seismic regulations announced in September have the potential to reduce expected remediation costs and provide greater certainty for asset owners. Kiwi Property in particular is likely to benefit, given the concentration of its assets in Auckland, where the Government intends to remove the earthquake-prone building regime entirely. The changes are still to be legislated.

Dividend guidance confirmed

"We remain committed to growing sustainable returns for shareholders. Consistent with the guidance provided in our FY25 annual results, we confirm our FY26 full-year dividend guidance of 5.60 cents per share [Note 2]. This is expected to be within our target payout range of 90% to 100% of year-end AFFO. We will pay a cash dividend of 1.40 cents per share for the second quarter of FY26 on 19 December 2025, taking the interim cash dividend payment to 2.80 cents per share," said Mackenzie.

Positioned for growth

For the remainder of FY26 and beyond, Kiwi Property is well positioned to benefit from improving economic conditions and the continued execution of its strategy.

"Our high-quality asset base, strong tenant relationships, and disciplined approach to capital management provide a solid foundation for long-term value creation. We are excited about the opportunities ahead, including the opening of IKEA at Sylvia Park in early December, further progress at Drury, and continued improvement in operating conditions for our assets," Shakesheff concluded.

Q&A:

Q: decrease in specialty sales per sqm?
Answer: Economic climate, Sylvia & The Base: some speciality retailers moved to mini-majors category which changed figures.

Q: Kmart renewal at The Plaza - was main driver of rental income increase?
Answer: yes.

Q: Sylvia park lifestyle sale?
Answer: An answer elaborating on how cash released is higher than sale price is its combination cash from sale, and also debt from new fund provides cash.
 
Q: Vero centre remaining 2000sqm to lease?
Answer: another lease of 1200 sqm almost closed, will be just one floor remaining to lease after that.

Q: Drury: what are risks to settlements of conditional sales?
Answer: have to finish infrastructure.

Q:  Mackersy  fund - any more assets in portfolio to consider adding/selling to fund?
Answer: new development like any unsold LFR at Drury, land beside IKEA development at Sylvia possibility

Q: valuations of ASB wharf post renewal?
Answer: valuers haven't moved valuation yet based on current market conditions

Q: non-core assets?
Answer: we want to continue to focus on mixed use assets in golden triangle, so will continue to look to exit regional retail, and also office asset sales.

Q: any help from Mackersy for office assets?
Answer: Mackersy may help office sales, have had some interest for ASB north wharf now post lease renewal.

Q: Sylvia park rental income drop?
Answer: rent reviews were up, but a $1.9m surrender fee caused a one off drop that needs to be adjusted out.

Q: 2nd half guidance implies weaker half, details?
Answer: maintenance Capex, timing issue on new leasing deals, capitalized leasing incentive on ASB north wharf.

Q: seismic disclosures?
Answer: This is the first time disclosing seismic total budget

Q: gearing?
Answer: 35% target, and any additional asset sales may reduce that further

Q: Drury sales / retained earnings?
Answer: Payout ratio will technically be lower when Drury land sales hit the balance sheet (as those funds will be used for Capex at Drury)

Q: Reside net rental income $3.6m for half, high occupancy, update on outlook going forward stabilized income? 3 years out?
Answer: $8m total net income in this financial year, will grow next year, some rental softness so a little less than expected initially.

Q: ASB north wharf: $22m commitment
Answer:  next couple of years will be refresh of fit out for new lease term through 2040, there and additional space built out, 3

Q: Vero commitment: is it Capex?
Answer: Upgrading and Maintenance - no incentives.
 
Q: old church site (?)
Answer: current leasing negotiations, may be LFR asset into Mackersy fund.

Anybody still remembering all these discussions in previous years whether they manage to rent out all those residential properties?

According to yesterdays review Resido is now 99% leased out. Not too bad:

QuoteOur flagship build-to-rent development, Resido at Sylvia Park, is now 99% leased, in line with our 12 to 18-month lease-up target. This validates the product and the appeal of amenity-rich rental accommodation.

Quote from: BlackPeter on Nov 25, 2025, 10:31 AMAnybody still remembering all these discussions in previous years whether they manage to rent out all those residential properties?

According to yesterdays review Resido is now 99% leased out. Not too bad:

Yup - they have just 2 vacant apartments currently out of 295 - who would have thunk that living right next to New Zealand's most popular retail destination with excellent public transport links would be attractive to many?

But to drop the sarcasm for a moment, they did acknowledge the rent achieved is lower than what was initially expected, so that isn't ideal, but they were still getting good premium to market, and rents will lift over time.

So while the higher build cost and lower rents are both slight negatives vs initial business case, they have still proved out the concept, and also now have a diversified rental stream that wont be impacted by things like a pandemic in the same manner. Will also be great experience for future BTR developments (I think they can probably afford to go downmarket slightly, and also have a better idea of what mix of units are popular - eg 1,2 or 3 bedrooms)   

99%+ occupancy is a very good outcome in a very weak market for apartment rentals.  I'm very impressed with that.    Also conditionally selling 77% of the land area at Drury that's available for large format retail is quite a lot better than where I thought they would be at this stage of the development.   As I said yesterday, I think It was a really solid half year result. 

To lease out 99 percent at Resido is a great achievement given the state of the market. Understandable that they have not achieved the initial rental figures quoted. The rental market in Auckland is still not flash with rents continuing to decline. I wonder how much Simplicity's apartment block down the road will affect them. Gearing still an issue at 38.5 percent.

Quote from: Shareguy on Nov 25, 2025, 03:46 PMGearing still an issue at 38.5 percent.

Sorry mate, I don't get it, why is that an issue ?
From the presentation.
Interest rate is down 41 bps to 4.89%
$248m funding headroom
Pro froma gearing scheduled to reduce to 37.5% after large format retail fund establishment which releases $53m capital
3.10 times interest cover ratio is very comfortably above the bank covenant of 2.25 times
Sales of large format retail sites in Drury expected to cover future development costs there
All looks very reasonable and comfortable to me.
Noting also that KPG has has just stopped the dividend reinvestment plan so the directors think its not a concern.

From memory VHP gearing is over 40% ?  I don't especially like gearing over 40%, but given their long leases and the nature of the healthcare tenants its probably also quite comfortable.

KPG Q & A
Q: gearing?
Answer: 35% target, and any additional asset sales may reduce that further

Not a major Basil and yes the Sylvia Park Lifestyle to Mackersy will release $53m, reducing gearing down to 37.5%. Note FY25 was 37.4 % so no improvement and also above KPG 35% medium-term target.

Have recently been to Sylvia Park and it was pumping. The signs are good with another OCR cut Tom and KPG paying a decent yield. If these economists are right we are in for a recovery in retail spending, housing, and the broader economy.

Would also point out that the assets are poised for upward valuations, which will also reduce gearing when it occurs. Of note there is an obvious reason they for the first time gave the seismic budgets for their assets that currently weigh on their value, along with all the comments that once the new earthquake standards bill is passed, then Auckland buildings will not be subject to the same seismic ratings as the rest of the country.

I think management were obviously implying that the seismic budgets for the Auckland properties included in their valuations will be reduced/eliminated to some degree.         

Good point LEK.  Page 8.  https://api.nzx.com/public/announcement/463213/attachment/457436/463213-457436.pdf
Present value of provisioning for Auckland properties $83m and estimate of say half of the rest of north Island = $17m, that's approx $100m of asset provisioning that's set to be expunged, boosting NTA by 6.25 cps ($100m / 1600m shares).  Also set to reduce gearing further as you quite rightly point out.

Craigs like the result

Constructive Outlook Supported by Relative Value, maintain O/W
After updating our forecasts, KPG now offers a Yield + Growth of 8.6%, which
is ahead of the sector average of 7.8%. Its office and retail weighting makes it
one of the more pro-cyclical LPV exposures; however, with signs of recovery
in retail spending, housing, and the broader economy we have a constructive
view on KPG's outlook. We note our revised forecasts imply AFFOps growth
of +3.4% p.a. through to FY29, which is among the strongest growth profiles
in the sector and does not rely on overly optimistic or demanding
assumptions. This growth outlook is complemented by a high cash yield,
which our back-testing of the barbell approach suggests should relatively
outperform during a rate-cutting cycle. Having last traded below our revised
$1.20 target price, we maintain our rating of Overweight

Excellent news! unconditional as well, very nice.

[URL unfurl="true"]https://www.nzx.com/announcements/463526[/URL]

Kiwi Property agrees unconditional sale of The Plaza

27/11/2025, 12:00 NZDT, GENERAL

Kiwi Property today announced it has secured an unconditional agreement for the sale of The Plaza shopping centre in Palmerston North to NZ Retail Property Group (NZRPG), one of New Zealand's largest privately-owned retail property development, investment and management companies.

The agreed sale price of $118.9 million is 0.9% below the held for sale value in the FY26 interim results. Following the sales of The Plaza to NZRPG and Sylvia Park Lifestyle to the Mackersy LFR Fund [Note 1], Kiwi Property's pro forma gearing will be 35.2% (based on September 2025 figures).

The sale of The Plaza is aligned with Kiwi Property's capital recycling strategy, which focuses on providing balance sheet flexibility and reinvesting asset sale proceeds into its mixed-use development pipeline and other growth opportunities. The Plaza, a regional retail asset located outside the Golden Triangle, is no longer central to Kiwi Property's long-term strategy.

Settlement is expected before the end of 2025, at which point ownership and management of The Plaza will transfer to NZRPG.

Notes: 1. Capital released from the Sylvia Park Lifestyle transaction assumes Kiwi Property acquires a 50% stake in the Mackersy LFR Fund as part consideration for the sale of Sylvia Park Lifestyle and provides an additional 25% equity underwrite on establishment.

So lets discuss what this means.

Further elimination of seismic risk:

The plaza was one of the 2 remaining assets that is outside of the golden triangle, and which KPG was keen to sell. One key reason being that after 2 decades of having earnings impacted from large seismic issue costs across its portfolio in Christchurch, Wellington & Palmerston North - they made the decision to eliminate that from continuing in future.

With The Plaza sold, the only other asset left to sell in a location in a seismic area is The Aurora Centre Office in Wellington (leased to MSD) - which is currently worth $147m on the books.

Non-core asset sold:

The Plaza was a retail only asset, KPG is keen to leverage Mixed-use assets primarily going froward.

Impact on financials:

Pro: proceeds will mean gearing is reduced (less debt to assets).
Pro: The $119m sale will mean that amount less in debt is required, roughly equating to $6m less in annual interest costs using their current average debt cost

Con: The Plaza is generating approx $18m in annual operating Income so that is a sizable amount to lose of the approx $200m total annual operating income.
Con: With the reduction in operating income, the management overhead will make up a significantly higher percentage.

Net result:

With this transaction KPG significantly reduces its seismic risk, reduces its debt load, gets closer to completing its realignment to being focused on its mixed-use asset strategy. It does so however with the cost of a reduction in its revenue and income going forward.

I don't really understand why anyone would sell an asset returning $18m for $119m, that's a 15% yield so they repay bank debt at a 4.9% cost that was raised to invest in build to rent apartments yielding about 4%.

Obviously the very highly paid management know far more than I do, (or do they ?), , but this change in investment strategy makes very little obvious sense to me.  I get it that residents at Resido are most likely to shop at Silvia park and so there's some underlying benefit but I cannot see how that could possibly mitigate much of the obvious yield difference.    Put another way, they just sold 3.6% of the value of the companies assets but have lost 9% of annual income.
I knew this day would come  but I was hoping it would be years away...never mind, this is progress...or so management will assure us...

What am I missing LEK ?

Quote from: Basil on Nov 27, 2025, 03:30 PMI don't really understand why anyone would sell an asset returning $18m for $119m, that's a 15% yield so they repay bank debt at a 4.9% cost that was raised to invest in build to rent apartments yielding about 4%.

Obviously the very highly paid management know far more than I do, (or do they ?), , but this change in investment strategy makes very little obvious sense to me.  I get it that residents at Resido are most likely to shop at Silvia park and so there's some underlying benefit but I cannot see how that could possibly mitigate much of the obvious yield difference.    Put another way, they just sold 3.6% of the value of the companies assets but have lost 9% of annual income.
I knew this day would come  but I was hoping it would be years away...never mind, this is progress...or so management will assure us...

What am I missing LEK ?

I agree it seems like a bargain for the purchaser given the gross yeild, but the sale was right around its independent valuation which perhaps reflected the more volatile nature of a retail only asset (cap rate used in valuation was significantly higher than for the mixed use assets) and that it still maybe required some ongoing seismic work to be done, or would soon need to be done.

When discussing its impact, the figures above are operating income, so excludes impact of lower debt costs from the sale, any employment/management cost savings (if any), and also before any required Capex costs.

In the end I think this is a case of both the buyer and seller being happy with the transaction, but I agree in the end it is a loss of income that will be noticed in the short term.

still should be able to maintain dividend at guided rate, but payout ratio will be higher, likely nearer 100% AFFO.

Thanks LEK.  Management have had a long time to think about it because they've had it on the market for a very LONG time and it was sold at close to independent valuation so I guess this is progress, of sorts.

Quote from: LaserEyeKiwi on Nov 27, 2025, 04:27 PMI agree it seems like a bargain for the purchaser given the gross yeild, but the sale was right around its independent valuation which perhaps reflected the more volatile nature of a retail only asset (cap rate used in valuation was significantly higher than for the mixed use assets) and that it still maybe required some ongoing seismic work to be done, or would soon need to be done.

When discussing its impact, the figures above are operating income, so excludes impact of lower debt costs from the sale, any employment/management cost savings (if any), and also before any required Capex costs.

In the end I think this is a case of both the buyer and seller being happy with the transaction, but I agree in the end it is a loss of income that will be noticed in the short term.

still should be able to maintain dividend at guided rate, but payout ratio will be higher, likely nearer 100% AFFO.

I agree and thanks for your insightful posts LEK. We all should have known about the divestments intentions and good to see they're getting it done, and regardless of revenue impacts it's good to see imo that the drag on these (seismic especially which change for the worse every year) are diminishing. I expect management costs to reduce as well.

KPG are smashing it out of the park imo, so glad I bought at an outrageously good yield over the past couple of years and seeing them go from strength to strength. A very satisfying investment, let's hope it continues.

Jenny Ruth has a piece out today starting "Kiwi Property's township/mixed use concept makes sense, but the financials of the build-to-rent component look problematic."

Seems something Jardens Arie says might have spooked her. He said '... that Resido cost $240 million to build and that its value at Sept 30 had dropped to $200 million "and the initial yield on cost looks like it is going to be in the order of just 3.5%."

Quote from: winner (n) on Dec 02, 2025, 09:22 AMJenny Ruth has a piece out today starting "Kiwi Property's township/mixed use concept makes sense, but the financials of the build-to-rent component look problematic."

Seems something Jardens Arie says might have spooked her. He said '... that Resido cost $240 million to build and that its value at Sept 30 had dropped to $200 million "and the initial yield on cost looks like it is going to be in the order of just 3.5%."

Yup they spent too much on construction, and they acknowledged at earnings that the rental market is softer than expected. Really wish they would partner with Simplicity who are the kings of BTR building efficiency, having built their own much better building system.

They did achieve revenue diversity though, which is part of the reason for introducing BTR to mixed use assets (which also enables higher overall mixed use valuations). 

 

I would guess the residents shop at Silvia Park.
Their spending would increase shops turnover,which would mean KPG would get more % rents.
What I would call a win win situation.
ie Shops subsidizing residents rents.

So.... the new build to rent is worth $200m, not a huge part of the business and obviously the market has been disappointed with the effective yield which has been reported as low as 3.5% by one source.

The share price has come back a fair way from $1.14 to $1.02 and I note the consensus view of brokers is a price target of $1.12.  I also note that asset back could be boosted by about 6 cps, see post #364 above taking it to $1.18 before any other revaluations the valuers put through with their revised valuation on 31 March 2026, only a few months away.  https://www.marketscreener.com/quote/stock/KIWI-PROPERTY-GROUP-LIMIT-19354941/finances/

Consensus is for dividends to grow 2-3% per annum over the next few years.  At $1.02 its giving a net forecast after tax yield of 5.6% worth ~ 8.4% gross to 33% taxpayers and 9.2% to those including trusts paying 39%.  Maybe the correction is a bit overdone and with the gross yields now being very attractive indeed and the prospects for share price growth in 2026 looking decent, opportunity knocks for those not already well positioned ?
 

Yes it seems good value or is it a dividend trap.

Although they have rented out Resido, the rents achieved are much lower than what was expected. You also have a rental market in Auckland that is getting worse with a big over supply. Simplicity have a huge competing offering just down the road that will be a future drag on rents and the return is simply not there.

https://simplicity.kiwi/learn/updates/simplicity-livings-biggest-project-yet

Jarden analyst Arie Dekker notes that Resido cost $240 million to build and that its value at Sept 30 had dropped to $200 million "and the initial yield on cost looks like it is going to be in the order of just 3.5%."

Dekker is the least optimistic of the five analysts with a 12-month target of just $1.02.

What in essence KPG have been doing is selling higher yielding assets which are going to be eps dilutive unless Drury and other assets performs.

They have elevated gearing and the plaza sale according to FB is 4 percent of the portfolio but 8 percent of AFFO.

I only have a small position. At a $1 I see little risk but I'm not buying.

Thanks Shareguy.  I agree the build to rent has not been a success, (pretending otherwise is irrational), and is possibly a victim of initially being planned when the market was very different. Worth keeping it in its proper context though, remembering its only 6% of their assets.

Probably a silly way of looking at it but this is how I look at it nonetheless. I look on my holding as the equivalent of owning a rental property.  I'm getting 5.6% net return after tax with no work whatsoever and buying at ~ 25% discount to NTA when I was buying in the mid 80 cent range .  I reckon I'd struggle to get half that net return after tax for an actual rental property and then there's all the hassles and work that goes with it and all the risk of a single tenant damaging the property and / or not paying the rent.  I also love the structure of it being a PIE.  Paying tax at 28% instead of 39%, floats my boat too.  In terms of cash flow I reckon I get the equivalent after tax of owning nearly two rental properties but only have the capital tied up of one.  I shudder at the thought of all the work involved with tenants owning 2 rental properties.  Life is too short for that many drama's.  Same deal with my holding in ARG but the discount to NTA was about 30% based on my average purchase price.  Worth noting that rents for ARG and KPG are going up each year whereas for rental properties they're going down.

I'd buy more KPG and ARG at this level if I wasn't already pretty much fully invested..

I recall when they initially proposed Resido there was some concerns raised around overly optimistic rental appraisals. Yield of 3.5% on residential property is pretty poor but on apartments it is abysmal. Regardless, I think this will bounce off 1 buck and get closer to $1.1 in the next few months.

Quote from: Plata on Dec 17, 2025, 07:03 PMI recall when they initially proposed Resido there was some concerns raised around overly optimistic rental appraisals. Yield of 3.5% on residential property is pretty poor but on apartments it is abysmal. Regardless, I think this will bounce off 1 buck and get closer to $1.1 in the next few months.

I agree, the rental property prices, and frankly all property is bouncing around like crazy, with no consistency countrywide. I can only see a brighter future and as rentals roll over, yields will improve. That said, I have no problem with a yield around bank TD deposit rates at the moment, or whether the SP does a bump from here. Reliable consistent returns are just fine with me, esp paid quarterly, and I have a sizeable relative portfolio allocation to back that conviction.

Interesting, KPG bounced twice now off the daily 200EMA, RSI bottomed and perked up. Maybe the selling pressure is done?

Great to see the news today, KPG just getting it done, working the strategy. I'm impressed with how decisive, effective and committed this management is and getting their gearing ratio into an easily manageable range. https://www.nzx.com/announcements/464919 ... and today we learnt that ACC are probably behind a chunk of the volume selloff, dropping 10.8m shares into the market, but still a substantial holder at 9.5% https://api.nzx.com/public/announcement/464993/attachment/459462/464993-459462.pdf

I think the talk that Resido is only yielding 3.5% is misguided.

At 31 March 2025 for the 6 months they only had $1.3m of net income and for the 6 months to 30 September that had risen to $3.6m. They told us it was 81% rented in August and it's now up to 99% but there will be timing lags with the rent roll growing. My guess is the net rental to 31 March 2026 will be closer to $4.5-5m. Still not amazing but not as bad as is being suggested. Probably around a 4.5% yield.

Quote from: Arbroath on Dec 20, 2025, 07:04 AMI think the talk that Resido is only yielding 3.5% is misguided.

At 31 March 2025 for the 6 months they only had $1.3m of net income and for the 6 months to 30 September that had risen to $3.6m. They told us it was 81% rented in August and it's now up to 99% but there will be timing lags with the rent roll growing. My guess is the net rental to 31 March 2026 will be closer to $4.5-5m. Still not amazing but not as bad as is being suggested. Probably around a 4.5% yield.

The calculation is also quite different if you are using the construction cost vs the current valuation.

Kiwi Property agrees sale of ASB North Wharf
27/01/2026, 10:15 NZDT, GENERAL
Following the extension of the lease to ASB for ASB North Wharf, Kiwi Property has now entered into an agreement to sell ASB North Wharf in Auckland's Wynyard Quarter to the Precinct Pacific Investment Limited Partnership for $205 million, representing a 3.3% discount to the September 2025 book value. As part of the transaction, Kiwi Property will complete approximately $2.2 million in remaining capital works at the property, with the purchaser assuming responsibility for additional capital expenditure associated with the extension of the lease to ASB.
 
 The extension of this lease to 2040 last year helped to position the asset for a successful transaction. The sale delivers a property IRR from inception of 10.1%.
 
 The sales of Sylvia Park Lifestyle (which remains conditional) [Note 1], The Plaza in Palmerston North (which completed in December 2025) and ASB North Wharf will reduce Kiwi Property's pro forma gearing to 30.9%, based on September 2025 figures. The sales present an opportunity for reinvestment into further growth initiatives, including potential acquisitions and development at our key mixed-use assets.
 
 Kiwi Property CEO, Clive Mackenzie, said: "The sale of ASB North Wharf is a significant milestone for our capital recycling programme and is the third property transaction we have agreed in the last three months. Our balance sheet is now strongly positioned to support growth, aligning with a property market that is showing clear signs of recovery."
 
 Completion of the sale of ASB North Wharf is subject to the consent of the Overseas Investment Office, with settlement expected in the first half of 2026.
 
 Notes:
 1: Capital released from the Sylvia Park Lifestyle transaction assumes Kiwi Property acquires a 50% stake in the Mackersy LFR Fund as part consideration for the sale of Sylvia Park Lifestyle and provides an additional 25% equity underwrite on establishment.

That certainly solves any perception that the gearing is too high. 

Bit of a minor narrative shift now.

They haven't completed their goal of transitioning to only mixed-use assets in Auckland/Hamilton yet, but they have sold enough of the standalone retail and office assets that now they are in a transition phase where they have sold down considerable income generating assets, reduced debt, and now have ample funding to proceed with the large scale development work at Drury & Sylvia Park while remaining well within the debt covenants.

The management cost ratio vs net rental income is going to spike a bit higher though for the next few years.

Wondering if they might offer to buy the other 50% of The Base off of Tainui.

https://www.marketscreener.com/quote/stock/KIWI-PROPERTY-GROUP-LIMIT-19354941/consensus/

Average target price $1.12 and average rating of 4 analysts is outperform.  Gosh its very cheap buying at $1.01.

Quote from: Basil on Jan 28, 2026, 04:23 PMhttps://www.marketscreener.com/quote/stock/KIWI-PROPERTY-GROUP-LIMIT-19354941/consensus/

Average target price $1.12 and average rating of 4 analysts is outperform.  Gosh its very cheap buying at $1.01.

␃␃

Dividend yield getting back to a level I might even consider adding more to my position again.

I have been buying at 99cents. Back in fully now

It seems all the REITS in N.Z. peaked in October 25.  Drops from the peak are SPG 20%, PCT 18%, GMT 17%, VHP 17%, PFI 16%, ARG 15% KPG 15%.

The extent of these falls seems like a lot to me.  Going off the new Reserve Bank Governors tone last week, I think interest rates could stay lower for longer.

Quote from: Basil on Feb 23, 2026, 03:16 PMIt seems all the REITS in N.Z. peaked in October 25.  Drops from the peak are SPG 20%, PCT 18%, GMT 17%, VHP 17%, PFI 16%, ARG 15% KPG 15%.

The extent of these falls seems like a lot to me.  Going off the new Reserve Bank Governors tone last week, I think interest rates could stay lower for longer.

Could be that the price of REITs got over inflated .... exuberance led to a fair degree of overpricing and that they have fallen back to more realistic/normal levels

Might bore you but on my KPG/10 Year Govt Stock correlation 'fair value' now is 97/98 cents

Yields are in some cases 6% net now, worth 9% gross to 33% taxpayers and ~10% to 39% taxpayers.

Quote from: winner (n) on Feb 23, 2026, 04:13 PMCould be that the price of REITs got over inflated .... exuberance led to a fair degree of overpricing and that they have fallen back to more realistic/normal levels

Might bore you but on my KPG/10 Year Govt Stock correlation 'fair value' now is 97/98 cents

Scary stuff possums ...KPG close today 97 cents

A first glance it looks like a good result announced by PFI this morning.  Guiding to a FY26 dividend increase.

Why so weak? We are ex-div, but it was only a few cents!

Don't know. Divvy was only 1 4 cps.

Was trading at a 20% discount to NTA there this morning, which is a bit of a strange one.

Is it not a storey of perceived interest rate rises. All the Reits are struggling.

Quote from: Shareguy on Mar 11, 2026, 03:24 PMIs it not a storey of perceived interest rate rises. All the Reits are struggling.

'Fair value' now based on long term correlation with 10 Year Govt Stock is 94/96

Spooky eh possums

Quote from: Shareguy on Mar 11, 2026, 03:24 PMIs it not a storey of perceived interest rate rises. All the Reits are struggling.

Quite correct mate. I just reviewed this again. They all peaked in October 2025.  Since then declines from the peak are as follows:-
PCT 18.1%
GMT 15.3%
VHP 19%
PFI 11.7%
ARG 15.7%
KPG 16.7%
SPG 23%
ITs been painful and I think its overdone but the market thinks otherwise so what can you do...

It is kind of strange how hard they REITs are getting hammered.  I'm sure fixed interest / bond funds aren't down that much of the same period.

I just had a look, the Simplicity NZ Bond Fund is down 1.36% since the end of October 2025. That's total return, i.e. interest reinvested.

I'm waiting for the next oil spike to drive this down into the 80s and I'll back up the truck, same with GNE.

Quote from: Basil on Mar 11, 2026, 04:42 PMQuite correct mate. I just reviewed this again. They all peaked in October 2025.  Since then declines from the peak are as follows:-
PCT 18.1%
GMT 15.3%
VHP 19%
PFI 11.7%
ARG 15.7%
KPG 16.7%
SPG 23%
ITs been painful and I think its overdone but the market thinks otherwise so what can you do...

Makes my 3% short term term deposits look good since October. You have to deduct the dividends paid off this decline as well which makes it less painful.

I guess we need to know where interest rates are heading to know what is the best option from here. Are we coming to the end of a long term interest rate cycle as Ray Dalio has suggested we might, in which case the property companies will under perform. Will we get money printing and interest rate suppression in which case they will thrive.

I recall Basil some time ago you looked at KPG and concluded that mgmt had been unable to grow earnings over a long period of time. Other than the yield do you see these companies growing their earnings. Higher interest rates not only mean moving capital valuation rates but higher interest costs as well.

Not wanting to be a doomsayer as I like the steady income provided by the property companies but do they have a bit further to fall as we adjust to a higher interest rate world?

Consensus for KPG is for steady earnings growth of about 3% per year for the next few years enabling DPS to rise gradually from 5.6 CPS to just over 6 CPS.

As I see it, the market hates uncertainty and maybe we're at peak uncertainty at the moment ?

Nobody knows how long the war will persist and oil prices stay elevated to where they very recently were.

Its well worth noting that fuel prices now are still lower than where they were three to four years ago and significantly lower in real inflation adjusted terms .

There's always sunshine after rain. Stay calm and carry on...

How the KPG share price has gone compared to 10 Year Govt Stock

One day might map yield v 10 Year -- prob look much the same

Screenshot 2026-03-12 125000.png

Hm. Competition for KPG as just down the Road

https://www.nzherald.co.nz/property/te-reiputa-auckland-build-to-rent-apartment-fills-fast-as-tenants-lock-in-up-to-10-year-leases/premium/CJSLA4KCGRFYZIYAPY2IMREZ3Y/

Disciplined FY26 execution strengthens balance sheet
18/05/2026, 08:30 NZST, FLLYR
Net rental income $202.4m (+4.3%)
Operating profit before tax $126.2m (+8.6%)
Net profit after tax $50.4m (-11.5%)
Adjusted funds from operations $100.2m (+8.0%)
Net tangible assets per share $1.12 (-2.4%)
Full year dividend 5.60 cents per share (+3.7%)

Dividend outlook for FY27 up 2.7% to 5.75 cps.

Occupancy up very strongly from 96.9% to 99%

https://api.nzx.com/public/announcement/472753/attachment/468522/472753-468522.pdf

Disc: Holding ~ 7% portfolio allocation for tax efficient reliable quarterly dividend income.

Quote from: Basil on May 18, 2026, 10:25 AMDisciplined FY26 execution strengthens balance sheet
18/05/2026, 08:30 NZST, FLLYR
Net rental income $202.4m (+4.3%)
Operating profit before tax $126.2m (+8.6%)
Net profit after tax $50.4m (-11.5%)
Adjusted funds from operations $100.2m (+8.0%)
Net tangible assets per share $1.12 (-2.4%)
Full year dividend 5.60 cents per share (+3.7%)

Dividend outlook for FY27 up 2.7% to 5.75 cps.

Occupancy up very strongly from 96.9% to 99%

https://api.nzx.com/public/announcement/472753/attachment/468522/472753-468522.pdf

Disc: Holding ~ 7% portfolio allocation for tax efficient reliable quarterly dividend income.

Yep, not too bad for a Build to Rent company.

On the other hand - after reaching 99% occupation, further occupancy gains will get more difficult, and 2027 forecast sounds as well a bit more - hmm complex..

But yes, I hold them as well despite all the people who complained about the build to rent program ... and don't see at this stage a reason to change this. Maybe I buy some more, while the price is right.

You call them a build to rent company, but they certainly aren't talking much about Resido in today's releases. Good occupancy, but looks like a small valuation fall and they are no longer talking about repeating the model as far as I can see.

Fairly small part of the portfolio, but maybe a failed experiment? Harder to account for the flow on benefits to their surrounding properties.

Yield on Resido lower than what they were expecting I reckon.  Interesting that foot traffic in Sylvia park is up 8% since Ikea's opening a while ago.  I'd suggest its opening was far more impactful than Resido.

Not so good to see the value of Drury fall considering the investment there.  I'm guessing the current cost of earthmoving and roading is well north of initial projections.  Maybe they slow this development down with so much geopolitical uncertainty at present ?

Good to see the forecast dividend go up and their goal to increase it by 3% each year.

Following on the Drury point, capex was already down nearly 20% this year ($82.5m vs ~$102.5m prior), and that mostly explains why pre-lease FCF moved from -$22m to roughly breakeven. If they ease Drury further it'd help cash short term but you'd want to watch the timing of when Drury actually starts generating earnings.

The other bit worth flagging is the dividend math. Payout ratio on NPAT has jumped to 45.6% vs a historical average around 27%.  They're growing the dividend through an earnings contraction. Company frames it as 92% on AFFO which is the standard property-sector frame, so fine on that basis. But if revaluations keep pulling NPAT down, the gap between statutory earnings and what they're paying out keeps widening.

The above is from a closer look I took via Annolyse (https://www.annolyse.ai/briefings/kpg-fy26), a site I've been building, does source-backed briefings on NZX results with a chat for follow-up questions.

Quote from: Basil on May 18, 2026, 02:27 PMYield on Resido lower than what they were expecting I reckon.  Interesting that foot traffic in Sylvia park is up 8% since Ikea's opening a while ago.  I'd suggest its opening was far more impactful than Resido.

Not so good to see the value of Drury fall considering the investment there.  I'm guessing the current cost of earthmoving and roading is well north of initial projections.  Maybe they slow this development down with so much geopolitical uncertainty at present ?

Good to see the forecast dividend go up and their goal to increase it by 3% each year.

The Drury valuation is based on the property value as is (ie before it is officially split into portions to sell). Valuations will jump once completed and LFR land parcels are settled on.

Craigs latest

Nick Hill has maintained the Overweight rating on Kiwi Property Group post the full year result (TP +2% to NZ$1.09). FY26 AFFO of $100.2m increased +$7.4m/+8.0% on pcp (FY25: $92.8m), slightly ahead of expectations (CIPe: $99.3m). Portfolio performance remained solid, with like-for-like rental growth of +4.0% and new leases and renewals delivering +6.3% growth. Retail-led mixed-use rental growth of +3.6% p.a. exceeded expectations (+2.5%) despite a soft macro backdrop. The Vero Centre is now almost fully leased at 99% occupancy (vs FY25: 92%). KPG enters FY27 with pro-forma gearing of 33.3% after recycling ASB North Wharf. While this has been marginally earnings-dilutive, KPG has guided to a FY27 DPS of 5.75cps (+2.7% vs pcp), which KPG expect to be at the upper end of its 90%-100% AFFO payout range. We have KPG slightly exceeding this band (102% in FY27) albeit this is a near term dynamic with Drury land sale profits and ongoing NPI growth providing a natural tailwind from FY28 onwards. At last close, KPG offered a cash yield of 6.3%, (ahead of the sector median at 5.7%) and with AFFO to grow at a 3% clip to FY30 the risk reward looks relatively attractive. Overweight rating retained with an updated TP of NZ$1.09 per share (KPG last 91cps) ...

https://www.nzherald.co.nz/business/economy/inside-economics-how-the-usiran-deal-could-jump-start-nzs-economic-recovery/premium/5WBMVDSWSJF6JDRC6ZFLEDH63M/?lid=vvpwpxmdojgd  Paywalled.
Interesting excerpt

QuoteIf Donald Trump hadn't started a war with Iran in the first place, we wouldn't have an oil crisis to crush our recovery in the first quarter.
(You can bet that's not going to stop him claiming credit as oil prices fall and consumers feel the benefits of lower prices at the pump.)
But it happened, and we adapted. We got through the bit where things got substantially worse.  We've found an equilibrium now; if things get better, it still feels like a win.  The momentum, the direction of travel for the economy, is suddenly in the right direction, gaining ... even if we are technically still worse off than pre-war. Petrol prices don't have to return to the lows of January to make us feel better. They just need to be better than last week.
There's a macroeconomic version of this called the Easterlin paradox.

Quick rebound to consumer spending coming ?

Quote from: Basil on Jun 17, 2026, 07:27 PMhttps://www.nzherald.co.nz/business/economy/inside-economics-how-the-usiran-deal-could-jump-start-nzs-economic-recovery/premium/5WBMVDSWSJF6JDRC6ZFLEDH63M/?lid=vvpwpxmdojgd  Paywalled.
Interesting excerpt

Quick rebound to consumer spending coming ?

Don't no about that. It's too early I reckon. Any rebound I think is going to be slow. House owners generally are not feeling the love. Election year and lots of job insecurity.

Quote from: Basil on Jun 17, 2026, 07:27 PMhttps://www.nzherald.co.nz/business/economy/inside-economics-how-the-usiran-deal-could-jump-start-nzs-economic-recovery/premium/5WBMVDSWSJF6JDRC6ZFLEDH63M/?lid=vvpwpxmdojgd  Paywalled.
Interesting excerpt

Quick rebound to consumer spending coming ?

I think so and have said so previously. The economy was already improving when the conflict started, confidence and up-cycle momentum were building. The relatively short conflict wasn't deep enough for any lasting damage I reckon

Latest ANZ card spending data for May out earlier this week with spending up 2.8% month on month provides encouragement.

Quote from: Basil on Jun 17, 2026, 09:11 PMLatest ANZ card spending data for May out earlier this week with spending up 2.8% month on month provides encouragement.

Agree. I do think we have seen the bottom but suggest consumers will be weary. It's going to be a slow grind up is how I see it. We need the property market to improve so that house owners start spending.