KPG - Kiwi Property Group

[snapiti]

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

[winner (n)]

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

[BlackPeter]

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

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 ;

[Shareguy]

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

[BlackPeter]

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

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?

[Basil]

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?

[winner (n)]

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

[BlackPeter]

KPG 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.

[Basil]

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).

[winner (n)]

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).

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

[BlackPeter]

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).

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 ...

[winner (n)]

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

[snapiti]

not

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?

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

[Basil]

not 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.

[Buzz]

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?

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.