KPG - Kiwi Property Group

[Ferg]

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

Yeah I read that the first time.  What specifically?

[Ferg]

Auckland 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.

[Shareguy]

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.

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).

[Basil]

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.

[KW]

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

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. 

[winner (n)]

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)

[Shareguy]

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. 

11 percent vacancy rate. I'm impressed where did you get that from KW?

[KW]

11 percent vacancy rate. I'm impressed where did you get that from KW?

Their website :-)  (go to "Available" and count them)

[Basil]

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

[KW]

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

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.

[lorraina]

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

[Basil]

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.

[winner (n)]

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.

How was Michael Hill looking ..... no robbers I hope

[LaserEyeKiwi]

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.

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.

[Basil]

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.

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.