KPG - Kiwi Property Group

[Basil]

Yup, I had a 5 year run of owning AREITs where I made 30% pa.  Those were the days 
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 

[KW]

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.  

[Waltzing]

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

[Basil]

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

[Waltzing]

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.

[winner (n)]

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

[Buzz]

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

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

The 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.

In 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.

One 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).

[Basil]

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

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.

[winner (n)]

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.

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

[Buzz]

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

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.

[Waltzing]

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?

[Waltzing]

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

[Waltzing]

 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 ...

[Whacc]

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.

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.

[Whome]

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.