Property Stocks

[BlackPeter]

...
I also think there's a pretty good case for KPG at 87 cents and noted in their half year presentation they are making solid moves on human resource cost reductions which has for a long time been one of my main criticisms.  I have the yield at 9.2% gross and AFFO payout at 89% based on 5.4 cps.  Not a massive fan of KPG but we are at the bottom of the retail cycle so it could be a good trade and also get a lot closer to NTA of $1.17 in the years ahead.  Yield is not shabby either when we have 2 x RBNZ rate reductions baked in as almost a certainty in the next two months on 9 April and 28 May.

Hmm - re KPG, wasn't it you highlighting their risky strategy to set on Build for Rent?

Just wondering how this will play out with immigration at a low point and Kiwis queuing up at the departure gates?

Did I miss  the memo - or do you assume that all the Americans fleeing the tyranny of the Dump regime will be enough to fill the empty appartments? I guess, it might be possible. How many of the 200 million decent Americans need to come to completely change our real estate situation? I reccon 0.1% of them (i.e. 200k) per year would be completely sufficient for a turn around in the domestic rent market.

[Basil]

50% leased as of 30 Sept 2024 isn't too bad mate and certainly exceeded my earlier expectations.  Overall, not a bad half year report considering that covered the very darkest part of the recession from April - Sept 2024.  Green shoots now going forward into FY26 and FY27 ?
https://api.nzx.com/public/announcement/442498/attachment/432656/442498-432656.pdf

I'm pleased to see they are striving for a more efficiencies in the operation of the business.  That to me was a big negative and change was long overdue.
Anyway...there's enough encouragement there, along with the fact that I am sure we are at the bottom of the commercial property and retail cycle for me to take a modest stake.  Its hard to find reliable yield elsewhere at that level and I can't go all in on Turners and HLG lol

Please don't start me up on that bloody idiot, Chump lol

[Cod]

"This time is different" -- LEK

History may not repeat, but it sure does have rhythm.

Every time is different, but it follows a similar path.

[LaserEyeKiwi]

"This time is different" -- LEK

History may not repeat, but it sure does have rhythm.

Every time is different, but it follows a similar path.

ha ha ha giving me a heart attack seeing that partial quote attributed to me in that manner! For the record I was arguing against the thought process often behind "This time is different".

[Cod]

ha ha ha giving me a heart attack seeing that partial quote attributed to me in that manner! For the record I was arguing against the thought process often behind "This time is different".

Apologies LEK, I agree with you sentiment - I was proposing up a more nuanced idea that people associated with that thought process might wish to entertain.

[Basil]

Argosy results out and looks pretty solid.  Sometimes a bit of boring in one's portfolio is a good thing. 
KEY RESULTS FOR THE PERIOD INCLUDE:
• Net property income for the period of $116.9 million, up 0.4% on the prior comparable period;
• $72.7 million revaluation gain for the 12 months to 31 March ($111.7 million revaluation loss in the prior comparable period), up 3.6% on book value, contributing to a full year net profit after tax of $125.9 million (loss of $54.5 million in the prior comparable period);
• Net distributable income of $55.8 million, the same as the prior comparable period (note this year Argosy incurred incremental tax expense of $2.8 million, following the Government's removal of tax deductions for depreciation on buildings);
• Sound portfolio metrics, with occupancy at 96.5% and WALT of 5.1 years;
• NTA per share of $1.53 up from $1.45 at 31 March 2024;
• Portfolio gearing steady at 35.7%, in the middle of the target band of 30-40%;
• Divested and settled the non Core asset at 8 Forge Way for $35.2 million, achieving above book value;
• Successful portfolio leasing and rent review outcomes, including 3.5% annualised rental growth on rents reviewed and 86% tenant retention rate;
• Progress on green developments, continuing our portfolio transformation and progress to a 50% green portfolio by 2031 (37.2% at 31 March 2025);
• Argosy achieved notable success at the annual Property Council of New Zealand (PCNZ) Awards. The company won the Supreme Award for its 6 Green Star Built property located at 8 Willis Street/Stewart Dawsons Corner. This property was also Highly Commended at the World Green Building Council's Asia Pacific Leadership in Green Buildings Awards.
• Additionally, the 6 Star Green Built property at 105 Carlton Gore Road received an Excellence Award at the PCNZ Awards. These accolades further underscore the quality of our portfolio and our commitment to sustainable practices;
• Appointment of Alex Cutler to the Board, as part of the Board succession process; and
• FY26 dividend guidance of 6.65 cents per share, consistent with the prior year.

[winner (n)]

Divie outside policy band but no worries- asked how the company planned to get back into its dividend ratio, chief financial officer Dave Fraser said there were "a lot of tailwinds" that would help

[BlackPeter]

RoE 9.6%, which is much better than the previous two years (they both had negative RoE), but worse than any other year since 2018 (first year I tracked them). Still - things are clearly improving, revaluation gains are back and they even sold some property above book value ... sort of confirming the latter is conservative.

I note dividend yield is 6.2% (and this on PIE income, i.e. tax favorable), which looks good in the context of likely capital appreciation.

[Basil]

Yeap, 6.2% net return is worth 9.25% gross for those on a 33% tax rate.  That and $1.07 is a long way south of $1.53 NTA and a gradually recovering economy together, seems like a solid dynamic underpinning the investment case.  I think we're past the bottom in this commercial property cycle and there is a not unreasonable prospect of the gap to NTA closing up a bit.   

Not sure about their latest acquisition on a 5% yield and whether that's eps accretive when borrowing cost is 5.1%, especially when they could be buying their own shares back at a huge discount to NTA.  Might have a word to them at the annual meeting about that.  That said, I think they have navigated the very deep and protracted recession very well and maintained the divvy payout throughout so some credit is deserved there.  Hopefully better economic times ahead noting their annual rent review average increase was 3.5% this year and many parts of the portfolio are significantly under-rented compared to market. (For those that don't know, many lease deals involve fixed rate reviews and that can slip behind market rates over the years).  Under-rented means current contracted rent v market value.

As much as all this "greening" of the portfolio makes me want to roll my eyes with disdain, it does seem to be what customers want. 
I added some more today noting the next divvy is due next month.

[LaserEyeKiwi]

budget surprise:

20% immediate tax write off for new commercial buildings built (excludes land).

[Basil]

budget surprise:

20% immediate tax write off for new commercial buildings built (excludes land).

Wow, that's ten years worth of the old straight line depreciation @ 2% per annum.

[Waltzing]

yes great news... market said ... nothing yet.. still good news for the prop comps going forward...

https://www.taxpayers.org.nz/nicola_willis_fudge_it_growth_budget

[LaserEyeKiwi]

Also read thats its retroactive, in that it will be available for things that were started before May 22, as long as they are finished after May 22.

[Waltzing]

Oh well  investors (campers) that means looking at the building programs of the com props... that is very supportive to SP's  and means actually reworking those bottom lines in models...

the brokers will have to rework there models and which will mean those debt limits on the books are now fully supported by the tax deductions..

[Red Baron]

Oh well  investors (campers) that means looking at the building programs of the com props... that is very supportive to SP's  and means actually reworking those bottom lines in models...

the brokers will have to rework there models and which will mean those debt limits on the books are now fully supported by the tax deductions..

Zo zoft vittings get a 'one off' 20% depreciation lolly.   But ztill 0% depreciation allowed vor ze 'hard zhell' zhat zurrounds zhem?  Property investment companies are ztill 'worse off' zhan vhen ze Nicola and Chris show came to town are zhey not?

Also much more to gain vrom 'other sectors' zucking ze 20% depreciation lolly zhan property.   Listed property asset investors zounding a little desperate as ze property market continues to ztagnate?

RB