Property Stocks

[Ferg]

I see the impact as being very muted for REITs: (18% depreciation differential) x (28% tax rate) x (building / land %) x (the $ of the portfolio that qualifies).  It's probably a small number....maybe 3.5% of the building value in year 1 only.  Unless a REIT is heavily weighted towards new builds......or does this also apply to buying existing buildings off another party?

[Cod]

I see the impact as being very muted for REITs: (18% depreciation differential) x (28% tax rate) x (building / land %) x (the $ of the portfolio that qualifies).  It's probably a small number....maybe 3.5% of the building value in year 1 only.  Unless a REIT is heavily weighted towards new builds......or does this also apply to buying existing buildings off another party?

The 20% immediate tax write-off under Budget 2025's Investment Boost applies to new commercial buildings and qualifying capital improvements owned by REITs, but it does not apply to all REIT buildings. Residential buildings, land, and second-hand commercial buildings already used in New Zealand are excluded. REITs must evaluate their assets individually to determine eligibility, focusing on whether the buildings are new, commercial, and meet the policy's criteria.

[Waltzing]

das Ganze Wirtschaft....odr konjunktur

[Otago K]

Disclosure, Indulged rather large on IPL 12 to 11 months ago, and the last few months into SPG.
bit random but regards the apparent changes in market sentiment towards REITs over the last year.

Perhaps a year ago I very much held a mindset that interest rates would be receding and that would affect capital valuations and consequently NTAs to be a positive for SP uplifts, also saw merit to the thought that the yields would reduce as investors saw REITs as an alternative to offset interest income levels dropping as bond yields fall, late August 2024 reassured me some, however where are we now. Seems that there are specific issues that is precluding much reduction in global bond yields.

I checked out some SPH notices this year in respect of SPG. If recall correctly Forbar had some significant investments made for their clients in MIS funds this calendar year at around $1.10 levels. Generate Invs had since October 2024 bought some at around an average of $1.30 levels but had pretty much exited at $1.10 levels glad I am not using them for my Kiwisaver perhaps. Is it that Ryman's SP decline has had ripple effects into the REITs?? In the end I think the current consensus is that the time to re-rate is still out into the future, am I still tying up my capital sooner than I should??

Could be losing my faculties but I find it hard not to be accumulating a few more SPG and KPG etc at current levels.

[seaweed]

Disclosure, Indulged rather large on IPL 12 to 11 months ago, and the last few months into SPG.
bit random but regards the apparent changes in market sentiment towards REITs over the last year.

Perhaps a year ago I very much held a mindset that interest rates would be receding and that would affect capital valuations and consequently NTAs to be a positive for SP uplifts, also saw merit to the thought that the yields would reduce as investors saw REITs as an alternative to offset interest income levels dropping as bond yields fall, late August 2024 reassured me some, however where are we now. Seems that there are specific issues that is precluding much reduction in global bond yields.

I checked out some SPH notices this year in respect of SPG. If recall correctly Forbar had some significant investments made for their clients in MIS funds this calendar year at around $1.10 levels. Generate Invs had since October 2024 bought some at around an average of $1.30 levels but had pretty much exited at $1.10 levels glad I am not using them for my Kiwisaver perhaps. Is it that Ryman's SP decline has had ripple effects into the REITs?? In the end I think the current consensus is that the time to re-rate is still out into the future, am I still tying up my capital sooner than I should??

Could be losing my faculties but I find it hard not to be accumulating a few more SPG and KPG etc at current levels.

Good choice Otago K. Your SPG is up about 11c and KPG up about 10.5c since your post on 27/5/25. I have been on a buying spree for last month and now looking at property stocks...GMT, PFI, SPG, KPG and ARG. Looking at the PE, EPS, NTA, DIV and YLD I notice ARG seems to be looking like a better buy at the moment. Every time I go to buy the others I seem to push the wrong button and end up buying ARG. Is it just me or is anyone else having the same problem.   

[Basil]

I posted this a while back in the KPG thread.

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.

and this in NOv 2024 when I started buying ARG

Presentation is here.  https://api.nzx.com/public/announcement/442203/attachment/432292/442203-432292.pdf
Sometimes boring is good.  ARG is a yield story.  Big research paper by Craigs I read recently has them as the highest yield of all listed property stocks.  6.65 cps / 109 = 6.1% PIE tax free yield worth 6.1 / 0.67 = 9.1% effective gross yield for 33% taxpayers.  Back out the 1.6625 cps coming in a few weeks and treat it as partial return of the purchase price those investing for 2025 income are getting 6.65 / (1.09-.016625) = ~ 6.2% tax free worth 9.25% gross for 33% taxpayers.  With the 2% DRP scheme reinitiated if you subscribe to that the effective yield becomes 9.25 / 0.98 = 9.44% gross, paid quarterly.

That will look pretty darn attractive this time next year when term deposits are under 4%.

Looking at the bigger picture with interest rates falling, cap rates should stabilize and eventually provide a tailwind, the economy should start recovering from sometime next year and they have a number of developments in the pipeline.

NTA is now $1.46 and it trades at a decent discount to that.  I think they have done well to keep the dividend yield unchanged this year in light of depreciation no longer being claimable, (unlike KPG who seem to look for any excuse to drop their payout)
I have a moderate position I hold for yield.

ARG have not run away much from the $1.09 I started buying at late last year.  My average price is just over $1.07 and I believe they are very good buying at the current level and the highest yielding stock of the listed REIT's.
Events since Nov 2024, I have added quite a few more and they now represent about a 10% portfolio position and almost the same for KPG.  Recent tax changes in this sector of an immediate 20% tax deduction for new commercial buildings will help ARG a lot in the coming years and others in the sector too.  Noting too that ARG still trade at a large discount to their $1.53 NTA.  Annual meeting is next Tuesday.

Funnily enough I was driving through Highbrook earlier this week, haven't driven through there in years so your post is quite timely.  GMT have done a great job there but I don't find their shares trading very close to NTA or the low yield attractive.  Noting also quite modest yields for VHP and PFI, they don;t float my boat either.  Don;t know enough about the other listed REIT's to post anything about them on here that adds value.

[KW]

Perhaps a year ago I very much held a mindset that interest rates would be receding and that would affect capital valuations and consequently NTAs to be a positive for SP uplifts, also saw merit to the thought that the yields would reduce as investors saw REITs as an alternative to offset interest income levels dropping as bond yields fall, late August 2024 reassured me some, however where are we now. Seems that there are specific issues that is precluding much reduction in global bond yields.

Same, I started loading up on Australian REITs in late 2023, early 2024.  Picked up some more during the April tariff tantrum when yields got pushed back up to 8%+ again.  

Back in 2008 I also loaded up on REITs.  Got a total return of 30% per annum over the next 5 years.  This time round won't be as lucrative, but I'm expecting at least 15% per annum for three years (Year 1 achieved, Year 2 on track, and the RBA should come to the party for 2026). 

[winner (n)]

Just imagine what'll happen to property related stocks if John Key gets his wish ...and RBNZ over reacts to takes OCR to 2.0%

https://www.nzherald.co.nz/business/sir-john-key-urges-100-basis-point-interest-rate-cut-to-boost-nz-economy/DTHZTVGQGZDC5ASZGELH3IVUEY/

[Shareguy]

Just imagine what'll happen to property related stocks if John Key gets his wish ...and RBNZ over reacts to takes OCR to 2.0%

https://www.nzherald.co.nz/business/sir-john-key-urges-100-basis-point-interest-rate-cut-to-boost-nz-economy/DTHZTVGQGZDC5ASZGELH3IVUEY/

Indeed. 50 points on the cards though.

Infometrics lifting forecast

https://www.rnz.co.nz/news/business/567250/infometrics-doubles-new-zealand-s-2026-growth-forecast

[winner (n)]

Not surprisingly there's a pretty strong correlation between the 10 Year Govt Bond rate and KPG share price

The Govt 10 year rate still hanging around the 4.5% mark ... hasn't moved down much for a while

If John Key gets his way and OCR goes to 2.25% and say 10 Yr rate goes to 3.% expect KPG share price to go to about $1.40

If 10 Year goes to say 2.0% (maybe wishful thinking) the KPG goes to something like $1.55

Pretty cool eh .....WHERE'S THE BUY BUTTON .... even if already in

[Dolcile]

Might just buy the kernel property fund so I don't have to guess who benefits the most

[Buzz]

Not surprisingly there's a pretty strong correlation between the 10 Year Govt Bond rate and KPG share price

Would you have chart of that?

[winner (n)]

Would you have chart of that?

KPG Share price v 10 Year Govt Bond relationship from 2008


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You cannot view this attachment.

[Basil]

Great image Winner.  Thank you for putting in the work to share this.
It was nice to see ARG getting some love today on the market, up on more than 1 m volume as well as KPG on more than 3 million shares traded.

[seaweed]

Great image Winner.  Thank you for putting in the work to share this.
It was nice to see ARG getting some love today on the market, up on more than 1 m volume as well as KPG on more than 3 million shares traded.

I topped up today on both KPG and ARG and looking forward to AGM tomorrow and might attend if I am feeling up to it.