Property Stocks

[Otago K]

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. 

Didn't quite get a bite of ARG, think I had placed a BUY at 96 cents while I delayed to assess, and when got back to it gut felt it had moved higher to a level that I would just focus on KPG.
KPG I will need to sell down the portfolio percentage allocated to KPG for in effect a Trust Entity owned holder as a result in part to appease a potential (discretionary) beneficiary expressed concerns. 20% uplift in values since second half of April will have to be the limit of the gains if I chose to appease him and listen to his threats of legal actions for my perceived fiduciary delinquency.
SPG still not back to SP 12 month lows as at Feb 2025 if I am not mistaken, perhaps the REITs will pop somewhat after the August OCR review??

[Plata]

Has anyone looked deeply into NZL? They reckon affo/ps will be ~7.75 cents in three years time, seems pretty attractive. And gearing is on the lower end of the sector. Surely dairy farm and forestry land is safer than office property these days. When it first listed I thought the management contract was excessively favourable to the manager but thinking about it more it really doesn't seem out of order when compared to actively managed investment funds.

[Basil]

KPG I will need to sell down the portfolio percentage allocated to KPG for in effect a Trust Entity owned holder as a result in part to appease a potential (discretionary) beneficiary expressed concerns. 20% uplift in values since second half of April will have to be the limit of the gains if I chose to appease him and listen to his threats of legal actions for my perceived fiduciary delinquency.
SPG still not back to SP 12 month lows as at Feb 2025 if I am not mistaken, perhaps the REITs will pop somewhat after the August OCR review??

Pretty disappointing that a discretionary beneficiary is throwing their weight around like that.  I think if that sort of thing happened to a trust I was serving on, I'd be reminding that person that the Trustees have the discretionary power to give him / her as much or as little as they think is appropriate, including perhaps, nothing.

REIT's like ARG and KPG which are both PIE's are yielding in the mid to late 8% range for 33% taxpayers.  That rises to close to a 10% effective gross yield for those on a 39% tax rate including trusts. 

[seaweed]

Didn't quite get a bite of ARG, think I had placed a BUY at 96 cents while I delayed to assess, and when got back to it gut felt it had moved higher to a level that I would just focus on KPG.
KPG I will need to sell down the portfolio percentage allocated to KPG for in effect a Trust Entity owned holder as a result in part to appease a potential (discretionary) beneficiary expressed concerns. 20% uplift in values since second half of April will have to be the limit of the gains if I chose to appease him and listen to his threats of legal actions for my perceived fiduciary delinquency.
SPG still not back to SP 12 month lows as at Feb 2025 if I am not mistaken, perhaps the REITs will pop somewhat after the August OCR review??

I was so looking forward to going to the AGM but Shingles got the better of me. My advice to everyone is to get the Shingles vaccine. Anyway, to take my mind off that blo-dy painful condition I have bought 3 lots of ARG in last three weeks and one lot of KGB but am still liking the look of ARG also bought FSF and PGW just for a laugh and still got lots of SPK for a bigger laugh. 

[seaweed]

Has anyone looked deeply into NZL? They reckon affo/ps will be ~7.75 cents in three years time, seems pretty attractive. And gearing is on the lower end of the sector. Surely dairy farm and forestry land is safer than office property these days. When it first listed I thought the management contract was excessively favourable to the manager but thinking about it more it really doesn't seem out of order when compared to actively managed investment funds.

I had a quick look but bought more ARG. When is NZL next div due? 

[Plata]

I had a quick look but bought more ARG. When is NZL next div due? 

Should be in September, 1.8-2 cents I'd guess.

[Basil]

Has anyone looked deeply into NZL? They reckon affo/ps will be ~7.75 cents in three years time, seems pretty attractive.

Thanks for bringing this company up which gets almost no attention.  I haven't looked deeply but on a quick review it listed in 2020 at $1.25 promising to pay 90-95% of AFFO but this has been adjusted to 60-90%.  I think its somewhat disrespectful to initial investors who bought this as a yield investment that the directors are now granting themselves such a wide power of discretion as to the level of dividend, although some might see that as a bonus if they trust the directors to invest in value accretive opportunities.
https://api.nzx.com/public/announcement/451937/attachment/443747/451937-443747.pdf

The yield 4.3% tax paid as a PIE does not compare favorably with the likes of KPG 5.7% tax paid, or ARG 5.9% tax paid but the farm leases are longer and it does accord an opportunity to invest in rural land at a reasonable discount to NTA.  Investors are well served with Rob Campbell as chair.  Best wishes to holders.

[Otago K]

Pretty disappointing that a discretionary beneficiary is throwing their weight around like that.  I think if that sort of thing happened to a trust I was serving on, I'd be reminding that person that the Trustees have the discretionary power to give him / her as much or as little as they think is appropriate, including perhaps, nothing.
......

Indeed has been done, including formally by my co-trustee lawyer via his acting solicitor, a differing reality that I think is a distorted one, if not merely a sense of entitlement or desire to control. I certainly don't see they have the attributes to replace me as a trustee.

[Otago K]

Thanks for bringing this company up which gets almost no attention.  I haven't looked deeply but on a quick review it listed in 2020 at $1.25 promising to pay 90-95% of AFFO but this has been adjusted to 60-90%.  I think its somewhat disrespectful to initial investors who bought this as a yield investment that the directors are now granting themselves such a wide power of discretion as to the level of dividend, although some might see that as a bonus if they trust the directors to invest in value accretive opportunities.
https://api.nzx.com/public/announcement/451937/attachment/443747/451937-443747.pdf

The yield 4.3% tax paid as a PIE does not compare favorably with the likes of KPG 5.7% tax paid, or ARG 5.9% tax paid but the farm leases are longer and it does accord an opportunity to invest in rural land at a reasonable discount to NTA.  Investors are well served with Rob Campbell as chair.  Best wishes to holders.

I haven't looked into NZL at all, but my gut thoughts, if you had a desire to hold farmland in your portfolio the yields you have identified look to indicate a degree of value, farmland doesn't offer the cash returns that other NZ property might do ( and I might suggest it's more volatile in valuations ). Not on my radar on any basis, discl; have some off market direct farmland ownership, albeit less than 24 months ago.

[Plata]

Thanks for bringing this company up which gets almost no attention.  I haven't looked deeply but on a quick review it listed in 2020 at $1.25 promising to pay 90-95% of AFFO but this has been adjusted to 60-90%.  I think its somewhat disrespectful to initial investors who bought this as a yield investment that the directors are now granting themselves such a wide power of discretion as to the level of dividend, although some might see that as a bonus if they trust the directors to invest in value accretive opportunities.
https://api.nzx.com/public/announcement/451937/attachment/443747/451937-443747.pdf

The yield 4.3% tax paid as a PIE does not compare favorably with the likes of KPG 5.7% tax paid, or ARG 5.9% tax paid but the farm leases are longer and it does accord an opportunity to invest in rural land at a reasonable discount to NTA.  Investors are well served with Rob Campbell as chair.  Best wishes to holders.

If I recall correctly that dividend switch up occurred because they became a bit overleveraged once the covid easy money dried up. They actually suspended it for a while under the guise of a buyback being better allocation. The current yield isn't the story though, the story is the future yield. If you hold the payout ratio of fy2024 81% constant, by their affo forecasts (midpoint) and guestimate of shares issued, DPS grows from 4 cents to 4.3 cents FY25, 4.9 cents FY26, 5.15 cents FY27. I feel this makes it quite competitive with the others, especially given the fact that ARG is at 100%+ payout ratio and KPG is approaching the same.

[Basil]

So the payout ratio of affo was 90-95%, then it was nothing and now its 80% with guidance of 60-90%, is that correct ?  Given this all occurred for a newcomer company within a few short years, how can we rely on any guidance they give about future earnings or payout ratios ?   

My wife already has enough exposure to rural land for both of us but just out of curiosity what's driving the growth in forecast income ?  How reliable are those forecasts given we are talking about the notoriously cyclical rural sector which is booming now but may be quite different 3 years hence ?
Look, if they can get those future forecast returns off rural land, obviously I am skeptical given the current boom in the rural cycle, that's a fantastic return.

Latest from ARV is current year payout is within normal program guidelines. Craigs have KPG growing DPS to 6 cps by FY28. That seems quite plausible to me given we are almost certainly at the bottom of the retail cycle.

To me, at face value, buying KPG you are buying what is almost certainly the bottom of the retail cycle whereas with rural, you are at face value, probably buying the top of the commodity cycle. That's my preliminary view but I'm certainly interested to hear your thoughts on those questions above.

For what its worth I added more KPG and ARG this week because I know I can almost certainly trust their forecast payouts and they both have a VERY long history of doing what they say they will do, (with the exception of one missed dividend during the depths of the Covid crisis with KPG).

[Plata]

Yes that is my understanding of the payout guidance. I agree they have not shown reliability with the dividend.
I would say the earnings growth forecasts they have provided hinge on rent reviews, this years avg rent increase looks like it will be around 5% due to cumulative CPI change since some properties had their last reviews. With CPI still at almost 3% and all the leases being CPI indexed or higher there should be consistent growth in income. I think for the later years in the forecast they must be assuming some level of interest rate reduction and/or rotation of assets (potentially from lower yield pastoral ~5% to orchard or forestry which so far have been ~8%). I may be mistaken but as they are the land owner, not the farmer, they are much less exposed to the dairy cycle.

I used to hold KPG and am open to holding again, especially with a 6 cent dividend. But not at a 100% payout ratio.

Our objectives are likely different, the dividend is nice but matters less to me than the risk/reward(TSR).

[Basil]

I had a bit more time today to have a somewhat deeper look into this. Thank you Plata for bringing this to our attention.  Its certainly not without its own unique merits and shareholders are very well represented with Rob Campbell as chair.  Always important to look ahead especially as FY25 is more than half done and dusted.  Looking at that forecast of 4.9 cps for FY26 on a share price of 93 cents that's a tax free PIE yield of 5.27%, worth 7.87% or 8.64% gross equivalent to 33 or 39% taxpayers respectively, (assuming they meet forecast and pay out 80% of affo).  That's a very good yield for rural land and your point about AFFO growth is well made.   

Not super happy that the manager get's 10% of all uplift in NAV from one year to another, (without any hurdle whatsoever in terms of acceptable run rate of growth....surely a baseline of the CPI + a few percent as a minimum should have been set as a baseline before performance fees become payable), but the 0.5% per annum of NAV management fee is a lot less than most actively managed funds charge so I suppose taken together its not unreasonable and the Chair is highly experienced and will be keeping a very close eye on what new deals will be asset and affo accretive with his (close to a million shares holding) so some comfort can be derived from that.

Seems like a good vehicle to gain exposure into rural land with no need to get your hands dirty or wear gumboots.  I wish my wife's rural land provided returns that good lol.

[Basil]

Nice to see Kiwi Property back at $1 today.  No reason I can see that this can't keep going up until its much closer to its NTA.  Ditto for ARG.

[Buzz]

Nice to see Kiwi Property back at $1 today.  No reason I can see that this can't keep going up until its much closer to its NTA.  Ditto for ARG.

Yes, though I expect Mr Market will gyrate around $1 for a while, albeit ameliorated by the (declining) 6.8% gross dividend paid quarterly. With NTA at $1.14, I'm not expecting any sudden increase in SP to close that gap, in time it will but not until KPG proves out it's BTR strategy, the property market stabilises and Drury especially continues to develop.

Those quarterly divis have been a lot more satisfying than my TD's, hence I have a decent swag of KPG and remain content with that decision.

Probably should say I accumulated for a couple of years in the 80's.