Property Stocks

[Red Baron]

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.

Zo you have held vor 40+ years, and vinally it gets back to ze issue price!   
Zhat eez vhat I call 'Buzzloyalty'

RB


   

[Basil]

ARG and KPG both closed today at prices that give a PIE tax free yield of 5.6%, 5.65% to be exact for ARG.
Depending on your marginal tax rate that's worth 8.4% gross to 33% taxpayers and 9.2% gross to anyone using this PIE structure to beat the 39% tax rate applicable to Trusts or those earning over $180k.

Those are very attractive effective gross yields in a falling interest rate environment. It wouldn't surprise me if in addition to a cut by the RBNZ next week there's another one next time and a further cut late this year or early 2026.

[Waltzing]

you accumulated when? in the 80's? Did not know the stock was listed back then... has the SP moved much since    what happened to it in the crash...

If the Reserved Bank dont cut the OCR the Minister is going to ask them release information on how they add up the numbers... 

[Plata]

What do you guys reckon is the reason for stride trading at a comparatively higher yield than the others? Maybe the wellington exposure? lower asset quality?

[Cod]

What do you guys reckon is the reason for stride trading at a comparatively higher yield than the others? Maybe the wellington exposure? lower asset quality?

They dropped their dividend just after covid, which instituted a bit of doubt and their last half year statement was signalling a slower recovery than say ARG. My view is they will get there. I believe their NTA is currently $1.72 determined by buillding values that have not yet increased much.

[Otago K]

What do you guys reckon is the reason for stride trading at a comparatively higher yield than the others? Maybe the wellington exposure? lower asset quality?

Yeah I would ask a similar question. There are some institutional and managed funds looking to work out of holding SPG, my worry is that the Wellington % is maybe (?) low on the earthquake building standards as an additional determinate.
discl: have a overweight position from late April 2025 in SPG, and had some influence in not taking a position in ARG at the same time. Suspect Basil might think I picked the wrong horse here.
Not personally sure the NTA of SPG will not shrink a little more still in the short term.

The whole NZ REIT sector is following a different correlation to what I think would drive it, compared to say the Aussie market from what I am picking up, it was quite buoyant around RBA rate cuts there.

At least KPG is performed well enough, having managed to re-balance one trust entity portfolio on a 19.7% SP rise to 99c from April purchases to hold a remnant percentage of shares at my nil cash funds invested basis.

[KW]

The whole NZ REIT sector is following a different correlation to what I think would drive it, compared to say the Aussie market from what I am picking up, it was quite buoyant around RBA rate cuts there.

With the exception of the Melbourne market, commercial real estate is doing ok over there.  Cap rates are dropping, and they are all reporting their first period where asset valuations are going up rather than down.  Rents are rising with inflation, vacancy rates are reasonable, debt levels are reducing, and dividends are being raised.  The build pipeline is shrinking due to costs, so a lot of older buildings are now being refitted or repurposed. 

[Basil]

What do you guys reckon is the reason for stride trading at a comparatively higher yield than the others? Maybe the wellington exposure? lower asset quality?

Yes and a range of other factors including:-
A steady reduction in distributable income per share over the last 5 years, 2025 to 2021 as follows - 8.64 cents 10.76 cents 10.66 cents 10.95 cents 11.58 cents, see page 43 of the annual report
Steady reduction in NTA over the years
High weighting to office assets including a fair few B grade assets which are highly vulnerable which saw a significant increase in vacancy rate in FY25
One of their divisional management contracts is not perpetual and subject to review next year
By comparison to other listed REIT's its fairly new and only listed in 2016, the market needs time to build trust and respect for what they are trying to do
The market is not attributing much value to the property management side of the business, (rightly or wrongly, you be the judge)
Some quite woke employment policies I spotted on their website which I think are excessive, e.g. 5 weeks annual leave for all staff, and 5% contribution to Kiwisaver for any staff member who contributes 4% or more.
The structure of the whole thing being stapled securities might put some investors off who want something that's simple to understand.
There will be other factors at play here for sure, which people can DYOR on a deep dive into this sector starting with reviewing their FY25 annual report here https://api.nzx.com/public/announcement/452359/attachment/444320/452359-444320.pdf

BTW - A very good recent article by Tim Hunter in the NBR recently about all the governance mistakes made by NZL.  You should try and get a copy.  It was scathing.  PM me with your email address if you can't get a copy of it any other way and I'll send it to you.  I'm not impressed at all with the way Rob Campbell has lead the governance of NZL.  Investment in NZL is a definite NO from me.  This presents as a possibility but there are plenty of modest quality B grade assets in their portfolio so its definitely not without considerable risk.

 

[Otago K]

Yes and a range of other factors including:-
A steady reduction in distributable income per share over the last 5 years, 2025 to 2021 as follows - 8.64 cents 10.76 cents 10.66 cents 10.95 cents 11.58 cents, see page 43 of the annual report
Steady reduction in NTA over the years
High weighting to office assets including a fair few B grade assets which are highly vulnerable which saw a significant increase in vacancy rate in FY25
One of their divisional management contracts is not perpetual and subject to review next year
By comparison to other listed REIT's its fairly new and only listed in 2016, the market needs time to build trust and respect for what they are trying to do
The market is not attributing much value to the property management side of the business, (rightly or wrongly, you be the judge)
Some quite woke employment policies I spotted on their website which I think are excessive, e.g. 5 weeks annual leave for all staff, and 5% contribution to Kiwisaver for any staff member who contributes 4% or more.
The structure of the whole thing being stapled securities might put some investors off who want something that's simple to understand.
There will be other factors at play here for sure, which people can DYOR on a deep dive into this sector starting with reviewing their FY25 annual report here https://api.nzx.com/public/announcement/452359/attachment/444320/452359-444320.pdf

BTW - A very good recent article by Tim Hunter in the NBR recently about all the governance mistakes made by NZL.  You should try and get a copy.  It was scathing.  PM me with your email address if you can't get a copy of it any other way and I'll send it to you.  I'm not impressed at all with the way Rob Campbell has lead the governance of NZL.  Investment in NZL is a definite NO from me.  This presents as a possibility but there are plenty of modest quality B grade assets in their portfolio so its definitely not without considerable risk.

 

Basil, could I please seek some depth to the highly vulnerable aspect comment, do you see that as merely the vacancy rate on what is less desirable office options for tenants in the Wellington supply or is there details of the earthquake ratings on the buildings to be accessed somewhere you could direct me to please?

[LaserEyeKiwi]

Basil, could I please seek some depth to the highly vulnerable aspect comment, do you see that as merely the vacancy rate on what is less desirable office options for tenants in the Wellington supply or is there details of the earthquake ratings on the buildings to be accessed somewhere you could direct me to please?

Towers in Wellington are highly vulnerable. proven history of needing to do earthquake strengthening and/or repairs on Wellington towers regardless of the supposed NBS ratings.

Remember vividly the KPG AGM where the retiring CEO spoke in great detail how it lead to a lost decade of returns across there assets in seismic active areas (Wellington/Chirstchurch/Palmerston North) - and subsequently they moved to unload their assets in those areas to eliminate that exposure in the future. 

[Basil]

Basil, could I please seek some depth to the highly vulnerable aspect comment, do you see that as merely the vacancy rate on what is less desirable office options for tenants in the Wellington supply or is there details of the earthquake ratings on the buildings to be accessed somewhere you could direct me to please?

Sure, no problem mate.  What do you make of the charts on page 27 of the annual report for forecast vacancy rate of B grade office buildings over the next 3 years ?  They looked pretty scary to me and in tandem with vacancy rates across their portfolio climbing quite a bit in FY25, I did not get sufficient comfort the dividend of 8 cps forecast for FY26 is sustainable in the medium term, especially when they might lose the management contract on part of their portfolio in FY27.  Others might have a different view and that's fine and I acknowledge the discount to NTA is quite large and the yield is the best of the REIT's and possibly / probably ? all the risks are already fully priced in.

The other positive seeing as they have new builds in the pipeline is the recently announced accelerated 20% write-off will help with their tax bill as those new buildings are delivered.  They will also benefit from falling interest rates and hopefully firming capitalisation rates like the rest of the sector.  I didn't read the whole report...there could be more info on the earthquake ratings and remedial costs or not, sorry, not sure.

[Basil]

ARG and KPG both closed today at prices that give a PIE tax free yield of 5.6%, 5.65% to be exact for ARG.
Depending on your marginal tax rate that's worth 8.4% gross to 33% taxpayers and 9.2% gross to anyone using this PIE structure to beat the 39% tax rate applicable to Trusts or those earning over $180k.  Those are very attractive effective gross yields in a falling interest rate environment. It wouldn't surprise me if in addition to a cut by the RBNZ next week there's another one next time and a further cut late this year or early 2026.

Forgot to add that in addition to those yields, canny investors topping up this month will know that both pay a quarterly dividend next month so they get some money back on their investment in double quick time.  Disc: I added a few more ARG at the close today and some more KPG last week.

[Otago K]

Sure, no problem mate.  What do you make of the charts on page 27 of the annual report for forecast vacancy rate of B grade office buildings over the next 3 years ?  They looked pretty scary to me and in tandem with vacancy rates across their portfolio climbing quite a bit in FY25, I did not get sufficient comfort the dividend of 8 cps forecast for FY26 is sustainable in the medium term, especially when they might lose the management contract on part of their portfolio in FY27.  Others might have a different view and that's fine and I acknowledge the discount to NTA is quite large and the yield is the best of the REIT's and possibly / probably ? all the risks are already fully priced in.

The other positive seeing as they have new builds in the pipeline is the recently announced accelerated 20% write-off will help with their tax bill as those new buildings are delivered.  They will also benefit from falling interest rates and hopefully firming capitalisation rates like the rest of the sector.  I didn't read the whole report...there could be more info on the earthquake ratings and remedial costs or not, sorry, not sure.

Thanks Basil and KW for addressing some matters that might be determinations. I had a quick look at the thread yesterday morning (and in my brain saw a bit more) that I don't disagree that there are matters to assess in determining a question of Mr Market having not got the SP right. but with real life matters of focus for me personally didn't reply, and I'm still needing to focus my time there at present. Admittedly there are some potential heightened risks with SPG, and ARG do seem to be in the process of actioning on a re-balance of assets in their portfolio to Industrial properties. Another big positive for ARG c/f SPG I admit is the clarity in their summary reporting, to get that sort of thing took quite some time or frustration and some estimations, maybe therein lies a reality. I agree in essence that the quality of some of the portfolio isn't going to match some other options.
The questions of the management side of the operation as you say is up for reassessment should the entity that they hold a minimal (2%?) ownership share, if the loss of the management contract of it eventuate it would alter the balance some, as to what value needs to be considered for that business operation ??, bearing in mind contracts are solely for business entities that they also hold a direct ownership interest in so they haven't attracted any independent commissions as such.

When I looked to determine the thoughts of valuation it wasn't easy to breakdown and consider what the SP moves might be.
I would be a fool to not re-assess when I have time to think it over again including what the KW post has heightened in my current consciousness, and the fact that some big players are clearly selling down or out. Always was going to sell down in the longer term with my general REIT and specific property company over weight allocation in my portfolio holdings.
On the positive if I need to do it extensively to sleep without doubts, at the current SP is comfortably above the sort of $1.12 BUY levels.

discl might tidy up to become coherent when brain isn't required elsewhere

[Waltzing]

Some investors that always make a killing will be doing so again from this ever isolating stocks that get hit every time the NZ govt and Reserved bank stuff up every ten year cycle...

Just wait for another NZ Government to do it all again in ten years... when the Prop Comps get to say ARG 1.60 or 70.. do a take some off the table... as they will blow it... they always do...

remember none of these professional politicians and none of the government officials ever come from the commercial sector in numbers big enough to to make any difference...

[Plata]

BTW - A very good recent article by Tim Hunter in the NBR recently about all the governance mistakes made by NZL.  You should try and get a copy.  It was scathing.  PM me with your email address if you can't get a copy of it any other way and I'll send it to you.  I'm not impressed at all with the way Rob Campbell has lead the governance of NZL.  Investment in NZL is a definite NO from me.  This presents as a possibility but there are plenty of modest quality B grade assets in their portfolio so its definitely not without considerable risk.

Yes re stride it seems the higher yield is not undeserved. Re NZL I exited the other day as the risk/income reward is not attractive anymore. I'm having an awful issue at the moment where all my unloved income stocks run up past the point of being compelling to hold. I'm concerned the strategic review will be yet another lucrative event for the manager, and like you I don't have much faith that the board can keep this reasonable. It continues to surprise me how none of the property companies ever just buy and hold, always churning around with the illusion of value add, strategy this and that.