National Property Trust units

[Zorwarrior]

Hi all,

I am very new to this forum and am a stock market novice. I was wondering what people thought about the National Property Trust units (NAP) in the current market. I bought a good amount of these under 2 years ago on the advise of a financial advisor. However, in the current market I am nervous.

Any thoughts about the units? Worth keeping or get rid of them now and take the hit?

[Zorwarrior]

Thanks Fungus. I dont need the money at the moment but I am nervous with all the finance companies and St Lawrence (owner of NAP) being in trouble. What are the chances that St Lawrence takes down NAP with it? Is it better to cut losses now?

[Billy Boy]

Zorwarrior
Dont Sell NAP.
You may have bought them a ways back so buy some more, it's called
averaging down. at 50c they are earning 11.8% !! better than money
in the bank.
They are a Unit Trust. In other words the property the trust holds
is owned buy the trust and is subject to the trust document. St Lawrence
dont own the trust they only manage it. They do hold units in NAP
but if St L go belly up, Nap just gets another manager
Go to direct broking tutorial, that will give you a lot of info.
what ever you do is dont give up on learning about shares and equities.
Saving (not) our money is NZ's Biggest problem. read some of the other
threads, Prob 1 is talked about.
Dont be afraid to come on this foram and ask your questions. There are
some very fine people who post here. (there are some dicks, but you
will learn who they are, ignor them).
Good luck and stick with it.
Cheers BB:)

[Phaedrus]

Should I get rid of them now and take the hit?
Let's assume you bought these at around 70 cents or so. You can see that NAP had support at 65 cents, so, technically, the time to take the hit and sell was when this support was broken in August last year. You can see that NAP has now found support again at 48 - 49 cents and is currently just above that level. Therefore, now is NOT the time to sell. In fact, as you can see from the red trendline, NAP looks about ready to break above it, giving a buy signal. Note how similar this advice is to that of Funguspudding, yet two totally different investment methodologies have been used. Isn't that encouraging?


The sharemarket, so I'm discovering, seems to comprise people who continually trade, follow charts etc - quite beyond me, so to repeat others will have a different view, so watch this space --- someone will turn up shortly to shoot me down in flames.. Well FP, here is someone who trades and follows charts turning up to agree with you! While NAP has not yet given a buy signal, it does appear to be consolidating at around 50 cents and is close to breaking the confirmed trendline that has been monitoring its downtrend over the last year or so. Don't automatically assume that different approaches necessarily lead to different conclusions. And another point - charts are NOT beyond you!
Take a look at the On Balance Volume at the top of the chart. The black arrows mark where "smart" money (big money) bought in to NAP. You can see why I have put the word "smart" in double quotes. Mugs! NAP has been an absolute dog of a stock, but now for the first time in its miserable existence, it just might be worth buying (Soon).

http://h1.ripway.com/Phaedrus/NAP725.gif

[Xerof]

Without wanting to bag this stock - don't discount the other side of that statement - the asset value could align with SP

[Billy Boy]

The economy will bounce back, property values will return and with this
reverse swing in the cycle, I will be quite happy to be holding ING, NAP,
KPF. APT. KIP.
Three years time maybe, returning 10% plus with Imps and an inbuilt
hedge against inflation, "Dont ya hate that when it happens" :D.
At todays prices I have allready begun to accumulate.
BB

[POSSUM THE CAT]

Remember the property companies crashed after 1987 as well Robt Jones Investments & Landmark Corporation are two

[Billy Boy]

Remember the property companies crashed after 1987 as well Robt Jones Investments & Landmark Corporation are two
Quite Right
But they were porperty company's not unit trusts and the same rules
wer,nt in place then. And up to 60% leveraged then if I remember right.
Different ball park 2day possum.
BB

[Lizard]

Quite Right
But they were porperty company's not unit trusts and the same rules
wer,nt in place then. And up to 60% leveraged then if I remember right.
Different ball park 2day possum.
BB

I'm only working off inherited memory, but thinking the property trusts we lost in 1988/89 were more like some of their Australian equivalents that have also been hugely punished (i.e. CNP, RRT)?

[POSSUM THE CAT]

Billy Boy Same scenario if Tenants go belly up they do not pay rent and partially leased buildings drop in value fast. They are talking about virtually empty shopping malls in America and who is losing the rental on the office space etc. occupied by all these finance companies. Have a look at the drop in share price of GMG on ASX the majority owner of GMT. Fall far greater than the average market fall. I hold most of the NZ property trusts & some of the Australian ones. Watching and being very care full. Have a look at Westfield malls tenant quality seems to be dropping in the area I live in. $2 type shop going into large area previously occupied by Bond & Bond also several empty shops.

[Billy Boy]

yep yep possum
But a good manager knows what the right rent is and how ito place it.
I dropped the rent on one of my props a while back, just to keep the
tennant. That paid off big time. Landlording is a buzz just like any
other. ya gotta take some hits.
If a unit trust came to me and said, "we are droppiong the rents coz
we need to keep cash flow and tennants coz of present day climate"
I would say fine, coz I know there will be a come back. Management
is the name of the game. Also these are different time to 1987, different knocks comming in.
BB

[smokin cubans]

But there is no reason why the value of commercial/industrial buildings will drop substantially. They might wobble round a little, and tenancy demand will weaken a bit, but every time you blink the cost of building materials rise; and replacement cost impacts on C + I, unlike residential properties. .

Havent been around the commercial market for very long i am guessing. commercial property is not like residential - there are very big swings - 30/40% YoY is not unusual when the market really decides to move. so if you think commercial property doesn't go back or is unlikely to go back far, do yourself a favour, go to the bayleys or cbre website and see if you can dig yourself up a little research before you dig yourself into a hole.

[The Great Gold Guru]

Rents are stable ... if anything moving higher.
Interest rate cycle has peaked and will rates will probably fall upto 150bps over the next 18 months.
Good property , well located , rented to good quality tenants ( at fair rents ) will hold their value very well.

The ANZ auction of 16 National Bank branches in early September will be a good measure of the strength of the commercial property market. A few of the dogs may go for 9% + yields ( Cromwell, Mosgiel, Sth Dunedin ) but I imagine the picks of the bunch such as New Plymouth, Nelson and Ashburton will be mid 7's and may even go as low as high 6's !

[smokin cubans]

"why i wouldn't think npt is particularly good value"

npt's quality of assets is at best second tier attracting the type of tenants most likely to desert the premises in a downturn. secondly in a downturn, while apt for instance might be able to maintain market rents, its unlikely npt could.

i would factor in a cap rate expansion of at least 200bp into any valuation of npt's assets plus allow for increased vacancies.

npt has the highest leverage of any listed property trust and very little hedging. of all the trusts it is most susceptible to increased rates, and its unit price is so low, a rights issue is unlikely given STL has no money at the moment and unlikely to dilute itself.

its current yield may look attractive, i dont know what it is, but im guessing 15 ish %, however npt in recent years cut dividends altogether (ie 0% yield) and that was in good times in the property market! if they struggle, you may struggle to see any divi's out of this puppy for a while or at least they will take a very big hit.

the proposed changes to npts management contract have recently come under fire by the cushing family for some very good reasons which are detailed below.

as property values are unlikely to rise anytime soon, it makes sense (from STL's perspective) to switch the performance fee component from increases in asset values to increases in unit value (which are at an all time low, which will ultimately result in higher performance fees - and they will be windfall fees if npt's unit price ever reaches parity with nta again).

the changes to the management contract also include a wide range of other fees, including fees on sale and purchase of properties. i havent really looked into this so i cant comment but i understand it is all a bit dodgy.

so, to npts good side, yeah, property trusts are pies but so are many cash funds now and other investments. and pies are only good so long as you get a dividend, which in npts case is no certainty. sure its new management team is doing a better job than the old team, but at the end of the day, its assets are crap compared to some of the others.

in summary, the share market is factoring in a poor economic environment, declining property values, higher interest rates rolling through hedges, and likely lower dividends to investors. hence unit prices are down way lower than nta's. the role of the share market is after all to attempt to predict the future and future cashflows. so to point to the gap between nta and unit price and think something is cheap is a misnomer. you should be looking more closely at risks to cashflows which are further to the downside.

i'd say those are pretty valid reasons to be wary of property trusts at the moment. for the same reason so many posters have extolled the virtues of nzog and prc for likely higher future cashflows to investors, you should be wary of companies that are likely to have lower future cashflows.

remember property trusts are not in the business of buying and selling property to make capital gains, using leverage to accentuate the capital gain. they generally buy and hold, try and add value where possible, and the value to investors is determined from the capital distributions to investors, which is where the risk currently lies.

WALT's and occupancy is all blah de blah in an economic downturn. if the **** hits the fan, companies will be going bankrupt or just breaking tenancy agreements and then it will be up to the property trust to chase after the defaulting tenants in court, which could take years. this is what happened in the early 90's, or don't you remember that?

so i can only advise from one investor to another, stop looking at the price and think its 'cheap' without considering the reasons why its cheap.

[Zorwarrior]

Thanks all for your valuable views and experiences. Sounds like the only real option I have at the moment is to ride this out and wait for better times. I definately think that its going to be a low ride for a few years but hopefully by Rugby world cup time things will pick up, even if its temporary, considering people with other currencies will come into the local market.

Would appreciate an more sites where I can learn more about the stock market and also about unit trusts. I am not going to be repeating the mistake of blindly puttin in money as per advice of a financial advisro who has nothing to lose himself. I dont ever listen to a real estate agent in property (most of them know very little about propoerty investment) but I made the mistake of leaving those learnings behind when I looked at the share market.

[Zorwarrior]

Good point Fungus. I did say 'most real estate agents' dont know much about property. I do listen to all of them but take advice very rarely. I do like the fact that I am able to invest in the commercial property market through these NAP units.

Has anyone read the papers today about the management fee structure being rejected, especially by the Cushing family? There is even talk about winding up the trust and distributing the profits out as they deem the management of the trust has been below average. Thoughts?

[croesus]

It appears St L and Kevin Podmore interests own a bit over 20%....if they go tits up.. those shares will be sold....in a hurry...

[Billy Boy]

What about NAP being a take over target ??
BB

[croesus]

Price has weakened somewhat. since the last post.

Should have had a Financial report by now I would have thought.

Be interested to know how the overall tenancy situation is.

Anybody with any thoughts.

[777]

Price has weakened somewhat. since the last post.

Should have had a Financial report by now I would have thought.

Be interested to know how the overall tenancy situation is.

Anybody with any thoughts.

Last year and 2007 their half year report was out in the last week of January. So about four weeks late so far this year.

[bermuda]

Price has weakened somewhat. since the last post.

Should have had a Financial report by now I would have thought.

Be interested to know how the overall tenancy situation is.

Anybody with any thoughts.

Could be suffering the same downtrend WDC is following. Pressure is building to keep Malls fully leased even with reduced rentals. WDC is in a free fall.

[croesus]

On reflection.. thinking they may have changed the balance date... ?

still if I was a shareholder would be concerned at how the S/P has gone lately.. with no update from Mr Crone ( General manager)....

Wondering who their debt is secured with, at what % rate ? .. and when do they need to refinance ?......

[croesus]

Freefall......almost a understatement... halved in a matter of months...

[Billy Boy]

By the looks of the depth it seams like the traders are have a great time.
30 - 35 cents ??.
Nap are trying to wind up, so maybe something in the wind
BB