Property Stocks

[Nor]

Hi all. What's the best NZ REIT to invest in? And why does Kiwi Property Group have a much higher divided yield than Property for Industry?
PS I have enough Precinct. Thanks in advance, but not for DYORs. Chronically lazy, but keeps out of a lot of trouble.

[troyvdh]

Nor ..great question.Im a bit biased...I believe when investing in these entities...It depends on your investment horizon.
I believe that over many decades PFI has been an outstanding...In fact the best returning property company over this period.
I could be wrong.
Boring unsexy industrial buildings.

[Baa_Baa]

Hi all. What's the best NZ REIT to invest in? And why does Kiwi Property Group have a much higher divided yield than Property for Industry?
PS I have enough Precinct. Thanks in advance, but not for DYORs. Chronically lazy, but keeps out of a lot of trouble.

Agree with Troyvdh, it probably depends on investment horizons. I have a high proportion of property investments and 10-20 year horizon, with bias towards income, albeit accumulation at present.

Mostly because I think all of their SP's are suppressed and present low priced entry with outstanding future potential, so I've been accumulating. Mostly in the RV's as they're basically property plays (albeit they're very poor income stocks, which I think will change), but I do like KPG in the pure property sector, and have decent chunk of portfolio in it, for its sustained high occupancy rates and attractive yields, quarterly dividends at a respectable return and their bold strategy moving to Build to Rent and even bolder move to establishing an entire community around their build at Drury, which is going very well with site development and divestments to high quality surrounding owners.

I also have a large proportion of portfolio in cash (the largest ever for me), accumulated over the past 3 years or so, which is likely that a big chunk will end up in property equities when they demonstrate a capital price turnaround. I'll probably diversify across other property plays, but KPG is my main pick now and probably for the foreseeable future, happy to accumulate more of them.

[Snoopy]

Hi all. What's the best NZ REIT to invest in? And why does Kiwi Property Group have a much higher divided yield than Property for Industry?
PS I have enough Precinct. Thanks in advance, but not for DYORs. Chronically lazy, but keeps out of a lot of trouble.

Nor, I have spent around a year researching this question. And never having invested in the property sector before, I don't have any attachment bias. I came to the conclusion that I should prefer 'big box' over 'office towers'. And 'commercial' over 'retail'. From what I have read there seems to be a shortage of good commercially zoned land around Auckland. So I started looking more closely at the property trusts that owned 'big box', 'commercial' properties with a bias to the Auckland region.

That lead me to 'Property for Industry' and 'Goodman Property Trust'. Both held the groupings of property I was after, but Goodman's was just way too expensive (yield far too low, even with the imminent rent rises touted). So I had a look at PFI more closely. PFI has a very impressive history, a 30 year run of buying and managing 'Properties for Industry' without getting side tracked into other property fashions along the way. So I figured out the price I was prepared to pay for the PFI earnings stream and waited and waited, but.....it has never hit my mark.

You can read the conclusion to all my PFI workings here:
https://www.sharetrader.co.nz/showth...=1#post1043980

Then suddenly over the last six weeks or so, other opportunities in other sectors of the market with what I consider a better risk return ratio have come up. So the answer as to which of the big eight property trusts that is most worthy of your investment on today's market is ..... drum roll..... none of them. It was a somewhat painful decision for me to make, having invested so much time into researching the options. But if the risk return thesis does not stack up, sometimes it is best to walk away. And before you ask. yes I was modelling in the PIE tax advantages of property trusts, and the governments more to remove structural depreciation on buildings into my analysis

SNOOPY

P.S. Kiwi Income Property is a bit of a special case because they have morphed from being a property investor into being a property developer. I would suggest that the dividend is likely to reduce from current levels as they commit serious cash to developing Drury. It is a higher risk higher reward play than the others in my judgement.

[kiora]

Nor, I have spent around a year researching this question. And never having invested in the property sector before, I don't have any attachment bias. I came to the conclusion that I should prefer 'big box' over 'office towers'. And 'commercial' over 'retail'. From what I have read there seems to be a shortage of good commercially zoned land around Auckland. So I started looking more closely at the property trusts that owned 'big box', 'commercial' properties with a bias to the Auckland region.

That lead me to 'Property for Industry' and 'Goodman Property Trust'. Both held the groupings of property I was after, but Goodman's was just way too expensive. So I had a look at PFI more closely. PFI has a very impressive history, a 30 year run of buying and managing 'Properties for Industry' without getting side tracked into other property fashions along the way. So I figured out the price I was prepared to pay for the PFI earnings stream and waited and waited, but.....it has never hit my mark.

You can read the conclusion to all my PFI workings here:
https://www.sharetrader.co.nz/showth...=1#post1043980

Then suddenly over the last six weeks or so, other opportunities in other sectors of the market with what I consider a better risk return ratio have come up. So the answer as to which of the big eight property trusts that is most worthy of your investment on today's market is ..... drum roll..... none of them. It was a somewhat painful decision for me to make, having invested so much time into researching the options. But if the risk return thesis does not stack up, sometimes it is best to walk away. And before you ask. yes I was modelling in the PIE tax advantages of property trusts, and the governments more to remove structural depreciation on buildings into my analysis

SNOOPY

P.S. Kiwi Income Property is a bit of a special case because they have morphed from being a property investor into being a property developer. I would suggest that the dividend is likely to reduce from current levels as they commit serious cash to developing Drury. It is a higher risk higher reward play than the others in my judgement.

They've been a property developer for a while
"The development is owned by Sylvia Park Business Centre Ltd (SPBCL), a subsidiary of Kiwi Property Group. The development is situated on 24 hectares of land, a large part of which is still to be developed as of the late 2000s. Kiwi Property acquired the land in two transactions in 1995."
https://en.wikipedia.org/wiki/Sylvia...rse%20breeding.

[Nor]

Thanks everyone for your responses. I think I'll go with PFI which was my first thought, and KPG. Snoopy you may be right that none are perfectly priced right now, but I'm thinking about what is being said about central banks likely giving up on controlling inflation and the need to be in hard assets. Not that I'm a wholesale portfolio rearranger, or even a fiddler, just for new stuff.

[Snoopy]

They've been a property developer for a while
"The development is owned by Sylvia Park Business Centre Ltd (SPBCL), a subsidiary of Kiwi Property Group. The development is situated on 24 hectares of land, a large part of which is still to be developed as of the late 2000s. Kiwi Property acquired the land in two transactions in 1995."
https://en.wikipedia.org/wiki/Sylvia...rse%20breeding.

I guess you could argue that Sylvia Park was the 'beginning of the transition' of KPG becoming a property developer. Perhaps you could argue that the tipping point was when they changed their ticker from KIP (Kiwi Income Property Group) to KPG (Kiwi Property Group). I can't recall exactly when this happened. I do recall eyebrows being raised with the idea of building a mega mall in an industrial area of nowhere. That Sylvia park has been such an operational success is a great credit to KPG management. Whether it has been a great success for unit holders is another matter, with both the share price and dividend income from KPG reducing.

Back in 1995, Kiwi Income Property Trust was just that: an income generating company for unitholders. There was a much larger geographical spread of shopping malls and office towers owned. The emphasis was on managing existing properties for commercial tenants. The current business model is entirely different to that. KPG are now down to just 3 sites (other peripheral holdings are on the sell off block), and the emphasis has changed to building whole of life needs of people in one location, which includes jobs and long term rental accommodation. These kind of projects have 'execution risk' that pure property owners do not have. I am not saying it is wrong or necessarily unfavourable to go down this new path. I am saying it puts KPG in a different category to SPG, IPL, GMT, PFI, ARG, VHP and PCT, the other members of the property 'big eight'.

SNOOPY

[Snoopy]

Thanks everyone for your responses. I think I'll go with PFI which was my first thought, and KPG. Snoopy you may be right that none are perfectly priced right now, but I'm thinking about what is being said about central banks likely giving up on controlling inflation and the need to be in hard assets. Not that I'm a wholesale portfolio rearranger, or even a fiddler, just for new stuff.

I thought Adrian Orr's brief had been rewritten such that his mandate is now entirely monovisioned. His one and only task is to control inflation. You are betting he will give up on this?

SNOOPY

[LaserEyeKiwi]

Hi all. What's the best NZ REIT to invest in? And why does Kiwi Property Group have a much higher divided yield than Property for Industry? PS I have enough Precinct. Thanks in advance, but not for DYORs. Chronically lazy, but keeps out of a lot of trouble.

Like others here I will say I’m biased upfront with my answer given I have invested in the name, and of course like everyone else will always recommend doing you own research on any company. KPG is the answer from me, and not just because of its amazing yield, but for the inevitable long term trends of the property cycle that will also lift the share price back in due course.

Kiwi have spent the last decade divesting away from seismically risky regions, having sold nearly all its assets south of Hamilton (Just one office block in Wellington and one mall in Palmerston North remain to get rid of). They had a very unlucky run with their Wellington & Christchurch assets over the last 15 years which really sucked up a lot of capital in necessary seismic strengthening following earthquakes etc before they sold them. (For what it is worth I myself stay well clear of any of the listed property entities that have a significant share of assets in Wellington and/or Christchurch). It wasn’t until they had sold nearly all the assets that they said explicity that it was such a big drag on company performance (obviously didnt want to spook buyers) - but they eventually did that last year at the AGM during Q&A with the departing Chair.

Now Kiwi are also divesting their office portfolio, with a goal of only having office towers as part of their mixed use communities (like the recently opened office tower at Sylvia Park). Recently they disclosed that they were in negotiations to sell the Vero Centre office tower in Auckland CBD, which if successful will be a transformative transaction for the company, given that it constitutes the bulk of the value of its remaining office portfolio, and the transaction will be in the $430m-$450m range. That will drastically reshape Kiwis portfolio, while also hugely reducing its debt.

Unlike Snoopy, I have no fear in the dividend reducing in any meaningful way absent a major event, and that combined with the steep share price discount to the already reduced underlying asset value makes it a very attractive name. Kiwi have strong stable income that has some level of infaltion protection built in, while being increasingly diversified (now with the addition of its first build-to-rent campus about to go live next month), and a considerable amount of capital release potential by way of sales of existing operating assets (the office portfolio and remaining non-core retail assets) as well as big payout coming for newly created assets (The Drury land “superlots” to be sold to residential developers).

Like Snoopy, I found some of the other names with good portfolios and strong stable earnings simply too expensive. I for the life of me do not understand why anyone would be buying goodman at its current multiple.

The one caveat to make is that no one knows when the property cycle will turn (obviously interest rates are a big part of that), so it may take quite a while for those looking for capital gains to get a good exit opportunity. However in the several years now that I have been invested, I have already had a decent amount of my capital that I put into KPG returned to me via its high dividend payout, so I personally am comfortable holding it long term (actually it is likely I will probably have my entire capital put in returned to me via dividends before I actually end up selling my holding).

[Nor]

I thought Adrian Orr's brief had been rewritten such that his mandate is now entirely monovisioned. His one and only task is to control inflation. You are betting he will give up on this?

SNOOPY

Don't know. Maybe I'm just one of those people who always agree with what the last person said. What I read had a US focus. What would happen if NZ went it alone and kept rates high when the big economies gave up? There would be screams from someone. Er . . . exporters and tourism?