KPG - Kiwi Property Group Limited

[Habits]

I'm not a chart / TA guy, but KPG closing at 1.27 after hitting 1.28 earlier today seems quite bullish - highest levels in 10 weeks.

Was watching.... suddenly took off mid avo and volume went up by 500k. FY2021 due in a month, will be a good result

[X-men]

My understanding.....full year AFFO will be 5.50 to 5.6 cents...oct 2020 to March 2021...?

Or completely full year from April 2020 till March 2021?

[epower]

Property values (thus cap rates) and interest rates are the opposite ends of a see-saw. That is why the best time to buy real estate, particularly housing, is when interest rates are high.

Hi Fungus Pudding,

Can you elaborate on this please. Few questions;

- If interest rates are high people can afford less house so house prices less?
- How have interest rates affected REITs over the past 10-20 years compared to wider stock market?
- If the case is interest rates are low now and REITs over valued/low yield what’s the alternative investment option?
- When in the interest rate cycle would you invest in stocks in companies (eg mainfreight, Auckland airport) opposed to REITs
- Do you borrow via residential loads to invest in REITs and how would this affect your timings of debt pay down or investments?

Anything else I’m missing?

[fungus pudding]

Hi Fungus Pudding,

Can you elaborate on this please. Few questions;

- If interest rates are high people can afford less house so house prices less?
- How have interest rates affected REITs over the past 10-20 years compared to wider stock market?
- If the case is interest rates are low now and REITs over valued/low yield what’s the alternative investment option?
- When in the interest rate cycle would you invest in stocks in companies (eg mainfreight, Auckland airport) opposed to REITs
- Do you borrow via residential loads to invest in REITs and how would this affect your timings of debt pay down or investments?

Anything else I’m missing?

Asset prices will rise and fall with the cost of money. Prices and interest rates are the opposite ends of a see-saw. If you buy a property when interest rates are 2% it will be cheap to own and buyers will compete for it. Then if interest rates rise to 24% - the same buyers will simply not be able to afford the price they once could. Result is price will fall. That's the range of mortgage interest rates rates we've seen in NZ since the late eighties. IOW the price is one factor in owning an asett - interst rate is the other. That's the first point. Second question is not one I can answer as I know nothing about the stock market. I do hold a reasonable quantity of REIT shares but nothing else apart from funds in Milford assets - just to see what happens.
I'm not much use with your questions, sorry to say. I'm just a burnt out old real estate investor, who, having got sick of tenants has bought into REITs aand property syndications asI have got rid of most of my investment properties. I don't borrow at all, although that's generally not a sensible policy, but I've been there and done that and somehow can't be bothered anymore. Your last point about borrowing on residential to invest elsewhere - I think the govt. has put that one to bed with deciding to apply income tax to an outgoing (mtge-interest) which is about as dopey as Bill Rowling's speculation tax. I hope that provides some answers but feel free to ask more about any point.

[Habits]

Hi Bull... would you mind doing an analysis on KPG. I see a breakout at 1.25 from flag formation. However there is no flag pole (gap up) and the price has been in a rut/trading range for 6 months between 1.32 and 1.12. I would love to hear your TA thoughts.

[epower]

Asset prices will rise and fall with the cost of money. Prices and interest rates are the opposite ends of a see-saw. If you buy a property when interest rates are 2% it will be cheap to own and buyers will compete for it. Then if interest rates rise to 24% - the same buyers will simply not be able to afford the price they once could. Result is price will fall. That's the range of mortgage interest rates rates we've seen in NZ since the late eighties. IOW the price is one factor in owning an asett - interst rate is the other. That's the first point. Second question is not one I can answer as I know nothing about the stock market. I do hold a reasonable quantity of REIT shares but nothing else apart from funds in Milford assets - just to see what happens.
I'm not much use with your questions, sorry to say. I'm just a burnt out old real estate investor, who, having got sick of tenants has bought into REITs aand property syndications asI have got rid of most of my investment properties. I don't borrow at all, although that's generally not a sensible policy, but I've been there and done that and somehow can't be bothered anymore. Your last point about borrowing on residential to invest elsewhere - I think the govt. has put thsat one to bed withj deciding to apply income tax to a outgoing (mtge-interest) which is about as dopey as Bill Rowling's speculation tax. I hope that provides some answers but feel freet to ask more about any point.

Great thanks for reply much appreciated

Did you own residential or commercial?

What do you now do with your cash pile from dividends? Do you buy on the dips? Do you buy just NZX REITs or overseas ones too?

[fungus pudding]

Great thanks for reply much appreciated

Did you own residential or commercial?

What do you now do with your cash pile from dividends? Do you buy on the dips? Do you buy just NZX REITs or overseas ones too?

I started with residential in the early 70s. By mid 80s I was right out of residential* - and into commercial and industrial - never in a big way, as I had no income other than my rental stuff right through. Lots of fun but it meant restricted ability to 'tick everything up to the eyeballs' as they say. It also meant learning how to live on next to nothing for a few years. Very educational. Nowadays as I said I just buy into syndicated props. e.g. Augusta, MacKersy properties etc. and REITs. I don't worry about buying the dips (I should but don't watch them closely enough to spot them), I have nothing overseas. As far as spending dividends go - I have a good surplus which I can't really burn up on travel that I had intended for the next few years, I have no debt to reduce, so I suppose I'll put a bit more into REITs. although I do have a special reason for buying into more syndicates. There's quite a few on offer. I like some of the syndicated offerings, but it's all horses for courses; meaning there's a benfit in the REITs as they are PIES. And the difference in taxation between the pies at 28% is worth having as the new top marginal rate is 39% (thanks Labour) Also, because I'm slack, I like the 'set and forget' nature of PIES - no paperwork at all. But no doubt I'll cling to my guiding adage 'keep stacking up income'
While I'm burbling away I'll add the special appeal of syndicated properties for me. That is my estate. Like most of us, I have my fair share of dead-beat beneficiaries to whom I would rather leave a proportional title or two, than too many REITs. The syndicated stuff is far less liquid and I would rather leave someone a bit of income than a bunch of shares they can flog off and blow in six months. Your other question - nowaday I only own one commercial building. It's a retail store with a national franchise tenant which is so easy to manage that the only reminder is a healthy pile of money in my account every month.


*I was young and green when I had a few flats and houses. The trick in those days was to find a vendor who was prepared to leave a bit owing on 2cnd or 3rd mtge - then wind a valuer up to a bit more then the purchase price (that was my equity) and bingo - on to the next one. It was fun. But I was too dam soft on tenants and realised commercial stuff is a different game as far as management goes.
Overall I've done okay out of R.E investing. I have a bit more money than I should ever need, and have avoided the horror of normal employment, having a boss and being told what to do - which never really appealed to me. :-)

[epower]

Good on you Fungus Pudding sounds like you’ve done well for yourself.

Once again appreciate the comprehensive reply

[bull....]

Hi Bull... would you mind doing an analysis on KPG. I see a breakout at 1.25 from flag formation. However there is no flag pole (gap up) and the price has been in a rut/trading range for 6 months between 1.32 and 1.12. I would love to hear your TA thoughts.


hi habit , i agree with you on the range trading. i dont see any flag though. heres a pic of the daily chart


12470


heres a pic of the 4 hourly shows a nice uptrend from covid lows


12471


heres a pic of 30 min chart showing the trading range


12472

short term traders be trading the range
long term holders will be just holding riding the uptrend
if/when the range breaks will entice more buyers/sellers into the stock. direction of the break is to be decided but the slow uptrend favours up at the moment.
fundamentally interest rates going forward and wall st will dictate long term outcomes for price.

good luck

[Habits]

Great thank you, what software do you use.

[bull....]

Great thank you, what software do you use.

i use a number of software applications but this is of tradingview , not to bad a application and its free for users to sign up.

[MauroNZ]

I started with residential in the early 70s. By mid 80s I was right out of residential* - and into commercial and industrial - never in a big way, as I had no income other than my rental stuff right through. Lots of fun but it meant restricted ability to 'tick everything up to the eyeballs' as they say. It also meant learning how to live on next to nothing for a few years. Very educational. Nowadays as I said I just buy into syndicated props. e.g. Augusta, MacKersy properties etc. and REITs. I don't worry about buying the dips (I should but don't watch them closely enough to spot them), I have nothing overseas. As far as spending dividends go - I have a good surplus which I can't really burn up on travel that I had intended for the next few years, I have no debt to reduce, so I suppose I'll put a bit more into REITs. although I do have a special reason for buying into more syndicates. There's quite a few on offer. I like some of the syndicated offerings, but it's all horses for courses; meaning there's a benfit in the REITs as they are PIES. And the difference in taxation between the pies at 28% is worth having as the new top marginal rate is 39% (thanks Labour) Also, because I'm slack, I like the 'set and forget' nature of PIES - no paperwork at all. But no doubt I'll cling to my guiding adage 'keep stcking up income'
While I'm burbling away I'll add the special appeal of syndicated properties for me. That is my estate. Like most of us, I have my fair share of dead-beat beneficiaries to whom I would rather leave a proportional title or two, than too many REITs. The syndicated stuff is far less liquid and I would rather leave someone a bit of income than a bunch of shares they can flog off and blow in six months. Your other question - nowaday I only own one commercial building. It's a retail store with a national franchise tenant which is so easy to manage that the only reminder is a healthy pile of money in my account every month.


*I was young and green when I had a few flats and houses. The trick in those days was to find a vendor who was prepared to leave a bit owing on 2cnd or 3rd mtge - then wind a valuer up to a bit more then the purchase price (that was my equity) and bingo - on to the next one. It was fun. But I was too dam soft on tenants and realised commercial stuff is a different game as far as management goes.
Overall I've done okay out of R.E investing. I have a bit more money than I should ever need, and have avoided the horror of normal employment, having a boss and being told what to do - which never really appealed to me. :-)

This post allowed to learn a couple of things. I might ask you some questions in the future. Thanks for posting it.

[LaserEyeKiwi]

https://www.stuff.co.nz/business/industries/125115429/streetwear-store-culture-kings-to-make-million-dollar-debut-in-sylvia-park

Sylvia Park becoming the go to destination for international brands looking to enter the NZ market:


Streetwear store Culture Kings to make million dollar debut in Sylvia Park

Australian streetwear giant Culture Kings will make its New Zealand debut at Sylvia Park, the second big brand to announce a new store at the Auckland mall.

The retailer, which is looking for in-store DJs as well as retail assistants to staff its new store, launched a local online shopping platform in 2017.

Kiwi Property’s general manager of leasing Aubrey Cheng said landing Culture Kings’ first New Zealand store at Sylvia Park was a huge coup for Kiwi consumers.

“With the streetwear scene becoming increasingly vibrant in New Zealand, the move to bring Culture Kings to Sylvia Park reflects the direction of the market, and allows Kiwis closer access to international brands and trends,” Cheng said.

The Culture Kings shop will be around 1000 square metres, Cheng said.

While Culture Kings did offer some unique product lines, the big drawcard for customers was the experience of the store, he said.

“They will set the new bar in terms of experience for retail.”

Entering a Culture Kings store was like entering a nightclub, which reflected their core customer base, Cheng said.

Bringing in brands like Culture Kings and JD Sports, (https://www.stuff.co.nz/business/125009013/athleisure-giant-jd-sports-plans-to-open-its-first-nz-store-in-sylvia-park-mall-soon) was part of a broader strategy for Sylvia Park, he said.

“We are targeting unique stores, so people like Zara, Culture Kings and JD Sports,” he said.

“These retailers understand that if you get [the launch] right, it will be absolutely massive.”

Cheng said about 15 per cent of shoppers at Sylvia Park come from around the country.

People came to the city for events and went to Sylvia Park because it was a “one-stop-shop”, he said.

“We are very purposefully looking for those big magnets. It's not just about getting the brand into our mall, it's about getting the biggest store, so it has that compelling, unique draw.”

Culture Kings founder and chief executive Simon Beard said coming to New Zealand was exciting for the brand and had been in the works for quite some time.

“We had offers on places pre-Covid, but we put it all on hold,” he said.

Culture Kings had been looking at sites in the CBD but, post Covid-19, there had been a clear shift away from city centres for shoppers, he said.

Parking also posed a real problem for customers in Auckland’s CBD, making Sylvia Park a better option, Beard said.

The Sylvia Park fit out was the most expensive the company had done and ran into “millions”, he said.

What made Culture Kings different was that it had up to 1000 new product arrivals each week with up to half of those being world exclusives, Beard said.

“We like to say we sit at the intersection of music, sport and fashion.”

Culture Kings had seven stores in Australia.

The new Sylvia Park location was its first bricks and mortar store outside of Australia.
In February, it was announced that Beard was in talks with Boston-based Summit Partners to sell a half share of the company.

If completed, the deal would value Culture Kings at more than A$600 million (NZ$647m), which would make it the biggest ever private sale in Australia’s retail and apparel sector, according to Australian media reports.

The deal offered the company a door into the United States, Beard said.

Culture Kings Group recorded a A$19.4 million profit for the year ended June 30, 2020.

The Sylvia Park Culture Kings store will open on July 23.

First Retail Group managing director Chris Wilkinson said Culture Kings had a cult following in Australia.

”It is a very immersive experience,” he said.

The stores in Australia included barbers, as well as DJs.

”Having the barbers there mean people go in on a regular and habitual basis but then, when you are in that environment, it's all encompassing. You get wrapped up with the vibe of the store.”

Wilkinson said the decision to bring in Culture Kings by Sylvia Park give the mall an edge. ”The location of Sylvia Park makes it New Zealand’s only real regional shopping centre,” Wilkinson said.

“The connectivity is really important. There is very strong road access from north and south. Then, you have really strong public transport links. It has everything, as a retail destination, that is fit for the future.”

[Justin]

why kpg cant back to the pre covid share price 1.5？

[Aaron]

Good insight fungus. The question is will we consider today's interest rate high in 1, 2 or 5 years time?

I have heard a theory that the western world are following a path similar to Japan in which case current interest rates might be considered high or normal 2 to 5 years from now.

[Rawz]

why kpg cant back to the pre covid share price 1.5？

Traded at a premium to NTA then.
Now trading at a discount.

No worries will revert to the mean again one day

[Waltzing]

A Buy.

also GMT result out with plenty of balance sheet room for farther development and a pipeline of ever increasing SQ Meters.

This sector providing resilience under pressure from the 10 year.

ARG a BUY.

[clown]

Looking forward to their results announcement...

https://www.nzx.com/announcements/372327

[Habits]

Looking forward to their results announcement...

https://www.nzx.com/announcements/372327

No hints this time:mad ;: there was an earlier upgrade :t_up:

[clown]

Kiwi Property today advised that Richard Didsbury proposes to resign as a director of the company at its annual shareholder meeting, scheduled to take place on 12 July 2021.

https://www.nzx.com/announcements/372492

[X-men]

traders are pushing down and collecting as many cheap shares before monday result??

back to 3 months low again....

[LaserEyeKiwi]

traders are pushing down and collecting as many cheap shares before monday result??

back to 3 months low again....

nothing nefarious going on - KPG has been roughly following the broader NZX market over the last few months, and in fact has been outperforming it most of the time - on a one month basis NZX50 is down 3.4%, while KPG is only down 2%.

[Habits]

nothing nefarious going on - KPG has been roughly following the broader NZX market over the last few months, and in fact has been outperforming it most of the time - on a one month basis NZX50 is down 3.4%, while KPG is only down 2%.

That would be fine but NZX is dominated by 3 or 4 stocks, fph, atm, mft and energy companies that I recall which all initially did well from pandemic and the green trend in the mid 5 or 6 months of last year. Since then has been different storyline

[X-men]

Kpg should trading around $1.25 at least.... possible traders are pushing down to collect cheap shares

[LaserEyeKiwi]

Kpg should trading around $1.25 at least.... possible traders are pushing down to collect cheap shares

How can they pick up more shares by selling shares to push down the price?

There has been MASSIVE volume of trading today (6.3 million shares, almost 5 times average volume) - its surprising its only 1c move.

[Baa_Baa]

How can they pick up more shares by selling shares to push down the price?

There has been MASSIVE volume of trading today (6.3 million shares, almost 5 times average volume) - its surprising its only 1c move.

Between 11:47 and 12:07 there were 5.8m shares traded for $7m. The rest of the day looks pretty normal.

[Cyclical]

Kpg should trading around $1.25 at least.... possible traders are pushing down to collect cheap shares


How can they pick up more shares by selling shares to push down the price?

Sounds like a great concept, X-men, please fill us in on the methodology.

[X-men]

Traders are feeding selling side with plenty of small amount of low shares... n while others side putting big no of share buying.

That make people sell as seeing the sp kept going down..

That is the theory...

[X-men]

Same with vista on the last couple days of trading..

[Sideshow Bob]

Kiwi Property announces FY21 annual results - NZX, New Zealand’s Exchange (https://www.nzx.com/announcements/372630)

Net profit after tax: $196.5m (+$383.2m on pcp)
• Property fair value movement: +$99.8m (+3.1%)
• Net tangible assets per share: $1.36 cps (+10cps)
• Net rental income: $173.6m (-7.1%)
• Operating profit before tax: $116.3m (-10.3%)
• Adjusted funds from operations: $89.4m (-12.5%)
• Gearing: 31.2% (FY20 32.0%)
• Full year dividend: 5.15 cps (2.95 cps final dividend)

Kiwi Property today announced its financial results for the year ended 31 March 2021 (FY21), recording a net profit after tax of $196.5 million, up $383.2 million on the year prior, underpinned by growth in the value of its investment properties.

A stabilisation of trading conditions in the second half of the year contributed to a 3.1% or $99.8 [Note 1] million increase in the fair value of the company’s property portfolio for FY21. Kiwi Property’s office assets performed particularly strongly, delivering a 10.2% fair value gain, while mixed-use was up 1.5%. The company’s property portfolio was valued at $3.3 billion at 31 March 2021.

Despite the growth in net profit, Kiwi Property’s financial performance was adversely impacted by COVID-19. The cost of asset lockdowns and the associated rent relief measures contributed to a 7.1% reduction in net rental income, which decreased to $173.6 million for the year. Operating profit before tax [Note 2] was similarly affected, declining 10.3% to $116.3 million.
Kiwi Property Chief Executive Officer, Clive Mackenzie said: “Like many businesses, Kiwi Property was affected by COVID-19 in the 2021 financial year, with the cost of supporting our tenants, following early lockdowns in particular, causing a drag on operating profit. Despite this, we ended the year in a robust position, with leasing projections and rental abatements tracking better than forecast.”

Balance sheet
Kiwi Property maintained a strong balance sheet throughout FY21 and ended the year with gearing of 31.2%, comfortably within its self-imposed range of 25-35%. Since the close of the financial year, the company has refinanced $700 million of bank debt facilities in order to take advantage of favourable lending rates, resulting in an increased weighted average debt term of 3.5 years (on a 31 March 2021 pro-forma basis).

Portfolio rebalancing
Kiwi Property stepped-up its portfolio rebalancing programme in FY21, with the aim of reducing the company’s exposure to traditional retail and recycling capital to help fund its growth pipeline. The Plaza was listed for sale in October 2020, with Northlands subsequently also taken to market. Negotiations are now underway for both assets, with further updates to be provided in due course.

“Kiwi Property’s future lies in the creation of mixed-use communities at our large, strategic landholdings. By diversifying our portfolio uses we intend to create a platform for accelerated growth. Selling The Plaza and Northlands will enable us to down-weight our retail footprint and provide the market with further clarity around our strategic direction,” said Mr. Mackenzie.
Sylvia Park

Sylvia Park’s Level 1 expansion has performed well since its launch on 15 October 2020, benefitting from the opening of flagship Sephora, North Beach and Superdry stores over recent months. High profile retailers including JD Sports and Culture Kings have also now been confirmed for the centre’s new urban and athleisure precinct adjacent to Hoyts cinemas. Sylvia Park is home to 10 of New Zealand’s 11 favourite retailers, as well as 270 stores and 5,000 free carparks, the most of any shopping centre in the country [Note 3].

Mixed-use development
Construction of a second office building at Sylvia Park is scheduled to begin in October 2021, marking the next stage in the asset’s continued mixed-use evolution. Located at 3 Te Kehu Way, the $63 million, six-storey development will target a 6 Green Star rating and has been designed in response to tenant feedback.
“COVID-19 has changed what a number of businesses want or need from their office environment. While a CBD ‘hub’ remains important for many corporates, others are telling us they also want the flexibility to base employees at a suburban ‘spoke’ office. The convenience, amenity and public transport links offered by our mixed-use assets make them ideally positioned to meet this requirement,” said Mr. Mackenzie.

Centre Place North
In March 2021, Kiwi Property announced the formation of a 50:50 joint venture with Tainui Group Holdings (TGH) over Centre Place North and adjoining properties in Hamilton’s central business district, with a combined value of approximately $71 million. The agreement builds on the existing relationship between Kiwi Property and TGH and paves the way for the creation of a mixed-use precinct in the heart of Hamilton’s CBD, including a new office building currently under design.

Drury
The company’s plans for the development of a 51-hectare master-planned community at Drury made substantial progress in FY21, with the Minister for the Environment currently processing a Fast-track application for the project under the COVID-19 Recovery Act 2020. If successful, the application could enable earthworks to begin at Drury in the 2022 financial year (FY22), up to three years ahead of schedule. This acceleration of the project timeline will help Kiwi Property unlock housing and create jobs in the Drury area.

Build to rent
Build to rent (BTR) accommodation remains a potentially exciting opportunity for Kiwi Property. The asset class has a low correlation to office and retail with lower volatility, helping to further diversify the company’s earnings. Development schemes are being prepared for BTR at Sylvia Park and LynnMall, with the consenting process underway for both projects.
Sustainability

The company made notable progress on its Environmental, Social and Governance (ESG) journey in FY21, with the launch of a new sustainability strategy and commitment to becoming net carbon negative in its operations by 2030. Kiwi Property’s focus on emissions reduction delivered a 60% decrease in carbon output compared to the 2012 baseline and contributed to the company being awarded an ‘A’ rating by the Carbon Disclosure Project, the only business in New Zealand to achieve this milestone. Kiwi Property also launched a Sustainable Debt Framework in March 2021, enabling the company to green its existing corporate bonds and paving the way for it to issue additional green bonds in the future.

Dividend
Kiwi Property will pay a final cash dividend of 2.95 cents per share for the six-month period ended 31 March 2021. Payment will be made on 24 June 2021. Kiwi Property’s total cash dividend for FY21 amounts to 5.15 cents per share, equivalent to 90% of Adjusted Funds from Operations (AFFO) [Note 2]. AFFO guidance for FY22 will be provided once the sale of The Plaza and Northlands has concluded, however based on current projections, next year’s dividend is expected to be no less than 5.30 cents per share [Note 4].

Outlook
“Kiwi Property enters the new financial year with good momentum and a clear focus on achieving our strategic priorities. We start FY22 with exciting prospects ahead of us, including Drury, the new office tower at Sylvia Park and potentially BTR. We are focused on realising these and other opportunities, with a continued commitment to creating value for our stakeholders,” Mr. Mackenzie concluded.

Additional information
Kiwi Property has today also released an Annual Results Presentation, Annual Report, Property Compendium and Sustainability Report, which are available for download on the company’s website kp.co.nz/annual-result or from nzx.com
> Ends

[Sideshow Bob]

...........

[Habits]

...........

The lockdowns drop in rental income -$13m went straight to bottom line. Ouch

Resumption of 12 months of dividend. Thank you KPG team for your extra efforts and dedication this last 12 months

There is a lot to like about this announcement. The various 'irons in the fire' and especially "the company being awarded an ‘A’ rating by the Carbon Disclosure Project, the only business in New Zealand to achieve this milestone."

[LaserEyeKiwi]

On this result, PE ratio is now under 10x!

Excellent news that they are in negotiations with buyers for both the Palmerston North Plaza Mall and also Northlands mall in Christchurch.

Also, combining the above with the facts that Drury is being fast tracked, along with the advanced plans for build-to-rent apartment towers at Sylvia Park & LynnMall - it really sounds like the pivot to further diversifying their holdings is well underway.

[Baa_Baa]

Very pleasing result all things considered and you can own it for 16 cents discount to NTA.

[LaserEyeKiwi]

Very pleasing result all things considered and you can own it for 16 cents discount to NTA.

Indeed! Really surprising to see gearing actually fell year on year - thank you property revaluation :t_up:

[LaserEyeKiwi]

The lockdowns drop in rental income -$13m went straight to bottom line. Ouch

Resumption of 12 months of dividend. Thank you KPG team for your extra efforts and dedication this last 12 months

There is a lot to like about this announcement. The various 'irons in the fire' and especially "the company being awarded an ‘A’ rating by the Carbon Disclosure Project, the only business in New Zealand to achieve this milestone."

hopefully lockdowns are all in the rear view mirror now, along with rent relief, especially with vaccinations ramping.

interesting they have projected increased dividend - with it likely to be raised higher following Plaza & Northlands sales.

[Beagle]

Solid result and quite a considerable discount to NTA of $1.36 as other shave noted. Might accumulate some more.

[Waltzing]

NTA in 24 -36 months higher and perhaps dividend possibly a 6 handle

[Habits]

From Announcement:
" could enable earthworks to begin at Drury in the 2022 financial year (FY22), up to three years ahead of schedule. This acceleration of the project timeline will help Kiwi Property unlock housing and create jobs in the Drury area."

This is HUGE potential ... Sylvia Park is roughly 9 hectares so this is 6 times the size though not as intensive.

Tbh housing in Drury is a bit far from the city however the offset is that KPG will be creating a new business district in the area. I just cant imagine what this will do for the fortunes of KPG holders. The management team are very skilled at first class properties

GLTAH

[Beagle]

From Announcement:
" could enable earthworks to begin at Drury in the 2022 financial year (FY22), up to three years ahead of schedule. This acceleration of the project timeline will help Kiwi Property unlock housing and create jobs in the Drury area."

This is HUGE potential ... Sylvia Park is roughly 9 hectares so this is 6 times the size though not as intensive.

Tbh housing in Drury is a bit far from the city however the offset is that KPG will be creating a new business district in the area. I just cant imagine what this will do for the fortunes of KPG holders. The management team are very skilled at first class properties

GLTAH

Crickey you're getting the dog salivating.

[Waltzing]

Another big decade coming for KIP.

[Habits]

Crickey you're getting the dog salivating.

More facts to chew on Mr Beagle ... 1. The suburb of Stonefields is 62 hectares approx. 2. The average new build retirement village is 5 to 7 hectares 3. The advice to the market that Drury is so far advanced is new information and 'should have' the SP bouncing up. The market is fickle so lets see what happens

Opportunity galore here

[LaserEyeKiwi]

Look at page 23 of the report - KPG management already consider Northlands and The Plaza GONE.

portfolio now listed as 4 “mixed use” properties & 4 office complexes. The additional 4 “retail” only assets present a year ago are no longer considered as either part of the core portfolio or have been “reclassified”.

50% of Centre place north has been included as “properties held for sale” (along with plaza & northlands malls). The other 50% of Centre place, along with westgate lifestyle, are to be listed under “other property”.

[LaserEyeKiwi]

“Properties held for sale” currently have an asset value of $347.5 million dollars. That is essentially the ballpark (low end minimum) for what we should expect KPG receive for the properties. With only 31% debt gearing ratio currently, there is going to be a lot of cash hitting KPG accounts this year.

This conceivably opens up the possibility or AFFO dividend payout increasing to 100%, possibly even a significant special dividend. However I wouldn’t mind if they kept most of it to allow for rapid development in Drury & build to rent towers within current gearing targets.

[LaserEyeKiwi]

Wow look at the geographic “diversification” map. KPG “diversified” right out of everywhere below Hamilton (apart from some secure government filled office towers in wellington).

looks like they have heavily reduced earthquake risks to portfolio now.

[LaserEyeKiwi]

Here’s the link to earnings call (just starting)

https://edge.media-server.com/mmc/p/5f93tguh

[Beagle]

More facts to chew on Mr Beagle ... 1. The suburb of Stonefields is 62 hectares approx. 2. The average new build retirement village is 5 to 7 hectares 3. The advice to the market that Drury is so far advanced is new information and 'should have' the SP bouncing up. The market is fickle so lets see what happens

Opportunity galore here


The company’s plans for the development of a 51-hectare master-planned community at Drury made substantial progress in FY21, with the Minister for the Environment currently processing a Fast-track application for the project under the COVID-19 Recovery Act 2020. If successful, the application could enable earthworks to begin at Drury in the 2022 financial year (FY22), up to three years ahead of schedule. This acceleration of the project timeline will help Kiwi Property unlock housing and create jobs in the Drury area.
Some caution is warranted here. I don't pretend to have any planning insights in terms of which projects may or may not be approved but clearly that approval may or may not happen.

[Waltzing]

Would be interesting to see the traffic figures over the next 12 -24 months on the Auckland South Corridor.

New Suburbs planned for east of hamilton and logistic hubs planned.

Projections for land use and demand both commercial and residential over the next decade is going to drive these SP's.

Rated BBB+ in MR B portfolio?

[LaserEyeKiwi]

“Aim to exceed the projected dividend payout - its just a floor” divestment timing plays a part.

sounds pretty certain there will be a large projected dividend increase once the sales of plaza and northlands are complete.

[LaserEyeKiwi]

Some caution is warranted here. I don't pretend to have any planning insights in terms of which projects may or may not be approved but clearly that approval may or may not happen.

said on earnings call:

”hope to commence earthworks at Drury in near future”

“If fast track application successful - 2 year earth moving & infrastructure program costing $50 million”

[fungus pudding]

“Aim to exceed the projected dividend payout - its just a floor” divestment timing plays a part.

sounds pretty certain there will be a large projected dividend once the sales of plaza and northlands are complete.

Seems like these shares must be overflowing the top of the barrow you are pushing.

[LaserEyeKiwi]

Earnings call comments on build-to-rent potential:

- higher yields from build-to-rent property
- lots of support from government about creating build-to-rent market, and discussions with government

[nevchev]

Ive watched this from the sidelines for some time and it seems they should be now in for a substantial lift in sp.Great forecast and future opportunities. NTA of $136?Its a no brainer for me

[Waltzing]

Surely NZ's GDP is now going to drive decisions and stopping the building of dwellings is not something that anyone wants to held be accountable for if they meet all legal compliance on statue books.

This new development will be something they drive to completion as hard as they can.

[LaserEyeKiwi]

Earnings comments regarding gearing ratio / debt

currently only committed to $60 million new Sylvia park office tower. Add to that the Drury development (even if fast tracked) would be an additional $50 million over 2 years on earthworks & infrastructure (before building of structures would start in mid or late 2023 presumably). Build to rent potential start of construction seems like a 2022/23 at the earliest as well.

My interpretation of all that means that after the disposal of Northlands & Plaza malls, KPG is going to have a lot of excess cash on the books this year.

They did briefly mention growing “other” revenue sources “including funds management”. I’m not quite sure what they mean there - and no analyst asked about it unfortunately. I’m wondering if that has something to do for the intended use of the big influx in cash. Maybe potential for KPG to start investing in other companies???

[Beagle]

Would be interesting to see the traffic figures over the next 12 -24 months on the Auckland South Corridor.

New Suburbs planned for east of hamilton and logistic hubs planned.

Projections for land use and demand both commercial and residential over the next decade is going to drive these SP's.

Rated BBB+ in MR B portfolio?

Rated more BCA (beagle cautiously accumulating), a few more, (got a few more thiis morning and will possibly add more on any untoward weakness). Minimum of 5.3 cps for people on a 33% tax rate = 7.91 cps gross which on $1.21 gives 6.5% gross yield and a 15 cent discount to NTA. These are good metrics in an ultra low interest rate environment and again, this is based on a minimum of 5.3 cps in annual dividends which I would like to think might rise to close to 6 cps in FY23 which would lift gross equivalent yield to 7.4%.

There's no timeline to get back to the 6.95 cps distributions they were paying pre covid though and details on the extent of capital funding required for all the projects proposed is scant. The possibility of further Covid lockdown's should not be overlooked as a key business risk here.

All that said I think Auckland badly needs a satellite suburb at Drury and I am sure many of the thousands of new residents at Pokeno would enjoy shopping there.

[Rawz]

A lot to like about the next 5 years for KPG. Drury is going to be a huge pipeline of growth and so is the little office blocks and build to rent apartment blocks they bolt onto their world class malls.

I would be shocked if the government doesn't approve the Drury project. New housing and infrastructure spending helps the government and their re-election chances I would have thought. Would go as far as to say that Cindy would be there with a hard hat on cutting the ribbon for a good photo op.

A solid hold imo and when you can buy them at a 11.5% discount to NTA it's very compelling.

[LaserEyeKiwi]

Rated more BCA (beagle cautiously accumulating), a few more, (got a few more thiis morning and will possibly add more on any untoward weakness. Minimum of 5.3 cps for people on a 33% tax rate = 7.91 cps gross which on $1.21 gives 6.5% gross yield and a 15 cent discount to NTA. These are good metrics in an ultra low interest rate environment and again, this is based on a minimum of 5.3 cps in annual dividends which I would like to think might rise to close to 6 cps in FY23 which would lift gross equivalent yield to 7.4%.

There's no timeline to get back to the 6.95 cps distributions they were paying pre covid though and details on the extent of capital funding required for all the projects proposed is scant. The possibility of further Covid lockdown's should not be overlooked as a key business risk here.

In case you missed it - the earnings call Q&A made it pretty clear the dividend will be higher than 5.3c this coming year, and expect a projected dividend increase once the northlands and plaza sales are finalized (both have conditional offers already).

Also they made it clear they don’t have any large capital requirements over the next 2 years ($60 million for new Sylvia park office tower is only near term planned cost, and $50 million for Drury earthworks over 2 years if fast track approved)

[Beagle]

I listened in.

[Habits]

Some caution is warranted here. I don't pretend to have any planning insights in terms of which projects may or may not be approved but clearly that approval may or may not happen.

Not 100 percent guaranteed. The boat which is certain has already sailed

[NZSilver]

not to much downside risk after that announcement, topping up at 1.22

[Habits]

Upgraded forecast issued 12 March 5.5 to 5.6 per share
Actual 5.72 (5.15 ÷ 90pct), up to 4 pct higher than upgrade

SP lower now at 1.22 each vs 1.27 then

Not sure I can understand this market value

[Waltzing]

inflation fears reflected in the 10 year and more to come weighing on sectors SP's. Perhaps offering a yet again wonderful opportunity to buy a bargain in a country that is expected to under perform.

[Habits]

Ohinewai given go ahead for housing and sleephead factory. Maybe that disadvantages the need for extra drury housing. Nope I dont think so

[Habits]

Retail spending surge may see NZ avoid recession
https://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=12445163

Says that we continued our post covid spending spree over the Summer months. If retail is hot, how about retail property??

[LaserEyeKiwi]

Ohinewai given go ahead for housing and sleephead factory. Maybe that disadvantages the need for extra drury housing. Nope I dont think so

Isn’t that nearer Hamilton? Quite far over the Bombay hills? Drury by contrast will basically be an extension of Auckland metro right? Long term over this century I imagine will be housing developments built all the way between Auckland to Hamilton.

[Waltzing]

Huntly , and other planned developments are by Perry on the Eastern side of the expressway.

Just shows the expansion all the way south to hamilton off the new motorway corridor.

The expressway south of tamahere went through some very wealthy farm land belonging to some of new zealand most prominent individuals.

[ratkin]

Retail spending surge may see NZ avoid recession
https://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=12445163

Says that we continued our post covid spending spree over the Summer months. If retail is hot, how about retail property??

Only anecdotal but in Chch the malls have plenty of boarded up units. South City for example I counted Five the other day. EB games gone, Michael hill gone, a shoe shop gone, couple of others gone. Either boarded up or turned into mini kids playground.
Barrington mall, all the banks closing their doors. Riccarton, busy as always, but a few empty units dotted about.

[Habits]

Only anecdotal but in Chch the malls have plenty of boarded up units. South City for example I counted Five the other day. EB games gone, Michael hill gone, a shoe shop gone, couple of others gone. Either boarded up or turned into mini kids playground.
Barrington mall, all the banks closing their doors. Riccarton, busy as always, but a few empty units dotted about.

KPG advised they have 99.7 pct tenanted up from 99.5, going from strength to even stronger imo. I dont know much about chch though banks closing physical branches is happening elsewhere too

[Rawz]

Only anecdotal but in Chch the malls have plenty of boarded up units. South City for example I counted Five the other day. EB games gone, Michael hill gone, a shoe shop gone, couple of others gone. Either boarded up or turned into mini kids playground.
Barrington mall, all the banks closing their doors. Riccarton, busy as always, but a few empty units dotted about.

Retail landscape changing from lots of smaller malls to much larger 'destination' malls with more/better offerings.
The retailers are dropping out of smaller malls and beefing up their online presence to support the smaller store footprints (great for margins).

Lucky KPG own some of the best destination malls :t_up:

[LaserEyeKiwi]

Only anecdotal but in Chch the malls have plenty of boarded up units. South City for example I counted Five the other day. EB games gone, Michael hill gone, a shoe shop gone, couple of others gone. Either boarded up or turned into mini kids playground.
Barrington mall, all the banks closing their doors. Riccarton, busy as always, but a few empty units dotted about.

Well at least the soon-not-to-owned-by-KPG Christchurch mall Northlands had near 100% occupancy when I was there last month.

south City mall had always been a dead zone from what I can remember (worked nearby for a couple of years 20 years ago) - and after the quakes i imagine it never recovered even to mediocre levels.

[X-men]

Good article on NBR regarding KPG is advancing to do built to rent ...

[Rawz]

Am a bit surprised about the SP performance post results.

Mr Market doesn't seem to share my stance on KPG that's for sure. Thought we would be heading to $1.30.

[Waltzing]

Instos will be the moving factor. A look over the last 10 years in relation to bond yields is a starting point.

[NZSilver]

Am a bit surprised about the SP performance post results.

Mr Market doesn't seem to share my stance on KPG that's for sure. Thought we would be heading to $1.30.

Not to worry, one to buy, take the 5%+ div with very limited downside risk at this stage, let their plans play out and there will be capital appreciation.

[Beagle]

Am a bit surprised about the SP performance post results.

Mr Market doesn't seem to share my stance on KPG that's for sure. Thought we would be heading to $1.30.

Yeah I agree with that. Trades cum the 2.95 cps divvy too. I'm happy to hold for the minimum gross yield of circa 6.5% I noted yesterday., and quietly hoping for slightly more this year and 6 cents or thereabouts in FY23 which is circa 7.5% gross for those on a 33% tax rate. Its okay as a hold and hope things get better.

My note of caution regarding any quick move back to and perhaps slightly above NTA of $1.36 is the company needs to demonstrate they have a clear roadmap back to annual distributions of 6.95 cps like they used to do before Covid (and hopefully more in time matching at least the rate of inflation so distributable earnings are not going backwards in real inflation adjusted terms). To be frank, estimated distributions of 5.3 cps for FY22 as a minimum was a slightly disappointing number and listening into the call yesterday gave a lot of broad brush stuff and future directional thinking but to me lacked clarity and definition in regard to what and exactly how they would rebuild distributions to that level ?

This is in stark contrast to ARG who seem to make steady annual increments to distributions notwithstanding the effects of Covid.

Its clear KPG have a focus on growing their asset base and transforming their real estate holdings and do not have a close focus on maintaining or getting back to prior distributable earnings in the short term. Kind of trust us, we will grow this thing for you.

On the other hand, ARG have a good development book too BUT they have a much closer focus on ensuring investors earn steady rewards for their support and have demonstrated greater resiliency during Covid and this together with their steady annual increases in dividends probably explains why ARG is trading at about NTA and KPG are at a ~ 10% discount. Disc: Hold both, twice as many ARG.

[value_investor]

Am a bit surprised about the SP performance post results.

Mr Market doesn't seem to share my stance on KPG that's for sure. Thought we would be heading to $1.30.

I am in the same boat as you. I've built a sizable position in this one so far and will keep buying at these prices. Fair value for me is still north of the NTA which has creeped upto $1.36.

Future prospects are also really strong for KPG. I expect the sales of the two older malls will find the new projects. Drury and BTR both represent fantastic opportunities and diversified recurring revenue streams for the company.

[Scrunch]

Yeah I agree with that. Trades cum the 2.95 cps divvy too. I'm happy to hold for the minimum gross yield of circa 6.5% I noted yesterday., and quietly hoping for slightly more this year and 6 cents or thereabouts in FY23 which is circa 7.5% gross for those on a 33% tax rate.

At some stage the listed PIE sector should also get a bit larger slice of the investments made by investors on the new 39% tax rate but I'm not sure if this group does enough investing to shift the pricing of KPG (or the other property PIE's). The 5.3c dividend is equivalent of 7.1% gross in this situation. If the div goes up to 6.0c, then its equivalent to 8.1% gross for those on 39% tax.

[Beagle]

At some stage the listed PIE sector should also get a bit larger slice of the investments made by investors on the new 39% tax rate but I'm not sure if this group does enough investing to shift the pricing of KPG (or the other property PIE's). The 5.3c dividend is equivalent of 7.1% gross in this situation. If the div goes up to 6.0c, then its equivalent to 8.1% gross for those on 39% tax.

For what its worth, in my opinion you will find that many investors affected by the new 39% tax rate will be instructing their accountants to form an investment company for them which attracts a maximum tax rate of 28%. Once you go above a one third tax rate people tend to do something about it and its easy enough and perfectly legitimate for people to hold their investments in an investment company. For many, distributions from such company will not be an issue as they will take same as part repayment of the loan they lent the company to purchase the shares held previously in their own name. Company could be part or wholly owned by their family trust as an exercise in succession planning and / or asset protection down the track. Too much is being made of the 39% thing in my opinion in terms of gross implied yield as most with significant investment income in this tax bracket will be diverting this into family trusts or family investment companies.

[Monarch]

To me, Sylvia is the golden goose of this company. More offices plus build to rent will surely help increase spending at the mall's shops, especially the food court/restaurants. Good synergies to be had building a working and living community on top of your shops. Not sure what I think about Drury yet, seems a lot of hurdles to clear yet in terms of council permits and such. Although if that new Drury train station ends up nearby I'll be pleased. One of my larger positions, not sure if I need more just yet but it's tempting.

[Habits]

For what its worth, in my opinion you will find that many investors affected by the new 39% tax rate will be instructing their accountants to form an investment company for them which attracts a maximum tax rate of 28%. Once you go above a one third tax rate people tend to do something about it and its easy enough and perfectly legitimate for people to hold their investments in an investment company. For many, distributions from such company will not be an issue as they will take same as part repayment of the loan they lent the company to purchase the shares held previously in their own name. Company could be part or wholly owned by their family trust as an exercise in succession planning and / or asset protection down the track. Too much is being made of the 39% thing in my opinion in terms of gross implied yield as most with significant investment income in this tax bracket will be diverting this into family trusts or family investment companies.

That is good for the accountants I guess

[Waltzing]

Mr B is describing the standard practise which we adhered to right through the late 80's and 90's of the companies being owned by the Trusts and the individuals with the distributions going out to all holders.

This reduced tax and allowed company profits to be held tax free as investments also in Trust before profits were distributed to trust beneficiaries.

We handled blood stock this way with the partnerships set up by Faye and co as the bankers and under writers.

These days we have all this automated, as the standard accounting systems dont handle this level of complexity very well.

A lot of this was based on published articles available to practitioner's via the Accounting societies research archives.

US 10 year down over night, good for commercial property.

[Beagle]

That is good for the accountants I guess

I've done countless thousands of tax returns over the last 40 years. There is only a tiny fraction of people who make over $180,000 personal income. Everyone I know earning more than that already has a family trust and / or company structure set up and the work was done years ago. People caught by this 39% personal tax rate will be those on a salary of more than $180,000, like ministers of parliament, Cindy and many of her colleagues how sad, never mind ;)

Yeah, 10 year rates in the US down overnight but what happens when the Fed's bond buying program comes to an end ?

[Waltzing]

US 10 Year.. would need to overlay the FED's buying programs. sorry the numbers were missing on the quilk cut and paste... but the general trend is there during the unwinding and the Taper tantrum.

12543

[bull....]

good result , i like how they are transitioning there model to community hub's. I think the govt making interest undeductible on rentals will pave the way for kpg to supply long term rentals and provide very stable returns.

[fungus pudding]

I've done countless thousands of tax returns over the last 40 years. There is only a tiny fraction of people who make over $180,000 personal income. Everyone I know earning more than that already has a family trust and / or company structure set up and the work was done years ago. People caught by this 39% personal tax rate will be those on a salary of more than $180,000, like ministers of parliament, Cindy and many of her colleagues how sad, never mind ;)

Yeah, 10 year rates in the US down overnight but what happens when the Fed's bond buying program comes to an end ?

How does a company structure save a taxpayer money, unless he or she doesn't ever want to spend it?

[Beagle]

How does a company structure save a taxpayer money, unless he or she doesn't ever want to spend it?

Perhaps a worked example is in order.

Jack and Jill are comfortably well off baby boomers in their late fifties both with good careers in upper middle management and both earning $170K per annum.
They've done well in life and have built up a very good nest egg of $2m in investments with an average gross yield 5% returning them $100K passive income per annum.
Rather than take Cindy's new tax rate on the chin they form a new investment company called Jack and Jill investments ltd part owned by their family trust in which they already have their house and bach.

They sell their $2m worth of shares into the investment company and the company owes them a debt of $2m for the purchase of the shares.
The odd time Jack and Jill want special treats for their children and grandchildren that isn't covered by their already good salaries they get a part repayment of the $2m loan from Jack and Jill investments to fund that fancy first class Swiss ski holiday for the whole extended family. The income earned in the company $100K per annum before tax, $72,000 after tax is used to make partial repayment of the loan to fund the nice holiday. This lovely story pre supposes a post Covid recovered world where such indulgences can be enjoyed.

Later in life they sell more of their shares in Jack and Jill investment to their family Trust and start gifting back part of the loan as and when appropriate.
People need to take professional advice on these sort of structures.

[fungus pudding]

People need to take professional advice on these sort of structures.
That's one off those structures that will earn you a pleasant little chat with a nice inspector from the IRD. Always opt to meet at their offices rather than your place. That way you will get a free cup of coffee.

[Scrunch]

That's one off those structures that will earn you a pleasant little chat with a nice inspector from the IRD. Always opt to meet at their offices rather than your place. That way you will get a free cup of coffee.

Or you could buy KPG shares directly which is why this discussion is on the KPG tread. Beagle however makes an excellent point that many high income individuals will have structures like this so the new 39% tax rate may not create much extra demand for KPG or other listed PIE's

[fungus pudding]

Or you could buy KPG shares directly which is why this discussion is on the KPG tread. Beagle however makes an excellent point that many high income individuals will have structures like this so the new 39% tax rate may not create much extra demand for KPG or other listed PIE's

I agree. Collect PIES myself. That's easy, whereas Beagle's suggestion is far from easy and far from a definite winner

[Waltzing]

Posted Removed.

[Getty]

That's one off those structures that will earn you a pleasant little chat with a nice inspector from the IRD. Always opt to meet at their offices rather than your place. That way you will get a free cup of coffee.

Very good advice, but they always insist on visiting my premises.

I make sure the 55 yr old fridge is given prominence.

Cant show too much extravagance eh?

[fungus pudding]

Very good advice, but they always insist on visiting my premises.

I make sure the 55 yr old fridge is given prominence.

Cant show too much extravagance eh?

You're lucky to have such a modern appliance. I've had a 1930 meat safe installed - just to impress visiting authorities such as IRD bean-counters and the Peelers.

[Getty]

You and I cant match the ethnic food joints though.

!930BC Abacus, & cash registers that don't register any cash!

[Beagle]

It was so busy at Lynmall today I got dizzy going round and round looking for a carpark. So busy you'd swear the Queen herself and her Corgi's were there.
These must be good buying at the current level.

[X-men]

People can not travel overseas holidays.

They spent on malls... retailers..food court..movies n etc.

I guess people are still in love with blue chips stock. Overvalued stocks ....

[Bob50]

Potential buyers remember these go ex dividend 2.95 cents on 8th June.

[Aaron]

I guess we can expect a pretty ugly decline in the share price on the 8th June as the share price is falling in the run up to the ex-dividend date.

[777]

8th of June is today and they are already trading above their theoretical ex price.

[Aaron]

8th of June is today and they are already trading above their theoretical ex price.

Sorry I am an idiot. Please ignore my posts.

[Habits]

It was so busy at Lynmall today I got dizzy going round and round looking for a carpark. So busy you'd swear the Queen herself and her Corgi's were there.
These must be good buying at the current level.

Shares on special... I think there was another time about 14 months ago when shares were cheap and only some could see it. At least we can though eh Beagle.

[Waltzing]

Market must have its allocations already then. It appears ARG and GMT are the darlings at the moment.

If retails is booming then the NZX market must be running short of SHAZ cash..

KMD and others no longer showing the large orders backed up.

Aus is slowly finding markets away from china and its the ASX that might outperform the NZX yet again.

[Beagle]

Shares on special... I think there was another time about 14 months ago when shares were cheap and only some could see it. At least we can though eh Beagle.

Cheap as chips...oh wait.... hang on a minute...hot chips at the local takeaways this evening $3, Copper Kettle wood fired BBQ chips at New World on special for $2.60 a packet this week, (those things taste soooo good they must be really bad for you, surely ?) or KPG for $1.195.

Scratch that...cheap as chips... were in the 1980's and no salt added to affect your blood pressure so probably much better for you than any other sort of chips.

[Habits]

Thats a big dilemma... KPG or hot chips? Hot chips win! With tomato sauce for a serve of vegetables in a balanced diet :D

[Waltzing]

or you can visit the food court at your KIP mall....KIP wins... it a buy surely..

[Rawz]

KPG has been undervalued all year. NTA is $1.36. Trading at a 13.8% discount. Would buy more but I have heaps in my portfolio

[LaserEyeKiwi]

KPG has been undervalued all year. NTA is $1.36. Trading at a 13.8% discount. Would buy more but I have heaps in my portfolio

Long term that NTA is going to grow significantly higher after Drury property is developed, it’s going to generate significant asset value appreciation far above the capital used to develop the land.

[Waltzing]

retail price pressures expected to come out in CPI might be causing some weakness in this stock.

[X-men]

KPG=Wealth destroyer

[Monarch]

How does "KPG = Kills Portfolio Gains" sound? On that note I'll probably pick some more of these up if it gets much lower :)

[Baa_Baa]

How does "KPG = Kills Portfolio Gains" sound? On that note I'll probably pick some more of these up if it gets much lower :)

At 14% discount to NTA why wait for lower! Good accumulation opportunity imho.

[Shareguy]

Yes I agree not many opportunities on the NZX at current prices. Discount to NAV and growth opportunity’s ahead especially building rentals at Sylvia park, which I believe will be very sort after so have decided to take a small position and am now on the register.

[Shareguy]

Yes I agree not many opportunities on the NZX at current prices. Discount to NAV and growth opportunity’s ahead especially building rentals at Sylvia park, which I believe will be very sort after so have decided to take a small position and am now on the register.

[Waltzing]

This stock is priced also for negative growth and inflation smashing retail under the street.

absurd ... head in the sand stuff..

cheap as chips..

[X-men]

KPG- dog stock...back to November low

[winner69]

KPG- dog stock...back to November low

I hear this stock is priced also for negative growth and inflation smashing retail under the street.

absurd ... head in the sand stuff..

cheap as chips..

[X-men]

Don't buy in...I am trying to sell mine...

[Beagle]

I'm now in jail with this one...not happy https://www.youtube.com/watch?v=5yt78H5f3b4

Maybe I will get some real chips for dinner to feel better.

[777]

Don't buy in...I am trying to sell mine...

If true then you are not doing your case much good with your posts. But keep it up, I have picked up another 50,000 this week and looking for more.

[X-men]

What... should I suck everyone in then?

[RTM]

Drury development: Auckland ratepayers could be stuck with multimillion-dollar infrastructure bill
https://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=12451562

Some chit chat re Dury development.

[Waltzing]

Could be a real fight to get this one going for the developers for sure. But south auckland has to development somewhere.

Its probably just the start of the who pays for what and when and how much.

Imagine if it gets the P/E of GMT.

With the bond yields due to rise it looks like the market want to hit this hard until the P/L shows it can handle the interest rate rises and the impact of inflation on retail demand.

[Joh13]

Scooped up some more of these today at $1.16, surely the future isn't that dire for KPG. Maybe the best buy on the NZX at the moment...

[LaserEyeKiwi]

Drury development: Auckland ratepayers could be stuck with multimillion-dollar infrastructure bill
https://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=12451562

Some chit chat re Dury development.

so what does the council want exactly? For KPG to pay for all the infrastructure cost, and then also have KPG pay regular rates thereafter to the council for the “right” to use the infrastructure they themselves paid for upfront? If the council wants to collect rates to supply infrastructure services, one would expect they have to actually supply the infrastructure in the first place in some manner and not pass on 100% of the initial costs to developers.

[tim23]

Scooped up some more of these today at $1.16, surely the future isn't that dire for KPG. Maybe the best buy on the NZX at the moment...

Hard to disagree

[Waltzing]

council are on a hiding to nothing here. KPG wont agree to a loss making development.

councils just dont understand public companies the types of people employed by each is very very different.

shareholders wont like the ground work on this if it looks like a sink hole.

KPG will be better to move even farther south into the golden triangle.

Traffic volumes in the centre of the island will increase with the new ring roads around hamilton and Perry has been quick to start developments.

for the absurdities of local council thinking look no farther than the new demo bike access path in hamilton city.. deadly concrete tank obstacle courses.

design to kill a person on a bike if you ride to fast and cost of invasion proof pathways mega expensive.

[Beagle]

Everyone is saying this is filthy dirt cheap, as cheap as chips, you can't go wrong...even I have fallen under the value spell.
You can't go wrong buying these we are all saying, the market must be absolutely nuts, but is it really ????

Why I'm not buying any more.

Property market has boomed over the last 5 years, listed, unlisted, retirement companies... you name it. Market has gone nuts...you simply can't go wrong in property in the last 5 years, surely ? Well I am sorry to say it but it seems you can go wrong.

So how have KPG gone in the last 5 years ?
http://nzx-prod-s7fsd7f98s.s3-website-ap-southeast-2.amazonaws.com/attachments/KPG/286427/240301.pdf
NTA 5 years ago $1.34 Dividends per share 5 years ago 6.6 cps
NTA now $1.36, (has reduced materially in inflation adjusted terms). Dividends per share forecast this year At least 5.3 cps.
Priced for negative growth...yes...because that's what's been happening.
Nothing I heard in the most recent call indicated to me that have any tangible plan to get back to 6.95 cps in annual dividends pre covid in 2019.

Is KPG working ? Yes, for management and staff and tenants. Its been a lousy investment for shareholders in the last 5 years and has woefully underperformed the property market.

Cheap for good reasons in my opinion.

Why am I a shareholder ? Having zoomed out and looked at the 5 year picture I am not sure but there are only really three reasons. Hoping that the gap to NTA will close. I have too much cash and cash gives me almost no return. Maybe the annual cash dividend can get back to 6 cps and given its a PIE that's worth 9 cps to me and the gross yield is worth 7.7% to me, which is high for a property company.

Maybe they will get their act together in due course ? I'm not going to go down this rabbit hole any further than I already am. Already got one paw slightly burned so I will stop digging.

I have a very modest 2.1% portfolio allocation which I will hold and hope this comes right. I'm not adding to it and will put a 10% stop loss on it and if it hits that, I'm out.

Why has this so badly underperformed every other property and quasi property (retirement) company on the NZX over the last 5 years ?
What is managements plan to fix this ?
Why is the forecast dividend this year at a minimum of 5.3 cps so low compared to pre covid at 6.95 cps ?
What is managements plan to fix this ?
All I heard on the call is a change of direction with future property plans and trust us we know what we are doing.

What I find especially "interesting" with this one is that the NTA has gone backwards in real inflation adjusted terms and yet the market capitalization rates (cap rates) the valuers use has dropped a long way over the last 5 years which for every other property company has boosted their NTA, (e.g. ARG's NTA was $1.00 in March 2016 and is now $1.53)...just one example.

I very warmly welcome rebuttal and explanations from others as to why this has so badly underperformed the market in the last 5 years.

[winner69]

What caused all the excitement to drive the share price close to 170 in late 2019. Even a $200m capital raise at 158 didn't seem to dampen enthusiasm

Was it plummeting interest rates and the chase for yield or something?

[Rawz]

Great post Beagle and good questions. I hope a KPG bull with more knowledge of KPGs portfolio can come in and shed some light on the situation.

I have heaps of these in my portfolio (10%), I dont have a rental property so I look at it as appropriate property exposure along with my OCA holding. Purchased the bulk under $0.90 last year. Then started to add more each time it dropped under $1.20 after the recovery to $1.30, with the most recent purchase being last week at $1.19. Now I am thinking ill sit on what I have and stop accumulating. Let the weighting drop as I buy other shares with each monthly pay. I have also just realized that the main reason for this investment was hoping for the NTA discount gap to close. Hmmm naughty me. Little other research was done other than looking at the property they own- which are quality, let's not forget that!!

Management are good operators.... they raised $200m in 2019 at $1.58 per share (how good). And another $200m odd before that in 2017 in the $1.30s. Now we can buy at $1.16.... The bulk of that money went into the Sylvia Park redevelopment + office tower which was completed around covid. Covid really did hurt the valuations, being retail. I wonder how much NTA value is to be unlocked there over the next 12 months? I also wonder if the Drury development potential is really reflected in the NTA?

Overall I am comfortable holding onto these for the following three reasons. May seem a bit simple but at the end of the day this is not a complicated company.
- Buying property in the golden triangle (being where the bulk of KPG properties are) under NTA value is good going. (Sorry, I can't answer why NTA has dropped over 5 years, was it just overvalued 5 years ago?)
- Drury is going to provide immense value gains over the next 10-15 years. Is this being reflected in NTA/share price?
- Management imo have the correct vision of the future with mixed use; retail, office, housing in the suburbs. As opposed to big CBD towers that require long commutes. When I saw ANZ take the naming rights+ floor space in the first tower at Sylvia park I saw that as a big endorsement of the model.

[Beagle]

Thanks for your thoughts Rawz and I agree that its going to take time for their land holding at Drury to crystalize value.

Might be a good idea if we zoom out a little further and look at how they've gone over the last decade. https://kp-wordpress.s3.ap-southeast-2.amazonaws.com/content/uploads/KPG_2012-2012-05-16-c.-annual-report-year-ended-31-Mar-12.pdf Its interesting to note that annual dividends were 7 cps a decade ago. Hmmm.

NTA has gone up in the last decade so I suppose that's something.

[winner69]

The notion that KPG will trade at or above NTA again/soon has some credence based on historical performance as below chart

Clsoe for NTA for a many years to 2019 and then things got exuberant before covid yet and the world went stupid

Unless there's a new paradigm as to how the world sees valuation of property stocks share price back to NTA one day I reckon

Unless dividend yields v Govt stock yield is key driver

[Beagle]

Great chart Winner, thanks.
Has never been materially below NTA apart from Covid era. Should come right sooner or later. Thanks, might sleep a bit better tonight.

[Beagle]

Double trouble again..

[Leftfield]

Yep great chart Winner......thanks.

Maybe the market is saying current NTA a bit over-rated given the 'toppy' real estate market?

Tho' no worries long term.

[Beagle]

Yep great chart Winner......thanks.

Maybe the market is saying current NTA a bit over-rated given the 'toppy' real estate market?

Tho' no worries long term.

Sounds plausible enough until you have a look at the rest of the sector...last reported NTA followed by closing share price on Friday
PCT $1.53, $1.59
ARG $1.53, $1.57
GMT $2.125, $2.29
PFI $2.209, $2.86
VHP $2.63, $3.07

Maybe management are well overpaid and well below average performers ? Could that be the real reason the share price is well below NTA ?

Maybe in particular this guy who has just left (pushed ?) was useless seeing as his tenure coincides with very poor performance of the business in the last 5 years
26/5/2021, 10:29 am ADMIN
Kiwi Property has today advised that Michael Holloway, GM Property Investment, will be leaving the company. Michael joined Kiwi Property in August 2016 as GM Commercial, before moving to his current role in March 2019.

http://nzx-prod-s7fsd7f98s.s3-website-ap-southeast-2.amazonaws.com/attachments/KPG/372630/346576.pdf Gave $19.5m in Covid concessions last year.
Maybe it closes some of the gap to NTA over the next year, maybe not. Unlikely to close all of it anytime soon in my opinion.

[Aaron]

Interesting chart.

Do you think interest rates will ever rise?

If they do then NTA should decrease and I guess the share price will follow it down unless they can increase income to offset the increase in the capitalisation rates as interest rates rise.

[winner69]

KPG had a NZX announcement re appointing Steve Penney as GM Funds Management

He doesn’t appear as a member of the Exec Team on their website

What does GM Funds Management do

[winner69]

Ah so ..from AR ..this guy Steve is our future ...

Kiwi Property has a large and exciting growth pipeline, including at Drury, where the company’s 51 hectare site is set to become the town centre for a thriving new community that is expected to ultimately number around 60,000 people. This pipeline is a sourceof significant competitive advantage and will unlock value for our shareholders.

Funding the company’s exciting growth plans will require an integrated capital solution, including a likely combination of funds management, asset recycling and joint ventures, such as those we have with Tainui Group Holdings at The Base and now also Centre Place North.

By leveraging third-party capital, we will be in a strong position to accelerate growth and create additional revenue streams. To this end, Steve Penney has been appointed to the role of General Manager Funds Management. He brings a wealth of investment experience to the role,

[X-men]

Might be fundies sold off last couple weeks to fund PCT fund rising...?

[Beagle]

From the annual return. Our purpose "To bring places to life" Lots of talk about ESG, carbon
By owning a group of assets
offering complementary economic
benefits, we increase income diversity
and encourage smoother returns. Not really what you want to read. I want to read about how they're going to grow earnings, not get smoother returns.
https://www.kiwiproperty.com/corporate/sustainability/
Pink headlines worry me.
Value trap ?

[Beagle]

From the annual return. Our purpose "To bring places to life" Lots of talk about ESG, carbon
By owning a group of assets
offering complementary economic
benefits, we increase income diversity
and encourage smoother returns. Not really what you want to read. I want to read about how they're going to grow earnings, not get smoother returns.
https://www.kiwiproperty.com/corporate/sustainability/
Pink headlines worry me.

A lot of "feel good" stuff and a real lack of focus on earnings per share. Long gone are the days where they had specific targets of achieving XYZ % total shareholders returns to beat the market and all that sort of shareholder focus talk has been replaced with truck loads of ESG, diversity, inclusiveness, carbon negative, sustainability and my personal favorite "our purpose is to bring places to life". Where's the focus on eps accretive development activities ? Do they even understand the term eps accretive ?
To me the focus with this company has changed over the years and they very conveniently overlook a focus on shareholder returns. Maybe this is why ACC have been selling down ?
I've said it before during Covid that I wasn't happy they canned the dividend just because valuations went south, (they still had good cash earnings why didn't they pay them out ?).

I feel as though I have tripped myself up into a classic value trap. (Stupid old mutt...suppose I shouldn't be too hard on myself...nobody gets every investment decision right.). Thankfully only 2% of my portfolio. Suppose I could hang around and stir things up at the annual meeting and hope for better ?

Can't go much lower than $1.16...surely ?

[X-men]

Fundies rebalance too last Friday

[Monarch]

I think the reason KPG has underperformed is retail property is out of favor, and has a cloudy outlook at best. I think this sentiment has weighed on the valuations effecting NTA, and the SP. I think going forward we will see concentration of retail, with lower quality venues dying out and superior locations such as Sylvia park continuing to grow. I've seen this first hand with my local mall steadily dying since Sylvia opened. These dying malls are likely offering low rents in a desperate attempt to survive, this might be causing KPG difficulty in growing rent income. I don't expect a quick return to the old dividends, given KPG will have a significant amount of money sitting in cash after the asset sales go through. Whatever they invest the proceeds in will take a few years to start generating cash.
So long as Sylvia continues to get busier, I'll hold, and not one second longer.

[Waltzing]

Mr B is quite right and it reminds me a bit of ARG a few years back but not as bad.

New data out shows that KIWI shoppers are now doing more local shopping; really?

It might well take a year or 2 for it come back to 1.30? Not if the market keeps moving up ? It usually moves up for a lot longer than is rational.

Not a growth stock as Drury looks increasingly like a very difficult development to get started and the market wont buy into the profits until it hits the PL.

But is retail dead ? Doesnt look like it and this company has the best of the best.

its priced as if it has the worst malls, not the best.


https://www.stuff.co.nz/business/prosper/300335645/covid-changed-the-way-kiwis-shop-research-suggests

"Can't go much lower than $1.16...surely ?"

yes it can , stock can always go lower, its the momentum.

perhaps some aucklanders havnt visited the base or havnt realised the growth that will happen in the new hamilton over the next 10 years.

It seems investors are traders after all?

In 03 the SP was 1.02 and its never been a trading stock except if you exited in 08.

Its a long term defensive stock but not as defensive as ARG since it a little more cyclical.

But interest rates at where? and heading up to what again?

Nope retail is not dead in these malls.

Dogs of malls? not in NZ they arnt.

"Bring places to life"

Well thats what the base did and they did to keep the younger generation interested. That means making malls more fun and sticky. Thats hard to do but new experiences such as virtual environments are bringing younger people back to these places. Its not easy to keep these malls fresh and that needs to be communicated to the public and shareholders..

This company is not selling office spaces to governments and warehouses to importers such as ARG and GMT.

Its got the hardest job of bringing the shopper out to buy and to enjoy other entertainment activities.

This is the tough nut to crack every time; retail and entertainment.

[LaserEyeKiwi]

I’m not sure why you guys are so pessimistic - Drury is running ahead of initial schedule after being fast tracked by government following covid 19 stimulus.

Dividends are already back, in case anyone forgot, we get the half year dividends paid into our accounts at the end of this week.

KPG is right in the middle of a successful deleveraging of an over reliance on retail (selling its Christchurch & Palmerston North Malls) de-risking earthquake exposure (again from getting out of large assets in Christchurch & Palmy) and increasing the more reliable office revenue (new office towers at Sylvia park) and exploring adding a new segment of very stable revenue in the form of build-to-rent residential towers at Sylvia park also.

The Drury opportunity is massive, once developed the finished product will add significantly more value than the asset value & capital spend required to complete it. The discount to NTA is only going to grow more significant, and with little in the way of immediate cash requirements the thoughts about what they might do with the sale proceeds from Northlands & The Plaza has me salivating.

[winner69]

Doing my homework

They say Sylvia Park is home to 10 of New Zealand’s 11 favourite retailers

Whose missing?

[winner69]

About 1.7% of total retail sales in NZ for year ended March 2020 go through KPG sites

About the same % for March 2020 year - so not losing share of spend

Just a bit of interesting stuff ....but prob doesn't mean that much

[fungus pudding]

Doing my homework

They say Sylvia Park is home to 10 of New Zealand’s 11 favourite retailers

Whose missing?

The apostrophe is.

[fungus pudding]

Doing my homework

They say Sylvia Park is home to 10 of New Zealand’s 11 favourite retailers

Whose missing?

The apostrophe is.

[winner69]

The apostrophe.

They haven't come to NZ yet

[clown]

Doing my homework

They say Sylvia Park is home to 10 of New Zealand’s 11 favourite retailers

Whose missing?
Probably Rebel or Briscoes?

[fungus pudding]

They haven't come to NZ yet

There are plenty of them around. It's not as though they're in short supply.

[winner69]

If in doubt look at what marketscreener says

Target share price ranges 117 to 142 with median (consensus) of 126

‘Consensus’ is interesting - consensus is usually wrong......things that prove consensus wrong are all things that are not, nor could not have been, predicted in advance.

Although consensus is a good thing it’s just that the world is far more complex and unpredictable than the consensus normally allows for, so be careful.

[Waltzing]

Risk -> W(n).

[Scrunch]

I was recently reading a report about mainfreight and despite the very high PE, its value was being justified due comparisons with international peers. Could some of the KPG discount to NTA be that international malls may still be struggling and this negatively impacts KPG comparator's?

[Waltzing]

More developments in the central North Island mean population drift away from auckland will probably increase. KPG is perfectly situated in this region to benefit over the next 10 years. A study of it 20 year history shows its a very slow moving stock price peaking only on global moves in interest rates and not always in the manner expected by theory.

More of these population movements will come about.

https://www.stuff.co.nz/life-style/homed/real-estate/125469817/house-hunters-from-hamilton-auckland-and-tauranga-buy-into-500m-housing-estate-in-rural-waikato

[jimdog31]

My own personal experience of dealing with A KPG development - Highly sought after locations - tightly held, minimal turnover in locations. They are pretty hard and fast with a marketing contribution 3-6%, and yearly fixed reviews at 3.5%. The concessions they gave during Covid were simply par for the course across the entire retail landscape.

I can confirm retail is not dying, and potential rerating based on whats happened to malls etc in the states is quite likely but IMO flawed. What works or doesn't work in the states quite often the opposite will happen here, or even Australasia for that matter.

Commercial values are absolutely skyrocketing, I have experienced a handful of market reviews recently and they have ranged from 5%-45% increase in base rents. I cannot see how KPGs next valuation wont be substantially UP.

Have a look on realestate.co.nz, there are virtually zero bulk retail stores for lease (offices and industrial on the other hand).

Commercial yield % is also hitting all time lows which effectively jacks the Asset price up. I received an email from a real estate agent who sold 6 commercial properties OFF MARKET last month ranging from 2.99 - 4.3 % yield.

[jimdog31]

Warehouse
Kmart
Noel Leeming
Farmers
Glassons
Hallensteins
Kathmandu
Macpac
Michael Hill
Spotlight

No bunnings or Mitre10?

[jimdog31]

Doing my homework

They say Sylvia Park is home to 10 of New Zealand’s 11 favourite retailers

Whose missing?

Warehouse
Kmart
Noel Leeming
Farmers
Glassons
Hallensteins
Kathmandu
Macpac
Michael Hill
Spotlight

No bunnings or Mitre10?

[jimdog31]

Doing my homework

They say Sylvia Park is home to 10 of New Zealand’s 11 favourite retailers

Whose missing?

Warehouse
Kmart
Noel Leeming
Farmers
Glassons
Hallensteins
Kathmandu
Macpac
Michael Hill
Spotlight

No bunnings or Mitre10?

[Bjauck]

Whitcoulls?
Lotto?

Both are at Sylvia Park I am told.

[Beagle]

....................

[winner69]

Thanks for your feedback mate. Against a backdrop of substantially lower interest rates than that which prevailed 5 years ago it beggars belief the NTA was $1.34 then and is only $1.36 now. According to the Reserve Bank inflation calculator (housing index) $1.34 should be $1.98 now and using general inflation $1.45.

Ten years ago KPG was distributing 7 cps in annual dividends and adjusted for general inflation only if they were matching this today they would have annual dividends of 8 cps and they are forecasting just 5.3 cents per share.
https://www.rbnz.govt.nz/monetary-policy/inflation-calculator/

KPG's NTA 10 years ago was $1 and its now $1.36, so that's a 36% gain in 10 years. The housing index suggests to match average house prices the NTA should have been $2.11.

As you've suggested commercial values are booming on the back of record low cap rates but KPG's huge reduction in annual dividends relative to where they were and their woeful underperformance in terms of capital growth appears grossly incongruous with the underlying trends in the overall property market and commercial property specifically.

I'm at a loss to explain their extremely poor performance ?. But things will be different going forward...or will they ?

the 5 Year Trend Statements in the AR aren't inspiring reading

You highlighted the words 'smoother returns' in one of their communications

They seem to have done a grand job in smoothing things in the last 5 years

[Beagle]

I should have done more research before I fell into the value trap, (not afterwards). Maybe the gap to NTA will close up somewhat and everything will be okay...

[winner69]

I should have done more research before I fell into the value trap, (not afterwards). Maybe the gap to NTA will close up somewhat and everything will be okay...

Safe as houses is Kiwi Property ....almost as safe as investing to the government

so you will be alright.

One of their bonds is yielding 1.0% and others 1.4% and 1.8%

And the Green Bonds at 2.0%

[kiwico]

There are plenty of them around. It's not as though they're in short supply.

Apostrophes seem to be buses. Not enought around when there should be some or far more than you need when they're not required.

[fungus pudding]

Apostrophes seem to be buses. Not enought around when there should be some or far more than you need when they're not required.

'Zactly. .

[jimdog31]

Thanks for your feedback mate. Against a backdrop of substantially lower interest rates than that which prevailed 5 years ago it beggars belief the NTA was $1.34 then and is only $1.36 now. According to the Reserve Bank inflation calculator (housing index) $1.34 should be $1.98 now and using general inflation $1.45.

Ten years ago KPG was distributing 7 cps in annual dividends and adjusted for general inflation only if they were matching this today they would have annual dividends of 8 cps and they are forecasting just 5.3 cents per share.
https://www.rbnz.govt.nz/monetary-policy/inflation-calculator/

KPG's NTA 10 years ago was $1 and its now $1.36, so that's a 36% gain in 10 years. The housing index suggests to match average house prices the NTA should have been $2.11.

As you've suggested commercial values are booming on the back of record low cap rates but KPG's huge reduction in annual dividends relative to where they were and their woeful underperformance in terms of capital growth appears grossly incongruous with the underlying trends in the overall property market and commercial property specifically.

I'm at a loss to explain their extremely poor performance ?. But things will be different going forward...or will they ?

I too am at a loss other than its more a case of market sentiment than poor performance?

A few things id point out...

Capitalisation at 5.82% is super conservative given what the market is actually doing, talk to any commercial real estate agent and they will tell you in Auckland it has dropped substantially, and very swiftly, and all around the country its following suit. What effect will this have on the value when it hits the next valuation?

I think with a reduction in Capitalisation rate come Mar 2022 and you will see a substantial Lift in NTA. Precovid Cap rate for sylvia was 5.38% last valuation was 5.5%. Imagine if sylvia park (1/3 of assets) hit 5% cap rate (not outside the realms) ?

Looking through the property compendium for 2019 vs 2020 vs 2021

2019 2020 2021
Sylvia Park 955 982 1100
Syliva Lifestyle 77 74.3 86.5
Lynnmall 284 245 249
The Base 217.5 198 187.5
Westgate 90 79 88.5
Vero 450 445 500.5
ASB 230 238 260
Aurora 159.5 170 181.7
44 terrace 53.5 57.1 59.4
Other 125.2 154.6 190
Development 58.2 60 68
Plaza 207 170 ?
Northlands 247 195 ?
Centreplace 53.5 36.5 ?
Held for sale ? ? 347

Total 3207.4 3104.5 3318.1

It seems they have been substantially writing down the value of the dogs for the last 3 years, and recycling that capital will have a positive effect on NTA also.

Dividend

I'll give them a pass on last year and accept the 5.15, given they gave concessions like everyone else. Next year though they have said,

"AFFO guidance for FY22 will be provided once the sale of The Plaza and Northlands has concluded, however based on current projections, next year’s dividend is expected to be no less than 5.30 cents per share [Note 4]."

There seems to be room for an upside there? Whats the plans for the $347 mill?

ACC

Pre covid (29 april 2016 last announcement) they were at 8.185% 104,473,105,

they then took advantage of the drop around covid and hit 9.206% 144,453,517, and then 10.463% 164,165,904

latest announcement (14 jun 2021) they are at 9.428% 148,034,507

So still 43,561,402 shares more than pre-covid.


Anyway, I truly believe NTA is way below what it actually should be and this will get rerated accordingly.

I think this would have to be the biggest bargain on NZX right now.

[winner69]

From KPG announcement -

Kiwi Property stepped-up its portfolio rebalancing programme in FY21, with the aim of reducing the company’s exposure to traditional retail and recycling capital to help fund its growth pipeline.

“Kiwi Property’s future lies in the creation of mixed-use communities at our large, strategic landholdings. By diversifying our portfolio uses we intend to create a platform for accelerated growth.

I have that feeling I’ve heard similar stuff before .....like Oceania underwent ‘change in strategic direction’ and it’s taken an eternity for that to sort of play out and for the market to try and understand it.

Maybe KPG will also frustratingly underperform for a few years until the market sees the light of day

[Beagle]

Thanks for sharing your perspective jimdog31.

[jimdog31]

From KPG announcement -

Kiwi Property stepped-up its portfolio rebalancing programme in FY21, with the aim of reducing the company’s exposure to traditional retail and recycling capital to help fund its growth pipeline.

“Kiwi Property’s future lies in the creation of mixed-use communities at our large, strategic landholdings. By diversifying our portfolio uses we intend to create a platform for accelerated growth.

I have that feeling I’ve heard similar stuff before .....like Oceania underwent ‘change in strategic direction’ and it’s taken an eternity for that to sort of play out and for the market to try and understand it.

Maybe KPG will also frustratingly underperform for a few years until the market sees the light of day

it sure does feel like OCA doesnt it. The valuations that KPG have are a little easier to follow though!

[winner69]

Jim dog - your comments re capitalisation rates are interesting

What do you make of this historical chart from recent preso?

Rates declining over the years except in retail. Do valuers see retail assets as increasingly riskier or something?

Whatever quite a fascinating chart

[Waltzing]

"t seems they have been substantially writing down the value of the dogs for the last 3 years, and recycling that capital will have a positive effect on NTA also."

it reminds me of ARG a few years ago and over the last 12 months KPG has started the move to concentrate on its core portfolio.

W(n) has the stats and while MR B paints the down side which is factual it should be the low at 1.10 or there abouts.

It took ARG a few years to turn it around and that took about 5 years.

Most of you will be investors unlike our small team which is using markets to test transactional software.

Surely your view as mostly NZ citizens is to look at your country over a 10 year horizon and GMT, ARG , PCT and KPG are defensive stocks that have 20 year or more investment strategies.

Mr B has highlighted they have possibly not managed the asset portfolio very well to say the least.

[jimdog31]

Jim dog - your comments re capitalisation rates are interesting

What do you make of this historical chart from recent preso?

Rates declining over the years except in retail. Do valuers see retail assets as increasingly riskier or something?

Whatever quite a fascinating chart

it is a fascinating chart. essentially what that chart is saying is that pure retail rental return is stable and/or increasing, while the underlying asset value isnt increasing OR that the underlying asset price is decreasing and rental is staying the same.

i can tell you that rental rates are increasing right across the country, therefore the underlying assets will appreciate. The majority of KPG assets are in Auckland, you cant tell me that the holdings havent increased substantially since early 2020? when the valuers decided to change cap rate for sylvia from 5.38 to 5.50.

I definitely think this cap rate that theyve used is skewed by the “dogs”, centre place, plaza.

Like i said before get those out of the portfolio and things will be back on track.

I do think there is a lot of “death of bricks and mortar” entrenched in valuers minds, and like another poster pointed out whats happened to malls in america.

Is that real though? Given what we are seeing in retail right across the board , does anyone here actually believe that?

”click and brick” is actually the new model. Every retailer worth their salt in NZ is embracing the need for both and creating synergys to make each work for each other.

[Beagle]

Plaza 207 170 ?
Northlands 247 195 ?
Centreplace 53.5 36.5 ?

Thanks for that jimdog. I know you have shops around many parts of the country so i am curious to hear any insights as to why the value of these regional malls have declined so much ?
Have they not invested enough to keep them modern and fresh ?
Is this the result of competitive pressure from other malls in those regions ?
Is this a retail regional problem specific to those regions in question ?
And finally, has their management of these malls been professional and competent ?

Any thoughts you'd care to share would be really appreciated.

On the cap rate thing for Sylvia Park in particular, yes I think there is "retail bias" from the Valuers there. Cap rate of over 5% seems really illogical for an asset of that quality.

[jimdog31]

Thanks for that jimdog. I know you have shops around many parts of the country so i am curious to hear any insights as to why the value of these regional malls have declined so much ?
Have they not invested enough to keep them modern and fresh ?
Is this the result of competitive pressure from other malls in those regions ?
Is this a retail regional problem specific to those regions in question ?
And finally, has their management of these malls been professional and competent ?

Any thoughts you'd care to share would be really appreciated.

On the cap rate thing for Sylvia Park in particular, yes I think there is "retail bias" from the Valuers there. Cap rate of over 5% seems really illogical for an asset of that quality.

I think we need to view each of those 3 in isolation.

Centre place north - i can speak with certainty around this as I live in Hamilton, basically the Base and chartwell have both affected the inner city shopping, much better parking in both.

I think selling this for a loss would be short sighted as there a huge amount of inner city developments going on to revitalise the CBD, and alot of empty shops are being earthquake strengthened and converted to apartments so this location will appreciate in value.

Northlands in Chch - very interesting here, i have recently purchased a building within 500m if this development and the cap rate is 5%!!! after completing this sale, the real estate rang me and asked if id sell to the neighbour for a quick $500k profit? (i said no, but would have meant a 4% cap rate) this mall is in the most affluent part of Christchurch and I cant understand why they have written the value down, unless of course they over capitalised when developing (surely not?). Maybe there is an aversion to the quakes here so that valuers suppress the value and therefore the cap rate is higher?

The plaza - Palmy is a strange case. The mall itself is very run down, but i think its more a reflection of the region/city as a whole. My impression is that the Uni isnt as well attended as it used to be, with massey having sites around the country, and potentially a lower socio economic effect in that region. I dont really see palmy fitting into their portfolio and rightly so they are disposing.

Another factor to take into account regarding valuations, cap rates is a lot of money is leaving residential due to the interest deductibility legislation and heading towards commercial property at all ends of the price continuum and this is massively impacting asking prices to the upside.

[Rawz]

Thanks for your posts Jimdog! Appreciate your thoughts.

Like you have pointed out, how has the Sylvia park cap rate increased?? Every time I go there it is packed. Never a shop empty unless it is being refurbished. How much of the KPG retail portfolio has been unfairly punished because of COVID and/or the overseas mall situation. The Base valuation has been dropping, cap rate at 6.38% Could/should it be in line with Sylvia park cap rate of 5.50% given it is Hamilton's best mall with room to expand into the mixed use model?

Might go back to accumulating more, if it goes low $1.10's I certainly will. Feel like NTA will continue to increase once the perception of (quality) retail brick and mortar catches up to reality.

Does anyone have on hand the cap rates of the other property funds? Or the market avg? I assume it is around 5% or just under?

[Aaron]

I think we need to view each of those 3 in isolation.

Centre place north - i can speak with certainty around this as I live in Hamilton, basically the Base and chartwell have both affected the inner city shopping, much better parking in both.

I think selling this for a loss would be short sighted as there a huge amount of inner city developments going on to revitalise the CBD, and alot of empty shops are being earthquake strengthened and converted to apartments so this location will appreciate in value.

Northlands in Chch - very interesting here, i have recently purchased a building within 500m if this development and the cap rate is 5%!!! after completing this sale, the real estate rang me and asked if id sell to the neighbour for a quick $500k profit? (i said no, but would have meant a 4% cap rate) this mall is in the most affluent part of Christchurch and I cant understand why they have written the value down, unless of course they over capitalised when developing (surely not?). Maybe there is an aversion to the quakes here so that valuers suppress the value and therefore the cap rate is higher?

The plaza - Palmy is a strange case. The mall itself is very run down, but i think its more a reflection of the region/city as a whole. My impression is that the Uni isnt as well attended as it used to be, with massey having sites around the country, and potentially a lower socio economic effect in that region. I dont really see palmy fitting into their portfolio and rightly so they are disposing.

Another factor to take into account regarding valuations, cap rates is a lot of money is leaving residential due to the interest deductibility legislation and heading towards commercial property at all ends of the price continuum and this is massively impacting asking prices to the upside.

Just reading Beagle's post that you have shops around many parts of the country.

How do listed property trusts/companies compare against owning in your own right.

What are the advantages/disadvantages. A few years back you could get a similar yield for shares/units in a listed entity as you could buying an individual property so I always wondered what the advantages of buying individual properties were.

I am guessing control, leverage and the possibility of adding value if you know what you are doing.

Versus liquidity, diversification of property and tenancy risk and no management responsibilities.

I guess it is only hypothetical for me as I lack the capital and I am risk averse when it comes to investment. Any property I could afford probably would be risky.

[Beagle]

Thanks mate, appreciate your thoughts. Agree centreplace is a great space in the heart of Hamilton and having been there a few times I totally hear you regarding parking ! Lack of investment in parking but also as you suggest, places like the base are a magnet for shoppers in north Hamilton and with abundant free parking too.
Palmy is another where I feel they could have done more and managed it better. It felt old and tired last time I was there 25 years ago !
I haven't been to the Chch one but "I get" the earthquake residual risk thing.

I need to mull this one over for a while. Its seems quite extraordinary that NTA was $1.34 5 years ago and is now only $1.36. Its really "quite something" to achieve that sort of return in 5 years against a backdrop of huge falls in cap rates. That's truly "remarkable". If I stick around (after stumbling into this value trap), I'll have some extremely tough questions for the directors at the annual meeting. The Beagle will be in maximum bark mode !!

[beetills]

1 also live in Hamilton and i gotta say that my friends and i very rarely go near the inner city of Hamilton,Centre Place included.
lI believe that there is a growing safety issue and despite the building of apartments etc,it's only going to get worse.

[jimdog31]

1 also live in Hamilton and i gotta say that my friends and i very rarely go near the inner city of Hamilton,Centre Place included.
lI believe that there is a growing safety issue and despite the building of apartments etc,it's only going to get worse.

Matt stark is singlehandley redeveloping the office space in the cbd and is doing a fantastic job, can honestly see the difference in a short space of time

[jimdog31]

Thanks mate, appreciate your thoughts. Agree centreplace is a great space in the heart of Hamilton and having been there a few times I totally hear you regarding parking ! Lack of investment in parking but also as you suggest, places like the base are a magnet for shoppers in north Hamilton and with abundant free parking too.
Palmy is another where I feel they could have done more and managed it better. It felt old and tired last time I was there 25 years ago !
I haven't been to the Chch one but "I get" the earthquake residual risk thing.

I need to mull this one over for a while. Its seems quite extraordinary that NTA was $1.34 5 years ago and is now only $1.36. Its really "quite something" to achieve that sort of return in 5 years against a backdrop of huge falls in cap rates. That's truly "remarkable". If I stick around (after stumbling into this value trap), I'll have some extremely tough questions for the directors at the annual meeting. The Beagle will be in maximum bark mode !!

someone needs to ask the hard questions !! i just think the timing of that 2020 valuation being right in the thick of the spiral has completly rocked the trajectory of the valuations/nta. as a result of that valuation the valuer had to remain conservative for 2021 or risk looking like he made a right mess of the 2020 valuation. If i were KPG id be appointing a new valuer for 2022.

Youre right in calling this a value trap, the value is SO obvious for all to see current share price vs dcf vs nta.

if the valuation had been timed for sept vs mar, i think you would have seen a much more consistent NTA appreciation.

the canary in the coal mine for me would be if tenancy in their core asset portfolio dropped which would lead to higher cap rates, and less free cashflow. like I said in a previous post thats not the case as their is a waiting list for their core properties and the majority of those have fixed % rent reviews.

[winner69]

Beagle said - I need to mull this one over for a while. Its seems quite extraordinary that NTA was $1.34 5 years ago and is now only $1.36. Its really "quite something" to achieve that sort of return in 5 years against a backdrop of huge falls in cap rates. That's truly

There are now 23% more shares on issue than in 2016 (a couple of cap raisings and DRP shares etc)

Reported NTA/share up 2% in 5 years

in $ terms up 25% - ... or 4.5% pa

Maybe a bit better than 'quite something' but not 'remarkable' either

[jimdog31]

Beagle said - I need to mull this one over for a while. Its seems quite extraordinary that NTA was $1.34 5 years ago and is now only $1.36. Its really "quite something" to achieve that sort of return in 5 years against a backdrop of huge falls in cap rates. That's truly

There are now 23% more shares on issue than in 2016

Reported NTA/share up 2% in 5 years

in $ terms up 25% - ... or 4.5% pa

Maybe a bit better than 'quite something' but not 'remarkable' either

Hmm good point winner!

[Beagle]

Its a shame there isn't a sarcasm emoji as that would have made my post clearer. I guess if they can get annual dividends up to 6 cps its a hold for yield. There's no point issuing more shares just for the sake of growth its its eps dilutive. I wonder if the massive development at Drury will be eps accretive or dilutive ? What ROI are they targeting ? They were so opaque on the call almost to the point of being deliberately obtuse. Maybe they simply have no idea and will accept whatever deal Tainui come to them with ? Do we or more importantly I, have confidence they can manage a development of that size and be eps accretive ? I just don't know about this one...

[winner69]

Hmm good point winner!

Bit of a worry they keep needing quite a lot of new capital to not progress that far

[winner69]

Share price doing well today .... that's good

[LaserEyeKiwi]

If I recall correctly, northlands mall still has some seismic strengthening work ahead of it, so value of that has been reduced prior to sale, this was mentioned in live Q&A web stream following annual results release.

note that in addition to Northlands & Plaza sales, KPG is also selling half of CentreplaceNorth.

FYI: The KPG AGM is coming up in 3 weeks (12th July).

[winner69]

Its a shame there isn't a sarcasm emoji as that would have made my post clearer. I guess if they can get annual dividends up to 6 cps its a hold for yield. There's no point issuing more shares just for the sake of growth its its eps dilutive. I wonder if the massive development at Drury will be eps accretive or dilutive ? What ROI are they targeting ? They were so opaque on the call almost to the point of being deliberately obtuse. Maybe they simply have no idea and will accept whatever deal Tainui come to them with ? Do we or more importantly I, have confidence they can manage a development of that size and be eps accretive ? I just don't know about this one...

Good point about being accretive ...or not

They did well raising $200m less than 2 years ago at $1.58 eh

Those were exciting times and everybody was happy as

[Beagle]

If I recall correctly, northlands mall still has some seismic strengthening work ahead of it, so value of that has been reduced prior to sale, this was mentioned in live Q&A web stream following annual results release.

note that in addition to Northlands & Plaza sales, KPG is also selling half of CentreplaceNorth.

FYI: The KPG AGM is coming up in 3 weeks (12th July).

Looking forward to that. I'm going to have some REALLY tough questions for the board and management.

P.S. I see the CFO bough a few last week with his own money at $1.17 http://nzx-prod-s7fsd7f98s.s3-website-ap-southeast-2.amazonaws.com/attachments/KPG/374273/348676.pdf

[jimdog31]

Looking forward to that. I'm going to have some REALLY tough questions for the board and management.

P.S. I see the CFO bough a few last week with his own money at $1.17 http://nzx-prod-s7fsd7f98s.s3-website-ap-southeast-2.amazonaws.com/attachments/KPG/374273/348676.pdf

And he is the CFO ! surely he wouldnt get caught in a value trap.....

must see real value!

[Beagle]

And he is the CFO ! surely he wouldnt get caught in a value trap.....

must see real value!

LOL, mate you forgot the :p emoji :)

[Baa_Baa]

The chart is looking pretty sick as well, the past 6-8 months reversing the uptrend rising channel(s) to form a medium term down trend, falling out of the post Covid rising channel (after failing to get anywhere near pre-Covid levels).

Now forming a large Descending Triangle (https://www.investopedia.com/articles/technical/03/091003.asp) (lower highs, flat base - yellow highlight). The MA's are really tight 50 & 100 are basically the same and heading down to the rising 200MA only one-click below. A crossing would be the dreaded 'death cross'. SP is already trading below 200MA.

12637

In summary, right now this is a risky TA buy, as the triangle could break either way and currently is heading short-term to the down side. A bounce off the horizontal base would be encouraging, followed by a breakout above the descending upper trend line would be a confident buy with tight stops. Either way, there's heaps of TA resistance above here, could take some time to work through.

Disc: accumulating small amounts on price weakness, for the long-hold portfolio.

[winner69]

Does anyone have on hand the cap rates of the other property funds? Or the market avg? I assume it is around 5% or just under?

Argosy as at March 21

Large format retail 5.65% (was 6.23% prior year)
Office 6.43% (pcp 6.83%)
Industrial 5.42% (pcp 6.17%)

[Waltzing]

"cap rates is a lot of money is leaving residential due to the interest deductibility legislation and heading towards commercial property at all ends of the price "

already?

re centre place has its custom and while it not crowded its not empty either. This will probably become the marginal site in the future but will potter along as there is nothing to cater for the south side of the city and farther out into the country side.

getting to the base is a pain it you live on the south side and the surrounding towns which have lost some big shed retailers over covid.

M10 being the exception which i dont think has shut any rural town sites.

Other than that centre place has some VERY GOOD SHOPS and the LIDO brings an element of culture that is badly needed in the central north island.

Lets hope hamilton can get it new concert venue built so that there is somewhere for an orchestra play without the need for plastic stall seats.

French film festival starts shortly and that brings some to the mall as well.

Nothing like a sports event of course but centre place has it place in the KPG portfolio.

Plenty of demand today into the close.

[X-men]

Kpg aka dog stock

[FTG]

The chart is looking pretty sick as well, the past 6-8 months reversing the uptrend rising channel(s) to form a medium term down trend, falling out of the post Covid rising channel (after failing to get anywhere near pre-Covid levels).

Now forming a large Descending Triangle (https://www.investopedia.com/articles/technical/03/091003.asp) (lower highs, flat base - yellow highlight). The MA's are really tight 50 & 100 are basically the same and heading down to the rising 200MA only one-click below. A crossing would be the dreaded 'death cross'. SP is already trading below 200MA.

12637

In summary, right now this is a risky TA buy, as the triangle could break either way and currently is heading short-term to the down side. A bounce off the horizontal base would be encouraging, followed by a breakout above the descending upper trend line would be a confident buy with tight stops. Either way, there's heaps of TA resistance above here, could take some time to work through.

Disc: accumulating small amounts on price weakness, for the long-hold portfolio.

Baa Baa,

Keep in mind that true triangles are actually CORRECTIVE moves. A period where the market is consolidating, and taking a breather so to speak. Some would argue indecision reigns whilst a triangle is forming.

So assuming that this is actually a triangle (realistically it's still TBC), then when it eventually terminates, pricing will revert back to the preceding primary trend.
As an aside; triangles (well, at least what TA's think are triangles) do on a reasonably regular basis make false breakouts, potentially confusing all & sundry.

Additionally, when looking at the internal dynamics of the KPG chart e.g. volume, I'd be a bit cautious. The behaviour isn't necessarily in sync with how a true descending triangle traditionally performs.

[Waltzing]

"accumulating small amounts on price weakness, for the long-hold portfolio."

good support in the close today indicate this may be a strategy that holding the SP where it is.

[jimdog31]

Kpg aka dog stock

Nice and constructive there

[nztx]

Okay .. let's see where this Dog's breakfast goes from here

have a small token holding so Waltzingironman doesn't feel lonely .. ;)

[Waltzing]

"have a small token holding so Waltzingironman doesn't feel lonely ."

thank you i try to support local businesses where possible.

numbers at centre place dont seem to be dropping to no one. i try to visit twice a week at least.

Remember even MR B has some although as soon as his holding hits cost + brokerage MR B will exit quick and perhaps is remiss on not buying more ARG and yet more HLG.

"Nice and constructive there"

shorting the stock no doubt. Didnt want to say anything.

[Beagle]

Put my toe in the water in a very small way last year at $1.09...bought a few more last month @ $1.22. Average taking off the 2.95 cent divvy this week, they owe me net $1.15.33 incl brokerage on an ex divvy basis and just a very modest 2% portfolio position at this point.

Not sure what to do with these to be honest. The current plan is to attend the annual meeting and ask as many awkward questions as I can, size up senior management and the board and make an assessment of what I think of them and go from there.

[Waltzing]

1.15 for MR B is a fair defensive price but on the metric that MR B applies retail assets as opposed to a high performance share like HLG the div ratio might not be good enough.

As far other companies for retail assets this company surely has the best although PCT has a nice shiny new building.

It also hasnt attracted enough of a bid to move the needle.

Orders have been light since its heyday. Dont see it going much past 1.30 for a long time.

over the last 20 years its only spiked twice.

a much underrated stock which the insto's just dont want until its div hits over 5% net.

[RTM]

Put my toe in the water in a very small way last year at $1.09...bought a few more last month @ $1.22. Average taking off the 2.95 cent divvy this week, they owe me net $1.15.33 incl brokerage on an ex divvy basis and just a very modest 2% portfolio position at this point.

Not sure what to do with these to be honest. The current plan is to attend the annual meeting and ask as many awkward questions as I can, size up senior management and the board and make an assessment of what I think of them and go from there.

Have had some bonds that have been maturing recently. So have parked some into KPG for the time being. Can’t see them going a lot lower, dividend better than the Bond most of it came from so can live with some capital lost, especially if unrealised in the shorter term. Longer term outlook seems positive, perhaps > 5years. So happy to just hold and hopefully enjoy an ok dividend yield in the mean time.

Thanks all for the interesting/helpful discussion which has supported my decision, mostly. Wish it had taken place before I decided to buy !

[Beagle]

That's my laser focus at the annual meeting. What's their plan to get back to 6.95 cps in annual dividends that they were paying in 2019 before Covid ?
They were paying 7 cps in annual dividends 10 years ago and its an absolute disgrace they're talking about only 5.3 cps this year.
All very well to sell up the dogs in the provinces but management oversaw the decline of those assets, and have clearly made mistakes. Do they take ownership of those mistakes and take learnings from them ?
People invest in REIT's for income, why did the board can the dividend during Covid when cash earnings were okay and use the excuse that capital values had fallen as a reason to stop the dividend ?
They never pay a bumper dividend when capital values go up nicely so why is a capital value decline a reason to stop the dividend ?
What assurance can they give us that there are the necessary development disciplines are in place that the development of Drury will be eps accretive and not dilutive ?
Why bother developing anything when the share price is at such a discount to NTA. Why not have a share buy-back instead ?
Why should we trust management they have "got this" in terms of a major new development at Drury when they've made such a mess of managing their regional assets ?
The more I think about it the more I think turning $1.34 of assets five years ago, (which is my standard historical yardstick I use for analysis of all companies looking at the big picture, so its not a "convenient timeframe by any means) into just $1.36 now (down 9 cps in inflation adjusted terms) is an absolute disgrace.

If I don;t get satisfactory answers at the annual meeting...

Someone has to wind this lazy board up.

[X-men]

Simon property up 6% overnight...so hope the sentiment is coming here?

[Beagle]

Questions for the annual meeting.
1. What's their plan to get back to 6.95 cps in annual dividends that they were paying in 2019 before Covid ?
2. The company was paying 7 cps in annual dividends 10 years ago, how is it possible after all this time the board are only talking about 5.3 cps this year ?
3. All very well to sell up the dogs in the provinces but management oversaw the decline of those assets, and have clearly made mistakes. Do you take ownership of those mistakes and take learnings from them ?
4. People invest in REIT's for income, why did the board can the dividend during Covid when cash earnings were okay and use the excuse that capital values had fallen as a reason to stop the dividend ? They never pay a bumper dividend when capital values go up nicely so why is a capital value decline a reason to stop the dividend ?
5. What assurance can you give us that there are the necessary development disciplines are in place that the development of Drury will be eps accretive and not dilutive ?
6. Why bother developing anything when the share price is at such a discount to NTA ?. Why not have a share buy-back instead ?
7. Why should we trust management they have "got this" in terms of a major new development at Drury when you've made such a mess of managing your regional assets ?
8 NTA was $1.34 five years ago and is now just $1.36 (down 10 cps in general inflation adjusted terms and a whopping 62 cps if one uses the housing inflation index).
When other property companies have grown NTA by 50% what are you doing wrong and how are you going to fix it ?
9. Lots of focus on carbon negative this, diversity that, Aotearoa this and all sorts of other cultural and diversity politically correct stuff. I'm struggling to see any laser focus on ensuring the future plans grow eps ? Is there any focus on growing earnings per share ? Is this your top priority ?

They're never going to allow one shareholder to ask that many questions...that's simply not the way annual meetings are run.

Who wants to put their hand up to play "tag team" and grill the board ?

If I don't get satisfactory answers at the annual meeting...

[winner69]

Remuneration report always interesting reading

Beagle …..KPG can’t be doing too badly. The execs generally seem to get big bonuses (OK should call them at risk STIs and LTI) for achieving targets (inc TSR)

I not that only 3 directors have shares —- and not many at that.

[winner69]

Can’t help but notice regular NZX capital change notices ……relating to issue of performance rights

[Beagle]

Yes consistent growth abounds with this one in one area only, employee remuneration.

[Baa_Baa]

Questions for the annual meeting. [snip]

If I don't get satisfactory answers at the annual meeting...

Excellent questions, no greater fury than a shareholder scorned! Realistically though, you're not going to get answers to all those questions at an ASM, you might be lucky to get in a couple of questions at best. It might be better to send the questions to investor relations in advance and say if they answer these questions now then they will not be raised at the ASM?

[winner69]

This image just into Annual Report looks a bit weird/ scary (esp the guy on the phone) but I suppose it has some real meaning to those who understand KPG

Think its got something to do with WE BELIEVE THE MORE CONNECTED THE PLACE, THE MORE CONNECTED THE PEOPLE WITHIN IT

See, i read the Annual Report from front cover to the last page

[Beagle]

Excellent questions, no greater fury than a shareholder scorned! Realistically though, you're not going to get answers to all those questions at an ASM, you might be lucky to get in a couple of questions at best. It might be better to send the questions to investor relations in advance and say if they answer these questions now then they will not be raised at the ASM?

Thanks and I am inclined to agree so have done exactly what you suggested, copy below) I'll let you guys know what response, (if any), I get before the meeting.
To campbell.hodgetts@kp.co.nz

Hi Campbell,

I have some very awkward questions for the annual meeting.

Do you want to address some of them before then ?

1. What's your plan to get back to 6.95 cps in annual dividends that you were paying in 2019 before Covid ?

2. The company was paying 7 cps in annual dividends 10 years ago, how is it possible after all this time the board are only talking about 5.3 cps this year ? (Please note that in inflation adjusted terms 7 cps a decade ago is 8 cps in annual dividends now. Why are dividends going backwards so badly in real terms ?

3. All very well to sell up the under-performing regional assets the provinces but management oversaw the decline of those assets, and have clearly made mistakes as the values have plummeted so badly. Do you take ownership of those mistakes and take learnings from them ?

4. People invest in REIT's for income, why did the board cancel the dividend during Covid when cash earnings were reasonably okay and use the excuse that capital values had fallen as a reason to stop the dividend when you never pay a bumper dividend when capital values go up nicely so why is a capital value decline a reason to stop the dividend ?

5. What assurance can you give us that there are the necessary development disciplines are in place that the development of Drury will be eps accretive and not eps dilutive ?

6. Why bother developing anything when the share price is at such a discount to NTA ?. Why not have a share buy-back instead ?

7. Why should we trust management they have "got this" in terms of a major new development at Drury when you've made such a mess of managing your regional assets ?

8 NTA was $1.34 five years ago and is now just $1.36 (down 10 cps in general inflation adjusted terms and a whopping 62 cps if one uses the housing inflation index). When other property companies such as Argosy have grown NTA by 50% in the last five years what are you doing wrong and how are you going to fix it ?

9. Lots of focus on carbon negative this, diversity that, Aotearoa this and all sorts of other cultural and sustainability politically correct buzz words. I'm struggling to see any laser focus on ensuring the future plans grow eps ? Is there any focus on growing earnings per share ? Why is this not your top priority ?

Regards

[winner69]

Valuers seeing the light of day ….just imagine a record increase for KPG

From a PFI announcement -


PFI Chief Executive Officer, Simon Woodhams, notes: “More than a year on from the onset of the COVID-19 pandemic, industrial property has emerged as a resilient property sector. Investors, benefiting from continued low interest rates, are attracted to this resilience and market fundamentals, that include continued low levels of vacancy and projected rental growth. These factors have combined to result in the most significant increase in value PFI has ever recorded.”

[arekaywhy]

...

8 NTA was $1.34 five years ago and is now just $1.36 (down 10 cps in general inflation adjusted terms and a whopping 62 cps if one uses the housing inflation index).
When other property companies have grown NTA by 50% what are you doing wrong and how are you going to fix it ?
9. Lots of focus on carbon negative this, diversity that, Aotearoa this and all sorts of other cultural and diversity politically correct stuff. I'm struggling to see any laser focus on ensuring the future plans grow eps ? Is there any focus on growing earnings per share ? Is this your top priority ?

They're never going to allow one shareholder to ask that many questions...that's simply not the way annual meetings are run.

Who wants to put their hand up to play "tag team" and grill the board ?

If I don't get satisfactory answers at the annual meeting...

I like all of these questions and certainly have thought about them at one time or another, never at the same time...

I can't be at the meeting, however, as they say, "Smash 'em bro!"

[jimdog31]

Valuers seeing the light of day ….just imagine a record increase for KPG

From a PFI announcement -


PFI Chief Executive Officer, Simon Woodhams, notes: “More than a year on from the onset of the COVID-19 pandemic, industrial property has emerged as a resilient property sector. Investors, benefiting from continued low interest rates, are attracted to this resilience and market fundamentals, that include continued low levels of vacancy and projected rental growth. These factors have combined to result in the most significant increase in value PFI has ever recorded.”

thats what ive been saying winner.... id love to redo that graph from there presentation witht the dogs backed out of it...

[mike2020]

PFI is already close to 30% over NTA and paying close to half the current KGP dividend. Surely patience will be rewarded here.

[Rawz]

Best time to buy is when a company jettisons the dogs or writes down the value of them. The remaining core assets then carry on onwards and upwards.

Worked a treat for me buying into MHJ near the end of their store closure/rationalization program.

[fungus pudding]

PFI is already close to 30% over NTA and paying close to half the current KGP dividend. Surely patience will be rewarded here.

PFI about to announce biggest ever valuation gain - will lift NTA 50c per share.

[fungus pudding]

PFI is already close to 30% over NTA and paying close to half the current KGP dividend. Surely patience will be rewarded here.

PFI about to announce biggest ever valuation gain - will lift NTA 50c per share.

[dibble]

... note that in inflation adjusted terms 7 cps a decade ago is 8 cps in annual dividends now. Why are dividends going backwards so badly in real terms ?

4. People invest in REIT's for income, why did the board cancel the dividend during Covid when cash earnings were reasonably okay and use the excuse that capital values had fallen as a reason to stop the dividend when you never pay a bumper dividend when capital values go up nicely so why is a capital value decline a reason to stop the dividend ?


Cash retention back then was a fair action (regardless of what they said-I preferred solvency threat to a dividend) and I wouldnt want a bumper div merely due to revaluation increases as it isnt a cash gain altho what happened to the cancelled dividend cash remains a mystery. Maybe that's the current Exec bonus pool.

But taking the dividend history Q further - 7cps 10 years ago was when interest rates were much higher. Gearing is a little lower now (from memory) but that aside we know rents have trickled up over the decade on assets already bought/developed, whilst int rates trickled down, surely the "margin" now is larger than ever? Where/how is this increased margin being squandered?

[dibble]

... note that in inflation adjusted terms 7 cps a decade ago is 8 cps in annual dividends now. Why are dividends going backwards so badly in real terms ?

4. People invest in REIT's for income, why did the board cancel the dividend during Covid when cash earnings were reasonably okay and use the excuse that capital values had fallen as a reason to stop the dividend when you never pay a bumper dividend when capital values go up nicely so why is a capital value decline a reason to stop the dividend ?


Cash retention back then was a fair action (regardless of what they said-I preferred solvency threat to a dividend) and I wouldnt want a bumper div merely due to revaluation increases as it isnt a cash gain altho what happened to the cancelled dividend cash remains a mystery. Maybe that's the current Exec bonus pool.

But taking the dividend history Q further - 7cps 10 years ago was when interest rates were much higher. Gearing is a little lower now (from memory) but that aside we know rents have trickled up over the decade on assets already bought/developed, whilst int rates trickled down, surely the "margin" now is larger than ever? Where/how is this increased margin being squandered?

[SPC]

Conveying my appreciation to Beagle for his correspondence to KPG and look forward to some answers, and additionally the whereabouts of the withheld dividend...?

[Baa_Baa]

Conveying my appreciation to Beagle for his correspondence to KPG and look forward to some answers, and additionally the whereabouts of the withheld dividend...?

Ditto that. Maybe an invitation to the CEO to come onto ST and share their thoughts, just like a couple of other companies do, which always seems appreciated.

[LaserEyeKiwi]

I hope you get some answers to your probing questions Beagle, but I suspect you will only get a repeat of what was already laid out in the Annual report:


12644126451264612647

[LaserEyeKiwi]

Government infrastructure slush fund arrives with perfect timing for KPG’s Drury development looking like a prime candidate for nabbing a share:

https://www.interest.co.nz/property/110956/government-ringfences-1-billion-38-billion-housing-acceleration-fund-councils-iwi

[Beagle]

I hope you get some answers to your probing questions Beagle, but I suspect you will only get a repeat of what was already laid out in the Annual report:

I think you are right. Asking them to do a "mea cupla" and a full self diagnostic on past issues is a bridge too far. I will be left to make my own assessment of management and come up with my own strategy.

[winner69]

Where did the divie money go?

From Cash Flow Statement to Mar 21

Operating cash flow about the same as pcp (rents etc down 18m and tax paid down 15m with other things much the same)

Investment spend 80m less than pcp

FCF was negative 6m, not too bad as usually a lot more

They borrowed 39m and paid 53m less divies

Cynically one could say the divie money went to tenants (rent abatement) and meant they didn’t need to borrow as much

[Waltzing]

SP holding; orders building on the buy side at 116.5..

well off to work on the sculling as my nordic friends have warned me that summer regattas will be held next year on the baltic.. Testing some special high velocity looms specially lengthened at kilwell.. Buying NZ with aussi blades..will take them all back to europe to promote local products.

[Waltzing]

"Asking them to do a "mea cupla" and a full self diagnostic on past issues is a bridge too far. "

perhaps we can vote MR B to an independent director.

[winner69]

SP holding; orders building on the buy side at 116.5..

well off to work on the sculling as my nordic friends have warned me that summer regattas will be held next year on the baltic.. Testing some special high velocity looms specially lengthened at kilwell.. Buying NZ with aussi blades..will take them all back to europe to promote local products.

no point'building on the buy side' .... we want them to be buying at market and not just ordering

Over a million at 117.25 is more like it - that buyer was keen

[Waltzing]

even in its heyday i dont recall more that 400-600 on the buy side at a single price point but it would go 4 or 5 deep on both sides.

[winner69]

After deep research and analysis I’ve come to the conclusion that KPG are pretty useless property investors and the market sentiment in pricing them at such a deep discount to NTA says much the same

Analysis of the last five years cash flows highlights a few issues - the main one being that property revenue (rents) haven’t grown at all over the last 5 years.

Last years dividend not paid - my assessment they couldn’t afford it and if they had paid one they would have had to borrow to do so.

Whichever way I look at things it seems any sustainable dividend (let alone an increasing one) will require a lot of increased debt and even more capital raises (even allowing for sales). That is not a good position to be in.

I might be proved wrong over the course of time but I’ll back my own judgement and not get tempted to buy into this ‘growth story’ and the riches to be made from their new strategic direction.

[X-men]

It is a dog stock.... believe me....own it more than a year now....

[LaserEyeKiwi]

After deep research and analysis I’ve come to the conclusion that KPG are pretty useless property investors and the market sentiment in pricing them at such a deep discount to NTA says much the same

Analysis of the last five years cash flows highlights a few issues - the main one being that property revenue (rents) haven’t grown at all over the last 5 years.

Last years dividend not paid - my assessment they couldn’t afford it and if they had paid one they would have had to borrow to do so.

Whichever way I look at things it seems any sustainable dividend (let alone an increasing one) will require a lot of increased debt and even more capital raises (even allowing for sales). That is not a good position to be in.

I might be proved wrong over the course of time but I’ll back my own judgement and not get tempted to buy into this ‘growth story’ and the riches to be made from their new strategic direction.

what ]s your math on that? They will have $400 million cash by year end, low planned capex spend over the next 2 years, and dividend payments are under $100 million annually. I don’t see why dividends wouldn’t be easily sustainable going forward.

[Waltzing]

"It is a dog stock"

its a defensive stock if you study its 20 year chart.

Sell ASAP and move to a tech stock.

Buy some oil futures.

This stock will take some years to move back to 1.30.

Buy apple on the next big pull back the new APPLE design ARM chip kicks the apple software into high gear for some specific tasks ensuring the user base will stay with apple.

[Beagle]

I have completed my study of KPG and after taking a small 2% portfolio nursery stake (which was without doubt my least most researched investment decision in recent years), I have had a good look "under the hood" and come away very disappointed with what I have found.

It is cheap for some profoundly good reasons, many of which I outlined in my post yesterday but its also well worth noting that even adding back in Covid accommodations given to tenants last year that gross top line revenue has increased at only 1% per annum on average for the last 5 years and as that's clearly below the average rate of inflation.

In real terms over the last 5 years top line revenue is declining, earnings per share are declining. dividends per share are declining and NTA has declined in an extremely poor way relative to the all other listed property companies and quasi property companies (retirement companies), listed on the NZX and relative to any other form of property investment you care to name.

Its not just a recent problem either, dividends per share are dramatically lower than 10 years ago when accounting for inflation and NTA growth over the last decade has very badly under performed the market. Consider this. Summerset is now 10 times the price is was 10 years ago and KPG is unchanged, (declined in real inflation adjusted terms).

The only way this sort of woeful underperformance could occur is through very poor management. To me, its become clear that while they have some good assets, their management skills are far below average and I seriously doubt they have the skills to effectively execute their future development plans at Drury in a way that's eps accretive to shareholders.

I listened into the recent call and was unimpressed with their answers to questions. To me they lack a clear plan to grow eps and are whistling in the wind and hoping if they sweep their poorly managed regional asset problems under the carpet their new developments will be the panacea to solve their problems.

Its also clear to me KPG are on the front line of any further covid disruption and earnings could very, very easily be affected again.

Cheap for many compelling reasons. I sold out today for just a fraction over break even. (Sorry I won't be attending the annual meeting as I am no longer entitled to as I don't own any shares). Others might like to take them to task over the issues I raised yesterday, (which are so serious I cannot remain a shareholder no matter what their attempted explanations are). There are other far better opportunities on the NZX in my opinion.

Good luck to all holders.

[LaserEyeKiwi]

I have completed my study of KPG and after taking a small nursery stake (which was without doubt my least most researched investment decision in recent years) I have had a good look "under the hood"
It is cheap for some profoundly good reasons, many of which I outlined in my post yesterday but its also well worth noting that even adding back in Covid accommodations given to tenants last year that gross top line revenue has increased at only 1% per annum on average for the last 5 years and as that's clearly below the average rate of inflation prevailing, in real terms over the last 5 years top line revenue is declining, earnings per share are declining. dividends per share are declining and NTA has declined in an extremely poor way relative to the all other listed property companies and quasi property companies (retirement companies) listed on the NZX and relative to any other form of property investment you care to name.

The only way this sort of woeful underperformance could occur is through very poor management. To me, its become clear that while they have some good assets, their management skills are far below average and I seriously doubt they have the skills to effectively execute their future development plans at Drury in a way that's eps accretive to shareholders.

I listed into the recent call and was unimpressed with their answers to questions. To me they lack a clear plan to grow eps and are whistling in the wind and hoping if they sweep their poorly managed regional asset problems under the carpet their new developments will be the panacea to solve their problems.

Its also clear to me KPG are on the front line of any further covid disruption and earnings could very easily be affected again.

Cheap for many compelling reasons. I sold out today for just a fraction over break even. Good luck to holders.

thanks for your thoughts - will keep it in mind when evaluating future performance and whether I need to lighten up as well. At present I intend to stay in long term (5+ years) as they grow Drury and build to rent/office portfolios in Auckland, but I could conceivably bail if it’s apparent they are mismanaging further.

[Waltzing]

increase in GDP over the next2 years we are "HOPEIUM" to get back above our ave of 1.23 in 3 portfolios.

then its just a test for transaction reporting.

they probably feel they have no competition and therefore performance is a non issue at the board table.

The delta variant is a threat but australia and NZ are exposed for the next 6 months at least.

MR B is performance based and has no time for bad management. The assets are mint though the best of the best for NZ once the dud's are disposed of.

sometimes the tide floats all boats and thats what we are banking on.

[Rawz]

Thanks Beagle for your post and W69 for yours last night. Always makes you think a little harder when a couple of ST legends bail on a stock.

I'm happy to hold on for now. SP will bounce back into the mid-high $1.20s again at which point I might sell some.

One thing I will say is they have absolutely nailed Sylvia Park which was a reasonably sized project.. this gives some comfort that they can execute on drury. Mismanaged a couple of smaller regional malls yes but they will be gone soon.

[Waltzing]

"One thing I will say is they have absolutely nailed Sylvia Park which was a reasonably sized project.."

if GDP keeps going and agriculture has held up the economy well. High 20's is there in the chart and then its a trade for our transaction engines.

remember that even as a badly run company it hit 1.60 and above before the great pandemic.

1.69

stock usually return to there previous highs.

lets see what they do with their next developments before making any decisions.

[RTM]

Cheap for many compelling reasons. I sold out today for just a fraction over break even. (Sorry I won't be attending the annual meeting as I am no longer entitled to as I don't own any shares). Others might like to take them to task over the issues I raised yesterday, (which are so serious I cannot remain a shareholder no matter what their attempted explanations are). There are other far better opportunities on the NZX in my opinion.

Good luck to all holders.

Thanks for sharing the outcome of your analysis Beagle; I am going to continue to hold.
1.25% of portfolio; so not going to break the bank either way.
Have made a diary note to come back to your post in 12 and 18 months and see how we are going.

[Biscuit]

Questions for the annual meeting.

3. All very well to sell up the dogs in the provinces but management oversaw the decline of those assets, and have clearly made mistakes. Do you take ownership of those mistakes and take learnings from them ?
......


To a large extent though, property investment is about long term strategic decisions. You buy the right property in the right place and catch the wave. Make the wrong decision and you don't catch the wave. Isn't that what has happened here? And isn't the fact they are refocusing their portfolio evidence that they recognize the mistakes and are acting on those learnings? The company isn't trading on a premium to NTA so there is potentially value there. Isn't the question really: are they making the right strategic choices?

[Beagle]

Thanks for sharing the outcome of your analysis Beagle; I am going to continue to hold.
1.25% of portfolio; so not going to break the bank either way.
Have made a diary note to come back to your post in 12 and 18 months and see how we are going.
You're welcome. I thought about halving my stake to 1% but decided it wasn't worth my time when the conviction wasn't there. My assessment is it might do okay in the short term, (close the gap to NTA by a modest amount), but long term...

Where to reallocate the funds is the next question burning away in my mind.

[Beagle]

............

[oldtech]

In my humble opinion, you could do worse than look at the competition (ARG) currently.

[Biscuit]

...
Where to reallocate the funds is the next question burning away in my mind.

ATM perhaps?

[RTM]

Where to reallocate the funds is the next question burning away in my mind.

Yes......that is a burning question for us all....especially with the market so high overall.
I am telling myself to be patient. But its hard sitting on ones hands when watching for something to but for a few weeks.
That's how I ended up with a taster of KPG !

[Waltzing]

"(ARG) "

yes it was a great defensive stock back in MAY last year....that was the time to load.

now KPG is the range bound trade for years to come... 1.10 to 1.60

trading and investing is a 20 year horizon.

If your sitting on cash take time to get those company accounts out and study what the companies have planned for the next 5 to 10 years.

You have the whole winter to do this.

Look at the Aussi market and hope they have a big lock down and some prices get hit.

NZ could also have a big lock down and you get a quick one day price opportunity..

You will have to wait longer for a big one or just dont sell that wonder stock like SKL.... sadly we sold ... its often the ones you sell that you thought were a good defence buy that surprise you if you wait.

[mike2020]

I have heard all this negativity about many different stocks here over the years, OCA and SUM spring to mind. I do value the opinions I find here but sometimes it pays to stick with your convictions and maybe you have a different game plan and time frame to others.