KPG - Kiwi Property Group Limited

[LaserEyeKiwi]

https://www.nzx.com/announcements/386382


Kiwi Property today reported the December 2021 sales for its mixed-use shopping centres, announcing a 9.6% increase on the prior comparable period [Note 1].

‘Mini-majors’ [Note 2] delivered a particularly strong increase in total sales, recording a 35.1% year-on-year uplift, led by recently opened retailers such JD Sports and Culture Kings. Sales across the ‘majors’ category were also up 6.1% in December, underpinned by supermarkets and the ongoing recovery of cinemas.

Sylvia Park was Kiwi Property’s top performing asset in December, achieving sales growth of 11.7%, with the centre’s level one expansion and new athleisure precinct helping drive a 47.7% increase in ‘mini-major’ sales. Kiwi Property’s other key mixed-use shopping centres, LynnMall and Te Awa The Base, also recorded robust sales growth of 7.3% and 4.5% respectively in the final month of 2021.

Linda Trainer, Kiwi Property GM Asset Management said: “Lockdowns had a significant impact on New Zealand’s retail sector in 2021, so it’s pleasing that many of our tenants ended the year on a high-note. The overall growth in sales across our mixed-use shopping centres during December is an encouraging sign heading into 2022, despite the presence of COVID-19.”
ENDS

Notes
1. Sales information is based on data obtained from third parties or estimated by Kiwi Property where this data is unavailable. Sales information has not been independently verified. Mixed-use shopping centres comprise Sylvia Park, LynnMall, Te Awa (The Base) excluding large format retail. Northlands, The Plaza and Centre Place are excluded for consistency with Kiwi Property’s FY21 annual and FY22 interim reporting treatment.

2. Mini majors include stores over 400 square metres in size, excluding anchor tenants, such as supermarkets, department stores and cinemas, which fall under the majors category.

[Habits]

Flip... this would normally be news that moves the market higher. Oh well there is always tomorrow :D

[Waltzing]

eye watering stuff and the share price has been slammed...well it wasnt hamilton central doing the heavy lifting. Although HAMTRON's appeared to be staying home in their HUTS as the expressway was empty yesterday afternoon to auckland. Even got out of auckland with light traffic at 5.30 PM. Never experienced that before. Central North island appears to be work from home. Expect retail to take a hit next 6 months right? Or will it?

Really interesting report LEK and is this a buy opportunity for retail stocks. The next 6 month most interesting period of trading; december through to mid year.

[LaserEyeKiwi]

Been a fairly narrow trading channel for the better part of the last year, not expecting any big movement upwards while Omicron outbreak proceeds over next few months. In fact I anticipate the discount to NTA will likely widen once they report their annual valuation update in March/April, and the likely sale of Northlands Mall at any moment. Which means steady accumulation still on the cards for those with a long term view.

With the mall sales reducing the debt load even more (gearing sub-30%), I do wonder how big a discount to NTA this company can get before the private equity vultures start circling…?

NTA is currently $1.42 per share (share price at a ~20% discount)

13445

[winner69]

Scale helps your view

Another view (yahoo) shows last 12 months KPG been in in a downtrend (lower highs and lower lows)

Down 10.57% (so say NZX today) in those 12 months - 5 Year Govt going from 0.4% to 2.4% might have had something to do it.

Share price on a roll today -- that's good

[LaserEyeKiwi]

Scale helps your view

Another view (yahoo) shows last 12 months KPG been in in a downtrend (lower highs and lower lows)

Down 10.57% (so say NZX today) in those 12 months - 5 Year Govt going from 0.4% to 2.4% might have had something to do it.

Share price on a roll today -- that's good

Sorry yes - should have stressed “the better part of a year” - was referring to the channel below 1.20, although breaking down to 1.12 the other day was indeed a new 12-month low, but only by a cent. Stock has basically only moved in this 1.12-1.20 range since before the delta outbreak started.

[Habits]

Flip... this would normally be news that moves the market higher. Oh well there is always tomorrow :D

"Tomorrow" did indeed prove itself with a very deserved 1.8 percent lift in shareprice today. Still well behind the 8 ball for gains, maybe tomorrow will have more luck.

[Habits]

Is this the KPG drury landholding... it certainly has the hallmarks. They are offering 1200sqm THAB land for $2m (plus gst) roughly of which there are 92 parcels (approx 11 hectares of 56 total) that size and larger making over $180m. Which is just the start of what is there. Remember roads take a big chunk of land and the earthworks and infrastructure costs are huge

https://www.trademe.co.nz/property/residential/sections-for-sale/auction-3449621614.htm

The Waipupuke sub-division is a new greenfields 56 ha development in Drury West. The sub-division has only two residential zones - Townhouse & Apartment Buildings (THAB) and Mixed Housing Urban (MHU).

The sub-division is located in Drury West between SH22 (Karaka Rd), Oira Rd and Jesmond Rd. It is included in Stage 1 of the Council approved Drury-Opaheke Structure Plan Area. It is approximately 1.5 kms from the Drury SH1 interchange.

The site is blessed with a ridgeline and easy contours with views of the Hunua Ranges and Manukau Harbour waterways (will depend on the height of buildings).

The sub-division master plan will create:
• 386 MHU lots with minimum lot size of 300sqm
• 92 THAB lots with minimum lot size of 1200 sqm
• 6 parks - one of which is a 3 ha park and 5 neighbourhood parks
• 2 childcare centers
• A neighbourhood center
• A commercial/retail/service center
• 6 Stormwater parks

[LaserEyeKiwi]

Is this the KPG drury landholding... it certainly has the hallmarks. They are offering 1200sqm THAB land for $2m (plus gst) roughly of which there are 92 parcels (approx 11 hectares of 56 total) that size and larger making over $180m. Which is just the start of what is there. Remember roads take a big chunk of land and the earthworks and infrastructure costs are huge

https://www.trademe.co.nz/property/residential/sections-for-sale/auction-3449621614.htm

The Waipupuke sub-division is a new greenfields 56 ha development in Drury West. The sub-division has only two residential zones - Townhouse & Apartment Buildings (THAB) and Mixed Housing Urban (MHU).

The sub-division is located in Drury West between SH22 (Karaka Rd), Oira Rd and Jesmond Rd. It is included in Stage 1 of the Council approved Drury-Opaheke Structure Plan Area. It is approximately 1.5 kms from the Drury SH1 interchange.

The site is blessed with a ridgeline and easy contours with views of the Hunua Ranges and Manukau Harbour waterways (will depend on the height of buildings).

The sub-division master plan will create:
• 386 MHU lots with minimum lot size of 300sqm
• 92 THAB lots with minimum lot size of 1200 sqm
• 6 parks - one of which is a 3 ha park and 5 neighbourhood parks
• 2 childcare centers
• A neighbourhood center
• A commercial/retail/service center
• 6 Stormwater parks

Drury is large project with multiple partners - KPG part is the 51ha town center, while others are handling the residential subdivisions.

13462

[Habits]

Yes not one and the same is it. Perhaps the TM listing gives some idea as to potential and near term value of KPG property.

[LaserEyeKiwi]

Yes not one and the same is it. Perhaps the TM listing gives some idea as to potential and near term value of KPG property.

I think that trade me listing is describing the Drury development as a whole, yes.

[Waltzing]

Plenty of shoppers out and about at centre place this afternoon..stocking up?

[Habits]

Commercial rental rates will be on the up soon I believe, next 6 to 12 months. Available leases are down. Yes, longterm interest rates up and businesses also under huge pressure from covid. But the number of leases available on trademe has dropped "bigly" across the country. Over 12 months auckland 11 percent, Hamilton 25, chch 39 and tauranga 29 percent. Less supply

[LaserEyeKiwi]

Commercial rental rates will be on the up soon I believe, next 6 to 12 months. Available leases are down. Yes, longterm interest rates up and businesses also under huge pressure from covid. But the number of leases available on trademe has dropped "bigly" across the country. Over 12 months auckland 11 percent, Hamilton 25, chch 39 and tauranga 29 percent. Less supply

When a company has a low gearing ratio (like KPG does) - inflation can be a good thing as rental income increases faster than its internet costs.

[fungus pudding]

When a company has a low gearing ratio (like KPG does) - inflation can be a good thing as rental income increases faster than its internet costs.

What on earth does that mean?

[LaserEyeKiwi]

What on earth does that mean?

It’s rental income increases faster than its debt interest payments do.

[Muse]

When a company has a low gearing ratio (like KPG does) - inflation can be a good thing as rental income increases faster than its internet costs.

Internet costs - the bain of LPT’s everywhere!

[777]

What on earth does that mean?

Perhaps his laser eye is playing up.

[fungus pudding]

Perhaps his laser eye is playing up.

I think it's fallen out!

[Habits]

Grarme Hart been spending large buying 9 resi properties in Mt Wgtn since late 2021 and paying premium prices. Sylvia Park and IKEA are seen as likely reasons. The suburb has it's own hub, not considered a long way out and the housing accord to free up development away from the RMA. Interesting

[Waltzing]

--------*-------*--<>--???----->-



$250m goods storage warehouses going up at Drury South Crossing sites - NZ Herald (https://www.nzherald.co.nz/business/250m-goods-storage-warehouses-going-up-at-drury-south-crossing-sites/3G5EBFHFVV6UO2STILAA7Z4TJQ/)

[fungus pudding]

Drury Progressing along?

$250m goods storage warehouses going up at Drury South Crossing sites - NZ Herald (https://www.nzherald.co.nz/business/250m-goods-storage-warehouses-going-up-at-drury-south-crossing-sites/3G5EBFHFVV6UO2STILAA7Z4TJQ/)

Gee. Brilliant! What does it say?

[Waltzing]

KPG

NZPortfolio->OS->,BUY || SELL

at this price MR B probably still doesnt want to touch it no matter how many new buildings go UP in greater Drury by developers ----->

Investing should always look at the wider picture.. The more the better in a geographic location.

Its simple, shouldnt need many words really, dödprat.

Got to add value surely.

113... very sad looking SP.

[Habits]

Gee. Brilliant! What does it say?

Refers to a 9.8 hectare prpty where a logistics hub is being developed and two builds commenced late last year. More builds later. Am Not 100 perc however I think this site is across the motorway and well away from KPGs new town centre and suburb

[Habits]

KPG

NZPortfolio->OS->,BUY || SELL

at this price MR B probably still doesnt want to touch it no matter how many new buildings go UP in greater Drury by developers ----->

Investing should always look at the wider picture.. The more the better in a geographic location.

Its simple, shouldnt need many words really, dödprat.

Got to add value surely.

113... very sad looking SP.

Kpg share price is behaving like a cat stalking its prey. The cat camouflages and crouches. It moves slowly before ripping out an explosive run, faster than bird in flight. Let's go!

[mike2020]

Looking at the graph I'd say less stalking cat and more comatose patient on long term life support in need of the paddles. i.e. send Mr B to a shareholder meeting.

[Waltzing]

"cat stalking its prey"

W.J. O Neil's Famous charts..the longer the extended base line the higher and steeper the chart... only with KIP the base line can last a long time..

US 10 YR hits 2.02.. interesting to see if the local market reacts and all COMP Props take a hit today.

[winner69]

KPG share price hit 111 yesterday and closed at 111.5 ..... 52 week low

The downtrend still in place

If you don't count the covid panic March20/Sep20 time a multi year low .... could say a 10 year low

[Waltzing]

at 1.0 it be very under valued .

But they might take the assets ratio and buy more land and build out farther as auckland moves north and south across much needed horticultural land.

Next YTD financials over the next 2 years will be worth studying.

[Habits]

KPG share price hit 111 yesterday and closed at 111.5 ..... 52 week low

The downtrend still in place

If you don't count the covid panic March20/Sep20 time a multi year low .... could say a 10 year low

Covid times should include august to nov last year as well. Click and collect did not work that well in some cases

[winner69]

Must have been worried about the share price trending down at a rate of knots

https://www.nzx.com/announcements/387600

Suppose 4.77% yield not too bad …..still risky?

[LaserEyeKiwi]

Must have been worried about the share price trending down at a rate of knots

https://www.nzx.com/announcements/387600

Suppose 4.77% yield not too bad …..still risky?

“Tax paid dividend yield of 4.77%” :t_up:

Dont see much risk - the percentage of KPG revenue coming from speciality retailers that might be negotiating any rent abatements is fairly tiny. Also there is their annual asset revaluation coming shortly to look forward too (normally announced in late March/Early April).

[RTM]

Must have been worried about the share price trending down at a rate of knots

https://www.nzx.com/announcements/387600

Suppose 4.77% yield not too bad …..still risky?

Out of curiosity Winner, why would they be worried about the share price ?
There’s really only one way to fix that, and that’s with decent results over a sustained period.
And Beagle has told us repeatedly that they have struggled to provide those.
Disc: small holding. ( and getting smaller )

[Waltzing]

have to see how those new development pan out to access risk. Housing in a downward trend due to credit being withdrawn and cost of capital being removed in some categories of income.

The GVT policy in this area seems to have got its effect.

Risk yes is still here in this stock still in the 1.0 to 1.25 range for a while.

[Beagle]

These guys are "brilliant". 5 years ago in 2017 annual dividends were 6.85 cps. In 2007, (15 years ago), annual dividends were 9.6 cps (13 cents per share in 2022 inflation adjusted terms). What a marvelous way to "grow" your income over time.

Almost goes without saying that the only thing that has grown really strongly over all that time is management's salaries.

Sorry, couldn't help myself express my contempt again for this wealth and value destruction machine.

As you were, just as well it will be different going forward ;)

[Waltzing]

really should go back and re read but far too busy..

someone should to the AGM and turn the heat up....

got the best retail property in NZ and its "Show us the MONEY!"

its a "Jerry MG" moment for sure....

https://www.youtube.com/watch?v=mBS0OWGUidc

[LaserEyeKiwi]

really should go back and re read but far too busy..

someone should to the AGM and turn the heat up....

got the best retail property in NZ and its "Show us the MONEY!"

its a "Jerry MG" moment for sure....

https://www.youtube.com/watch?v=mBS0OWGUidc

They are already yielding the best dividend out of all the NZX listed property companies with a fully imputed ~5%, how much more money do they need to show? ;)

[winner69]

Out of curiosity Winner, why would they be worried about the share price ?
There’s really only one way to fix that, and that’s with decent results over a sustained period.
And Beagle has told us repeatedly that they have struggled to provide those.
Disc: small holding. ( and getting smaller )

They mentioned shareholders today ….. Kiwi Property Chief Executive Officer, Clive Mackenzie, said today’s announcement would offer the company’s shareholders certainty, amidst a volatile macro-economic climate.

See. …they worried about them seeing their capital diminish at a faster rate than dividends trying to keep up.

[Bjauck]

They are already yielding the best dividend out of all the NZX listed property companies with a fully imputed ~5%, how much more money do they need to show? ;) It does seem as though they are trying to find a finger for the dike in an attempt to stop a leaking share price. They may run out of fingers?

[Waltzing]

yep after 20 years its still stuck with an ever increasing asset base and a lower yield.

Relative to other yields is not the point on this one as MR B keep pointing out.

MR B is coming from a Balance Sheet perspective and it COUNTS!

[Beagle]

really should go back and re read but far too busy..

someone should to the AGM and turn the heat up....

got the best retail property in NZ and its "Show us the MONEY!"

its a "Jerry MG" moment for sure....

https://www.youtube.com/watch?v=mBS0OWGUidc

I think its crystal clear there is no plan to grow dividends. Management's plan seems to be focused entirely on growing their asset base to justify ever increasing salaries, bonus's and "performance fees"

Note the subtle nuance change in tone here...this is what they said last year

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

Now, despite not concluding a sale of the Plaza and Northlands, (said in the call to be eps accretive if they were held) the dividend guidance is for 5.3 cps, (not above that figure).

I guess we could be charitable and say in the circumstances given the long lockdown in Auckland in late 2021 and the current Omricon mess that at least the dividend didn't go down yet again but being chaitable to management of KPG does not come easily to this dog considering in real inflation adjusted terms dividends were 13 cps 15 years ago !

I like this bit from their announcement last year

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.

The only stakeholder they seem to be focused on creating value for is management and staff lol

[Waltzing]

Its a company that has been captured by some slick wide shoulder padded sales man....

"Liar's Poker"

its a rerun ...

at some point the insto's must apply the heat...

[LaserEyeKiwi]

Shrugging my shoulders here - I continue adding for the 5% yield, the big discount to NTA, and the gigantic value still to be unlocked at Drury which is not at all accounted for yet on the books.

Too each their own, I don’t mind accumulating as much as I can before the asset value is realized, whenever that may be.

[Waltzing]

I agree with you LEK that the actual asset base is FAB...cant argue with that and the LAT:LONG is perfect.

next profit and loss statement and balance sheet is where the action is.

ever hoping they will unlock the value.

[Beagle]

Shrugging my shoulders here - I continue adding for the 5% yield, the big discount to NTA, and the gigantic value still to be unlocked at Drury which is not at all accounted for yet on the books.

Too each their own, I don’t mind accumulating as much as I can before the asset value is realized, whenever that may be.

Discounts to NTA are not uncommon now. Good examples are Investore Property Ltd also trading at a 20% discount to NTA and the well respected and regarded Argosy Property with their excellent track record of growing NTA and dividends over many years now trading at a 15% discount to NTA.

With higher interest rates and headed higher still future rental capitalization rates the valuers use will rise and with it the NTA will fall and the market is merely reflecting future expectations of REIT's coming out in the future with portfolio devaluations (as compared to revaluations previously). This process could easily go on for several years as we see a sustained rise in interest rates over time. For this reason I think the whole REIT sector is vulnerable.

A little while back KPG stood out as the only REIT with a discount to NTA, now if anything, considering managements systemic failure to add any value over many years I would argue their discount to NTA should be even higher.

I rate the whole REIT sector as underperform and KPG the worst possible choice in the sector. If the yield gets above 6% net, (currently 4.82%) it might be worth a short term trade. I'll save you the maths, that's 88 cents assuming KPG don't drop the dividend again next year, which is not necessarily a safe assumption.

[LaserEyeKiwi]

Discounts to NTA are not uncommon now. Good examples are Investore Property Ltd also trading at a 20% discount to NTA and the well respected and regarded Argosy Property with their excellent track record of growing NTA and dividends over many years now trading at a 15% discount to NTA.

With higher interest rates and headed higher still future rental capitalization rates the valuers use will rise and with it the NTA will fall and the market is merely reflecting future expectations of REIT's coming out in the future with portfolio devaluations (as compared to revaluations previously). This process could easily go on for several years as we see a sustained rise in interest rates over time. For this reason I think the whole REIT sector is vulnerable.

A little while back KPG stood out as the only REIT with a discount to NTA, now if anything, considering managements systemic failure to add any value over many years I would argue their discount to NTA should be even higher.

I rate the whole REIT sector as underperform and KPG the worst possible choice in the sector. If the yield gets above 6% net, (currently 4.82%) it might be worth a short term trade. I'll save you the maths, that's 88 cents assuming KPG don't drop the dividend again next year, which is not necessarily a safe assumption.

Property for Industry just this morning reported a 22.2% increase in its property value from revaluation. not sure there is any sign of NTA decreases in the near term horizon if that's any guide. Plus there is also the impact of massive increase in land valuations over the last year to contend with.

We will see KPGs latest revaluation announced in the next 3-5 weeks, so hopefully that will provide a good guide for its existing developed properties (doesn't account for its future projects on undeveloped land assets of course).

[Beagle]

Property for Industry just this morning reported a 22.2% increase in its property value from revaluation. not sure there is any sign of NTA decreases in the near term horizon if that's any guide. Plus there is also the impact of massive increase in land valuations over the last year to contend with.

Industrial property is still in great demand because its a growth industry in massive demand and supply constrained. Cap rates on industrial property are at 100 year lows, I see their portfolio at just 4.4%. I am confident that will be the last revaluation PFI investors will see. This is also reflected in the share price being below the new NTA of $3.03 despite PFI's excellent track record. I put it to you that the market is often far more forward looking than either you or I give it credit for. 90% of that gain in NTA was due to a huge move down in capitalization rates...obviously that ~ 80 cent gain in NTA resulting is reversible when cap rates firm up again. Its probably also worth noting that those cap rates were as per valuation in December 2021. A lot has happened in the market since then including inflation numbers here and overseas that were shocking and higher interest rates.

In terms of capital preservation...I believe for the foreseeable future investors in all REIT's are skating on very thin ice.

[winner69]

lost nearly 20% of that dividend today ...... at least the yield is now 4.82% ....if one os lucky it could be 4.86% later in week and if one is really luck 5.00% next week (share price 105)

[Waltzing]

ARG - hoping for a drop to the 125 - 130...

inflation doesnt last forever there will be an up cycle in next 5 years..

[winner69]

This was interesting from the PFI presentation

Online sales in New Zealand expected to grow from the current 11% to 17% (or $9.3Bn) by 2025

− Based on this growth in online sales alone, it is estimated an additional 230,000 sqm of warehouse space will be needed by 2025
- PFI’s portfolio set to benefit from this thematic, through strong forecast rental growth and continued low levels of vacancy

Seems a better proposition than having retail space (not going to grow?) and building rentals

[Waltzing]

GMT has been a fab trade and will be going forward.

[Beagle]

This was interesting from the PFI presentation

Online sales in New Zealand expected to grow from the current 11% to 17% (or $9.3Bn) by 2025

− Based on this growth in online sales alone, it is estimated an additional 230,000 sqm of warehouse space will be needed by 2025
- PFI’s portfolio set to benefit from this thematic, through strong forecast rental growth and continued low levels of vacancy

Seems a better proposition than having retail space (not going to grow?) and building rentals

Absolutely. I think its crystal clear we have been oversupplied with retail space for some time which is why rental growth with retail has been so pitiful.

[Waltzing]

ARG might move into GMT direction but where does it get the land from?

[LaserEyeKiwi]

Kiwi sitting at exactly average -7.1% year to date performance for the 8 listed property equities on the NZX:

13551

[winner69]

Kiwi sitting at exactly average -7.1% year to date performance for the 8 listed property equities on the NZX:

13551

Property been a dismal investment (even counting dividends) since interest rates started increasing

Correlation with 10 year govt stock suggests another 15% downside

[Waltzing]

winner notice the SP handles for commercial props in 2007.

the 10s are moving a bit yes.

[winner69]

Top notch appointment by KPG - this Joanna seems to be ideal, esp as " ..her expertise at the intersection of HR and transformation will be invaluable as Kiwi Property continues its evolution into a creator of world-class mixed-use communities.”

Got to love the spin from Kiwi trying to seduce even more investors into the fold

[Waltzing]

only thing going to move this SP is earnings and that is yet to appear.

Tractor supply stocks are up in the US...

Buy Agri stocks... next 5 years is commodities..

[LaserEyeKiwi]

only thing going to move this SP is earnings and that is yet to appear.

Tractor supply stocks are up in the US...

Buy Agri stocks... next 5 years is commodities..

KPG has at least one major transaction that is due to close (sale of large Mall properties in Christchurch & Palmerston North), which could be market moving when announced. However that has been in final stages for months so who knows when that will finally happen.

Also, if Stagflation is actually on its way, Real estate trusts are historically a good performing asset class in that environment:


For example, Schroders crunched data and found that the top performers during periods of stagflation have been gold (+22.1 per cent), commodities (+15.0 per cent) and real estate investment trusts (REITs) (+6.5 per cent)

Edit to add: Also if we end up with just good old regular high inflation instead of stagflation, then that is also usually a good environment to own Real Estate Trusts, especially those with low gearing ratios.

[Beagle]

Top notch appointment by KPG - this Joanna seems to be ideal, esp as " ..her expertise at the intersection of HR and transformation will be invaluable as Kiwi Property continues its evolution into a creator of world-class mixed-use communities.”

Got to love the spin from Kiwi trying to seduce even more investors into the fold

I think this sums up the culture problem at KPG. They see their role as creating wonderful environments for mixed-use communities, in other words community users are the key stakeholder they are serving. They lost their focus on serving shareholders, (who should have always been their primary focus), with trying to grow eps a long long time ago.
If the focus was always on what's going to be an eps accretive growth opportunity for shareholders we would have seen vastly different long term outcomes for them. The one analyst call I tuned into last year gave me the clear impression that eps growth is a subject that's not even on their radar.

[winner69]

KPG got all excited a few weeks ago to 'confirm' dividend guidance of 5.3% and proudly said 4.77% yield

Rate share price is going that'll all be gone in a few days time and one needs to get back into that hoping game - hoping like hell that the share price will be back to $1.11 by years end to 'confirm' total return was actually 4.77%

But then if we go back to June/July last year share price down heaps more than likely dividend

Maybe 2023 will be better

[LaserEyeKiwi]

KPG got all excited a few weeks ago to 'confirm' dividend guidance of 5.3% and proudly said 4.77% yield

Rate share price is going that'll all be gone in a few days time and one needs to get back into that hoping game - hoping like hell that the share price will be back to $1.11 by years end to 'confirm' total return was actually 4.77%

But then if we go back to June/July last year share price down heaps more than likely dividend

Maybe 2023 will be better

Depends on your investing style / strategy. My KPG holding is in my Kiwisaver so I am in the “multi-decades” mindset with this one before I can access any funds from it. With that in mind, as long as the company keeps spitting out a healthy cashflow & dividend while increasing its asset base, then I want the share price as low as possible to maximize dividend reinvestments and my contributions.

Of course I would rather that lower share price come from market undervaluation rather than from mediocre performance like Beagle predicts going forward!

I think there is an immense amount of value locked up in the Drury project (CBD type property bought for rural land prices) - but that won’t be unleashed in the form of rental returns for a few more years yet. I think if they manage to cock up that easy lay up (to borrow a basketball term) and the big asset diversification effort to Build-to-rent apartments has issues, then I would definitely re-evaluate my long term holding position.

[Waltzing]

"Real estate trusts are historically a good performing asset class in that environment"

gosh ... well since travel back to europe is off the cards for the year dusting off some old High Voltage surf boards ... left in storage .

after whatching riders at the mount last night the shapes are still all the rage..

better dust off some historical data on the last stagflation period LEK!

[SPC]

Agreed. It's a long term hold. If you don't need the money for the next ten years then why waste time postulating. Land will always find a use. It's not a trading stock.
Bottom draw stuff. Especially at current prices. Nothing to sniff here..

[Waltzing]

Mr B might remember this company back pre 2005 , how long term are we talking here.

There is long term and then there is generations... it nearly back to 2003 price high... 20 years!!!

[Beagle]

Mr B might remember this company back pre 2005 , how long term are we talking here.

There is long term and then there is generations... it nearly back to 2003 price high... 20 years!!!

No mate we have to go back to 1994 when on 31 March in that year it was $1.18 and here we are 28 years later its worth less !...wow that's really quite an "accomplishment" Factor in inflation over that period and the share price has halved in real terms :eek2:
Just as well it will be different going forward ;)

[Habits]

Just as well it will be different going forward ;)

I am sure you are right... it's like if someone overpays for a property, it is not a waste if the future is bright. Which I think is the case with KPG. The value today is much less important than the value tomorrow. Imagine paying a vendors inflated price and seeing the value at twice the asking.

[Waltzing]

" it nearly back to 2003 price high"

2003 is the closest could find AFTER 2000 to the current price......

pre that mean previous DECADE!!

1994 , oh dear .... did not look pre 2000...

current management must be the slickest real estate agents.

[winner69]

Morningstar only goes back to 2015

A $1,000 invested then would be $1,124 today including dividends ..... return of 1.8% pa over 6.5 years

Not to bad I suppose

[Beagle]

I am sure you are right... it's like if someone overpays for a property, it is not a waste if the future is bright. Which I think is the case with KPG. The value today is much less important than the value tomorrow. Imagine paying a vendors inflated price and seeing the value at twice the asking.

"Only" have to wait another 28 years to see if it halves in value again...think about it...why would the trend change when its already perfectly clear their business model destroys shareholder value over time.

[Recaster]

Seems to have good cash flow and profits but relies on unrealised property revaluations for increasing shareholder wealth as all the property companies do.

https://recastinvestor.substack.com/p/basic-analysis-kiwi-property-group

[Waltzing]

Slickest management ever ..

next 5 years should be very interesting

lets hope their competition keeps them honest.

would be very interesting to see inside there ledgers in relation to current assets / current liabilities.

and what happens to the sell down of current assets funds realised from assets sales.

Notes: 3.4.1

"The bank loans are provided by ANZ Bank New Zealand, Bank of New Zealand, China Construction Bank Corporation (New Zealand Branch), Commonwealth Bank of Australia, The Hongkong and Shanghai Banking Corporation (HSBC) and Westpac New Zealand (unchanged from 31 March 2020)"

Notice the retained earnings.

ARG also having a large retained earnings account.

[Habits]

"Only" have to wait another 28 years to see if it halves in value again...think about it...why would the trend change when its already perfectly clear their business model destroys shareholder value over time.

True the previous performance is not stellar... That is water under the bridge and largely irrelevant. It is all about how they manage what they have from now on and I think they have a few things starting to shape up. Well I have only held KPG shares for 2 and half year... bought pre-covid, lost money, received windfall cash, bought a bunch more in the lows so am ahead now. That would have been the case with most stocks and with better gains than kpg since covid lows. Their upcoming FY report will be an interesting one having sold a block of land and having progressed their projects. Considering they have a huge element of retail which mainly they refer to as mixed use, they have handled the pandemic well I believe.

[ados_nz]

I wonder what discount to NTA is needed before other players see KPG as a takeover opportunity?

[Snoopy]

I wonder what discount to NTA is needed before other players see KPG as a takeover opportunity?

With rising interest rates, come consequently increased discount rates that are used to value future cashflows. With Increasing construction costs for the Sylvia Park accommodation towers and the greenfield Drury townscape, the easiest way to close the difference between the share price and declared net asset backing looks to be devaluing the 'on the books' assets.

SNOOPY

[Waltzing]

yeah comp props were a sale back when and it was shocking the pace of change.

interesting to look back at 2007 though and the spike in SP's in the sector.

some of these stocks carrying retain earnings that will be adjusted with any devaluations.

[Snoopy]

yeah comp props were a sale back when and it was shocking the pace of change.

interesting to look back at 2007 though and the spike in SP's in the sector.

some of these stocks carrying retain earnings that will be adjusted with any devaluations.


Yes, I don't think any of the big property players will be 'financially destabalised' by any upcoming property devaluations. There is plenty of 'revaluation fat' that has been accumulated on the upside to cushion any devaluations (as the Waltzingironman has reminded us). I thought Recaster made a good point that none of these property companies carry 'revaluation reserves' on the books. No doubt accounting standards do not require it. But it would, in my view, be a more honest representation of where the comfortable capital position of these companies has come from if 'revaluation reserves' were separately ring fenced. Are Recaster and I alone in these thoughts?

On the positive side of asset values for shareholders, I would think the increase in building construction costs might put a brake on the amount on any devaluations. But being relatively 'new' to the commercial property market, I am not 100% sure that it works like that!

SNOOPY

[LaserEyeKiwi]

Yes, I don't think any of the big property players will be 'financially destabalised' by any upcoming property devaluations. There is plenty of 'revaluation fat' that has been accumulated on the upside to cushion any devaluations (as the Waltzingironman has reminded us). I thought Recaster made a good point that none of these property companies carry 'revaluation reserves' on the books. No doubt accounting standards do not require it. But it would, in my view, be a more honest representation of where the comfortable capital position of these companies has come from if 'revaluation reserves' were separately ring fenced. Are Recaster and I alone in these thoughts?

On the positive side of asset values for shareholders, I would think the increase in building construction costs might put a brake on the amount on any devaluations. But being relatively 'new' to the commercial property market, I am not 100% sure that it works like that!

SNOOPY

I doubt it would be easy to find many examples of high inflation periods that had falls in commercial property values.

Will also repeat that the value of the Drury land bank is not currently valued as what it actually is (its valued as essentially rural land, rather than a central commercial/retail/high density residential real estate location in the middle of a new soon to be built wealthy suburb.

[dibble]

Yes, I don't think any of the big property players will be 'financially destabalised' by any upcoming property devaluations. There is plenty of 'revaluation fat' that has been accumulated on the upside to cushion any devaluations (as the Waltzingironman has reminded us). I thought Recaster made a good point that none of these property companies carry 'revaluation reserves' on the books. No doubt accounting standards do not require it. But it would, in my view, be a more honest representation of where the comfortable capital position of these companies has come from if 'revaluation reserves' were separately ring fenced. Are Recaster and I alone in these thoughts?

SNOOPY


Not sure anyone with a modest knowledge of how valuations are conjured up will be placing too much value on NTA so Im not sure accounting jiggery pokery makes too much difference. Of paramount importance is the quality of the locations, actual assets and leases. If you understand all those and the growth opportunites the NTA is just a handy bit of extra data.

And re the comment above about poor performance being water under the bridge, ...past mgmt performance is very relevant. Its largely why Mainfreight is so expensive, the consistency of management to get it right counts. Quite how much is arbitrary of course but it is a factor even for LPTs, perhaps even moreso given the singular extent of a dodgy building investment, you cant just tweak a setting or hope for a better crop next year.

[Waltzing]

from the DIC SNOOP

'revaluation reserves'

no doubt there will be another change down the track reversing the current Accounting Standard and as if there isnt enough to read.e

agree with DIC SNOOP why make it more complicated as these revals are not profit.

The average investor wants information that is easily understood.

What place do revals got in a profit and loss.

Just shows that sometimes the very very very clever just get confused.

This is common problem in software where the engineers have a god moment and thats when it take years longer than expected because it actually more complicated than god thought.

In this case was it a mistaken god moment for a KISS moment.

Just a note to the accounts.

[Habits]

And re the comment above about poor performance being water under the bridge, ...past mgmt performance is very relevant. Its largely why Mainfreight is so expensive, the consistency of management to get it right counts. Quite how much is arbitrary of course but it is a factor even for LPTs, perhaps even moreso given the singular extent of a dodgy building investment, you cant just tweak a setting or hope for a better crop next year.

"Largely irrelevant" was the comment when referring to a timeline of decades. If you were one of their exec directors would you take accountability for things done over twenty five years ago. And a bit much to expect directors and managers 28 years hence in 2050 who are currently at primary and high school to be accountable for you. I would say that over the last 3 years or 5 that KPG have been pretty active. There is no need to explain that they have done great work spread across multiple sites and property types. That is yet to come to fruition.

[SPC]

I've begun holding this LPT recently and performance from the distant past is completely irrelevant to me. I wasn't there and don't have grievances. I'm buying in on the future possibilities. The only timeframe that interests me is from 2022 forward.
I'll judge my success in times to come not times that have been.

[winner69]

Tax treatment of interest deductibility of BTR ….Kiwi mentioned in this article

Didn’t seem to get what hoped for

https://www.interest.co.nz/property/114768/government-declines-request-build-rent-developments-be-exempt-interest-deduction

[Poet]

Tax treatment of interest deductibility of BTR ….Kiwi mentioned in this article

Didn’t seem to get what hoped for

https://www.interest.co.nz/property/114768/government-declines-request-build-rent-developments-be-exempt-interest-deduction

I don't think this is much of an issue. What was at stake was whether a new build could deduct interest costs indefinitely or only for the first 20 years. The ruling was that only deductible for first 20 years.
The rules on deductibility have changed a number of times in the last ten years and I'm sure they will change again before 2042 so this decision is probably completely irrelevant

[Beagle]

Lessons from 40 years of investing.
1. The best guide to the future is the recent past.
2. The second best guide to the future is looking at all the past results.
3. The third best guide to the future is what management are telling you.
4. It can take many many many years to change the culture of a company and often it never changes.
5. Some business models are fundamentally worse than others which leads to consistent sector underperformance as is the case here and I am starting to think might also be the case at OCA.
6. Buying on a confirmed downtrend and having excess hubris about one's fundamental assessment of value almost always leads to short term pain especially in times of great uncertainty.
7 Young bucks seldom listen to seasoned investors because you cannot put an old head on young shoulders.

Just as well this time its different and none of the above apply ;)

[Waltzing]

jury is still out on if this is a turn around and like OCA it was a dump the lot and wait and see.

the problem with OCA is the accounting just takes to long to work through and the model itself to calculate future profits from the rebuild and sales is not worth the effort when there is a whole world out there of stocks and markets.

[Habits]

Development projects and rezonings take time to come to fruition. If those are profitable with a good development margin the SP should reflect that. If not then what is the point in doing any new projects it is a chasing tail exercise and simply the staff and exec's take home their pay with nothing left for those who own the business. I cannot imagine that is the case with 50 hectares of Greenfield land, just to name one, that is moving at speed, to become new town centre etc

[winner69]

jury is still out on if this is a turn around ...........

What, a 'turn around' ..... you saying that everything they've done over the last few years has been a failure and to save the sinking ship they need to turn it around

[Beagle]

jury is still out on if this is a turn around and like OCA it was a dump the lot and wait and see.

the problem with OCA is the accounting just takes to long to work through and the model itself to calculate future profits from the rebuild and sales is not worth the effort when there is a whole world out there of stocks and markets.
Its without doubt the hardest set of financials to comprehend of any company on the NZX50 that I look at.


What, a 'turn around' ..... you saying that everything they've done over the last few years has been a failure and to save the sinking ship they need to turn it around

Big ship, small rudders. Thankfully its not the Titanic lol

[Waltzing]

"Its without doubt the hardest set of financials "

and there we have it! Buffet said something like "dont invest in something you cant understand".

[Harley]

Up 4.3% today, more Likers than Haters. What was the thing that happened today?

[LaserEyeKiwi]

Up 4.3% today, more Likers than Haters. What was the thing that happened today?

No news, although the Auckland covid case numbers really starting to shrink now which might be encouraging some investors back. Lots of buying pressure at the close as well.

[Habits]

Up 4.3% today, more Likers than Haters. What was the thing that happened today?

There was an uptick in the SP on this day in 1995, so we are simply shadowing that move. Thus to prove the point this company has no future it only has a past /sarc

[Beagle]

NZX50 rebalance at close.

[LaserEyeKiwi]

Kiwi Property increases FY22 dividend guidance

19/4/2022, 3:36 pm MKTUPDTE

Kiwi Property today increased its FY22 dividend guidance, following a stronger than expected fourth quarter.

The company’s diversified asset portfolio proved more resilient to the financial impact of Omicron and the red COVID-19 traffic light setting, with adjusted funds from operations exceeding forecast through the latter stage of the financial year. As a result, Kiwi Property now expects to pay a dividend of 5.6 cents per share (cps) for FY22 [NOTE 1], up 5.7% from the 5.3 cps guidance previously announced. The proposed dividend represents a New Zealand tax-paid yield of 5.21% [NOTE 2].

The resilience of Kiwi Property’s asset portfolio has been highlighted by the rental growth achieved over the course of the year, despite the headwinds caused by COVID-19. Rental income from new mixed-use leases was up approximately 4% in FY22 compared to the year before, with office rents rising by over 8% in the same period. Rent reviews also increased, delivering uplift of almost 4% for mixed-use and more than 4% for office.

Sales across Kiwi Property’s mixed-use properties were strong over recent months, growing approximately 4% through January and February, compared to the year before. Sylvia Park sales rose by over 8% on the prior comparable period, underpinned by the Level One expansion and new athleisure precinct.

Kiwi Property Chief Executive Officer, Clive Mackenzie, said he was pleased by the company’s robust continued performance through the pandemic in FY22.

“We’re delighted to be in a position to increase the dividend guidance. While COVID-19 has invariably caused disruption, we’ve come through Omicron well so far, with rental growth, sales and income exceeding expectations.

“We’re continuing to transition our asset base and deliver on our strategy of creating mixed-use communities at key metropolitan centres, with good progress being made on build-to-rent and the 3 Te Kehu Way office development, in particular. We look forward to maintaining this momentum as we enter our new financial year.”

[Grimy]

And Sylvia Park was packed all weekend. Excellent.

[winner69]

That's good news eh LEK ..... 5.6 cent is better than 5,3 cents

Wasn't the F19 dividend about 7 cents

[Beagle]

No mention of how they're getting on with selling their regional malls that have bene on the market for a very long time now.
Yet another multi million dollar write-down coming for them ?
I do remember them saying last year if they couldn't sell them then it was good for short term eps so this dividend probably mostly reflects that.
Whether that's a good thing or not in the medium term remains to be seen.

[Arbroath]

No mention of how they're getting on with selling their regional malls that have bene on the market for a very long time now.
Yet another multi million dollar write-down coming for them ?
I do remember them saying last year if they couldn't sell them then it was good for short term eps so this dividend probably mostly reflects that.
Whether that's a good thing or not in the medium term remains to be seen.

A write down could be brutal. Centre City in New Plymouth sold for $20m against a valuation of about $65m. It has earthquake code issues but that is a brutal discount for AMP to take selling it.
I think P North was meant to be worth about $200m but maybe the real value is $150m or so.

[Ohdoyle]

A write down could be brutal. Centre City in New Plymouth sold for $20m against a valuation of about $65m. It has earthquake code issues but that is a brutal discount for AMP to take selling it.
I think P North was meant to be worth about $200m but maybe the real value is $150m or so.
It has more than just earthquake issues the building itself will be bordering on worthless by 2030.

Great land holding though.

[Arbroath]

$20m likely a bargain for the land holding only although still have the costs of clearing the site etc

[Beagle]

A write down could be brutal. Centre City in New Plymouth sold for $20m against a valuation of about $65m. It has earthquake code issues but that is a brutal discount for AMP to take selling it.
I think P North was meant to be worth about $200m but maybe the real value is $150m or so.

Almost any asset that's been on the market for over a year and unsold is probably worth a lot less than the asking price. Your guess looks like a pretty good one to me but whatever the next write-down is management will try and sweep it under the carpet like a past tense issue, except its not and the properties remain unsold. I think its telling that there was no mention of the provincial properties sale process in the update.

[LaserEyeKiwi]

Almost any asset that's been on the market for over a year and unsold is probably worth a lot less than the asking price. Your guess looks like a pretty good one to me but whatever the next write-down is management will try and sweep it under the carpet like a past tense issue, except its not and the properties remain unsold. I think its telling that there was no mention of the provincial properties sale process in the update.

KPG had a provisional agreement on the Northlands sale last year, but was held up after a member of the consortium that was too buy it had a change. It was implied back then that in the renegotiation that followed the company was looking at achieving a possible higher price, not less (given the increase in Christchurch values vs when original contract was negotiated). Latest update said covid lockdowns had caused issues with completing final on site condition completions (likely out of the way now, especially with freedom of movement trans Tasman).

I would expect a sale to be completed or at least announced before or during KPG full year earnings in 4 or 5 weeks time.

[LaserEyeKiwi]

KPG now trading with a gross yield above 7.5% using their increased dividend guidance.

Also looks like some in the market are finally waking up to what the potential impact of Drury will be:


Kiwi is due to report its results on May 23 and the analysts note that the successful rezoning of the Drury site, on which Kiwi plans its fourth mixed-use centre, "may also deliver a solid revaluation uplift”

[Waltzing]

Those properties would have sold if the underlying economy was exploding even as employment reaches new lows.

Or is it government employment reaches new highs.

[winner69]

KPG now trading with a gross yield above 7.5% using their increased dividend guidance.

Also looks like some in the market are finally waking up to what the potential impact of Drury will be:



KPG only listed property stock that is 'underpriced' v 10 year govt stock (multi year correlation)

BUY BUY BUY

unless on thinks becoming a residential landlord is a dumb idea

[Beagle]

KPG = 5.6 / 106 = 5.28% net PIE yield which for shareholders on a 33% tax rate = 7.88% gross (5.28 / 0.67)
Alternatives with about the same gross yield.
You can get about the same gross yield on a safe utility like GNE, arguably without the downside risk
ARG have about half their assets in industrial property and my estimate of FY23 dividends is 6.8 cps which on $1.305 is 5.2% net PIE yield = 7.77% gross yield for 33% taxpayers.

There's certainly other alternatives out there than investing in shopping malls. I think the tailwinds with industrial property will continue so added some more ARG last week.

[Waltzing]

technically W(n) maybe right but the geography of the central north island and its narrow landscape means competition for land space is high.

technical's may not apply as a heavy weighting factor for periods of time.

ARG at 1.25 looks very nice hope it stays there for a while.

PIE for many will be attractive with the NEW DOOMS DAY BOOK coming from the Tax Man.

[LaserEyeKiwi]

KPG now has a forward gross yield of 8.15%

[bull....]

KPG now has a forward gross yield of 8.15%

and 10 yr bond yields fast approaching 4% with no risk

[Beagle]

People need to carefully review KPG's long term track record of earnings per share. Its not just about current yield.

[LaserEyeKiwi]

People need to carefully review KPG's long term track record of earnings per share. Its not just about current yield.

You are right long term growth has not been great (especially share price growth, and returns would have been outright horrible without the dividends.

But in terms of the underlying business, they have been reasonably good, especially when looking past covid impact.

Using AFFO (Adjusted funds from operations) which excludes impact of portfolio revaluations on net profit, the past 5 years looks like this:

2017: $78.0 million
2018: $94.7 million
2019: $91.6 million
2020: $102.2 million
2021: $89.4 million (includes $15.2 million in covid rent abatements)

2022: on track for $105 million+ (1st half was $48 million and included $7.4 million in covid rent abatements, 2nd half is over and will be reported in a few weeks time.)

[LaserEyeKiwi]

and 10 yr bond yields fast approaching 4% with no risk

Which is of course horrible news if you happen to be invested in bonds. Anyone invested in bonds has seen their portfolio value utterly decimated so far this year.

[winner69]

Looking at a 2017 KPG presentation could helpbut be amazed with this chart

Hmmm

[winner69]

Then I saw this chart on RBNZ site

[GTM 3442]

Which is of course horrible news if you happen to be invested in bonds. Anyone invested in bonds has seen their portfolio value utterly decimated so far this year.

There are some good buys out there in bond-land at the moment.

And they're only going to get better!

Good times!

[Muse]

Saw a graph in a new research report this morning highlighting LPT sector net yield spread to 10 year gov bonds is now the lowest its been since 2007.

The difference has averaged to just below 200bps (LPT yields 200bps more than 10yrGB) since 2011. It's about 25bps now.

Back in 2007 they went to negative 75bps and P/NTA's went from 1.2x to 0.6x.

That drove the spread to 400bps by early 2009. and then some minor gyrations before stabilising at about/tad under 200bps.

[Waltzing]

OCR in 2007 was approaching what? over 7?

notice SP handles on PROP COMPS were at there highest in relation to OCR.

Did not stay there of course. If the market only compared yields then the whole market should be repriced.

With more and more taxes likely and professions unlikely to not increase their fees more people will want PIE income?

https://www.rbnz.govt.nz/statistics/key-graphs/key-graph-90-day-rate

[LaserEyeKiwi]

There are some good buys out there in bond-land at the moment.

And they're only going to get better!

Good times!

Indeed - and the irony is that due to the losses the bond market has suffered in 2022 so far, people are dumping their bond portfolios, when in fact they should be doing the opposite arguably. Investor psychology never fails to amuse.

[GTM 3442]

Indeed - and the irony is that due to the losses the bond market has suffered in 2022 so far, people are dumping their bond portfolios, when in fact they should be doing the opposite arguably. Investor psychology never fails to amuse.


I think many people do bonds through bond funds rather than directly, and all they see is the capital erosion as rates rise and fund prices fall correspondingly.

Good times!

[winner69]

Its all go for Drury

http://nzx-prod-s7fsd7f98s.s3-website-ap-southeast-2.amazonaws.com/attachments/KPG/391644/370009.pdf

[Lego_Man]

Indeed - and the irony is that due to the losses the bond market has suffered in 2022 so far, people are dumping their bond portfolios, when in fact they should be doing the opposite arguably. Investor psychology never fails to amuse.

Yep. Ignoring the incredibly rare defaults - with bonds, all you do is shift your nominal return through time. At the end, you always get your 100 bucks back.

Meanwhile Precinct just raised debt at 5.25% for 5 years, Mercury at 5.73%.

I would much rather own the bonds than the equity of any of these REITs - first security and a higher yield.

[Arbroath]

Yep. Ignoring the incredibly rare defaults - with bonds, all you do is shift your nominal return through time. At the end, you always get your 100 bucks back.

Meanwhile Precinct just raised debt at 5.25% for 5 years, Mercury at 5.73%.

I would much rather own the bonds than the equity of any of these REITs - first security and a higher yield.


Except you're wrong about the relative yields. The net yield on the equity is 4.6% for Precinct and for the newly issued bonds about 3.5% depending on your tax rate.

[LaserEyeKiwi]

BOOM! KPG gets DRURY sign off:


Kiwi Property gets approval for Drury development

6/5/2022, 9:23 am

Auckland Council has announced the approval of Kiwi Property’s Drury Private Plan Change application, paving the way for the creation of a major Green Star Community.

The successful application will unlock development at Kiwi Property’s 53-hectare site, which is set to be the location for the new Drury Town Centre, as outlined in the Drury-Opaheke Structure Plan. The company intends to create a thriving mixed-use community that will become a hub for the additional 60,000 people who are expected to call the area home over the next 25 years. Drury will be a transit-oriented development that brings together retail, office and residential, all within easy walking distance of each other and the new Drury Central Train Station, scheduled to open in 2025.

An earthworks consent has been issued by Auckland Council and this work is now underway, with the potential for construction of residential homes and large format retail to begin as early as 2023, pending funding.

Kiwi Property Chief Executive Officer, Clive Mackenzie, said Drury was poised to be a transformative project for the company.

“Kiwi Property’s strategy centers on the creation of connected mixed-use communities in key growth nodes. Drury will be the location of the third Auckland Metropolitan Centre in our portfolio, alongside Sylvia Park and New Lynn, offering an exciting range of future possibilities. The development is expected to unlock thousands of houses and new jobs, and generate significant value for the company for years to come."

ENDS


More details summarizing the Auckland council and central government funding for the area:


Auckland council has set aside $400m for local roads, parks and drainage at Drury over the next 10 years.

Central government has earmarked $2.4b for the area under its NZ upgrade infrastructure package, including $655m worth of upgrades to state highway 1 and the electrification of Kiwirail's Papakura-to-Pukekohe line.

There are also plans for a new $500m Drury central train station.

[Waltzing]

Gosh well there you go....

Big news.

[winner69]

Yield now close to 9%

Just trying to help the ramping

[Snoopy]

Yield now close to 9%

Just trying to help the ramping


....which will reduce as soon as KPG sells their Palmy and Christchurch Northlands Malls, which have the annoying and pesky habit of generating that stuff that the KPG board seem to treat with disdain - cash. Someone said the going rate for builders in Auckland is 100 bucks an hour now. So why not sell the malls and employ a whole lot of builders to dig some holes at Drury that might be covered over by buildings in a few years. That latter path sounds like a much higher cashflow option, provided you aren't worried about whether that cashflow has a positive or negative sign in front of it of course......

SNOOPY

[Beagle]

Yep. Ignoring the incredibly rare defaults - with bonds, all you do is shift your nominal return through time. At the end, you always get your 100 bucks back.

Meanwhile Precinct just raised debt at 5.25% for 5 years, Mercury at 5.73%.

I would much rather own the bonds than the equity of any of these REITs - first security and a higher yield.
I don't see it as a one or the other situation. Nothing wrong with a classic 60/40 equities / bonds portfolio now good quality bonds are paying over 5%.
I put my hand up for some of those Mercury bonds at 5.73%. That's a very, very attractive yield for a low risk utility bond.
Yes the gross yield on most REIT's is higher because they're issuing tax paid PIE returns but there's clear ongoing downside risk as aptly demonstrated by the recent share price performance of KPG which even on a day when they announced their much touted major development at Drury has been approved, went down 2.5 cents per share (2.4%).


....which will reduce as soon as KPG sells their Palmy and Christchurch Northlands Malls, which have the annoying and pesky habit of generating that stuff that the KPG board seem to treat with disdain - cash. Someone said the going rate for builders in Auckland is 100 bucks an hour now. So why not sell the malls and employ a whole lot of builders to dig some holes at Drury that might be covered over by buildings in a few years. That latter path sounds like a much higher cashflow option, provided you aren't worried about whether that cashflow has a positive or negative sign in front of it of course......
SNOOPY
LOL Classic post mate. That's the thing with these guys. They just keep building shiny new things at lower and lower net yields to investors and think they're doing a good job. I don't think I've ever read the term eps accretive in any of their presentations ?
What the heck is the point of building new shiny things if its eps dilutive ? I seriously wonder if management even understand these eps terms and if they do whether they're ever a consideration ?

Quite apart from whether new developments are eps accretive or dilutive rents don't seem to ever increase at anything like the inflation rate so the real winners with KPG properties are first and foremost management who keep patting themselves on the back with ever increasing pay and bonus rates and telling everyone what wonderful new facilities they've built and secondly all the tenants. You'd very easily be forgiven for thinking the interests of shareholders are subservient to all other stakeholders !

[LaserEyeKiwi]

I don't see it as a one or the other situation. Nothing wrong with a classic 60/40 equities / bonds portfolio now good quality bonds are paying over 5%.
I put my hand up for some of those Mercury bonds at 5.73%. That's a very, very attractive yield for a low risk utility bond.
Yes the gross yield on most REIT's is higher because they're issuing tax paid PIE returns but there's clear ongoing downside risk as aptly demonstrated by the recent share price performance of KPG which even on a day when they announced their much touted major development at Drury has been approved, went down 2.5 cents per share (2.4%).

LOL Classic post mate. That's the thing with these guys. They just keep building shiny new things at lower and lower net yields to investors and think they're doing a good job. I don't think I've ever read the term eps accretive in any of their presentations ?
What the heck is the point of building new shiny things if its eps dilutive ? I seriously wonder if management even understand these eps terms and if they do whether they're ever a consideration ?

Quite apart from whether new developments are eps accretive or dilutive rents don't seem to ever increase at anything like the inflation rate so the real winners with KPG properties are first and foremost management who keep patting themselves on the back with ever increasing pay and bonus rates and telling everyone what wonderful new facilities they've built and secondly all the tenants. You'd very easily be forgiven for thinking the interests of shareholders are subservient to all other stakeholders !

Seems clear to me - long term rising operating earnings, while also having gotten rid of some older asests in high earthquake risk areas over last 5 years.

2017: $78.0 million
2018: $94.7 million
2019: $91.6 million
2020: $102.2 million
2021: $89.4 million (includes $15.2 million in covid rent abatements)

2022: on track for $105 million+ (1st half was $48 million and included $7.4 million in covid rent abatements, 2nd half is over and will be reported in a few weeks time.)

[Monarch]

With the NTA discount hitting fresh highs, I hope that management seriously consider a buyback of some sort. If they actually believe the current NTA is an honest valuation of the company's assets then how can they go wrong buying them back, the NTA accretion would be immense. By my math, at the current NTA and price a buyback of 10% of the shares issued would allow an 11% higher dividend per share while keeping the total dividend expense constant. Also NTA accretive, taking NTA from 1.42 to 1.467.

[Beagle]

As far as I am aware the maximum you can buy back within a year is 5%. KPG will need every available dollar to assist with their massive expansion at Drury.
The market is telling you what its thinks of the huge outlay involved by sending these under $1. I think management are going into this without a clue in the world as to whether the Drury thing will be eps accretive or not. Do they have any experience at all with a development of this size ? It seems to me that the directors and management think its all about building wonderful new facilities for other stakeholders to enjoy in an environmentally sensitive way. What's in it in terms of earnings accretion or dilution seems completely irrelevant to them. Why ?

Good questions for the next shareholders meeting. What assurance can you give us that the Drury development will be eps accretive to shareholders ?
If you can't give us this assurance who are you serving and why are the owners of the business not being put first ?
If this is eps dilutive why not just stop being Magpie's collecting shiny new things and do a share buy-back instead ?
(Optional for extra impact) you could dress in black and white colours like a Magpie.

[Monarch]

As far as I am aware the maximum you can buy back within a year is 5%
Interesting, I did not know that. Thanks.

I think with such a (supposedly) obvious avenue for eps/nta accretion (buyback) they really need to detail their financial projections for Drury, more in depth info about the Sylvia park towers would be good as well as I was not very impressed with the info given for those either. Are these developments worth the risk? A lot of questions to be asked of this one... I'm deeply underwater with this one now and without some clear numbers from management I may just cut my losses.

[Beagle]

If it makes you feel any better I'm getting kicked in the head with my ARG shares too which closed at a 26% discount to NTA today.
I think these discounts, or at least part of them are not real and is the market front running an expectation that as the capitalisation rates the valuers use head up, the NTA will naturally decrease.

You are right to ask hard questions of KPG management though. Another good question might be Is the current years dividend of 5.7 cps sustainable if you do these new developments ?

[Baa_Baa]

When the whole markets sh1ts its pants, which it has done a few times in my lifetime, it's the time to not be pessimistic as fabulous asset accumulation opportunities are here, or not far away. If one doesn't like the company, then don't worry about it anymore, focus on what assets you're going to buy when the fan is finally hit, and not before.

[LaserEyeKiwi]

KPG has outperformed most of the listed NZ property trusts this year, but they have all been taken to the cleaners in the current environment. Trying to blame KPGs stock price action on something company specific is a fools errand.

13810

I’m extremely bullish on Drury, they picked up the land for pennies on the dollar and the value is already being realized now that permission has been granted for the development. KPG has ample funding available and a well paced timetable of developments with gearing well below target.

[Monarch]

Are you not bothered by the lack of transparency on their financial modelling? Surely they must have some idea what return to expect on these new investments. I think the Drury development has many of the same traits as Sylvia park (which I like) but I haven't found any real numbers for anything about it.

[LaserEyeKiwi]

Are you not bothered by the lack of transparency on their financial modelling? Surely they must have some idea what return to expect on these new investments. I think the Drury development has many of the same traits as Sylvia park (which I like) but I haven't found any real numbers for anything about it.

I would expect the properties they develop at Drury to achieve at minimum similar yields as their other developments, but the land cost component of the project will be much cheaper so will deliver above average returns overall.

Just 5 more trading days until earnings and we get some more data (they report on Monday 23rd May).

[LaserEyeKiwi]

Just a reminder that today is the last trading session before KPG reports on Monday morning.

[Sideshow Bob]

KPG builds momentum with strong FY22 annual result - NZX, New Zealand’s Exchange (https://www.nzx.com/announcements/392451)

- Net profit after tax: $224.3m (+$14.1%)
• Property fair value movement: +$120.5m (+3.5%)
• Net tangible assets per share: $1.45 (+9 cps)
• Net rental income: $187.1m (+7.8%)
• Operating profit before tax: $124.8m (+7.3%)
• Adjusted funds from operations: $100.4m (+12.3%)
• Gearing: 31.6% (FY21 31.2%)
• FY22 cash dividend: 5.60 cps (+8.7%)

[WAIKEN]

A great result One of the best gross div yields in the market
I predict the price will reach NTA once the European geopolitics settles into a predictable pattern devoid of nuclear threats

[LaserEyeKiwi]

Results! Big announcement regarding Office portfolio! (will sell percentage of entire office portfolio to other investors)

23/5/2022, 8:30 amFLLYR
• Net profit after tax: $224.3m (+$14.1%)
• Property fair value movement: +$120.5m (+3.5%)
• Net tangible assets per share: $1.45 (+9 cps)
• Net rental income: $187.1m (+7.8%)
• Operating profit before tax: $124.8m (+7.3%)
• Adjusted funds from operations: $100.4m (+12.3%)
• Gearing: 31.6% (FY21 31.2%)
• FY22 cash dividend: 5.60 cps (+8.7%)

FY23 dividend guidance: “No less than 5.70 cps”

My brief thoughts on earnings highlights:

- despite covid abatements during year (rent relief for lockdown periods), the company is achieving strong operating profit leverage on its growing asset base and rising rents. The best example of this: Rental income increased by $12.8 million, while property related expenses only increased by $1.8 million.
- Interest costs actually decreased by $2.4m from $44.6m to $42.2m. KPG had a large bond at 6.15% rate that finally matured and was replaced by a new bond at a 2.85% rate.
- divestment of perhaps half of office assets (via selling~ 50% share of combined portfolio) will provide a large amount of cash while also continuing to de-risk seismic risk to portfolio at it will remove half of Wellington exposure.
- value of “properties held for sale” (which now only includes two items: Northlands mall & the land to be sold to IKEA) increased in value during the year by $35.3m, from $172.1m to $207.4m.

Notes from conference call:

- Current construction Projects remain within contingency budgets despite recent building industry cost increases.
- IKEA land sale is conditional (transaction not yet completed, no funds received)
- Looking forward to announcing a sale of Northlands “at appropriate time” with the potential offshore buyers. “number of parties” interested (delayed by Covid).
- Plaza removed from sale temporarily while undertaking seismic evaluation (expect to list towards end of financial year). Car park building area specifically the issue in terms of potential works (either for KPG or potential buyer once design quantified).
- Reduction in average cost of debt (thanks to elimination of a long dated 6.1% bond replaced by a 2.85% bond)
- CBD office co-investment platform Financial Q3 announcement likely (? - may have misheard what Q3 reference was on the call), so towards end of calendar year perhaps. OIO approval for international parties may be a factor for timeline. Very opportune time to realize funds from office assets given current cap rates. KPG will retain strategic ownership position & management contract of office assets. Management implied it will be closer to a 50% sale than a 25% sale. In response to last analyst question about either 25% or 50% sale this year, management said 25% sale probably wouldn’t be large enough opportunity for the potential buyers in this market that KPG is looking to attract.
- Covid abatements provision adequate.
- Dividend guidance assumes northlands sale and possible further minimal covid lockdown cost.
- Enough capital to fund existing commitments (Sylvia BTR, Drury earthworks, 3 Tekuku way office).
- Northlands sale & CBD office co—investment platform will fund Lynnmall BTR & Drury development.
- Large format retail at Drury will be the first capital cost project there following earthworks completion.

[Rawz]

AFFO up 12.3%
Dividend up 8.7%

Good result!

[Habits]

Results! Big announcement regarding Office portfolio! (will sell percentage of entire office portfolio to other investors)

23/5/2022, 8:30 amFLLYR
• Net profit after tax: $224.3m (+$14.1%)
• Property fair value movement: +$120.5m (+3.5%)
• Net tangible assets per share: $1.45 (+9 cps)
• Net rental income: $187.1m (+7.8%)
• Operating profit before tax: $124.8m (+7.3%)
• Adjusted funds from operations: $100.4m (+12.3%)
• Gearing: 31.6% (FY21 31.2%)
• FY22 cash dividend: 5.60 cps (+8.7%)

FY23 dividend guidance: “No less than 5.70 cps”

My brief thoughts on earnings highlights:

- despite covid abatements during year (rent relief for lockdown periods), the company is achieving strong operating profit leverage on its growing asset base and rising rents. The best example of this: Rental income increased by $12.8 million, while property related expenses only increased by $1.8 million.
- Interest costs actually decreased by $2.4m from $44.6m to $42.2m. KPG had a large bond at 6.15% rate that finally matured and was replaced by a new bond at a 2.85% rate.

Notes from conference call:

- Current construction Projects remain within contingency budgets despite recent building industry cost increases.
- IKEA land sale is conditional (transaction not yet completed, no funds received)
- Looking forward to announcing a sale of Northlands “at appropriate time” with the potential offshore buyers. “number of parties” interested (delayed by Covid).
- Plaza removed from sale temporarily while undertaking seismic evaluation (expect to list towards end of financial year). Car park building area specifically the issue in terms of potential works (either for KPG or potential buyer once design quantified).
- Reduction in average cost of debt (thanks to elimination of a long dated 6.1% bond replaced by a 2.85% bond)
- CBD office co-investment platform Financial Q3 announcement likely (? - may have misheard what Q3 reference was on the call), so towards end of calendar year perhaps. OIO approval for international parties may be a factor for timeline. Very opportune time to realize funds from office assets given current cap rates. KPG will retain strategic ownership position & management contract of office assets. Management implied it will be closer to a 50% sale than a 25% sale. In response to last analyst question about either 25% or 50% sale this year, management said 25% sale probably wouldn’t be large enough opportunity for the potential buyers in this market that KPG is looking to attract.
- Covid abatements provision adequate.
- Dividend guidance assumes northlands sale and possible further minimal covid lockdown cost.
- Enough capital to fund existing commitments (Sylvia BTR, Drury earthworks, 3 Tekuku way office).
- Northlands sale & CBD office co—investment platform will fund Lynnmall BTR & Drury development.
- Large format retail at Drury will be the first capital cost project there following earthworks completion.

Lots of information such as BTR numbers at sylvia, there are def positives. Why no numbers for IKEA sale, that would be very pertinent. Reval gains while positive are still small at 3.5 percent. Given the drury zone change it should be more. I wonder what the net reval gains since 2020 have been, not that much. Market likes the result however market price is lower than a couple months ago, prob due to rising interest rates, 10 year bond. Div yield ok but not high, final div 2.85 cps vs 2.75 cps, increase of 3.6 percent. They say the div is up 8.7 perc but maybe that is more due to div going down over last two years. The shares could struggle.

Discl, I have sold out remaining 15000 shares this morn. Will watch and wait

[Rawz]

Hopefully the guidance for FY23 dividend of "no less than 5.70cps" is just them being really really conservative. Otherwise its only going to be up 1.7% from this year and with all this inflation around....

[Biscuit]

All the numbers are moving in the right direction. Hard to see anything not to like, still looks under-valued to me.

[LaserEyeKiwi]

Lots of information such as BTR numbers at sylvia, there are def positives. Why no numbers for IKEA sale, that would be very pertinent. Reval gains while positive are still small at 3.5 percent. Given the drury zone change it should be more. I wonder what the net reval gains since 2020 have been, not that much. Market likes the result however market price is lower than a couple months ago, prob due to rising interest rates, 10 year bond. Div yield ok but not high, final div 2.85 cps vs 2.75 cps, increase of 3.6 percent. They say the div is up 8.7 perc but maybe that is more due to div going down over last two years. The shares could struggle.

Discl, I have sold out remaining 15000 shares this morn. Will watch and wait

Going from management comments on call:
- IKEA sale still conditional and sale price confidential
- Omicron surge lead to very conservative revaluations on assets (was done in March at height of outbreak), but despite that still increased.
- stated dividend was aimed to be consistent sustainable amount, and will be no less than 5.7cps even with expected sales of cash generating assets in year ahead (Northlands & just announced office portfolio outside investment partnership).

I think they are focused on maintaining the dividend at this new level while also generating a very large cash amount on the books from the asset sales.
Over $200 million from Northlands & IKEA land sale, and then potentially another $500 million from selling 50% of the Office portfolio (currently valued at $1.04 Billion, which excludes the Sylvia Park office towers).

Given ballpark construction project costs in current financial year (Sylvia Park BTR & 3 Te Kehu way), KPG could be sitting on anywhere between $500-$600 million in cash by this time next year if both expected large capital recycling projects are completed within the financial year.

EDIT to add: Drury development was approved just a few weeks ago (early May), so any revaluation on that land would not be included in the current report which is to March 31st. Also, I have no idea when Drury assets would actually be revalued to capture that new value - woudl it be before or after earthworks are completed, or even after after further construction has begun/finished?

[LaserEyeKiwi]

A bit of Pros & Cons of the office co-investment plan.

On the pro side:
- Releases a large amount of cash potentially, highlighting share value in KPG which are currently trading at a large discount to NTA. A 50% sale at the current 4 tower office portfolio value of $1.042 Billion would be $521 million, or the equivalent of 33c per share in cash
- KPG will receive a management fee on the amount they sell off to a 3rd party.
- Will mean they can fund capital projects for the next several years without needing to add additional debt while interest rates are heading higher.
- ensures they have a large amount of cash to maintain dividend while net income fluctuates (see “Cons” below).
- further reduces “seismic risk” as 50% of the value (and any future seismic exposure) of the two Wellington office towers would be removed.

Cons:
- reduces income. The Office portfolio generated $48.8 million rental income (out of $183.1 million total company rental income - or 26.6%). So with rental growth we can say that if they sold 50%, that rental income will decrease by ~$25 million, or approx 13.5%. To counter that they will receive a new management fee of presumably single digit millions, and also some interest income on the $521 million in cash raised. The reduced level of income will also reduce operating leverage. While rental income will reduce, expenses will not reduce by the same amount (meaning we get the opposite of operating leverage in the short term). Other income from the companies portfolio will continue to grow as rents increase, especially once 3 Te Kahu way (early 2023) & Sylvia Park BTR (early 2024) are finished, but it will take a couple of years or rental growth to return to a similar level of net rental income, especially when Northlands income is also removed (as well as Plaza Mall if that manages to sell once it again goes to market).
- in the short term will increase “Mixed used” as a proportion of assets, which has a higher level of speciality retail exposure. Medium term the cash from the office sale would fund the build out of more BTR & Office assets at its mixed use locations (Sylvia, LynnMall), as well as new Large Format Retail (Supermarkets & Big box retailers) at Drury.

[LaserEyeKiwi]

On the hypothetical outcome of proposed transactions, and the impact on ex-cash NTA discount:

Presuming Northlands, IKEA land & 50% sell down of office assets are done at current valuations:
Cash from sales: $795 million = 50.6 cents per share
Non-cash net assets: 94.4 cents per share
(Total NTA = 145 cent per share).

So if you were working on an ex-cash basis, you could subtract 50.6 cps form the current share price (105.5cps) and would have a share price of 54.9 Cents per share against non-cash net assets of 94.4 cents per share - a 42% discount to non-cash NTA in this scenario.

If someone wanted to invest in KPGs office portfolio, they would probably be better off acquiring KPG entirely, and then selling off/re-listing the assets they don’t want. They would get a much better deal, even assuming a 20% premium needed for takeover.

[Waltzing]

Mr B might be wondering just how much of a management fee they can try and get their hands on.

All that cash washing around in the bank accounts.

That all sounds pretty good modelling LEK.

[Habits]

Just wondering the cap rate used to value the offices. I think if I was in the market for a half share of offices in Welly with potential seismic problems I would be wanting above average yield 8 to 10 percent. Meaning a lower purchase price than 500 mills. Try 400 mills. Depends how serious is the seller and how desperately they need the funds. Any likely buyer could easily find out a lot about their future partners motivations from the AR

[Beagle]

Mr B might be wondering just how much of a management fee they can try and get their hands on.

All that cash washing around in the bank accounts.

That all sounds pretty good modelling LEK.

Had to give my brain a rest today after just about having a brain hemorrhage deciphering OCA's financials' on Friday. Big job being entertainment director for my Granddaughter yesterday too. Had to have a good rest today and save up some mental energy for Turners tomorrow. This semi retired gig is pretty hard work lol

At first glance the result today doesn't look too bad but good luck to KPG trying to find buyers for office assets anytime soon LOL

[LaserEyeKiwi]

Just wondering the cap rate used to value the offices. I think if I was in the market for a half share of offices in Welly with potential seismic problems I would be wanting above average yield 8 to 10 percent. Meaning a lower purchase price than 500 mills. Try 400 mills. Depends how serious is the seller and how desperately they need the funds. Any likely buyer could easily find out a lot about their future partners motivations from the AR

The two Wellington office towers in KPG office segment account for only 23% of the portfolio value ($239m of $1.04 Billion office portfolio, the rest are in central Auckland), and both have received relatively recent EQ strengthening in 2016/17. Cap rates used were 5.38% & 5.75% for the two Wellington towers. The Wellington cap rates were 1% higher than the Auckland office tower cap rates.

plenty of Wellington towers changing hands recently for inflated prices. I don’t understand the demand myself, but will be happy for KPG to sell down stake in them if they can.

[winner69]

In the media …

Mackenzie said the market isn't recognising Kiwi's true value, but he did agree that it's likely capitalisation rates will rise from here, given that interest rates are rising – the higher the cap rate, the lower a building's value.

[Poet]

In the media …

Mackenzie said the market isn't recognising Kiwi's true value, but he did agree that it's likely capitalisation rates will rise from here, given that interest rates are rising – the higher the cap rate, the lower a building's value.
OK If the management think it is so undervalued let's see how many they buy in the insider trading window that is now open to them

[Waltzing]

So far Winners(n) predictions regarding SP handles is tracking True.

Even if ARG has bumped up for week.

OCR heading to 3.75 could see SP 's depressed for an extended period of time.

[bull....]

rising rates pressure stocks like this

[Habits]

So far Winners(n) predictions regarding SP handles is tracking True.

Even if ARG has bumped up for week.

OCR heading to 3.75 could see SP 's depressed for an extended period of time.

The currant SP is much closer to 0.75 than 3.75 waltzing. Of course many
of us want the higher one

Edit: now I understand... OCR. Oh well I must be a bit fruity like the CurrAnt sp

[Habits]

Ikea land-seller Kiwi Property Group: Rising profitability, higher dividends
https://www.nzherald.co.nz/business/ikea-land-seller-kiwi-property-group-rising-profitability-higher-dividends/KG6HWRR5UN5TWS5IOS3UHPKHA4/

Good report in nzme's herald.... sadly mr market still needs more convincing of the viability. Maybe its the low forecast of 3 percent increase in forecast div failing to inspire vs rising int rates. Better to sell out I think and buy back later

[Waltzing]

Markets are getting nervous surprised GOLD is not a lot higher.

[Rawz]

Markets are getting nervous surprised GOLD is not a lot higher.

It's actually been quite an orderly sell off. Death by 1000 cuts. Not sure what's worse actually. Maybe a big 40% drawdown would be better than what we are going through

[Baa_Baa]

Markets are getting nervous surprised GOLD is not a lot higher.

Gold is not really a factor in KPG, unless there's some physical stashed under the floorboards which is unlikely.

But excuse my indiscretion while I go a bit off piste on Gold, since you mentioned it.

Gold market is currently confused in fallback mode. Gold's global fiscal job for a long time was to balance the global balance sheet but it has failed at that for decades, due to paper gold (derivatives) issuance and manipulation (more paper Gold than physical gold) and the obscene global cash issuance (which is real money we all use) and currency constrained balance sheet distortions to ridiculous levels.

The easiest indicator is monetary supply which counters Golds ability to balance (which further compromises its role and therefore it's price), as Gold hasn't either the production or the cash inflows that equal (by a very long way) or exceed the reality of sovereign nations ability to endlessly extend monetary supply. That's because Gold, real Gold, is a physical thing limited in total stock and supply. It can never outrun profligate governments until some great reckoning, which the Gold bulls would love but the rest of the world haven't even given a thought to.

Recently though Gold reverted to its short term uncertainty mode as everyone is confused about global store of wealth. So it's acting like a currency, but not having sovereign links it's schizophrenic, note the difference in USD/Others upturn past couple of day, similar number went down. Gold went with the Up's.

So that's my theory on gold, thanks for the indulgence, which has nothing at all to do with buying commercial bricks and mortar which might be one of the very few sectors that don't get quite as badly hurt in a recession. Especially if they have a stash of Gold under the floorboards.

"Do not go gentle into that good night".

[Waltzing]

Actually GOLD is still used in technology today and its not likely to be completely replace by other metals in producing computing devices.

A lot of metals are currently becoming hard to source and prices are rising.

In high inflationary times commodities often out perform other sectors of the market.

In times of high risk such as a world war where trade grinds to a halt metals become even more valuable.

Its true silver and copper provide higher conductivity but can corrode.

Gold connectors on PCB's can handle high temperatures.

https://www.sciencedirect.com/science/article/pii/S0959652620336428

https://www.specialtymetals.com/blog/2014/3/3/a-brief-history-of-printed-circuit-boards-and-the-gold-they-contain


...GOLD A metal that not used anymore for anything? Your joking...


For example the China lock downs have hit demand for gold in technologies.


It used in almost every technology that uses a high end LED.

Every commercial property that wants to go green will have to use technology that was created using polluting processes and GOLD will have been used in that process.

[Habits]

What a flirty little shareprice, flirting with the single..

[Waltzing]

Going by pass performance it will at sometime perhaps start a very slow 6 year grind higher...

maybe....seems to peak once every 10 years...

a statistic eager beaver like winner(n) might even calculate the ODD's on it..

[Habits]

Soon you can live at the mall: Corporate landlord model coming to Auckland | Stuff.co.nz
https://i.stuff.co.nz/life-style/homed/300599420/soon-you-can-live-at-the-mall-corporate-landlord-model-coming-to-auckland

I do wonder if part of the appeal is bringing shoppers to retailers... win win for both parties and kiwi in the middle collecting lots of moola

[cyclist]

From the last paragraph of the article:

Last year the company made a net profit of $224 million, including $187m in rent from its commercial properties, and paid shareholders a dividend of $5.60 per share.

Looking forward to that $5.60 a share dividend! That should get the share price out of the doldrums.

[Waiuta]

From the last paragraph of the article:

Last year the company made a net profit of $224 million, including $187m in rent from its commercial properties, and paid shareholders a dividend of $5.60 per share.

Looking forward to that $5.60 a share dividend! That should get the share price out of the doldrums.
Certainly woke me up to. My portfolio is looking really healthy now!

[GTM 3442]

Soon you can live at the mall: Corporate landlord model coming to Auckland | Stuff.co.nz
https://i.stuff.co.nz/life-style/homed/300599420/soon-you-can-live-at-the-mall-corporate-landlord-model-coming-to-auckland

I do wonder if part of the appeal is bringing shoppers to retailers... win win for both parties and kiwi in the middle collecting lots of moola

Mixed-use developments may be new to New Zealand, but theyve been a feature of the Gulf states for a long time.

Residential tower above big mall with a hypermarket as an anchor tenant.

What's not to like?

[LaserEyeKiwi]

I suggest taking the time to read through the pages of the Annual report published last week.

Was interested to see one of the big benefits of adding BTR, office & large format retail to a mall complex as one big “Mixed Used Asset” is that the entire asset receives a lower cap rate for valuation purposes. Which makes complete sense as it lowers the revenue risk profile of the asset overall. Hence why Sylvia Park is now “Sylvia park precinct” after the Sylvia Park Lifestyle (adjacent large format retail centre) was absorbed, and with now two office towers and the BTR apartments now included in the valuation (It is now valued as if the under construction BTR towers & 3 Te Kehu way office tower are finished, less the value of the future expected construction costs required to finish those developments).

[Waltzing]

KPG may well have its big re pricing time in the sun.

https://www.stuff.co.nz/life-style/homed/300599420/soon-you-can-live-at-the-mall-corporate-landlord-model-coming-to-auckland

[LaserEyeKiwi]

First clear mention of an initial BTR number for Drury in that stuff article (500). They have always said BTR residential would be part of their effort at Drury, but nice to see some figures now (this is separate to the thousands of residential dwellings that will be supplied by the 2 other partners in the wider Drury development, which will be built around KPGs town centre development).

[Waltzing]

LEK could this be better than OCA model?

as OCA seems to have suffered from peter to pay paul.

Profits from one part of the pie being eaten by care..

[Habits]

First clear mention of an initial BTR number for Drury in that stuff article (500). They have always said BTR residential would be part of their effort at Drury, but nice to see some figures now (this is separate to the thousands of residential dwellings that will be supplied by the 2 other partners in the wider Drury development, which will be built around KPGs town centre development).

Resi rentals are a whole new ball game as compared retail commercial leasing. The ones that kpg are proposing at sylvia are upmarket enough to keep out riff raff and avoid problems that other landlords experience, fingers crossed. Also central enough to guarantee good demand. Further out in Drury will be very different. Having police visits or shootouts wont be good for business. Neither noisy tenants now you cannot issue 90 day notices or evictions. Kpg could use the excuse they have to do extensive renovations to the apartment!

[Waltzing]

"shootouts"

be very interesting to see the demand and how much they are prepared to pay..

[Habits]

I wonder how the yields stack up for return on investment. Doing some rough figures I think it could be 7.5 percent net based on full occupancy. There are alot of factors to consider for it to be viable and I am concerned that KPG are launching themselves in to this area in a big way. 1200 apartments just at sylvia. Basing it on overseas experience may not be relevant to nz and the way we do things here plus the potential tenants

[Walter]

It seems like a great diversification to me. Among the younger generations living in a warm, safe, low maintenance apartment within walking distance of the shopping centre, railway station and employment would be a winner. In addition it is relatively close to the airport, city centre and main highway. It could turn to custard if the do not have great tenant management though.

[winner69]

Council going to appeal against go ahead for Drury


https://www.rnz.co.nz/news/ldr/468496/auckland-council-set-to-appeal-against-go-ahead-for-new-town-the-size-of-napier

Auckland needs Leo as mayor I reckon

[Grimy]

Well Auckland Council has never had a problem with wasting ratepayers money up till now. So why not this time too?

[Habits]

Council going to appeal against go ahead for Drury


https://www.rnz.co.nz/news/ldr/468496/auckland-council-set-to-appeal-against-go-ahead-for-new-town-the-size-of-napier

Auckland needs Leo as mayor I reckon

Thanx for the link Winner. kpg has 50 hectares so the other two have 280 hectares between them. Kpg plans to take ten years so I couldn't imagine why anyone needs 280 hectares of developable land

[LaserEyeKiwi]

Council going to appeal against go ahead for Drury


https://www.rnz.co.nz/news/ldr/468496/auckland-council-set-to-appeal-against-go-ahead-for-new-town-the-size-of-napier

Auckland needs Leo as mayor I reckon

It’s clear this is just a disagreement on costs - not on the actual goal of the project itself - the council does not want to stop the project, but wants mediation on costs

(Auckland council doesn’t want to pay for its share of the infrastructure upfront, despite the government contributing money, and even though building said infrastructure will enable the construction of tens of thousands of dwellings that will generate a massive anoint of recurring rates revenue for the council in future).


The council is committed to continuing to work with the private plan change applicants and other parties whether that is through court-directed mediation or other avenues,"

[LaserEyeKiwi]

For context - KPG went ex-Divi today.

[Aaron]

What is a co-investment platform?

KPG is establishing a stand alone CBD office co-investment platform.

What is it? A funny way to say new head office?

[LaserEyeKiwi]

What is a co-investment platform?

KPG is establishing a stand alone CBD office co-investment platform.

What is it? A funny way to say new head office?

No, they are selling equity (up to 50%) to third parties in KPGs office portfolio, and in future potentially other assets. KPG will generate management fees from the “co-investor(s)” also.

Given the current 30% share price discount to net assets, it will be interesting to see the share price reaction when KPG sells a significant portion of its assets at their actual market value.

KPGs office portfolio (its 4 standalone office towers) was valued at $1.042 Billion at financial year end - so selling 50% of that would generate $521 million in cash, or the equivalent of 33c in cash per share.

[Aaron]

No, they are selling equity (up to 50%) to third parties in KPGs office portfolio, and in future potentially other assets. KPG will generate management fees from the “co-investor(s)” also.

Given the current 30% share price discount to net assets, it will be interesting to see the share price reaction when KPG sells a significant portion of its assets at their actual market value.

KPGs office portfolio (its 4 standalone office towers) was valued at $1.042 Billion at financial year end - so selling 50% of that would generate $521 million in cash, or the equivalent of 33c in cash per share.

Many thanks.

Equity financing for the new developments but somehow limited to the office portfolio. I guess the office portfolio are in a subsidiary company owned by KPG, they sell shares for up to 50% of the portfolio and have a management contract to manage the properties. Not really a question just writing whatever comes into my head after reading your response. I should read the annual report.

Can't see KPG doing well in a rising interest rate environment and falling residential property market but holding for diversity and the long term.

[LaserEyeKiwi]

Many thanks.

Equity financing for the new developments but somehow limited to the office portfolio. I guess the office portfolio are in a subsidiary company owned by KPG, they sell shares for up to 50% of the portfolio and have a management contract to manage the properties. Not really a question just writing whatever comes into my head after reading your response. I should read the annual report.

Can't see KPG doing well in a rising interest rate environment and falling residential property market but holding for diversity and the long term.

They do already have assets that they sold a 50% interest in (Hamilton assets with Tainui), so not totally new territory for the company. In terms of funding there is also the pending sale of Northlands mall (somewhere between $150-200 million transaction), along with the land sale to IKEA, so they will be well cashed up for a while.

[winner69]

Sounded like an exciting ASM …cool movies and plenty of raves


Like this bit ….share price is currently lower than any of us would like. Ours is a robust business, however of late, the market hasn’t recognised what we believe to be the true value of the Company, our assets or the pipeline of opportunities we have ahead.

Believers will believe that

[Bjauck]

Sounded like an exciting ASM …cool movies and plenty of raves


Like this bit ….share price is currently lower than any of us would like. Ours is a robust business, however of late, the market hasn’t recognised what we believe to be the true value of the Company, our assets or the pipeline of opportunities we have ahead.

Believers will believe that

How low can it go? For my sins I recently topped up my small holding.

Believer?
https://www.youtube.com/watch?v=T7LD5CTRtRk

[SPC]

I'm a believer. Lord have mercy on me. I have sinned and bought many. I will no doubt reap the dividends for doing so.

[winner69]

You've got to wonder when the rot will stop and this trend of KPG share price discount to NTA will reverse

Then again maybe it's the 'market' saying the guru valuers really have no idea who value things and KPG is valued about right at the moment

Who knows

[winner69]

Don't know which chat is more depressing -- this one or the one in previous post

Share price hasn't really recovered from the time it collapsed with the onset of covid has it

[LaserEyeKiwi]

Yup still in the doldrums. Im still taking the opportunity to buy $1.45 bills for $1 while the sale is on.

On where it goes from here, I think the market might start to close the valuation gap when more of the NTA is in the form of cash, which looks set to be a reality soon. Also it appears bond rates may have already peaked, which if true would make the 7% dividend yield somewhat of an outlier.

approximately $750m in KPG asset sales coming up before year end. At least $500m for 50% of office portfolio going into “co-investment platform” for overseas pension funds to buy into. $200m for northlands, which chairman said at recent AGM should be concluded within 2 months.

After that still the potential plaza mall sale and already confirmed ikea land sale funds to come through, and potential for mixed use centers to also enter a co-investment platform.

The advantage of the co-investment platform is that KPG releases funds on its assets, while still retaining asset control and also creates a new revenue stream in the form of management fees on the equity it sells off.

[Waltzing]

hamilton very busy yesterday with great winter support.

malls not dead yet.

[LaserEyeKiwi]

Government announces that new Build-to-rent residential developments will be able to deduct interest.

There are conditions, but seem to line up with KPGs stated plans to offer long term occupancy contracts.

https://www.rnz.co.nz/news/political/472745/tax-break-for-investors-providing-long-term-rentals

[winner69]

KPG share price back under $1 ….. possibly because 10 year govt back up close to 4% again

[LaserEyeKiwi]

KPG share price back under $1 ….. possibly because 10 year govt back up close to 4% again

7%+ yield, 31% discount to NTA.

Good while still allocating funds, but it is a tough slog staying in that long term mindset.

[SPC]

That's right. A 4 yr bank TD, or KPG with a superior pie return and capital upside.
A $1.40+ investment unit value for around $1. Not to be barked at in my opinion 😉

[Rawz]

I agree, don’t hold but maybe can get 8% yield? It hit that a few weeks ago right?

Plus you got to think that the DPS will grow over the years and NTA?? Even thou it’s history in that regard has been quite poor

[LaserEyeKiwi]

Ok so here is a bit of a thought experiment:

Stock currently trades at a 31% discount to NTA (Net Tangible Assets). KPG generally keeps a low cash balance (pays out a high dividend ratio). So calculating cash per share balances or what the asset value per share excluding cash on hand is, is currently rather pointless.

However…KPG is in the process of selling a 50%+ equity stake in its office portfolio, and in final stages of selling Northlands Mall in Christchurch. The sales at book value will be somewhere close to $750m.

Using the hypothetical $750 million sale value, the non-cash Asset value per share changes dramatically. Valuing the cash at 100% value (as one should), and removing that from the current share price and NTA per share value - would leave a share price trading at a 47% discount to NTA.

See my math below:

14098

Who knows what happens in the scenario where those sales are completed and the share price stays roughly where it is now, potentially becomes a very easy take over target.

The company also has The Plaza Mall to sell, along with the already announced sale of the IKEA land to proceed in future, and also stated possibility of further equity sales / co-investments of all its other property assets possibly - but we ignore all that for now. Although hypothetically KPG could keep selling equity stakes in its properties and end up in a situation where the cash balance surpasses the current market cap, and it still would have half a billion in property assets (ignoring the future value created at Drury etc).

[Waltzing]

Its becoming a very interesting stock.

Your a true arithmetical investor LEK..

One hopes that something really good comes of it at some point in time.

If immigration opens up and the current strange policy of keeping people out changes then new multi purpose planned towns created by private sector capital could become a new public stock investor model.

[Snoopy]

KPG is in the process of selling a 50%+ equity stake in its office portfolio, and in final stages of selling Northlands Mall in Christchurch. The sales at book value will be somewhere close to $750m.

Using the hypothetical $750 million sale value, the non-cash Asset value per share changes dramatically. Valuing the cash at 100% value (as one should), and removing that from the current share price and NTA per share value - would leave a share price trading at a 47% discount to NTA.

Who knows what happens in the scenario where those sales are completed and the share price stays roughly where it is now, potentially becomes a very easy take over target.

The company also has The Plaza Mall to sell, along with the already announced sale of the IKEA land to proceed in future, and also stated possibility of further equity sales / co-investments of all its other property assets possibly - but we ignore all that for now. Although hypothetically KPG could keep selling equity stakes in its properties and end up in a situation where the cash balance surpasses the current market cap, and it still would have half a billion in property assets (ignoring the future value created at Drury etc).


So your thesis is LEK, that:

a/ If KIwi sell down some of their assets at NTA for cash AND
b/ Those cash assets are are then 'upvalued' by the market (because Kiwi have replaced formerly undervalued by the market buildings with cash on their balance sheet) THEN
c/ The Kiwi shares should be uprated by the market OR - if they are not - THEN
d/ A predator company can come and bid for the company and use the cash on the Kiwi balance sheet to fund a leveraged buyout.

You make a good case. But allow me to put forward what I see as the counter argument.

Go back one step and ask yourself why Kiwi are selling Northlands Mall in Christchuch, and half a stake in their office portfolio in the first place. The answer is that they need the money to develop the tenement towers for long term rental accommodation that they envisage at their Auckland shopping precincts. Oh and to develop their greenfield town at Drury. Now ask yourself what would happen in your leveraged buyout scenario.

The predator company would strip out the Kiwi cash and have no money left to proceed with these property developments. So they would probably have to sell down more Kiwi properties to fulfill the possibly already inked development contacts. They end up with a couple of residential towers, with the remaining shopping centres sold off to fund them, a management team with no experience operating long term tenancies, and an uncertain green field town centre development 'out of town' just as fuel prices skyrocket to a new plateau. Suddenly our 'predator company' isn't looking so clever. A clever 'predator company' probably wouldn't make such a takeover offer in the first place.

Next we get to the delayed Kiwi property sales. A real estate agent once told me every property has a buyer at the right price. If your property hasn't sold in many months of trying, the most likely reason is that the price you are asking is too high. If a clean sale was on offer for Northlands, surely the boxes would have been ticked by now? And the Palmy mall is still getting earthquake strengthening work done on it, is it not? More dollars out of that 'spare cash' you keep talking about?

For listed property Mr Market has spoken. And the reason that all these listed property companies are trading well below net asset backing is that the net asset backing is too high. No matter what some hired calculating valuation stuffed shirt has been telling the Kiwi directors based on historical (and that word is important) evidence. I don't consider myself a property guru. But when even I see 'really good' long leased warehouse assets in an apparently land constrained area only able to be bought at a yield of 3% (I am thinking GMT property here), I have to wonder: Is that GMT share really undervalued? I can get a higher return than that on a bank term deposit now, without any downside property value risk.

The key theme I am trying to get across here is that the Kiwi Property Group is, at heart, now a property developer - not a property owner. And property developments require money, and lots of it. I am not saying that Kiwi will fail in their development execution, and neither am I saying they will succeed. What I am saying is that there is no 'spare cash' to be had here. My opinion of course. Make of it what you will.

SNOOPY

[Waltzing]

GMT is this yield land is a trade... It was a hold a year back and then was a sell... now a trade.

KPG, GMT are really not the same sector.

both on land but warehousing is a lower risk than developing whole towns. KPG now developing mini towns.

as warehouse space becomes harder to find it may have the effect of GMT being permantly over priced.

a bit like EBO.

[LaserEyeKiwi]

KPG moving to quarterly dividends - next one to be paid on Wednesday September 21st.

Doesn’t actually state the dividend amount…?

https://www.nzx.com/announcements/397867

[SPC]

Fabulous news. As signalled recently by Chairman. Well done KPG board.
Definitely worth barking about 😉🐕

[winner69]

“We’re pleased to be moving to quarterly dividend payments, which will assist investors by providing them with more frequent returns.”

Suppose asking for monthly payments is a step too far

[777]

Go for weekly and they might then agree at monthly.

I just wish they had made the payments in May,Aug, Nov and Feb. My divvys are a bit light in those months.

[fungus pudding]

Go for weekly and they might then agree at monthly.

I just wish they had made the payments in May,Aug, Nov and Feb. My divvys are a bit light in those months.

You might be able to find a job for those months. :scared:

[777]

You might be able to find a job for those months. :scared:

I would probably get fired for lack of interest after the first month.

[fungus pudding]

I would probably get fired for lack of interest after the first month.

That's not bad. I'd be gone by lunchtime

[LaserEyeKiwi]

KPG moving to quarterly dividends - next one to be paid on Wednesday September 21st.

Doesn’t actually state the dividend amount…?

https://www.nzx.com/announcements/397867

Dividend amount confirmed:


Kiwi Property will pay a first quarter cash dividend of 1.425000 cents per share. The dividend will have imputation credits of 0.271023 cents per share attached and a supplementary dividend of 0.122985 cents per share will be paid to non-resident shareholders. The record date for the dividend is 13 September 2022, and the payment date is 21 September 2022. The dividend reinvestment plan will not operate for this dividend.

[winner69]

Day out for you LEK

http://nzx-prod-s7fsd7f98s.s3-website-ap-southeast-2.amazonaws.com/attachments/KPG/398041/378142.pdf

[LaserEyeKiwi]

Day out for you LEK

http://nzx-prod-s7fsd7f98s.s3-website-ap-southeast-2.amazonaws.com/attachments/KPG/398041/378142.pdf

hmmm…a but short notice for us wellingtonians. I see its being recorded to be viewed online later, so seems like no big news dropping.

[LaserEyeKiwi]

Belated reply.


So your thesis is LEK, that:

a/ If KIwi sell down some of their assets at NTA for cash AND
b/ Those cash assets are are then 'upvalued' by the market (because Kiwi have replaced formerly undervalued by the market buildings with cash on their balance sheet) THEN
c/ The Kiwi shares should be uprated by the market OR - if they are not - THEN
d/ A predator company can come and bid for the company and use the cash on the Kiwi balance sheet to fund a leveraged buyout.



A-C - yes that is my theory in a nutshell.
D - Takeover was purely a hypothetical, no expectations on that, although if pension funds are interested in buying 50%+ of office portfolio at book value, then maybe they might judge buying shares in KPG at its discount to NTA and higher divi yield as the more prudent approach.



Go back one step and ask yourself why Kiwi are selling Northlands Mall in Christchuch, and half a stake in their office portfolio in the first place. The answer is that they need the money to develop the tenement towers for long term rental accommodation that they envisage at their Auckland shopping precincts. Oh and to develop their greenfield town at Drury. Now ask yourself what would happen in your leveraged buyout scenario.

The predator company would strip out the Kiwi cash and have no money left to proceed with these property developments. So they would probably have to sell down more Kiwi properties to fulfill the possibly already inked development contacts. They end up with a couple of residential towers, with the remaining shopping centres sold off to fund them, a management team with no experience operating long term tenancies, and an uncertain green field town centre development 'out of town' just as fuel prices skyrocket to a new plateau. Suddenly our 'predator company' isn't looking so clever. A clever 'predator company' probably wouldn't make such a takeover offer in the first place, sometime in 23/24 perhaps (depenging on Auckland council squabble)

Next we get to the delayed Kiwi property sales. A real estate agent once told me every property has a buyer at the right price. If your property hasn't sold in many months of trying, the most likely reason is that the price you are asking is too high. If a clean sale was on offer for Northlands, surely the boxes would have been ticked by now? And the Palmy mall is still getting earthquake strengthening work done on it, is it not? More dollars out of that 'spare cash' you keep talking about?

For listed property Mr Market has spoken. And the reason that all these listed property companies are trading well below net asset backing is that the net asset backing is too high. No matter what some hired calculating valuation stuffed shirt has been telling the Kiwi directors based on historical (and that word is important) evidence. I don't consider myself a property guru. But when even I see 'really good' long leased warehouse assets in an apparently land constrained area only able to be bought at a yield of 3% (I am thinking GMT property here), I have to wonder: Is that GMT share really undervalued? I can get a higher return than that on a bank term deposit now, without any downside property value risk.

The key theme I am trying to get across here is that the Kiwi Property Group is, at heart, now a property developer - not a property owner. And property developments require money, and lots of it. I am not saying that Kiwi will fail in their development execution, and neither am I saying they will succeed. What I am saying is that there is no 'spare cash' to be had here. My opinion of course. Make of it what you will.

SNOOPY

I am not sure if they have ever said if openly, but Kiwi have spent the last decade (post-2011) offloading malls & other assets south of Hamilton for one obvious reason: a major de-risking of there portfolio exposure to seismic events. Northlands & The Plaza are the last two malls to go, and the 50%+ proposed “co-investment platform” (sale) of office assets will take the exposure south of Waikato (just two Wellington office blocks currently worth $239m) down to just a few percent portfolio value (~$120m if 50% divested).

Would agree they are becoming a property developer, but the bulk of their assets, even after both southern malls & 50%+ of offices sold, will remain in existing mixed used portfolio (mostly Sylvia Park).

In terms of cash needed - the current immediate outlays are not actually very significant. 3 Te Kehu way (new office tower at Sylvia park) is almost finished, and the Build-to-rent project is already in progress. Drury is mostly earthworks still, and the first phase constructed by KPG will be some buildings for big box retailers and car parks in 23/24, timing dependent on Auckland council squabble.

So who knows what they will do with a big influx of cash (~$700m+) IF they manage to sell Northlands & 50% of office portfolio this year. Capital return possibly. Maybe just sit on it I suppose is an option. There are ZERO bond maturities until FY2024, and even then it is only $175m. (FY2025 sees $358m mature).

[Waltzing]

What did they do with the the last decade of cash from sale of malls. Did they sink that into auckland?

well they could do a buy back...

[LaserEyeKiwi]

What did they do with the the last decade of cash from sale of malls. Did they sink that into auckland?

well they could do a buy back...

The funds were minimal in nterms of portfolio value, it was more important to de-risk.

For instance the Majestic centre tower in Wellington was sold for $123m in 2017, but that was a money pit with a multi-year $85m earthquake strengthening program done before the sale.

Porirua Mall (North City) was a better result, selling for $100m in 2018 (5% below book value at the time).

Kiwi sold centre place south in Hamilton for $46m, and entered into a 50/50 partnership with Tainui Group for Centre Place North & The Base. (I guess Kiwi actually wants to keep as much of its portfolio as possible north of the Bombays.

Kiwi has spent more on Sylvia Park expansions alone than all the cash raised from those asset sales so far.

[Waltzing]

LEK suppose it take a while to realign a portfolio in a small market where selling assets takes a while and creating new assets for long term growth also takes time.

Evidence the time it takes in NZ to built a road...although for SMALL country the motorway extensions from huntly to south karapiro went smoothly.

lot of retirement village new builds underway is that area.

[winner69]

Another cool preso from Kiwi

Deep dives, halos and other stuff .... and even mentioned pathways

Lots of pictures of buildings etc but the people shown seem to be predominantly caucasian

http://nzx-prod-s7fsd7f98s.s3-website-ap-southeast-2.amazonaws.com/attachments/KPG/398335/378420.pdf

[Rawz]

Another cool preso from Kiwi

Deep dives, halos and other stuff .... and even mentioned pathways

Lots of pictures of buildings etc but the people shown seem to be predominantly caucasian

http://nzx-prod-s7fsd7f98s.s3-website-ap-southeast-2.amazonaws.com/attachments/KPG/398335/378420.pdf

Maybe KPG dont see colour like you W69? Just see us as the bags of meat that we are. Walking wallets for their malls or fodder for their rentals.

I didn't realize how big drury was!!! Sylvia park is 34 hectors and Drury is 56% bigger at 53 hectors holy moly

[LaserEyeKiwi]

Well that took some time to read through - definitely wasn’t expecting that level of detail today!

Was great seeing the more detailed masterplan for Sylvia, and the timelines for developments over the next decade.

Noted they said the council appeal has now been settled, good news! But countered somewhat by commentary saying the deterioration in macro-economic environment has disrupted negotiations for co-investment platform partner(s) currently. Good to see that current capex commitments are low however.

[winner69]

Hey LEK. …..they put a few slides in about the US REIT market

Purpose …..seeking out global investors? Who might be impressed impressed with the 1+1=3 concept?

[Poet]

I see they have announced a conditional sale of Northlands Mall for $160m (light conditions, so probably a done deal)

[777]

I see they have announced a conditional sale of Northlands Mall for $160m (light conditions, so probably a done deal)

But...

$75 Million of vendor finance to be provided and...

No mention of how the sale price compares to the latest "fair value" that they reported for this asset

Latest AR shows around $386m for Northlands and Palmerston North so on the face of it have we sold Northlands at a significant discount to fair value?

I'm assuming so since they would have been crowing if sale had been at a premium.

Another spin job from an NZX listed company, or what ?

No wonder NZX listed companies trade at such a discount to international peers when this is the standard of governance

On the basis of the sale being conditional that is all you can expect.

[Poet]

On the basis of the sale being conditional that is all you can expect.

No, I was mistaken, properties held for sale were only $207m at last balance date (included Ikea land as well) - so my apologies

[LaserEyeKiwi]

I see they have announced a conditional sale of Northlands Mall for $160m (light conditions, so probably a done deal)

Have been busy - missed this yesterday afternoon. Very good news that they will be getting paid to manage the mall.

Not sure exactly what the seismic comment is exactly saying, but the $23 million difference between the $9 million cash remaining in the deal and the $32 million of “seismic insurance proceeds that remains unspent” is possibly money in KPGs pocket in addition to the sale price (but already on KPG’s books perhaps).

Great to be finally out of the seismic risk that is Christchurch, while continuing to collect a seven figure revenue stream from managing the asset.


Kiwi Property secures conditional Northlands sale

7/9/2022, 4:20 pmGENERALAs part of its ongoing strategy to focus on the development of mixed-use town centres, Kiwi Property has secured a conditional agreement to sell Northlands Shopping Centre and 43 Langdons Road (Northlands) in Christchurch to MP Holdings 5 Limited, an entity managed by Mackersy Property (Mackersy), for $160 million. The final sale price represents a property level internal rate of return of 10.9% since inception.

The purchaser will retain $9 million to complete seismic works (noting that Kiwi Property has approximately $32 million of Northlands seismic insurance proceeds that remain unspent at the asset).

The transaction is subject to two conditions: the landlord’s consent to the transfer of a ground lease over part of the carpark and approval by the Kiwi Property Board. The sale is expected to settle on or before 30 November 2022.

Kiwi Property will continue to manage Northlands on Mackersy’s behalf and has also agreed to provide vendor finance of up to $75 million to settle the purchase, if required.

Kiwi Property Chief Executive Officer, Clive Mackenzie, said: “The sale of Northlands is an important step in our capital recycling programme. Proceeds from the transaction will be used to fund the company’s exciting mixed-use development pipeline and provide further balance sheet flexibility.”

[LaserEyeKiwi]

No, I was mistaken, properties held for sale were only $207m at last balance date (included Ikea land as well) - so my apologies

Properties held for sale also includes westgate lifestyle in addition to Northlands, Plaza & IKEA land.

[LaserEyeKiwi]

I think it is fair to say the purchasers of Northlands got a good deal, with an asset that was priced at a very high yield north of 12% (Northlands had $19.1m in operating income in 2019) - in return for the seismic risk inherent with any Christchurch property.

Kiwi took a loss on book value with that sale price - although it looks a lot better with that $23m worth of the unspent seismic insurance payout that they are keeping.

[Habits]

Why would Kiwi Property sell Northlands at Papanui for $87m less than 2019 valuation?
https://www.nzherald.co.nz/business/why-would-kiwi-property-sell-northlands-at-papanui-for-87m-less-than-2019-valuation/E6OAYBDRJP3MH6OX6HVYITLT2A/

AB/NTA is a joke now

[LaserEyeKiwi]

Why would Kiwi Property sell Northlands at Papanui for $87m less than 2019 valuation?
https://www.nzherald.co.nz/business/why-would-kiwi-property-sell-northlands-at-papanui-for-87m-less-than-2019-valuation/E6OAYBDRJP3MH6OX6HVYITLT2A/

AB/NTA is a joke now

Northlands was on Kiwis books at likely under $180m as of March 31st this year, so the current NTA figure for KPG is not a joke as its based on March 2022 valuations. Northlands value had already reduced considerably on the books since 2019.

Look in annual report - “Properties held for sale” was $207m total, which was: “The fair value at 31 March 2022 includes Northlands and certain adjoining properties located at Sylvia Park in relation to the sale of land to IKEA. Northlands is carried at the value determined by external valuation and the IKEA adjoining properties are carried at contract price.”

Remember that Norhtlands still requires potentially tens of millions in seismic repairs, which KPG no longer needs to pay for.

[winner69]

Quarterly divies and glitzy presentations haven't not done much to help arrest the KPG share price decline that's been in play this year

Did close at 95 cents in June - possibly go below that soon

Great dividend yield .................. but rate of capital loss is greater these days

[LaserEyeKiwi]

Quarterly divies and glitzy presentations haven't not done much to help arrest the KPG share price decline that's been in play this year

Did close at 95 cents in June - possibly go below that soon

Great dividend yield .................. but rate of capital loss is greater these days

I’ve almost picked up my desired allotment by reinvesting dividends - hopefully hit that nice round number of shares at some point next year. Then have to wait another couple of decades to eventually sell down (the shares are sitting in a self-directed kiwisaver account). A few property cycles to witness in that time frame I guess. Even without capital appreciation (which would be horrible performance) - at my cost basis and with minimal average growth in dividend payments reinvested then by the time I hit 65 that particular position should have grown by 4-5 times in number of shares held.

It’s probably my only holding where I don’t mind the low floundering share price due to:
a) Mandatory long time frame of holding &
b) high dividend payments being reinvested means more shares while price is depressed.

Very hard mindset to maintain though, when I have traditionally made most of my big wins in picking the right growth stocks.

(note: that isn’t to say I wouldn’t ditch the position if I felt the long term prognosis was not as good as I predicted - will then have to find another very long term growth prospect I perceive as low risk for my Kiwisaver account)

[Baa_Baa]

Divi in the bank, nice.

$0.95 technical double bottom bounce, if it holds.

[LaserEyeKiwi]

I’ve almost picked up my desired allotment by reinvesting dividends - hopefully hit that nice round number of shares at some point next year. Then have to wait another couple of decades to eventually sell down (the shares are sitting in a self-directed kiwisaver account). A few property cycles to witness in that time frame I guess. Even without capital appreciation (which would be horrible performance) - at my cost basis and with minimal average growth in dividend payments reinvested then by the time I hit 65 that particular position should have grown by 4-5 times in number of shares held.

It’s probably my only holding where I don’t mind the low floundering share price due to:
a) Mandatory long time frame of holding &
b) high dividend payments being reinvested means more shares while price is depressed.

Very hard mindset to maintain though, when I have traditionally made most of my big wins in picking the right growth stocks.

(note: that isn’t to say I wouldn’t ditch the position if I felt the long term prognosis was not as good as I predicted - will then have to find another very long term growth prospect I perceive as low risk for my Kiwisaver account)

jeepers wasn’t expecting to re-invest at this sort of price. What a bargain.

[Habits]

Passed by Sylvia today. Does anyone know what is the building being constructed at the roadside, is it the BTR units or the next office block.

[winner69]

Not an awesome chart as KPG share price collapses to all time low(?) ..... makes a mockery of those guesses that make up the reported NTA of $1.45

Wouldn't surprise me if the listed bonds went over 6% and head to 7%

KPG beginning to be viewed as a 'very risky' outfit .....not quite default material yet but who knows

[Rawz]

What on earth is going on?!?!

[ralph]

What on earth is going on?!?!

I know its just a minor blimp in the greater scheme of things don't worry to much

[winner69]

What on earth is going on?!?!

Maybe big worry about their development model and leverage and maybe some punters are thinking that they could default like some Chinese outfits are

Pretty ugly though eh Rawz

[Perky]

I have no idea …but I getting my popcorn and beer ready for the end of day trading as Q3 get squared away.
Might be some opportunist buys.


I agree with winner. I wonder if people worried about sustainability of div and whether they might need to raise some funds for the developments planned…just my gut thoughts

[Rawz]

Maybe big worry about their development model and leverage and maybe some punters are thinking that they could default like some Chinese outfits are

Pretty ugly though eh Rawz

whoever these punters are comparing Sharetraders beloved KPG to Chinese developers need to check to see if their head is screwed on

[LaserEyeKiwi]

whoever these punters are comparing Sharetraders beloved KPG to Chinese developers need to check to see if their head is screwed on

lol yes good for a laugh.

[Rawz]

I have no idea …but I getting my popcorn and beer ready for the end of day trading as Q3 get squared away.
Might be some opportunist buys.


I agree with winner. I wonder if people worried about sustainability of div and whether they might need to raise some funds for the developments planned…just my gut thoughts

Yes i think this is it too. Drury is a big big project big big execution risk

[Perky]

I’m not a current holder. But it must be bloody hard to price anything big with confidence the moment. I know the council just canned a drainage upgrade in our area…this is what they said
The work has been heavily impacted by geotechnical design issues and escalating material, labour, and traffic management costs. The result has been a doubling in the original forecast to $278 million.

Imagine the risks involved with the size of Drury


LEK…be interested in your thoughts why share price tanking. It’s been in a slow grind down for a long time now. I sold my last lot at 1.20….the beagle was scaring me with his analysis but he’s probably been proven right …great div but been a big capital loss for holders

[LaserEyeKiwi]

I’m not a current holder. But it must be bloody hard to price anything big with confidence the moment. I know the council just canned a drainage upgrade in our area…this is what they said
The work has been heavily impacted by geotechnical design issues and escalating material, labour, and traffic management costs. The result has been a doubling in the original forecast to $278 million.

Imagine the risks involved with the size of Drury


LEK…be interested in your thoughts why share price tanking. It’s been in a slow grind down for a long time now. I sold my last lot at 1.20….the beagle was scaring me with his analysis but he’s probably been proven right …great div but been a big capital loss for holders

Everyone running for the hills at the moment with indiscriminate selling.

If I recall, Beagle was trying to convince me/others that his favored property holding (GMT) was better, but since the start of this year that has provided worse total returns than KPG. Make of that what you will. Despite its large fall in share price GMT only currently paying just a 3.4% divi (well under half of KPG) in an environment of 4-4.5% term deposit rates. No thanks.

KPG historical return not been good, but to be honest I have only been building a position since 2020, and those past periods do not concern me given the large pivot they have made to de-risk exposure away from there previous problem areas. My average cost currently is $1.08

KPG has a conservative dividend, low gearing (under 30% now that northlands sale has gone unconditional - see NZX release last night after market close) and a very low cost of debt with none of it due to renew in next 18 months. Just the one large asset left to divest (Palmerston North The Plaza) to compete its seismic & retail de-risking program.

I see people keep quoting Drury as a boogie man instead of a fantastic opportunity. I would suggest reading the development plan unveiled at the recent investor day presentation. Drury is a 10-15 years long project, in partnership with two other large infrastructure partners (KPG has the town centre, the other two have all the surrounding residential). All near term development is at Sylvia Park & soon LynnMall, but only as market conditions allow. KPG is now very conservative with its growth plans and very happy to raise cash from selling down equity stakes in existing assets instead of taking on debt)

[ithaka]

LEK…be interested in your thoughts why share price tanking. It’s been in a slow grind down for a long time now. I sold my last lot at 1.20….the beagle was scaring me with his analysis but he’s probably been proven right …great div but been a big capital loss for holders
I believe Beagle is back in after the move to quarterly divs.

[Baa_Baa]

Everyone running for the hills at the moment with indiscriminate selling.

[...] KPG has a conservative dividend, low gearing (under 30% now that northlands sale has gone unconditional - see NZX release last night after market close) and a very low cost of debt with none of it due to renew in next 18 months. Just the one large asset left to divest (Palmerston North The Plaza) to compete its seismic & retail de-risking program.

I though the days trading volume and SP action was a bit unusual with an early rout then a big clawback into the auction with 1.3m shares traded, then a whopping 1.3m more shares traded and some big trades at the close - almost like the news had leaked during the day. Posting the Northlands sale after market close, on a Friday, is a bit odd, like why wait until after market?

Good to see Northlands sold with no vendor finance.

[winner69]

My mate shareguy posted this elsewhere .... may as well let it go viral lol

Seems KPG most exposed (although just OK) on adjusted property valuations and gearing covenants - surwly not a dilutive cap raise on cards

Here's what shareguy posted -

Craig's recent report says

Implied revaluations impact on gearing
As property values begin to incorporate the rate hike cycle, there is a risk that decreasing valuations may lead to an LPV breaching its gearing covenant ratios. Such a breach may force an LPV to raise equity at dilutive prices

At current asset valuations the NZ LPV sector has an average committed gearing of 32.8%, which rises +8.3% to an average of 41.1% according to Adjusted Premium implied revaluations. We note the following:
With the exception of NZL, none of the NZ LPVs would breach their gearing covenant on a committed basis should property values close to what the Adjusted Premium implies. However, as highlighted before, recent data for NZ dairy land is supportive of current valuations and we view the discount NZL trades to NTA as a function of it being in the early stage of its growth rather than investors view on dairy land revaluations.
On a committed basis GMT and PFI would experience the smallest increase in gearing of +5.9% and 5.6%. This is unsurprising given they have some of the smaller Adjusted Premium implied downwards revaluations.
PCT and VHP have the next lowest increases in committed gearing of +7.2% and +7.0% respectively. In our PCT calculations we have included the $114m development of 117 Pakenham Street which, although an uncommitted opportunity, is experiencing a level of leasing enquiry PCT described as 'encouraging'. We therefore view it will likely commence.
Excluding ARG/IPL/KPG/SPG are implied to experience the greatest increase in committed gearing levels of +8.1%/+9.4%/+10.3%/+12.0%. Pleasingly, should their gearing increase to the point Adjusted Premium implied downwards revaluations suggest, they will still be within their covenants with ARG/IPL/KPG/SPG having headroom of 9%/23%/5%/2%.

[LaserEyeKiwi]

My mate shareguy posted this elsewhere .... may as well let it go viral lol

Seems KPG most exposed (although just OK) on adjusted property valuations and gearing covenants - surwly not a dilutive cap raise on cards

Here's what shareguy posted -

Craig's recent report says

Implied revaluations impact on gearing
As property values begin to incorporate the rate hike cycle, there is a risk that decreasing valuations may lead to an LPV breaching its gearing covenant ratios. Such a breach may force an LPV to raise equity at dilutive prices

At current asset valuations the NZ LPV sector has an average committed gearing of 32.8%, which rises +8.3% to an average of 41.1% according to Adjusted Premium implied revaluations. We note the following:
With the exception of NZL, none of the NZ LPVs would breach their gearing covenant on a committed basis should property values close to what the Adjusted Premium implies. However, as highlighted before, recent data for NZ dairy land is supportive of current valuations and we view the discount NZL trades to NTA as a function of it being in the early stage of its growth rather than investors view on dairy land revaluations.
On a committed basis GMT and PFI would experience the smallest increase in gearing of +5.9% and 5.6%. This is unsurprising given they have some of the smaller Adjusted Premium implied downwards revaluations.
PCT and VHP have the next lowest increases in committed gearing of +7.2% and +7.0% respectively. In our PCT calculations we have included the $114m development of 117 Pakenham Street which, although an uncommitted opportunity, is experiencing a level of leasing enquiry PCT described as 'encouraging'. We therefore view it will likely commence.
Excluding ARG/IPL/KPG/SPG are implied to experience the greatest increase in committed gearing levels of +8.1%/+9.4%/+10.3%/+12.0%. Pleasingly, should their gearing increase to the point Adjusted Premium implied downwards revaluations suggest, they will still be within their covenants with ARG/IPL/KPG/SPG having headroom of 9%/23%/5%/2%.

That is no longer accurate for KPG post the northlands sale, which provides cash equivalent to over 12% of their debt outstanding at date of last earnings.

[LaserEyeKiwi]

I though the days trading volume and SP action was a bit unusual with an early rout then a big clawback into the auction with 1.3m shares traded, then a whopping 1.3m more shares traded and some big trades at the close - almost like the news had leaked during the day. Posting the Northlands sale after market close, on a Friday, is a bit odd, like why wait until after market?

Good to see Northlands sold with no vendor finance.

I would say the unconditional status was achieved only yesterday (hence the last in the day announcement), being the last day of KPGs financial year.

[Sideshow Bob]

What % of holders participate in the DRP's? This would make a bit of a difference (although DRP didn't operate for the last divvy).

[LaserEyeKiwi]

A 5.6% Pop today, on no news. Let’s see what the rest of the week brings.

[winner69]

A 5.6% Pop today, on no news. Let’s see what the rest of the week brings.

Posted todays leaderboard for posterity and to show anything is possible

Only beaten by that dog Rakon today but doing better than CRP is some effort