Are things going to get Sticky for Listed Commercial Property outfits ?

[nztx]

If this is what Oyster are doing - then what about listed Outfits ?


https://www.nzherald.co.nz/business/1b-oyster-group-fund-suspends-investor-withdrawals-selling-properties/6BV3NIJ34ZEXVNGT4JI4C4KF2M/

$1b+ Oyster Group fund suspends investor withdrawals, selling properties


Sorry folks the good old Herald dont want you reading the rest unless there's a coin in the slot ;)



And following this more Bad news for Commercial Operators with Depreciation getting the knife from Govt
on the horrizon. Interesting that the Taxman was very critical of this Govt move too.

[troyvdh]

Dear nztx...This scenario is so predictable...As Warren said..."Its only when the tide goes out do you discover ......"
Again....risk and reward.
KISS.

Off course Im perfect.

[nztx]

Dear nztx...This scenario is so predictable...As Warren said..."Its only when the tide goes out do you discover ......"
Again....risk and reward.
KISS.

Off course Im perfect.


And still waiting on the sideline .. or not ? :)

[Valuegrowth]

If this is what Oyster are doing - then what about listed Outfits ?


https://www.nzherald.co.nz/business/1b-oyster-group-fund-suspends-investor-withdrawals-selling-properties/6BV3NIJ34ZEXVNGT4JI4C4KF2M/

$1b+ Oyster Group fund suspends investor withdrawals, selling properties


Sorry folks the good old Herald dont want you reading the rest unless there's a coin in the slot ;)



And following this more Bad news for Commercial Operators with Depreciation getting the knife from Govt
on the horrizon. Interesting that the Taxman was very critical of this Govt move too. These things happened in the past as well. They have become new normal. I can still remember how customers tried to withdraw money at once from banks and finance companies.

[Snoopy]

If this is what Oyster are doing - then what about listed Outfits ?

https://www.nzherald.co.nz/business/1b-oyster-group-fund-suspends-investor-withdrawals-selling-properties/6BV3NIJ34ZEXVNGT4JI4C4KF2M/

$1b+ Oyster Group fund suspends investor withdrawals, selling properties



Listed property trusts are doing the same thing, selling properties, to try and simmer down those interest rate bills. I have spent the last year having a close look at the 'big eight' NZX listed property trusts. I was seduced to look by the capped 28% maximum tax rate, the safety and security of property blah blah blah.....I whittled my choice down to two: Property for Industry with a very strong management record in industrial sites (a favoured property sub category), and Investore also 'big box' but made attractive because it looked dirt cheap relative to the other options.

Try as a I might, I just could not make the case for Investing in 'Property for Industry' stand up. I even looked through the current high interest rates, thinking what would happen when interest rates started to fall and I still couldn't get the yield to work for me. It wasn't a bad deal. But it takes something 'better than average' to get my investment juices excited.

The yield at Investore did stack up. But then I figured out they were selling two higher yielding supermarkets (which are not sold after being on the market for more than 18 months) to finance a brand new supermarket development at Kaiapoi. A development which they had arranged to rent out on a long term contract at a loss. Total idiocy. No wonder the IPL shares are so heavily discounted on the market.

As a result and as a self declared 'late starter' in property investment, I have decided to have no listed property investments in my portfolio. So this late starter will become an 'even later starter' should I ever decide to invest in listed property in the future. I can hear Sailor Rob on the sidelines now, saying "I told you so."

Completely outside of property, I had been on the investment sidelines looking for opportunities for a year, and suddenly three turn up within a week. It reminds me of the story of the fella at the bus stop, waiting waiting. Then suddenly three buses turn up at once. Anyway I am currently 'investment happy' and will continue to leave the listed property investment game to others.

SNOOPY

[ronaldson]

Listed outfits offer transparent liquidity via the NZX and risk is spread over a large number of properties, often diverse by sector and location.

But capital gain is muted; they tend, in my view, to overtrade; and are also subject to cyclical pressures but provided they are well managed have less, if any, need to divest when conditions are adverse.

Nevertheless the loss of deductibility for building depreciation will hurt. Very poor policy initiated by the Labour Government and difficult to adjust due to current economic concerns.

[Nor]

There are no withdrawals from listed property trusts of course. As I understand it listed property trusts were introduced in response to an earlier run on funds that allowed withdrawals. You sell a listed property trust for what you can get, if you want, or need to.

[Bjauck]

Listed outfits offer transparent liquidity via the NZX and risk is spread over a large number of properties, often diverse by sector and location.

But capital gain is muted; they tend, in my view, to overtrade; and are also subject to cyclical pressures but provided they are well managed have less, if any, need to divest when conditions are adverse.

Nevertheless the loss of deductibility for building depreciation will hurt. Very poor policy initiated by the Labour Government and difficult to adjust due to current economic concerns.
Didn’t the National Govt remove commercial building depreciation in 2010? Labour brought it back in 2020. Both of them campaigned last election on removing it. Even the previous 2% allowance # was low compared to international comparisons.

Anyway it is yet another factor making investing in NZ business less appealing. May as well just add to over-investing in existing residential property. Then we will wonder why we are falling further behind Australian living standards.

# I think Oz has a tax allowance of 2.5% pa depreciation and maybe 4.0% in some cases.

[nztx]

https://www.nzherald.co.nz/business/oyster-fund-194m-profit-turns-to-225m-loss-pastoral-house-payments-stopped/GHH5NL44FFEMFFQN34J7D44CBQ/

Oyster fund $19.4m profit turns to $22.5m loss, Pastoral House payments stopped


So all it took to trigger this was Property Revaluations - all Unrealised suddenly turning negative - likely funneled through as part of Profit ? ;)


Have to take care traversing delicate Oyster Shells it seems ;)

[whatsup]

I have just listened to a podcast from Aust, the exact same thing is happening there with over 2,000 companies going to the wall in the lucky country, this is not restricted to N Z and all for the same reasons, high house hold fixed costs, power, food gas, power and very high interest rates.

This is not a govt issue as the same is happening over there but on a larger scale, we are in for 2-3 years of tough times imho.

The economy is like a piece of string, you can pull it in the direction that you want it to go but you cannot push it there.

[ronaldson]

https://www.nzherald.co.nz/business/oyster-fund-194m-profit-turns-to-225m-loss-pastoral-house-payments-stopped/GHH5NL44FFEMFFQN34J7D44CBQ/

Oyster fund $19.4m profit turns to $22.5m loss, Pastoral House payments stopped


So all it took to trigger this was Property Revaluations - all Unrealised suddenly turning negative - likely funneled through as part of Profit ? ;)


Have to take care traversing delicate Oyster Shells it seems ;)

And that was for year end 31 March 2023. A lot riding on valuations as at 31 March 2024 methinks.

[nztx]

And that was for year end 31 March 2023. A lot riding on valuations as at 31 March 2024 methinks.


Why would the Fund be so hastily scurrying around putting Stuff on the block for sale now - less than 2 weeks before 31 March 2024 - as reported in first article ? :)

[X-men]

I just nosy around Oyster fund...thier debt assets gearing is at 49.7% as on 31st Dec 2023.

No wonder they are in the sheet!!

Most syndicates or listed property funds are around 30-38% max

[LaserEyeKiwi]

“Are things going to get sticky for listed commercial property outfits?”

I mean, hasn’t that been the case for the last 2 years already? NTAs and share prices have already massively slumped, and assets have been sold off to maintain gearing ratios. None of the large listed names appear to be in any danger of breaching covenants, and there is no issue of investors pulling out money as “the money” is simply listed equites that can be bought & sold as needed with zero impact on the company operations.

Oyster is completely different style of company/investment, where people wanting their capital back impacts the entity directly.

[Toddy]

Usual cycle. Just a repeat of GFC. The property cycle always takes longer to feel the crunch.

The real issue I have with these funds is that the older generation is always sucked into these investments down at the golf club by snake oil 'financial accredited' advisors.

Then their money is stuck when they need it.

[Joshuatree]

I just nosy around Oyster fund...thier debt assets gearing is at 49.7% as on 31st Dec 2023.

No wonder they are in the sheet!!

Most syndicates or listed property funds are around 30-38% max

And that's when punters remember (but ignored) their mates warning them about the lack of liquidity!

[Panda-NZ-]

I have just listened to a podcast from Aust, the exact same thing is happening there with over 2,000 companies going to the wall in the lucky country, this is not restricted to N Z and all for the same reasons, high house hold fixed costs, power, food gas, power and very high interest rates.

This is not a govt issue as the same is happening over there but on a larger scale, we are in for 2-3 years of tough times imho.

The economy is like a piece of string, you can pull it in the direction that you want it to go but you cannot push it there.

They have higher productivity and a large population (more economies of scale and better negotiation vs competitors). Plus more competitive markets across industry in grocery, power even banking.

Sure they will be affected too but their unemployment has dropped today and interest rates are lower for longer.

[Valuegrowth]

Usual cycle. Just a repeat of GFC. The property cycle always takes longer to feel the crunch.

The real issue I have with these funds is that the older generation is always sucked into these investments down at the golf club by snake oil 'financial accredited' advisors.

Then their money is stuck when they need it.Dear Toddy: Some say this time is different and they don't believe cycles. I’m well prepared for coming cycles in commodities, stocks, and other assets especially real estate.

[dibble]

Why would the Fund be so hastily scurrying around putting Stuff on the block for sale now - less than 2 weeks before 31 March 2024 - as reported in first article ? :)

Selling assets to reduce debt and/or gearing only helps if you sell them for more than their value. Its all relative.
In this climate it would be rare to realise more than book value (and dont ignore sales costs).
I guess we might thus surmise this class of property company (syndicators in particular) is cash strapped and perhaps close to insolvency (to meet interest payments). One late paying low quality tenant could be the trigger.

[troyvdh]

Risk and reward.
101,

[kiwikeith]

Selling assets to reduce debt and/or gearing only helps if you sell them for more than their value. Its all relative.
In this climate it would be rare to realise more than book value (and dont ignore sales costs).
I guess we might thus surmise this class of property company (syndicators in particular) is cash strapped and perhaps close to insolvency (to meet interest payments). One late paying low quality tenant could be the trigger.


That is a problem with property syndicates compared with Listed property companies. The listed property companies often have a large number of tenants so can withstand one tenant being unable to pay. Property syndicates often have only a few tenants and sometimes only one tenant.