Goodman Property Trust

[Beagle]

https://www.nzx.com/files/attachments/193790.pdf

In a market that's going sideways its time we had a good look at maximising dividend yield and providing a relatively safe haven.

My preference in this sector is Goodman Property Trust GMT. I am not a strong believer in the retail or office sector and therefore I avoid REIT's
in those sector's. I believe Goodman's industrial portfolio provides the infrastructure for many of N.Z's core business's and has sound business prospects.

Dividend pay-out forecast this year is 6.45 cents per unit. This is a portfolio investment entity (P.I.E) so tax paid by the Trust is the final tax.
At the current price of $1.07 6.45 cents per unit = 6.03% net. For an investor on a 33% tax rate this is the equilivent of 9% gross per annum.

Whilst this isn't an exceptional return in this sector what is exceptional and well worth noting is the GMT are presently paying out only 80% of their net earnings as they
grow their investment portfolio and fill up their business parks such as the one at Highbrook.

Worth noting is the changes in their structure planned - see above link.

There's presently a strong development pipeline and the un-used land bank as a percentage of their investment portfolio is reducing such that real growth in future
payouts is highly likely in my opinion.

Arguably this Trust pays an excellent dividend yield with real prospects for the best dividend growth in same in the medium term.

What's your thoughts and / or preference in this sector ?

Anyone going to the AGM of GMT tomorrow ?

[couta1]

Held them all in the past Roger my preference is first Goodman then Argosy, not keen on Kiwi or Precinct although Precinct has the lowest debt ratio of the bunch. Disc-Hold none at present

[Joshuatree]

Hi Roger , sorry to be a little off thread but curious whether you checked this out?. Biggest downside is the unlisted vehicle and possible liquidity exit probs if one needs to get out in hurry. BUT the 5 star green rated building, location, tenant , 8% yield with 3 % increase yearly for first 10 years is in its favour. GMT stacks up well but the PIE doesn't work for me.
Augusta opens door to Telecom's home (http://www.google.co.nz/url?sa=t&rct=j&q=&esrc=s&source=web&cd=1&ved=0CDYQqQIwAA&url=http%3A%2F%2Fwww.nzherald.co.nz%2Fproperty%2Fn ews%2Farticle.cfm%3Fc_id%3D8%26objectid%3D11299635&ei=iyzYU7jYLYO0uASP2IHwCw&usg=AFQjCNH_USrYwTzRuJMD5s0THZTsgB3wKg&bvm=bv.71778758,d.c2E)

[Beagle]

Hi Roger , sorry to be a little off thread but curious whether you checked this out?. Biggest downside is the unlisted vehicle and possible liquidity exit probs if one needs to get out in hurry. BUT the 5 star green rated building, location, tenant , 8% yield with 3 % increase yearly for first 10 years is in its favour. GMT stacks up well but the PIE doesn't work for me.
Augusta opens door to Telecom's home (http://www.google.co.nz/url?sa=t&rct=j&q=&esrc=s&source=web&cd=1&ved=0CDYQqQIwAA&url=http%3A%2F%2Fwww.nzherald.co.nz%2Fproperty%2Fn ews%2Farticle.cfm%3Fc_id%3D8%26objectid%3D11299635&ei=iyzYU7jYLYO0uASP2IHwCw&usg=AFQjCNH_USrYwTzRuJMD5s0THZTsgB3wKg&bvm=bv.71778758,d.c2E)

Hi Joshuatree,

Comparing listed and unlisted property investments is a minefield of contentious opinions and debate that I'd prefer not too unpack but just for your consideration I'll make the following comments.
First of all you need to have a look at the track record of the promoters. Chris Lee has had some less than complimentary things to say about Augusta and their track record with Kermadec is anything but stellar. The Francis family overall track record is something people need to decide for themselves if they're comfortable with.
Secondly you need to form you own opinion of whether their projections in a rising interest rate environment are credible, (worth noting that some promoters use a fair bit of leverage and lock in short term funding which is cheaper than locking in long term funding and thus makes their short term yield projections look attractive...what happens to net returns when they have to re-finance short term debt at higher interest rates ?).
You also need to consider lease termination risk by a single tenant on a single property at the end of the term of the lease and how attractive the property is in regard to other corporations in the future ?
You might ask yourself why risk your investment on a one building one tenant investment that's very illiquid compared to a broadly diversified portfolio of industrial buildings that has good liquidity and easy entry and exit with low brokerage rates. Sometimes people get sick or need to liquidate their investment for a vast range of other potential reasons...why go there for a slightly higher perceived return ?
Have a look at the costs to get out if you want too, can you ?
DYOR and be very, very careful. My 2 cents.

[Beagle]

Held them all in the past Roger my preference is first Goodman then Argosy, not keen on Kiwi or Precinct although Precinct has the lowest debt ratio of the bunch. Disc-Hold none at present

Pretty much my preference order too. Interestingly Argosy pay 6 cps this year which is a slightly lower dividend yield based on their SP of $1.005 but are digging into distribution reserves to maintain that whereas GMT are only distributing 80% of distributable profit, (something I thought the market would have picked up by now).

The situation is similar over at KIP with their projected distribution of around 6.5 cents based on a SP of $1.17 = tax paid yield of only 5.55% but they're also sailing very close to the wind with distributing all of available after tax profit and making noises about having to dig into reserves to maintain it due to a major redevelopment of one of their larger building's commencing Nov 2014.

As GMT's Highbrook park fills up they're targeting land at 5% of their NAV their ability to payout increased divvy's is strong based on higher rental returns from previously unoccupied land and a change in the payout ratio :) According to Bing finance GMT has a beta of only 0.48 so volatility is low.
Disc I hold plenty.

I ran the ruler over Vital Healthcare Trust as a possible diversification strategy a little while back. Yield was lower and trading at a substantial premium to NTA. Low risk due to very long leases on properties in the healthcare sector but SP appears vulnerable to a pull-back in a rising interest rate environment.

[Onion]

I ran the ruler over Vital Healthcare Trust as a possible diversification strategy a little while back. Yield was lower and trading at a substantial premium to NTA. Low risk due to very long leases on properties in the healthcare sector but SP appears vulnerable to a pull-back in a rising interest rate environment.

I have some VHP. I was attracted to the exposure to Australia and they have a very long average lease term. I have always had some doubts about VHP's management. It's manager (NorthWest Value Partners) and biggest shareholder are linked and I have never quite made up my mind whether that creates a conflict (i.e. they get the return from managing the trust even if the returns are not great for the rest of the shareholders).

[fungus pudding]

https://www.nzx.com/files/attachments/193790.pdf

In a market that's going sideways its time we had a good look at maximising dividend yield and providing a relatively safe haven.

My preference in this sector is Goodman Property Trust GMT. I am not a strong believer in the retail or office sector and therefore I avoid REIT's
in those sector's. I believe Goodman's industrial portfolio provides the infrastructure for many of N.Z's core business's and has sound business prospects.

Dividend pay-out forecast this year is 6.45 cents per unit. This is a portfolio investment entity (P.I.E) so tax paid by the Trust is the final tax.
At the current price of $1.07 6.45 cents per unit = 6.03% net. For an investor on a 33% tax rate this is the equilivent of 9% gross per annum.

Whilst this isn't an exceptional return in this sector what is exceptional and well worth noting is the GMT are presently paying out only 80% of their net earnings as they
grow their investment portfolio and fill up their business parks such as the one at Highbrook.

Worth noting is the changes in their structure planned - see above link.

There's presently a strong development pipeline and the un-used land bank as a percentage of their investment portfolio is reducing such that real growth in future
payouts is highly likely in my opinion.

Arguably this Trust pays an excellent dividend yield with real prospects for the best dividend growth in same in the medium term.

What's your thoughts and / or preference in this sector ?

Anyone going to the AGM of GMT tomorrow ?


Any need to start a new thread?

http://www.sharetrader.co.nz/showthread.php?2157-MGP-ING-CHP-PFI-KIP-APT-Property-Trusts

[Beagle]

Opps, forgot there was another thread. Lets make this one a specific to GMT then. Can one of the mods please change the thread title to Goodman Property Trust.

[Joshuatree]

Thanks for your opinion Roger. we both agree re the vehicle and poss exit difficulties. I wasn't aware of Augusta's track record. The carrot is the five star building, location tenant etc but yes single building risk and small print need a thorough work over and the 8% yield suggested has lots of wiggle room downward.Also min invest $50,000. cheers JT

[RRR]

Roger- have you considered the fact that new shares will be issued to the promoters since settlement of highbrook buyout was deferred by 2 years(I can't remember the exact arrangements)? I like them but sold out recently! I still like GMT but believe there is a conflict of interest due to being not internally managed!

I like ARG and hold a few. Planning to add more!

I sold VHP - I just don't trust Northwest and we missed the opportunity to buy back the management right few years ago when investors had the chance!

[winner69]

Opps, forgot there was another thread. Lets make this one a specific to GMT then. Can one of the mods please change the thread title to Goodman Property Trust.

Your thread you can change the title

Go to the first post / edit / change the title

[Beagle]

Roger- have you considered the fact that new shares will be issued to the promoters since settlement of highbrook buyout was deferred by 2 years(I can't remember the exact arrangements)? I like them but sold out recently! I still like GMT but believe there is a conflict of interest due to being not internally managed!

I like ARG and hold a few. Planning to add more!

I sold VHP - I just don't trust Northwest and we missed the opportunity to buy back the management right few years ago when investors had the chance!

Quite correct. There remains 37.3m units to be issued in Dec 2015 as deferred consideration in respect of the highbrook transaction. Current units on issue are 1,225m so a 3% dilution is earnings per share will prima facie occur but as the ongoing development of this park progresses, (fastest development pace in over 5 years at present), I am very comfortable that we will see this transaction as earnings accretive.

The trust has a target land value holding of only 5% of its portfolio, expected percentage at the completion of current development projects is just over 10% so while they continue to distribute only 80% of earnings as development of this park continues I expect this to change ion the medium term. I also like the moves the trust are making towards corporatizing their structure and the appointment of independent directors.

I believe we will see meaningful medium term growth in distributions from this trust (soon to be a company).

I have held Argosy but recently sold at $1.00 on the basis that I struggle to see where earnings growth is coming from.

[Beagle]

All resolutions passed at the AGM. I got trapped in the office and didn't get a chance to attend but had the live webcast going in the background and it all sounds good and prospects for growth look excellent.

Interestingly for holders on less than a 33% tax rate, the first quarterly dividend of 1.6125 cents is plus an additional 0.26609 cps imputation credits, just over a quarter of a cent so holders with a 17.5% tax rate, (income up to $48,000), have the option of including about 1 cent of that dividend, (approx. 2/3 rd's of it) as a fully imputed dividend at 28% and by doing same will be able to claim back the 10.5% difference between the corporate tax rate of 28% and their personal rate of 17.5% on most of their dividend. I expect as GMT's effective tax rate increases future dividends will be imputed to this level or slightly higher. The balance of the dividend is able to be treated as exempt income notwithstanding the fact that some shareholders will take advantage of claiming some of the imputation credits back.

This change which I only realised today with their first quarterly distribution announcement also makes the trust an attractive investment to shareholders on a 17.5% tax rate.
Stock is trading cum the above mentioned dividend, ex date is early September.
Disc: I added more yesterday and today at $1.07.

[Beagle]

GMT suspends dividend reinvestment plan today - doesn't need to keep the money with very low gearing.
It could be argued that they no longer need to retain 20% of earnings for further development either, what with their low gearing and stated objective of recycling older developments for new ones.
I'll be writing to the board later this year suggesting a higher pay-out ratio next year, suggesting 90% which, if implemented, would see the gross dividend yield at about 10% based on today's price for those on a 33% tax rate and still leaving adequate funds for further development. I'll also be suggesting another bond issue what with their longest dated bonds presently bid at 5.6% on the NZDX, makes sense if they paying circa 6.6% to their banking syndicate.
1% saving on $100m is another $1m per annum in unit holders pockets :)

[Billy Boy]

"GMT suspends dividend reinvestment plan today"
Thats the best news I've heard in a while. They are staying with those that
are already established in DRP. I wish they would cancel that as well.
DRP's in general are not good IMO as they dilute the share cap and nullify
any capital gain.
BB

[Sideshow Bob]

Craigs have downgraded from hold to sell, as above its price target. Cites outdated governance structure, capitalised interest charge to be released into the P&L, and unsustainable dividend payout ratio.

[couta1]

Craigs have downgraded from hold to sell, as above its price target. Cites outdated governance structure, capitalised interest charge to be released into the P&L, and unsustainable dividend payout ratio.
Wouldn't buy any of the property trusts at current prices at 96c level GMT was okay as was ARG at 90c.

[Beagle]

Craigs have downgraded from hold to sell, as above its price target. Cites outdated governance structure, capitalised interest charge to be released into the P&L, and unsustainable dividend payout ratio.

Unsustainable payout ratio WTF ???? They're only paying out 80% of after tax EPS whereas almost all other REIT's are paying out very close to 100%, in Argosy's and KIP's case they're paying over 100%.

Couta1 - Mate I agree they were both good buying at those prices and I did, (sold Argosy at $1.00 on the basis that they're fully priced with no growth). GMT are now a dividend story at the current price.
As mentioned previously, if they change their payout ratio to 90% next year then we are talking about a stock paying out a gross yield of 10% for investors on the 33% tax rate.

The prices of these stocks bottomed out at those level's much earlier this year at a time when world growth looked like it would take off and interest rates with it.
Now we're looking at much more muted growth it appears fears of rapidly rising interest rates have abated significantly, globally and within N.Z.
In that sort of environment I expect these sort of returns to be highly attractive in a sideways environment.

[Beagle]

Craigs have downgraded from hold to sell, as above its price target. Cites outdated governance structure, capitalised interest charge to be released into the P&L, and unsustainable dividend payout ratio.
I've found Craig's call most intriguing and definitely didn't agree as posted above. What I find really interesting is that right after they made that call 3 weeks ago the stock got hammered down to $1.05 - $1.055 on really high volume but since then its been steadily rising to close today at $1.13. That's a substantial gain in only 3 weeks for a low beta, low geared property stock in what has ostensibly been a pretty flat market environment and an epic fail on that analysts part at Craig's in my opinion. Very happy to continue holding :)

[winner69]

Gaynor seems less than impressed with the carry on around the recent sales.

Seems those in the trust have lost out on millions, if not tens of millions, with the managers doing very well


http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=11358864

[Chaowee88]

Gaynor seems less than impressed with the carry on around the recent sales.Seems those in the trust have lost out on millions, if not tens of millions, with the managers doing very wellhttp://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=11358864Ouch, that a scathing assessment

[percy]

Well I am not happy.Excellent article.
The trust I help out on was recommended by Macquaries to buy GMT and PCT for yield.
I told them I did not follow, or like these property trusts, as I thought they were run for the managers' benefit,rather than sharesholders' benefit.
Macquaries told me both GMT and PCT had internalised their management,so there were no conflicts of interest.
Looks as though the next meeting with Macquaries is going to another round of "frank talking" by Percy.

[Beagle]

Gaynor seems less than impressed with the carry on around the recent sales.

Seems those in the trust have lost out on millions, if not tens of millions, with the managers doing very well


http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=11358864

I own a significant holding in GMT and am not overly enamoured with the deal. At first I was extremely angry and communicated with the trustee in an effort to block the deal. As a result of that communication John Dakin Chairman of Goodman called me and we had a lengthy and frank discussion.

The deal in effect involves the net disposal of approx. $80m of Viaduct property by GMT at 31 March 2014 values. I was assured that transaction costs were 1% so less than $1m.
John's position was that the benefit to GMT will be brought about by the greater diversification of properties /' tenants in the Viaduct area.
I outlined my position that with a well diversified portfolio already I thought the value of the extra diversification was negligible and that the deal should have at the very least been subject to a current valuation.
John responded that people should not get too caught up with the price as they'd "touched up" the 31 March 2014 valuation as they were working on the deal back then.
I'm not sure how you "touch up" a valuation by one of the major international valuers so don't really accept that explanation and told him that.

I went on to explain that their competitor Argosy had commissioned a valuation on their properties as at 3O September 2014 and the average market capitalisation rate had firmed by 20 bps such that the valuation of their properties had increased by just over 2% compared to 31 March 2014. John went on at some length about the strategy of Goodman which I don't have time to explain in detail today.
While I think it is great that Bryan Gaynor is piling the pressure on Goodman and the NZX and that the NZX should not have granted a waiver and I agree that there are some positives for the deal, albeit very minor, the net cost to GMT is nowhere near as high as Bryan makes out.

Best guess is Viaduct values would have gone up a similar amount based on market cap rates firming 20 bps so say about 2.5% on 80M ($2m) plus transaction costs of $800K total approx. $3m.
.
We had a lengthy discussion about their pay-out ratio, their strategy with Highbrook business park and how long that would take to complete.
As I said at the outset I am not overly enamoured with the deal but assertions its destroyed vast amounts of value appear exaggerated.

It is worth noting that GMT pays out only 80% of its after tax EPS while in a development phase with the completion of the highbrook park development.

[winner69]

Good report their Roger

Wasn't one of Gaynor's other grumps that the management company are working themselves into a situation where they cant be sacked (somehow building up 26% equity)

Jeez, you seem to pick up some doozie companies to put your money into. A Norah who sells just before an announcement and a Chairman John who 'touches' up valuations, Good god.

[Beagle]

GMT has been a solid performer for me this year. Bought at 96 cents early in 2014, now $1.11, collected 3 quarterly divvy's so far and another one due next month and this sort of return on a VERY low risk stock.

[RRR]

This inherent conflict of interest is the reason why I exited GMT! GMT is a quality stock, but we do have other LPTs with internalised management!

[Beagle]

This inherent conflict of interest is the reason why I exited GMT! GMT is a quality stock, but we do have other LPTs with internalised management!

You're absolutely right however when you look at the extremely high price ARG and KIP to name just two examples paid to internalise their management, the ongoing debt burden imposed on those entities to fund the buy-out and then add in the ongoing cost to manage the property themselves is there really all that much in it in terms of net benefit from internalisation ? I maintain there isn't much in it and at the end of the day investors are better to focus on the quality of the portfolio, the quality of the management and future prospects.
Whether GMT have received quality management in this instance is an open question. VHP is an example of a property trust that also has external management but due to its performance nobody seems to be making much noise about the management issue in regard to that stock. Whether internal managers of ARG, KIP and others do a better job than their previous external managers is also an open question. Internalising management removes any potential conflict of interest, no question about that.

[RRR]

Cost of internalisation is one off cost, although expensive, but it removes the constant threat of the conflict of interest in property portfolio transactions of the LPT.
VHP - the manager is from Canada and we have lost the opportunity to internalise the management forever! NZSA should have been a bit more lenient with this one, they are the ones who argued that the price of internalisation is expensive! So the ANZ (I think) just sold the right of management to SW group from Canada.

[percy]

Cost of internalisation is one off cost, although expensive, but it removes the constant threat of the conflict of interest in property portfolio transactions of the LPT.
VHP - the manager is from Canada and we have lost the opportunity to internalise the management forever! NZSA should have been a bit more lenient with this one, they are the ones who argued that the price of internalisation is expensive! So the ANZ (I think) just sold the right of management to SW group from Canada.

I was a shareholder in VHP at the time the Canadians brought their holding and the management contract.
VHP were about to internalise the management.
I thought it was a disgrace,so sold.

[Beagle]

Just on $25m clipped off the market cap of GMT yesterday as a result of Bryan Gaynor's article. Hmmm.
Thing is when you trawl through all the LPT's with internalised management I can't find anything more I like better than GMT.

[winner69]

Went through the last Annual Report and no mention of valuations being 'touched up'

'Touched up' must be a technical term or something

[Beagle]

LOL yeah, highly technical.
Property for industry is the most directly comparable stock. PFI trades at $1.46 on a forecast dividend pay-out of 7.25 cps paying out 95-100% of earnings after tax, so working on this being say 97.5% of earnings this implies EPS of 7.43 cps.
GMT trades at $1.10 on a forecast pay-out of 6.45 cps paying out 80% of after tax earnings for EPS of 8.06 cps, i.e. greater EPS. Even accounting for the fact that Goodman are taking their management fee is extra units for the next 4.75 years and there's just over 3% additional units due to be issued as final consideration for the highbrook acquisition EPS of these two companies are ostensibly the same.

Must be a pretty fancy management structure at PFI to justify such a significant premium to NTA and such a low yield ? Shame it isn't giving a more meaningful EPS for a stock trading at $1.46.

Motto. Look past the nonsense and politically incorrect / non flavour of the month management structure to determine the real yield and EPS. Non flavour of the month is often where you get the best deal :)

[Beagle]

Goodman sells Enterprise park for $53.2 million, book value $50m. I know they have been trying to sell this older property for some time so its a good result at more than 6% above the most recent 2014 valuation.
No reason why they can't significantly lift their dividend payout ratio next year
http://www.sharechat.co.nz/article/84793685/goodman-sells-enterprise-park-in-wiri-for-53-2-million.html?utm_medium=email&utm_campaign=Goodman+sells+Enterprise+Park+in+Wiri +for+532+million&utm_content=Goodman+sells+Enterprise+Park+in+Wiri+ for+532+million+CID_32b12dd5511d8d1edb89a31e0a0fd6 c0&utm_source=Email%20marketing%20software&utm_term=httpwwwsharechatconzarticle84793685goodma n-sells-enterprise-park-in-wiri-for-53-2-millionhtml

[Billy Boy]

[QUOTE=Roger;522654]G
No reason why they can't significantly lift their dividend payout ratio next year.
Yes and no
I like what they are doing... ditching the old and building new, and they don't have a DRP, which is good. A lift in NTA and Shr holders Equity through valuation's.
Arg are the one's that need to lift their divvy as they are drifting at the moment. Their DRP is holding them back through dilution. Which is not good
BB

[Beagle]

I noted recently ARG reaffirming dividend guidance for 2015 at 6 cps and therein they noted that they were paying out 102% of distributable earnings at that level, i.e. digging into distribution reserve to maintain the 6 cps.
On the other hand GMT paying 6.45 cps and only paying out 80% of distributable earnings. Clearly with all the recent sales by GMT there's quite considerable scope to raise their dividend significantly for FY 2016 whereas with ARG none at all.

[Billy Boy]

Yep Rodger you'r onto it.
GMT... buy paying a low div they can effectively lift the portfolio.Which in the long run is good for shareholders.
Arg on the other hand is giving shareholders the finger. But the managers are still collecting their bonuses.
BB

[Beagle]

I dunno about giving them the finger BB. ARG have had a very good run and are now trading at quite a substantial premium to NTA.
I think its a reasonable investment but like many in the LPT sector is fully priced.

[fungus pudding]

I dunno about giving them the finger BB. ARG have had a very good run and are now trading at quite a substantial premium to NTA.


They've certainly been a better investment than Goodman, which have been a standout among LPTs - as useless.

[Billy Boy]

I dunno about giving them the finger BB. ARG have had a very good run and are now trading at quite a substantial premium to NTA.
I think its a reasonable investment but like many in the LPT sector is fully priced.
.
Dont get me wrong here as I have a sizable holding in ARG.(well into 6 fig's)
I now see Arg as fully priced and no where to go . As such I've stopped my buying on them.
A good thing in Arg's favour is their dropping of the retail sector. (IMO).
I see GMT as a better buying strategy for further down the track because of their model,
as you explaned above.
Fungus... welllll you have always had a snitcher GMT, and away's back I was agreeing with your
reasoning. But not now.
Time to dust off the suit and go for Arg's board ???;)
.
cheers BB:)

[fungus pudding]

.
Dont get me wrong here as I have a sizable holding in ARG.(well into 6 fig's)
I now see Arg as fully priced and no where to go . As such I've stopped my buying on them.
A good thing in Arg's favour is their dropping of the retail sector. (IMO).
I see GMT as a better buying strategy for further down the track because of their model,
as you explaned above.
Fungus... welllll you have always had a snitcher GMT, and away's back I was agreeing with your
reasoning. But not now.
Time to dust off the suit and go for Arg's board ???;)
.
cheers BB:)

Was I anti GMT a while back? Maybe. I don't remember, but obviously not too much cos I bought a few, but only 100,000 which is low in my collection of LPt shares. No doubt cos I saw them more as would be developers rather than investors. Still they haven't moved much in value, nor has dividend been anything spectacular. Is that going to turn round? I doubt it.

[Billy Boy]

Was I anti GMT a while back? Maybe. I don't remember, but obviously not too much cos I bought a few, but only 100,000 which is low in my collection of LPt shares. No doubt cos I saw them more as would be developers rather than investors. Still they haven't moved much in value, nor has dividend been anything spectacular. Is that going to turn round? I doubt it.
..
That can be said for both Arg & Gmt, and some others. I be generalising of course.
BB

[fungus pudding]

..
That can be said for both Arg & Gmt, and some others. I be generalising of course.
BB

Except I note my ARG shares have gained 29.2% against GMT at 12.7. That might be a little unfair as I'm not sure when I bought them. I'm happy that I bought substantially more ARG.

[Beagle]

They've certainly been a better investment than Goodman, which have been a standout among LPTs - as useless.

Long term they haven't been much good no point trying to debate that but buying at 96 early this year, collecting 4 divvy's and now $1.12 is a pretty good run for those that timed their entry well :)
BB I agree with you regarding ARG, nowhere for the SP to go but track sideways. Purely a tax efficient yield play now with their PIE status. 6 / 110 = 5.45% net which for those on a 33% rate = 8.1% gross. Not spectacular but in an environment where most people are picking interest rates to stay lower for longer not too bad. You could invest in Russian bonds and give your portfolio a yield boost :eek2:

[Billy Boy]

2morrow the FED's will come out with their money policies,
depending on what they do will have an impact on the derivative Markets
This in turn could send the Share markets into a tail spin. The best place to
be right now is in defensive stocks like LPT's.
Lets wait and see ???
BB
ps I hope I'm Wrong......

[Billy Boy]

Except I note my ARG shares have gained 29.2% against GMT at 12.7. That might be a little unfair as I'm not sure when I bought them. I'm happy that I bought substantially more ARG.
.
I am talking about todays prices in conjunction with todays divvys.
My other comments are in this context as well, and looking forward.
BB:)

[Beagle]

.
I am talking about todays prices in conjunction with todays divvys.
My other comments are in this context as well, and looking forward.
BB:)

Yep, based on both ARG and GMT trading at $1.12 today the former is paying a gross yield of exactly 8% and the latter 8.6% with only GMT having significant potential to ramp up dividends in the near / medium term. (Assumes investors on 33% tax rate)
With little prospect for capital gain from here for either of them its pretty clear to me which is the better medium term yield prospect.

[Billy Boy]

Yep, based on both ARG and GMT trading at $1.12 today the former is paying a gross yield of exactly 8% and the latter 8.6% with only GMT having significant potential to ramp up dividends in the near / medium term. (Assumes investors on 33% tax rate)
With little prospect for capital gain from here for either of them its pretty clear to me which is the better medium term yield prospect.
.
And Gmt div is based on 80% earnings, They retaining 20%.
Agr are paying 102% so they gotta rely on the bloody DRP.
bb

[Beagle]

.
And Gmt div is based on 80% earnings, They retaining 20%.
Agr are paying 102% so they gotta rely on the bloody DRP.
bb

Yep. See post #23. I bleated like a lamb lost from its mother to John Dakin about the 80% pay-out ratio which they've had for years and is out of line with the rest of the LPT's.
The main thrust of my argument was LPT's are being priced on yield and with all your asset sales fully funding new development there's no need for you to retain 20% of distributable earnings anymore.
I went on to point out, (hammer the point home), that if they really felt they needed to retain some cash they could always reinstate the DRP in tandem with lifting the pay-out ratio.
Not sure if he was really listening to be honest as at that time so many people were giving him flak over the Viaduct deal he was busy putting out fires.
Be interesting to see what happens to the SP of GMT if they lift FY16 distribution guidance to 7.5 cps in due course. I haven't finished with Mr Dakin yet. I'll send him an e.mail in the new year reminding him of our conversation and reminding him that seeing as they have even more sales in the ledger since we last spoke there's no reason they can't lift their pay-out ratio. I like paddling my own canoe :)

[Billy Boy]

Go for it Roger.
Be we a little at odds... it's heathy
I think to broaden the overall portfolio base, that way higher divvs
and Shr-Prc will naturally follow.
BB
Paddle Paddle :D

[Cricketfan]

What are people's thoughts on investing in GMT or other property stocks now? I currently have a split of about 60/40 in favour of cash and I'd like to move some more to shares but with the whole China uncertainty I think I'm at my limit there. GMT already constitutes about 25% of my share portfolio and I'm wondering whether I should top that up a bit, or maybe even another property stock like ARG.

[Onion]

What are people's thoughts on investing in GMT or other property stocks now? I currently have a split of about 60/40 in favour of cash and I'd like to move some more to shares but with the whole China uncertainty I think I'm at my limit there. GMT already constitutes about 25% of my share portfolio and I'm wondering whether I should top that up a bit, or maybe even another property stock like ARG.

If you are nervous about the China uncertainty then you are probably a bit cautious by nature. Why on earth would you allocate such high proportion of your portfolio into a single share? Even 25% in a single share is pretty aggressive (even 25% of 40% is still 10% of your investments).

[Cricketfan]

Why on earth would you allocate such high proportion of your portfolio into a single share? Even 25% in a single share is pretty aggressive (even 25% of 40% is still 10% of your investments).

My thinking was that property stocks are less volatile and a more conservative option, so I felt more comfortable having a larger allocation in that, whereas the rest of my share portfolio is more diversified. I also intended to grow my other shares over time so that the proportion of GMT would go down, but that was before the whole China thing which has unnerved me a bit (yes I am cautious by nature).

[Beagle]

What are people's thoughts on investing in GMT or other property stocks now? I currently have a split of about 60/40 in favour of cash and I'd like to move some more to shares but with the whole China uncertainty I think I'm at my limit there. GMT already constitutes about 25% of my share portfolio and I'm wondering whether I should top that up a bit, or maybe even another property stock like ARG.

I have a reasonable sized allocation to GMT and its still my preferred property investment. I think it wouldn't hurt you to hold some ARG as well, (I do).

I expect in the ultra low interest rate environment that we have for the foreseeable future GMT will do very well with cheap funding, capital gains from the capitalisation rate coming down and the yield for the low / moderate risk involved is reasonably attractive. Low risk and reasonable return. I'm expecting about 6.85 cps distributions next year and the stock trades cum the next quarterly distribution due next month of 1.6625cps.
6.85 / 1.265 = 5.415% PIE distribution. For those on a 33% tax rate that's 8.08% gross. Note, investments like this are attractive on a relative basis compared to cash which I expect will be under 3% shortly even for bonus saver accounts, (which are subject to the Reserve Bank's open bank resolution, whereas GMT aren't).

Its still an equity investment so don't expect immunity to major world-wide economic influences including China but I think on a risk reward basis its worth having a reasonable sized investment in GMT in a well balanced portfolio. Like you I am over 50% cash at present. I have a 6.5% portfolio allocation in GMT. I am looking at increasing that to about 10% because I think its one of the safest investments on the NZX.

They seem determined to keep 20% of retained earnings at this stage as they continue to fill out their Highbrook Park development. Over the years this will change when they get to under 5% of their portfolio value held as development land (currently about 10%). This augers well for the prospect of long term dividend increases.

[winner69]

Cricketfan - do what Baz does, just go for it and do what your instincts tell you.

(Mind you Baz was an abject failure yesterday)

[RGR367]

Though I sold some of it late last year, I still have about 7% of my portfolio on GMT and would not hesitate to increase or decrease it when the opportunity is presented. I view this stock as a boring but very reliable dividend giving stock :)

disc: holder since IPO

[macduffy]

I, too, have a few GMT but I'm conscious of the view of some pundits that their management structure is outdated and not entirely aligned to the interests of unitholders. Other property companies/trusts, such as AMP and Kiwi have "bought out" the original management companies and are thought to now more directly represent the interests of the owners.
What are others' thoughts on this? Roger?

[Beagle]

As long as its EPS accretive, the price is competitive and new management have a long and proven track record then I'm happy to see the management internalised, otherwise I'm reasonably comfortable with the status quo.

Goodman argue their track record and contacts through the Goodman group and property management experience and expertise means unit holders get great management and good value for money from the recently renegotiated management contract. Its hard to make a call on this one way or the other. That said, there was a fair bit of disquiet about their deal around regarding the Viaduct Harbour J.V. and I think they learned from that. (Really that sort of transaction should have been subject to a unit holders meeting and been done at current market value, not the previous balance date. FWIW John Dakin tells me that the management team personally have about 7 million units and argues management and unit holders interests are indeed aligned...make of that what you will....)

I think some pressure to increase the dividend and reinitiate the DRP wouldn't go amiss. Seeing as GMT regularly remind us that they're recycling old assets to pay for new developments why the need to retain 20% of earnings ? If they feel they need some cash up their sleeve why not pay out 100% of earnings after tax and reinitiate the DRP for those that want to reinvest ?

I think there's some potential for unit holder activism on this front and its on my radar as a job for this year. Most of these shares are valued by investors as a yield instrument and I think in this case any move to reconsider the pay-out ratio would be materially beneficial for the SP. Note to self: I Must buy some more and then start paddling my canoe a bit harder :D

[Mickey]

As long as its EPS accretive, the price is competitive and new management have a long and proven track record then I'm happy to see the management internalised, otherwise I'm reasonably comfortable with the status quo.

Goodman argue their track record and contacts through the Goodman group and property management experience and expertise means unit holders get great management and good value for money from the recently renegotiated management contract. Its hard to make a call on this one way or the other. That said, there was a fair bit of disquiet about their deal around regarding the Viaduct Harbour J.V. and I think they learned from that. (Really that sort of transaction should have been subject to a unit holders meeting and been done at current market value, not the previous balance date. FWIW John Dakin tells me that the management team personally have about 7 million units and argues management and unit holders interests are indeed aligned...make of that what you will....)

I think some pressure to increase the dividend and reinitiate the DRP wouldn't go amiss. Seeing as GMT regularly remind us that they're recycling old assets to pay for new developments why the need to retain 20% of earnings ? If they feel they need some cash up their sleeve why not pay out 100% of earnings after tax and reinitiate the DRP for those that want to reinvest ?

I think there's some potential for unit holder activism on this front and its on my radar as a job for this year. Most of these shares are valued by investors as a yield instrument and I think in this case any move to reconsider the pay-out ratio would be materially beneficial for the SP. Note to self: I Must buy some more and then start paddling my canoe a bit harder :D

Thanks very much Roger. I've been looking at GMT lately and your thoughts are very helpful indeed (as are your posts on other topics). I haven't yet decided what my entry point might be so will continue with my research and make a decision at some point.

[macduffy]

Yes, thanks, Roger.

The fact that other property trusts have succumbed to pressure for more unitholder involvement might augur well for some change. It probably depends on how strongly the instos feel about the issue - and the size of their holdings.

[Beagle]

https://nzx.com/companies/GMT/announcements/279200

Stellar result coming up !!

[Beagle]

Huge volume through today, highest in many many months so time for a review which coincides with the two year entry point for me at 96 cents. Now $1.36 up 41.6% and a 9% gross divvy yield paid quarterly. Total shareholder return in 24 months 59.6%...not too shabby for a boring REIT.

Of more interest is the current yield and outlook. What is attractive to people that is fuelling this enormous volume today ? I believe the weighted average capitalisation rate is coming down to 7%, (the rate the valuers use to value the buildings) which as per previous post will raise NTA by about 10 cps. I see further potential for this rate to come down next year as the economy softens and we head to 100 year lows with interest rates and I see interest rates staying very low for a very long time.

I expect a minimum pay-out this year of 6.75 cps and as stated before its a PIE so taxpayers pay no further tax on distributions. Based on $1.36 the prospective yield to 33% top rate taxpayers is (6.75 / 136) / 0.67 = 7.4%. As stated earlier in the thread there is potential for them to lift the pay-out ratio to more than 80% of distributable earnings and I suspect there could be some inside knowledge that this could happen which could be fuelling today's massive volume.

Either way a minimum gross yield of 7.4% I expect GMT will be reasonably attractive to low risk investors wanting exposure to a modern portfolio of commercial and industrial buildings with potential further upside. I continue to hold and added a few more today and expect REIT's will be a reasonably attractive alternative for retired investors who will have no choice to take on board some risk when their bank starts offering to roll over their term deposit at ~ 3% and even less later this year. (Plenty of funds sitting at a "whopping 2% and headed lower" in a call account brings fresh focus to one's decision making).

I expect the scramble for safe yield to continue for the foreseeable future so these still look like a pretty safe investment to me.

[troyvdh]

Dear Roger....listed property companies do indeed appear to be the place to be ...fairly predictable me thinks given blah blah...anyways Ive held PFI for ever ..they have returned around 9 percent a year for over 2 decades...(I may have asked you this before)...what is the historical return per year for GMT..cheers

[Lewylewylewy]

I think Google finance might help you there Troy

[Beagle]

Dear Roger....listed property companies do indeed appear to be the place to be ...fairly predictable me thinks given blah blah...anyways Ive held PFI for ever ..they have returned around 9 percent a year for over 2 decades...(I may have asked you this before)...what is the historical return per year for GMT..cheers

Hi Troy, My apologies, I didn't get around to asking them. Don't know but looking at google finance as Lewy suggested shows PFI have outperformed them over the long haul since GMT's inception.

Actually PFI have done very well over the long haul compared to all of the listed property trusts but I guess its now a toss up between yield and possible capital growth. Not sure how Fisher and Paykel's announcement yesterday affects PFI, maybe you can shed some light seeing as F & P by far PFI's biggest tenant. Current yield 4.4% for PFI not sure if its a PIE or not ?

I had a quick look through PFI's recently released annual report. I don't wish to offend but at first glance a lot of the industrial properties look fairly old to me. I think on a quick look one of the key differences between these two apart from the higher yield at GMT, is that GMT have developed a of of newer properties on their Highbrook land development and also have some high quality office properties.

I'm more than happy to debate the relative merits of these two going forward but kudos to the team at PFI, there's no argument their performance over the long haul at just on an average of 9.5% per annum has been very good. That said as I am sure you can imagine I'm pretty happy with a near 60% total shareholder return in just two years from GMT.

Where too from here is the real question of course.

[fungus pudding]

Hi Troy, My apologies, I didn't get around to asking them. Don't know but looking at google finance as Lewy suggested shows PFI have outperformed them over the long haul since GMT's inception.

Actually PFI have done very well over the long haul compared to all of the listed property trusts but I guess its now a toss up between yield and possible capital growth. Not sure how Fisher and Paykel's announcement yesterday affects PFI, maybe you can shed some light seeing as F & P by far PFI's biggest tenant. Current yield 4.4% for PFI not sure if its a PIE or not ?



It is a PIE. I think all LPTs are PIES with the exception of Augusta. It would be great if somewhere there was a list of PIES. It's hard to know which companies are PIEs. A lot of them don't even state on their websites.

[troyvdh]

Roger I asked PFI about F+P and age of properties...they replied
-they have 8.5 years remaining on lease
-manufacturing area only took 1/3 of space
-The PFI property is F+P hub and probably they are going to amalgamate there rather than depart

re age of properties ...PFI are comfortable with there properties and are constantly reviewing same et al

Cheers troy

[Jay]

Recently bought into PFI and ARG - (the combined % of the two approx. = the % I would normally put into 1 share) So good to hear about F & P- (thanks troyvdh) and hope I backed the right horses or at least good ones!

[Beagle]

Thanks Troy.

[Cricketfan]

Sounds like a good result: https://www.nzx.com/companies/GMT/announcements/282613

[Jenny Ruth]

Hi all. The latest column published on my Substack, Just the Business, this morning looks at the proposal to internalise Goodman Property Trust's management contract. The headline is: Goodman proposal is a $500m “vote of confidence in NZ”
And you can find it here:
https://justthebusinessjennyruth.substack.com/p/goodman-proposal-is-a-500m-vote-of

[winner69]

Hi all. The latest column published on my Substack, Just the Business, this morning looks at the proposal to internalise Goodman Property Trust's management contract. The headline is: Goodman proposal is a $500m “vote of confidence in NZ”
And you can find it here:
https://justthebusinessjennyruth.substack.com/p/goodman-proposal-is-a-500m-vote-of

I commented when the deal was announced ‘ Always suspicious of Internalisation Management proposals’

Suppose the headline on your article says I shouldn’t be.

[Jenny Ruth]

Hi winner69. Your suspicions will always serve you well. You can see the Forsyth Barr analyst thinks unitholders will be paying a very high price. However, the GMT business is high quality and well-managed. When PFI internalised, I thought the price was high, but PFI is similarly high quality and well-managed. The big difference is that PFI's management contract owners wanted to exit. Goodman is taking payment in new units, so no cash outlay for unitholders, and it has pledged to help seed the new fund with $200m. So effectively, Goodman is investing about another $500m. I thought that the group having to pay the trust management fees on the new fund was a nice touch, too.
Given Goodman's track record, I'm inclined to think this is likely to work out well for unitholders.

[Bjauck]

Hi all. The latest column published on my Substack, Just the Business, this morning looks at the proposal to internalise Goodman Property Trust's management contract. The headline is: Goodman proposal is a $500m “vote of confidence in NZ”
And you can find it here:
https://justthebusinessjennyruth.substack.com/p/goodman-proposal-is-a-500m-vote-of
Do you pay Sharetrader an advertising fee for all these links to your paid subscriber only articles?

[fungus pudding]

Hi all. The latest column published on my Substack, Just the Business, this morning looks at the proposal to internalise Goodman Property Trust's management contract. The headline is: Goodman proposal is a $500m “vote of confidence in NZ”
And you can find it here:
https://justthebusinessjennyruth.substack.com/p/goodman-proposal-is-a-500m-vote-of

Please could you indicate on your posts 'subscriber only' - and stop wasting the majority of readers' time.

[RTM]

Please could you indicate on your posts 'subscriber only' - and stop wasting the majority of readers' time.

I seem to be able to remember that Jenny’s posts are subscriber only. Not that hard really.