The KPG boys not afraid to make the big calls.
25 storey block proposal for Lynn Mall.
Lets hope erecting their phallus doesn't prove to be a fallacy, suffering deflation.
Printable View
The KPG boys not afraid to make the big calls.
25 storey block proposal for Lynn Mall.
Lets hope erecting their phallus doesn't prove to be a fallacy, suffering deflation.
“A big strategic shift for Kiwi property” quote form the investor presentation today.
Couldn’t agree more. With 1,800 BTR apartments already identified for a “medium term” target at Sylvia Park & LynnMall (600 in the near term), and much more flagged for future, KPGs BTR assets will make up a significant portion of the company’s assets before decade end. Combined with Drury the company is going to look significantly different, and larger, over the next 5-10 years.
Management just said they are “reasonably advanced” in the long sale process of The Plaza & Northlands mall.
OIO approval is “not seen as an issue” (for the entity currently in the process of buying the malls).
No change in earnings guidance, implying minimal impact from lockdown so far in Auckland. Very comfortable with 5.3c guidance.
Confirming the BTR Net yield of 4.5% is after all operating costs. (8% IRR)
The advantage of KPGs landholdings really shining through here.
Call over. Analysts really loving the plan. Big day for KPG, the BTR plans are much bigger than many would have assumed - facing the prospect that BTR may dominate KPGs holdings in due course, and they have first mover advantage in the NZ market.
Pretty modest yield especially with interest rates forecast to head much higher in coming years.
Good luck getting consent for a 25 level apartment complex in New Lynn, nothing around there is anywhere near that high so it would be completely out of context for the area.
Couple of different leading health experts both opining in a report in the N.Z. Herald this morning that Auckland could be stuck at level 3 for months.
I'd be very surprised to see Auckland malls opening anytime soon and therefore expect the effects of Covid in FY22 to be much more significant than in FY21.
Recent Auckland Council decision to increase development levies in Drury by 660% is a major handbrake on the Drury development.
Just adding my perspective.
Disc: No position either long or short.
Their calculations for net yield are based on market rates but eventually they should get a significant premium based on the amenities provided. Their strategy is to get synergies for each property component type by combining them. Whether that works in Auckland only time will tell I guess.
a) 4.5% net rental yields (that is after all costs) is amazing in Auckland right now for residential - and that excludes any capital appreciation and rental increases going forward after completion.
b) KPG already got resource consent at Sylvia park for the highest part of the new apartment complex (which was well above normal zoning allows) - so it shows Auckland council is keen to play ball with allowing these developments.
c) I don’t see how the current lockdowns impacts future BTR at all? This new BTR operation will be entirely rental income that starts rolling in once thiese first BTR developments are completed in 2024. Maybe I’m missing your meaning here? If you are referring to the impact of current lockdowns on KPG: Management reiterated today on the call that they are comfortable maintaining current earnings and dividend guidance given what they have seen up until now in lockdown, and the sale process of The Plaza & Northlands are in the advanced stages.
d) the Auckland development levies as they are are very low - even at the high end of the “up to 660%” increase (there is no confirmation at all that will be that high) it does not in any way pose a handbrake on the Drury development. It is merely bringing it inline with development costs in other main centers, and besides it is a very minor cost of the overall project that is continuing at pace. They also gave an update on Drury project on todays call in reply to an analyst question: They are in the final stages of planning with Auckland council, and are also awaiting the response from central government about fast tracking of the project consent (and by implication access to the government infrastructure slush fund which would be a nice little bonus).
=====
To roundup: today was a massive day in KPG history, with the likelihood that in a decades time KPG will be almost unrecognizable compared to today. The BTR is a far bigger effort than I had anticipated. The projects already announced for the near and medium term (1600+ apartments) by asset value will exceed the company’s current market cap. KPG is set to be one of the country’s largest landlords (behind housing NZ and the retirement village operators) and to get there it isn’t even going to need to buy any extra land (although it sounds like they might to expand the effort). Such a big pivot for the company today. It also provides a compelling plan b if a large exodus from office premises over the next decade if the work from home eventuates as the norm rather than a temporary pandemic situation (eg converting existing CBD office towers to BTR stock - or a mixed use model)
Well at least having a moderate feed here is more productive than barking at passing tail pipes..
With a recent report out for Home ownership stats in the next 10 years renting look sets to increase.
One part of the report has a pretty shocking number for pacific islanders and locals.