I think you are chasing your tail a bit here FP.
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Not sure what the issue is here - as beagle said new residential builds allow for interest to be fully deducted for 20 years no problem. And yes KPG can issue bonds any time it wants against its existing $3.2 Billion in commercial/retail assets, and has large existing bank credit lines along with ample cashflow.
also it is rather unlikely that a future National Party government won’t reverse that residential interest deductibility rule long before the 20 year period is up (for those that want there to be interest bearing debt against those BTR units in perpetuity.
Most corporates borrowing when you read the fine print is for "general corporate purposes" so in 20 years time once the initial exemption period runs out in my opinion there may need to be some apportionment of those borrowing costs. I don't want to get into technical area's of the application of tax laws on here or speculate on how or why KPG might apportion interest costs as that's 20 years away.
I went down to New Lynn today to pick up a prescription from the chemist. One bank, one Chemist and one supermarket were open in the whole shopping center. It was like a morgue.
KPG will be getting seriously affected by this longest ever lockdown, anyone who thinks otherwise is an Ostrich with their head in the sand.
That is the secondary market 2.36% still well below 6%. From .5% in Sept 2020 last year to over 2% now. Is NZ govt 300% more risky? Surely Adrian Orr can print up some dosh and start buying if it gets too high?
Is this the end of a long term interest rate cycle as Ray Dalio tells us.
If I knew the adjustment to higher interest rates was going to be quick I should get out now and buy back in later. That said it could be another 80-90 years before interest rates reach their peak again. Not sure I have that much time so maybe should focus on the shorter term interest rate cycles.
So many questions, in need of some guidance Winner69. Time to sell up and wait till yields improve? Or buy and hold?
well management aren’t concerned at all, and that’s likely because of everything I laid out below in a post from August (the vast majority of tenants by revenue are still paying KPG 100% of their rent). Speciality stores in Auckland unable to open yet are the minority of revenue, and are still paying rent, albeit some will be getting temporary relief from KPG. Regardless of the minor immediate impact on KPG, this is a soon to pass situation - just as you have rightly pointed out in the HLG thread, which is precisely why the share price has been barely impacted since going into lockdown, even with interest rate rises. On top of that KPG is well on its way to diversifying even further away from retail with BTR & Drury.
KPG v ARG - a 5 year perspective.
KPG 5 years ago ~ $1.50, today $1.15
ARG 5 years ago ~ $1.00, today $1.61
LEK tells us it will be different going forward. The dog believes a lot can be learned looking at the big picture of the last 5 years and thinks not much will change going forward in terms of their relative future performance.
Is KPG a good place to hide from the rapidly increasing rate of inflation ? Consider this. On 30 June 1997, more than 24 years ago KPG's share price was $1.15 exactly the same as it is today.
Do you know any other property investment that hasn't gone up at all in the last 24 years ?
By way of stark contrast another property investment is worth 55 times its price over the same time. Original investors in the RYM IPO. I leave you good folks to judge for yourself which business model and management have worked better for their investors but the way I see it is that
The long term picture clearly defines KPG as a profoundly epic fail as a property investment.
Some will have you believe it will be different going forward. Some people still believe in the tooth fairy.
Thank god you sold right Beagle
"Ostrich with their head in the sand"
Kiwi in the Dark...
ARRRR G...