ARG - Argosy Property.

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Originally Posted by BlackPeter

... another $600k to the bottom line as gain from selling non core assets:

https://www.nzx.com/companies/ARG/announcements/290682

I guess its not overwhelming news, but much better than a book loss ...

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Better than a poke in the eye with a sharp stick that's for sure. I hold and am wondering if the decline to 52 week lows is a little overdone ?

I get it that the market is a little worried about the fact that we may be at the bottom of the interest rate cycle, certainly from an international perspective but with RBNZ looking to cut next month and a current PIE exempt return of 6.1 / 106 = 5.75% = 8.58% gross for 33% taxpaying shareholders I would have thought we'd found a floor at the current level.

Interesting to note that ARG has grown underlying earnings per unit by a CAGR of 6% per annum for the last five years. A somewhat misunderstood and very conservative investment in my opinion.

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Originally Posted by Roger

Better than a poke in the eye with a sharp stick that's for sure. I hold and am wondering if the decline to 52 week lows is a little overdone ?

I get it that the market is a little worried about the fact that we may be at the bottom of the interest rate cycle, certainly from an international perspective but with RBNZ looking to cut next month and a current PIE exempt return of 6.1 / 106 = 5.75% = 8.58% gross for 33% taxpaying shareholders I would have thought we'd found a floor at the current level.

Interesting to note that ARG has grown underlying earnings per unit by a CAGR of 6% per annum for the last five years. A somewhat misunderstood and very conservative investment in my opinion.

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Looks like there are some investments we can agree on ...;); I couldn't resist to buy some more at 106.5 ... and yes, this is the conservative part of my portfolio I used to put into bonds - at times when you still got a return from them worthwhile mentioning.

While ARG might go down slightly if & when bond interest rates are returning above 6% or so again (not sure, I expect that anytime soon), would I think that they are a quite safe investment even if the markets decide at some stage to rerun the GFC ... it would take a lot to push a material number of their customers at the same time out of business, and even than would they still have the buildings.

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Originally Posted by Paper Tiger

Yesterday (when all my troubles seemed so far away) I sold my ARG (to buy more Grrrhhhh :D)

Some of that I tipped into a few more EBO shares - I do rash things from time to time.

So EBO is now slightly more than 10% of the portfolio and that is enough.

Best Wishes
Paper Tiger

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That was 14-Sep-16 when I posted that.

Short term that turned out to be a great move. Hopefully long term too.

Subsequently I have sold all of my GMT, KPG & SPG as well, and own nothing in this sector. Again a good short-term move.

Basically I see much more downside than upside to listed property and am churning the money into likely looking ASX listed small/medium caps & (more importantly) foreign travel over Xmas & New Year.

Best Wishes
Paper Tiger

ARG NTA as at balance date was $1.04. Taking into account interest rate decreases since then I'd expect their current NTA with a slightly more favourable market capitalisation rate on their building lease income to be approx. $1.06-$1.07 so its basically trading at or slightly below NTA now.

The stripey one could well be right that it could correct below NTA but I am happy to hold a modest position for the dividend yield.

NZ prop stocks down through 60 and 200DMA, RYM and co close behind.Same in AUS. Where this downward trend will end may take a while. Will keep a watch for the bend at the end of the trend.

Will ARG be impacted by NZ Post House still being largely unoccupied since the earthquakes? Note that Kiwibank had moved out of that building. Not sure if losses will be covered by ARGs insurance cover?

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Originally Posted by JeremyALD

Will ARG be impacted by NZ Post House still being largely unoccupied since the earthquakes? Note that Kiwibank had moved out of that building. Not sure if losses will be covered by ARGs insurance cover?

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Understand floors Kiwibank occupied covered in asbestos and when / if they return it wont be to next year

Just street talk

Hopefully ARG covered.

Interesting noting more divestments and reinvestments in today's announcement.
Positive they have made a new "mutually benefical long term relationship."
Interesting partner,with a growing NZ foot print.

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Originally Posted by percy

Interesting noting more divestments and reinvestments in today's announcement.
Positive they have made a new "mutually benefical long term relationship."
Interesting partner,with a growing NZ foot print.

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Sale prices and premium to NTA of the regional properties sold was exceptional. Leasing land out at a 5% return is something I'm not especially keen to see them doing no matter who they are leasing it too.

In that case buy more shares in ARG's partner's listed company.
NB.I believe ARG's partner brought the $8.6mil Wiri site for $4mil in 2015.
A very healthy development margin.!!!!..lol.

Who is this partner company to which you refer Percy ?

TRA.................Turners Automotive Group Ltd.
The property ARG brought from Turners, is Turners Wiri Truck and Machinery site,160 Roscommon Road,which ARG paid $8.6 mil.Interesting to note TRA paid $4mil for it in 2015.It is pleasing seeing TRA "book" the development margin.Great for ARG having a solid NZ listed company on a long lease.
As ARG's CEO,Peter Mence said,"We are pleased to have commenced what we envisage to be a mutually benefical long-term relationship with an organisation that has a significant real estate footprint accross NZ".
TRA's interim at the end of the month should be "interesting".
TRA's future large [more than possible] developments in ChCh and Auckland will most probably be on sold to ARG.
Couta1 may be right with TRA's "target price".......lol.

ARG may have paid too much for that site as land values in South Auckland have not increased that much. A 5% net yield isn't great. Definitely something I will be bringing up at the next ARG shareholder investor day. https://www.aucklandcouncil.govt.nz/...an=12345402517
I have a client with some industrial land near to that location and we feel the real value is ~ 25% above Council value. On that basis ARG may have overpaid but its a funny market and some properties are selling for below 5% gross yields with much weaker leases than what ARG have signed up TRA too.
What this suggests to me, (and as alluded too in ARG's recent investor presentation) is that industrial cap rates have definitely declined. Further evidence is provided by the substantial premium ARG achieved above 31 March 2018 book values for their regional properties sold.

I think we could see a cracker result inclusive of revaluation gains for ARG next week. NTA could show a material increase above its current level of $1.12.
This remains my preferred property stock as its trading at a material discount to 30 Sept 2018 net asset backing.

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Originally Posted by Beagle

ARG have obviously paid too much for that site as land values in South Auckland have not increased that much. A 5% net yield is pathetic. Definitely something I will be bringing up at the next ARG shareholder investor day.

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Jeeze....they should have checked with you before they bought it Beagle ! What were they thinking?

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Originally Posted by RTM

Jeeze....they should have checked with you before they bought it Beagle ! What were they thinking?

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Yes I toned that post down a bit after recalling that some deals are going through at under a 5% yield. Shortage of commercial sites in South Auckland ? Maybe they're hoping TRA will develop it but they've probably got their own idea's like shifting a shipping container onto it lol
Definitly a subject to bring up at the next ARG investor day.

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Originally Posted by RTM

Jeeze....they should have checked with you before they bought it Beagle ! What were they thinking?

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My thoughts too....
What do they say about property values.?
The value is governed by the quality of the tenant.
ARG know the value of Turners, and "benefit ofl long-term relationships."

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Originally Posted by Beagle

Yes I toned that post down a bit after recalling that some deals are going through at under a 5% yield. Shortage of commercial sites in South Auckland ? Maybe they're hoping TRA will develop it but they've probably got their own idea's like shifting a shipping container onto it lol
Definitly a subject to bring up at the next ARG investor day.

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Google Turners Wiri,and you will note Turners have developed the site.[to suit Turners requirements].

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Originally Posted by percy

TRA.................Turners Automotive Group Ltd.
The property ARG brought from Turners, is Turners Wiri Truck and Machinery site,160 Roscommon Road,which ARG paid $8.6 mil.Interesting to note TRA paid $4mil for it in 2015.It is pleasing seeing TRA "book" the development margin.Great for ARG having a solid NZ listed company on a long lease.
As ARG's CEO,Peter Mence said,"We are pleased to have commenced what we envisage to be a mutually benefical long-term relationship with an organisation that has a significant real estate footprint accross NZ".
TRA's interim at the end of the month should be "interesting".
TRA's future large [more than possible] developments in ChCh and Auckland will most probably be on sold to ARG.
Couta1 may be right with TRA's "target price".......lol.

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Incorrect. They paid $4.8m for it in 2016. https://www.nbr.co.nz/article/turner...d-48m-b-192486

Some silly deals being done presently on silly yields...ARG's latest is one of them...but their two sales at prices substantially over book value suggest others are playing silly buggers with their buying too ! All this augers well for ARG's upcoming half year result.

So what.
$4mil in three years is a very healthy gain.

Try and be accurate please. There's a 20% difference between $4.0m and $4.8m. Maybe being a bean counter I am a little fixated with the detail because I have to be in my job but there's no way $4.8m rounds down to $4m. I agree TRA have done well probably mostly because they got it very cheap in 2016. (Distressed sale at that time perhaps ?) So yes, kudos to TRA who have done well making a $3.8m gain less transaction costs.