KPG - Kiwi Property Group Limited

[LaserEyeKiwi]

Congrats Habits on your portfolio. I too invested in residential property many years ago and built-up a large portfolio which enabled me to retire in my 40s. Sure there can be issues with Tenants now and again. Understand that a lot of people don’t like taking on large mortgages but overall it has been very ,very easy. Most tenants are good people. The key is picking the right tenants, doing proper reference checks and credit checks. Most of our properties are now worth four or five times what we paid for them. When we started buying people were saying the same things the knockers are saying now, “they’re too expensive, how can you cope with all the tenant problems, interest rates will skyrocket,”I have heard it all.

At the end of the day there is one simple fact “there is only limited supply of land” and like it or hate it our population is going to keep growing.

So going back to KPG I think it’s going to be a game changer for them in a positive way with residential towers at Sylvia park. The ability to take the lift down with bars, restaurants and shopping at your doorstep. A train station right there is why I think it’s going to be a gold mine. I currently have a small position in KPG and do agree with Beagle regarding the risk regarding the current net asset value. The two large shopping centres that they are selling to fund this have been on the market for some time with no announcements made.

Delta is a game changer so I would imagine that anyone looking to purchase these assets would want these at a very attractive price considering the risks. So until they have concluded the sale and we can get some clarity on the future with COVID I won’t be adding to my portfolio.

FYI they updated the mall sales process on the call yesterday - it’s in the “advanced stages” and lockdown caused some minor delay but proceeding as scheduled. In other words the sale is basically done with a few small steps left to complete before announcement is made.

[LaserEyeKiwi]

Hey beagle, the media just said ‘the project looks good on a spreadsheet but in reality a lot of the assumptions made need to play out in reality’

Same commentator said the interest deductibility long term is no given

was asked on the call yesterday - immaterial to project apparently as this will be funded out of company issued debt and cash so they aren’t relying on interest free deductibility (just like any listed industrial/commercial/retail/hotel property company have interest deductibility on their assets currently). But they did say that would of course be advantageous if it resulted, and have had discussions with government about BTR sector.

[Rawz]

Correct me if I am wrong but isnt this model widely used in Europe? Big property corporates build to rent and are happy to lease a place to a tenant for LIFE. Good for the property company because they have multi decade long term views. Good for tenants as they dont face the risk of being kicked out. There are a lot of people living in NZ that will never own their own home but can happily pay rent.

If Jacinda gets another term I suspect the screws on mum and dad property investors will tighten even further, many will decide to call it quits and sell up. The KPGs of the world will need to step in a be the countries landlord alongside more professional property investors that are already in the market.

This is just the start and KPG are the leaders. I think these apartments near shopping malls and major transport links will be highly sort after and attract premium 'working professional' type tenants.

I own a rental in the CBD and the building manager is completely hopeless, body corporate not much better. Everything moves so slow when a complaint is made by a tenant. If the entire apartment tower is owned and managed by one single entity it will be far better for tenants, and if a place is great for tenants there will be demand for it.

[LaserEyeKiwi]

Correct me if I am wrong but isnt this model widely used in Europe? Big property corporates build to rent and are happy to lease a place to a tenant for LIFE. Good for the property company because they have multi decade long term views. Good for tenants as they dont face the risk of being kicked out. There are a lot of people living in NZ that will never own their own home but can happily pay rent.

If Jacinda gets another term I suspect the screws on mum and dad property investors will tighten even further, many will decide to call it quits and sell up. The KPGs of the world will need to step in a be the countries landlord alongside more professional property investors that are already in the market.

This is just the start and KPG are the leaders. I think these apartments near shopping malls and major transport links will be highly sort after and attract premium 'working professional' type tenants.

I own a rental in the CBD and the building manager is completely hopeless, body corporate not much better. Everything moves so slow when a complaint is made by a tenant. If the entire apartment tower is owned and managed by one single entity it will be far better for tenants, and if a place is great for tenants there will be demand for it.

indeed, bizarre it has taken this long to arrive in New Zealand. Figures from yesterdays presentation:

759C5419-71D6-4F88-9FA0-E983534100A7.jpg

[LaserEyeKiwi]

I was simply referring to the fact that the unit I looked at buying if mortgaged would not enjoy interest deductibility. I wasn't referring to KPG's situation...but I think you knew that already. You must be really "impressed" that in real inflation adjusted terms KPG's share price has been going backwards for the last two decades, let alone comparing it with the property index which it has been woefully underperforming. That's quite an "achievement" in this booming market.

Original investors in RYM in mid 1999 have made over 55 times their money in just over two decades, (I got some of that), whereas over that same timeframe KPG investors have seen their shares go from 93 cents ($1.48 in 2021 real inflation adjusted terms) to $1.17, a loss in value of 21% in real inflation adjusted terms against a backdrop of the housing index more than quadrupling over that timeframe. Inflation calculator is here, have a play with it and draw your own conclusions. https://www.rbnz.govt.nz/monetary-po...on-calculator/

I think its crystal clear that over the long term KPG has been an absolute disaster as a property investment, (sort of okay if all anyone cares about is dividend yield). Two possible explanations present for this incredibly woeful long term underperformance. Investing in shopping malls is the worst possible asset class by a country mile and / or management are completely incompetent.

I'll leave you guys in peace which is, I am sure, what you really want...if people think it must be good buying because its at a discount to NTA or that this BTR thing is a game changer for KPG, and you trust management to deliver then good luck to you because I think its clear you are going to need it.

don’t disagree with you that besides dividends it wouldn’t have been a great experience being a long term investor in KPG. I have only been building a position over the last couple of years, so am more focused on future returns than what has been achieved in the past. But yes you are right it is fair to keep in mind past management performance when evaluating the company. So far I am happy with the way they are pivoting the company by maintaining a healthy leverage ratio, and reducing risk with the exiting of assets in earthquake prone areas, and also now creating a large 3rd sector (BTR) to reduce exposure from the current two (Office & Retail).

[Waltzing]

Its not a performer at the moment and MR B is right the chart is simply going nowhere for several decades but it is a trade.

[Beagle]

don’t disagree with you that besides dividends it wouldn’t have been a great experience being a long term investor in KPG. I have only been building a position over the last couple of years, so am more focused on future returns than what has been achieved in the past. But yes you are right it is fair to keep in mind past management performance when evaluating the company. So far I am happy with the way they are pivoting the company by maintaining a healthy leverage ratio, and reducing risk with the exiting of assets in earthquake prone areas, and also now creating a large 3rd sector (BTR) to reduce exposure from the current two (Office & Retail).

Fair enough, good luck mate.

[peat]

From BusinessDesk

A key factor in Kiwi's decision is whether the government will keep its promise to exempt new builds from the tax changes to residential property set to kick in from Oct 1


Initially I'm like 'why wouldnt they' but then I thought about it ;+)

and this article raises the point so maybe there is some doubt about it.

[winner69]

indeed, bizarre it has taken this long to arrive in New Zealand. Figures from yesterdays presentation:

759C5419-71D6-4F88-9FA0-E983534100A7.jpg

It's mainly because NZ has never been into high rise council flats type of stuff

[LaserEyeKiwi]

From BusinessDesk

A key factor in Kiwi's decision is whether the government will keep its promise to exempt new builds from the tax changes to residential property set to kick in from Oct 1


Initially I'm like 'why wouldnt they' but then I thought about it ;+)

and this article raises the point so maybe there is some doubt about it.

that is the exact opposite of what management said on the call yesterday, Which is that the BTR development will be progressing regardless of what the government decides to do tax wise for new builds.