KPG - Kiwi Property Group Limited

[Biscuit]

What sort of creativity? What 'purpose test'? Interest paid by a property investor is a cost, so deductible if borrowing is to purchase income producing real estate (excluding residential).

I think you are chasing your tail a bit here FP.

[LaserEyeKiwi]

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.

[fungus pudding]

I think you are chasing your tail a bit here FP.

I simply asked what you meant by KPG probably can load debt on other assets to get tax deductibility for interest? It makes no sense to me.

[Beagle]

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.

[Aaron]

Jeez 10 year govt bonds hit 2.36% yesterday. A year ago they were under

And some economists saying OCR could go to 2.0% next year

Could see the 10 year go over 3%

This could lead to a 25% fall in listed property stocks (from current overvalued levels)

Doubt whether KPG's big discount to NTA will soften a blow of that size

Interesting times ahead

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?

[LaserEyeKiwi]

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.

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.

Reposting and updating some info that I shared a couple of weeks back:

- Less than half of KPGs tenants are speciality retail stores - and they all are getting more financial support from government than they did during last years lockdown (wage subsidy + lump sum resurgence payments),

- The rest of KPGs tenants are office tenants (most of who are carrying on as normal working from home), government departments and essential stores that remain open (supermarkets, medical etc) - none of whom will require rent relief.

- KPGs retail assets south of Auckland will be reopening fully on Wednesday (initially for click and collect and takeaway food operations), further reducing likelihood of rent relief to those speciality businesses - and if Level 2 arrives next week then even better.

- The income from “regional malls” like Northlands in Christchurch & The Plaza in Palmerston North (currently listed as “held for sale’) is not actually accounted for in KPG annual guidance. KPG management has said the longer these assets remain on their books, then the higher profits will be in the short term. So important to keep in mind that those regional malls are reopening fully shortly and have and will continue to be generating cashflow while they remain unsold, which will help counteract any rent relief payments that may occur in the Auckland assets. This is in addition of course to all of the continued uninterrupted cashflow being generated from KPGs commercial office assets nationwide, along with the cashflow from the large essential large anchor tenant stores (supermarkets etc obviously).

I think Auckland will likely be in level 4 for another few weeks at least, but I think the market has learnt that this is transient and a relatively minor concern long term for KPG. Especially as retail post lockdown has proved very resilient - if not outright booming - there have been no waves of retail bankruptcies, there have been no drop in retail rental yields (they have actually increased rents), there has in fact been more investment in retail assets across New Zealand.

This is the reason KPGs share price has essentially just seen a blip lower in this latest outbreak (remember it dropped to 83c last year when everyone was freaking out).

Attachment 12899

[Beagle]

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.

[LaserEyeKiwi]

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.

lol ok Beagle agree to disagree.

[Entrep]

Thank god you sold right Beagle

[Waltzing]

"Ostrich with their head in the sand"

Kiwi in the Dark...

ARRRR G...