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  1. #91
    Reincarnated Panthera Snow Leopard's Avatar
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    Arrow And out they go

    As I (may have) said before they listed I ended up with a silly amount of shares in IPL. So it was either buy more or sell them and use the money elsewhere.
    After a little consideration I came to the conclusion that elsewhere was better.

    So today I sold them all.
    I still have the Stride holding but I have no intention of topping that up at the moment either.

    Best Wishes
    Paper Tiger
    om mani peme hum

  2. #92
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  3. #93
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    Successful Completion of $85 Million Placement

    30/4/2020, 8:30 amOFFER
    Investore Property Limited (Investore) advises that it has successfully completed the $85 million placement of new shares which forms part of the $100 million capital raising announced on 29 April 2020. The placement had been fully underwritten at $1.59 per share and was allocated to investors at the final price of $1.65 per share, representing a 6.8% discount to the last closing price of Investore's shares on NZX.
    Mike Allen, Chairman of Investore, said “The Board is delighted with the outcome of the placement, with the full $85 million fully allocated, following strong support from our existing institutional shareholders and shareholders who are clients of wealth management firms. The capital raising strengthens the balance sheet during this period and provides the funding flexibility to continue Investore's strategy to grow its portfolio, positioning it well to secure investment opportunities that may arise and continuing its objective of maximising distributions and total returns to investors over the medium to long term.”
    Settlement and allotment of the new shares issued under the placement is expected to occur on 5 May 2020.
    Goldman Sachs New Zealand Limited acted as sole lead manager, placement agent, bookrunner and underwriter of the placement.
    Share Purchase Plan opens on Tuesday
    Eligible shareholders will receive their personalised application forms to apply for up to $50,000 of new shares in the share purchase plan component of the offer from 5 May 2020. Shareholders can apply online at www.shareoffer.co.nz/investore until 5.00pm (NZT) on 14 May 2020.
    Record Date: 5.00pm (NZ time) 28 April 2020
    Announcement of Offer: 29 April 2020
    Share Purchase Plan Opening Date: 5 May 2020
    Offer Document and Application Form sent to eligible shareholders: 5 May 2020
    Share Purchase Plan Closing Date (last time for online applications, or for receipt of an Application Form, with payment): 14 May 2020, 5pm
    Share Purchase Plan issue price announced: 15 May 2020
    Allotment of new shares under the Share Purchase Plan and commencement of trading: 20 May 2020

  4. #94
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    So currently 7c in the green but new shares not tradeable until 20th may. Applicants got less then 10% that they applied for ive heard.Every raise is having voracious FOMO funds just thrown in, looking for a bit of arbitrage or gain, anything to earn even a little regardless of the real world calamities around us, the divergence continues!

  5. #95
    Speedy Az winner69's Avatar
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    Seismic issues at Bunnings Mt Roskill see stores closed

    Thought seismic was a Wgtn / CHCH problem.
    “ At the top of every bubble, everyone is convinced it's not yet a bubble.”

  6. #96
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    Default Dogs vs Hyenas (Part 1)

    Quote Originally Posted by Joshuatree View Post
    Seems excessive?
    Management fees and operating costs

    • The management fee payable to the Manager will equate to 8.1% and 9.6% of revenue in FY17and FY18 respectively and be a material cost.
    • Investore incurs other operating expenses,primarily in relation to repairs and maintenance and valuations.
    Wild dog truth No. 28: If you sense a good feed, make sure the hyenas haven't beaten you to the dinner table.

    I was contemplating this very matter, as it relates to 'Investore', managed by 'Stride Investment Management Services' (SIML), a subsidiary of the Stride Property Group. On the Stride Property thread, I figured out that the $8.393m in management fees charged to Investore over FY2021, worked out to be 0.868% of assets under management.

    Or to translate to Joshuatree language (based on 'gross rental income' of $64.514m):

    $8.393m/$64.515m = 13% of revenue (gross rental income)

    I guess Joshuatree would describe that as 'more than excessive'. But what do Investore get for their money? A fair go? Or are these high fees just double milking the cash cow?

    SNOOPY
    Last edited by Snoopy; 01-03-2022 at 05:33 PM.
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  7. #97
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    Default Dogs vs Hyenas (Part 2)

    Quote Originally Posted by Snoopy View Post
    Wild dog truth No. 28: If you sense a good feed, make sure the hyenas haven't beaten you to the dinner table.

    I was contemplating this very matter, as it relates to 'Investore', managed by 'Stride Investment Management Services' (SIML), a subsidiary of the Stride Property Group. On the Stride Property thread, I figured out that the $8.393m in management fees charged to Investore over FY2021, worked out to be 0.868% of assets under management.

    Or to translate to Joshuatree language (based on 'gross rental income' of $64.514m):

    $8.393m/$64.515m = 13% of revenue (gross rental income)

    I guess Joshuatree would describe that as 'more than excessive'. But what do Investore get for their money? A fair go? Or are these high fees just double milking the cash cow?

    SNOOPY
    What does SIML do?

    From the Investore Annual Report for FY2021, page 48:
    "Investore has appointed SIML as its exclusive provider of ongoing real estate investment management services. Investore does not have any employees, accordingly, there are no senior managers of Investore who have a relevant interest in the shares of Investore."

    Even I would have to admit that 'zero employees' sounds like a tightly run ship. So could it be that some of the SIML Hyenas are actually wearing working suits?

    From AR2021 p8
    "The Manager and Management Fees Investore’s Manager, Stride Investment Management Limited (SIML), has provided an excellent level of service during the period impacted by COVID-19, which presented a number of challenges. SIML undertook negotiations with tenants that were forced to close due to COVID-19 lockdown restrictions, and the Board is pleased with the outcome of those arrangements, with rent abatements and deferrals being offset in many cases by an increased lease term. Investore also had a high proportion of tenants that were able to remain open and trading, such as supermarkets, and this presented its own challenges in ensuring that these tenants were able to continue to operate safely and efficiently. The Investore Board considers that the SIML team dealt with the varying challenges presented by COVID-19 in a capable and efficient manner."

    That doesn't sound too bad, although we have to remember this report was written by those 'Hyenas in suits'. People do tend to write their own history in a favourable light.

    From AR2021 p9
    "The Board is pleased to report that the independent review concluded that, relative to scale, Investore’s current management expense ratio is favourable to its peers, and Investore’s current management fees are fair and consistent with both other New Zealand listed property vehicles and Investore’s Australian large format retail peers."

    A hint that the Hyena's are not as voracious as they might be? The 'relative to scale' qualification is notable. I would think that as the scale of a company increases, the relative size of expenses should decrease.

    From AR2021 p8
    "Finally, SIML has been very pleased to assist Investore to continue to execute its strategy of targeted growth, with agreements to acquire two new properties announced in May 2021. These transactions are the outcome of several months’ work by SIML on behalf of Investore in negotiating terms and completing due diligence, and we are pleased to be able to deliver high quality acquisitions that complement Investore’s portfolio. We look forward to continuing to support Investore in its targeted growth strategy."

    That is a very long winded way of saying that contracted management are doing their ordinary job. But on p13 AR2021, we get some numbers:

    "(SIML) Completing 65 lease transactions during FY21 (excluding COVID-19 transactions), including 56 rent reviews over 77,500 sqm, resulting in a 2.3% increase to previous rentals."

    From AR2021 p13
    "SIML assists Investore to meet its sustainability objectives."

    There is the ESG box ticked, by installing some Tesla superchargers in the car parks.

    Now we know what SIML does for its Investore customer, how does SIML determine their charging regime?

    SNOOPY
    Last edited by Snoopy; 01-03-2022 at 05:33 PM.
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  8. #98
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    Default Dogs vs Hyenas (Part 3)

    Quote Originally Posted by Snoopy View Post
    Now we know what SIML does for its Investore customer, how does SIML determine their charging regime?

    How does SIML charge?

    How are the management fees calculated? There is no one section in the annual report we can go to to answer this question. Yet there are hints on the way through

    (from AR2021 p7)
    "The higher base management fees are a result of Investore’s higher portfolio value, although with a higher portfolio value Investore benefits from a lower rate for asset management fees of 0.45% of portfolio value over $750 million."

    $966.5m is my assessment of the average value of Investore property under management over FY2021 (see post 243 on the Stride thread for this calculation)

    0.45% x $966.5m = $4.349m (c.f. actual Asset management fee charged $4.965m(1)).

    (from AR2021 p48)
    "The performance fee expense (actual over the year added to $2.076m) is calculated and payable on a quarterly basis as 10% of the actual increase in shareholder returns (being share price, adjusted for dividends, and other changes in capital structure), which is above 2.5% (compounding annual rate of 1.025^4 -1 = 10.38%) and under 3.75% (compounding annual rate of 1.0375^4 -1= 15.87%) in a quarter.

    /a/ Where shareholder returns exceed 3.75% in a quarter, no payment is due for the actual amount of the increase above 3.75% BUT the amount of the increase above 3.75% is carried forward and added to the calculation of shareholder returns in the next seven quarters. However...,
    /b/ if shareholder returns are less than 2.5% in a quarter, the deficit is carried forward and subtracted from the calculation of shareholder returns in the next seven quarters.
    /c/ Additionally, the performance fee for any twelve month period is capped at 0.2% of the value of Investore’s portfolio value (0.002x $966.5m=$1.933m, c.f. actual payment of $2.076m (2)) , and any excess performance fee is carried forward into the following quarter."

    On first read that sounds fair, as deficits below the target return are carried forward and subtracted from the targeted returns over the subsequent 7 quarters. IOW bonuses are paid on an 'overall net gain basis'. And that base does not reset every year. However, in the fine thinking print, it does mean that any 'value falls' that do not recover after two years are forgiven (in that special case the baseline is reset). Such a reset could come into play over the next year or so, because of the precipitous fall in share price from a peak of around $2.25 a year ago to near $1.75 today. For the rest of the two year window that started in early 2021, and in the current rising interest rate environment, it is difficult to see 'Investore' recovering that ground over the next year.

    My 'interest rate' comments heightens the reality that most of these share price changes are interest rate driven, and that is one factor that property managers can do little about. I would regard these bonus payments as rewarding a low correlation between the share price and landlord management effort expressing itself through business performance. Some future rent price rises will no doubt come under the category of 'inflation plus' rent contracts, or turnover increases from their hard working lessees. Should management be given a bonus for what I see as working within the normal confines of their normal job description?

    From a Stride management perspective, the bonus payments are fantastic. From a lessee perspective, they are a rort that adds higher costs for no value. Therefore from an 'Investore' (lessee) perspective, I believe that 'performance fees' should simply be regarded as a normal extension of, and part of, 'regular management fees'.

    Result of my musings

    Management fee (excluding operations) for FY2021 = $4.965m + $2.076m = $7.041m

    Management fee as a %ge of assets under management = $7.041m / $966.5m = 0.729%

    Notes

    (1)/ The wording of the Annual Report suggests there is a higher management fee rate for total assets less than $750m. The higher rate is not listed. But it must be greater than the indicative incremental lower rate of 0.45%. Hence it is no surprise that when we calculate the management fee based on 0.45%, the result is less than the true value.
    (2)/ Actual bonus payment showing is greater than the maximum, because my maximum calculation is based on a linear average of 'between the two different years' figures. This method has -obviously- underestimated the true value of the portfolio.

    SNOOPY
    Last edited by Snoopy; 07-03-2022 at 10:48 AM.
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  9. #99
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    Default Dogs vs Hyenas (Part 4)

    Quote Originally Posted by Snoopy View Post

    Result of my musings

    Management fee (excluding operations) for FY2021 = $4.965m + $2.076m = $7.041m

    Management fee as a %ge of assets = $7.041m / $1,901,5m = 0.370%
    Following the revelation (to me) that Investore has no employees, I thought it might be useful to restate expenses in a way that compares with other companies that do employ people. Effectively I am looking at what would happen if the 'contract work' was brought in house. Furthermore I am looking to compare those returns with similar property companies.

    Property Expenses FY2021 Investore As Presented Investore with In House Staff Argosy As Presented Property For Industry As Presented Goodman Property Trust As Presented
    Management expenses $0m $1.102m $0m $4.612m $0m
    Management Services Contracted $1.102m $0m $0m $0m $0m
    Other administration expenses $0.831m $0.831m $11.888m $2.652m $2.700m
    Direct property operating expenses $8.701m $8.701m $25.762m $16.753m $29.0m
    Accounting expenses $0.250m $0.250m $0.194m $0.201m $0.300m
    Performance fee expense $2.076m $0m $0m $0m $13.7m
    Asset Management fee expense $4.965m $7.041m $0m $0m $12.8m
    Expense Recoveries $0m $0m $0m ($0.712m) $0m
    Total Operating Expenses {A} $17.925m $17.925m $37.844m $23.506m $58.5m
    Gross Income from rentals $64.514m $64.514m $111.522m $107.941m $182.0m
    Total Operating Expense to Rental Income ratio {A}/{B} 27.4% 27.4% 33.9% 21.8% 32.1%
    Building Portfolio Valuation (avg) {C} $966.5m $966.5m $1,938m $1,841.9m $3,431.7m
    Total Operating Expense to Operating Asset Ratio {A}/{C} 1.85% 1.85% 1.95% 1.28% 1.70%

    Notes

    i/ 'Building portfolio average value' for ARG is from Argosy thread post 368. 'Building portfolio average value' for 'Property for Industry' on post 5 of the PFI thread. 'Building Portfolio average value' for Investore is from post 243 on the Stride thread.2021

    What constitutes a 'similar' property company is open for debate.

    I have selected Argosy for four reasons:

    1a/ At the end of Calendar Year date, and considering the big 8 property companies, Argosy was the closest in yield to 'Investore'. That is equivalent to saying it has an equivalent 'market risk' from an investor perspective.
    1b/ Argosy does own some big box retail stores - like Investore - albeit making up only 12.5% of the total portfolio (Refer Argosy thread post 368).
    1c/ Argosy no longer has external managers, having bought them out in 2011 (in contrast to Investore).
    1d/ Argosy has a very high occupation rate of their properties of 99% (c.f. Investore 0.9% vacancy rate)

    Furthermore I have selected 'Property for Industry' as a second comparator because:

    2a/ They have long term stable tenants.
    2b/ They have a very high occupation rate, 100% as of EOFY2021.
    2c/ Property for Industry does not have external property managers (the external management contract was bought out in 2017).
    2d/ The construction of the buildings in the portfolio is generally 'big box type', even though they are not used for retail purposes.
    2e/ Building property valuation is on post 5 of the PFI thread.

    Finally I have selected the 'Goodman Property Trust', as a third comparator because:

    3a/ they operate 'big box buildings' (albeit not in retail) AND
    3b/ they do have an external property manager (the same situation Investore is in).
    3c/ Building property valuation for GMT averaged over the year is (from GMT AR2021):

    0.5 ($3,074.0m + $3,789.3m) = $3,431.7m

    3d/ they have a high portfolio occupancy rate of 98%


    SNOOPY
    Last edited by Snoopy; 27-07-2023 at 09:33 AM. Reason: Op Income ratio->Op Asset Ratio, add TOE/Rent
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  10. #100
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    Default Dogs vs Hyenas (Part 5)

    Quote Originally Posted by Snoopy View Post

    Property Expenses FY2021 Investore As Presented Investore with In House Staff Argosy As Presented Property For Industry As Presented Goodman Property Trust As Presented
    <snip>
    Performance fee expense $2.076m $0m $0m $0m $13.7m
    Asset Management fee expense $4.965m $7.041m $0m $0m $12.8m
    Total expenses {A} $17.925m $17.925m $37.844m $23.506m $58.5m
    Gross Income from rentals $64.514m $64.514m $111.522m $107.841m $182.0m
    Building Portfolio Valuation (avg) {B} $966.5m $966.5m $1,938m $1,841.9m $3,431.7m
    Total Operating Expense to Operating Asset Ratio {A}/{B} 1.85% 1.85% 1.95% 1.28% 1.70%
    We now come to the nub of this series of posts. Are the 'asset managing' hyenas ripping so much flesh off these fat property company carcasses, that the remaining feed left for we dogs (the shareholders), is not worth bloodying our snouts for?

    I was surprised, from the four under comparison, to see that ARG had the highest Operating Expense to Operating Asset ratio (OEOAR) at 1.95%. And being 'management contract free', there were no hyenas in sight! The other hyena free listing, PFI, had the lowest OEOAR, with the two hyena harbouring asset managers IPL and GMT occupying the middle ground. Based on the OEOAR figures alone, and my admittedly small sample of four, one might conclude that having no external management contracts as a matter of principle is not a cost issue, - despite those companies overthrowing their management contracts claiming they were doing the best thing for shareholders at the time. However, digging a bit deeper, there is a little more to it than that.

    ARG is an outlier in the portfolio in a composition comparative sense. It has by far the smallest amount of tenanted 'big boxes' (it is in fact 40.4% office buildings). My feeling is that office buildings are more likely to be shared. That means there are more tenants to deal with on a per square metre basis. This in turn translates to more management time and cost. Furthermore over FY2021, ARG was also dealing with the after effects of earthquake claims in Wellington, in particular a claim on their 'former New Zealand Post House' on Waterloo Quay. Tough negotiations with the insurance companies were completed. These are a couple of very real reasons that might explain why the Argosy OEOAR was the highest of the four companies looked at.

    Of the two 'hyena guarded' companies, IPL and GMT, it was GMT which had the lower OEOAR ( 1.7% vs 1.85% ). However, you can see by the respective annual revenue figures that GMT is by far the larger entity, by a factor of 3.5 in fact (in revenue terms). Shouldn't one expect some economies of scale? Given the differential in revenue streams, I think the 'only slightly lower' OEOAR at GMT is disappointing. So is all this pointing to the expected high value (before I did my calculations) of OEOAR for IPL being not as bad as I thought?

    IPL has some "in built economies of scale' itself. 64% of their anchor tenants are Countdown supermarkets. I would think that those on each side of these supermarket letting transactions would know each other very well. Furthermore, the leasing contracts I would expect to be very similar across all Countdown sites. In terms of shortages of customers, you would have to conclude that the supermarket industry was least affected by the pandemic. If anything, any "revenue connected rent contracts" would have been supercharged. It may be a reflection of this that has come through in the significant 'performance fee' earned over the FY2021 period for operating IPL.

    GMT is in a similar market demographic 'sweet spot', being a major landlord to another fast growing sector - the freighting business. Tenants NZ Post 6.8%, DHL 3.8%, Freightways 2.6%, Fliway 2.4%, Toll 2.3%, Mainfreight 2.2%, and Linfox 2.1%, add up to more than 22% of the GMT portfolio. Furthermore, the third largest tenant overall, 'Officemax' (2.9% of the portfolio, and strictly not a freighting business) is transitioning from physical stores to a nationwide warehouse distribution network. The 'performance fee' for GMT over FY2021 made up a very high 52% of all 'management fees' over FY2021. Yet even despite that, the overall OEOAR at GMT was still less than the same rate at IPL.

    Taking account of all of these factors, my overall opinion is that the hyenas are ruling the carcass at IPL. Yet so fat is the IPL beast, in relative terms, there is sufficient fat on the bone left for the dogs to dive in after the hyenas have had their share. But as always, the "dive in price" has to be right.

    A further argument, in shareholder value terms, is that Mr Market will sort all of the hyenas out. Because if those hyenas are really denying the dogs their rightful dividend stream, the respective company share prices will be marked down accordingly. And that will bring the dividend yield back to 'fair value'. But does that argument hang together in this context?

    SNOOPY
    Last edited by Snoopy; 28-03-2022 at 10:12 AM.
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