Property Shares

[King1212]

Yes...long term...for retirement spending.

[Beagle]

Underwriting terms appear not unreasonable as does the yield. Projected NTA as at 30 March 2020 didn't leap out of the PDS statement at me on a brief skim but I have very limited time to apply to this so its probably there, just I haven't noticed it.
Some of their buildings are quite old and I know the Kelston shopping centre has been a dog forever and a day. I think if we get tough economic times small tenants of small buildings are probably less resilient than big corporates or government departments leasing larger buildings off the listed property owners so there's definitely extra risk with smaller tenants.

On the yield front 7% seems reasonable and the closest comparative listed vehicle would be ARG which is also a PIE and on a grossed up basis assuming a 33% tax rate is yielding 6.5% forecast for FY20. ARG have a policy of only paying out sustainable dividends and deduct sufficient to pay incentive fees for lease renewals and repairs and maintenance sufficient to keep their buildings in a good state of repair.

For a half of one percent yield difference you're getting much better diversification with ARG, a proven sustainable dividend yield, generally more substantial sized tenants and the benefits of being listed with easy entry and exit to the shares.

I don't know much about these guys so can't comment further and I tend to stick to what I know and trust and if I need a yield boost to my portfolio there's any number of stocks like AIR, ZEL and HLG to name just 3 paying over 10% so its easy to make up that half a percent with some allocation elsewhere.

Agree 100% that domestic rental properties are a very tough gig especially under the current Govt regime heavily favoring tenants rights and with the widespread proliferation of methamphetamine adding to the already very high risks from tenant damage and with limited scope for capital gains and lack of ability to claim depreciation on the house and now ring fencing of rental losses, landlords look like they're on a hiding to nothing.

[fungus pudding]

Underwriting terms appear not unreasonable as does the yield. Projected NTA as at 30 March 2020 didn't leap out of the PDS statement at me on a brief skim but I have very limited time to apply to this so its probably there, just I haven't noticed it.
Some of their buildings are quite old and I know the Kelston shopping centre has been a dog forever and a day. I think if we get tough economic times small tenants of small buildings are probably less resilient than big corporates or government departments leasing larger buildings off the listed property owners so there's definitely extra risk with smaller tenants.

On the yield front 7% seems reasonable and the closest comparative listed vehicle would be ARG which is also a PIE and on a grossed up basis assuming a 33% tax rate is yielding 6.5% forecast for FY20. ARG have a policy of only paying out sustainable dividends and deduct sufficient to pay incentive fees for lease renewals and repairs and maintenance sufficient to keep their buildings in a good state of repair.

For a half of one percent yield difference you're getting much better diversification with ARG, a proven sustainable dividend yield, generally more substantial sized tenants and the benefits of being listed with easy entry and exit to the shares.

I don't know much about these guys so can't comment further and I tend to stick to what I know and trust and if I need a yield boost to my portfolio there's any number of stocks like AIR, ZEL and HLG to name just 3 paying over 10% so its easy to make up that half a percent with some allocation elsewhere.

Agree 100% that domestic rental properties are a very tough gig especially under the current Govt regime heavily favoring tenants rights and with the widespread proliferation of methamphetamine adding to the already very high risks from tenant damage and with limited scope for capital gains and lack of ability to claim depreciation on the house and now ring fencing of rental losses, landlords look like they're on a hiding to nothing.

Difference in yield is substantial. 7% from Pacific is the amount paid out - so 10.5% equivalent to a 33% margin taxpayer; Arg pays 4.32 or as near as damnit to 6.5%.

[Beagle]

Difference in yield is substantial. 7% from Pacific is the amount paid out - so 10.5% equivalent to a 33% margin taxpayer; Arg pays 4.32 or as near as damnit to 6.5%.

Page 45 of the PDS alludes to 6.03 cents per share projected yield after tax = 5.7% net.

[dibble]

The 7% is gross is my understanding... ie you then have to sort tax out yourself

[mfd]

I'm not sure if the structure is the same, but open ended property funds have been running into trouble in other parts of the world as investors tend to want to cash out when times are tough, leading to forced disposal of properties at the worst possible time, or significant added fees to discourage withdrawals. For example

https://www.moneyobserver.com/news/o...rexit-concerns

[fungus pudding]

I'm not sure if the structure is the same, but open ended property funds have been running into trouble in other parts of the world as investors tend to want to cash out when times are tough, leading to forced disposal of properties at the worst possible time, or significant added fees to discourage withdrawals. For example

https://www.moneyobserver.com/news/o...rexit-concerns

I think the difference is those funds pay out to investors on demand, and hold some cash to do so; whereas Pacific must be sold to another investor either through Pacific, if they have buyers, or through a broker who deals in unlisted shares. They do not offer to buy back the shares.

[King1212]

Yup correct....it will take around 30 days to sell your shares....just like the house. But saying that..this is unlisted....therefore the sp not up and down like a yoyo...

[mfd]

I think the difference is those funds pay out to investors on demand, and hold some cash to do so; whereas Pacific must be sold to another investor either through Pacific, if they have buyers, or through a broker who deals in unlisted shares. They do not offer to buy back the shares.

That sounds more sensible, if you don't mind the lack of liquidity. Not for me, but it sounds like you've got a pretty decent moat of more liquid holdings.

[Beagle]

I think with these sort of things you need to have a look at the total return and not get too fixated with yield.
PDS states that in 2014 the value was $1 and five years later they're raising new capital at $1.05.
Few thoughts.
1. If the level at which they are raising funds is representative of the net tangible asset backing of same this is a pitiful performance compared to the NTA growth of say GMT an active property developer and you could very easily make the case the vastly more experienced team at Goodman Property Trust who's shar price has nearly doubled over the same time have added substantially more value through their management and development activities. ARG another example and their share price has climbed 45% over that time. PFI another example and there are many more.
2. The question must be asked, why has the net tangible asset backing apparently gone backwards, (in real inflation adjusted terms) over the last 5 years since the inception of this fund when all the listed companies have done vastly better over the same timeframe ?
3. What does this suggest about the calibre of the management of this company and their property selection processes and criteria ?

To me management have shown woeful underperformance in terms of even keeping the net tangible asset backing the same in real inflation adjusted terms, let alone matching the listed company benchmark. The sum total of management's expertise since this was formed in 2014 so badly underperforms the market this suggests to me they have bought properties primarily for yield with little or no consideration given toward capital growth prospects.

Forecast are one thing, but as a bean counter I have learned to put far more stock on the long term past track record of a company and while the yield has been okay, their track record of lack of growth suggests this is a dead end yield trap to me.

Notes. According to the reserve bank inflation calculator $1.00 in 2014 should presently be worth $1.06 based on general inflation and $1.42 based on housing inflation.
https://www.rbnz.govt.nz/monetary-po...ion-calculator thus managements long term track record is most unimpressive.