Listed Property Trusts

[nelehdine]

Not many property trusts pay dividends at present that match your local Westpac or BNZ. The dividends are however growing and in my view will continue to grow for the near and medium term future. The big problem for investors in term deposits is that inflation eats at your returns, however inflation is every property investors friend as it forces rents up, pushes land prices up, pushes building costs up and generally makes existing commercial property more valuable. APT and KIP have long term interest rate hedging on their books at very favourable rates ( read the latest annual report for details )so short term rate rises to combat inflation are not a major cost. Rent growth is still strong and tenant demand for good office space ( and to a lesser extent retail space ) is very healthy. Vacancy rates for prime office space in Auckland and Wellington is virtually zero ... and not many new office towers are planned to meet the growing demand ... rents can only keep going up for the foreseeable future. In terms of NAV, APT and KIP are probably trading at small premiums, given the quality of their portfolios I think that premium is justifiable. I hold a decent number of both and will do for the foreseeable future.

[nelehdine]

Record close for KIP at 166 today. Saw on CNBC that yields on prime New York office properties down as low as 3% ... record low levels. NZ property while not exactly midtown Manhattan is certainly cheap with yields still in the 6.5%-7.5% ... buying now via APT or KIP at 138/166 and holding until the interest rate cycle starts its next downward leg ( granted could be another 18 months ) looks like great buying to me. Not too many quality assets on the block at present but via the stockmarket you can buy a share of the best commercial property in NZ every day ... magic opportunity.

Bgt another 28,000 APT's today , now hold 131,809

[nelehdine]

400,000 crossed at 138 in APT ... great value here for the long term, get set, and forget !

[nelehdine]

Another 500k at 138 ...

[Tim]

Nelehdine
Are these the best property trusts? would you add any aussie ones into the mix?

[Tim]

Nel, APT shares NTA around $1.06 why so much premium

[nelehdine]

NTA of $1.06 is a VERY historical number ... I would estimate something around $1.25 at current no's so perhaps a 10% premium. In Australia I really like Tishman Speyer ( TSO ) ... anything under $2.70 is great buying. I think APT will be over $1.50 by the end of 2007. At 1.38 currently that is a 9% capital appreciation plus about 6c in after tax divies for another 4% so total return of 13% over the next 10 months ... annualised return on the high side of 14% is pretty good ... double what the bank will give you.

[Tim]

Nel
You always offer good points. Is property for industry and westfield in the same category as KIP and APT

[Farouk]

You can buy Kermadec Property fund for $1.05 (KPF), I reckon that this is a bargain - should be up around $1.20 once people start to realise the potential

The fledgling Kermadec Property Fund has been recommended by a broker after a tax overhaul which will make listed real estate vehicles more attractive.

Jeremy Simpson, of Forsyth Barr Research, gives a buy recommendation for the new company, saying its unit price is expected to rise.

Kermadec would benefit from the new portfolio investment entity (PIE) regime, he said.

Listed property vehicles are expected to qualify for PIE status by October this year, following the introduction of a new law in December which will see investors keep more dividends and pay less tax.

Simpson said Kermadec had good prospects.

"Kermadec is trading at a larger-than-expected discount to the listed property vehicle sector, and we see upside as it develops a listed track record. We also expect further upside for the sector once the positive aspects of the PIE regime are fully understood."

While other property entities had been re-rated with unit price rises, Kermadec was yet to benefit.


"Kermadec has significantly and unjustifiably lagged its listed peers in terms of the PIE market re-rating to date," Simpson said. Its share price was trading at around net tangible asset value, which he said was unusual in a sector that was now largely trading at solid premiums to asset backing.

Kermadec listed in December

[nelehdine]

Tim, PFI and Westfield are excellent long term choices, certainly wouldn't argue with those two.