ARG - Argosy Property.

[Sideshow Bob]

Craigs last research note (Nov 22) estimated that ARG used more fixed rents reviews than its peers (76% of properties) so rental rate increases would fall behind the CPI.

[fungus pudding]

Craigs last research note (Nov 22) estimated that ARG used more fixed rents reviews than its peers (76% of properties) so rental rate increases would fall behind the CPI.

What does 'used fixed rent reviews' mean?

[Habits]

What does 'used fixed rent reviews' mean?

I would say a defined method such as cpi adjustment with a minimum amount every year or two, on review date. Then a market rent review less frequently

[fungus pudding]

I would say a defined method such as cpi adjustment with a minimum amount every year or two, on review date. Then a market rent review less frequently

Fixed rent reviews is fair enough, but the 'used' bit isn't so clear. Maybe it's just a poor word choice? Nearly all leases provide for a review - usually to market, or as you say cpi adjustments with market reviews periodically.

[Sideshow Bob]

What does 'used fixed rent reviews' mean?

FYI I said "estimated that ARG used more fixed rents reviews than its peers"

Perhaps a poor choice of words, but Craigs indicated fixed rent reviews were more common with ARG than other LPT's.

[SailorRob]

https://www.oaktreecapital.com/insig...on-valley-bank

The following factors are influencing the CRE sector today:

• Interest rates are up substantially. While some borrowers benefit from having fixed interest rates, roughly 40% of all CRE mortgages will need to be refinanced by the end of 2025, and in the case of fixed-rate loans, presumably at higher rates.
  
• Higher interest rates call for higher demanded capitalization rates (the ratio of a property’s net operating income to its price), which will cause most real estate prices to fall.
  
• The possibility of a recession bodes ill for rental rates and occupancy, and thus for landlords’ income.
  
• Credit is likely to be generally less available in the coming year or so.
  
• The concept of people occupying desks in office buildings five days a week is in question, threatening landlords’ underlying business model. While workers may spend more time in the office in the future, no one knows what occupancy levels lenders will assume in their refinancing calculations.

[bull....]

https://www.oaktreecapital.com/insig...on-valley-bank

The following factors are influencing the CRE sector today:

• Interest rates are up substantially. While some borrowers benefit from having fixed interest rates, roughly 40% of all CRE mortgages will need to be refinanced by the end of 2025, and in the case of fixed-rate loans, presumably at higher rates.
• Higher interest rates call for higher demanded capitalization rates (the ratio of a property’s net operating income to its price), which will cause most real estate prices to fall.
• The possibility of a recession bodes ill for rental rates and occupancy, and thus for landlords’ income.
• Credit is likely to be generally less available in the coming year or so.
• The concept of people occupying desks in office buildings five days a week is in question, threatening landlords’ underlying business model. While workers may spend more time in the office in the future, no one knows what occupancy levels lenders will assume in their refinancing calculations.

which put div's under pressure when debt is repriced ( i dont think rates going back to 2% ) if not compensated by revenue increases. companies in this space with huge debt levels relative to revenue will suffer most

[Sideshow Bob]

https://www.nzx.com/announcements/411537

Key highlights for the period include:
• Net property income for the period of $112.8 million, up 7.3%;
• Net distributable income of $64.2 million;
• High year end occupancy (99.3%) and WALT (5.4 years);
• $146.6 million annual revaluation loss, down 6.4% on book value, resulting in a net loss after tax of $80.8 million;
• NTA per share of $1.58 from $1.74 at 31 March 2022;
• Strong portfolio leasing and rent review outcomes, including 3.6% annualised rental growth on rents reviewed;
• Continued focus on sustainability with several green developments completed and 105 Carlton Gore Road nearing completion;
• A full year dividend of 6.65 cents per share, a 1.5% increase over FY22; and
• FY24 dividend guidance of 6.65 cents per share.

[winner69]

HeyBob, Not much of a pay rise who hold for divie income …and no pay rise next 12 months

[ronaldson]

HeyBob, Not much of a pay rise who hold for divie income …and no pay rise next 12 months

Yes, in a high inflationary environment it isn't a satisfactory outcome. I noted that the interest expense increased by $10.7m on a prior year comparison and no doubt more to come in FY24 as rate increases continue to flow thorough. Weighted average was 5.39% compared with 4.14% as at 31 March 2022.

Net distributable income was static at just over $64m and I doubt growth is expected in FY24 even if net property income improves due to interest costs and other inflation effects.

And $66m of assets said to be for sale "as they no longer meet the investment criteria", which as always begs the question why they were acquired in the first place.