ARG - Argosy Property.

[LaserEyeKiwi]

Inflation is enabling a rent surge higher, hence the nice increase in rental income.

Important to remember that rental income wont drop when the interest rate cycle reverses, but the interest costs will.

The math should be obvious on what that means for future “distributable income”

[Sideshow Bob]

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

Around 6%, based on the current price of $1.10. Similar to a 1 year term deposit.

NTA is almost redundant isn't it. $1.58 NTA vs $1.10.

It's all about the income.

[Ggcc]

Inflation is enabling a rent surge higher, hence the nice increase in rental income.

Important to remember that rental income wont drop when the interest rate cycle reverses, but the interest costs will.

The math should be obvious on what that means for future “distributable income”

I used to rent a commercial property in Hawkes bay with rent linked to the rate of inflation. However there is only so high you can go until people can’t pay anymore, or they start looking at other options Ie working from home or warehouses.

Eventually I feel commercial properties will be a thing of the past, or only available in a few select areas in mega malls. For that reason I would never invest in the likes or Argosy.

[ronaldson]

Around 6%, based on the current price of $1.10. Similar to a 1 year term deposit.

NTA is almost redundant isn't it. $1.58 NTA vs $1.10.

It's all about the income.

I wonder what would happen if a shareholder resolution was put forward to sell the portfolio and distribute cash to holders?

After all, at a current dividend of 6.65cps it would take nearly 8 years to make up the difference between current share price and NTA.

And at 6% for a term deposit you would get over 9cps equivalent on a cash distribution at the NTA figure.

Pretty sobering really.

[Sideshow Bob]

I wonder what would happen if a shareholder resolution was put forward to sell the portfolio and distribute cash to holders?

After all, at a current dividend of 6.65cps it would take nearly 8 years to make up the difference between current share price and NTA.

And at 6% for a term deposit you would get over 9cps equivalent on a cash distribution at the NTA figure.

Pretty sobering really.

If their goal or driver is the standard corporate one of "maximising shareholder wealth" then the best thing to do would be to sell up and distribute the cash. Especially as a property company, they aren't out there with some altruistic driver, to 'save the world', or some greater good.

Given they've just written down their value, then those NTA values must be pretty recent, and must be able to realise something close to that figure.

The board would probably argue that they are there for 'long term' shareholder value blah blah blah.

Could be a good question at an AGM!

[ronaldson]

And I looked back, and at market close on 31 March 2013 (ie 10yr ago) ARG traded at 98.5c. So minimalist capital gain in the intervening period despite significant inflation/CPI increases over that time.

Do you think anyone who simply bought and held an individual property in any of the commercial, industrial or residential sectors did worse over that timescale?

The Board need to ask why? Something is wrong with the model and the execution.

[ronaldson]

For example, a better idea could be to sell the entire portfolio on-market whilst retaining the management rights. So holders would get the cash distribution but retain their ARG shares, maybe after a 1 for 20 consolidation, and still have a (much lesser) ongoing dividend stream?

[BlackPeter]

...
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.

Ever wondered why people are buying their first home just to sell it on later due to family growing, a new job in a different place or just a bigger budget? I guess really, with this knowledge they better would not have bought it in the first palace - right?

Same thing might happen to companies - they grow, the environment changes, the environment of their investment might change and the investment criteria might change and develop as well.

[ronaldson]

BP - These sale transactions are not transparent. There is no reporting as to whether acquiring then selling the particular property was a good or bad outcome for shareholders. We are told the gross sale price and how much it was above (occasionally even below) book value. Book value is a figure adjusted at each portfolio valuation, usually twice yearly, so hardly meaningful in the wider overview.

What would be good to know is what was the acquisition cost, how much capital expenditure was committed during the holding period, what was the annual rental income after maintenance, outgoings, and holding costs (interest and management overhead) each year, and costs of sale, depreciation recovered and so on. So how did it stack up? We never know.

See post #626 above. Why does this share trade at such a massive discount to NTA? What can be done about it? Would a merger within the sector enable costs to be taken out? And merely to suggest to the market that the Board were open to offers for the portfolio whilst retaining management rights would jump the share price at least 30c in a week? Of course that would ultimately be a major transaction requiring shareholder support but you get my drift.

[LaserEyeKiwi]

Why would you liquidate a property company at the bottom of the property cycle?

Now if we were somewhere that seemed like the top of a cycle (low interest rates, roaring economy, a sustained period of rising asset values) and a property company were still selling at a significant discount to NTA, then that would be the time for that conversation.

But liquidating at the bottom seems incredibly foolish. Instead it should be identified as what it actually is: A great time for accumulation.