Goodman Property Trust

[Onion]

What are people's thoughts on investing in GMT or other property stocks now? I currently have a split of about 60/40 in favour of cash and I'd like to move some more to shares but with the whole China uncertainty I think I'm at my limit there. GMT already constitutes about 25% of my share portfolio and I'm wondering whether I should top that up a bit, or maybe even another property stock like ARG.

If you are nervous about the China uncertainty then you are probably a bit cautious by nature. Why on earth would you allocate such high proportion of your portfolio into a single share? Even 25% in a single share is pretty aggressive (even 25% of 40% is still 10% of your investments).

[Cricketfan]

Why on earth would you allocate such high proportion of your portfolio into a single share? Even 25% in a single share is pretty aggressive (even 25% of 40% is still 10% of your investments).

My thinking was that property stocks are less volatile and a more conservative option, so I felt more comfortable having a larger allocation in that, whereas the rest of my share portfolio is more diversified. I also intended to grow my other shares over time so that the proportion of GMT would go down, but that was before the whole China thing which has unnerved me a bit (yes I am cautious by nature).

[Beagle]

What are people's thoughts on investing in GMT or other property stocks now? I currently have a split of about 60/40 in favour of cash and I'd like to move some more to shares but with the whole China uncertainty I think I'm at my limit there. GMT already constitutes about 25% of my share portfolio and I'm wondering whether I should top that up a bit, or maybe even another property stock like ARG.

I have a reasonable sized allocation to GMT and its still my preferred property investment. I think it wouldn't hurt you to hold some ARG as well, (I do).

I expect in the ultra low interest rate environment that we have for the foreseeable future GMT will do very well with cheap funding, capital gains from the capitalisation rate coming down and the yield for the low / moderate risk involved is reasonably attractive. Low risk and reasonable return. I'm expecting about 6.85 cps distributions next year and the stock trades cum the next quarterly distribution due next month of 1.6625cps.
6.85 / 1.265 = 5.415% PIE distribution. For those on a 33% tax rate that's 8.08% gross. Note, investments like this are attractive on a relative basis compared to cash which I expect will be under 3% shortly even for bonus saver accounts, (which are subject to the Reserve Bank's open bank resolution, whereas GMT aren't).

Its still an equity investment so don't expect immunity to major world-wide economic influences including China but I think on a risk reward basis its worth having a reasonable sized investment in GMT in a well balanced portfolio. Like you I am over 50% cash at present. I have a 6.5% portfolio allocation in GMT. I am looking at increasing that to about 10% because I think its one of the safest investments on the NZX.

They seem determined to keep 20% of retained earnings at this stage as they continue to fill out their Highbrook Park development. Over the years this will change when they get to under 5% of their portfolio value held as development land (currently about 10%). This augers well for the prospect of long term dividend increases.

[winner69]

Cricketfan - do what Baz does, just go for it and do what your instincts tell you.

(Mind you Baz was an abject failure yesterday)

[RGR367]

Though I sold some of it late last year, I still have about 7% of my portfolio on GMT and would not hesitate to increase or decrease it when the opportunity is presented. I view this stock as a boring but very reliable dividend giving stock

disc: holder since IPO

[macduffy]

I, too, have a few GMT but I'm conscious of the view of some pundits that their management structure is outdated and not entirely aligned to the interests of unitholders. Other property companies/trusts, such as AMP and Kiwi have "bought out" the original management companies and are thought to now more directly represent the interests of the owners.
What are others' thoughts on this? Roger?

[Beagle]

As long as its EPS accretive, the price is competitive and new management have a long and proven track record then I'm happy to see the management internalised, otherwise I'm reasonably comfortable with the status quo.

Goodman argue their track record and contacts through the Goodman group and property management experience and expertise means unit holders get great management and good value for money from the recently renegotiated management contract. Its hard to make a call on this one way or the other. That said, there was a fair bit of disquiet about their deal around regarding the Viaduct Harbour J.V. and I think they learned from that. (Really that sort of transaction should have been subject to a unit holders meeting and been done at current market value, not the previous balance date. FWIW John Dakin tells me that the management team personally have about 7 million units and argues management and unit holders interests are indeed aligned...make of that what you will....)

I think some pressure to increase the dividend and reinitiate the DRP wouldn't go amiss. Seeing as GMT regularly remind us that they're recycling old assets to pay for new developments why the need to retain 20% of earnings ? If they feel they need some cash up their sleeve why not pay out 100% of earnings after tax and reinitiate the DRP for those that want to reinvest ?

I think there's some potential for unit holder activism on this front and its on my radar as a job for this year. Most of these shares are valued by investors as a yield instrument and I think in this case any move to reconsider the pay-out ratio would be materially beneficial for the SP. Note to self: I Must buy some more and then start paddling my canoe a bit harder

[Mickey]

As long as its EPS accretive, the price is competitive and new management have a long and proven track record then I'm happy to see the management internalised, otherwise I'm reasonably comfortable with the status quo.

Goodman argue their track record and contacts through the Goodman group and property management experience and expertise means unit holders get great management and good value for money from the recently renegotiated management contract. Its hard to make a call on this one way or the other. That said, there was a fair bit of disquiet about their deal around regarding the Viaduct Harbour J.V. and I think they learned from that. (Really that sort of transaction should have been subject to a unit holders meeting and been done at current market value, not the previous balance date. FWIW John Dakin tells me that the management team personally have about 7 million units and argues management and unit holders interests are indeed aligned...make of that what you will....)

I think some pressure to increase the dividend and reinitiate the DRP wouldn't go amiss. Seeing as GMT regularly remind us that they're recycling old assets to pay for new developments why the need to retain 20% of earnings ? If they feel they need some cash up their sleeve why not pay out 100% of earnings after tax and reinitiate the DRP for those that want to reinvest ?

I think there's some potential for unit holder activism on this front and its on my radar as a job for this year. Most of these shares are valued by investors as a yield instrument and I think in this case any move to reconsider the pay-out ratio would be materially beneficial for the SP. Note to self: I Must buy some more and then start paddling my canoe a bit harder

Thanks very much Roger. I've been looking at GMT lately and your thoughts are very helpful indeed (as are your posts on other topics). I haven't yet decided what my entry point might be so will continue with my research and make a decision at some point.

[macduffy]

Yes, thanks, Roger.

The fact that other property trusts have succumbed to pressure for more unitholder involvement might augur well for some change. It probably depends on how strongly the instos feel about the issue - and the size of their holdings.

[Beagle]

https://nzx.com/companies/GMT/announcements/279200

Stellar result coming up !!