KPG - Kiwi Property Group Limited

[LaserEyeKiwi]

It means they flogged it to some idiot who paid far too much and most all the return came from capital appreciation rather than cash generation from the net rent.

The buyer is now holding the nuclear waste.

The sale price is $85m below the peak building value from 2 years ago. That’s how bad the office building market has collapsed post-pandemic & in the current high interest rate environment.

The buildings new owners (IF the sale is completed) will likely do ok as interest rates decrease as the interest rate cycle reverses.

[winner69]

These property companies always throw out return % that sound great but they never seem to end as solid shareholder returns

Like Morningstar data says $1,000.00 invested in Kiwi in 2014 is now worth $997.42 …..and that’s with dividends reinvested

Could mean anything but will $10,000 invested today be worth $25,937 in 10 years

[SailorRob]

Its 11%, like KPG said today.

Net operating income last year for the building was $25.4m, which is a 5.5% return on the $459m sale price. But $25.4m is a 10.75% return on the original $236m build cost.

So including capital gain & net operating income, 11% sounds entirely plausible for an average annual return over 21 years.

Yep that's pretty bloody good to be honest.

[LaserEyeKiwi]

These property companies always throw out return % that sound great but they never seem to end as solid shareholder returns

Like Morningstar data says $1,000.00 invested in Kiwi in 2014 is now worth $997.42 …..and that’s with dividends reinvested

Could mean anything but will $10,000 invested today be worth $25,937 in 10 years

No argument that it’s been severe underperformance over the last decade.

But as I have mentioned before, the outgoing chair last year at the AGM finally put it all in black and white as to why that was: many hundreds of millions of dollars went into seismic strengthening and repairs for assets in the lower North island and the South Island, for which there was zero return in terms of upward valuations, but was required to simply keep the assets producing an income (and which in turn meant they could be subsequently sold).

Which is why KPG spent the last half decade divesting as many of those assets as possible south of Hamilton. It in no way wants to be exposed to that sort of capital spend program again.

Pre 2018 they owned 3 malls & 3 office towers south of Hamilton. They have since sold 2 of the malls and 2 of the office towers. They had a conditional offer on the last office asset last year (Aurora centre, a sale that did not complete), while the last mall (the Plaza) had interest, but is now undergoing seismic strengthening before attempting to sell again (which really drives home the seismic issue).

The 2 office towers & 2 malls were sold for a total $420.2m
The remaining office tower & mall left to be sold are currently valued at a total of $256m

[bull....]

yep kpg of the future is what it is about now , a totally different beast. stockland in aus likes the town centre approach as well saying it offers resilence in a portfolio

[SailorRob]

No argument that it’s been severe underperformance over the last decade.

But as I have mentioned before, the outgoing chair last year at the AGM finally put it all in black and white as to why that was: many hundreds of millions of dollars went into seismic strengthening and repairs for assets in the lower North island and the South Island, for which there was zero return in terms of upward valuations, but was required to simply keep the assets producing an income (and which in turn meant they could be subsequently sold).

Which is why KPG spent the last half decade divesting as many of those assets as possible south of Hamilton. It in no way wants to be exposed to that sort of capital spend program again.

Pre 2018 they owned 3 malls & 3 office towers south of Hamilton. They have since sold 2 of the malls and 2 of the office towers. They had a conditional offer on the last office asset last year (Aurora centre, a sale that did not complete), while the last mall (the Plaza) had interest, but is now undergoing seismic strengthening before attempting to sell again (which really drives home the seismic issue).

The 2 office towers & 2 malls were sold for a total $420.2m
The remaining office tower & mall left to be sold are currently valued at a total of $256m

Thats a huge lesson in risks that can just come out of nowhere. Who would have picked that.

[Baa_Baa]

Thats a huge lesson in risks that can just come out of nowhere. Who would have picked that.

More important to me is that they have recognised those vulnerabilities, completely changed their property investment strategy and are executing on it successfully. There is literally nothing about the KPG past that is part of the KPG long term future. I've bought into the future, we'll see how that goes. Meanwhile, 8%+ yield paid out in quarterly dividends are welcome capital to grow my share or invest elsewhere.

[SailorRob]

More important to me is that they have recognised those vulnerabilities, completely changed their property investment strategy and are executing on it successfully. There is literally nothing about the KPG past that is part of the KPG long term future. I've bought into the future, we'll see how that goes. Meanwhile, 8%+ yield paid out in quarterly dividends are welcome capital to grow my share or invest elsewhere.

Yes but what are the next vulnerabilities that they nor us have recognised, this goes for any company.

They have mitigated the last risk that smashed them - good - but what else is out there?

My comment was nothing specific to KPG, just that these risks can come out of nowhere.

[Baa_Baa]

Yes but what are the next vulnerabilities that they nor us have recognised, this goes for any company.

They have mitigated the last risk that smashed them - good - but what else is out there?

My comment was nothing specific to KPG, just that these risks can come out of nowhere.

I get that, but if you did a risk analysis on all of the reliable dividends payers that most mum and dads invest into, you'd not invest at all. They're all going to be wiped out by earthquakes, tsunami, flooding, climate change etc. Likelihood = unlikely/rare, Consequence = major/devastating. But people don't do this analysis, it's too scary.

It's another example of folks who invest their money for the reliable and sustainable income and don't really care or even think about how that income is generated, all they care about is the income still comes in. Maybe also that their capital isn't decimated in the process, but even then, that income is precious, for many investors.

[SailorRob]

I get that, but if you did a risk analysis on all of the reliable dividends payers that most mum and dads invest into, you'd not invest at all. They're all going to be wiped out by earthquakes, tsunami, flooding, climate change etc. Likelihood = unlikely/rare, Consequence = major/devastating. But people don't do this analysis, it's too scary.

It's another example of folks who invest their money for the reliable and sustainable income and don't really care or even think about how that income is generated, all they care about is the income still comes in. Maybe also that their capital isn't decimated in the process, but even then, that income is precious, for many investors.

Yeah man that's bloody harsh but I think you're right.

And we're led to believe that the market is hyper efficient and absorbs and prices everything instantly.