Turning Japanese... japanese...
https://www.youtube.com/watch?v=IWWwM2wwMww
Lift off ....
https://www.youtube.com/watch?v=KMtmGkGtznU
Printable View
Turning Japanese... japanese...
https://www.youtube.com/watch?v=IWWwM2wwMww
Lift off ....
https://www.youtube.com/watch?v=KMtmGkGtznU
kiwi property kpg first property co to release negative revaluations
https://www.nzx.com/announcements/400217
expect plenty more to come
but no worries to the SP because the dividend yield is so good
" FY23 cash dividend guidance of no less than 5.70 cents per share remains unchanged. This figure represents a New Zealand tax-paid yield of 6.23% or gross equivalent yield of 9.30% (based on a closing share price of 91.5 cents recorded on 7 October 2022 and assuming a 33% tax rate for the gross equivalent yield)."
Property Trusts are basically an income investment.
With term Deposit rates now at about 4%, how far do property company shares have to fall to make their dividend yields competitive?
Can anyone provide us with the Morningstar report ..announcement made today re listed entities.
Recent transactions defy commercial property crash fears
Listed REIT pricing implies a commercial property crash, with major groups such as Dexus (ASX: DXS) and GPT Group (ASX:GPT) trading at 35% discounts to net tangible assets, or NTA. Transaction evidence remains thin, but a handful of recent deals suggest capitalisation-rates (yields used to value property) haven’t risen much yet, and valuations have not crashed.
Dexus Wholesale Property Fund sold Shepparton Marketplace for AUD 92 million in early October on a cap-rate of 6.25% to Metro Holdings of Singapore. Charter Hall Retail REIT (ASX:CQR) acquired an AUD 120 million stake in a portfolio of Z Energy service stations in New Zealand on a cap-rate of 5.5% (announced Aug. 29, 2022). The Australian Financial Review reported a Bunnings site in Melbourne had sold for AUD 80 million in the last week of September, on a cap-rate of 3.95%. None of these deals is much worse than cap-rates seen in late 2021.
Admittedly, rate rises probably aren’t over, and we expect further price falls in property. There’s probably selection bias too, with better deals publicised, but transactions at steeper discounts kept confidential for now. Even so, this evidence supports our base case that the market is holding up compared with doomsday fears that prevail in listed markets.
Looking at the transactions in more detail, we believe the Dexus and Charter Hall deals are reasonable representations of the where the market is—that is, lower, but not crashing. The 3.95% cap-rate on the Bunnings deal was remarkably low—reportedly lower than the 10-year bond yield at the time the deal was struck. It’s also lower than the average cap-rates reported by BWP Trust (the listed REIT that owns numerous Bunnings sites across Australia)—it reported an average cap-rate of 5.11% in December 2021 and 5.04% in June 2022. We don’t read too much into this deal as the buyer was reportedly an individual private investor. Private, individual buyers typically have a limited influence on the market, because they can’t usually afford the massive price tags on major shopping centres and A-grade office towers—pricing there is typically dominated by institutional investors.
A more convincing piece of evidence was Charter Hall Retail REIT’s acquisition of a portfolio of Z Energy service station assets on a cap-rate of 5.5%. That compares with the group’s acquisition of an Ampol portfolio in December 2021 on a cap-rate of 5.0%. The characteristics of the portfolios are similar, and therefore provide a reasonable benchmark for how the market has moved. Both portfolios have triple-net leases (where tenants pay outgoings), have rent linked to CPI with a 2% floor and 5% cap, and the WALE for the Ampol transaction in December 2021 was 15.6 years, versus 15.3 years for the Z Energy deal in August 2022. Both the portfolios are located predominantly in metropolitan areas (78% for Z Energy, while the Ampol portfolio is 75% metro or “commuter metro” according to Charter Hall). The major difference is that the Z Energy portfolio is in New Zealand, whereas the Ampol portfolio is in Australia. New Zealand typically has slightly higher cap-rates than Australia so, if anything, the implication from this transaction is that the market widening in cap-rates so far is less than 50 basis points.
Singapore-listed Metro Holdings acquired Shepparton Marketplace, a mall in regional Victoria, for AUD 88 million on a cap-rate of 6.25%. The asset was sold by the Dexus Wholesale Property Fund. The property is reportedly the dominant mall in the area. By comparison, Stockland said cap-rates on its roughly comparable retail town centre portfolio averaged 6.1% at June 2021 (when lockdown fears were acute), 5.9% at December 2021 (before interest rate rises) and remained flat at 5.9% by June 2022.
It’s difficult to make definitive claims as cap-rates vary on every property depending on occupancy, lease terms, opportunities for redevelopment or enhancement of the asset, and so on. The Charter Hall deal and the Shepparton Marketplace purchase both imply only modest cap-rate widening so far. The reality may be slightly worse given the aforementioned selection bias and the fact that these deals are smaller than major shopping centres or CBD office towers (which can sell for hundred of millions of dollars). But we think these deals support the view that the market is not crashing.
It’s worth revising why physical prices matter—REITs need to own their properties to collect the rent, so we value REITs based on the cash-flows generated by the properties, not what they might be able to sell the properties for. However, physical prices do offer real-world backing to our discounted cash-flow valuations. And in some cases physical property prices can be absolutely critical.
Physical prices matter most to REITS with excessive debt. It can affect covenants imposed by lenders, and if a REIT is trying to reduce debt by selling assets, physical property pricing is critical.
It’s also worth mentioning that physical property prices are also important for property fund managers who charge management fees based on the value of client property portfolios, and performance fees linked to the returns of the portfolios. Charter Hall, Goodman Group, and Lendlease are the major property fund managers we cover, but many of the traditional REITs have at least some funds management exposures. Pricing also matters for developers such as Lendlease, Mirvac and Stockland. We ascribe a high uncertainty rating to Lendlease given the importance of development earnings for the group (development is important for Mirvac and Stockland but both have substantial passive rental portfolios).
We think Unibail-Rodamco-Westfield, or URW, and Cromwell have too much debt, and both are striving to pay off debt by selling assets. The prices they achieve on sales are critical to their valuation, and we account for this by ascribing high uncertainty ratings to both names. URW’s most recent sale was at a 10.7% discount to book value, and sold on a yield of “sub 6%”. Since the deal was struck in August, market volatility and interest rates have increased, which is likely to put further pressure on pricing. However, this remains consistent with our assumption that the group sells properties on an average 6.25% yield.
We think Scentre Group’s debt is also too high. Our base case there is that the group can grow its way out of its debt load as its earnings recover from the pandemic, though an equity raising remains a risk.
Many REITs are now undervalued relative to our unchanged fair value estimates. But names with higher debt are most vulnerable if interest rate rises go beyond expectations.
Thanks Ithaca for posting that ….very interesting